Internalizing Externalities: the GATT-Legality of Border Tax Adjustments and the Compelling Need for its Implementation

Abstract

The nations of this world face the intersection of two global dilemmas: enhancing economic welfare and mitigating climate change. With a “point of no return,” for the latter of these predicaments rapidly approaching and evidence that unilateral action on either of these problems haven proved minimally, if it all, effectual, the world faces a pervasive and imminent threat. However, recent international jurisprudence and global sentiment has allowed for a single solution to each of these quandaries in the form of a carbon tax regime. Previous scholarship has focused on structural deficiencies within the World Trade Organization that prevent certainty and encourage inaction or organizational modification, few have looked to the possibilities present within the current regime and how using said structures may enable the efficacy of unilateral action vis-a-vis each of these dilemmas. A carbon tax regime consisting of both domestic carbon taxes and border tax adjustments for those who fail to comply with the international efforts potentially meets both the strictures under the Kyoto Protocol and the World Trade Organization and creates an more efficient market from one that has formerly been woefully inefficient. As commentators note the imminence for a time of action, few if any solutions match the efficacy of a carbon tax regime in complying with the regulatory parameters currently permitted with a small mass of nations serving to effect substantial change regarding climate change mitigation while complying with international trade laws.