Climate change and the WTO: EU emission trading and the WTO disciplines on trade in goods, services and investment protection

Journal of World Trade

Volumn 43, Issue 4, 2009, Pages 707-735

  Vranes, Erich ^a  

^a VIENNA UNIVERSITY OF ECONOMICS AND BUSINESS   (Austria)

Author keywords

[No Author keywords available]

Indexed keywords

CLEAN DEVELOPMENT MECHANISM; CLIMATE CHANGE; EMISSIONS TRADING; EUROPEAN UNION; INVESTMENT; JOINT IMPLEMENTATION; KYOTO PROTOCOL; WORLD TRADE ORGANIZATION;

EID: 70349857830     PISSN: 10116702     EISSN: None     Source Type: Journal    
DOI: 10.54648/trad2009029     Document Type: Article

References (241)

1. Cf. the so-called EC linking directive, Directive 2004/101/EC of the European Parliament and of the Council of 27 Oct. 2004 [2004] OJ L 338/18; on this directive, cf. also below, Section 1.3.
2. J. Lefevere, 'Greenhouse Gas Emission Allowance Trading in the EU: A Background', Yearbook of European Environmental Law 3 (2003): 149, 155.
3. Cf. FIELD, 'EC Trade and Competition Law Issues Raised by the Design of an EC Emissions Trading Scheme', FIELD Scoping Paper Number 1, prepared for the EC Commission, , June 1999, 13 ff.;
4. J. Werksman, Greenhouse Gas Emissions Trading and the WTO, Review of European Community and International Environmental Law (1999): 251, 254 ff.;
5. A. Petsonk, The Kyoto Protocol and the WTO, Duke Environmental Law and Policy 10 (2000): 185 ff.
6. Kyoto Protocol to the United Nations Framework Convention on Climate Change (the Kyoto Protocol; Kyoto, 11 Dec. 1997; (1998) 37 ILM 22, ). The Kyoto Protocol entered into force on 16 Feb. 2005.
7. The Marrakesh Accords were adopted at the Seventh Conference of the Parties in October and November 2001 at Marrakesh (cf. UNFCCC, Conference of the Parties, Report of the Conference of the Parties on its Seventh Session, held at Marrakesh from 29 Oct. to 10 Nov. 2001, Addendum, Part Two: Action Taken by the Conference of the Parties, vols I and II, UNFCCC Doc FCCC/CP/2001/13/Add.1 of 21 Jan. 2002 and UNFCCC Doc FCCC/CP/2001/13/Add.2 of 21 Jan. 2002, ).
8. For an overview of COP/MOP 1 and related developments, cf. Earth Negotiations Bulletin 12, no. 291 of Monday, , 12 Dec. 2005;
9. B. Müller, Montreal 2005. What Happened, and What It Means, Oxford Institute for Energy Studies Working Paper EV 35 (2006), .
10. Cf. also A. Reuter & R. Busch, Einführung eines EU-weiten Emissionshandels - Die Richtlinie 2003/87/EG, Europäische Zeitschrift für Wirtschaftsrecht 15, no. 2 (2004): 39.
11. Cf., e.g., P. Zapfel, Greenhouse Gas Emissions Trading in the EU: Building the World's Largest Cap-and-Trade Scheme, in Emissions Trading for Climate Policy. US and European Perspectives, ed. B. Hansjürgens (Cambridge: Cambridge University Press, 2005), 162.
12. Cf., e.g., Lefevere (2003), 157-158;
13. S. Bode, Emissions Trading Schemes in Europe: Linking the EU Emissions Trading Scheme with National Programs, in Emissions Trading for Climate Policy. US and European Perspectives, ed. B. Hansjürgens (Cambridge: Cambridge University Press, 2005), 199, 199-200.
14. Articles 2 and 3 of the Kyoto Protocol.
15. Article 3, para. 1 of the Kyoto Protocol.
16. Cf. para. 23 ff. of Decision 19/CP.7 of the Marrakesh Accords (FCCC/CP/2001/13/Add.2).
17. Article 3, paras 10-11 of the Kyoto Protocol.
18. Exceptions are provided in Art. 3, paras 7-8 of the Kyoto Protocol, pursuant to which Annex I parties may use 1995 as the base year for Hydrofluoro Carbons (HFCs), Perfluoro Carbons (PFCs), and Sulphur Hexa Fluoride (SF6). This exception is due to the overlap in coverage of the Kyoto Protocol and the Montreal Protocol as regards HFCs and PFCs, which are used as replacements for ozone-depleting substances; cf. also UNFCCC, 'Caring for Climate. A Guide to the Climate Change Convention and the Kyoto Protocol', rev. edn, , 2005, 27.
19. Article 3, para. 7 of the Kyoto Protocol.
20. Th. Langrock & W. Sterk, 'The Developing Market for CERs', Journal for European Environmental & Planning Law 2, no. 2 (2005): 101, 103.
21. Article 3, para. 1 of the Kyoto Protocol.
22. Cf. Art. 3, para. 9 of the Kyoto Protocol.
23. Cf. Art. 6, para. 1 of the Kyoto Protocol.
24. Cf. Art. 12 of the Kyoto Protocol.
25. Cf. Art. 6, para. 1(a) and Art. 12, para. 5(a) of the Kyoto Protocol.
26. Cf. Art. 3, paras 10-12 of the Kyoto Protocol.
27. Cf. Art. 3, paras 3-4 of the Kyoto Protocol, and Art. A of the Annex to Decision 9/CMP.1, Guidelines for the Implementation of Art. 6 of the Kyoto Protocol (UNFCCC Doc FCCC/KP/CMP/2005/8/Add.2); see also the official UNFCCC brochure, UNFCCC (2005), 33 ff., 39, cited above.
28. Cf. Art. A of the Annex to Decision 9/CMP.1, Guidelines for the Implementation of Art. 6 of the Kyoto Protocol (UNFCCC Doc FCCC/KP/CMP/2005/8/Add.2).
29. Cf. Art. 6, para. 3, Art. 12, para. 9 of the Protocol and Art. 5 of the Annex to Decision 18/CP.7.
30. Cf. Art. 1 of Decision 2/CMP.1, Principles, nature and scope of the mechanisms pursuant to Arts 6, 12 and 17 of the Kyoto Protocol, UNFCCC Doc FCCC/KP/CMP/2005/8/Add.1, and Art. 6, para. 1; Art. 12, para. 3(b); and Art. 17 of the Kyoto Protocol.
31. Cf. the preambles to Decisions 16/CP.7 and 17/CP.7.
32. Cf. Art. 7(b) of Decision 17/CP.7.
33. Alternatively, parties are to hold 100% of five times its most recently reviewed inventory, whichever is lowest, cf. Art. 6 of the Annex to Decision 18/CP.7.
34. Cf. Art. 6 ff. of the Annex to Decision 18/CP.7.
35. Cf. Decision 24/CP.7. On this, cf. also X. Wang & G. Wiser, The Implementation and Compliance Regimes under the Climate Change Convention and Its Kyoto Protocol, Review of European Community and International Environmental Law 11 (2002): 181 ff.
36. Cf. s. XV, para. 5 of the Annex to Decision 24/CP.7.
37. Cf. Art. 18 of the Kyoto Protocol.
38. Cf. Decision 24/CP.7.
39. Cf. Decision FCCC/KP/CMP/2005/L.5 and Art. 1 of Decision 27/CMP.1, Procedures and mechanisms relating to compliance under the Kyoto Protocol, UNFCCC Doc FCCC/KP/CMP/2005/8/Add.3; on the background of this strategy, cf. Earth Negotiations Bulletin 12, no. 291 of Monday, , 12 Dec. 2005, 12 ff.; see also Müller.
40. Article 4 of the Kyoto Protocol.
41. Council Decision 2002/358/CE of 25 Apr. 2002 concerning the approval, on behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfilment of commitments thereunder [2002] OJ L 130/1.
42. Cf. Annex II of the Council Decision 2002/358/CE of 25 Apr. 2002 concerning the approval, on behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfilment of commitments thereunder [2002] OJ L 130/1.
43. See Annex B of the Kyoto Protocol.
44. Directive 2003/87/EC of the European Parliament and of the Council of 13 Oct. 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC [2003] OJ L 275/32.
45. Directive 2004/101/EC of the European Parliament and of the Council of 27 Oct. 2004 [2004] OJ L 338/18. On this directive, cf. e.g., L. Knopp & J. Hoffmann, Das Europäische Emissionsrechtehandelssystem im Kontext der Projektbezogenen Mechanismen des Kyoto-Protokolls, Europäische Zeitschrift für Wirtschaftsrecht 16, no. 20 (2005): 616 ff.
46. Cf., e.g., Lefevere (2003), 164.
47. Cf. Arts 4 and 6 of Directive 2003/87/EC.
48. In an upstream trading regime, in contrast, the producers and importers in particular of fossil fuels would be required to hold certificates. On the typology of downstream and upstream trading regimes, cf. FIELD, 'EC Trade and Competition Law Issues Raised by the Design of an EC Emissions Trading Scheme', , 1999, 18 ff. et passim; J.A. Kim, Potential Limits Imposed by the Multilateral Trading System in Implementing Flexibility Mechanisms, CSERGE Working Paper GEC 2000-19, 2000, , 8 ff.; Werksman (1999), 251, 257 ff.; Lefevere(2003), 165; Zapfel (2005), 165; C. Reimann, 'Wettbewerbsrechtliche Aspekte des Handels mit Emissionszertifikaten', Europäisches Wirtschafts - und Steuerrecht 15, no. 4 (2004): 160, 162; cf. also A. Green, 'Climate Change, Regulatory Policy and the WTO. How Constraining Are Trade Rules?' JIEL 8 (2005): 143, 151 with further references regarding the Canadian pilot program; Shinya Murase, 'WTO/GATT and MEAs: Kyoto Protocol and Beyond', (2003), 14 ff.
49. Cf. Art. 6, para. 2(e) Directive 2003/87/EC.
50. Cf. Art. 3, Directive 2003/87/EC.
51. Article 11a of Directive 2003/87/EC.
52. On these, cf. above, Section 1.2.
53. Cf. Art. 30, para. 3 of Directive 2003/87/EC.
54. Cf. Art. 11a, para. 3(a) of Directive 2003/87/EC.
55. Cf. Art. 11a, para. 3(b) of Directive 2003/87/EC.
56. Article 25 of Directive 2003/87/EC.
57. Cf. above, Section 1.2.
58. Commission Regulation (EC) No. 2216/2004 of 21 Dec. 2004 for a standardized and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision No. 280/2004/EC of the European Parliament and of the Council [2004] OJ L 386/1.
59. Austrian Emission Certificates Act (Emissionszertifikategesetz), Federal Gazette I Nr. 46/2004.
60. 'Die Emissionszertifikate haben den Rechtscharakter einer Ware und können an Warenbörsen gehandelt werden' (Austrian Emission Certificates Act (Emissionszertifikategesetz), para. 22).
61. Cf. Art. 8 of the Guidelines, , that were adopted pursuant to para. 43 of the Austrian Promotion of the Environment Act (Umweltförderungsgesetz), Federal Gazette Nr. 185/1993, as amended in Federal Gazette I Nr. 57/2005.
62. Paragraph 8(3) of the Guidelines for the Austrian JI/CDM Programme, .
63. Cf. para. 11(8) of the Act on Emission Certificates (Emissionszertifikategesetz), Federal Gazette I Nr. 46/2004, as amended by the Umweltrechtsanpassungsgesetz 2005, Federal Gazette I Nr. 34/2006.
64. Cf. below, Section 2.2.1.
65. Cf. below, Section 2.2.3.
66. Cf. below, Section 2.2.5.
67. The notion 'hot air countries' is commonly used to refer to countries with economies in transition, mainly Russia, where the collapse of the economy in the 1990s has led to vast surplus amounts of certificates that could be sold even though they do not represent genuine emission reductions. Cf. also United Nations University Institute of Advanced Studies/Global Environment Information Centre, Global Climate Governance. Scenarios and Options on the Inter-Linkages between the Kyoto Protocol and Other Multilateral Regimes. Report - Part 2 (date of publication not available), 16 ff.; Petsonk (2000), 185, 199 ff.; Werksman (1999), 255;
68. T. Voon, Sizing Up the WTO: Trade-Environment Conflict and the Kyoto Protocol, Journal of Transnational Law and Policy 10 (2000): 71, 103.
69. On the problem of trade restrictions, cf. also G. Wiser, Frontiers in Trade: The Clean Development Mechanism and the General Agreement on Trade in Services, International Journal of Global Environmental Issues 2 (2002): 292.
70. Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol; Montreal, 16 Sep. 1987; (1987) 26 ILM 1550). The Montreal Protocol entered into force on 1 Jan. 1989. It forms a protocol to the Vienna Convention for the Protection of the Ozone Layer (Vienna Convention; Vienna, 22 Mar. 1985; (1985), 26 ILM 1529) as foreseen in Art. 8 of the latter.
71. Cf. also R.G. Tarasofsky, The Kyoto Protocol and the WTO, Working Paper, (2005), 4, on file with the author; S. Charnovitz, Trade and Climate: Potential Conflicts and Synergies, working draft (2003), , 2 and 13-14; M. Buck & R. Verheyen, International Trade Law and Climate Change - A Positive Way Forward, pdf>, 2001 (30 Sep. 2008), 4 ff. et passim.
72. Cf., e.g., M. Sell, B. Lee & M. Walls, Emerging Issues in the Interface between Trade, Climate Change and Sustainable Energy, ICTSD Discussion Paper 2005, , 4; Shinya Murase, 9; Le Monde Diplomatique, L'Atlas, hors-série 2006 (2006), 166-167.
73. Cf. also the paper (precited) by FIELD, 'EC Trade and Competition Law Issues Raised by the Design of an EC Emissions Trading Scheme', FIELD Scoping Paper Number 1, prepared for the EC Commission, June 1999, 13 ff.; Werksman (1999), 254 ff.; Petsonk (2000), 185, 185 ff.
74. Cf., e.g., Werksman (1999), 251 ff.; R. Wolfrum, 'Völkerrechtliche Beurteilung des Handels mit Emissionsrechten', in Klimaschutz durch Emissionshandel, ed. H.-W. Rengeling (Munich: Carl-Heymanns Verlag, 2001), 189, 199 ff.; Charnovitz (2003), 10.
75. M. Rodi, Legal Aspects of the European Emissions Trading Scheme, in Emissions Trading for Climate Policy. US and European Perspectives, ed. B. Hansjürgens (Cambridge: Cambridge University Press, 2005), 177, 181; Tarasofsky (2005), 14 ff.
76. Petsonk (2000), 197 ff.
77. Cf. Wolfrum (2001), 199 ff.
78. Kim (2000), 7.
79. Cf. Wiser (2000), 292 ff.
80. Cf. Reimann (2004), 165, whose reasoning remains somewhat obscure on this point; this view seems also to be held by Petsonk (2000) 199 ff.;
81. S. Jinnah, 'Emissions Trading under the Kyoto Protocol: NAFTA and WTO Concerns', Georgetown International Environmental Law Review 15 (2003): 709, 721.
82. Cf. Voon (2000), 95; Kim (2000), 7; Jinnah (2003), 740 ff.; on this, cf. below, Section 2.1.3.
83. C. M. Forstinger & A.F. Wagner, Emissionshandel und Aufsichtsrecht 52, no. 4 (Österreichisches Bankarchiv, 2004), 607 ff., who do not specifically refer to WTO law, but rather appear to present economic arguments for their view; on this, cf. also below, Section 2.1.3.
84. Cf. above, Sections 1.1 and 1.2.
85. See also Werksman (1999), 252 ff.
86. This is partly overlooked by Wolfrum (2001), 199 ff., and apparently also by Petsonk (2000) 197 ff., and Wiser (2002), 292 ff. and 295.
87. Cf. Art. I:1 of the GATS, which in this respect incorporates consistent jurisprudence under the GATT: Thus, it ensues clearly from the travaux préparatoires that the term 'affecting' has been chosen on purpose by the drafters of the GATS in order to bring its scope of application in line with the principles developed in GATT jurisprudence, according to which that agreement applies 'not only [to] laws and regulations which directly govern the conditions of sale or purchase but also [to] any laws or regulations which might adversely modify conditions of competition between like domestic and imported products on the internal market' (cf. the Panel Report, EC - Bananas III, para. 7.281, referring to the Note by the Secretariat, Definitions in the Draft General Agreement on Trade in Services, GATT Doc MTN.GNS/W/139, 4, para. xii; this jurisprudence started with the 1958 Panel Report, Italian Agriculture Machinery, para. 12 and was confirmed in consistent GATT/WTO jurisprudence).
88. This stance is also taken by Reimann (2004), 165-166.
89. This is true not only for trade in 'other' products and services that may be affected (see also Werksman (1999), 254 ff.; Charnovitz (2003), 10) but also for trade in ERUs, CERs, and allowances themselves that are traded by private parties, if and to the extent that these certificates have to be regarded as goods or financial instruments in the sense of WTO law. On this, cf. in the following.
90. This view is also taken, with respect to CERs, by Wiser (2002), 294-295.
91. This conclusion is drawn, however, by Wiser (2002), 294 ff.
92. Cf. also the Panel Report, EC-Bananas III, para. 7.171 ff., in which licenses were unequivocally considered as state measures in the sense of the GATT.
93. Cf. the Panel Report, EC-Bananas III, para. 7.171 ff.
94. Cf. also Reimann (2004), 165.
95. See also Werksman (1999), 255.
96. Cf. ECJ, Case 7-68, Commission v. Italian Republic (Italian Art) [1968] ECR (English Special Edition), 423 ('by goods, within the meaning of [ex-Art. 9 of the EC Treaty], there must be understood products which can be valued in money and which are capable, as such, of forming the subject of commercial transactions').
97. Cf. also Reimann (2004), 160 ff., 165.
98. A case in point is electricity, which is sometimes regarded as being immaterial but is regularly classified as a product. On this classification, cf. also ECJ, Case C-393/92 Almelo [1994] ECR I-1477, para. 28; this point of view is also taken by several writers on WTO law, cf. e.g., Wiser (2002), 292, 294;
99. S. Charnovitz, Trade and Climate: Potential Conflicts and Synergies, in Beyond Kyoto, ed. Pew Center on Global Climate Change (2003), 141, 147, www.pewclimate.org/docUploads/Trade%20and%20Climate%2Epdf;
100. P.X. Pierros & S. Nüesch, Trade in Electricity. Spot on, JWT 34 (2001): 95, 98-99, 100-101, 103-104 et passim.
101. Cf. the GATT Panel Report, Canada - Measures Affecting the Sale of Gold Coins, L/5863, 17 Sep. 1985, unadopted, para. 51; on this, see also Petsonk (2000) 185 ff., 199 ff.
102. Cf. Art. 5, paras (x)-(xiv) of the GATS Annex on Financial Services.
103. Cf. Art. XXIX of the GATS.
104. Cf. Art. XX of the GATS.
105. Cf. the Panel Report, US - Gambling, para. 6.34 ff.; and the Appellate Body Report, US - Gambling, para. 159 ff.
106. Cf. WTO, Financial Services. Background Note by the Secretariat, WTO Doc S/C/W/72, 2 Dec. 1998, para. 8 ff.
107. Cf., e.g., Appellate Body Report, United States - Subsidies on Upland Cotton, WT/DS267/AB/R, adopted 21 Mar. 2005, para. 324 and n. 314.
108. Cf. the paper (precited) by Forstinger & Wagner (2004).
109. Cf. J.H. Dalhuisen, Dalhuisen on International Commercial, Financial and Trade Law (Oxford: Hart, 2000), 741 ff.
110. F. Puderbach & I. Zenke, Handel mit Erlaubnispflichtigen Energiehandelsgeschäften aus Juristischer Perspektive, in Handel mit Energiederivaten. Recht, Wirtschaft, Praxis, eds I. Zenke & N. Ellwanger Munich: Beck, 2003), 29, 72.
111. For the economic understanding of derivative instruments, cf. e.g., Satyajit Das, Derivative Products and Pricing (Singapore: Wiley, 2006) 1 ff.; H. Geman, Commodities and Commodity Derivatives: Modeling and Pricing for Agriculturals, Metals and Energy (Chichester: Wiley, 2005), 4 ff.
112. R. Eller, Derivative Instrumente - Überblick, Strategien, Tendenzen, in Handbuch Derivativer Instrumente. Produkte, Strategien und Risikomanagement, ed. R. Eller (Stuttgart: Schäffer-Poeschel, 1996), 3 ff.;
113. J.C. Hull, Optionen, Futures und Andere Derivate, 6th edn (München: Pearson Studium, 2006), 24 ff., 635 ff.; these works similarly appear to rely on the understanding that derivative products are concluded on contractual parties.
114. Puderbach & Zenke (2003), 72; M. Strack & P. Solt, Emissionszertifikategesetz, Praxiskommentar (Vienna: LexisNexis-Verlag ARD Orac, 2004), 64.
115. N. Kümpel, Wertpapier-, Geldund Auslandsgeschäft, in Bankrechts-Handbuch, ed. H. Schimansky (Munich: Beck, 1997), 2663, 2669;
116. U. Sommer, Sind Emissionszertifikate Wertpapiere im Sinne des Kreditwesengesetzes?, Energiewirtschaftliche Tagesfragen 53, no. 4 (2003): 187.
117. Regarding German, Austrian, English and Russian laws, cf. E. Micheler, Wertpapierrecht zwischen Schuldund Sachenrecht. Zu einer kapitalmarktrechtlichen Theorie des Wertpapierrechts. Effekten nach österreichischem, Deutschem, Englischem und Russischem Recht (Vienna: Wirtschaftsuniversität Wien, 2004); regarding Austrian and German laws, cf. Strack & Solt (2004), 64; as for German law, cf. also Puderbach & Zenke (2003), 72; cf. also Dalhuisen (2000), 741 ff.
118. Cf. Wiser (2002), 303 ff.; and H.C. Black, Black's Law Dictionary (St. Paul, MN: West, 1991), 942.
119. Cf. Wiser (2002), 303 ff.; and Black (1991), 719; contra: United Nations University Institute of Advanced Studies/ Global Environment Information Centre, Global Climate Governance. Scenarios and Options on the Inter-Linkages between the Kyoto Protocol and other Multilateral Regimes. Report - Part 2 (date of publication not available), 18, where no clear reasoning is provided, however.
120. Cf. Black (1991).
121. Cf. Jinnah (2003), 740 ff.
122. Cf. Wiser (2002), 303 ff., who argues that financial assets ordinarily are assets denominated in or redeemable in money.
123. On these concepts, cf. e.g., C. Niemann, 'Innovationen am DM-Kapitalmarkt', Finanzberater (1992, special supplement 18): 1, 3; Dalhuisen (2000), 741 ff.; Satyajit Das (2006), 1 ff.; Geman (2005), 4 ff.; Eller (1996), 3 ff.; Hull (2006), 24 ff., 635 ff.
124. Cf. also Werksman (1999), 255, 257; Wiser (2002), 303 ff.
125. On 'exotic' underlying assets on which emission, energy, and weather derivatives, etc., are based, cf. e.g., Hull (2006), 635 and 663 ff.; Geman (2005).
126. Cf. above, Section 2.
127. Article 3, para. 5 of the UNFCCC; see also United Nations University/Global Environment Information Center/ UNU Institute of Advanced Studies, Global Climate Governance. A Report on the Inter-linkages between the Kyoto Protocol and other Multilateral Regimes. Report - Part 1 (date of publication not available) 9; Tarasofsky (2005), 1 ff.
128. Cf. Art. 30(3) of Directive 2003/87/EC, which establishes the EC ETS.
129. Regarding, e.g., Austrian law, cf. para. 11(8) of the Act on Emission Certificates (Emissionszertifikategesetz), Federal Gazette I Nr. 46/2004, as amended by the Umweltrechtsanpassungsgesetz 2005, Federal Gazette I Nr. 34/2006.
130. Cf. Arts 11a(1), 11a(2), and 30(3) of Directive 2003/87/EC.
131. This is also pointed out by Werksman (1999), 256; Buck & Verheyen (2001), 27.
132. On the relationship between Art. XI and Art. III of the GATT, cf. the Note ad Art. III pursuant to which '[a]ny internal tax or other internal charge, or any law, regulation or requirement of the kind referred to in paragraph 1 which applies to an imported product and to the like domestic product and is collected or enforced in the case of the imported product at the time or point of importation, is nevertheless to be regarded as an internal tax or other internal charge, or a law, regulation or requirement of the kind referred to in paragraph 1, and is accordingly subject to the provisions of Art. III'.
133. CERs and ERUs accrue only under emission reduction projects conducted abroad; cf. above, Section 1.2.
134. CERs and ERUs, on the one hand, and allowances, on the other hand, differ in the way they are generated: CERs and ERUs come into existence when a project has led to verified emission reductions. Allowances, on the other hand, are attributed to installations covered by the EC ETS at the beginning of a trading period. This difference should not conceal the fact that all three types of certificates are in fact legal creations. What is more, from the point of buyers of certificates, all three types of certificates will normally appear substitutable, as all three represent the right to emit one tonne of carbon dioxide equivalent (cf. above, Section 1.2). This militates in favour of regarding all three types of certificates as like products in the sense of the GATT, given that the determination of likeness has to be conducted primarily from the point of the consumers of the products in question (on this, cf. below, Section 3.3).
135. Cf. above, Section 1.3.
136. These had to be adopted, e.g., under Austrian law before the start of the first Kyoto commitment period in 2008. Cf. para. 11(8) of the Act on Emission Certificates (Emissionszertifikategesetz), Federal Gazette I Nr. 46/2004, as amended by the Umweltrechtsanpassungsgesetz 2005, Federal Gazette I Nr. 34/2006.
137. On this need, cf. also Lefevere (2003), 156.
138. For a detailed discussion of the justification requirements under Art. XX in the 'trade and environment' context more generally, cf. E. Vranes, Trade and the Environment. Fundamental Issues in International Law, WTO Law and Legal Theory (Oxford: Oxford University Press, 2009) 256 ff.
139. On this, cf. above, Section 2.1.3.
140. S.J. Key, Financial Services, in The World Trade Organization: Legal, Economic and Political Analysis, eds P.F.J. Macrory, A.E. Appleton & M.G. Plummer (New York: Springer, 2005), 954;
141. J. Kokott, Liberalisierung der Finanzdienstleistungen im Rahmen der WTO, Recht der Internationalen Wirtschaft 46 (2000): 401;
142. E.H. Leroux, Trade in Financial Services under the World Trade Organization, JWT 36 (2002): 413;
143. E. Vranes, The Single Euro Payments Area (SEPA) and Its Compatibility with the GATS Disciplines on Financial Services, JWT 42, no. 3 (2008): 508, 517-518.
144. As was shown already, certificates may, and derivatives based on them will, fall under the notion of financial instruments as circumscribed in the Annex (cf. above, Section 2.1.3).
145. WTO, Fifth Protocol to the General Agreement on Trade in Services, WTO Doc S/L/45, 3 Dec. 1997.
146. These results are often referred to as a WTO 'Agreement' on financial services, which however is misnomer, given that a separate multilateral agreement on financial services does not exist, as is rightly pointed out by, e.g., by Key (2005), 954 ff., 957.
147. Cf. WTO, Fifth Protocol to the General Agreement on Trade in Services, WTO Doc S/L/45, 3 Dec. 1997, para. 1.
148. Cf. European Communities and their Member States, Schedule of Specific Commitments, Supplement 4, Revision, WTO Doc GATS/SC/31/Suppl.4/Rev.1, 18 Nov. 1999.
149. Cf. para. (ii) of the head note of the Understanding, pursuant to which the Understanding 'does not prejudice the right of any Member to schedule its specific commitments in accordance with the approach under Part III of the [GATS]'; cf. also the final sentence of the headnote, according to which a Member's specific commitments are 'subject to conditions and qualifications' specified in its schedule; cf. also Key (2005), 957.
150. Cf. Art. B.4(c) of the Understanding.
151. Cf. Art. 5(x)(C) of the Annex.
152. Cf. Art. 5(x)(F) of the Annex.
153. Article 5(xiv) of the Annex.
154. Article 5(xv) of the Annex.
155. Article 5(xvi) of the Annex.
156. Article 3(c) of the Understanding.
157. Article B.7 of the Understanding.
158. Pursuant to Art. D.3 of the Understanding, '[a] new financial service is a service of a financial nature, including services related to existing and new products or the manner in which a product is delivered, that is not supplied by any financial service supplier in the territory of a particular Member but which is supplied in the territory of another Member'.
159. Article B.10(a) of the Understanding.
160. Article (iii) of the Headnote to the Understanding.
161. Cf. European Communities and their Member States, Schedule of Specific Commitments, Supplement 4, Revision, WTO Doc GATS/SC/31/Suppl.4/Rev.1, 18 Nov. 1999.
162. Cf. Ibid., para. 2.
163. On these modes, cf. Art. I(2)(a) and (b) of the GATS.
164. Cf. above, Section 2.2.1.2.2.
165. Cf. European Communities and their Member States, Schedule of Specific Commitments, Supplement 4, Revision, WTO Doc GATS/SC/31/Suppl.4/Rev.1, 18 Nov. 1999, para. 5. Furthermore, Austria has reserved the right to permit only members of the Austrian Stock Exchange to engage in securities trading at the Stock exchange (cf. European Communities and their Member States, Schedule of Specific Commitments, Supplement 4. Revision, WTO Doc GATS/ SC/31/Suppl.4/Rev.1, 18 Nov. 1999). In this respect, it has to be stressed that certificates do not represent securities under WTO law (cf. above, Section 2.1); moreover, certificates may be traded at commodities exchanges in Austria and are also traded over the counter (OTC). Therefore, the reservation scheduled by Austria does not cover this type of trading.
166. Cf. above, Section 2.2.3.
167. Cf. above, Section 2.2.1.1.
168. This arguably ensues inter alia from the fact that Art. XVI, sub-paras (a)-(f) are narrowly drafted: Art. XVI:2(a), for example, only covers limitations on the number of service suppliers 'in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test'. Arts XVI:2(b)-(d) and sub-para. (f) contain similarly restrictive wording. Moreover, the elements enumerated in the definitions, which are set out in the individual subparagraphs, have to be construed as being exhaustive as well, as follows in particular from a comparison with the express wording of Art. XI of the GATT (cf. the Panel Report, US-Gambling, para. 6.325). A further argument follows from the teleological consideration that, on an expansive interpretation, the purview of Art. XVI risks becoming unduly broad, given that it also covers non-discriminatory measures (cf. J. Pauwelyn, Rien ne Va Plus? Distinguishing Domestic Regulation from Market Access in GATT and GATS, SSRN Working Paper (2005), 29).
169. Cf. Art. (i) of the headnote to the Understanding.
170. Cf. above, where reference is made to the necessity of sustainable domestic efforts.
171. Cf. above, Section 2.2.1.2.
172. Cf. Art. 11a(3)(a) of Directive 2003/87/EC.
173. On this, cf. above, Section 2.2, and Art. 11a(3)(a) of Directive 2003/87/EC.
174. The Marrakesh Accords 'recognize' that Annex I parties of the Kyoto Protocol 'are to refrain from using' CERs and ERUs that have been 'generated from nuclear facilities' in meeting their quantified emission commitments; cf. the preambles to Decisions 16/CP.7 and 17/CP.7.
175. Cf. again the wording of the Marrakesh Accords cited in the preceding footnote.
176. Communication by the Climate Change Unit of the Austrian Ministry for Environmental Affairs to the author.
177. Cf. para. 8(3) of the 2003 Guidelines for the Austrian JI/CDM Programme (as amended, cf. ) , adopted pursuant to paras 13 and 43 of the Environment Promotion Act (Umweltförderungsgesetz), Federal Gazette Nr. 185/1993, as amended by Federal Gazette I Nr. 57/2005.
178. These are defined in Art. I of the GATS.
179. Cf. ECJ, Case C-384/93 Alpine Investments [1995] ECR I-1141, para. 30.
180. Cf., e.g., para. 3 of the GATS preamble ('Desiring the early achievement of progressively higher levels of liberalization of trade in services through successive rounds of multilateral negotiations...').
181. Cf. above, Section 1.3.
182. Cf. above, Section 1.3, and Art. 7(a) and (b) of Decision 17/CP.7.
183. Cf. above, Section 2.1.2.
184. On this, cf. e.g., S. Charnovitz, 'The Law of Environmental "PPMs" in the WTO: Debunking the Myth of Illegality', Yale Journal of International Law 27 (2002): 59 and the references in the following footnotes.
185. In 2000, the Canada - Automotive panel found that non-discriminatory NPR PPM requirements should be regarded as being consistent with Art. I:1 of the GATT when they do not incur disparate impacts (Panel Report, Canada - Certain Measures Affecting the Automotive Industry, WT/DS/142/R, adopted on 19 Jun. 2000, para. 10.25 ff.). This reasoning may be transposable also to Art. III of the GATT. On this, cf. e.g., Charnovitz (2002) 61, 67 ff.; cf. also the extensive discussion of these issues in Vranes (2009, forthcoming).
186. Cf. the Appellate Body Report, United States - Import Prohibition of Certain Shrimp and Shrimp Products - Recourse to Art. 21.5 of the DSU by Malaysia, WT/DS58/AB/RW, adopted 21 Nov. 2001, DSR 2001:XIII, 6481, para. 138.
187. M. Ehrmann, 'Das ProMechG - Verknüpfung des Europäischen Emissionshandels mit den Mechanismen des Kyoto-Protokolls', Zeitschrift für Europäisches Umweltund Planungsrecht 3, no. 5 (2005): 206.
188. Cf. Art. 50 of Commission Regulation (EC) No. 2216/2004 of 21 Dec. 2004 for a standardized and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision No. 280/2004/EC of the European Parliament and of the Council [2004] OJ L 386/1.
189. Cf. also Werksman (1999), 255.
190. The terms buyer liability and seller liability are used to describe whether the buyer or the seller bears the risk of overselling of certificates, that is selling of amounts that endangers the possibility of complying with the Kyoto Protocol commitments. Under a system of buyer liability, the buyer must verify whether the certificates acquired represent genuine emission reductions; on these systems, cf. Lefevere (2003), 157-158.
191. Cf. Lefevere (2003) 158 and UNFCCC (2005), 33.
192. In this context, it must be recalled that WTO adjudicating bodies appear to be prepared to apply a reduced degree of scrutiny under Art. XX of the GATT with respect to vital environmental goals, in particular if these are based on international consensus evidenced by multilateral environmental agreements (MEAs); on this, cf. the so-called 'new' necessity test that was introduced in the Appellate Body Report, Korea - Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/ DS161/AB/R, WT/DS169/AB/R, adopted 10 Jan. 2001, DSR 2001:I, 5, para. 159 ff. (in particular, para. 162: 'The more vital or important those common interests or values are, the easier it would be to accept as "necessary" a measure designed as an enforcement instrument'); see also the Appellate Body Report, European Communities - Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 Apr. 2001, DSR 2001:VII, 3243, in particular, para. 172. This test is analyzed e.g., by the WTO Secretariat, GATT/WTO Dispute
193. D. Osiro, GATT/WTO Necessity Analysis: Evolutionary Interpretation and Its Impact on the Autonomy of Domestic Regulation, LIEI 29 (2002): 12;
194. J. Neumann & E. Türk, Necessity Revisited: Proportionality in World Trade Organisation Law after Korea - Beef, EC - Asbestos and EC - Sardines, JWT 37 (2003): 199;
195. G. Marceau & J.P. Trachtman, GATT, TBT and SPS: A Map of Domestic Regulation of Goods, in The WTO Dispute Settlement System 1995-2003, eds F. Ortino & E.U. Petersmann (The Hague: Kluwer Law International, 2004), 275, 316-317; on this discussion,
196. see also E. Neumayer, Greening the WTO Agreements. Can the Treaty Establishing the European Community Be of Guidance? JWT 35 (2001): 145.
197. Concerning the GATS, it has been explained above in Section 2.1.3 that emission certificates may have to be regarded as financial instruments in the sense of the GATS Annex. Moreover, the EC schedule (in which the reservations of the then fifteen Member States, including Austria, were listed in 1999) does not contain relevant limitations on national treatment; cf. European Communities and their Member States, Schedule of Specific Commitments, Supplement 4, Revision, GATS/SC/31/Suppl.4/Rev.1, 18 Nov. 1999.
198. J.H.H. Weiler, Epilogue: Towards a Common Law of International Trade, in The EU, the WTO, and the NAFTA. Towards a Common Law of International Trade?, ed. J.H.H. Weiler (Oxford: Oxford University Press, 2000), 201, 231;
199. J.P. Trachtman, Lessons for GATS Article VI from the SPS, TBT and GATT Treatment of Domestic Regulation, SSRN Working Paper, , 2002, 20-22;
200. Marceau & Trachtman (2004), 308.
201. Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol; Montreal, 16 Sep. 1987; (1987) 26 ILM 1550). The Montreal Protocol entered into force on 1 Jan. 1989. It forms a protocol to the Vienna Convention for the Protection of the Ozone Layer (Vienna Convention; Vienna, 22 Mar. 1985; (1985) 26 ILM 1529) as foreseen in Art. 8 of the latter.
202. Cf. also Tarasofsky (2005), 4; Charnovitz, 2003, 2 and 13-14; Buck & Verheyen (2001), 4 ff. et passim.
203. Cf. Art. 2 of the Kyoto Protocol. On the related supplementarity obligations, cf. above, Sections 1.2 and 1.3.
204. Cf. the Appellate Body Report, United States - Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/ AB/R, adopted 6 Nov. 1998, DSR 1998:VII, 2755, para. 177.
205. Cf. the GATT Panel Report, Canada - Administration of the Foreign Investment Review Act, L/5504, adopted 7 Feb. 1984, BISD 30S/140, para. 5.4 ff.
206. P. Civello, The TRIMs Agreement: A Failed Attempt at Investment Liberalization, Minn. J. Global Trade 8 (1999): 97;
207. W. Weiss & C. Herrmann, Welthandelsrecht (Munich: C.H. Beck, 2003), 332 ff.
208. On the GATS as an investment protection agreement, cf. e.g., M. Vocke, Investment Implications of Selected WTO Agreements and the Proposed Multilateral Agreement on Investment, IMF Working Paper WP/97/60 (1997);
209. T. L. Brewer & S. Young, 'Investment Issues at the WTO', JIEL 1, no. 3 (1998): 457-470.
210. Cf. Art. XXVIII of the GATS.
211. On this, cf. e.g., M. Krajewski, National Regulation and Trade Liberalization in Services (The Hague: Kluwer, 2003), 76 ff.
212. For such an examination, cf. J. Werksman, K.A. Baumert & N.K. Dubash, Will International Investment Rules Obstruct Climate Protection Policies?, International Environmental Agreements: Politics, Law and Economics 3 (2003): 59, 70 ff.
213. Services supplied by investors in JI or CDM projects will include a broad range of services, such as construction, engineering, consulting, and verification services; cf. Wiser (2002), 288 ff.
214. Cf. Werksman et al., (2003).
215. Cf. Art. 6, para. 3 and Art. 12 of the Kyoto Protocol; see also para. 29 of the Annex to Decision 9/CMP.1, Guidelines for the Implementation of Art. 6 of the Kyoto Protocol (UNFCCC Doc FCCC/KP/CMP/2005/8/Add.2), and para. 33 of the Annex to Decision 3/CMP.1, Modalities and procedures for a CDM as defined in Art. 12 of the Kyoto Protocol (UNFCCC Doc FCCC/KP/CMP/2005/8/Add.1).
216. Cf. paras 21 ff. and 29 of the Annex to Decision 9/CMP.1, Guidelines for the Implementation of Art. 6 of the Kyoto Protocol (UNFCCC Doc FCCC/KP/CMP/2005/8/Add.2), and paras 31-33 of the Annex to Decision 3/ CMP.1, Modalities and procedures for a CDM as defined in Art. 12 of the Kyoto Protocol (UNFCCC Doc FCCC/KP/ CMP/2005/8/Add.1).
217. Cf. Art. 1, para. 1 of the GATS.
218. L. Bartels, Applicable Law in WTO Dispute Settlement Proceedings, JWT 35 (2001): 499;
219. J. Pauwelyn, How to Win a World Trade Organization Dispute Based on Non-world Trade Organization Law?, Journal of World Trade 37 (2003): 997.
220. Moreover, although this is a contentious issue, it could be argued that the WTO Members that are also parties to the Kyoto Protocol have modified the reach of the GATS MFN clause inter se in this regard: To the extent that such a modification in particular does not infringe the rights of third WTO Members, it is not per se prohibited under the principles of international law;
221. cf. the detailed study by J. Pauwelyn, Confl ict of Norms in Public International Law. How WTO Law Relates to Other Rules of International Law (Cambridge: Cambridge University Press, 2003); for a slightly different argumentative approach,
222. E. Vranes, Jurisdiction and Applicable Law in WTO Dispute Settlement, German Yearbook of International Law 48 (2005): 395-418.
223. This is also pointed out by J. Werksman, K.A. Baumert & N.K. Dubash, Will International Investment Rules Obstruct Climate Protection Policies?, World Resources Institute Climate Notes, , 2001, 10 ff.
224. On the notion, cf. above, Section 3.1.
225. Cf. also Wiser (2002), 300.
226. Werksman et al. (2001), 10 ff.
227. This seems to be the concern alluded to by Werksman et al. (2001), 10 ff., where they state that the 'experiences of the GATT/WTO regime, however, do not bode well for an interpretation of "like" that allows for discrimination on the basis of environmental criteria'.
228. On this, cf. also Appellate Body Report, European Communities - Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 Apr. 2001, DSR 2001:VII, 3243, para. 102 with further references; Report of the Working Party on Border Tax Adjustments, BISD 18S/97, para. 18, and the academic writings cited in the following footnotes.
229. On this consideration, cf. e.g., O.K. Fauchald, Flexibility and Predictability under the World Trade Organization's Non-discrimination Clauses, JWT 37 (2003): 443, 453;
230. J.P. Trachtman, Lessons for the GATS from Existing WTO Rules on Domestic Regulation, in Domestic Regulation and Service Trade Liberalization, eds A. Mattoo & P. Sauvé (Oxford: Oxford University Press, 2003), 57, 63-64;
231. H. Horn & P.C. Mavroidis, Still Hazy after All These Years: The Interpretation of National Treatment in the GATT/WTO Case-Law on Tax Discrimination, JIEL 15 (2004): 39, 43; for a detailed analysis, cf. also Vranes (2009, forthcoming).
232. Cf. Vranes, ibid.
233. On the Appellate Body's 'new' approach to the necessity test under Art. XX of the GATT and Art. XIV of the GATS, cf. the footnotes accompanying Section 2.2.4 in fine.
234. Cf. the preambles of Decision 16/CP.7 and Decision 17/CP.7 of the Marrakesh Accords.
235. Cf., in particular, Art. 12, para. 2 of the Kyoto Protocol, which states that 'The purpose of the clean development mechanism shall be to assist Parties not included in Annex I in achieving sustainable development....
236. Article 2, para. 3 of the Kyoto Protocol.
237. On the underlying presumption against conflict, cf. e.g., W. Karl, Conflicts between Treaties, in Encyclopedia of Public International Law, ed. R. Bernhardt, vol. 7 (North-Holland: Elsevier, 1984), 467, 469;
238. H. Aufricht, Supersession of Treaties in International Law, Cornell Law Quarterly 37 (1952): 657;
239. C.W. Jenks, The Conflict of Law-Making Treaties, British Yearbook of International Law 30 (1953), 401, 427-429;
240. H. Lauterpacht, Second Report to the ILC, Document A/ CN.4/87, Yearbook of the International Law Commission (1954), vol. II, 123, 137-138;
241. Pauwelyn (2003), 212 ff., 488.