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WTO launches trade sustainability group, carbon tax likely on agenda

Highlights

Group aims to help eliminate trade barriers

WTO foresees mediation role in carbon border tax disputes

London — The World Trade Organization is launching a Trade and Environmental Sustainability joint initiative group which was expected to be a forum for the discussion of carbon border taxes.

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Some 53 WTO member countries are slated to take part in the group's inaugural meeting on March 5, which will identify goals and objectives related to trade and sustainable development, a WTO official told S&P Global Platts.

That will involve "structured discussions ... on actions and deliverables" in this area, according to the WTO.

Canada and Costa Rica will coordinate the initial meeting, whose attendees will include the EU, Australia, Canada, Chile, Japan, Mexico, New Zealand, Norway, Singapore, South Korea, Taiwan and the UK, the official said.

Neither China nor the US are slated to take part but could join later, he said.

A WTO release last November on the aims of the new group indicated that its work program could contribute to eliminating tariff and non-tariff barriers in environmental goods and services, reforming inefficient fossil fuel subsidies, and promoting a global circular economy by facilitating trade along supply chains.

CBAM discussion

The EU's plan for a Carbon Border Adjustment Mechanism were likely to be discussed at the meeting, although may not be included in the formal agenda.

The EU was expected to make a proposal in the second quarter for a carbon border tax on imports of products relating to their carbon footprint, in a scheme designed to become effective in 2023.

The US is said to also be considering a similar move.

Although viewed by some as a form of green protectionism, carbon border taxes are designed to encourage use of less carbon-intensive technologies worldwide and are likely to result in standardization of what may qualify as a 'green' or low-carbon product, including in the key steel and aluminum areas.

David Boublil, the European Commission's director general, taxation and customs union, said in November in presentation to a European steel distributors' association Eurometal conference that the EC considered the risk of trade retaliation to be a key challenge to its proposed implementation of a CBAM for selected sectors including steel, even though the tax is aimed to be an "important element of climate diplomacy".

WTO deputy Deputy Director-General Alan Wolff foresees the trade organization needing to mediate in disputes surrounding carbon border taxes.

"Co-operation will be necessary as countries move to raise the cost of emitting greenhouse gases, with many considering carbon border tax adjustments to prevent carbon leakage," Wolff said Feb. 9 in a meeting at Washington International Trade Association.

"The alternative to co-operation would be bitter conflict and protracted policy uncertainty. The WTO has an important role to play to deliver the better of these two choices."