WORLD TRADE  
ORGANIZATION  WT/CTE/W/248 
30 March 2011 
 (11-1577) 
Committee on Trade and Environment Original:   English 
  
 
PROMOTING MUTUAL SUPPORTIVENESS BETWEEN TRADE  
AND CLIMATE CHANGE MITIGATION ACTIONS:   
CARBON-RELATED BORDER TAX ADJUSTMENTS 
 
Communication from Singapore
 
 
 1. The Ministerial Decision on Trade and Environment states that there should not be nor need 
be any policy contradiction between upholding and safeguarding an open, equitable and non-
discriminatory multilateral trading system on the one hand and acting for the protection of the 
environment on the other. These two areas of polic y-making are both important and they should be 
mutually supportive in order to promote sustainable development.  
2. Trade Policy and the WTO can and should play a role in supporting environmental protection 
and sustainable development. One concrete way is  through the liberalisation of Environmental Goods 
and Services (EGS).  Aside from environmental bene fits, EGS liberalisation will also have trade-led 
development benefits. Consumers will benefit from lower prices, greater choice and higher quality 
brought about by more competition among suppliers.  
3. As our contribution to the DDA mandate, Singa pore has tabled a list of 35 environmental 
goods in the CTESS.
1  The paper identifies seven categories of  goods. One of those categories relates 
to energy efficiency – which is critical for mitig ating climate change. Working with other Members, 
we recently made a submission to the CTESS on a "hybrid approach"2 to address barriers to trade in 
environmental goods. It is an inclusive, flexible  and multilateral modality incorporating elements of 
the various proposed approaches - i.e. List, Project/I ntegrated, and Request/Offer.  There is something 
in the "hybrid approach" for everyone. 
4. Climate change is one of the greatest sustainable development challenges facing the 
international community.  This issue of the "gl obal commons" requires a global solution at the United 
Nations Framework Convention on Climate Change (UNFCCC).  Building on the Cancun 
Agreements, a global agreement covering all four pilla rs of the Bali Action Plan is necessary if we are 
to effectively address climate change.  Trade Policy – particularly the liberalization of climate friendly 
goods, services and technologies – will complement UNFCC C efforts to combat climate change.  The 
benefits of EGS liberalization woul d be negated if Parties were to adopt trade restrictions, albeit for 
the purposes of combating climate change.  
5. The UNFCCC provides considerable flexibility to  its Parties  (hereinafter referred to as 
"Members") to adopt domestic actions, including trade measures, as part of their efforts to combat 
climate change.  UNFCCC Article 3.5 however requi res Members to ensure that these measures are 
non-discriminatory and that they are not used as dis guised restriction to international trade.  The WTO 
contains similar requirements.  To mitigate cl imate change, Members may adopt domestic carbon 
price mechanisms (e.g. cap-and-trade, carbon tax).  Concurrently, they may choose to employ Border 
                                                      
1 JOB/TE/5. 
2 JOB/TE/15. WT/CTE/W/248 
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  Tax Adjustments (hereinafter  referred to as "Carbon-related BTAs " - CBTAs) to address 
competitiveness and leakage issues that may result from the use of these carbon price mechanisms.   
6. The WTO permits the use of BTAs subject to certain conditions.  It is however unclear 
whether all CBTAs on imports would be in line with th e WTO rules.  This is particularly so if those 
CBTAs are based on the amount of carbon emitted during the production process.   Even if such 
CBTAs are permitted, if we were to be guided by the precedence of Anti-Dumping and Safeguard 
measures, even WTO permitted measures could poten tially be abused.   CBTA is therefore a double-
edged instrument.  In addition, CBTAs may not necessarily sit well with the Convention, including 
for the following reasons: 
• The Convention recognises the need for flexib ility in policy responses to take account 
of different conditions prevailing in different countries.  Due to their specific national 
circumstances, one Member may opt for a carbon tax, another Member may use a 
cap-and-trade system, yet another Member may prefer to use regulations such as energy standards, yet other Members may adopt sustainable development policies and actions in the building and transport sector.  Nowhere in the UNFCCC does it say that 
Members should adopt  similar domestic actions. 
• Assuming Members choose to adopt a domes tic carbon tax, the Convention does not 
require them to impose the same quantum of  tax, the mutual recognition of measures 
rather than harmonisation of measures wi ll be in keeping with the Convention. 
• Members such as those which are alternative energy disadvantaged
3 may have 
difficulties switching away from fossil fuels.  It will be unfair to penalize those countries through border taxes. 
• Requiring Members to adopt the same quantum  of carbon tax or coercive border taxes 
may not stand up to the Convention which requires that the protection of the climate 
system must be pursued "on the basis of equity and in accordance with [the 
Parties'] common but differentiated responsibilities and respective capabilities". 
• There are difficulties in implementing and administering CBTAs.  This includes 
identifying the energy or carbon content embodied in traded products.  
7. CBTAs have been raised in the context of climate change.  To pre-empt potential abuse of 
CBTAs, some Members proposed language in the c limate change negotiations prohibiting the use of 
CBTAs by certain groups of countries.  While motivat ed by valid concerns (i.e. CBTAs could be used 
for protectionist purposes and as a coercive instrume nt), the proposed language was inconsistent with 
both the UNFCCC Article 3.5 and the WTO.  The langua ge that was eventually agreed in Cancun is 
consistent with UNFCCC Article 3.5 and the WTO.  If th ere is to be text on trade, in the future global 
agreement on climate change, Members should ensure  that it is consistent with their rights and 
obligations in the UNFCCC and the WTO.  
                                                     
 
3 In the submission to the UNFCCC [ie. FCCC/AWG LCA/2009/MISC.4 (Part II)], Singapore proposed 
that the agreed outcome at the UNFCCC must give full consideration to the national circumstances of Parties. A key factor determining Parties’ ability to reduce their greenhouse gas emissions  is their access to renewables and 
other non-fossil alternatives. Based on the preliminary study found in Annex A of Singapore’s submission, such 
access is a function of size and location, with smaller co untries facing greater limita tions in accessing alternative 
energy. In this regard, the serious di fficulties faced by Parties, particular ly small countries, in switching from 
fossil fuels to alternatives must be  quantified and taken into account in  their efforts to reduce emissions.  WT/CTE/W/248 
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  8. There are uncertainties surrounding the issue of CBTAs.  The issue of environment related 
taxes and BTAs was last discussed in the Committee on Trade and Envi ronment in the run-up to the 
1996 Singapore Ministerial Conference.  While there were no specific outcomes, the CTE recommended that "scope exists under the WTO provisions for Member governments to apply 
environmental charges and taxes.  The CTE has under taken so far a preliminary examination of some 
of these issues under the item.  Further work on this  item is needed".  Building on existing work, it 
will be useful for Members to discuss these issu es with a view to clarifying them.  A better 
understanding of these issues will also be condu cive to a smoother negotiating process in the 
UNFCCC. 
9. In view of the above, we request the Secretariat to prepare a compilation of existing studies 
on:  
• The role that CBTAs can play in addr essing competitiveness and leakage concerns 
with as minimal economic and trade impacts as possible; 
• How CBTAs can be applied in a WTO consistent manner; and  
• The usefulness of developing a set of multilate rally agreed guidelines to pre-empt the 
abuse of CBTAs.   
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