Themes in Subsequent Chapters

In Chapter 2, we examine a series of international environmental principles that enjoy broad acceptance, as evidenced by their inclusion in the1992 Rio Declaration on Environment and Development. We analyze how these principles find expression in international climate change law and WTO law, in order to determine the legal parameters that unilateral measures must respect to be consistent with both international legal regimes. This analysis shows that there is no inherent inconsistency between the climate change regime and WTO law. This discussion will inform more detailed analyses in subsequent chapters of international economic law (international trade law, international investment law, and international intellectual property law).

Governments have the right to regulate matters that fall within their jurisdiction. They have agreed to restrict that right in international treaties on trade, investment, and intellectual property rights. Thus, the right to regulate is constrained to the extent that the conduct in question is specifically covered by international treaty obligations[1] or other sources of international legal obligations. Therefore, to determine the scope of the right to regulate requires the interpretation of those international treaty obligations to determine their scope and meaning. This task has become increasingly complex with the proliferation of international treaties, many of which have not been judicially interpreted. In addition, these international treaties must be interpreted in light of each other’s content, in order to avoid conflicting interpretations. The complexity of this legal analysis represents an additional obstacle to the effective regulation of climate change, particularly since the relevant treaties that regulate international economic law were not drafted with climate change in mind.

The legal constraints require climate change policies to be implemented within the limits imposed by international obligations regarding trade and foreign investment. Compliance with the WTO Agreement on Technical Barriers to Trade and the General Agreement on Tariffs and Trade (GATT) will require careful design of measures such as standards, carbon labels, carbon taxes, and border tax adjustments. Similarly, governments will need to respect the provisions of international investment agreements to avoid the cost of compensating foreign investors. We address these issues in Chapters 3 and 4.

Technological innovation will have to play a central role in addressing climate change mitigation and adaption. We do not focus on the policies needed to spur such technological innovation nor the scientific challenges. Rather, we focus on what is needed to overcome obstacles to technological diffusion, which are legal, economic, financial, and political impediments or constraints. Impediments refer to obstacles that may foreclose certain policy options. Constraints refer to parameters within which policies must be designed and implemented.

The legal impediments affect policies regarding intellectual property and subsidies. With respect to intellectual property, there is no one-size-fits-all solution; the solution depends on the nature of the technology in question. This means that flexibility is important regarding the policy options that countries have at their disposal. However, a growing number of free trade agreements have introduced “TRIPS plus” provisions that reduce flexibility in this regard, which may affect the affordability of some climate change technologies. We analyze the potential effects of the TRIPS Agreement and the UPOV Convention on access to climate resistant plant varieties in Chapter 5.

Chapter 6 applies the concepts of environmental economics to the problem of climate change. Greenhouse gas emissions create a negative economic externality, by imposing the costs of climate change on society. Climate change regulation seeks to internalize this cost by adjusting the market price for carbon emissions. Unilateral measures represent only a partial solution because they will not achieve the desired level of emissions reductions. However, they can still be used to create incentives for multilateral action, which is what is needed to effectively address the risks associated with climate change. Chapter 6 examines the macroeconomic models used to calculate those risks.

International treaty obligations are not the only constraints on climate change regulation. Governments also face financial constraints, which will also influence the design of climate change regulation. Chapter 7 analyzes the role of financial markets in addressing climate change, examining the lessons learned from the SO2 market and the EU emissions trading system to consider how CO2 mitigation will work in the future. Chapter 7 also considers the role of insurance in climate change adaptation. The catastrophic risk markets in the reinsurance industry give us a market-based way to address the adaptation problem.

Existing WTO law also restricts the use of subsidies and permits the application of countervailing measures to subsidized imports, both of which have implications for investments in technology development and dissemination. We examine climate finance in Chapter 8 and consider sources of financing and constraints on financing mechanisms in WTO subsidies law.

  • [1] Robert Jennings and Arthur Watts (eds.), Oppenheim’s International Law (9th edn., Longman,London 1996) vol. 1, 931—2.
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