The study attempts to clarify the nature of tensions between action against climate change and competitiveness on the one hand, and the interface between the Kyoto Protocol and WTO rules on the other. The existing literature concerning the link between environmental legislation and its impact on competitiveness asserts that there are competitiveness impacts associated with environmental regulation, but in most cases they are moderate, the paper notes.
The report identifies two types of competitiveness concerns creating potential uneven playing fields:
- The first concerns parties enjoying an unfair advantage because they are not subject to carbon constraints, and;
- second, some parties may create unfair competitive advantages for domestic industry by the manner in which they implement the Kyoto commitment.
The first issue seems to create more concern than implementation, the report concludes.
The paper observes factors determining the impact of environmental measures on competitiveness at different levels. At firm level, the capacity to innovate will determine the impact of regulatory demands. The sector-level factors include energy costs, the ability to pass along cost-increases to consumers and the opportunities for abatement. The impact on any given sector will finally depend on national-level factors, such as the national regime of action, ie the decision establishing the extent to which one sector is expected to contribute.
The authors therefore propose strategies that parties to both the Kyoto Protocol and the WTO might use to ensure conformity between the two agreements. For example, Kyoto parties could use public-procurement policies such as the WTO Agreement on Public Procurement, to influence suppliers to act in a manner that conforms with the objectives of the Kyoto Protocol.
