Border Tax Adjustment on Imports Responding to Climate Change under the WTO Rules

There has been a growing concern that greenhouse gas emissions could make the phenomenon of climate change more serious. In order to slow down this phenomenon, the greenhouse gas emissions have to be reduced. Imposing a tax on carbon and energy is considered as an effective way to encourage a more efficient use of fossil fuels and energy. However, this kind of tax, in effect, will make carbon/energy-intensive products more expensive and thus change the terms of competition. To offset these additional costs and eliminate the competitive disadvantage, the system of border tax adjustments was introduced. Border tax adjustments responding to climate change would address the competitiveness concerns on domestic industries, and accordingly may reduce the resistance of these industries to greenhouse gas reduction regulation. The border tax adjustments have been applied from the beginning of GATT, however, the intricacies of them for climate change-based regulations have yet to become totally clear. In order to gain its legitimacy under the current multilateral trading mechanism, a border tax adjustment measure must be designed and applied in a way to be in compliance with WTO rules. For this, the focus should be put on how the climate change-related border tax adjustment measures can be designed and applied so as to avoid WTO-illegal questions. The article introduces the background and definition of border tax adjustment, which are followed by the conflicts and harmonization of the adjustment with the WTO’s principle and provisions. Throughout the article, the focus is put on how the climate change-related border tax adjustments can be designed and applied so as to avoid the WTO-contradictory issues and questions. If a country embarks on a carefully designed measure of border carbon/ energy tax adjustments, these measures could secure the legality under the WTO mechanism. This means that border tax adjustment could be one of the efficient trade measures to reduce the risk of a market being filled with "pollution-intensive imports" and accordingly to combat climate change issues under the current WTO mechanism.