Discussion Paper

No. 2009-20 | March 25, 2009
Climate Policy Options and the World Trade Organization


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.

Submitted as Policy Paper

JEL Classification:

F13, F53, K33, Q54, Q58



Cite As

Gary Clyde Hufbauer and Jisun Kim (2009). Climate Policy Options and the World Trade Organization. Economics Discussion Papers, No 2009-20, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2009-20

Comments and Questions

Anonymous - Referee Report
April 30, 2009 - 10:00

see attached file

Anonymous - Referee Report
May 05, 2009 - 15:57

This paper considers various climate change policy options within the WTO framework. As an academic with an interest in both aspects of this paper it was a pleasure to read.

My only comment relates to how closely this article follows your 2009 book. Assuming there are no issues of ...[more]

... "originality" I believe this paper makes a useful contribution.

Whilst I am not convinced by the green space aguments in the recommendations section of this paper I think the arguments are sound.