CLIMATE CHANGE AND
CARBON BARRIERS TO
TRADE
PRESENTED AT
THE ENERGY AND RESOURCES INSTITUTE
By Raktim Ray (Intern)
Resources and Global Security Division

Linking climate change to trade.
The North-South divide
Trade instruments used for the purpose of
distorting free trade.
•tariffs
• Border Tax measures
•non-tariff barriers
•Quotas
•Product standardization

R&D investments to reduce GHG emissions involves
• Higher compliance Costs
• Higher product prices
Stiff competition from products of developing nations who
are not cutting back on emissions as a result of trade
Given the present scenario it is not possible for only the
developed nation to take the burden alone

Implementation of greener technology is
difficult due to high costs and strict IPR whereas
other issues domestically needs to be taken care
of for the sake of growth.
Burden should be borne by the developed
nations because their contribution to
environmental degradation is much more than
developing nations.

The Cancun Climate Conference held between 29th
November-11th December 2010 had some useful
highlights:*
Establishment of Green Climate Fund(GCF) to support projects, programmes
and other activities in developing countries, using thematic funding windows.
Commitment by developed countries transfer $100 billion a year by 2020 to
developing countries for adaptation and mitigation.
Invitation to developed country parties to submit information on resources for
fast-start financing and long-term finance.
Scaled-up, new and additional, predictable and adequate funding for
developing countries for GHG reduction.
*Data source: International Institute for Sustainable development (IISD)

17%
10%
73%
INDIA:EXPORT VOLUME BREAKUP
USA UK,France & Germany Others
21%
8%
71%
CHINA:EXPORT VOLUME BREAKUP
USA UK,France & Germany Others

In all the cases the US is the leading market for
Exports followed by the EU with the US being the only
country to have import shares in double figures.
18%
8%
74%
BRAZIL:EXPORT VOLUME BREAKUP
USA UK, France and Germany Others
11%
19%
70%
S.AFRICA:EXPORT VOLUME BREAKUP
USA UK, France and Germany Others

Understanding the existing regulations /policies on trade barriers.
•Mainly developed countries as they are footing the major costs for climate change.
The countries framing the policies:
•Mainly developing countries due to their large share of exports to developed countries and
also due to incomplete implementation of greener technology.
The countries being affected:
•Identifying the sectors that are most vulnerable
•Overall impact on the volume of trade between countries
Estimating the impact on export volumes as a result of the trade
barriers:

US
Waxman-Markey Bill
European Union
French prime minister of 2006
suggested that countries who do not
sign up for a post 2012 international
treaty on climate change could
potentially face extra tariffs on their
industrial exports. In early 2008 the EC
discussed the idea of implementing a
de-facto carbon tax on products of
countries which do not similarly restrict
their GHG emissions.
These policies pose an initiative for conflict between the two
parties because the clauses are not in tandem with the WTO
agreements and the agreements in Article XX under GATT

Newly included Part F to Title VII entitled Ensuring Real Reductions in Industrial
Emissions has two subparts:
Emission Allowance Rebate Program
International Reserve Allowance
Program
Introduction and passing of the bill by the house of representatives on 26th June 2009.
The “American Clean Energy and Security Act of 2009” authored by US
representatives Henry Waxman and Edward Markey.

• Establishing an Emission allowance rebate program
commencing no later than 30th June 2011 for eligible
industrial sectors, to distribute emission allowances to
GHG emitting entities in the US domestic eligible
industrial sectors
Emission
Allowance
Rebate Program
• To establish an International Reserve Allowance Program
no later than 30th June 2018, which would require US
importers to purchase and submit international reserve
allowances as a condition for being able to import into
and sell in the US, goods produced outside the US.
International
Reserve
Allowance
Program
Our main focus will be on the second part

Imports of the countries which would be exempted
are based on conditions laid down in the bill.
Any country determined to meet any of the standards provided in
section 767(c).
Any foreign country that the United Nations has identified as the
least developed of the developing countries
Any foreign country that the president has determined to be
responsible for less than 0.5% of the total world emission of GHGs
and less than 5% import of covered goods to the US with respect
to that industrial sector.

0.00
1000000.00
2000000.00
3000000.00
4000000.00
5000000.00
6000000.00
7000000.00
China Russia India Korea Iran Saudi
Arabia
South
Africa
Mexico Indonesia Brazil
ThousandtonsofCO2
GHG Emission Level
After exclusion of the countries based on the above criteria, the top 10
GHG emitting countries are listed here

0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
China Mexico Korea Venezuela Malaysia Saudi Nigeria Brazil Thailand India
in1000dollars
Export Volume
After exclusion of the countries based on the above criteria, the top 10 countries
with the highest volume of exports to the US are listed here.

The previous
graphs
contained data
pertaining to
the year 2006
or averaged
around 2006
INDIA belongs
to both the lists
and will most
certainly fall
under the
purview of the
bill should it
come into
effect.
Another major
and obvious
choice from the
graphs is China

0.00
500.00
1000.00
1500.00
2000.00
2500.00
3000.00
3500.00
4000.00
4500.00
NTRL OR
CLTRD
PRLS,PRCS
OR
SEMIPRECS
STNS,PRE.
METALS,CL
AD WITH
PRE.METAL
AND
ARTCLS
THEREOF;I
MIT.JEWLR
Y;COIN.
ARTICLES
OF
APPAREL
AND
CLOTHING
ACCESSORI
ES, NOT
KNITTED
OR
CROCHETE
D.
OTHER
MADE UP
TEXTILE
ARTICLES;
SETS;
WORN
CLOTHING
AND
WORN
TEXTILE
ARTICLES;
RAGS
ARTICLES
OF
APPAREL
AND
CLOTHING
ACCESSORI
ES,
KNITTED
OR
CORCHETE
D.
NUCLEAR
REACTORS,
BOILERS,
MACHINER
Y AND
MECHANIC
AL
APPLIANCE
S; PARTS
THEREOF.
ARTICLES
OF IRON
OR STEEL
IRON AND
STEEL
ELCTRCL
MCHINRY
& EQPMNT
& PRTS
THEREOF;
SOUND
RECRDRS &
REPRDCRS,
TELEVSN
IMAG &
SND
RECRDRS &
REPRDCRS
& PRTS.
ORGANIC
CHEMICALS
CARPETS
AND
OTHER
TEXTILE
FLOOR
COVERINGS
.
Series1 4414.45 1701.54 933.06 879.36 783.01 664.27 625.32 607.27 535.80 453.86
inmilliondollars
Sectoral trade with the
US: Top 10 sectors

• Data representation
carried out at the two
digit HS code level
and averaged around
2006.
• Shows the sectors
most vulnerable to
the implementation of
border tax measures
on export revenues.
• Sectors were
afterwards looked
into at the 4 digit level
for further detailed
study regarding the
GHG emission levels.

To arrive at an estimate of the GHG emission levels of the of
the sectors, data was collected from the CMIE database
regarding inputs quantities. Key inputs considered are
Mineral fuels
Coal
Petroleum oil and gases
Fuel oils
Fuel wood
Electricity energy

Identifying the key industrial sectors
based on the level of energy consumption
and export share.
Arranging data on the amount of output
in physical quantity of the sectors
collected from the ASI where the
classification is on the basis of NIC codes.
Tabulating and correlating the NIC codes
for each of the sectoral classification
based on the CMIE database.

DATA SOURCES
ALL DATA ARE SECONDARY IN NATURE
DGFT website: Export data to the US from India
were collected according to HS classification both
at the 2 and 4 digit levels.
United States International Trade Commission
(USITC) website: US import data to all countries
not excluded from the reserve program list based
on NAICS classification.
UNEP Geostat database: GHG emissions level for
the calculation of energy intensity for all
countries included in the reserve program list.

CMIE database: Sector wise fuel and electricity
consumption data of all companies registered to
the database for the purpose of calculating overall
carbon content of the products and industries.
Annual Survey of Industries(ASI): Quantity of
output produced in the various sectors according to
NIC 3 digit classification containing products
classified under ASICC
UN comtrade database for export volumes of
developing countries to the US and EU

Even if any other measures of a similar kind does come into being, the time of
implementation(2020) is a long way away and the whole trade scenario might change
and along with it the global effects.
India’s export patterns might change sector
wise as well as overall with the US
China might emerge as the major exporter
of manufactured products to the effect of
monopolizing trade with developed nations
Though the bill has minute possibilities of being put into effect, nevertheless the
study would help us to identifying the sectors most potent to fall pray to trade
distortions