The Sky is Not the Limit: - Carbon Trade Watch

The solution, as proposed by industrylobby groups and neo-liberal thinktanks, is to encourage WTOcompliance across the board. Manycorporate lobby groups in particular,want unrestricted free trade ingreenhouse gases rather thangovernment regulation and taxation. 4The WTO’s supremacy over nationalgovernment’s ability to legislate makesit difficult to implement climate policies,including tough regulations onemissions trading markets, which donot conflict with free trade rules.Increasingly, regional tradeagreements such as NAFTA and theEU Single Market also contain suchmeasures. A recent NAFTA disputebetween the US and Canada over atoxic fuel additive, MMT, led to theCanadian government having to repealits ban of MMT, a substancemanufactured by US-based EthylCorp., and to pay compensation to thecompany for profit losses. 5Interestingly, the US government itselfbans the use of MMT in fuels, whereasCanada was instituting the ban after ithad signed NAFTA. Also of note, isthat in this particular dispute, EthylCorp. was able to sue the Canadiangovernment directly. 6 Such ‘investorstate’provisions are appearing in newtrade and investment treaties andthreaten to bring a whole raft of similarchallenges against countries’environmental and social standards bytransnational corporations.Investment Liberalisation: AnEmerging ThreatWhile global trade rules have anenormous impact on climate policy,global investment rules, as codified inthe WTO’s rules on services,intellectual property and trade-relatedinvestment measures, as well asthrough regional trade agreements,and through International InvestmentAgreements (IIAs) are also importantto consider.International investment can take twomain forms: foreign direct investment(FDI) and international portfolioinvestment (IPI). FDI can be definedas an investment by a corporationfrom one country in an asset (in wholeor in part) of a company (most often asubsidiary) in another country.Therefore a majority of FDI flows arein the form of mergers, acquisitionsand takeovers, which contributes tothe increase in size and concentrationof the economic power ofcorporations. 7Portfolio investments can be definedas the buying of stocks, bonds or otherparts of the financial markets that donot result in a ‘controlling stake’. Suchinvestment is often more short termthan FDI, and much more speculative.Emissions trading, broadly defined,involves both forms of internationalinvestment. Project-based trades suchas investment in a CDM or JI projectwould be considered FDI, while tradingin emissions permits would beclassified as portfolio investments.In the past, governments have tried tonegotiate special multilateralagreements on investment in the WTOand in the Organisation for EconomicCooperation and Development(comprising the 29 most industrialisedcountries).However intense public outrage andgovernment opposition ultimately ledto their demise. Corporate lobbygroups such as the InternationalChamber of Commerce (ICC) and the24