Maximum carbon intensity limitations and the agreement on technical barriers to trade

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Courtesy of Lexxion Verlagsgesellschaft mbH

Emission of greenhouse gases is a global problem. Any nation seeking to restrict such emissions by its manufacturers should avoid putting them at a disadvantage in world and domestic markets where they are likely to compete with producers that do not bear the cost of emission controls. One approach being considered in the United States would be adoption of technical regulations limiting the carbon intensity of basic products, such as cement, aluminum, steel, etc., offered for sale in the US market (carbon intensity would be defined as the CO2 equivalent emissions per ton of product). Domestic and imported products that exceed the regulation limit could not be sold in US commerce, except pursuant to exceptions that would be available on a national treatment basis. Technical regulations would be based on the quantity of carbon equivalent gases emitted in the production of a unit of product, such as a ton of steel. The regulations would set a numerical limit on carbon intensity; would set discrete limits for different products and types of manufacture; would require auditable facility measurement but could allow compliance on an average company-wide basis; and would be tightened over time to encourage new technologies. However, there would be no requirement for the adoption of specific technologies. The article will analyze the validity of such regulations under the World Trade Organization (WTO) Agreement on Technical Barriers to Trade (TBT Agreement).1 The preamble to the TBT Agreement recognizes that “no country should be prevented from taking measures necessary ... for the protection of human, animal or plant life or health, [or] of the environment ... at the levels it considers appropriate”. In addition, TBT Agreement Article 2.2 includes “protection of human health or safety ... or the environment” as legitimate objectives of technical regulations. The article will examine whether a maximum carbon emission limit would be a “[t]echnical regulation” as defined by the TBT Agreement Annex 1.1, taking into account the WTO Appellate Body statement that characteristics subject to regulation are not limited to “qualities intrinsic to the product itself ”. Consideration will also be given to the TBT Agreement requirement that technical regulations should not be applied so as to create unnecessary obstacles to trade. Finally, there will be an evaluation of the application of Article III of the General Agreement on Tariffs and Trade (GATT)2 to measures that qualify as technical regulations.

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