Carbon Tax as Discrimination: Revisiting the Legal Standard of National Treatment in WTO Law

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—Zaker Ahmad

This paper explores the possibility of an alternative take on the current understanding of the GATT national treatment obligation, especially in the assessment of the possible discriminatory impact of a carbon tax. The traditional legal standard, when applied to an import-adjusted carbon tax measure, may result in a finding of discrimination, despite there being sound economic rationale underlying such a measure. It is proposed that during the analysis of discrimination, comparison between products should also account for emission footprints. Furthermore, to assess the discriminatory impact of a carbon tax, one should not only take into account the tax burden imposed on products, but also the level of pre-existing distortion in the market. This paper finds that while such an alternative approach may be promising, it can, in case of inadequate forethought, run into problems.

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