Climate Policy Options and the World Trade Organization

Hufbauer, Gary Clyde; Kim, Jisun Article Climate Policy Options and the World Trade Organization Economics: The Open-Access, Open-Assessment E-Journal Provided in Cooperation with: Kiel Institute for the World Economy – Leibniz Center for Research on Global Economic Challenges Suggested Citation: Hufbauer, Gary Clyde; Kim, Jisun (2009) : Climate Policy Options and the World Trade Organization, Economics: The Open-Access, Open-Assessment E-Journal, ISSN 1864-6042, Kiel Institute for the World Economy (IfW), Kiel, Vol. 3, Iss. 2009-29, pp. 1-15, https://doi.org/10.5018/economics-ejournal.ja.2009-29 This Version is available at: https://hdl.handle.net/10419/27548 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by-nc/2.0/de/deed.en V ol. 3, 2009-29 | June 18, 2009 | http://www.economics-ejournal.org/economics/journalarticles/2009-29 Climate Policy Options and the World Trade Organization Gary Clyde Hufbauer and Jisun Kim Peterson Institute for International Economics, Washington Abstract This paper examines whether the climate policy options policymakers are contemplating are compatible with core principles of the world trading system set forth in the General Agreement on Tariffs and Trade (GATT), the World Trade Organization (WTO), and Appellate Body decisions. The authors argue that border measures—both import restrictive measures and export subsidies—contemplated in US climate bills and the climate policies of other countries stand a fair chance of being challenged in the WTO. Given the prospect of foreseeable conflicts with WTO rules, the authors suggest that key WTO members should attempt to negotiate a new code that delineates a large “green space” for measures that are designed to limit GHG emissions both within the member country and globally. By “green space,” the authors mean policy space for climate measures that are imposed in a manner broadly consistent with core WTO principles even if a technical violation of WTO law could occur. To encourage WTO negotiating efforts along these lines, the authors recommend a time-limited “peace clause” to be adopted into climate legislation of major emitting countries. The peace clause would suspend the application of border measures or other extraterritorial controls for a defined period while WTO negotiations are under way. Published as Policy Paper JEL: F13, F53, K33, Q54, Q58 Keywords: Global warming climate change; climate policy options; world trading system; world trade organization; WTO; border measures; greenhouse gas emissions Correspondence Gary Clyde Hufbauer, Peterson Institute for International Economics, 1750 Massachusetts Avenue, NW, Washington DC 20036, USA; e-mail: [email protected] Jisun Kim, Peterson Institute for International Economics, 1750 Massachusetts Avenue, NW, Washington DC 20036, USA; e-mail: [email protected] © Author(s) 2009. Licensed under a Creative Commons License - Attribution-NonCommercial 2.0 Germany Economics: The Open-Access, Open-Assessment E-Journal 1 1 Introduction The economic downturn poses daunting challenges, but Washington seems eager to take action against climate change. President Obama insists that global warming ranks among his top priorities. In the wake of the financial crisis, the Administration linked economy recovery with a low-carbon future. The American Recovery and Reinvestment Tax Act of 2009, a $787 billion stimulus package signed by President into law on February 17, 2009, provides incentives for renewable energy, energy efficiency, and smart grid and electricity transmission—about $43 billion in spending plans and about $20 billion in tax provisions.1 President Obama’s 10-year budget blueprint, released on February 26, 2009, ambitiously embraced the idea of “a Clean Energy Economy.” The budget blueprint states: “After enactment of the Budget, the Administration will work expeditiously with key stakeholders and the Congress to develop an economy-wide emissions reduction program to reduce greenhouse gas emissions approximately 14 percent below 2005 levels by 2020, and approximately 83 percent below 2005 levels by 2050. This program will be implemented through a cap-and-trade system, a policy approach that dramatically reduced acid rain at much lower costs than the traditional government regulations and mandates of the past. Through a 100 percent auction to ensure that the biggest polluters do not enjoy windfall profits, this program will fund vital investments in a clean energy future totaling $150 billion over 10 years, starting in FY 2012. The balance of the auction revenues will be returned to the people, especially vulnerable families, communities, and businesses to help the transition to a clean energy economy”2 During his first official foreign visit, President Obama agreed with Canadian Prime Minister Stephen Harper to launch a new clean energy initiative as a step towards a North American climate change treaty. The Kyoto protocol expires in December 2012; a successor regime is meant to be agreed in Copenhagen or at least before 2012. Leaders have warned that international negotiations on the post-Kyoto regime will be undermined if the United States does not enact domestic legislation to reduce carbon emissions. In his remarks at the climate event held at the US Capitol on March 3, 2009, former British Prime Minister Tony Blair emphasized that the United States must show its seriousness about enacting legislation.3 Connie Hedegaard, Danish climate and energy minister, said that the world is waiting for the United States to provide leadership.4 Ambassador Todd Stern, _________________________ 1 See “United States: Summary of Clean Energy And Energy Efficiency Provisions In The New Stimulus Package” by Richard M. Schwartz, Donna Mussio, David A. Zilberberg, Coleman Kennedy, David Felman and Joel Scharfstein, February 19, 2009. Available at http://www.mondaq.com/article.asp?articleid=74760. 2 See “A New Era of Responsibility: Renewing America’s Promise,” released on February 26, 2009. Office of Management and Budget. Available at: http://www.whitehouse.gov/omb/assets/fy2010_new_era/ A_New_Era_of_Responsibility2.pdf. 3 See “Obama must pass climate laws ahead of Copenhagen, Danish minister warns,” by Suzanne Goldenberg, Guardian, March 4, 2009. Available at http://www.guardian.co.uk/environment/2009/mar/04/climate-obama-denmark . 4 See “Obama must pass climate laws ahead of Copenhagen, Danish minister warns,” by Suzanne Goldenberg, Guardian, March 4, 2009. Available at http://www.guardian.co.uk/environment/2009/mar/04/climate-obama-denmark . www.economics-ejournal.org 2 Economics: The Open-Access, Open-Assessment E-Journal President Obama's special envoy for climate change, stressed that nothing would give a more powerful signal to other countries than a significant and mandatory US plan enacted before Copenhagen.5 It is not certain whether countries will sign a comprehensive post-Kyoto plan at the UN Climate Change conference in Copenhagen in December 2009, but at the Group of 20 (G-20) London Summit, held in April 2009, leaders committed to reach agreement at Copenhagen. On Capitol Hill, the debate is vigorous and several bills aiming at GHG controls have been introduced. Most prominent, the American Clean Energy and Security Act of 2009 (H.R. 2454, also known as the Waxman-Markey bill) sponsored by Representatives Henry Waxman (D-CA) and Edward Markey (D-MA) has gained the most attention. The Waxman-Markey bill, based on a cap-and trade system, was introduced to the House Energy and Commerce Committee on May 15, 2009 and passed by the Committee by a vote of 33-25 on May 21, 2009. The bill is expected to be approved by the full House this summer. While the debate on domestic GHG controls has moved forward, it still remains to be seen whether the United States will actually have domestic climate legislation in place before the Copenhagen summit in December 2009, or even before the end of 2010. The prospect of stringent emissions controls provokes fear that heavy costs will weaken US firms, leading to the “leakage” of production and jobs to foreign firms located in countries that do not equivalently control carbon emissions, such as China and India. Not surprisingly, the economic slump has intensified the fear of losing competitiveness. A related objection is that, in the end, US controls will make no difference to climate change if emissions activity simply migrates to other countries and if US controls do not create enough “leverage” to prod China and India and other large but reluctant emitters to take action. To address both “leakage” and “leverage” concerns, the United States and other countries are contemplating provisions in their climate bills such as the allocation of free allowances, special exemptions from new controls, and border measures. In the debate, border measures are gaining political support. While it is questionable whether border measures will bring the relief sought by vulnerable US firms,6 border measures seem all but certain for political reasons. History shows that border adjustments were decisive in securing political acceptance of value added tax (VAT) systems. Many economists contend that, with flexible exchange rates, there is little difference between imposing a VAT at a product’s origin or at a product’s destination. Under the origin principle, exports pay the tax and imports do not. Under the destination principle, imports pay the tax and exports do not. In terms of economic impact after allowing for exchange rate adjustments, the principles are highly similar, if not _________________________ 5 See “US Climate Official Urges Congress To Curb Greenhouse-Gas Emissions,” by Stephen Power, Wall Street Journal, March 3, 2009. Available at: http://online.wsj.com/article/SB123611493656622581.html?mod=googlenews_wsj). 6 For example, the United States imports carbon-intensive goods largely from Canada and the European Union—countries that emit less CO2 than the United States. China and India, the primary targets of US trade measures, are not large suppliers of carbon-intensive exports to the United States. This implies two things: first, trade measures may not provide intended economic relief to domestic industries affected adversely by US climate change policy because US firms are competing mostly with “cleaner” countries; and second, that US trade measures may not create substantial leverage to shape the climate policies of other countries—particularly China and India. For more details, see Hufbauer, Charnovitz, and Kim (2009). www.economics-ejournal.org Economics: The Open-Access, Open-Assessment E-Journal 3 identical.7 Yet virtually all countries that adopt VAT systems have opted for destination principle border tax adjustments (BTAs) to gain the acceptance of domestic firms. A parallel argument has surfaced in the debate over climate legislation and many US climate bills introduced in the Congress have included border measures: they limit on imports from countries that do not have comparable climate policies, and they contain some forms of relief for exports of carbon-intensive products.8 Whatever their ultimate effectiveness, border measures have the potential to conflict with World Trade Organization (WTO) rules. Under the WTO, countries have great flexibility in adopting environmental regulations within their territories, but the same discretion does not apply to environment-related trade measures or measures with transborder economic effects. When GHG trade measures are mixed with mechanisms designed to alleviate the burden of emission controls on domestic firms, various possible collisions could occur with WTO rules. Accordingly, such measures stand a fair chance of being challenged in the WTO. This paper examines the interaction between national measures designed to limit GHG emissions, and the operation of the world trading system. 2 Overview of Applicable World Trade Organization Rules This section provides short summaries on core articles of the General Agreement on Tariffs and Trade (GATT) and other WTO agreements that might be cited in potential disputes over GHG trade measures under consideration. Detailed analysis of key GATT articles, WTO agreements, and the decisions of the GATT panels and WTO Appellate Body can be found in Hufbauer, Charnovitz, and Kim (2009). GATT Article I (Most Favored Nation Treatment) The principle of most favored nation treatment in GATT Article I holds that any advantage accorded to an imported product has to be accorded to a “like” product from any WTO member country. Article I applies to customs duties and charges, import and export formalities, and the national treatment measures covered by Article III:2 and III:4. Note, however, that if a measure is covered by GATT Article III, but is not a violation of Article III because GATT Article III:8(b) permits the payment of subsidies exclusively to domestic producers, such a measure would not come within the discipline of GATT Article I:1. GATT Article II (Tariff schedules) GATT Article II:1(a) and (b) contain the core disciplines in the GATT on the imposition of ordinary customs duties. In addition, Article II:1(b) prohibits the imposition of newly _________________________ 7 When the profile of VAT across traded sectors is jagged—some very high rates, some very low rates—the similarity begins to fade between the impact of origin and destination BTAs. Origin BTAs will not adequately shield the highly taxed sectors from foreign competition, even after the exchange rate adjusts. 8 These measures are akin to destination BTAs. Because carbon taxes or limits hit a few sectors fairly hard, and because countries will not all impose the same limits, the argument for destination-type BTAs is stronger. www.economics-ejournal.org 4 Economics: The Open-Access, Open-Assessment E-Journal applied charges (on items having bound tariffs) by extending the coverage to “all other duties or charges of any kind imposed “on or in connection with” importation.9 The scope of Article II is limited, however, by Article II:2(a), which states that nothing in the article shall prevent a government from imposing on the importation of any product “a charge equivalent to an internal tax imposed consistently with the provisions of paragraph 2 of Article III in respect of the like domestic product or in respect of an article from which the imported product has been manufactured or produced in whole or in part.” GATT Article III (National Treatment) The principle of national treatment in GATT Article III holds that an imported product is to be treated no less favorably than a like domestic product. This purpose is carried out through two principal provisions: the first sentence of Article III:2 deals with internal taxes or charges on products, and Article III:4 deals with taxes not covered by Article III:2. The Appellate Body has explained that the broad and fundamental purpose of Article III is to avoid protectionism in the application of internal tax and regulatory measures. Article III covers taxes and regulations applied both within national borders and on imported products. In decided cases, this article has been strictly applied. GATT Article XI (General Elimination of Quantitative Restrictions) This article prohibits the imposition of quotas, import or export licenses, or other measures on trading partners unless they fall into one of the exceptions listed in paragraph 2 of GATT Article XI. GATT Article XX (General Exceptions) A measure violating any provision of the GATT can be excused if it qualifies for an exception under Article XX. The Appellate Body has explained that the exceptions are “limited and conditional,” and that the analysis is two-tiered. When a measure is provisionally justified under one of the specific exceptions, the panel will then determine whether the measure meets the legal standard set forth in the chapeau of Article XX 10 Relevant to climate change, the subsections of Article XX permit otherwise inconsistent trade measures if they are “necessary” to protect human, animal or plant life or health (Article XX (b)) or if they conserve exhaustible natural resources (Article XX (g)); both terms appear to cover limits on GHG emissions. While the Appellate Body’s rulings in previous cases show considerable sympathy with environmental concerns, the decisions are made case-by-case; they depend on the particular facts and circumstances; and the rule of stare decisis does not strictly apply. _________________________ 9 See the WTO Understanding on the Interpretation of Article II:1(b) of the GATT, 1994. 10 Article XX states in part: “Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:…(b) necessary to protect human, animal or plant life or health;...(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption….” The full text of the GATT Article XX is available at: http://www.wto.org/english/docs_e/legal_e/gatt47_02_e.htm. www.economics-ejournal.org Economics: The Open-Access, Open-Assessment E-Journal 5 WTO Disciplines on Subsidies The WTO Agreement on Subsidies and Countervailing Measures (ASCM) governs the use of subsidies. Because many climate change proposals rely upon subsidies, the ASCM comes into play. A government grant or tax exemption is clearly a “subsidy” under the ASCM, but whether the free allocation of an emission allowance is a subsidy does not have an obvious answer, and so far there has been no WTO jurisprudence on this point. Under the ASCM, a subsidy exists when a government makes a financial contribution and a benefit is conferred to the recipient firm. The free allocation of emission allowances surely is a benefit, but the key question is whether such an allocation is a financial contribution. The answer is murky since emissions allowances given away freely could be considered government permits rather than financial contributions—in other words, something akin to permission to drill for oil or construct a road. However, there are strong policy grounds for treating emission allowances as subsidies covered by the ASCM. Otherwise, in the future carbon-conscious world, governments would be able to avoid subsidy disciplines by using the “coin” of tradable emission allowances to confer aid on favored industries. WTO Disciplines on Domestic Regulations Another WTO agreement supervising governmental regulations is the Agreement on Technical Barriers to Trade (TBT). The scope of the TBT agreement includes both mandatory and voluntary measures. Mandatory measures are termed “technical regulations” and are defined as any measure that “lays down product characteristics or their related processes and production methods.”11 If a regulation about the energy footprint of a product is not covered by the TBT agreement, it would be covered by GATT Articles III:4 or XI. When the TBT agreement was drafted, conventional wisdom held that it covered regulations about the physical products and did not cover regulations about the way products are made. Whether that understanding would survive the text-oriented approach to interpretation now used in the WTO dispute settlement (which gives little consideration to negotiating history) remains to be seen. 3 Climate Policy Options under WTO Rules This section discusses key components of climate policy generically, and then the consistency of those climate policy options with core principles of the world trading system, as set forth in the GATT, the WTO, and Appellate Body decisions. Border Adjustments on Imports A border tax adjustment (BTA) on an import is the application of a charge or tax on the import aimed to match the domestic indirect taxes imposed on the like product and/or its inputs. Historically, of course, BTAs had nothing to do with environmental concerns; they were applied to level the playing field between domestically made and imported goods with respect to indirect taxes and later value added taxes (i.e., taxes on products). _________________________ 11 Agreement on Technical Barriers to Trade, Article 1.2 and Annex 1, paragraph 1. The TBT agreement does not apply to sanitary or phytosanitary measures (see Article 1.5). www.economics-ejournal.org 6 Economics: The Open-Access, Open-Assessment E-Journal In the climate context, analysts have sometimes used the term “BTA” as an imprecise reference to a tax imposed at the border designed to match the economic effects of a regulation on imports. But when there is no domestic tax, but only calculated economic effects, the application of the supposedly corresponding tax or charge on imports is not a BTA. 12 Under GATT rules, only taxes on products can be border-adjusted. Thus, taxes not applied to products are not susceptible to being border-adjusted. Whether taxes on energy consumed in making a product (sometimes called “embedded energy” or “carbon footprint” taxes) are border-adjustable on an import has not been considered in WTO dispute settlement. Annexes I and II of the ASCM may be read so as to permit the rebate of prior stage energy taxes on exports, but whether that would correspondingly allow the imposition of domestic energy taxes on imports remains unclear. It might seem straightforward to characterize carbon taxes as product taxes and impose them at the border when goods are imported. But things are not so simple. The core problem is that a product of a given physical description—say a ton of hot-rolled steel plate—will be responsible for different amounts of CO2 emission depending on the manufacturing process. Emissions will differ from firm to firm and even within a firm. Moreover, if the border-adjustment scheme reflects carbon emissions of ancillary materials (e.g., scrap steel), the tracing challenge becomes an additional source of difficulty. Border Adjustments on Exports Whether the ASCM permits the rebate of energy taxes on exportation has not yet been resolved. Rebating an energy or carbon tax on exports would seem to be environmentally perverse because exportation does not undo the environmental impact of the GHG emissions. Of course, the WTO legality of a BTA does not hinge on an environmental justification. Te only sensible rationale for a rebate of climate taxes on exports would be to avoid double carbon taxation. In other words, in a world economy where nearly all governments are taxing domestic emissions, and imposing BTAs on imports to match their domestic carbon taxes, there could be an agreement to use the destination principle for energy taxes by taxing imports but not exports. All domestic production would be taxed, but when a product is exported the tax would be rebated by the exporting country government. As noted earlier, the ASCM seems to allow the rebate or remission of prior stage energy taxes when goods are exported but it is uncertain whether the same provision extends to prior stage GHG taxes. Another border adjustment could occur if a domestic firm purchased a GHG emission allowance to produce an exported good, and the payment was then rebated. The rebate of this emission allowance would not be a rebate of a tax because the requirement to purchase an emission allowance is a regulation, not a tax. Thus, the rebate of an emission allowance on exportation is technically not a BTA. Rebating an emission allowance could have adverse WTO implications if the allowance is viewed by _________________________ 12 Cosbey (2008) also recognized that the term “BTA” has been used imprecisely. He argued that requirements to buy into domestic cap-and-trade schemes are more like regulations than taxes, and so adjustment to those schemes cannot rightly be called a tax adjustment. To avoid confusion, he proposed to use “border carbon adjustment,” a broad term that refers to any trade measure that is adopted in order to level the playing field. www.economics-ejournal.org Economics: The Open-Access, Open-Assessment E-Journal 7 the WTO as the equivalent of money. If a government pays money to a firm in connection with an export, that payment constitutes a prohibited export subsidy. Unilateral Countervailing Duties or Sanctions A countervailing duty (CVD) is a trade penalty applied to an imported product to offset the competitive effect of a foreign subsidy. The prerequisite to a CVD action is a subsidy that is specific to a firm or industry, and that causes material injury to the competing domestic industry producing the like product. Commentators have sometimes proposed applying CVDs on carbon-intensive imports as a “stick” against “carbon free riding.”13 The problem with this formulation is that free riding on carbon restrictions is not a subsidy, as currently defined by the ASCM, because the absence of a government regulation is not the legal equivalent to the presence of a financial contribution from that government. If the intent of a proposed trade penalty is to sanction countries that are going slow on adopting climate measures, then it would violate GATT Articles I or XI or both, and would not be justified by Article XX. The justification for the import ban in the United States—Shrimp case was that the imported products from certain producers were caught in a way that led to the killing of endangered sea turtles. The Appellate Body ultimately permitted that ban, even though it was unilateral, because conditioning market access on a foreign government’s adoption of a program comparable in effectiveness to the US program gave sufficient latitude to that foreign government.14 In our view, one cannot infer from this single case that the Appellate Body would approve a trade sanction levied against a target country proceeding at a different environmental speed than the sender country. The most prominent slowpoke on the climate issue over the past 10 years has been the United States, and there was never a serious suggestion that other countries could have legally imposed trade sanctions against the United States for that reason. In commenting on the legal status of trade sanctions, it should first be repeated that border adjustment measures are not trade sanctions. The central purpose of a border adjustment measure is to equilibrate conditions between an imported product and a domestic product. Border adjustments can be legal or illegal under WTO rules, depending on the underlying economic circumstances. One motivation for a border adjustment may be to influence the policy of another country. That is also an argument for imposing countervailing duties, namely in part to dissuade foreign governments from subsidizing. But having the motivation to influence another government does not necessarily mean that a measure amounts to a “sanction.” Moreover, there are no officially agreed upon bright lines as to when a restrictive trade measure constitutes a sanction. Finally, the WTO implications of multilaterally agreed trade sanctions against climate scofflaws have yet to be addressed. Multilaterally approved trade sanctions are virtually unknown outside of the UN Security Council and the WTO dispute system. _________________________ 13 See Ralph Nader and Toby Heaps, “We Need a Global Carbon Tax,” Wall Street Journal, December 3, 2008, A17. 14 Appellate Body Report, United States—Import Prohibitions of Certain Shrimp and Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/AB/RW, adopted November 21, 2001, paragraph 144. www.economics-ejournal.org 14 Economics: The Open-Access, Open-Assessment E-Journal characteristics than traditional energy sources; subsidies that finance the sequestration of greenhouse gas emissions; and subsidies for climate adaptation. Also, to ensure comparability between imported and domestic products, like domestic products need to be defined under internationally standardized system for classifying traded products such as the Harmonized tariff system (HTS) code. Hufbauer, Charnovitz, and Kim (2009) outline possible elements of a new code in details. The key WTO members that are big emitters (say ten countries) could negotiate a code as a plurilateral agreement under Annex 4 of the WTO agreement. In a plurilateral agreement, a subset of WTO members may commit to a set of rules that is binding among them and can be enforced in WTO dispute settlement. Although such a code would require consensus of all WTO members to be formally added to the WTO agreement, such action could be politically possible because it would not require that all WTO members agree to the text or substance of the code. If negotiating a code as a WTO plurilateral agreement proves politically impossible, then a group of like-minded member governments could negotiate a code outside the WTO. The advantage of acting outside the WTO is that non-participating countries could not block the negotiation of such a code. Of course, with an extra-WTO code, WTO dispute settlement would not be available for enforcement. But we do not see that as a serious disadvantage because other forms of dispute settlement could be used if needed. Regardless whether the code is negotiated inside the WTO as a plurilateral agreement or outside the WTO among like-minded countries, the code would not directly apply to countries that did not subscribe to it. So the purpose of such a code would not be to regulate the legal relationship between code members and nonmembers, but rather for participating governments to agree in advance to a set of rules for trade-related climate measures in the interest of heading off disputes among those governments in the WTO. Also, the new code should encourage, but not require, members to adopt GHG carbon taxes, or to auction emissions permits, as preferred GHG control measures. The reason is that to the extent the award of emissions permits becomes a commercial transaction, the room for subsidies is narrowed, and the basis of comparing emissions costs between activities and across countries is vastly improved. Given the importance of the matter, it is crucial that the code includes major emitting countries such as the United States, the European Union, Japan, China, India, and Brazil. We believe that such code is in interests of both developing and developed countries because the code would minimize risks on exports of developing countries by limiting trade measures contemplated by some developed countries, and also because the code would eliminate the risk of possible disputes over trade measures adopted by developed countries. To encourage WTO negotiating efforts along these lines, we recommend that the United States and other important emitting countries should adopt a time-limited “peace clause” into their climate legislation. The “peace clause” would suspend the application of border measures or other extra-territorial controls for a defined period of time while WTO negotiations are underway. www.economics-ejournal.org Economics: The Open-Access, Open-Assessment E-Journal 15 References Cosbey, Aaron (2008). Border Carbon Adjustment. Winnipeg: International Institute for Sustainable Development. Frankel, Jeffrey A. (2008). Options for Addressing the Leakage/Competitiveness Issue in Climate Change Policy Proposals. Paper presented at a conference on “Climate Change, Trade and Investment: Is a Collision Inevitable?” Brookings Institution, Washington, June 9, 2008. Hufbauer, Gary Clyde, Steve Charnovitz, and Jisun Kim (2009). Global Warming and the World Trading System. Washington: Peterson Institute for International Economics. Kejun, Jiang, Aaron Cosbey, and Deborah Murphy (2008). Embodied Carbon in Traded Goods. Paper presented at the Trade and Climate Change Seminar, Copenhagen, June 18–20. 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Please go to: www.economics-ejournal.org/economics/journalarticles/2009-29 The Editor © Author(s) 2009. Licensed under a Creative Commons License - Attribution-NonCommercial 2.0 Germany