The Kyoto Protocol and the WTO: Integrating Greenhouse Gas Emissions Allowance Trading into the Global Marketplace

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"This article explores the relationship between the newly emerging market for tradable greenhouse gas emissions allowances established by the 1997 Kyoto Protocol on Climate Change and the rule-based frameworks of the World Trade Organization (WTO). The paper finds that the greenhouse gas emissions reduction responsibilities and emissions trading rights established by the Kyoto Protocol do not conflict in any way with the responsibilities and rights of the nations under the WTO Agreements governing trade in goods, services, and the provision of subsidies. Rather, the emissions trading structure of the Kyoto Protocol deploys a rule-based system of "free trade" in emissions allowances to benefit the environment in a manner that is fully compatible with the WTO system. The article cautions, however, that if governments implement their Kyoto Protocol obligations by placing quantitative restrictions on trade in allowances, or arbitrarily or unjustifiably discriminating against certain nations engaged in emissions trading, such measures might raise WTO issues at the same time that they would diminish the environmental effectiveness of the protocol. The article recommends that in designing rules for the Kyoto Protocols multilateral emissions trading system and structuring national implementation of Protocol obligations, governments can maximize environmental and economic benefits if they refrain from raising non-tariff barriers to trade in emission allowances, and avoid imposing quantitative restrictions on, or arbitrarily discriminating against, such trade. The article concludes that by following these recommendations, governments enhance the potential for the Kyoto Protocol to achieve real, significant, and cost-effective reductions in emissions of global warming gasses, while reducing the likelihood that their implementation of greenhouse gas emissions reduction measures would raise any inconsistency with their responsibilities under the multilateral trading system."



greenhouse effect, Kyoto Protocol, cooperation--international, global commons, international relations, prisoner's dilemma