Compatibility of the Carbon Border Tax with the Laws of the World Trade Organization
There are different ways to reduce CO2 emissions: in particular, CBT (carbon border tax) is designed to eliminate and combat the adverse effects of climate change. However, one should not ignore the fact that the existence of multilateral international agreements encourages countries to care about the planet and the environment, but also limits the scope of their legal autonomy to take action in various areas, including the policy of taking urgent action on climate change. The exact design of the CBT proposed by the European Commission is not entirely clear, and there is a high probability that it will contradict Article I or III of the GATT (General Agreement on Tariffs and Trade). Thus, it will be further assessed whether CBT can be subject to exceptions from GATT (Article XX). It is important to analyze whether a CBT policy can be formalized legally without contravening WTO law and without risking being prosecuted for this violation. Last but not least, it is very important to assess whether the exceptions to Article XX of the GATT can be used to justify a CBT. Two of those exceptions are particularly relevant to environmental measures, namely those contained in Articles XX(b) and XX(g) of the GATT. If the European Union (EU) wants to use environmental exemptions to protect CBT, the EU needs to remove two hurdles. First, the EU should establish a preliminary justification for the use of Article XX by showing that the sub-clauses apply. Second, the EU should then establish that the measure under consideration does not contradict the leading paragraph, known as the introductory part of Article XX, which means that it should not be arbitrary, unjustified or disguised restriction on trade. At the same time, it is necessary to consider whether CBT is a suitable tool.