Journal Article
No. 2009-29 | June 18, 2009
Climate Policy Options and the World Trade Organization
(Published as Policy Paper)


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.

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: The Open-Access, Open-Assessment E-Journal, 3 (2009-29): 1–15.

Comments and Questions

Anonymous - Climate Policy and WTO
July 05, 2009 - 18:48

This is a very good review of the issues regarding the complicated process of bringing climate-change-related policies into the WTO. The recommendations are useful and practical. The "green space" idea is an interesting one, though I must say that I am a bit less optimistic as to how ...[more]

... well it will prevent abuse.