India Threatens WTO Case Against Proposed 'Carbon Border Taxes'

31 March 2010

India will bring a WTO challenge against any "carbon taxes" that rich countries impose on Indian imports, Indian Environment Minister Jairam Ramesh said this week.

"If they impose such a tax, we will take them to the WTO dispute settlement forum," the minister told The Hindu Business Line, an Indian daily newspaper. "We will deal [with this] through hard negotiations. Such barriers are not going to be WTO-compatible and we will fight it."

No such measures have been implemented, but politicians in both the United States and the European Union have discussed the possibility of imposing tariffs or other forms of "border carbon adjustment" on goods imported from countries with laxer regulations on greenhouse gas emissions. Buzz around the idea - widely known as a "carbon tax" - has grown since December's climate conference in Copenhagen failed to produce a global deal to reduce emissions of heat-trapping gases. Proponents say that the measures could help level the playing field for firms and industries based in countries with strict climate regulations.

A form of border carbon adjustment was written into the climate legislation passed by the US House of Representatives last summer. US President Barack Obama criticised the measures, warning of the dangers of "sending any protectionist signals" amid the economic downturn. The Senate has yet to vote on its version of the bill.

European heads of state reportedly remain divided over whether the 27-nation bloc should impose a carbon tax at EU borders. At a recent summit of European leaders, Austrian Cancellor Werner Faymann argued that "it wouldn't be a good negotiating tactic," Agence-France Presse reported. But French President Nicolas Sarkozy is an ardent supporter of the measures. Sarkozy told journalists last week that European Commission President Jose Manual Barroso will put forward a proposal for a European carbon border tax in June.

But many in Europe remain unconvinced. Speaking to journalists earlier this month, Connie Hedegaard, the European Commissioner for Climate Action, cautioned against the unilateral measures. If we trust other countries' pledges to take action to limit climate change, then "it should not be the time to say, OK, but we just give you a carbon tax. Why not now make an effort to try to conclude the international deal?" Hedegaard said, according to a report from Dow Jones.

India has pledged to reduce its carbon emissions by 20 to 25 percent by 2020, but the country opposes any multilateral climate deal that would be legally binding.

ICTSD reporting; "India threatens to move WTO on carbon tax issue," THE HINDU BUSINESS LINE, 29 March 2010; "EU Hedegaard: Now not right time for carbon border tax," DOW JONES, 9 March 2010; "Europe still split over carbon tax at border," AFP, 26 March 2010.

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