International Trade

AuthorElizabeth Trujillo
Page 197
I. Introduction
e Deep Decarbonization Pathways Project (DDPP) pol-
icy report for the United States denes deep decarboniza-
tion as “the reduction of greenhouse gases over time to a
level consistent with limiting global warming to 2 degrees
or less, based on the scientic consensus that hig her levels
of warming pose an unac ceptable risk of dangerous cli-
mate change.”1 is translates to a reduction of U.S. green-
1. J H. W  ., P  D D  
U S, U.S. 2050 R, V 2: P I 
house gas emissions by at least 80% by 2050.2 It identies
three pillars of deep deca rbonization as energy eciency
and conservation, decarbonization of electricity and fuels,
and switching of liquid fuels to low-carbon supplies. In
developing eective policy for energy transformation,
the DDPP recognizes the complex market and jurisdic-
tional landscape in wh ich the U.S. energy system operates,
including geographic fragmentation of energy markets
and the divisions across multilevels of governance around
energy policy (federal, state, and local).
e DDPP report correctly notes that decarbonization
in the United States, and elsewhere, requires transforma-
tion of the physical energy system to one that will funnel
capital and investments towards low-carbon inf rastructure,
energy sources, and consumer products. e report identi-
es a great many laws and policies to achieve that result.3
Many of these policies are domestic, of course, but there
D D   U S 8 (Deep Decarboniza-
tion Pathways Project & Energy and Environmental Economics, Inc.,
2015), available at
2. Id.
3. See id.
Chapter 8
International Trade
by Elizabeth Trujillo
As countries fulll their commitments to the Paris Climate Agreement and engage in climate change mitiga-
tion policies and domestic decarbonization strategies, governments must ensure their policies comply with their
trade obligations. is chapter provides a brief overview of key areas where international trade rules may impact
U.S. policies geared toward decarbonization. It focuses primarily on the policies needed for decarbonization, as
outlined in the Deep Decarbonization Pathways Project reports, that are connected to international trade rules,
with the goal of nding ways of using the international trade legal framework as another tool for encouraging,
rather than inhibiting, decarbonization eorts at the national level. Part II sets out the policy tools promoting
decarbonization most likely to implicate or conict with trade rules. Part III provides a primer on the main trade
rules that intersect with decarbonization tools, such as border tax adjustments, subsidies, labeling schemes, and
local content requirements. Part IV examines specic cases where decarbonization has led to trade law conicts
as well as recommendations for decarbonization strategies that are trade compliant and avoid such conicts in
the future. Part V considers preferential trade agreements as an alternative way that trade policymakers and
regulators may work together toward decarbonization.
Author’s Note: is chapter is based on and excerpts have been
drawn from Elizabeth Trujillo’s upcoming book with Cambridge
University Press, Reframing the Trade and Environment Linkage
for Sustainable Development. e author would like to extend
special thanks to Prof. James Salzman at University of California,
Los Angeles School of Law and Bren School of Environmental
Science and Management, who generously contributed to this
chapter with helpful comments and edits. anks also go to Anna
Roy and Sara Murdock for their research assistance on this chapter.
e author would also like to thank the research support of Texas
A&M University School of Law.
Page 198 Legal Pathways to Deep Decarbonization in the United States
is another critical layer of governance important to under-
standi ng the energy polic y landscape— the supranational.
is chapter focuses on regional and multilateral trade
regimes to which the United States is a member. While
there are few if any specic trade r ules for deep carboniza-
tion laws and policies, they may have implications for trade
and even violate a trade agreement, especially if they are
intended to protect U.S. industries at the expense of com-
petitive goods and services from importers.4 As this chap-
ter explains, international trade rules provide both a set of
constraints and a set of opportunities for decarbonization.
is chapter is divided into four main parts. Section II
sets the stage by briey describing the ma in policy mecha-
nisms that countries, and the United States more speci-
cally, use to promote their domestic renewable energy-sector
and low-carbon infrastr uctures—mecha nisms that may
implicate trade commitments. ese include feed-in tar-
is (FITs), local content requirements (LCRs), taxes and
border tax adjustments (BTAs), subsidies, and eco-label-
ing. Section III provides a brief primer on the most sig-
nicant international trade ru les in the context of these
deep carbonization strategies. Section IV brings together
these parts, expla ining how policy mechanisms to promote
deep carbonization can c onict with international trade
rules. is section also makes recommendations for policy
measures that ca n avoid potential trade law violations. An
overarching theme is that these schemes work best under
trade rules when they are pa rt of a more comprehensive
decarbonization policy intended to address cl imate change
and environmenta l concerns.
Section V steps away from the traditional doctrinal
trade tools and considers other forms for reconciliation
that use the international trade framework as a means of
fostering sustainable development, namely through the
negotiating processes of preferential trade agreements and
regulatory cooperation established w ithin them. A prefer-
ential trade agreement reduces tari s for specied products
for Parties to the agreement, and has many fewer Parties
than the multilateral trade framework of the World Trade
Organization (W TO); many preferential trade agreements
are regional (e.g., North American Free Trade Agreement
(NAFTA)). is section considers key areas where there
already is some regulatory coordination, for example,
among the North American pa rtners of the United States,
Canada, and Mexico t hrough the emergence of regulatory
cooperation councils in specic sectors of common inter-
4. Corporate Average Fuel Economy (CAFE) standards and local standards
regarding transportation are less likely to impact trade, except to the extent
there may be dierent standards for U.S. goods and services in this regard
than for similar imports and these dierences advantage U.S. production
over importers. is chapter will not specically discuss transportation and
CAFE standards.
est such as oil and gas.5 Also, it briey discu sses the regu-
latory cooperation frameworks established in the recently
executed European Union (EU)-Canada C omprehensive
Economic and Trade Agreement (CETA)—the free trade
agreement that has argu ably made the largest strides in
reconciling trade and environmental issues. Despite recent
changes in the U.S. position on the Trans-Pacic Partner-
ship (TPP) and the Transatlantic Trade and Investment
Partnership (TTIP), these new plurilatera l agreements can
serve as models for future U.S. trade agreements, espe-
cially with respect to the reduction of non-tari barriers
and enhanced regulatory cooperation and harmonization.
Section VI conc ludes.
Conicts between trade liberalization eort s and envi-
ronmental protection have been at the center of the trade
and environment debate for some time. In fact, one of the
challenges for both environmental and trade policymakers
results from their respective legal frameworks, which have
dierent goals and use dierent vocabularies in approach-
ing economic development. Recent measures promoting
deep decarbonization, as identied in the next section,
have increased the conict in the past decade, resulting
in a signicant number of formal trade disputes.6 Some of
these tensions may be unavoidable, especially when they
are also part of a greener industrial policy.7 International
trade law’s emphasis on increased liberalization of com-
merce and the ecient expansion of supply chains as part
of economic development will often run into eorts to
protect the environment that have protectionist impacts,
whether intentional or not. e overall goal of this chap-
ter is to nd ways of reducing these tensions, using both
market and regulation mecha nisms to create fertile ground
for the multiple goals of ecient clean energy production,
low-carbon infrastructure, and market production. While
international trade rules certainly impose limits on how
the United States can pursue decarbonization, they also
provide opportunities.
II. Policy Tools to Promote Deep
Countries have relied on a great variety of basic polic y tools
to promote decarbonization at the national and local levels.
In practice, this has primarily meant measure s intended to
5. See Ex O   P   U S, U
S-M H-L R C C W
P (2012),les/omb/
work-plan.pdf; T W H, U S-C R
C C J F P (2014), https://obamawhite-
6. See, e.g., Mark Wu & James Salzman, e Next Generation of Trade and
Environment Conicts: e Rise of Green Industrial Policy, 108 N. U. L.
R. 401 (2014).
7. Id.

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