Is USTR Trying to Increase China’s Carbon Emissions?
Our friends Daniel Firger and Michael Gerrard at Columbia Law School’s Center for Climate Change Law have written a useful new paper analyzing two important pending WTO climate cases. Of these, the more important appears to be DS 419, in which the United States is challenging China’s wind energy subsidies.
Firger and Gerrard note that the factual record remains unclear pending future briefing, but at first blush, the entire action appears bizarre. First, the United States complains that China will not accept binding emissions targets; then, when Beijing attempts to foster clean energy, the United States complains about that.
It’s possible, of course, that the Chinese subsidy program requires domestic content, but that is odd on a couple of grounds. It seems counterintuitive to think that Chinese product would be more expensive given lower labor and transport costs. More importantly, given the fairly massive externalities involved in any program of carbon emissions abatement, standard international trade theory would appear somewhat inapposite: this is one reason why Article XX of the GATT provides environmental exceptions.
Perhaps the United States is arguing that China couldn’t care less about carbon emissions: Beijing is thirsty for reliable power, and perhaps for reliable power that avoids localized environmental impacts, and shouldn’t get an Article XX exception because of incidental climate benefits. The problem, of course, is how one could tell, particularly in a decision-making system as opaque as China’s. In any event, subjective standards like this are notoriously slippery, as the managers of the Clean Development Mechanism have learned. It’s better to determine on the basis of some sort of objective evidence, whether a project would qualify.
But then what would the standard of such evidence be? Perhaps one way to approach the problem would be to consider a nation’s overall GHG policy, and consider what role a policy or project plays in achieving that policy’s overall goals. The point isn’t why China has decided to enact subsidies; rather, the inquiry would turn on China’s overall carbon control goals and whether those goals advance the world toward meeting the G-20’s target of limiting surface temperature increase to 2 degrees Celsius.
Obviously, this framework raises far more questions than it answers: what in fact would it mean for Chinese policy to “advance” reducing the world to a 2-degree increase? It might require a WTO appellate body to set its own guidelines for nations’ fair shares in order to determine whether a nation can get a climate exception. But that also seems fair: if a nation is going to claim a climate exception to WTO rules, then it should present evidence that it is actually doing its part. (Would such a posture overly disincentivize incremental measures?).
In any event, it’s not clear whether USTR has considered any of these things, or even whether it has consulted with the climate representatives in the State Department (one more reason why, as I have argued to no avail, that USTR should actually handle American climate diplomacy). And if we are going to criticize the seriousness of other countries’ climate efforts, we might want to take a stern look in the mirror.
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Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic – Land Use, the Environment and Loc…
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It’s worth noting that Beijing has announced this week an intention to name not just a carbon cap this year but also a total energy cap too. China’s a little hamstrung in reducing emissions at the moment as their economy and manufacturing base is not only developing but rapidly expanding. Comparisons between the US and China on emissions is a little like comparing oranges with steak, they’re both food but there’s not much else in common.
I didn’t mean to suggest that the United States was right on the issue; anything but. After years of the US complaining about the failure of India and China to adopt binding caps, we have found that they are leaving us behind. If anything, the higher growth rate of India and China makes the United States looks worse, although it should be remembered that the Chinese cap will not reduce Chinese growth. The Chinese seem to be coming around to the idea that many pro-Kyoto scholars want: a cap with a lot of headroom in order to help establish prices and markets. To the extent that the Chinese intention is serious and they follow through, things seem to be coming into place — just as the United States has achieved a the dream GOP policy regime, viz. insane dysfunction.
This dispute seems to be rather narrow. It’s about protectionist Chinese trade policy and their attempt to seek an environmental exclusion from a trade agreement forbidding subsidies contingent on the use of domestic goods. Nobody is arguing that the Chinese government cannot subsidize green energy, just that they cannot do so in a way that violates international trade agreements.
It’s not clear, though, why domestic content in the case of climate policy SHOULD violate the WTO. For one country to assist in climate protection means that it is bearing costs that should be shared among all; it thus stands to reason that it might want to externalize some of those borne costs. That’s why the Article XX argument might have purchase. In any event, many forms of subsidies also violate the WTO; from an economic standpoint, subsidizing of a domestic company is the same as putting a tarriff on foreign products. At some point, a decision needs to be made about what is permissible and what isn’t — and why.