Abstract

Within the current "energy transition" process, growth of "green" and low-carbon energy sources’ production is supported by various national and regional carbon regulation measures that directly or indirectly prescribe or encourage reduction of the fossil fuels use. Privileged treatment of “green” energy and carbon border taxation are examples of such measures. Under WTO law, these measures share one common feature in that they are capable of creating obstacles to international trade due to different treatment of otherwise identical goods based on their varying carbon footprint (e.g. preferred treatment of “green” as compared to “brown” electricity). The present article deals with the WTO legal issues arising out of such differentiation: permissibility to grant subsidies to renewable energy; “likeness” of products with varying carbon footprints; eligibility of “greener” products to preferences other than subsidies; availability of the environmental exception under GATT Article XX for justification of different treatment. The article concludes that unilateral measures aiming at tackling climate change are likely to be (i) less effective as compared to the global action and (ii) vulnerable under WTO law when they pose carbon-related barriers to international trade. There are two routes to pursue in order to develop an international consensus on the means to tackle climate change: concluding an agreement within the WTO framework (e.g. Agreement on Carbon Barriers to Trade) and ensuring effectiveness of - currently soft - substantive commitments under the Paris Agreement. On a practical side climate measures not associated with carbon barriers to international trade should be further encouraged, including enhancement of natural (forests) and artificial (carbon capture and storage) absorbing capacities that would contribute to reaching net-zero emissions target; carbon labelling that would enable consumers to freely make responsible choices and technological innovations that would make traditional types of energy climate-friendly.