Emissions Trading Schemes under International Economic Law

Abstract

This book assesses whether—and how—emissions trading schemes are subject to international economic law. Through an analysis of trade and investment treaties and related jurisprudence, it argues that the objects of trade in these schemes, namely carbon units (also known as emissions permits or carbon credits), are capable of being legally characterized as ‘goods’, ‘services’, ‘financial services’, and ‘investments’ under international economic law. The sui generis properties of carbon units—such as their intangibility, their degree of permanence, their relationship to an economic activity performed, and their use as a regulatory instrument—make this a particularly complex question. Having ascertained whether and how carbon units are regulated in this regard, this book undertakes a comparative analysis of numerous emissions trading schemes and uncovers a raft of design elements affecting trade and investment in carbon units that could be impugned under international economic law. In particular, it demonstrates how all of the major schemes—from the nascent schemes in China, South Korea, and Ontario to the more established schemes in the European Union, Switzerland, New Zealand, Norway, California, and Quebec—engage in violations of international economic law that are, in many cases, unlikely to be justified under environmental or other exceptions or exemptions. Not only do these conclusions have implications for the relationship between the international economic and international climate regimes but, more broadly, these conclusions interrogate the efficacy of international economic law for covering market-based mechanisms designed to manage environmental problems. They also provide guidance to policy-makers seeking to inoculate their emissions trading schemes from legal challenges under international trade and investment treaties.