This is the last post for the year and it is on trade and climate.
Recent news of the compatibility of EU's Carbon Border Adjustment Mechanism have been discussed here, here, here and here. The EU CBAM is essentially a carbon tax on imports into the EU based on the carbon content of the product. Initially it covers iron and steel, cement, fertilizers, aluminium and electricity generation.
The questions of the measure being discriminatory and incompatible with WTO law would engage trade lawyers no end - from non-discrimination to like products to process and production methods debates. A WTO challenge, when the measure is in place, would be likely.
However, what caught my attention in the last week of 2021 is a piece by Christian Haberli on the inevitability of a challenge and what is the way forward. Titled Carbon Border Adjustment Mechanism + WTO = Impasse Totale? he suggests that a possible way out is the defunct dispute settlement mechanism. What I understood of this argument was that the crisis facing the WTO dispute settlement with the Appellate Body crisis is possibly a "quick way" for the implementation of the CBAM.
"... Might the absence of a coercing dispute settlement mechanism in the WTO open a window for the EU to proceed with a "clean and green" CBAM not entirely WTO-compatible?"
It is a non-trivial issue when one states that a non-functioning dispute settlement mechanism can impact effective implementation of WTO rules. The lack of the threat of effective enforcement can be a ground for WTO inconsistent measures to take precedence. While the merits of having such measures may be strong, it no doubt undermines the system. Today, climate change measures, tomorrow national security and day after may be labour enforcement? It seems that a lack of a strong dispute settlement mechanism can re-imagine domestic policy that impacts trade. However, will all WTO members be able to take advantage of this "temporary" stalemate or just a few?
Appealing into the void seems to be appealing now!
See you in 2022.