Environmental Reviews and Case Studies: Trade and the Environment Debate: Recent Developments and Implications for China

Abstract

This report focuses on the current state of debate surrounding environmental goods negotiations under the World Trade Organization in the context of Chinese exports and imports. The report also examines some recent proposals (in United States and European Union) that called for increased trade barriers against imports from nations that have less stringent carbon policies and then draws implications for China.

Notes

Notes

1. The trade issues regarding environmental services are of a different nature and often involve domestic regulatory issues, as well. The article therefore focuses only on environmental goods.

2. On the contrary, there are no indications of carbon leakage from the European Union Emissions Trading System (EUETS). There are many explanations for the absence of a significant impact of the EUETS on industry at this stage. First of all, to a large extent, European industry has received a relatively large quantity of free allowances, which tends to reduce the climate-policy cost. Another factor is the booming demand for aluminum and other commodities, which has kept most heavy-industry activities quite profitable. Finally, the longtime lags involved in deciding on new investment and location is also a probable reason why limited, if any, could be observed at this relatively early stage (Reinaud, 2008).

3. Importantly, carbon can leak through three channels: International relocation of firms because of changes in international production cost relations, higher fossil fuel use abroad because of lower fossil fuel use at home (where the climate policy is imposed) via lower international fossil fuel prices (fossil fuel price channel), and, finally, because of increased free-rider incentives, meaning that emissions reductions may be relaxed abroad once climate policy becomes more stringent at home.

4. One is Senate Bill 1766, introduced by Senators Jeff Bingaman (Democrat–New Mexico) and Arlen Specter (Republican–Pennsylvania); the other is Senate Bill 2191, introduced by Senators Joseph Lieberman (Independent–Connecticut) and Warner (Republican–Virginia).

5. The other measure under discussion is carbon-based export rebates. (Exporters get their carbon-pricing payment returned.) This measure will not be compatible with WTO legislation.

6. In early 1997, India, Malaysia, Pakistan, and Thailand brought a joint complaint against a ban imposed by the US on the importation of certain shrimp and shrimp products. The protection of sea turtles was at the heart of the ban. The US Endangered Species Act of 1973 listed as endangered or threatened the five species of sea turtles that habitat in US waters, and prohibited their take within the US, in its territorial sea and the high seas. Under the act, the US required that US shrimp trawlers use turtle-excluder devices in their nets when fishing in areas where there is a significant likelihood of encountering sea turtles. The US lost the case, not because it sought to protect the environment but because it discriminated among WTO members. It provided nations in the Western Hemisphere—mainly in the Caribbean—technical and financial assistance and longer transition periods for their people in the fishing industry to start using turtle-excluder devices.

7. More than 70% of the world emissions increase from 2020 to 2030 according to the International Energy Agency is projected to come from non-Annex 1 (developing) countries. China alone will contribute about a quarter of the increase in carbon dioxide emissions, or 3.8 gigatons (Gt), reaching 7.1 Gt in 2030.