From a WTO legal perspective, it seems that Stiglitz’s article (" A New Agenda for Global Warming" ) proposes a mix of several strategies that must in fact be carefully distinguished because every strategy rests on the invocation of different dispositions which pose specific legal problems. Even if Sitglitz does not attempt to distinguish legally the various strategies that he suggests, such is not his purpose, it is however easy to recognize them through the text of his article.
I) The “Anti-Subsidy” Strategy
The Multilateral Option
Stigliz suggests this option when he writes that “Japan, Europe, and the other signatories of Kyoto should immediately bring a WTO case [against the US] charging unfair subsidization”. If the potential complainants choose this option, and without that being explicitly distinguished by Siglitz, they would in fact have to choose between two possible scenarios.
1) The “Lax Emissions Standards” Scenario
Let us suppose for the sake of the argument that US emission standards are, all things considered, sub-Kyoto. It seems however, that such lax standards do not fall under any category of financial contribution listed in Article 1/SCM. Moreover, and this is a crucial point, these categories are exhaustive and not illustrative, a fact recognized by the Export Restraints panel when it declares that these categories constitute “a finite list [of] the kinds of government measures that would, if they conferred benefits, constitute subsidies”. In other words, the exhaustive nature of these categories, does not leave any room for manoeuver for considering lax emission standards as embodying a governmental financial contribution.
Before a WTO panel, this conclusion would for all intents and purposes close the complaint since it would be impossible for the panel to examine allegedly violated subsidy disciplines in the absence of such a financial contribution. This means that the panel could even dodge the issue of “specificity” (namely, are CO2 emitting firms a “sufficiently discrete segment” of the US economy?) and the issue of “benefit” ( namely, are these firms "better off" than they would otherwise have been, absent the lax emission standards?). Of course, the panel would not even consider the issue of what subsidies disciplines are possibly violated by these sub-standards since they are quite simply not “subsidies” in the legal meaning of the term.
2) The “Failure to Tax ” Scenario
In contrast with the “lax emission standards” scenario, this latter scenario is explicitly considered by Sitglitz when he writes that :
A subsidy means that a firm does not pay the full costs of production. Not paying the cost of damage to the environment is a subsidy.... In most of the developed countries of the world today, firms are paying the cost of pollution to the global environment, in the form of taxes imposed on coal, oil, and gas. But American firms are being subsidized—and massively so.
In other words, in such a scenario the complainants would have to demonstrate the failure by the US government to impose adequate fees for CO2 emissions ( in the form of a tax or a charge) entails a governmental financial contribution providing selectively ( “specific”) a benefit on some firms.
One could be tempted to say that we have here a financial contribution within the meaning of Article 1 of the SCM, since a “government revenue that is otherwise due is forgone or not collected”. However, this view appears to be unfounded. In the US FSC case which tested an “otherwise due” tax scenario, the Appellate Body agreed with the panel that the basis of comparison (namely, the situation “otherwise due”) must be tax rules applied by the Member in question and rejected the idea that WTO obligations somehow compel Members to choose a particular kind of tax system. This means, that if the US government exempts all firms emitting CO2 from a tax, whereas such a tax exemption would not be available for other firms “in a comparable situation”, then of course there would be a governmental financial contribution in the form of “revenue foregone” on an “otherwise due” tax. This is not however the case here, since we are not in a situation where CO2 emitters are exempted from a tax that other firms in a comparable situation have to pay.
The Countervailing Duty Option
Stiglitz proposes implicitly this option when he suggests that, at the very least, others countries should “impose a high tax on [the importation of American goods], to offset the subsidy that those goods currently are receiving”. This vocabulary is exactly the same as the one found in the SCM Agreement which says that the aim of countervailing duties is “ to offset subsidization”.
The legal problem arising for such an option is exactly the same as in the multilateral option. Once again, the inexistence of a governmental financial contribution in the sense of Article1/SCM would be a stumbling block. In fact, the SCM Agreement specifies clearly that “countervailing duties may only be imposed pursuant to investigations initiated and conducted in accordance with the provisions of this Agreement....”.
II) The “Ban on Importation of US Goods Using Energy Intensive Technologies” Strategy
Stiglitz suggests this strategy when he writes that “other countries should prohibit the importation of American goods produced using energy intensive technologies”.
According to the Shrimp-Turtle jurisprudence, the legal obstacle for a country wishing to impose a ban on imports on environmental grounds by invoking Article XX of GATT 94 does not come from the fact that the natural resources that it wants to protect are located outside its jurisdiction or the fact that it invokes unilaterally decided environmental standards. The obstacle resides above all in the fact that under the Chapeau of Article XX , an exporting country can challenge such a ban if it is applied in a manner that amounts to an “ arbitrary or unjustifiable discrimination between countries” where the same conditions prevail or to “a disguised restriction on international trade”.
In particular, the Appellate Body held in the Shrimp-Turtle case that to avoid “arbitrary or unjustifiable discrimination”, the country imposing a ban on imports from an exporting country must provide a formal hearing that allows the exporting country to argue that it has comparable environmental policies even if they are not precisely the same as the policies in the importing country. It must also make the same efforts to negotiate with all exporting countries, make the same efforts to transfer technology to all exporting countries, and provide a formal notice of the reasons for adverse decisions and some procedure for review of or appeal from these denials.
Since the United States has its own environmental strategy centered on technology improvement that it most likely considers as effective even if not identical to Kyoto prescriptions, one could legitimately ask if an ban on imports could be justified without clashing with the Chapeau of Article XX. Add to that that these countries would have to prove according to Article XX that the ban is made “ in conjunction with restrictions on domestic production or consumption”, which is not obvious since many countries are not really restricting production and consumption even if they have ratified Kyoto, and that many important developing countries are exempted from Kyoto disciplines.