Classifying Carbon Subsidies in Trade

One area of focus related to agriculture and climate change will come after the United Nations meeting in Copenhagen, Denmark, but likely to generate a great deal of debate in coming years: How are carbon incentives or "subsidies" going to be classified under the World Trade Organization? Given that these incentives are going to be far more lucrative in developed countries, carbon incentives are going to a whole new area of fodder for possible WTO disputes and challenges in coming decades, said Tim Josling, a professor emeritus of agricultural policy at Stanford University. Among the first major possible challenges would be likely for any government program involving a direct payment to a producer. Direct payments for carbon sequestration, for instance, would fit there. There are vagaries about the idea of a government certification program that would allow a producer to qualify for a payment on the open market, however. Selling offsets to a non-farm seller may not be a subsidy. There have been no rules spelled out regarding whether free allocation of greenhouse-gas emissions would qualify as a subsidy. Research on climate change could be considered a subsidy if the research is targeted to benefit a specific sector. Classifying a subsidy may be the critical part. Are they "green box" under WTO rules, meaning they are not trade distorting, but providing a public environmental benefit? Josling said farmers may need incentives to join a carbon program, so that would exclude such payments from being green box...read more