The certainties in life: death, taxes, and global warming? An analysis of border tax adjustments as incentives for promoting worldwide energy efficiency.

Author:Gates, Kayla

    Benjamin Franklin once wrote: "[I]n the world, nothing can be said to be certain except death and taxes." (1) Over 200 years later, there may now be another certainty in life: global warming. (2) Perhaps we can use one certainty to avert another. (3) One way to help alleviate global warming is to encourage environmentally responsible conduct through taxes, as taxes serve as an incentive influencing people's lifestyle choices. (4) For example, some countries offer tax breaks for constructing energy efficient buildings and driving electric cars to reduce carbon emissions. (5) Although ecotaxes are currently in place, to establish a norm of environmental respect worldwide, the World Trade Organization (WTO) should implement border tax adjustments (BTAs) on exports manufactured using inefficient energy technologies. (6)

    This Note will propose the implementation of export taxes on goods produced using inefficient manufacturing processes and analyze whether such taxes would comply with WTO regulations. (7) Part II of this Note will discuss the causes and potential future effects of global warming. (8) Part III of this Note will discuss the history of BTAs, as well as the structure and functions of the WTO. (9) In Part IV, this Note will analyze the benefits of BTAs as incentives promoting energy efficiency. (10) Finally, Part V of this Note will support the need for the WTO to weigh environmental concerns above commercial matters. (11)

  2. FACTS

    1. Global Warming

    1. Causes of Climate Change

      Recently, much debate has surfaced regarding the magnitude and uncertainty of how global warming will affect the Earth and whether global warming is exacerbated by human activities. (12) However, according to NASA, certain facts and observations regarding Earth's recent climate change are indisputable. (13) For example, sea levels have risen about 17 centimeters in the last century, and the rate of sea level increase in the last decade is nearly twice that of the last century. (14) Additionally, ocean temperatures increased 0.302[degrees]F since 1969, and ice sheets in Greenland and Antarctica decreased in mass about 36 and 60 cubic miles between 2002 and 2006. (15) Scientists have come to accept these observations regarding climate change as proof that global warming is real. (16)

      While scientists are certain that global warming is happening, they have spent years trying to determine exactly what is causing it. (17) Although scientists have determined that certain natural events have been a factor in climate change, nature alone cannot explain the significant increase in global warming that has occurred in recent years. (18) According to National Geographic, the recent increase in global warming is attributable to greenhouse gases emitted by human activity, such as the combustion of fossil fuels in cars, factories, and electricity production. (19) These greenhouse gases absorb the heat radiating from Earth and trap the heat in the atmosphere, thereby causing the planet's surface temperature to rise. (20) Additionally, certain gases in the atmosphere prevent heat from escaping into space and remain semi-permanently in the atmosphere. (21) Human activity has exacerbated the greenhouse effect as our industrial activities have only increased the amount of greenhouse gases that seep into the atmosphere. (22)

    2. The Future of Global Warming

      Climatologists know with virtual certainty that Earth's temperature has risen about 1.0 to 1.7[degrees]F between 1906 and 2005. (23) Additionally, the Intergovernmental Panel on Climate Change (IPCC) concluded that the probability that human activities have warmed the Earth over the past 250 years is more than 90%. (24) Although speculation exists among the science of climate change, climatologists claim that their "understanding of global warming processes and computer models have improved" significantly over the years. (25) For example, scientists have considerable confidence in computer models of the Earth's climate, called general circulation models, which simulate the planet's climate and project future climate changes. (26) While the exact future consequences of global warming are uncertain, based on recent scientific observations, the IPCC asserts that "warming of the climate system is unequivocal" and that global warming is continuing at an unprecedented rate. (27)

      General circulation models indicate, and scientists project accordingly, that in the next century the average temperature of the planet will increase between 2.5 and 10[degrees]F and that the sea level will rise between 3.5 and 35 inches. (28) Warming of the Earth's surface could cause further glacial melting, which would lead to rises in sea levels. (29) Global warming could also alter precipitation cycles, and this could significantly shift the climate in various regions, thereby changing the habitats of wildlife and plants. (30)

      Ecosystems professor John Harte came up with a way to investigate the consequences of climate change by using a meadow in the Rocky Mountains as a test site and gradually heating the site for 15 years. (31) Harte studied how the heating affected the meadow's natural carbon levels and observed that the soil in the meadow lost 20% of its carbon as it warmed over the years. (32) Warming caused the soil's carbon to escape into the atmosphere, and if a similar loss were to occur worldwide, the carbon dioxide levels in the atmosphere could increase to amounts beyond the results that worst-case models have predicted. (33) Although Harte concedes that one alpine meadow test plot is not enough to make global claims about climate change, Harte also noted that ecosystems in other locations have started to show similar outcomes and effects of global warming. (34)


    1. Border Tax Adjustments

      Border adjustments date back to the formation of the European Union and the Treaty of Rome in the late 1950s, which aimed to reduce customs duties on trade between member states and establish a common external tax. (35) A BTA is "an adjustment of the taxes imposed domestically on products when the goods are imported" into a country. (36) Nations can use BTAs "to internalize certain negative externalities otherwise not reflected in product prices." (37)

      One type of BTA that has been the topic of ongoing debate is a carbon BTA, or a trade tariff that carbon-taxing nations would impose on goods produced in non-carbon-taxing countries. (38) The idea behind this type of carbon BTA is to level the playing field of the international trade market by incorporating the social costs of pollution into the prices of goods manufactured through carbon intensive processes. (39) Essentially, these BTAs would impose additional trade tariffs on goods produced by states whose manufacturing processes are very energy intensive. (40) Proponents of these carbon-based BTAs argue that export taxes could incentivize developed countries to take responsibility in confronting global warming, and in turn these developed countries can aid developing countries in addressing climate change. (41)

      Former French Prime Minister Dominique de Villepin proposed that countries that do not join the Kyoto Protocol or some other post-2012 treaty on climate change should face additional trade tariffs on their exported goods. (42) French President Nicolas Sarkozy and Italian prime Minister Silvio Berlusconi support the idea of a carbon-based BTA and have urged the European Commission to consider introducing such a tax at the EU level. (43) Similarly, economics professor Joseph Stiglitz wrote that other countries should impose BTAs on U.S. exports manufactured using energy intensive facilities in order to compensate for the subsidy that those exports receive due to the lack of a nationwide carbon tax in the United States. (44) According to Stiglitz, U.S. companies benefit from an unfair competitive advantage because of the low costs these companies incur using energy intensive technologies, and "the world is paying the price through global warming." (45)

      Likewise, John Hontelez, secretary general of the European Environmental Bureau, proposed that the European Union should use BTAs to tax U.S. exports, thereby reducing environmental irresponsibility from outside. (46) Doing so would allow nations that currently use clean and renewable energy production methods to advance and encourage non-carbon-taxing countries to follow suit. (47) Hontelez also mentioned, however, that poor countries with lower rates of carbon emissions should not have to face BTAs; instead, the burden belongs to developed nations like the United States who have failed to take a stand against climate change. (48) The United States, for example, has not ratified the Kyoto Protocol, nor has it implemented a federal carbon tax, despite the fact that the United States is one of the highest carbon-emitting countries. (49) Therefore, Hontelez argues, countries like the United States owe a duty to the rest of the world to compensate or pay for extensive carbon emissions instead of taking advantage of low energy costs that pollute the environment. (50)

    2. The WTO

      1. What is the WTO?

        The WTO is the only international body that oversees the rules of international trade. (51) WTO rulings are binding on each of the 153 countries that are members of the international agency, including the United States. (52) In 1995, the Uruguay Round negotiations created the WTO to replace an earlier international organization called the General Agreement on Tariffs and Trade (GATT), which was promulgated in 1948 and lasted until the WTO replaced it in 1994. (53) The WTO adopted the GATT but broadened its scope to cover intangible property and services. (54) The WTO strives to promote free trade by negotiating trade agreements, settling trade disputes, and supervising international trade policies. (55) Although the WTO aims to open trading on a global scale, the WTO also acknowledges that some...

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