Regular readers of the Forum may have noted I have contributed a number of pieces dealing with the legal aspects of a carbon tax and emissions trading schemes (ETS). One aspect that I have written on has been the legality (under the World Trade Organisation) of a border tax adjustment (BTA) under a carbon tax.
This is one means of dealing with the loss of international competitiveness when a country decides to unilaterally impose a price for carbon emissions. Other alternatives include issuing free permits to especially affected entities under an ETS (as is proposed under Australia's mooted ETS - the Carbon Pollution Reduction Scheme. See http://www.climatechange.gov.au/emissionstrading/index.html).
A topical question is whether such measures are protectionist in nature (which would violate the WTO) and/or are efforts by the relevant country to impose its environmental policies on its trading partners. Such comments have been made to me privately in respect of a carbon tax BTA as a reason why such measures are unlikely to happen (but for political rather than legal reasons).
An interesting article appeared in the Wall Street Journal this week on this matter. President Obama's Energy Secretary, Steven Chu, reportedly commented during a House hearing that if countries like China and India do not impose a carbon charge on its own products after the US goes down this path (as is on President Obama's agenda), then the US could impose a carbon tariff on imports from these countries.
While such a measure would almost certainly violate the WTO, leading to all manner of legal and political consequences, it does demonstrate that these matters are front and centre in the ongoing move towards charging for carbon emissions.
Read the full article at: