A proposal on broadening Colombia’s National Carbon Tax’s scope

Environmental concerns are present in our everyday reality, shifting between several shapes throughout the different stages of modern society. Nowadays, each person can inquire about climate change, endangered species, air pollution, and every other upsetting phenomenon, the reason why awareness about the entity of these situations has spread worldwide.

Similarly, this problem has reached to higher instances, such as international organizations as the United Nations, setting the path for international cooperation against preventable environmental disasters. For example, there have been several agreements on how to tackle them, obliging governments to put them on the move.

Nonetheless, States pursuing such ends cannot be oblivious to other commitments acquired with other international organizations. Thus, the World Trade Organization obliges its members to liberalize trade and to avoid the imposition of discriminatory measures, meaning that perhaps some measures against climate change, for example, could be found to be distorting trade.

Carbon taxes are part of the range of measures against climate change and have demonstrated to be an essential tool in facing it. Thereupon, several countries decided to enact them, and some studies claim that the effects that they will bring are positive. Among these countries, we can find Colombia and its National Carbon Tax, levying fossil fuels.

However, fossil fuels are not the only product that harms the environment. Other polluting goods could be subject to a carbon tax. For example manufactories, food, and catering, clothing, and footwear, among others,[1] thereby enhancing environmental protection through it; yet, this process has to be made cautiously to avoid any conflict inside the World Trade Organization.

For instance, the National Treatment Principle enshrined in GATT article III aims for granting imported, as well as domestic products equal competitive opportunities inside the market.[2] A measure such as carbon taxes may nevertheless break this balance, favoring certain products as they could escape the reach of it, jeopardizing a high percentage of products, since many of them are manufactured with emissions of Green House Gases.

However, to demonstrate that the carbon tax is consistent with rules under the World Trade Organization framework, it would have to be shown that the products at issue are neither like nor in a competitive relationship between each other.[3]

This situation could be done by demonstrating that consumers’ tastes and habits towards the products at issue differ,[4] mainly because they act differently concerning eco-friendly products. Also, it could be ascertained that the products, though similar, are not in a direct competitive bond due to their price differentials,[5] as commonly, green products are more expensive.[6]

Still, the measure could be found to be inconsistent with the stated provisions, leading an analysis towards a possible claim of an exception under GATT Article XX. It has to be acknowledged that WTO Members may enact specific measures that not comply with the obligations under the General Agreement but that are justified, for instance, as they protect exhaustible natural resources or human, animal or plants life or health.[7] This claim could succeed since the proposed measure would seek exclusively to protect the environment, not to alter trade whatsoever, being the measure that better fits Colombia to pursue such an end.

Hence, it is necessary to bring some light on what circumstances must be taken into account by lawmakers to widen the coverage of a carbon tax and thus elude any dispute under the World Trade Organization. If the measure would be contested under the Dispute Settlement Mechanism of the WTO, it is essential to address arguments that favor Colombia’s measure. Then the relevant question will be whether extended carbon taxes would be consistent with the law of the World Trade Organization?

Pablo Aponte (student of International Litigation: Gustavo Guarin)

[1] The carbon emissions generated in all that we consume. London: Carbon Trust, 2016. Accessed March 15, 2019. https://www.carbontrust.com/media/84936/ctc603-the-carbon-emissions-generated-in-all-that-we-consume.pdf

[2] Canada – Certain Measures Concerning Periodicals (1997), WT/DS31/AB/R (Appellate Body Report), p. 18.

[3] General Agreement on Tariffs and Trade, 61 Stat. pt. 5 T.I.A.S 1700 55 U.N.T.S 194, (October 30th, 1947), article III:2, first and second sentences.

[4] European Communities – Measures Affecting Asbestos and Asbestos-Containing Products (2001), WT/DS135/AB/R (Appellate Body Report), para. 101.

[5] Philippines – Taxes on Distilled Spirits (2011), WT/DS403/AB/R (Appellate Body Report),

para. 215.

[6] “Green goods cost nearly 50% more.” The Telegraph. March 30, 2010. https://www.telegraph.co.uk/news/earth/earthnews/7785705/Green-goods-cost-nearly-50-more.html

[7] General Agreement on Tariffs and Trade, 61 Stat. pt. 5 T.I.A.S 1700 55 U.N.T.S 194, (October30^th, 1947), article XX paragraphs (b) and (g).