Topsy-Turvy : The European Court of Justice and Border (Energy) Tax Adjustments – Should the World Trade Organisation Follow Suit?

National environmental priorities, as well as international commitments to reduce the emission of greenhouse gases, have led to the increased use of ‘smart' energy taxation. In particular in OECD countries, States aim to encourage inter alia the use of renewable sources of energy, through a layered system of taxation. Such system targets the (perceived) less environmentally friendly forms of energy, with a higher rate of taxation. Competitiveness concerns of such a green taxation regime, would normally be offset by Border Tax Adjustment (BTA). However in the energy sector, BTA is complicated by the fact that one cannot distinguish the method of production from the final product. The paper employs this dilemma and the way it is tackled in the European Union, as a benchmark for similar taxation applied on a global scale. It lays considerable emphasis on recent case-law, which initially seemed to signal less flexibility on the Border Tax Adjustment side (Outokumpu Oy), and more flexibility on the aspect of quantitative restrictions to trade (PreussenElektra), but was subsequently overtaken by the regulatory intervention of the European legislator. That interplay between negative harmonization (case-law) and positive harmonization (regulatory intervention), is exactly where the WTO and the international environmental community, ought to follow suit