Border Adjustments on Energy Taxes: A Possible Tool for European Policymakers in Implementing the Kyoto Protocol?

This article analyses whether the European Union could lawfully enact border adjustments for energy taxes vis-à-vis other industrialised countries that are not party to the 1997 Kyoto Protocol to the UN Framework Convention on Climate Change without violating world trade law, in particular the General Agreement on Tariffs and Trade (GATT) and the Agreement on Subsidies and Countervailing Measures (SCM Agreement). We outline the rationale for border adjustments for energy taxes and conclude that despite remaining ambiguity in both the legal provisions and the pertinent case law, energy-related border tax adjustments are under certain circumstances compatible with world trade law.