China says "carbon tariffs" proposals breach WTO rules

BEIJING Fri Jul 3, 2009 2:04am EDT

Smoke billows from chimneys at a chemical factory in Tianjin Municipality in this December 23, 2008 file photo. REUTERS/Stringer

Smoke billows from chimneys at a chemical factory in Tianjin Municipality in this December 23, 2008 file photo.

Credit: Reuters/Stringer

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BEIJING (Reuters) - Proposals to impose "carbon tariffs" on imported products will violate the rules of the World Trade Organization as well as the spirit of the Kyoto Protocol, China's Ministry of Commerce said.

In a statement posted on its website, the ministry said collecting carbon duties from foreign products would enable developed countries to "protect trade in the name of protecting the environment."

"This will not help strengthen confidence that the international community can cooperate to handle the (economic) crisis, it also will not help any country's endeavors during the climate change negotiations, and China is strongly opposed to it," the statement said.

The statement comes amid a series of complex debates and negotiations about the impact a new global pact to reduce CO2 emissions will have on the international balance of trade.

Concerned their efforts to curb greenhouse gases would put their industries at a competitive disadvantage, the United States, Canada and the European Commission have all put forward proposals to "level the playing field" by raising duties on imports from countries that are not making the same effort.

The U.S. Clean Energy and Security Act, passed by the lower house of Congress on Friday last week, includes provisions allowing the government to take action against trading partners that fail to meet U.S. greenhouse gas standards and thereby gain a competitive advantage -- but not before 2025.

"I think generally they're using this as a means to pressure developing countries to take stronger action on emissions," said Zhang Haibin, a professor of environmental politics at Peking University and an adviser to the Ministry of Commerce on trade and climate change policies.

"But if the United States takes unilateral action without proper multilateral consultations and agreement that could spark big trade disputes, a trade war even," he said.

The Ministry of Commerce statement did not mention the United States or the new energy bill, known as the Waxman-Markey bill. But it said any carbon tariff proposals ran against the spirit of the Kyoto Protocol principle that developed countries should bear the bulk of the burden when it comes to reducing carbon emissions.

Carbon tariffs would "seriously hurt the interests of developing countries" and "disrupt the order of international trade," it said.

"COMPARABILITY OF EFFORTS"

The first phase of Kyoto ends in 2012 and final negotiations on a new global climate change pact are set to be completed in the Danish capital Copenhagen in December.

China has called on developed countries to commit to deeper cuts in their CO2 emissions but has balked at the idea that developing nations should pledge similar reduction targets.

India also said it would reject binding CO2 reduction targets, saying its top priority remains the eradication of poverty and the development of the economy.

According to the Bali roadmap agreed at U.N. climate talks in late 2007 to lay out the principles of a new climate accord, there should be a "comparability of efforts" in the fight against global warming.

"But there is no definition of comparability," said ZhongXiang Zhang, climate change expert at the East-West Center in Hawaii.

"If you look at the roadmap, it talks about a comparability of efforts between the European Union, the United States and Japan, and not about China or India."

He said some industrialized countries had extended the vague notion of "comparability" to developing nations, and have threatened to use unilateral trade measures to address their concerns about lost competitiveness.

"When these climate negotiations are going on, developing countries should strongly urge a definition of what is meant by 'comparability'."

Zhang Haibin of Peking University said finding a solution to the interlocking problems of trade and climate would be crucial leading up to the Copenhagen talks.

"But I don't see any chance of these issues being agreed before Copenhagen. On the Doha round (of trade negotiations), we've seen virtually no progress, and negotiations on WTO provisions and climate change policies will be even more complex, so I don't see any chance of these issues being settled soon."

(Additional reporting by Chris Buckley, Editing by David Fogarty)

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