I. INTRODUCTION II. CLIMATE CHANGE POLICIES: MULTILATERAL AND

TRADE AND CLIMATE CHANGE: UNVEILING THE PRINCIPLE OF COMMON BUT DIFFERENTIATED RESPONSIBILITIES FROM THE WTO AGREEMENTS FABio MOROSINI* ABSTRACT Climate change is reshaping international law as we speak. In the past, it might have been possible to separate aspects of international law into different "boxes." In the current state of affairs, however, one can observe environment and health policies impacting directly on the trade agenda and vice versa. The most current illustration of such interactions concerns the impact of climate change policies on multilateral trade regulation. This Article examines whether climate change policies are consistent with World Trade Organization (WTO) agreements, especially General Agreement on Tariffs and Trade (GATT) 1994. This Article argues that the principle of common but differentiated responsibilities reflected in the WTO legal system and in the climate change multilateral regulation should be used by WTO dispute settlement bodies to help resolve trade and climate change disputes. This Article then attempts to apply this new approach to a WTO Panel examining the trade restrictive aspects of the current draft of the American Clean Energy and Security Act of 2009. TABLE OF CONTENTS I. INTRODUCTION... 714 II. CLIMATE CHANGE POLICIES: MULTILATERAL AND UNILATERAL REGULATION... 717 A. The Principle of Common But Differentiated Responsibilities... 718 B. Multilateral Climate Change Regulation... 725 * Professor in law, Federal University of Rio Grande do Sul School of Law. Researcher, National Council of Technological and Scientific Development. Ph.D. 2007, LL.M. 2001, University of Texas at Austin; LL.M. (Honors) 2004, Universit6 Paris 1, Panthbon-Sorbonne, Institut d'ttudes Politiques de Paris; LL.B. 2000, Catholic University of Rio Grande do Sul. This article was written during a twelve-week fellowship at the WTO. I am extremely grateful to Gabrielle Marceau for her very thoughtful comments and to Patrick Low, Victor do Prado, Vera Thorstensen, and Jonathan Pratter. I am also thankful to Mariana Bom and Renan Andrade for excellent research assistance. Finally, this research would not have been possible if it were not for the financial support I received from FAPERGS and from the Board of Trustees of the WTO. All errors, of course, remain mine.

The Geo. Wash. Int'l L. Rev. [Vol. 42 C. National Regulatory Responses to Climate Change and Competitiveness... 728 1. The European Response: The EU ETS D irective... 729 2. The US Response: The Draft to the American Clean Energy and Security Act of 2009... 731 D. Summary... 735 III. TRADE AND CLIMATE CHANGE IN THE WTO DISPUTE SETTLEMENT: A GATT ARTICLE XX SPECULATIVE ANALYSIS... 737 A. The Free Allocation of GHG Emission Allowances, the "Emission Allowance Rebate Program" and the "International Reserve Allowance Program" Consistency with GATT Article XX (b) and (g)... 738 B. The Free Allocation of GHG Emission Allowances, the "Emission Allowance Rebate Program" and the "International Reserve Allowance Program" Consistency with GATT Article XX chapeau... 742 C. Summary...... 746 IV. CONCLUSION... 747 I. INTRODUCTION Climate change has become a buzz expression in recent times. Studies estimate that the global average surface temperature has increased by 0.74 C over the last century, and another 1.8 0 C to 4 0 C increase is expected by the year 2100.1 Greenhouse gases are responsible for naturally maintaining some of the sun's heat from reflecting back into space; thus, keeping the world a warm place. 2 When compounded with greenhouse gases originating from human activities, however, the global temperature may achieve levels that could, one day, eliminate all forms of life on earth. World leaders have acted collectively and proactively to address climate change issues, at least since the 1988 Rio Conference on Environment and Development. At the 1988 Rio Conference, the countries in attendance agreed that global environmental problems need to be addressed, taking into account the common 1. Fact Sheet: Climate Change Science - The Status of Climate Change Science Today, UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE (UNFCCC), http://unfccc.int/ press/fact-sheets/items/4987.php (last visited June 20, 2011). 2. Id.

2010] Trade and Climate Change but differentiated responsibilities (CDR) of states. 3 In 1992, as a result of the Rio Conference, most countries joined an international treaty to reduce global warming and to cope with whatever temperature increases are inevitable. 4 While the international regime on climate change has continued to evolve to take into account countries' different historical contributions to global warming and their ability to prevent or reduce the negative effects of increasing temperatures, several states have started to adopt their own versions of climate change policies; 5 such policies have significant impacts on a large number of sectors outside the purely environmental realm, including international trade. 6 This Article looks at the effects of some national climate change policies on the regulation of international trade, particularly in the goods sector, under the General Agreement on Tariffs and Trade (GATT). Within the world trading system, the assumption that trade will benefit the environment has come under serious attack, due to (1) concerns that more trade and economic activity may result in more environmental degradation; 7 (2) that the competition brought about by free trade may put pressure on governments to lower environmental standards; 8 and (3) that trade agreements may prevent governments from enacting certain environmental regulations. 9 In some early cases, the approach taken by GATT panels proved so controversial that it was never adopted by the GATT parties as required by GATT rules. 10 In subsequent cases involving measures that are taken to protect the domestic environment, WTO judicial bodies have taken a different approach, allowing more policy space for members to pursue health and envi- 3. United Nations Conference on Environment and Development, Rio de Janiero, Braz., June 3-14, 1992, Rio Declaration on Environment and Development, princ. 7, U.N. Doc. A/CONF.151/26/Rev.1 (Vol. 1), Annex I (Aug. 12, 1992) [hereinafter Rio Declaration]. 4. United Nations Framework Convention on Climate Change, May 9, 1992, 1771 U.N.T.S. 165 [hereinafter UNFCCC]. 5. WTO-U.N. ENV'T PROGRAMME, TRADE AND CLIMATE CHANGE 88 (Ludivine Tamiotti et al. eds., 2009), available at http://www.wto.org/english/res-e/bookspe/tradeclimate_ change-e.pdf. 6. See id. at 89. 7. See Joost Pauwelyn, Recent Books on Trade and Environment: GAF Phantoms Still Haunt the WF7O, 15 EUR. J. INT'L L. 575, 578 (2004). 8. Id. 9. Id. 10. Panel Report, United States-Restrictions on Imports of Tuna, DS21/R (Sept. 3, 1991); Panel Report, United States-Restrictions on Imports of Tuna, DS29/R (June 16, 1994); Panel Report, United States-Taxes on Automobiles, DS31/R (Oct. 11, 1994).

The Geo. Wash. Int'l L. Rev. [Vol. 42 ronmental objectives. 1 ' Recently, in Brazil - Measures Affecting Imports of Retreaded Tyres (Brazil - Retreaded Tyres),12 the Appellate Body has relaxed the necessity test of GATT Article XX (b), by merging it with the "relating to" test of GATT Article XX (g) and creating a new test. 1 3 Under this new test, a measure will be found to constitute a legitimate health and environment exception if it materially contributes to the achievement of the policy objective. 14 Additionally, the Appellate Body has developed a new understanding regarding the requirement that no WTO-consistent alternative to the measure be reasonably available, and the Appellate Body has developed on the GATT-era a less trade restrictive approach. 15 Currently, an alternative measure reasonably available is one that: (1) achieves the level of protection originally intended by the member country invoking the exception; 16 (2) is not theoretical in nature, meaning that the country may not be capable of taking it;17 and (3) does not impose undue burden on the member, such as prohibitive costs or significant technical difficulties.' 8 As to the chapeau of Article XX, which requires WTO members to ensure that measures are not applied in a manner that produces "arbitrary and unjustifiable" discrimination or a "disguised" restriction on trade, WTO jurisprudence has shown that the Appellate Body has determined that the conditions of the chapeau are not met if there is a failure to enter into cooperative arrangements with foreign producers; failure to take into account the costs imposed on foreign producers; or a failure to apply the measure flexi- 11. See Appellate Body Report, United States-Standards for Reformulated and Conventional Gasoline, at 29-30, WT/DS2/AB/R (Apr. 29, 1996) [hereinafter United States-Gasoline]; Appellate Body Report, United States-Import Prohibition of Certain Shrimp and Shrimp Products, 184-86, WAT/DS58/AB/R (Oct. 12, 1998) [hereinafter United States-Shrimp 1]; Appellate Body Report, United States-Import Prohibition of Certain Shrimp and Shrimp Products: Recourse to Article 21.5 of the DSU by Malaysia, 1 123-24, WT/DS58/AB/RW (Oct. 22, 2001) [hereinafter United States-Shrimp I1]. 12. See Appellate Body Report, Brazil-Measures Affecting Imports of Retreaded Tyres, WT/ DS332/AB/R (Dec. 3, 2007) [hereinafter Brazil-Retreaded Tyres]. 13. See Gabrielle Marceau & Julian Wyatt, Trade and the Environment: The W1"O's Efforts to Balance Economic and Sustainable Development, in ECONOMIE ENviRONNEMENT ETHIQUE: DE LA RESPONSABILITE SOCIALE ET SOCIETALE 225, 230-31 (Rita Trigo Trindade, Henry Peter & Christian Bovet eds., 2009). 14. Brazil-Retreaded Tires, supra note 12, 1 210. 15. Appellate Body Report, United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services, 1 308, WT/DS285/AB/R (Apr. 7, 2005) [hereinafter United State-Gambling]; Brazil-Retreaded Tyres, supra note 12, 170. 16. United States-Gambling, supra note 15, 1 308. 17. Id. 18. Id.

2010] Trade and Climate Change bly-rejecting or denying basic fairness and due process to exporting Members. 19 This Article addresses whether climate change regulation (multilateral and national) is consistent with GATT rules. This Article argues that climate change regulation is consistent with GATT rules, provided they rely on the principle of CDR, and that regulation, which departs from these rules and imposes trade restrictive environmental measures, may not be found to meet the conditions of GATT Article XX health and environment exceptions. The first Part of this Article searches for coherence between trade rules and climate change regulation, and it demonstrates that the principle of CDR, central to effective climate change regulation, can be found to exist within the WTO covered agreements. The second Part of the Article speculates on the possibility of a concrete GATT Article XX dispute settlement proceeding regarding the adoption of domestic regulation of climate change, which unilaterally restricts trade based on the objective of global reduction of greenhouse gas emissions, and competitiveness concerns. II. CLIMATE CHANGE POLICIES: MULTILATERAL AND UNILATERAL REGULATION Although the WTO covered agreements do not regulate the environment directly, members have drafted provisions in such a way that the provisions leave some open doors for the environmental regime to interact with trade rules. 20 The concept of sustainable development is one such example; by inserting the concept of sustainable development in the preamble to the agreement establishing the WTO, one could conclude that WTO members did not want to limit its effects to trade and environmental relations. In the field of trade and environmental relations, however, it is evident that the concept of sustainable development is reshaping the interpretation of the WTO covered agreements. 21 Looking further in the WTO rules, one can find other manifestations of principles that are supposedly born within the environmental legal system, as is the case with the principle of CDR. In this Part, this Article will demonstrate that the principle of CDR can be found to exist within 19. United States-Shrimp I, supra note 11, 1 181. 20. See, e.g., Marrakesh Agreement Establishing the World Trade Organization, pmbl., Apr. 15, 1994, 1867 U.N.T.S. 154 [hereinafter Marrakesh Agreement]; General Agreement on Tariffs and Trade art. XX(1)(b), (g), Oct. 30, 1947, 61 Stat. A3, 55 U.N.T.S. 194 [hereinafter GATT). 21. See Marceau & Wyatt, supra note 13, at 226-27.

The Geo. Wash. Int'l L. Rev. [Vol. 42 the WTO covered agreements. Therefore, it can be expected that the judicial bodies of the WTO will resort to CDR to resolve conflicts between trade, environment, and development. Section A defines the principle of CDR, identifies its central role in several multilateral environmental agreements, and argues that CDR also exists within the set of commitments assumed by WTO members. Section B addresses the multilateral work related to climate change, and contrasts it with some national policies to mitigate and adapt to climate change which, in some cases, may violate multilateral climate change and WTO rules altogether. A. The Principle of Common But Differentiated Responsibilities This Section deals with the principle of CDR, 22 which could be interpreted either as a component of the concept of sustainable development or independently. Either way, the principle of CDR is present in the WTO covered agreements. The principle of CDR is based on the idea that all states should cooperate to achieve the global objective of environmental protection. 23 In this sense, the responsibilities towards a sound environment are common-each state doing its part in a sort of global partnership. The principle of CDR, however, also acknowledges that these responsibilities are not equally distributed. 24 Professor Sands argues that the degree of differential responsibility will be measured against states' contribution to the creation of an environmental problem and their ability to prevent, reduce, and control the threat. 25 The Rio Declaration negotiators were aware of how hard it was to make developing countries agree on their common responsibilities, due to an old discussion on which countries should bear the 22. The principle of common but differentiated responsibilities (CDR) has been subject to considerable attention by legal scholars. See Duncan French, Developing States and International Environmental Law: The Importance of Differentiated Responsibilities, 49 INT'L & CoMP. L.Q. 35, 35 (2000) (examining the legal principle of common but differentiated responsibilities and discussing the ways of operationalizing it); Christopher D. Stone, Common but Differentiated Responsibilities in International Law, 98 AM. J. INT'L L. 276, 283-84 (2004) (exploring three different versions of common but differentiated responsibilities: rational bargaining, equitable, and inefficient); Lavanya Rajamani, The Principle of Common but Differentiated Responsibility and the Balance of Commitments Under the Climate Regime, 9 REv. EUR. COMMUNITY & INT'L ENVrL. L. 120, 120 (2000) (exploring the role of developing countries in the climate regime commensurate with the principle of common but differentiated responsibility). 23. See Rio Declaration, supra note 3, princ. 7. 24. See id. 25. See PHILIPPE SANDS, PRINCIPLES OF INTERNATIONAL ENVIRONMENTAL LAW 286 (2d ed. 2003).

2010] Trade and Climate Change costs of a clean environment. 26 Developing countries considered it unfair to slow down their development process to pay a bill that was not theirs in the first place. 27 Developed countries, on the other hand, were unwilling to compromise if no commitment was achieved on the part of developing countries. 28 The principle of CDR was the middle-ground solution. 29 In favor of developing countries' demands, the principle recognizes the historical contribution of states to the existing degradation and therefore, attributes greater responsibilities to developed countries. 30 Principle 7 of the Rio Declaration on Environment and Development states the following: States shall cooperate in a spirit of global partnership to conserve, protect and restore the health and integrity of the Earth's ecosystem. In view of the different contributions to global environmental degradation, States have common but differentiated responsibilities. The developed countries acknowledge the responsibility that they bear in the international pursuit to sustainable development in view of the pressures their societies place on the global environment and of the technologies and financial resources they command. 3 ' The principle of CDR was a major contribution of the Rio Conference. While it echoes the demands of developing countries for differential treatment, the principle reaches middle ground, where rich and poor countries alike are committed to "conserve, protect[,] and restore" the environment. 32 The language of the Rio Declaration does not base developed countries' responsibilities on their historical contribution to environmental degradation, but on "the pressure their societies place on the global environment." 33 Importantly, the Rio Declaration laid the groundwork for binding agreements that would further confirm the principle of CDR and quantify, where possible, theses different responsibilities. As a direct result of, and immediately following, the Rio Conference and Declaration, two important multilateral environmental agreements adopted the principle of CDR. First, the preamble to the Climate Change Convention acknowledges that "the global nature 26. See Ileana M. Porras, The Rio Declaration: A New Basis for International Cooperation, in GREENING INTERNATIONAL LAw, 20, 22-23 (Philippe Sands ed., 1994). 27. Id. 28. Id. 29. Id. at 27-30. 30. Id. 31. Rio Declaration, supra note 3, princ. 7 (emphasis added). 32. Id. 33. Id.

The Geo. Wash. Int'l L. Rev. [Vol. 42 of climate change calls for the widest possible cooperation by all countries and their participation in an effective and appropriate international response, in accordance with their common but differentiated responsibilities... [,] respective capabilities[,] and their social and economic conditions." 3 4 Article 3(1) of the Convention provides that "[lt] he Parties should protect the climate system for the benefit of present and future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities. Accordingly, the developed country [p] arties should take the lead in combating climate change and the adverse effects thereof." 35 Article 4 of the Convention also takes into account the CDR with regard to countries' commitments. 3 6 The 1997 Kyoto Protocol to the Climate Change Convention (Kyoto Protocol) 37 would take another step in the direction of establishing how the parties to the Protocol should meet their CDR. 3 8 Second, the 1994 Convention to Combat Desertification 39 also adopts the principle of CDR. Article 3(d) acknowledges the special needs of affected developing countries parties. 40 Article 5 establishes the obligations common to all the states party to the Convention, whereas Article 6 details obligations specific to parties that are developed countries. 41 On the non-legally binding side, the principle of CDR has been adopted in multilateral instruments, such as the Principles for a Global Consensus on the Management, Conservation, and Sustainable Development of all Types of Forests. 42 The legal status of the principle of CDR in international law has been subject to scholarly debate. Professor Malgosia Fitzmaurice argues that the principle of CDR forms part of the notion of the 34. UNFCCC, supra note 4, pmbl. 35. Id. art. 3(1). 36. See id. art. 4. 37. Kyoto Protocol to the United Nations Framework Convention on Climate Change, Mar. 16, 1998, 37 I.L.M. 22 [hereinafter Kyoto Protocol]. 38. Section B infra discusses the Kyoto Protocol's specific commitments. 39. United Nations Convention to Combat Desertification in Those Countries Experiencing Drought and/or Desertification, Particularly in Africa, Oct. 14-15, 1994, 33 I.L.M. 1328. 40. Id. art. 3(d). 41. Id. arts. 5-6. 42. United Nations Conference on Environment and Development, Rio de Janeiro, Braz., June 3-14, 1992, Non-Legally Binding Authoritative Statement of Principles for a Global Consensus on the Management, Conservation, and Sustainable Development of All Types of Forests, art. 8(a), U.N. Doc. A/CONF.151/26 (Vol. III), Annex III (Aug. 14, 1992) ("All countries, notably developed countries, should take positive and transparent action towards reforestation, afforestation and forest conservation, as appropriate.").

2010] Trade and Climate Change concept of sustainable development. 43 She challenges Sands' 1995 categorization of the principle of CDR as one that merely provides assistance to achieve sustainable development, as opposed to a principle inherent to the concept of sustainable development. 44 In Principles of International Environmental Law, Professor Sands uses the principle of CDR, as developed in Article 3(1) of the Climate Change Convention, to explain sustainable development's legal element of equitable use of natural resources. 45 According to Sands, one source of equity in international law is the principle of CDR used in the climate regime, which takes into account the needs and capabilities of different countries and their historic contribution to a given problem. 46 As a result, arguably, Sands reconsidered his 1995 opinion and after 2003, placed the principle of CDR within (inherent to) the concept of sustainable development by means of the equitable use of natural resources component of this concept. Based on the WTO covered agreements and on the case law developed by the WTO dispute settlement bodies in trade and environment disputes, possible interactions between the principle of CDR and WTO rules can be speculated. This Article suggests that the principle of CDR is inherent to the WTO rules, either as part of the concept of sustainable development or independent from it. First, the principle of CDR is arguably part of the concept of sustainable development, in line with Professor Fitzmaurice's thinking, 47 or according to Professor Sands' classification of the principle of CDR as inherent to the concept of sustainable development. 48 Hence, one needs to rely on the preamble to the WTO Agreement, which recognizes that WTO members should conduct their trade relations "in accordance with the objective of sustainable development." 49 The Appellate Body of the WTO has given increasing importance to the meaning of the objective of sustainable development. 50 In United States - Reformulated Gasoline, the 43. See Malgosia A. Fitzmaurice, International Protection of the Environment, 293 REcuEIL DES COURS 39, 64 (2001). 44. See id. at 51. 45. See SANDS, supra note 25, at 262. 46. See id.; Fitzmaurice, supra note 43, at 53 (arguing that "in the instance of international environmental law, equity is related to the principle of [CDR]"). 47. See Fitzmaurice, supra note 43, at 64. 48. See SANDS, supra note 25, at 262. 49. Marrakesh Agreement, supra note 20, pmbl. 50. See Marceau & Wyatt, supra note 13, at 226-27.

The Geo. Wash. Int'l L. Rev. [Vol. 42 Appellate Body recognized the objective of sustainable development as a legitimate and inherent WTO concern. 5 1 In United States - Shrimp I, the Appellate Body condemned the U.S. measures that mandated importing states to adopt the same regulatory program as that prevailing in the United States without taking into account different conditions that occur in the territory of the disputing countries. 52 In United States - Import Prohibition of Certain Shrimp and Shrimp Products - Recourse to Article 21.5 of the DSU by Malaysia (United States - Shrimp I), the Appellate Body approved U.S. measures because they took these conditions into consideration. 53 Finally, in Brazil - Retreaded Tyres, the Appellate Body took into consideration Brazil's developing country condition when it assessed the availability and feasibility of the measures alternative to the import ban. 54 In summary, in United States - Reformulated Gasoline, United States - Shrimps I and II, and in Brazil - Retreaded Tyres, the Appellate Body of the WTO relied on the concept of sustainable development to interpret WTO covered Agreements. In this situation, if the principle of CDR comes into play in the context of the WTO dispute settlement, a member could argue that CDR is inherent to the objective of sustainable development and therefore, rely on the preamble to the WTO Agreement's reference to such objective and the WTO dispute settlement bodies' use of it. Second, even if one disagrees that the principle of CDR is inherent to the concept of sustainable development, a member could still make the case that the principle of CDR should inform the interpretation of the WTO covered agreements based on a different passage of the preamble to the WTO Agreement or on GATT Article XX chapeau. The first possible manifestation of the principle of CDR outside the objective of sustainable development within WATO Agreements could be found in the preamble to the Marrakesh Agreement. 55 The preamble to the WTO Agreement provides the following: [That the member states] [r]ecognizing that their relations in the field of trade and economic endeavo[r] should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services... seeking both to protect and preserve the 51. United States-Gasoline, supra note 11, at 29-30. 52. See United States-Shrimp I, supra note 11, 1 163. 53. See United States-Shrimp II, supra note 11, 140, 144. 54. See Brazil-Retreaded Tyres, supra note 12, 171. 55. See Marrakesh Agreement, supra note 20, pmbl.

2010] Trade and Climate Change environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development[.] 56 The principle of CDR embraces the common responsibility of states for the protection of the environment and the need to take into account differing circumstances, or in other words, a state's contribution to a particular environmental problem and its ability to correct it. 57 This clause of the preamble to the WTO Agreement relies on the importance of trade relations as a means to promoting development, through the references to raising standards of living, full employment, and steadily growing volume of real income. 58 These development issues will be paramount to achieving the objectives of protection and preservation of the environment-a common responsibility of members. The clause, however, goes on to make reference to the differentiated responsibility of states for the protection of the environment by providing that their responsibility will be consistent "with their respective needs and concerns at different levels of economic development." 59 In other words, the negotiators of the WTO Agreement took into account a range of factors to establish members' responsibility for environmental protection: special needs and circumstances, different levels of economic development, and the demand that their societies place on the global environment. In sum, this preamble clause was drafted to embrace the principle of CDR. A second possible manifestation of the principle of CDR outside the WTO objective of sustainable development could be found within GATT Article XX chapeau; the Appellate Body already accepted a similar construction concerning the precautionary principle in EC - Hormones. 60 In EC - Hormones, the Appellate Body recognized that the precautionary principle indeed finds reflection in Article 5.7 of the SPS Agreement. 61 Now, a WTO member could rely on GATT Article XX chapeau tojustify the recognition of the principle of CDR by GATT negotiators. Article XX, chapeau and letters (b) and (g) provide the following: 56. Id. (emphasis added). 57. See Rio Declaration, supra note 3, princ. 7. 58. See Marrakesh Agreement, supra note 20, pmbl. 59. Id. 60. See Appellate Body Report, European Communities-Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R (Jan. 16, 1998) [hereinafter EC - Hormones]. 61. Id. 9 124.

The Geo. Wash. Int'l L. Rev. [Vol. 42 Subject to the requirements that such measures are not applied in a manner [that] would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:... (b) necessary to protect human, animal or plant life or health; (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption. 62 This Article argues that Article XX (b) and (g), and the principle of CDR, are based on similar rationales. In this sense, it is correct to suggest that Article XX, chapeau-when applied to environmental measures-plays the role of the principle of CDR within the WTO legal system. First, both Article XX (b) and (g), and the principle of CDR, acknowledge the common responsibility of states for the protection of the environment. The principle of CDR is grounded on this very assumption-that every country is responsible for the global environment. 63 Article XX (b) and (g) recognize that environmental concerns are so important to members that they may override trade-related interests. Second, Article XX (b) and (g), and the principle of CDR, take into account different circumstances of the states, such as the ability of the country to protect the environment. The principle of CDR considers the ability of the country "to prevent, reduce, and control the threat." 64 In doing so, this principle assesses the particular country's special needs and circumstances, stage of economic development, and historical contributions to causing an environmental problem. Similarly, the chapeau of Article XX examines the special needs and circumstances, the stage of economic development, and, arguably, the involved countries' contributions to causing a particular environmental problem, all under the framework of the clause "between countries where the same conditions prevail." 65 In United States - Shrimp I, the Appellate Body condemned the measures adopted by the United States because it did not take into consideration the local conditions, such as developing country status, of the complaining member states. 66 In United States - Shrimp II, the Appellate Body, inter alia, agreed that the United States adopted a 62. GATT, supra note 20, art. XX(I)(b), (g) (emphasis added). 63. See Rio Declaration, supra note 3, princ. 7. 64. See SANDS, supra note 25, at 286. 65. GATr, supra note 20, art. XX. 66. See United States-Shrimp I, supra note 11, 177, 181.

2010] Trade and Climate Change more flexible approach in the revised measures to take into account different levels of economic development. 67 Finally, in Brazil - Retreaded Tyres, the Appellate Body took into consideration Brazil's developing country status to conclude that the measures the European Union indicated to replace the import ban were neither viable nor feasible. 68 B. Multilateral Climate Change Regulation The Rio Conference on Environment and Development opened the door for a series of new multilateral environmental agreements that incorporated most of the key concepts and principles discussed in Rio. 69 The United Nations Framework Convention on Climate Change (UNFCCC), one of these agreements, was opened for signature in 1992.70 The UNFCCC is aimed at stabilizing greenhouse gas concentrations at a level that would prevent dangerous anthropogenic interference with the climate system 71 and has been ratified, as of June 2011, by 195 countries. 72 The UNFCCC has incorporated the concept of sustainable development, the principle of CDR, and the precautionary principle, while recognizing that measures taken to address climate change 73 should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade-in line with GATT Article XX. 74 Under the UNFCCC, countries are committed to developing national inventories of anthropogenic emissions of greenhouse gas (GHG), promote scientific, technological and technical cooperation in the area of climate change, and integrate climate change concerns into relevant social, economic, and environmental policies. 75 As a result of the principle of CDR, several provisions of the UNFCCC recognize that the effective implementation of the Convention should take into account special circum- 67. United States-Shrimp II, supra note 11, 144. 68. Brazil-Retreaded Tyres, supra note 12, 171. 69. See The Convention on Biological Diversity, June 5, 1992, 1760 U.N.T.S. 143 for an example of one of the multilateral agreements that was a product of the Rio Conference on Environment and Development. 70. UNFCCC, supra note 4, art. 20. 71. Id. art. 2. 72. Status of Ratification of the Convention, UNFCCC, http://unfccc.int/essential_back ground/convention/status of-ratification/items/2631 txt.php (last visited June 25, 2011). 73. UNFCCC, supra note 4, art. 3. Article 3(1), (3)-(4) defines climate change as change of climate, which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to natural climate variability observed over comparable time periods. Id. 74. See GATT supra note 20, art. XX. 75. UNFCCC, supra note 4, art 4.

The Geo. Wash. Int'l L. Rev. [Vol. 42 stances of developing countries, 76 their overriding social and economic development priorities, and their reduced capacity to take positive actions towards climate change mitigation. 77 In this regard, the UNFCCC emphasizes activities that take into account the special needs and concerns of these countries, such as investment, technology transfer, and insurance. 78 Moreover, the UNFCCC established a Conference of the Parties, 79 the supreme body of the Convention, and a Secretariat. 80 The UNFCCC, like the WTO, has a dispute settlement mechanism to address conflicts concerning the interpretation or application of the Convention. 81 Both agreements encourage the settlement of disputes between their parties through peaceful means, such as diplomatic negotiations. 82 In case the parties do not reach a mutually satisfactory agreement, the UNFCCC and WTO's Dispute Settlement Understanding will take different paths to settle the dispute. The UNFCCC submits the dispute to the International Court ofjustice, while the Dispute Settlement Understanding claims compulsory jurisdiction over the WTO covered agreements, creating a set of special procedures to govern these disputes. 83 Importantly, parties to the UNFCCC may propose amendments 84 and adopt protocols 85 to the Convention. So far, the most popular protocol of the UNFCCC is the Kyoto Protocol. The Kyoto Protocol was adopted in Kyoto, Japan, in 1997, and entered into force in 2005.86 As of March 2011, 193 parties have ratified the Kyoto Protocol. 87 As opposed to the UNFCCC, which encourages industrialized countries to stabilize GHG emissions, the Kyoto Protocol commits them to do So. 8 8 The Protocol sets binding targets for thirty-seven industrialized countries and the European Union 76. Id. art. 3(2). 77. Id. art. 4(5), (7). 78. Id. art. 4. 79. Id. art. 7. 80. Id. art. 8. 81. Id. art. 14(1); see Understanding on Rules and Procedures Governing the Settlement of Disputes art. 1 (1), Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401 [hereinafter DSU]. 82. UNFCCC, supra note 4, art. 14(1); DSU, supra note 81, at 415. 83. UNFCCC, supra note 4, art. 14(2); DSU, supra note 81, at 401. 84. UNFCCC, supra note 4, art. 15. 85. Id. art. 17. 86. Status of Ratification of the Kyoto Protocol, UNFCCC, http://unfccc.int/kyoto-protocol/status of ratification/items/2613.php (last visited June 25, 2011). 87. Id. 88. Kyoto Protocol, supra note 37, art. 3.

2010] Trade and Climate Change (including countries that are undergoing the process of transition to a market economy) for reducing GHG emissions by at least 5% below 1990 levels in the commitment period 2008 to 2012.89 The UNFCCC divides the parties into three categories, and the Kyoto Protocol requires a different commitment from each of them. 90 Each category is placed in a different annex to the Convention. Annex I Parties include the industrialized countries, which were members of the Organization for Economic Co-operation and Development (OECD) in 1992 and countries with economies in transition (the EIT Parties), Monaco, Liechtenstein, and the European Union. 9 1 Annex II Parties comprise the OECD members of Annex I and excludes the EIT Parties. 9 2 The third category is referred to as Non-Annex I Parties and consists mostly of developing countries, with special consideration given to the least developed among them. Moving away from a command-and-control approach to environmental regulation, the Kyoto Protocol developed a series of economic incentives to engage countries in working toward the objective of stabilizing GHG concentrations in the atmosphere. These economic tools include the so-called project-based mechanisms; for instance, a joint implementation mechanism, a clean development mechanism, and an emission trading scheme. 9 3 First, the joint implementation mechanism provides that any "Annex I Party may transfer to, or acquire from, any other [Annex I] Party emission reduction units resulting from projects aimed at reducing anthropogenic emissions by sources 94 or enhancing anthropogenic removals by sinks 95 of [GHG] in any sector of the economy." 96 Second, the clean development mechanism allows Annex I Parties to develop projects in developing countries (non-annex I Parties) 89. See id. art. 3, Annex B (listing the following countries: Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, European Community, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, Monaco, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russian Federation, Slovakia, Slovenia, Spain, Sweden, Switzerland, Ukraine, United Kingdom of Great Britain and Northern Ireland, and the United States). 90. See UNFCCC, supra note 4, Annexes I, II; Kyoto Protocol, supra note 37, art. 3. 91. See WTO-U.N. ENV'T PROGRAMME, supra note 5, at 69. 92. Id. 93. Kyoto Protocol, supra note 37, arts. 6, 12, 17. 94. "'Source' means any process or activity which releases a greenhouse gas, an aerosol, or a precursor of a greenhouse gas into the atmosphere." UNFCCC, supra note 4, art. 1(9). 95. "'Sink' means any process, activity or mechanism which removes a greenhouse gas, an aerosol or a precursor of a greenhouse gas from the atmosphere." Id. art. 1(8). 96. Kyoto Protocol, supra note 37, art. 6 (citations added).

The Geo. Wash. Int'l L. Rev. [Vol. 42 aimed at reducing GHG concentration in the atmosphere. 9 7 These project activities will generate certified emission reductions, which will help Annex I Parties to meet their commitments. 9 Third, Annex B Parties to the Kyoto Protocol may engage in emission trading. 99 In sum, the incorporation of the concept of sustainable development and the principle of CDR to the climate regime has made parties aware of the special needs and circumstances of developing countries and, consequently, has not required them to reduce their overall GHG emissions. While several Annex I Parties have made positive efforts to internalize the Kyoto Protocol to their domestic laws, 100 other parties have departed from Protocol commitments to elaborate climate change regulation focused mostly on competitiveness concerns, in potential disregard of the multilateral climate regime. 10 In the course of the next Section, this Article deals with an example of each approach: the experience of the European Union in establishing its scheme for GHG emission allowance trading within the Union and the U.S. climate change bill. C. National Regulatory Responses to Climate Change and Competitiveness In an effort to adopt measures to reduce GHG emissions, many countries have drafted their own versions of climate change regulation. 10 2 While the existence of multilateral environmental agreements, such as UNFCCC and its Kyoto Protocol, have encouraged some countries to create legislation that incorporates the main principles governing this field of regulation; other countries have reacted in the opposite direction, adopting measures that fail to take into account the different historical contributions to GHG 97. See id. art. 12(2). 98. See id. art. 12(3). 99. See id. art. 16 bis. The concept is simple: Parties agree to restrict the overall amount of GHG that they may emit in a given commitment period. Such amount of GHG is divided into units that can then be traded among the Parties. Erich Vranes, Climate Change and the WFO: EU Emission Trading and the WTO Disciplines on Trade in Goods, Services and Investment Protection, J. WORLD TRADE, Aug. 2009, at 707, 708. 100. See, e.g., Directive 2003/87/EC, of the European Parliament and of the Council of 13 October 2003 on Establishing a Scheme for Greenhouse Gas Emission Allowance Trading Within the Community and Amending Council Directive 96/61/EC, 2003 O.J. (L 275) 32. 101. See, e.g., American Clean Energy and Security Act of 2009, H.R. 2454, 111th Cong. (2009). 102. See WTO-U.N. ENV'T PROGRAMME, supra note 5, at 88.

20101 Trade and Climate Change emissions of developed and developing countries and their distinct levels of economic and social development. By rejecting the principle of CDR, some countries have gone as far as drafting legislation that may be interpreted as supporting the adoption of unilateral trade measures to guarantee that developed and developing countries are treated alike. The case study involving the EU ETS Directive reflects the first group of countries, and the draft of the U.S. Clean Energy and Security Act of 2009 portrays the second group of countries. 1 0 3 1. The European Response: 10 4 The EU ETS Directive The European Union has successfully created a complex mechanism to address climate change concerns within the Union. In 2003, the European Union passed Directive 2003/87/EC of the European Parliament and of the Council (EU ETS Directive), which creates a cap and trade scheme compatible with the UNFCCC and the Kyoto Protocol. 10 5 Under the Kyoto Protocol, the European Union is committed to achieve an 8% reduction in emissions of greenhouse gases by 2008 to 2012, compared to 1990 levels. 10 6 The EU ETS Directive applies to selected activities, namely: energy, production, and processing of ferrous metals, mineral industry, and to industrial plants for the production of pulp, paper, and board. 10 7 In addition, the EU ETS Directive applies to six types of greenhouse gases: carbon dioxide, methane, nitrous oxide, hydrofluocarbons, perfluorcarbons, and sulphur hexafluoride. 10 8 To achieve the objective of stabilizing concentration of greenhouse gases in the atmosphere, the EU ETS Directive has set up a complex emission trading scheme. 0 9 The EU ETS Directive establishes a greenhouse gas emissions permit, which is mandatory for the operation of GHG-emitting 103. Directive 2003/87/EC, supra note 100; H.R. 2454. 104. See generally Javier de Cendra, Can Emissions Trading Schemes Be Coupled with Border Tax Adjustments? An Analysis vis-d-vis WTO Law, 15 Riv. EUR. COMMUNITY&- INT'L ENVrL. L. 131 (2006) (dealing with the issue of whether the introduction of an emission trading scheme in combination with a border tax adjustment is likely to be compatible with WTO rules). 105. Directive 2003/87/EC, supra note 100. 106. Id. pmbl, recital 2. 107. Id. Annex I. 108. Id. Annex II. 109. See Cendra, supra note 104, at 133 (noting that the Commission acknowledged the little progress made on the issue of carbon energy taxation as a reason for introducing an emissions trading scheme).

The Geo. Wash. Int'l L. Rev. [Vol. 42 installations within the selected sectors mentioned above." t 0 The permit shall contain a description of the activities and emissions from the installation, monitoring requirements, reporting requirements, and an obligation to surrender allowances equal to the total emissions on the installation in each calendar year. 1 ' At the member state level, each state shall develop a national plan stating the total quantity of allowances 1 2 that it intends to allocate and how it intends to do so. 1 13 From 2005 to 2007, member states should have allocated at least 95% of allowances free of charge; and, from 2008 to 2012, 90% of the allowances shall be allocated for free. 14 The EU ETS Directive provides that member states shall lay down rules on penalties for infringing the national provisions pursuant to the Directive.1 15 Even though the majority of the allowances are allocated for free, this does not mean that the EU ETS Directive does not address competitiveness concerns. At the intra-eu level, for instance, provisions related to a national allocation plan, 116 to the methods of such allocation, and to the issuance of allowances" 17 demonstrate that the framers of the Directive were aware that it could impact negatively on the competitiveness of the European Union industry. With regard to negative impacts originating from international competition, Annex III states that national allocation plans may contain information on the manner in which the existence of competition from countries outside the European Union should be taken into account. 1 " To date, no country has brought any formal GATT complaint before the WTO based on the EU ETS Directive. According to Professor Vranes, however, the Directive may be challenged before the WTO for imposing a series of quantitative and qualitative restrictions on international trade. 1 9 In relation to GATT, problems may arise out of Article 30(3) of the EU ETS Directive: 110. Directive 2003/87/EC, supra note 100, art. 4. 111. Id. art. 6. 112. Id. art. 3 (defining allowance as "an allowance to emit one tonne of carbon dioxide equivalent during a specified period, which shall be valid only for the purposes of meeting the requirements of this Directive and shall be transferable in accordance with the provisions of this Directive"). 113. Id. art. 9. 114. Id. art. 10. 115. Id. art. 16. 116. Id. art. 9. 117. Id. arts. 10-11. 118. Id. annex 111(11). 119. See Vranes, supra note 99, at 713-16.

2010] Trade and Climate Change the issue being "whether complying with the requirements of [S]upplementarity requires quantitative or market access restrictions." 1 20 A second potential EU ETS Directive-GATT inconsistency is the restriction on the use of emission reduction units and certified emission reductions generated from nuclear facilities and land-use change and forestry activities. 121 This issue raises the product versus production process methods discussion. 122 A third potential GATT-inconsistency may arise out of the EU ETS Directive scheme for mutual recognition of emission certificates, which is limited to certificates originating from parties to the Kyoto Protocol. 123 2. The U.S. Response: The Draft to the American Clean Energy and Security Act of 2009 Across the Atlantic, climate change policies have also been subject to extensive legislative debate. First, onjune 26, 2009, the U.S. House of Representatives passed a bill entitled American Clean Energy and Security Act of 2009124 (U.S. Climate Bill), proposed by Senators Waxman and Markey. In addition, in 2010, Senators Kerry and Lieberman, proposed the American Power Act, 125 an alternative to the U.S. Climate Bill, which has not been formally introduced in the Senate. The analysis of the Kerry-Lieberman draft of American Power Act is beyond the scope of this Article. The U.S. Climate Bill is the first nationwide response to climate change and related competitiveness concerns. The U.S. Climate Bill is quite ambitious and purports to create energy jobs, achieve energy independence, reduce global warming pollution, and transition to a clean energy economy. 2 This Article focuses on specific elements of the policies related to reducing global warming pollution and transition to a clean energy economy-referred to in the U.S. Climate Bill as the Safe Climate Act. 120. Id. at 721. 121. Id. at 727. 122. See, e.g., United States-Shrimp I, supra note 11, 42. 123. See Vranes, supra note 99, at 729. Article 25(1) of Directive 2003/87/EC, supra note 100, provides as follows: Agreements should be concluded with third countries listed in Annex B to the Kyoto Protocol which have ratified the Protocol to provide for the mutual recognition of allowances between the Community scheme and other greenhouse gas emissions trading schemes in accordance with the rules set out in Article 300 of the Treaty. 124. See H.R. 2454. 125. See American Power Act of 2010, S_ 111th Cong. (2010), available at http:// lieberman.senate.gov/assets/pdf/apa-full.pdf (last visited June25, 2011). 126. See H.R. 2454, pmbl.

The Geo. Wash. Int'l L. Rev. [Vol. 42 Like the EU ETS Directive, the Safe Climate Act intends to reduce the quantity of GHG emissions within its covered territory. 127 To reduce the quantity of such emissions, the Safe Climate Act establishes a cap and trade scheme based on the level of U.S. GHG emissions in 2005.128 In 2012, the quantity of U.S. GHG emissions shall not exceed 97% of the quantity of emissions in 2005.129 The schedule decreases progressively, so that in 2020 quantity of U.S. GHG emissions shall not exceed 80% of 2005 levels; in 2030, that quantity drops to 58%, and in 2050, U.S. GHG emissions shall not exceed 17% of the quantity of the U.S. GHG emissions in 2005.130 Notably, environmentalists severely criticized the choice of 2005 as the base year for the U.S. GHG reduction emissions policy because the emission level in 2005 did not meet Kyoto's target based on 1990 levels.' 3 ' Unlike the EU ETS Directive, pricing of emission allowances is already thoroughly detailed. 132 The U.S. Safe Climate Act relates to the EU ETS Directive in many respects. First, similar to the EU ETS Directive, the Safe Climate Act enumerates which gases fall under the category of GHG for the purpose of the Act. 1 33 In addition to the six gases recognized by the EU ETS Directive, the Safe Climate Act also considers GHG nitrogen trifluoride and any other anthropogenic gas designated by the U.S. Environmental Protection Agency. 34 Second, in line with Article 10 of the EU ETS Directive, the Safe Climate Act elaborates a detailed emission allowances program from 2012 to 2050,135 thoroughly detailed in Section 321. Third, consistent with the allowance program, the Safe Climate Act establishes a system of permits, 136 similar to what the EU ETS Directive does in Articles 4, 127. See id. 702. 128. See id. 722. 129. Id. 702(1). 130. Id. 702(2), (3), (4). 131. See EUA: entre comercio e mundan~as climdticas [EUA: Between Trade and Climate Change], PONTES [BRIDGES], Sept.-Oct. 2009, available at ictsd.org/downloads/pontes/pontes5-4.pdf. Kyoto's emission reduction targets for the United States are -8% of its 1990 levels. See id. The U.S. Safe Climate Act GHG emission reduction targets are 4% of its 2005 levels. See id. 132. See, e.g., H.R. 2454 726(b)(1)(B). 133. Compare H.R. 2454 711 (a) (designating the gases that are considered GHG for purposes of the Act) with Directive 2003/87/EC, supra note 100, Annex II (listing the gases that are considered GHG). 134. H.R. 2454 711 (a)(7)-(8); Directive 2003/87/EC, supra note 100, Annex II. 135. H.R. 2454 721. As for the legal status of emission allowances, the Act states that an allowance does not constitute a property right. Id. at 721(c) (1); see also id. 321. 136. Id. 727.

2010] Trade and Climate Change 5 and 6.137 Fourth, like the EU ETS Directive, the Safe Climate Act establishes a scheme to offset international credits.1 38 On the other hand, the U.S. Safe Climate Act differs from the EU ETS Directive in many respects. While the European rules on competitiveness are still maturing, the United States has put forward a confusingly complex system to address this issue. First, the Safe Climate Act establishes a detailed system of free allocation of emission allowances to the benefit of several of its economic sectors. 1 3 9 Second, the Safe Climate Act creates two types of border tax adjustment schemes: 40 an "Emission Allowance Rebate Program"' 141 and an "International Reserve Allowance Program. ' 42 As for the free allocation of GHG emission allowances, the Safe Climate Act provides beneficial treatment to a series of consumers, government agencies, and industries. 43 Beneficiaries include, but are not limited to, electricity consumers, natural gas consumers, home heating oil, propane, and kerosene consumers.1 44 Starting in 2012, the Safe Climate Act auctions less than 30% of allowances during the first two years of operation. 45 Local distributors of electricity and natural gas, refining companies, and others get the remaining 70% of emission allowances for free. 14 c Freely allocated allowances increase in the following years; by 2014, only 18% of emission allowances are auctioned, against 82% of allowances distributed for free. 147 These figures allow economists to conclude that between 2012 and 2025 roughly 80% of allowances would be distributed freely, with the remaining 20% auctioned. 48 137. Directive 2003/87/EC, supra note 100, arts. 4-6. 138. Compare id. arts. 12(2), 25, 30(3) (listing various ways to offset international credits) with H.R. 2454 722(d) (1) (D), 728, 732 (listing various ways to offset international credits). 139. For an economic criticism of the Act's system of free allocation of emission allowances, see Andrew Chamberlain, Who Benefits from Free Emission Allowances? An Economic Analysis of the Waxman-Markey Cap-and-Trade Program (Sept. 28, 2009), available at http://ssrn.com/abstract=1479857. 140. H.R. 2454 763, 768. Finland also levies a carbon tax on the carbon content of fuels used for heating and transportation. WTO-U.N. ENV'T PROGRAMME, supra note 5, at 90. Similar carbon tax initiatives can be found in Sweden, Norway, Denmark, Slovenia, Italy, Estonia, and Switzerland. Id. at 130 n.12. New Zealand and Japan have considered introducing a carbon tax scheme, but decided not to proceed with it. Id. at 130 n.13. 141. H.R. 2454 763. 142. Id. at 768. 143. Id. at 782. 144. Id. at 783-85. 145. Chamberlain, supra note 139, at 23. 146. Id. 147. Id. 148. Id.

The Geo. Wash. Int'l L. Rev. [Vol. 42 The second set of measures aimed at U.S. competitiveness involves border tax adjustments to protect the U.S. economy against competition from foreign products produced under less stringent climate change regulation. 149 The border measures compensate U.S. producers for the costs incurred in implementing the Safe Climate Act, whenever foreign competitors bear lower "climate costs."' 150 The first group of measures adopted by the Safe Climate Act is known as the "Emission Allowance Rebate Program" (EARP), and it provides U.S. producers or manufacturers compensation for incurred "climate costs" upon the exportation of products to countries that do not impose such costs on similar products or where these costs are lower than those levied in the United States. 151 Eligible industrial sectors comprise entities included in the six-digit classification of the North American Industrial Classification System of 2002 that are energy or greenhouse gas intensive, trade intensive, or very energy or green house intensive. 152 Section 764 of the Safe Climate Act governs the distribution of the EARP.1 53 The second group of measures falling within the category of border tax adjustment is contained in the "International Reserve Allowance Program" (IRAP). 154 Different from the EARP, which compensates U.S. producers for "climate costs" upon exportation to countries marketing competitive products, IRAP works in the opposite direction, but also towards the protection of U.S. industry. IRAP is concerned with those products manufactured outside the U.S. territory, bearing lower "climate costs," and destined to the U.S. market. These imports are charged with international reserve allowances equivalent to those incurred by U.S. manufacturers because competitive U.S. products are put at a disadvantage vis-dvis imports. 55 The Safe Climate Act exempts from IRAP "any foreign country that the United Nations has identified as among the 156 least developed of developing countries[.]' Section 768 of the U.S. Safe Climate Act governs the distribution of the IRAP and states that the purpose of this Section is to address the threat of 149. H.R. 2454 763-64. 150. This Article uses the term "climate costs" to refer to costs incurred by industries within a country to reduce greenhouse gas emissions. 151. H.R. 2454 763. 152. Id. 153. Id. 764. 154. Id. 768. The IRAP is effective upon imports of covered goods entering the customs of the United States after January 1, 2020. Id. 155. Id. 156. Id.

2010] Trade and Climate Change "carbon leakage," ' 157 despite its highly disputable status in economic theory. 158 Alternatively to unilateral measures taken by the United States at the border, such as the International Reserve Allowance Program, the Safe Climate Act stresses that an international agreement with GHG-emitting nations is preferable. According to the Safe Climate Act, these agreements should be viewed as manifestations of the U.S. administration working proactively under the UNFCCC, towards committing all major GHG-emitting nations to contribute equitably to the reduction of global GHG emissions. 159 In describing the negotiating objectives of the United States with respect to multilateral environmental negotiations of this kind, the Act reinforces the need for worldwide common responsibilities and undifferentiated commitments to reduce GHG emissions. 160 This conclusion is reinforced in Section 3 of the U.S. Climate Bill, which mandates the administrator of the Safe Climate Act to annually prepare and certify a report to the Congress concerning whether China and India have adopted GHG standards at least as strict as those adopted by the United States. If international negotiations fail to accomplish a multilateral agreement under these terms by January 1, 2018, an international reserve allowance program shall be established. D. Summary In Part II, this Article demonstrated that the principle of CDR encourages every country to act cooperatively to achieve a given environmental objective, and commits particular states to make positive efforts to prevent or reduce an environmental problem based on these countries' historical contribution and ability to 157. The Act defines carbon leakage as "any substantial increase... in [GHG] emissions by industrial entities located in other countries if such increase is caused by an incremental cost of production increase in the United States resulting from the implementation" of the U.S. Safe Climate Act.. Id. 762. 158. See Arik Levinson, Environmental Regulations and Industry Location: International and Domestic Evidence, in I FAIR TRADE AND HARMONIZATION: PREREQUISITES FOR FREE TRADE? 429, 429 (Jagdish Bhagwati & Robert E. Hudec eds., 1996) (concluding that despite "anecdotal evidence that political jurisdictions (national or sub-national) pass environmental laws with an eye toward attracting (or retaining) industry, there is no evidence that industry responds to differences in these laws in significant ways"); John Douglas Wilson, Capital Mobility and Environmental Standards: Is There a Theoretical Basis for a Race to the Bottom, in 1 FAIR TRADE AND HARMONIZATION: PREREQUISITES FOR FREE TRADE?, supra note 158, at 393, 396 (suggesting that the chances for a race-to-the-bottom to occur are "mixed at best"). 159. H.R. 2454 765. 160. Id. 766.

The Geo. Wash. Int'l L. Rev. [Vol. 42 address such problem. As this Article has shown, the principle of CDR has been subject to considerable academic debate concerning its status in international law. Be it inherent to the concept of sustainable development or merely assisting in the process of achieving sustainable development, CDR can be found within the WTO legal system. If the principle of CDR is inherent to the concept of sustainable development, then it must be based on the preamble to the WTO Agreement, which makes express reference to sustainable development. 161 If, however, the principle of CDR is not part of the concept of sustainable development, manifestations of CDR are still found in another passage of the preamble to the WTO Agreement, or in the GATT Article XX chapeau. 162 In EC - Hormones, the Appellate Body recognized that Article 5.7 of the SPS Agreement could be read to reflect the precautionary principle. 163 The WTO dispute settlement bodies could do the same concerning the relationship of GATT Article XX chapeau and the principle of CDR. In sum, one way or another, the principle of CDR is part of WTO rules. Apart from the adoption of the principle of CDR by the WTO covered agreements, this Section has also shown that this principle has been incorporated into several other international instruments, such as the 1992 United Nations Declaration on Environment and Development, the 1992 UNFCCC, the 1994 Convention to Combat Desertification, and the 1997 Kyoto Protocol. Hence, as a matter of good faith and standing by its international commitments, WTO members to these agreements are expected to conduct their trade and environment relations in accordance with the principle of CDR. An investigation of some illustrative examples of recent national policies to mitigate and adapt to climate change does not always support this conclusion. In the case of the European Union, the EU ETS Directive draws its GHG reduction commitments from the Kyoto Protocol to the UNFCCC. Thus, one can conclude that the European Union climate change regulation is informed by the principle of CDR. 164 On the other hand, the analysis of the U.S. Safe Climate Act demonstrates that the principle of CDR is not fully acknowledged, even though the United States is a signatory to the UNFCCC. In the Safe Climate Act, with the excep- 161. Marrakesh Agreement, supra note 20, pmbl. 162. See id.; GATT, supra note 20, art. XX. 163. EC-Hormones, supra note 60, 124. 164. For an analysis of the consistency of the EU ETS Directive with the multilateral trade regime, see generally Vranes, supra note 99; Cendra, supra note 104.

2010] Trade and Climate Change tion of the least developed of developing countries, developing and developed countries alike are to be treated equitably with regard to their obligations to reduce global GHG emissions. As this Article will demonstrate in the next Part, the U.S. Safe Climate Act, as it stands, may be inconsistent with U.S. commitments before the WTO. III. TRADE AND CLIMATE CHANGE IN THE WTO DISPUTE SETTLEMENT: A GATT ARTICLE XX SPECULATIVE ANALYSIS The current version of the U.S. Safe Climate Act may challenge different GATT disciplines. First, the international reserve allowance program applicable to a limited number of countries while not extending it to every other WTO member may give rise to claims based on most favored nation violations. Such a measure could possibly violate members' commitments to eliminating quantitative restrictions or non-discriminatory administration of quantitative restrictions. Second, measures such as the international reserve allowance program may give rise to national treatment violation claims, if domestic-like products do not equally bear such costs. 165 Third, the WTO rules on subsidies may become an issue. 1 66 The WTO limits the level of specific subsidies allowable, and these subsidies are restricted if they are found to cause negative effects on trade and international competition. 167 Moreover, the WTO prohibits export subsidies. 168 Thus, national measures granting free GHG emission allowances to local producers and export tax-rebates, such as the U.S. "Emission Allowance Rebate Pro- 165. On the other hand, it has been suggested that a measure such as the international reserve allowance program could be considered GATT-legal if interpreted as a GATT Article 11(2) (a) border tax adjustment and in accordance with the 1970 Report of the Working Party on Border Tax Adjustments. SeeJoost Pauwelyn, U.S. Federal Climate Policy and Competitiveness Concerns: The Limits and Options of International Trade Law 17 (Duke U. Nicholas Inst. for Envtl. Pol. Sol., Working Paper No. 07-02, Apr. 2007), available at http://nicholasinstitute.duke.edu/climate/policydesign/u.s.-federal-climate-policy-and-competitiveness-concerns-the-limits-and-options-of-international-trade-law/at_download/paper. 166. This Article treats the Agreement on Subsidies and Countervailing Measures as a GATT issue. The Subsidies and Countervailing Measures (SCM) Agreement draws from GATT Article XVI (Subsidies). Because the SCM Agreement does not expressly revoke GATT Article XVI, this Article interprets the former as an extension of the latter. 167. See Gabrielle Marceau, The WTO and Climate Finance: Overview of the Key Issues, in CLIMATE FINANCE 247, 251 (Richard B. Stewart, Benedict Kingsbury & Bryce Rudyk eds., 2009). 168. See Agreement on Subsidies and Countervailing Measures art. 3.1 (a) -(b), Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, 1867 U.N.T.S. 154.

The Geo. Wash. Int'l L. Rev. [Vol. 42 gram," may be challenged under WTO's Agreement on Subsidies and Countervailing Measures (SCM Agreement). It is, however, beyond the scope of this Article to speculate on the consistency of the U.S. climate policy with GATT Articles I, II, III, XI, XIII, and the SCM Agreement. This Article is limited to speculating on the consistency of the U.S. Safe Climate Act with GATT Article XX environmental exceptions. 169 Therefore, for the sake of argument, this Article assumes three things. The first assumption is that a developing country member without a GHG emission reduction program decides to challenge the consistency of the U.S. climate policy before the WTO judicial bodies. It then assumes that a WTO dispute settlement body concludes that the challenged U.S. measures are found to violate one, some, or all of the above mentioned GATT provisions and/or the SCM Agreement. The third and final assumption is that the United States will invoke GATT Article XX (b) and (g) in a defense, as ajustification for otherwise inconsistent measures. Sections A and B of this Part contrast this assumption against the background of relevant WTO case law and attempt to predict whether future WTO dispute settlement bodies would find the U.S. climate change measures to benefit from the justification and flexibilities provided in the Article XX environmental and health exceptions. A. The Free Allocation of GHG Emission Allowances, the "Emission Allowance Rebate Program" and the "International Reserve Allowance Program" Consistency with GATY Article XX (b) and (g) Section 701 (b) of the U.S. Safe Climate Act states that the general purpose of the Act is "to help prevent, reduce the pace of, '1 70 mitigate, and remedy global warming and its adverse effects. Besides other primarily domestic policies, the United States plans to achieve this policy goal and address competitiveness concerns through essentially three mechanisms: (1) free allocation of emis- 169. Note that the potential tensions between national climate change regulation and WTO rules are by no means limited to the GATT. See Marceau, supra note 167, at 249 (suggesting that the potential tensions between climate policy and international trade law might not be limited to GATT, but may as well raise significant issues under TBT, SPS, GATS, the Agreement on Agriculture, Regional Trade Agreements, and TRIPS). 170. H.R. 2454 701(b).

2010] Trade and Climate Change sion allowances; 171 (2) export tax-product rebate; 1 72 and (3) border tax adjustments on imports. 173 The Appellate Body has interpreted GATT Article XX health and environmental exceptions in an evolutionary manner to take account of WTO's commitment to sustainable development. 174 Consequently, the WTO has allowed greater policy space to members invoking health and environmental policy concerns. In Brazil - Retreaded Tyres, the latest representative trade and environment dispute, the Appellate Body seems to have merged GATT Article XX (b) and (g) tests to examine environment and health measures with an integrated approach.' 75 This Section of the Article will replicate the Appellate Body's approach taken in Brazil - Retreaded Tyres1 7 6 to verify the consistency of the measures enacted through U.S. climate change policies with (b) and (g) of Article XX. The Appellate Body's approach in Brazil - Retreaded Tyres has relaxed Korea - Beef's threeprong weighing and balancing test. 177 Korea - Beefs test seems to have been replaced by a less stringent analysis concerning the determination of whether the challenged measures adopted by a member is apt to materially contribute to achieving the health and environment policy objective. 1 78 In Brazil - Retreaded Tyres, the Appellate Body stated the following: A contribution exists when there is a genuine relationship of ends and means between the objective pursued and the measure at issue. To be characterized as necessary, a measure does not have to be indispensable. However, its contribution to the achievement of the objective must be material, not merely marginal or insignificant[.] 179 Concerning the U.S. climate policies, the first question to ask is whether free allocation of allowances, export tax-product rebates, and border tax adjustment on imports qualify as a potential material contribution to achieving the objective of helping prevent, reducing the pace of, mitigating, and remedying global warming 171. Id. 782. 172. Id. at 763. 173. Id. at 768. 174. See United States-Shrimp 1, supra note 11, 11 130, 135. 175. See Marceau & Wyatt, supra note 13, at 230-31. 176. See Brazil-Retreaded Tyres, supra note 12, 150, 210. 177. See Appellate Body Report, Korea-Measures Affecting Imports of Fresh, Chilled and Frozen Beef 91162-63, WT/DS161/AB/R, WT/DS169/AB/R (Dec. 11, 2000) [hereinafter Korea-Bee], for the test. 178. See Brazil-Retreaded Tyres, supra note 12, 1 210. 179. Id.

The Geo. Wash. Int'l L. Rev. [Vol. 42 and its adverse effect. One can argue that free allocation of emission allowances makes part of the transition period from high to low carbon-based domestic industry easier. Once the industry is used to the functioning of GHG emission allowances, it will arguably be easier to introduce the auction-based GHG emission allowance scheme. The auction-based GHG emission allowances scheme will make the U.S. carbon-intense industries meet national environmental and health policy goals, the ultimate objective of the U.S. climate regulation. The United States, however, would probably argue that full compliance with the GHG emission allocation scheme depends on foreign competition bearing climate costs equitably. Thus, the policy goal is presented as a comprehensive policy package, which relies on free allocation of emission allowances, export tax-product rebates, and BTAs on imports. Notably, in Brazil - Retreaded Tyres, the Appellate Body recognized the difficulty of isolating the contribution to health or environmental policy goals of one specific measure from those attributable to other measures that are part of the same comprehensive policy. 180 This difficulty may very well be the case presently before us. The allocation of GHG emission allowances within the United States is conditioned to foreign competitors adopting equitable measures. 18 In the U.S. climate regulation package, the interplay between free allocation of emission allowances, export tax-product rebates, and BTAs on imports could reasonably be seen as one that constitutes a material contribution to achieving the ultimate policy goal of reducing GHG emissions. The Appellate Body has concluded that the measures do not need to be indispensable. 182 In conclusion, the U.S. measures arguably fall under the category of measures that materially contribute to the achievement of the purpose of reducing GHG emissions-even if this contribution is not readily observable.1 s3 A second point within the analysis of whether a measure or group of measures falls under GATT Article XX (b) and (g) exceptions involves the long-standing debate over reasonably available less trade restrictive alternatives. In the pre-wto era, the member 180. The Appellate Body stated: "[H]t may prove difficult to isolate the contribution to public health or environmental objectives of one specific measure from those attributable to the other measures that are part of the same comprehensive policy." Id. 151. 181. See infra Section B for a discussion of what could constitute equitable measures. 182. Korea-Beef supra note 177, 161. 183. See Brazil-Retreaded Tyres, supra note 12, 1 151.

2010] Trade and Climate Change invoking a health or environmental trade restrictive measure had to demonstrate that no other less trade restrictive measure existed. 184 In more recent WTO jurisprudence, two significant changes have taken place with regard to the requirement that no WTO-consistent alternative to the measure be reasonably available. 85 First, the Appellate Body has established that the member challenging the trade restrictive measure bears the burden of proving that other less trade restrictive measures exist, which are also reasonably available--not imposing prohibitive costs or substantial technical difficulties upon the respondent. 186 Thus, after United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services (United States - Gambling), it is no longer required for the WTO member adopting the measure to prove that there exist no alternative measures to meet its health and environment policy objective. 187 Second, the Appellate Body has concluded that a measure only qualifies as reasonably available if it achieves the level of protection originally intended by the member invoking the exception-even if that level is zero risk. 188 In sum, in the case before us, it would be up to the members challenging the U.S. measures to prove that reasonably available measures exist that meet the U.S. level of health and environmental protection. For the sake of argument, this Article assumes that the United States would be successful in establishing that their measures fall under the material contribution standard, required from GATT Article (b) and (g) paragraphs; and that the member challenging these measures would not be capable of demonstrating that reasonably available measures in fact exist. The next step of the analysis involves determining whether the U.S. measures meet the conditions of GATT Article XX chapeau. 184. Panel Report, United States-Restrictions on Imports of Tuna, 5.28, DS21/R - 39S/ 155 (Sept. 3, 1991). 185. See Marceau & Wyatt, supra note 13, at 232-34. 186. See United States-Gambling, supra note 15, 309. 187. Id. 188. See Appellate Body Report, European Communities-Measures Affecting Asbestos and Asbestos-Containing Products, 172, WT/DS135/AB/R (Mar. 12, 2001).

The Geo. Wash. Int'l L. Rev. [Vol. 42 B. The Free Allocation of GHG Emission Allowances, the "Emission Allowance Rebate Program" and the "International Reserve Allowance Program" Consistency with GATT Article XX chapeau. The chapeau of Article XX is a good faith requirement. 189 It is not enough that WTO members taking trade restrictive measures to further environmental and health policy goals succeed in establishing that their policies fall under paragraphs (b) and (g) of Article XX; they must also demonstrate that they apply these measures in a non-discriminatory fashion. Moreover, after the creation of the WTO, trade and environment relations are to be built upon the concept of sustainable development. This Part of the Article contrasts recent WTO jurisprudence concerning the Article XX chapeau with the manner in which the United States tends to apply these measures. In United States - Reformulated Gasoline, the Appellate Body concluded that the United States did not meet the requirements of the GATT Article XX chapeau because it failed both to pursue the possibility of entering into cooperative arrangements with foreign producers and to take into account the costs imposed on foreign producers. 190 The United States' failure to meet the requirements of the GATT raises two questions: (1) Would the manner in which the United States is likely to apply its climate change regulation meet the standards set by the Appellate Body in United States - Reformulated Gasoline?; and (2) Do the U.S. climate measures take note of sustainable development's role in their policies? First, one needs to establish whether the U.S. Safe Climate Act's provisions on international negotiations towards the creation of a binding multilateral environmental agreement meet the first condition created by the Appellate Body in United States - Reformulated Gasoline in order to pursue the possibility of entering into cooperative arrangements with foreign producers. 191 Section 766 (a) (1) of the U.S. Safe Climate Act states that the negotiating objectives of the United States with respect to multilateral environmental negotiations is to "reach an internationally binding agreement in which all major [GHG]-emitting countries contribute equitably to the reduction of global [GHG] emissions."' 92 Arguably, the United States is pursuing the possibility of entering into cooperative 189. See United States-Shrimp I, supra note 11, 158; see also Marceau & Wyatt, supra note 13, at 234. 190. See United States-Gasoline, supra note 11, at 27-28. 191. See id. at 27. 192. H.R. 2454 766 (a)(1).

2010] Trade and Climate Change arrangements with foreign producers. It seems beyond the scope of Appellate Body's interpretation in United States - Reformulated Gasoline to examine the terms of the said arrangements. What if the terms of the arrangement are mostly beneficial to the proponent member, does it still meet the requirement of "pursuing the possibility of entering into cooperative arrangements with foreign producers"? 193 In the Shrimp II dispute, the Appellate Body has concluded, inter alia, that the said member is expected to have made "serious, good faith efforts" to conclude an international agreement. 194 One could argue that going into the terms of a non- WTO international agreement falls outside of the dispute settlement bodies' 'jurisdiction." The second prong of United States - Reformulated Gasoline requires the WTO member invoking a health and environmental exception to take into account the costs imposed on foreign producers. 195 Here, the United States would have to calculate the costs their climate regulation imposes upon foreign producers that export their products to the United States. Seemingly, the United States is only calculating the costs of climate change regulation to its own national industry. There are no signs in the present version of the U.S. Safe Climate Act of a parallel concern for the climate costs incurred by foreign competition. The Appellate Body's requirement to take into account the costs imposed on foreign producers should be read in conjunction with the WTO members' obligations to conduct their relations according to the objective of sustainable development, present in the preamble to the WTO Agreement. Accordingly, the United States would need to consider the effects of its climate regulation on the economies of the affected countries; bearing in mind that focusing on U.S. interests alone, at the end of the day, may amount to unjustifiable or arbitrary discrimination. In other words, WTO dispute settlement bodies should approach the trade effects of the U.S. climate measures as a potential hindrance to achieving sustainable development among WTO developing countries. In addition, this inquiry should not be subject to a time limit, according to the Appellate Body in Brazil - Retreaded Tyres. 196 Moreover, Section 765 of the U.S. American Clean Energy and Security Act states that the U.S. policy is to work proactively under 193. See United States-Gasoline, supra note 11, at 27. 194. United States-Shrimp I1, supra note 11, 132. 195. United States-Gasoline, supra note 11, at 28. 196. Brazil-Retreaded Tyres, supra note 12, 151.

The Geo. Wash. Int'l L. Rev. [Vol. 42 the United Nations Framework Convention on Climate Change prior to establishing unilateral trade measures. 19 7 Sections 765 and 766 of the Act are aimed at committing all major GHG-emitting nations to contribute equitably. 198 How should the obligation to contribute equitably be interpreted by the WTO dispute settlement bodies? In United States - Shrimp I, the Appellate Body concluded that the United States did not succeed in meeting the conditions of GATT Article XX chapeau because they failed to apply the measure flexibly-taking into account the need to permit different regulatory approaches in different countries. 199 When the United States - Shrimp's flexibility test 200 is applied to the U.S. climate regulation, 20 1 the first question is whether the obligation that all major GHG-emitting nations contribute equitably to the reduction of global GHG emissions falls under the definition of a measure being applied flexibly. At least two interpretations are possible: one that supports the thesis that U.S. climate change regulation is applied flexibly and another that holds the contrary conclusion. Either way, U.S. climate regulation should be read in accordance with the concept of sustainable development and the principle of CDR-inherent to the WTO legal system. The first possible interpretation of the U.S. climate regulation supports the conclusion that the obligation for all major GHGemitting countries to contribute equitably to the reduction of global greenhouse gas emissions meets the requirement that the measure be applied flexibly. This interpretation is possible if one reads the word equitably as taking into account the principle of CDR, namely: (1) different levels of economic and social development of GHGemitting countries affected by the regulation; (2) the affected members' contribution to climate change; and (3) the ability of the affected countries to contribute to climate change mitigation. Once all these elements are addressed by the U.S. climate policy and all of the major GHG-emitting countries' obligations are set accordingly, then the U.S. measures would seem to fall under the Appellate Body's definition of a measure applied flexibly. The second possible interpretation of the U.S. climate regulation does not support the conclusion that the obligation of all 197. See H.R. 2454 765. 198. See id. 765-66. 199. United States-Shrimp I, supra note 11, 177, 181. 200. See id. 201. H.R. 2454.

2010] Trade and Climate Change major GHG-emitting countries to contribute equitably to the reduction of global GHG emissions meets the requirement that the measure be applied flexibly. Under this interpretation, equitably means equally, in the same manner that the United States contributes. In United States -Shrimp I, the Appellate Body condemned the measures adopted by the United States precisely because the United States did not take into consideration the stage of development of the complaining members, and therefore, were not applied flexibly. 2 0 2 Requiring that every major GHG-emitting member complies with the same U.S. standards, irrespective of their level of economic development, their technical capacity to equally contribute, not to mention its historical contribution to global climate change, does not meet the requirement of the measure being flexibly applied; quite the contrary in fact. As Part 11 (A) argues, GATT rules have incorporated the principle of CDR in at least two different passages of the preamble to the WTO Agreement and in GATT Article XX chapeau. In so doing, members recognize that their trade and environment relations are informed by differentiated responsibilities-depending on the country's contribution to the creation of the environmental problem and their ability to prevent, reduce, or control it. In conclusion, this interpretation of WTO members' obligation to contribute equitably to the reduction of global GHG emissions would not likely meet the requirements of GATT Article XX chapeau. Finally, the WTO dispute settlement bodies would arguably be committed to interpret a potential U.S.-developing country member dispute according to the concept of sustainable development, present in the preamble to the WTO Agreement. 20 3 United States - Reformulated Gasoline demonstrates that the Appellate Body took into account the preamble to the WTO Agreement and the Decision on Trade and Environment to acknowledge the importance of coordinating policies on trade and environment. 20 4 In United States - Shrimp I, the Appellate Body reinforced this approach when it concluded that the manner in which the United States applied its measures were not flexible enough to take into account different development conditions of the complaining members. 20 5 Finally, in Brazil - Retreaded Tyres, the concept of sustainable development also played an important role in the Appellate Body's analysis of 202. United States-Shrimp I, supra note 11, 177. 203. See Marrakesh Agreement, supra note 20, pmbl. 204. See United States-Gasoline, supra note 11, at 29-30. 205. United States-Shrimp I, supra note 11, 1 177.

The Geo. Wash. Int'l L. Rev. [Vol. 42 alternatives reasonably available to Brazil. 20 6 There, the Appellate Body concluded as follows: [T]he capacity of a country to implement remedial measures that would be particularly costly, or would require advanced technologies, may be relevant to the assessment of whether such measures or practices are reasonably available alternatives to a preventive measure, such as the Import Ban, which does not involve 'prohibitive costs or substantial technical difficulties.' 20 7 In the context of climate change mitigation, compliance with currently drafted U.S. policies concerning reduction of GHG emissions may prove difficult even to the more developed of the developing countries. Therefore, if a U.S.-developing country dispute arises before the WTO, its dispute settlement bodies are expected to follow previous Appellate Body interpretation and take into account the levels of development of the disputing member to assess its capacity (financial and technical) to contribute to the reduction of GHG emissions. C. Summary This Part of the Article demonstrated that the draft of the U.S. Safe Climate Act may challenge a series of GATT provisions. First, the Article assumed that the U.S. comprehensive policy package on climate change would be found to violate specific GATT provision because this Article focuses on the relationship between trade and environmental and health policies. Second, this Article assumed that the United States would argue that even if their measures were to be found in violation of GATT provisions, they would nonetheless fall under GATT Article XX (b) and (g) health and environment exceptions. Predicting WTO dispute settlement bodies' interpretation of the current U.S. Climate Safety Act, this Article concluded that the comprehensive package of U.S. climate policies would likely meet the conditions set in paragraph (b) and (g). As for GATT Article XX chapeau's interpretation, this Article showed that there would be at least two possible interpretations. The U.S. Safe Climate Act commits all major GHG-emitting nations to contribute equitably to the reduction of global GHG emissions. If WTO dispute settlement bodies interpret this GHG term "equitably" to be read according to the principle of CDR, the U.S. policy would likely meet the conditions of the chapeau. If the term equitably is read to mean equally, however, in the same manner as the United 206. Brazil-Retreaded Tyres, supra note 12, 169-72. 207. Id. 171.

2010] Trade and Climate Change States is supposed to reduce global GHG emissions, then WTO dispute settlement bodies would likely conclude that the measures are applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination where the same conditions prevail, or a disguised restriction on international trade. Finally, a WTO panel or the Appellate Body would likely make use of previous trade and environment WTO jurisprudence that recognizes the need to coordinate trade, environment, and development policies. IV. CONCLUSION Regulation of climate change is undoubtedly one of the most complex problems facing world leaders today. Potential conflicts of climate change regulation with other regulated branches of international law, such as international trade, cannot be underestimated. The number and the level of discussions presently taking place in international institutions, such as the WTO, indicate that the trading system needs to be prepared to accommodate climate change demands in the international trade agenda. Finding the right balance within the trade and climate change relationship is far from an easy task, especially after the failure of the United Nations Climate Change Conference in Copenhagen to reach an agreement on new binding commitments to reduce greenhouse gas emissions. 2 0 8 Unless international negotiations on climate change achieve what today looks like a miraculous compromise between developed and developing countries, chances are that the WTO dispute settlement bodies will likely be called to address the trade-related aspects of climate change policies. This Article advocated for coherence between trade and climate change regulations through the principle of common but differentiated responsibilities, arguably inherent to the rules of both systems. The Article's proposal supports the thesis that states negotiate international agreements in good faith, taking into account their previous commitments in other related fora; 20 9 and it dismisses the complexities of WTO outsourcing. 210 Finally, this 208. See The United Nations Climate Change Conference in Copenhagen, 7-19 December 2009, UNFCCC, http://unfccc.int/meetings/cop_15/items/5257.php (last visited July 11, 2011). 209. See Gabrielle Marceau, A Call for Coherence in International Law: Praises for the Prohibition Against "Clinical Isolation" in WJ'O Dispute Settlement, J. WORLD TRADE, Oct. 1999, at 87 (discussing the good faith aspect of negotiating international agreements). 210. See Petros C. Mavroidis, No Outsourcing of Law? WTO Law as Practiced by Courts, 102 AM. J. INT'L L. 421 (2008) (providing an assessment of the corpus of law that the adjudicating bodies of the WTO have used since the establishment of the organization).

748 The Geo. Wash. Int'l L. Rev. [Vol. 42 Article strongly suggests that due consideration to the WTO principle of common but differentiated responsibilities in future trade and climate change disputes will be an effective way to empower and engage developing countries in the fight against global warming.