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A Study on Trade Measures Related to Climate Change

Author: TanXiuJie
Tutor: ZhouMaoRong
School: Wuhan University
Course: International Law
Keywords: Competitiveness Carbon Leakage "Carbon Tarif" Inclusion ofAviation in the EU ETS Product Carbon Labeling
CLC: D996.9
Type: PhD thesis
Year: 2013
Downloads: 39
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Abstract

How to respond to climate change has been gradually becoming one of the focuses of the economic, political and diplomatic games for the international community. At the same time, ambitious climate policies in developed countries have evoked concerns about the damage to the international competitiveness for domestic industries. Therefore, the "Pollution Haven Theory" has been applied to analyze the impact of climate policies on the international trade, and has given rise to the issue of competitiveness and carbon leakage. In this context, a number of trade measures related to climate change have been proposed and taken by some developed countries. Among these measures,"Carbon Tariff", Inclusion of Aviation in EU ETS and Product Carbon Labeling have received enormous attention, and other new types may also come into being in the future. Although the history of these three trade measures is not very long, they have exerted a huge impact on climate negotiations and international trade. As a newly emerging problem for China in the21st century, the trade measures related to climate change involve a series of theoretical issues. Besides, since China is the biggest exporter of goods as well as the largest emitter of greenhouse gases, it will be greatly influenced by these trade measures. Therefore, the study of the trade measures related to climate change carries great theoretical and practical significance. This dissertation will first analyze the causes and motivating factors of such measures and make an empirical test on the most direct reasons----the competitiveness and carbon leakage issues. And then it will discuss regulations, legitimacy, impacts and future trends of three existing measures respectively. Finally, it will provide policy recommendations for China. The dissertation consists of seven chapters and the main contents are as follows:The first chapter is the introduction. This chapter starts with the background and significance of the dissertation, gives related literature reviews afterwards, followed by introducing the research thoughts and applied methods, and ends with the main innovations and inadequacies.The second chapter is about the causes and motivating factors of the trade measures related to climate change. These trade measures are mainly put forward to relieve the developed countries of their worries about competitiveness and carbon leakage. The more important motivating factors come from both the international level and the domestic level. Internationally speaking, these factors include the attention that WTO pays to environment protection, the problems of assigning responsibility for greenhouse gas emissions and "a big stick" for developing countries in the climate negotiations, while the domestic ones include the motivation of the various interest groups inside the developed countries.The third chapter empirically analyzes the severity of the competitiveness and carbon leakage issues. The essence of these issues is whether ambitious climate policies will cause negative influences on international investment and trade. This is why this chapter introduces the CCPI index, CLIMI index and C3-I Index, which quantify countries’strength of climate policies, and establishes a location choice model and a gravity model with the panel date during the period2008-2011to explore such negative relationship. The empirical tests do not show any proof of negative impacts, which as a whole cannot rule out the possibility of competitiveness and carbon leakage issues, though it leads to serious doubts of empirical proofs of the these two issues.The fourth chapter makes a special study of "Carbon Tariff". The European Union and the United States have been discussing this measure for many years. The most concerned issue is whether this policy is consistent with WTO rules, which is still an open question until now."Carbon Tariff" has not been implemented yet, however, it has challenged the principle of common but differentiated responsibility (CBDR). Besides,"Carbon Tariff", if introduced, would hurt China’s exports badly. Although it will not be implemented in the short term because of various obstacles, developed countries will not give up, and new changes to the detailed designs might arise in the future.The fifth chapter analyzes Inclusion of Aviation in the EU ETS. There has been strong opposition to this measure, and the European Commission has proposed to suspend it for one year. Its legitimacy has also been widely questioned, and some US airlines and their trade association have brought a suit against it, but the European Court of Justice confirmed that the EU’s legislation on aviation emissions was compatible with the international law. If it was applied as planned, China’s aviation industry and exports to the EU would be tremendously affected. What’s more, the measure made by EU has had a far-reaching impact on the progress of ICAO’s work underway to address international civil aviation emissions. And its future will depend largely on the outcome of ICAO General Assembly in2013.The sixth chapter talks about the Products Carbon Labeling. All the existing Product Carbon Labeling is voluntary, but France intends to establish a mandatory labeling scheme, which would probably go against the WTO rules. Product Carbon Labeling may contribute to shifts in consumer preferences towards low-carbon goods, and thus it will weaken the competitiveness of products from developing countries. In the future, Product Carbon Labeling will develop circuitously, but it is unlikely to see it become mandatory.The seventh chapter presents the policy recommendations for China. In order to minimize the negative impacts of these trade measures, China may take the following strategies:sticking to resolving issues related to climate change under UNFCCC, opposing unilateral trade measures in future climate negotiations, ensuring consistency with the CBDR principle if trade measures are inevitable and turning pressure into motivation to promote low-carbon foreign trade.

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