The Political and Legal Background to the Discussion About Consumption-Based Policies

Abstract

The idea of switching to a consumption-orientation in international climate policy is politically controversial and might contravene some regulations of international trade law. The debate on these issues is typically framed in terms of “border carbon adjustments”—the best-known method of introducing consumption-based policies. This chapter first presents the various motivations for advocating border adjustments: to preserve the competitiveness of industry in abating countries, to increase the global environmental effectiveness of unilateral abatement measures, to sanction countries not participating in an international abatement regime, and to prevent an increase of what has become known as “weak” carbon leakage. Then the international political debate on border carbon adjustments is summarized: in the U.S., this debate focuses on competitiveness concerns, whereas in the EU generally environmental motives are emphasized. Most developing and emerging economies, on the other hand, see border measures as unfair protectionism. As regards international trade law, border carbon measures tread legally uncharted territory. In particular border measures extending to exports, measures that differentiate between goods according to the amount of “embodied” carbon, and measures used to sanction other countries or to preserve a country’s competitiveness instead of furthering purely environmental objectives are deemed problematic. Border adjustments can be designed such as to minimize the risk of a legal challenge; such designs are however typically environmentally less effective.