When Climate Action is Justified, Carbon Import Fees Are Warranted

By Daniel Hoenig
February 14, 2024

Momentum continues to build worldwide for the use of carbon import fees, policies that charge importers for the emissions embedded in traded goods. The World Trade Organization (WTO) Appellate Body has yet to definitively interpret provisions that could determine the legality of carbon import fee approaches. In the absence of guidance, some have voiced reservations about the consistency of carbon import fees with WTO law.

In the Council’s recent report, “Carbon Import Fees and the WTO,” Matthew Porterfield offers credible legal defenses for each of the policies under consideration by policymakers. Justification of climate action as an essential security measure, an exception under Article XXI(b) of the General Agreement on Tariffs and Trade (GATT), may provide the most expansive legal protection. This exception hinges on two pieces of logic:

  • a qualifying security interest exists if it constitutes an emergency in international relations; and
  • countries have broad discretion to adopt policies that confront these security threats when they qualify as an emergency in international relations.

The WTO only has authority to rule on the first question: whether a security interest qualifies as an emergency in international relations. If its conditions are met, then the WTO may not “prevent any contracting party from taking action which it considers necessary” to combat the threat. Countries are then at liberty to launch countermeasures as they see fit.

In a previous ruling on the U.S. Section 232 tariffs, a WTO panel clarified that a qualifying security interest exists if the threat “rise[s] to the gravity or severity of tensions on the international plane so as to constitute an ‘emergency in international relations.’” Given this interpretation, the WTO should not inhibit countries from addressing security threats that are widely recognized as such by the international community. Key WTO members have already recognized climate change as a national climate emergency and identified the multifaceted risks that it poses to security interests.

Although the U.S. has not officially declared a climate emergency, President Biden says that he has done so “practically speaking.” Government reports, including a 2021 report from the U.S. National Intelligence Council (NIC), have found that climate change poses a threat to the U.S., its allies, and our security interests. This includes direct threats to U.S. assets, as well as to regions of the world with less adaptive capacity in which the U.S. may be called upon to provide humanitarian assistance, resolve disputes, or accept migrants. Climate change poses a risk to public health, energy and food systems, internal conflict mitigation, and military readiness, all of which tend to have a cascading effect

The NIC report is rich with examples. Rising temperatures, for instance, have increased conflict and ineffective governance surrounding water resources. This has reduced access to clean drinking water, lowered crop yields, and intensified disease outbreak. The ensuing instability has left power vacuums ripe for insurgencies and terrorists that threaten U.S. assets. Meanwhile, rising sea levels threaten coastally-located U.S. military installations and impede the Navy’s ability to respond to foreign threats.

Eighteen countries have officially made Climate Emergency Declarations (CEDs) since 2019, including important WTO members South Korea, Japan, Canada, France, Italy, Spain, and New Zealand. In addition, over 2,300 sub-national jurisdictions and local governments have announced their own CEDs, representing over 1 billion people. These declarations all express the same sentiment: the threat of climate change is real and imminent.

For example, the South Korean CED asserts that “humanity faces an era of ‘climate crisis’ that goes beyond ‘temperature changes,’” as “droughts, floods, heat waves, cold waves, typhoons, and large-scale forest fires are increasing.” The Japanese CED also cites “unprecedented damage” from natural disasters exacerbated by the “climate crisis.” The Canadian CED cites studies that shows its temperatures rising at twice the global average and the French and Italian CEDs voice the critical need to reach net zero emissions goals by 2050.

In its 2019 CED, the European Parliament called on the European Commission, the Member States, and all global actors “to urgently take the concrete action needed in order to fight and contain this threat before it is too late.” The Parliament references this CED in its justification for the WTO-permissibility of its own carbon import fee, the Carbon Border Adjustment Mechanism (CBAM).

The EU has been the most vocal opponent of broad WTO interpretations, having previously argued against the U.S.’ invocation of Article XXI to justify the section 232 steel and aluminum tariffs. But Article XXI permits the U.S. to confront security risks that constitute an emergency in international relations, a grading that the European Parliament has itself used to describe climate change. Alongside other important world players, the U.S. has asserted the severity of the climate threat and the critical need for quick and decisive countermeasures.

Climate change has been broadly documented to present a threat to the essential security interests of the United States and other countries. It is reasonable that the U.S. respond as it would to any existential security threat.

The essential security measure provides legal grounds for the adoption of carbon import fees.

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