On Carbon Tax And Its Impact On International Trade Law

Climate change now becomes a common issue to the whole world. On the international level, with the end of the first commitment period during 2008-2012 stipulated in the Kyoto Protocol, the international world is stepping into the after-Kyoto era. During the past United Nations Climate Change Conferences in both Copenhagen and Cancun, the participants went through a difficult time in rounds of negotiations without coming into any binding treaties. On the national level, several countries have taken measure in dealing with carbon-emission restriction such as carbon tax, cap-and-trade mechanism, etc. The paper focuses on carbon tax and its impact on international trade law. With the deepening of the international trade, the carbon tax enacted by different countries will have an impact on international trade, among which the most heated issue is the border tax measure-carbon border tax adjustment. The paper discusses its legality under both the GATT 1994 II (2) (a) and XX, supported by WTO cases and the current practice. The paper holds that carbon border tax adjustment practiced under the national principle is legal under the current international trade law. What's more, the current international trade law framework does not stipulate clearly enough or is rather crude on how to coordinate trade and environment, which needs much effort on future negotiation between countries. Finally, the paper discusses how China as a developing country takes measure to restrict carbon emissions and holds that given the China's economic status and energy structure, carbon tax measure is superior to cap-and-trade. We suggest enlarging the tax base and increasing the tax rate step by step, while taking other tax-neutral measures, in order to decrease the tax burden of corporations and residents. Besides, we can also take carbon border tax measures at the right chance. Together with carbon tax, we should also take other comprehensive measures such as developing new energy technology to upgrade the industry structure and develop a low-carbon economy.