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Greenhouse Gas Reduction Policies and Agriculture: Implications for Production Incentives and International Trade Disciplines

Report by Blandford, David; Josling, Tim/ICTSD, 2009

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Climate change and the instruments of policy that are emerging as a response to that phenomenon pose a multitude of challenges to the multilateral trade system. Both are likely to have an impact on agricultural production. There is also a potential for conflict with World Trade Organization (WTO) trade rules, both through the choice of policy instruments to address climate change and through the way in which governments react to pressures to avoid or deflect the costs of climate change mitigation and adaptation. We assess the implications of domestic policies designed to reduce greenhouse gas (GHG) emissions from agriculture and to enhance the role of agriculture in GHG mitigation in the context of existing and future WTO disciplines. The following types of policies are examined: (1) performance standards, (2) best-practice requirements, (3) subsidies, (4) carbon taxes, (5) cap and trade (CT) schemes and (6) public expenditure for research and extension.

Greenhouse Gas Reduction Policies
and Agriculture:


Implications for Production Incentives
and International Trade Disciplines


By David Blandford and Tim Josling
August 2009


Issue Brief No. 1


ICTSD-IPC Platform on Climate Change, Agriculture and Trade




Greenhouse Gas Reduction Policies and Agriculture:
Implications for Production Incentives and International Trade Disciplines


ICTSD
International Centre for Trade
and Sustainable Development


David Blandford and Tim Josling


David Blandford is Professor in the Department of Agricultural Economics and Rural
Sociology, Pennsylvania State University and Tim Josling is Senior Fellow at the Freeman
Spogli Institute for International Studies, Stanford University


Greenhouse Gas Reduction
Policies and Agriculture:
Implications for Production
Incentives and International Trade
Disciplines


Issue Brief No. 1




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Implications for Production Incentives and International Trade Disciplines


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ICTSD - IPC


Published by


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International Envrionment House 2
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Tel: +41 22 917 8492 Fax: +41 22 917 8093
E-mail: ictsd@ictsd.ch
Visit ICTSD’s website at: www.ictsd.org


And


International Food & Agricultural Trade Policy Council (IPC)


1616 P St., NW, Suite 100, Washington, DC 20036, USA


Tel +1 202 328 5056 Fax +1 202 328 5133


Email: agritrade@agritrade.org


Visit IPC’s website at www.agritrade.org


Charlotte Hebebrand, President/CEO of IPC, and Marie Chamay Peyramayou, Manager of the ICTSD Global
Platform on Climate Change, Trade Policies and Sustainable Energy, are the persons responsible for this initiative.


Acknowledgments:


This paper was presented at the Experts’ Meeting on “Climate Change, Agriculture, and Trade on the Road to Copenhagen”
organised by the ICTSD–IPC Platform on Climate Change, Agriculture and Trade on 12 May 2009 in Salzburg, Austria,
alongside IPC’s international seminar on Food and Environmental Security. The authors reviewed the paper based on the
comments they received at this meeting. We are grateful to the participants for their valuable inputs.


This paper was produced under The ICTSD Global Platform on Climate Change, Trade Policies and Sustainable Energy -
An initiative supported by DANIDA (Denmark); Ministry of Foreign Affairs of Finland; the Department for International
Development (U.K.); the Ministry for Foreign Affairs of Sweden; the Ministry of Foreign Affairs of Norway; and the
Commonwealth Secretariat.


IPC wishes to thank the William and Flora Hewlett Foundation and all of its structural funders for their generous support.


ICTSD and IPC welcome feedback and comments on this document. These can be forwarded to Marie Chamay Peyramayou,
mchamay@ictsd.ch and/or Christine St Pierre, stpierre@agritrade.org.


Citation: Blandford, D. and Josling, T. (2009). Greenhouse Gas Reduction Policies and Agriculture: Implications for Production
Incentives and International Trade Disciplines, ICTSD–IPC Platform on Climate Change, Agriculture and Trade, Issue
Brief No.1, International Centre for Trade and Sustainable Development, Geneva, Switzerland and International Food &
Agricultural Trade Policy Council, Washington DC, USA.


Copyright © ICTSD and IPC, 2009. Readers are encouraged to quote and reproduce this material for educational, non-
profit purposes, provided the source is acknowledged.


The views expressed in this publication are those of the authors and do not necessarily reflect the views of ICTSD and IPC
or the funding institutions.


ISSN 2075-5856




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ConTenTs


ABBReVIATIons AnD ACRonYMs iv


FoReWoRD v


eXeCUTIVe sUMMARY vii


1. InTRoDUCTIon 1


2. PoLICY APPRoACHes To THe ABATeMenT AnD MITIGATIon oF
GHG eMIssIons In AGRICULTURe 1
2.1 The Imposition of Performance Standards 2


2.2 Incentivizing Best-Practice Measures for Agriculture 2


2.3 Subsidies for Producing and Using GHG-Reducing Energy Sources 3


2.4 Carbon Taxes 4


2.5 Cap and Trade Schemes 5


2.6 Public Support for Research and Extension Aimed at Reducing GHG
Emissions in Agriculture 6


2.7 Private versus Public Incentives and GHG Remediation 6


3. PRoDUCTIon InCenTIVes AnD TRADe eFFeCTs oF PoLICY
InsTRUMenTs 7


4. CLIMATe CHAnGe PoLICY AnD WTo RULes 8
4.1 Performance Standards 8


4.2 Incentivizing Best Practices 9


4.3 Subsidies for Reducing GHG Emissions 11


4.4 Taxes on Carbon Emissions 14


4.5 Cap and Trade Schemes 14


4.6 Research and Extension 15


5. Us AGRICULTURe AnD CLIMATe CHAnGe LeGIsLATIon 16


6. ConCLUsIon 17


noTes 19


ReFeRenCes 22




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ABBReVIATIons AnD ACRonYMs


AMs aggregate measurement of support


AoA Agreement on Agriculture


BTA border tax adjustment


CAP Common Agricultural Policy


CARB California Air Resources Board


CoDeX Codex Alimentarius Commission


CT cap and trade


ePA Environmental Protection Agency


eTs Emissions Trading Scheme


eU European Union


eurepGAP common European standard for farm management practice


GATT General Agreement on Tariffs and Trade


GHG greenhouse gas


GlobalGAP Global Partnership for Good Agricultural Practice


GMo genetically modified organism


IPPC International Plant Protection Convention


Iso International Organization for Standardization


MeA Multilateral Environmental Agreement


MPs market price support


MRV monitoring, reporting and verifying


oIe International Office for Epizootics


PPM production and processing method


Ps product standard


sCM Subsidies and Countervailing Measures Agreement


sPs Sanitary and Phytosanitary Measures Agreement


TBT Technical Barriers to Trade Agreement


UsA United States of America


WTo World Trade Organization




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For countries seeking to design effective domestic or international climate change abating policy
and incite mitigation, a solid understanding of the implications of greenhouse gas reduction policies
for production incentives in agriculture and for international trade disciplines is imperative.


From nearly twenty years of analysis and inquiry into the impact of human activity on climate and
the effects of climate change on specific regions and economic sectors, we now know - albeit not at
the level of detail and depth we need – that significant changes to agricultural production and trade
are to be expected. The questions of how policies adopted to address climate change may affect
agricultural production and how they relate to international trade rules are equally important and
are also in need of further research.


This paper addresses these issues and makes the case for international trade rules that enable -
rather than serve as obstacles to - sound policies to reduce agricultural greenhouse gas emissions.
It also calls for climate change policies that do not lead to further distortions of the international
agricultural trade system.


The ICTSD–IPC Platform on Climate Change, Agriculture and Trade is pleased to release this
paper, trusting that it will contribute to a better understanding of these complex linkages and their
treatment in the current negotiations in the international climate change and trade fora.


Ricardo Meléndez-Ortiz
Chief Executive, ICTSD


Charlotte Hebebrand,
President /CEO, IPC


FoReWoRD




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EXECUTIVE SUMMARY


Climate change and the instruments of policy that are emerging as a response to that phenomenon
pose a multitude of challenges to the multilateral trade system. Both are likely to have an impact
on agricultural production. There is also a potential for conflict with World Trade Organization
(WTO) trade rules, both through the choice of policy instruments to address climate change and
through the way in which governments react to pressures to avoid or deflect the costs of climate
change mitigation and adaptation.


We assess the implications of domestic policies designed to reduce greenhouse gas (GHG) emissions
from agriculture and to enhance the role of agriculture in GHG mitigation in the context of
existing and future WTO disciplines. The following types of policies are examined: (1) performance
standards, (2) best-practice requirements, (3) subsidies, (4) carbon taxes, (5) cap and trade (CT)
schemes and (6) public expenditure for research and extension.


The impact of these policies on the competitive position of agriculture, and hence upon agricultural
production and trade, is complex, particularly if combinations of policies are used. The effects
depend on such factors as whether agriculture is the target of the policies or is affected by policies
applied to other sectors; whether the policies generate private incentives to change production
methods or the volume of output or whether this is generated solely by a publicly funded incentive;
and whether the net effect is to create an incentive to increase agricultural output in the aggregate
or to change its composition. In general, policies that restrict current activities (e.g. take land out of
production) will have a depressing effect on production. Policies that subsidize particular practices
will tend to encourage output.


In terms of the current policy debate, three key questions arise: (1) Should subsidies be used to
promote the reduction of GHG emissions in agriculture or an expansion of its mitigation activities?
(2) Should agriculture be included in CT schemes? And (3) should one continue to promote
biofuels?


Rewarding beneficial climate change mitigation by agriculture is both possible and likely. The
approach will probably combine best-practice promotion with the tailoring of existing subsidy
systems to encourage change. Subsidies could be given for such practices as minimum tillage or the
co-generation of on-farm bioenergy. Conservation payments could incorporate incentives for carbon
sequestration. Although these could be challenged by foreign competitors, they would appear to be
consistent with trade rules if they are part of a comprehensive environmental programme.


The main constraint from the viewpoint of trade rules is that, in order to qualify for the environmental
component of the green box under the WTO Agreement on Agriculture (AoA), subsidies should
be limited to the extra costs incurred by farmers. Tying current direct payments to sequestration
or other beneficial aspects of farming activity may be subject to challenge, as they would almost
certainly exceed the additional costs involved. Moreover, such a link would weaken the claim that
the payments are unrelated to current production activity and hence trade-neutral. In other words,
care has to be taken to ensure that climate change subsidies respect the criteria of the green box.
Alternatively, the green-box criteria may need to be clarified in order to reflect desirable policy.




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Including agriculture fully in a CT scheme poses a number of technical problems, including the
fact that monitoring farming activities involves a large number of firms employing a wide diversity
of technologies. Standard emission factors for crops and livestock production are not at present
considered very reliable, although some experts view the uncertainties as being no greater than
those in other sectors. Much of the domestic burden of the CT system is lifted if initial permits
are given out rather than auctioned. Agriculture could argue for a significant free distribution of
permits. This, combined with the ability to sell permits if emissions are reduced, would constitute a
subsidy. Foreign competitors might challenge the subsidy element, particularly on export crops.


It is more likely, however, that the agricultural sector will not be required to obtain permits but will
still be involved in a cap and trade market by being allowed to sell offsets to others. This also raises
the issue of whether such provisions constitute subsidies. Farming practices that sequester carbon
could benefit from such a scheme, although funds would be derived from the market for offsets
rather than from the government in the form of permit allocation.


Climate change mitigation schemes at the national level will be enacted in the context of multilateral
environmental agreements. Thus, the issue arises as to whether there should be a global obligation
to incorporate agriculture in such schemes. Considering that the largest (and growing) share of
agricultural greenhouse gas emissions occurs in developing countries, then for a global CT scheme
to be both effective and fair, it must facilitate inclusion of developing country producers, despite the
fact that they have limited ability to undertake monitoring, reporting and verifying (MRV).


The promotion of biofuels also raises questions in connection with climate change mitigation: the
contribution of some biofuels (e.g. corn-based ethanol) to GHG reduction has been brought into
question. Subsidies tied to specific uses of farm commodities have unintended consequences on
food supplies and prices, and tying such subsidies to climate change goals is likely to confound an
already confused situation.


Given these complexities, the aim should be to identify and address the positive and negative
aspects of farming on atmospheric GHG concentrations that are uncontroversial and relatively
easy to measure. Large-scale livestock enterprises are already potentially within the scope of
Environmental Protection Agency (EPA) regulations that control emissions. Reforestation for
improved sequestration could easily be given more encouragement within current conservation
programmes. Co-generation of energy on farms is not difficult to reward, particularly if surplus
energy can be transferred to the electricity grid. Greater emphasis on publicly funded research
and development to foster lower GHG emissions in agricultural production systems or to increase
sequestration could have important payoffs.


Domestic climate change legislation is constrained by international trade obligations, but a carefully
crafted programme should not raise insuperable problems. It should be possible to devise domestic
schemes that contribute to effective international action. However, an international consensus on
what measures are likely to be effective is crucial for avoiding trade disputes. The move towards
“decoupled” payments unrelated to price and current output has provided an opportunity for such
a consensus. Recoupling these payments in such a way that climate change mitigation is encouraged
without jeopardizing food security may be a constructive first step.




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Climate change legislation is currently being
discussed in the Congress of the United States of
America (USA). The extent to which agriculture
will be included in the provisions is still under
debate. Farm groups, concerned about a rise in
input prices, want to ensure that the contribution
that agriculture can make towards mitigation
of climate change is recognized and rewarded.
Meanwhile, the trade rules for agriculture in
the World Trade Organization (WTO) are
still under review in the Doha Round of trade
talks. Subsidies to agriculture in industrial
countries will need to be restrained if these
talks reach a conclusion. It is therefore useful to
consider the implications of policies designed to
reduce greenhouse gas (GHG) emissions from
agriculture and to enhance the role of agriculture
in GHG mitigation in the context of existing
and future WTO disciplines. The primary focus
is on domestic policies that are likely to affect
agriculture directly, although they may not be
targeted exclusively at the sector.


This paper is composed of four main sections:


a discussion of policy approaches •
to the reduction of GHG emissions
from agricultural production and
enhancement of the role of agriculture
in GHG mitigation;
an assessment of the potential •
implications of these policies for
agricultural production incentives and
for international trade;
an analysis of the issues that may arise •
in the context of WTO constraints
on subsidies and other rules that
may influence the choice of policy
instrument;
a conclusion suggesting some of the more •
contentious farm policy and agricultural
trade policy issues that may arise as
countries pursue GHG reduction and
other climate change policies.


1. InTRoDUCTIon


2. PoLICY APPRoACHes To THe ABATeMenT AnD
MITIGATIon oF GHG eMIssIons In AGRICULTURe


Emissions of GHG (mainly methane, carbon
dioxide and nitrous oxide) are generated
throughout the entire food and agricultural
supply and distribution system, from the
production of agricultural inputs through to
the final consumption of food products (e.g.
the miles driven by shoppers to supermarkets).1
The range of policies that can be used to
address those emissions is also extensive.
However, for the purposes of this study, our
focus is on policies targeting emissions that
are likely to have a direct effect on agricultural
production.


Policy approaches that attempt to include
agriculture in the abatement of GHG emissions
and in GHG mitigation can take several forms.
These include:


reduction in the amount of GHG •


emissions generated by agricultural crop
and livestock production;
absorption of emissions from •
agriculture and other sectors as a result
of the process of photosynthesis and
the storage of carbon in organic matter
(sequestration);
encouragement of production of crops •
that can aid the replacement of high
GHG emitting products with potentially
lower emitting products (e.g. biofuels);
switching to alternative energy sources on •
farm that reduce reliance on carbon-based
sources of energy (e.g. co-generation).


Agriculture may also be affected by policies that
are multisectoral or economy-wide in their scope,
such as cap and trade (CT) schemes or carbon
taxes. Although the primary focus is on policies
that are applied at the national level, some can




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be applied at the state and local levels.
In the following sections, we examine six
categories of policy measures that are under
active consideration in the USA and other
countries:


the imposition of performance standards •
for the agricultural and food sector


the promotion of best-practice •
requirements for agriculture
subsidies for the production and use of •
GHG-reducing energy sources
carbon taxes•
CT schemes•
public support for agricultural research •
and extension aimed at reducing or


mitigating GHG emissions.


2.1 The Imposition of Performance
standards


Performance standards are a direct way
to regulate the emission of GHGs from
agricultural enterprises. GHG emission
standards could be specified for agricultural
production processes, similar to the emission
standards that target phosphorous, nitrogen
or organic material in order to improve water
quality. As with other forms of regulation,
the effectiveness of this approach depends
on the ability to monitor GHG emissions
in agriculture and to impose penalty costs
on those who exceed allowable standards.
It is easier to achieve this for concentrated
production operations, such as feedlots,
which are point sources of pollution, rather
than more diversified farming operations,


which are non-point sources of pollution. As
a result, this approach is likely to have limited
application in agriculture.
It is possible to use other regulatory methods.
Rather than regulating emissions directly,
limitations may be imposed on the size of
operations, such as the number of animals in a
feedlot, or by imposing particular production
requirements, for example methods for handling
animal waste. This can be easier to enforce than
the regulation of emissions, since it is simpler to
verify that process standards are being applied
than to monitor outputs from those processes.
Consequently, process standards can be applied
both to concentrated and to more diversified forms
of production. In both cases, however, regulation
is likely to be effective only if there are sanctions
(costs) for producers who do not conform. In
agriculture, it is often administratively (and


politically) difficult to design regulatory systems that include adequate inspection requirements and
sanctions for non-compliance.
2.2 Incentivizing Best-Practice Measures


for Agriculture


Because of the challenges of using a regulatory
approach in agriculture, the focus has often
been on providing direct or indirect incentives
for farmers to adopt changes in production
practices that result in improved environmental
outcomes. This has been the principal approach
adopted in agri-environmental schemes in
Europe and North America with respect to such
aims as reducing water pollution or maintaining
biodiversity. With respect to GHG emissions,
the best-practice approach could be used to:


change production practices in order •
to reduce agriculture’s GHG emissions
through the adoption of lower emission
methods of crop or livestock production,
for example by encouraging conversion
from conventional to conservation
tillage;2
keep land out of agricultural production in •
order to avoid carbon emissions, for example
through enrolling land in the Conservation
Reserve Program in the USA;
enhance carbon storage in trees and soils •
through tree planting.




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The adoption of best-practice requirements
by producers can occur under a range of
circumstances conditioned by government
action and market forces:


When the private •
return to adoption
of the requirement
exceeds its private
cost in the absence
of government
action: This may


apply because the practice requirement
results in reduced input use or an increase
in output (increased productivity of
existing inputs) in agricultural activities.
Alternatively, the practice requirement
may generate a new economic activity
whose returns exceed its costs (e.g. the
sale of wood from afforested land).
When regulation creates a return to the •
adoption of a requirement: Thus, for
example, input regulations (e.g. the use
of animal manure) or environmental
regulations (e.g. on water quality) may
make it profitable to adopt alternative
production practices in order to avoid
the costs imposed by regulations (e.g.
exceeding nitrogen concentration in
ground or surface water). Note that
such regulations could also be directed
specifically towards the reduction of
GHG emissions, such that farmers


would adopt a new practice in order to
reduce the costs associated with meeting
a GHG emission standard.
When the adoption of a practice is made •
profitable through the creation of property
rights: Thus, for example, it might become
profitable for farmers to adopt measures
that lead to reduced GHG emissions or
to sequester atmospheric carbon because
a market is created for these (e.g. under a
carbon trading scheme). The creation of
property rights in this case is most likely
due to the imposition of regulations on
emissions or the expectation that such
regulations will be imposed.
When adoption is driven by direct •
government incentives: The imposition
of practice requirements might be a
condition for receiving other government
benefits (e.g. direct payments that are
intended to provide income support).
Alternatively, practice requirements
might be associated with specific financial
incentives that are designed to promote
the adoption of those requirements (e.g.
payments under agri-environmental
programmes or investment subsidies
for equipment that reduces GHG
emissions). Payments might be made to
compensate producers for the additional
costs of adopting a practice or to provide
an additional incentive (a return above
costs) to promote adoption. Incentive
payments are likely to be needed if there


The adoption of best-
practice requirements by
producers can occur under
a range of circumstances
conditioned by government
action and market forces.


are limited private benefits from adoption (e.g. the practice requirements do not result in a


reduction in costs).


2.3 subsidies for Producing and Using
GHG-Reducing energy sources


Rather than providing incentives for changes
in existing production practices, payments may
be made to increase the output of products
that are viewed to contribute to lower GHG
emissions in the economy as a whole. Two
examples of this are:


the production of existing crops or •
alternative cellulosic feedstocks for the
production of biofuels;
the development of on-farm sources of •
alternative energy (e.g. co-generation
from biomass).


The emphasis in this case is on promoting the
expansion of specific outputs, rather than a
change in input use or production methods.




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Incentives can be provided through output
subsidies (e.g. a subsidy per acre or per ton for the
production of feedstock) or through investment
subsidies (e.g. in co-generation equipment).
Subsidies can also be provided indirectly through
energy use mandates, such as those applying to
renewable energy or through consumption or
blending mandates for biofuels.3 In markets
where electricity prices are regulated, the price
paid for farm-generated bioenergy could be set
at a rate that provides an incentive to invest in
on-farm generation and supply.


There has been considerable debate on whether
the promotion of biofuels as alternative energy
sources actually results in a net reduction in


emissions of GHG (e.g. Wang et al. 2007).
Particular controversy has surrounded the
balance of GHG emissions associated with the
use of corn for the production of ethanol, on
account of the direct consumption of fossil fuels
that this involves and the possible indirect effect
of opening up fresh land for corn production.


We should note that policies for the promotion
of renewable energy that are not specific to
agriculture are having an impact on the use
of agricultural land in some countries. The
principal example is the development of wind
energy. This may reduce agricultural production
through the use of land for wind turbines, access
roads and power transmission facilities. It may


also permit the intensification of production on remaining land if farmers, as landowners, realize


an additional income stream from wind energy
that can be used to invest in their agricultural
operations.


2.4 Carbon Taxes


Most of the focus in agricultural policy tends to
be on the provision of payments to farmers as
a means of achieving various policy objectives.
There is generally a reluctance to use taxes to
achieve policy aims. This reluctance means that
the full costs of agricultural activity may not be
internalized, i.e. taken into account by farmers
in production and resource allocation decisions.
To the extent that GHG emissions contribute
to climate change and climate change imposes
costs on society as a whole, the failure to
internalize these costs constitutes market failure.
Carbon taxes are one way to internalize the costs
so as to influence decision-making and resource
allocation.


As far as agriculture is concerned, a significant
issue is the potential impact of a carbon tax, i.e. the
internalization of GHG emission costs through
taxes on fossil-fuel energy sources (coal, natural
gas, oil) on the profitability of the sector. Sectors
that use such inputs (either directly or indirectly)
most intensively would be most affected by


this approach. Agriculture is a significant user
of fossil fuels, not least through the natural gas
that is a feedstock for fertilizer, but also through
direct energy consumption in agricultural
production.4 Without significant changes in
input use, either through higher efficiency in
the use of fossil fuels or through the substitution
of “green” alternatives for fossil-fuel inputs,
agriculture’s costs would rise. Cost increases
would be felt by the consumers of agricultural
products through higher prices, and by farmers
through lower profits. Given the price inelasticity
of the demand for food in the aggregate, extra
costs would be borne primarily by consumers,
but there could be important redistributive
impacts within the agricultural sector.5 High
fossil-fuel-using activities that are prone to
substitution effects
in consumption
would likely
experience a
decline in demand
and would become
less profitable.


The net impact of carbon taxes on GHG
emissions for the economy as a whole, and
in agriculture, depends on how the revenues
from the taxes are used. If taxation revenue is


The net impact of carbon
taxes on GHG emissions
for the economy as a whole,
and in agriculture, depends
on how the revenues from
the taxes are used.




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redistributed in ways that promote consumption
of high-fossil-fuel products or activities, then the
impact of taxes on mitigation objectives may be
diluted. In such a case, the income effect of the
distribution of the tax revenue would offset the
substitution effects of a change in relative prices.
Conversely, if the tax revenue is distributed in
such a way that it promotes the consumption
of low-carbon products, or directly promotes
conservation or reductions in carbon usage, then
the effects of the tax may be amplified. From this
perspective, expenditure on the development
and adoption of new low carbon technologies
or a shift in consumption from traditional to
“green” products could moderate the impact of
carbon taxes on agriculture.


A more direct approach to the reduction of
GHG emissions in agriculture would be to
impose output taxes that reflect the contribution
of specific sectoral activities to emissions. Thus,
for example, livestock production has been
identified as particularly problematic in its
contribution to GHG emissions in agriculture
(FAO 2006). Methane produced by ruminants
is estimated to be over 20 times more potent
on a volume-for-volume basis than carbon
dioxide in terms of global warming. If this
were to be reflected in livestock production,
then prices of beef and dairy products, for
example, would be substantially higher than in
a free market (in the absence of any offsetting


changes in technology). GHG taxes on output could significantly alter the pattern of production,


particularly for products that are associated
with high methane emissions (paddy rice is the
major crop in this regard).


2.5 Cap and Trade schemes


Most of the discussion of abatement strategies in
the context of GHG emissions has been on CT
schemes rather than carbon taxes. The political
preference is for establishing emission limits
rather than influencing behaviour through taxes.
CT schemes require that a limit be placed on the
total volume of GHG emissions. Firms can then
buy and sell permits to emit. Initial emission
allowances can be distributed to firms without
cost or auctioned off to the highest bidder (or
a combination of these methods can be used).
Provided that the cap is binding, the former yields
a windfall gain to firms and the latter results in
revenue for taxpayers. To be effective, CT schemes
require that compliance with emission permits
be monitored. Because of the need for emissions
to be limited under CT schemes, these typically
require government intervention, for example
the European Emissions Trading Scheme (ETS).
However, there is one private scheme operated
through the Chicago Carbon Exchange, where
no government-imposed cap exists. In that
case, participation is driven by pressure from


shareholders, customers and citizens, as well as
by expectations of future regulation.


There are several possible implications of CT
schemes for agriculture. A key issue is whether
agriculture’s GHG emissions are included in the
cap and whether its emissions would be subject
to limitations. If that is the case, then farmers
might be subject
to the same
windfall gain from
the allocation of
GHG entitlements
as other firms.
Farmers are
provided with an
additional asset (the emission permit) that has
a market value. If they are able to reduce their
emissions below their allowable limit, then the
sale of unused permits yields additional income.
If they are not able to do this, then the need
to obtain additional permits turns CT schemes
into an additional cost of production as the CT
scheme acts to internalize the external costs of
emissions (provided that compliance with the
cap can be monitored effectively).


As in the case of carbon taxes, CT schemes
can also impose additional costs on agriculture


A key issue is whether
agriculture’s GHG emissions
are included in the cap and
whether its emissions would
be subject to limitations.




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indirectly. For example, emissions from
industries supplying agriculture with inputs
(energy, chemicals, machinery) might be
constrained through CT schemes. In that case,
the cost of inputs will rise. If farmers are not able
to realize productivity gains, such that the use of
inputs per unit of output falls, then their costs
of production will increase and their profits
will decline. This is a necessary implication of
internalizing the cost of emissions as the entire
cost structure of the economy adjusts.


Agriculture can benefit from CT schemes even


if its emissions are not included in the cap.
Agricultural producers may be allowed to offer
carbon credits (offsets) resulting from carbon
sequestration or other GHG-reduction activities
to firms subject to emission reductions. Firms
could meet their reduction requirements in part
by purchasing such offsets. Farmers might be able
to realize revenues from producing biomass (e.g.
planting trees) or reducing methane emissions
from livestock by using manure digesters to
produce biogas for electricity production. In
such cases there can be two revenue streams: one
from selling the initial GHG reduction credit


social benefits from reductions in GHG emissions through reduced global warming and less disruptive
changes in climate.


and a second from the sale of related products (e.g. wood or energy). This dual revenue stream
argument has been used to try to attract farmers to participate in the Chicago Climate Exchange
scheme.
2.6 Public support for Research and


extension Aimed at Reducing GHG
emissions in Agriculture


Public research and extension can be directed at
improving animal feed use, nutrient digestion,
carbon sequestration and other approaches to
GHG reduction and remediation. Such research
can increase the supply of new technologies
that can be adopted by farmers with the aim of
reducing GHG emissions from agriculture or
enhancing its role in carbon capture. However,
it is important to note that research that is not
targeted directly to these aims but that results
in productivity gains (higher output per unit
of input) can also result in a relative, if not an
absolute, reduction in GHG emissions. Research
that results in the more efficient use of inputs
whose production involves significant emissions
(e.g. fertilizer, agro-chemicals or energy) can


have a particularly significant impact. Indeed, to
focus on absolute reductions in GHG emissions
from agriculture runs the risk of conflicting with
food security goals. The more useful metric in
this case may be GHG emissions per unit of
food output: reductions in this measure would
avoid such a clash of objectives. Productivity
gains on existing arable land also contribute to
climate change mitigation, since they reduce
pressure to convert land from other uses, for
example forests.


Public support for research and training in
connection with GHG emissions rests on the
same premise that underlies using public funds
to enhance investment in all agricultural activities
that are viewed to have a significant public good
dimension. In this case, the perceived gains to
society extend beyond the impact of productivity
improvements on the cost of food, to perceived


2.7 Private versus Public Incentives and
GHG Remediation


An important issue is the extent to which GHG
remediation in agriculture can result from market
incentives or whether it will be adopted only as the
result of government actions. For private incentives


to be the primary driver, a private market for the
GHG-reducing output must already exist or can
easily be created. Thus, for example, co-generation
through the use of alternative fuels may result
naturally if the technology exists for farmers to
substitute new sources of energy (e.g. electricity
generated from biogas) for a conventional supply




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of electricity from the power grid or if producers
perceive that they can exploit a profitable new
activity by delivering co-generated electricity to
the grid. Neither of these necessarily requires any
government action, but the rate of adoption may
be influenced by government efforts to increase
the supply of co-generation technology or its
diffusion. Adoption will be driven primarily by
whether the returns to on-farm energy production
exceed its costs.


Similarly, limitations on GHG emissions
outside agriculture can create property rights in
the sector in the form of options for reducing its


own emissions or to sequester carbon emitted
by others. In addition, the balance of incentives
may be affected by
other government
policies, for
e x a m p l e
restrictions on
the application of
animal waste to
cropland that make
it desirable to find
alternative methods for disposing of that waste.
In that case, the private benefits that result
from having an alternative use (higher livestock


An important issue is the
extent to which GHG
remediation in agriculture
can result from market
incentives or whether it will
be adopted only as the result
of government actions.


production) must be added to the value of the electricity produced in determining the incentive to
adopt.


3. PRoDUCTIon
InCenTIVes AnD TRADe
eFFeCTs oF
PoLICY InsTRUMenTs


The impact of GHG policies on the competitive
position of agriculture and hence upon agricultural
production and trade is complex. The effects depend
on such factors as whether agriculture is the target
of the policies or is affected by policies applied to
other sectors; whether the policies generate private
incentives to change production methods or the
volume of output or whether this is solely generated
by a publicly funded incentive; and whether the
net effect of the policy is to create an incentive
to increase agricultural output in the aggregate
or to change its composition. In general, policies
that restrict current activities (e.g. take land out
of production via subsidies for sequestration) will
have a depressing effect on production. Policies
that subsidize particular practices will tend to
encourage output. Even if the product is not
ultimately destined for agricultural markets (e.g.
bioethanol), its production will influence those
markets. Improvements in animal nutrition
could increase output, as could best practices
in tillage, although subsidies for sequestration
could possibly lower output levels if they led to
less intensive land use.


Determining the net effect of GHG policies on
production and trade is even more problematic
when multiple policy instruments are applied.
Since GHG emissions are not solely an issue in
agriculture but are economy-wide, it is likely that
some combination of sectoral and economy-wide
policies will be applied, with potentially offsetting
influences on agricultural production. Thus,
for example, measures to change production
techniques in agriculture or to shift production
towards preferred crops may serve to enhance
production, whereas economy-wide carbon taxes
would likely have the opposite effect. Although
the internalization of the full costs of production
would probably act as a production disincentive
in the aggregate, it may not have that effect for
individual marketable agricultural commodities.
The determination of impact could be made only
by examining the specifics of the policy in place
and their relationship to output incentives and
methods of production at the farm level.


Considering the requirement to double food
production by 2050 in order to meet the
needs of an expanding global population, a
better understanding of the impacts not only
of climate change itself but also of potential
climate change policies on food production is
critically important. Pursuing climate change
mitigation without regard to food security is not




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measures that do not negatively impact, or
can even contribute positively to, agricultural
productivity.


4. CLIMATe CHAnGe


PoLICY AnD WTo RULes


Climate change, or at least the instruments
of policy that are emerging as a response to
that event, poses a multitude of challenges to
the multilateral trade system. At the broadest
level, an open trading system is perhaps the
best guarantee against severe disruptions to
economic activity as a result of climate change.
As different agricultural regions face higher or
lower temperatures, rainfall and other climatic
changes trade will compensate for local supply
disruptions. If droughts and floods are more
common, then assistance flowing through
established trade channels will be available more
quickly. Therefore, steps such as the completion
of the Doha Round of WTO negotiations make
good sense even in the context of concerns over
climate change.


At this broad level, the main concern is to avoid
any adversarial positions that might cast the trade
system as inhibiting the ability of countries to
respond in ways that they see as sensible.6 With
respect to agricultural subsidies, this is even more
critical, as the domestic politics of incorporating
that sector into climate change policy could well
prevail over the sensitivities of trade partners.
The discussion in the first section of this paper
categorizes policy response, at least in the area of
agricultural production, as a choice between the
establishment of performance standards, a best-
practices approach
to incentivize
reduction and
mitigation, the use
of subsidies and
taxes to provide
an incentive to
changes in fuel
use and GHG
emissions, the establishment of ceilings with the
possibility of trading emission certificates, and
the encouragement of research on ways to lower


The potential clash with
WTO trade rules comes both
in the choice of instrument
and in the way in which
governments react to
pressures to avoid or deflect
the costs of climate change
mitigation and adaptation.


sensible for obvious reasons. The great challenge facing agriculture is to identify effective mitigation


emissions or enhance sequestration. The potential clash with WTO trade rules comes both in the
choice of instrument and in the way in which governments react to pressures to avoid or deflect the
costs of climate change mitigation and adaptation. This section will consider these broad choices
and their possible conflicts with WTO rules.


4.1 Performance standards


Mandatory performance standards (alternatively
referred to as technical regulations) are a familiar
issue in trade relations and are accommodated in
both multilateral and regional or bilateral trade
agreements. As technical regulations imposed on
domestic producers tend to increase production
costs, they do not in general cause concern among
competing countries. This would be true in the
case of agriculture. If the mandatory standard
relates, say, to emissions from a particular
process (livestock feeding practices or the use of
fertilizer in crop production), then competing
producers in other countries are unlikely to
be harmed; but if the performance standard is


accompanied by subsidies, then a trade issue
could arise. Subsidies in compensation for the
additional cost of meeting the standards are
discussed below.
Different issues are raised if a link is established
between domestic standards and those applied to
traded goods. Normally, exporters expect to have
to meet the standards of the importing country.
These standards can be expressed in terms of
product characteristics (product standards,
PS) or of production and processing methods
(PPMs). The implementation of PPMs on traded
goods is problematic, as the importing country
will not in general be able to verify conformity.7
Moreover, not only does the trade nomenclature
generally not distinguish among products based
on method of production or processing, but also
WTO agreements (such as the Technical Barriers




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to Trade Agreement (TBT), discussed further
below) do not allow for differential treatment of
like products, i.e. where production methods do
not result in observable differences in the final
shipped product. So, trade conflicts arise when
unverifiable technical requirements or standards
are imposed on imports.


Imposing process standards
on imports is an issue with a
long history in the General
Agreement on Tariffs and
Trade (GATT)/WTO and
one that is still not fully
resolved (Josling et al. 2004).
Climate change standards
are likely to rekindle many
of the old controversies
regarding process standards.
Identifying goods according
to the use of energy in the
production and processing,


with the aim of favouring those that have a smaller
carbon emission history, will challenge normal
customs procedures and could lead to trade
disputes.


The WTO, through its incorporation of the
GATT (1994), includes a “general exceptions”
provision (Article XX) that allows considerable
scope to governments in imposing trade
restrictions to support domestic objectives.
Among those objectives are health and safety
(for human, crop and livestock populations),
public morals and environmental preservation.
The somewhat cryptic provisions of Article XX


have subsequently been elaborated, first in the
Standards Code that emerged from the Tokyo
Round and later by the TBT and the Sanitary
and Phytosanitary Measures Agreement (SPS)
from the Uruguay Round.8 Any measure that
is justified on grounds of health and safety falls
under the scope of the SPS; other regulations
fall essentially within the purview of the TBT.


Issues that fall within the TBT are discussed
in the TBT Committee. This body provides
a valuable place to examine the legitimacy of
standards and other measures (such as labelling)
that are common instruments in climate
change legislation. The criteria used to examine
these measures are whether they constitute
unnecessary barriers to trade, taking into account
the legitimate objectives of the policy, and the
implications of not applying the measures.


Most of the technical regulations that have been
discussed in the TBT Committee have dealt
with non-agricultural measures – fuel economy
standards for cars, eco-design requirements for
energy-saving appliances, and emission limits
for diesel engines. The links with agriculture
have not been emphasized, although clearly
as a major user of agricultural machinery and
transport services the connection is apparent.
Domestic political sensitivities have so far
prevented widespread application of industrial
standards to agricultural production; but as
this sensitivity is replaced by effectiveness and
equity considerations, such standards are likely
to spread to agriculture. Moreover, some 37
measures have been notified since 2000 on


Identifying goods
according to the
use of energy in the
production and
processing, with the
aim of favouring
those that have
a smaller carbon
emission history, will
challenge normal
customs procedures
and could lead to
trade disputes.


biofuels alone by 20 WTO members (see http://www.wto.org), and it is likely that this may signal a


trend to formulate similar measures with regard
to agricultural production.


4.2 Incentivizing Best Practices


A best-practices approach to climate change
mitigation would seem ostensibly to pose no
particular conflict with WTO rules. Trade rules
focus on actions by governments that injure


other parties through discrimination against, or
unfair treatment of, their products or services.
Adoption of best practices in one country, in
the form of conservation tillage or the use of
alternative energy, is not likely to have a negative
impact on the international competitive position
of agriculture in other countries, unless these
practices have a significant output-enhancing
effect. Encouragement to switch to forestry or to




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sequester carbon in other ways will also tend to be
in the interests of other agricultural producers.


Clearly the key
question with regard
to the trade policy
implications of best
practices is: what
incentives are given to
farms and businesses


to adopt those practices? As discussed above,
market opportunities may emerge to encourage
changes in production and processing methods.
More problematic is adoption stimulated by
public policy. Thus, for example, a subsidy (or
tax relief ) designed to encourage the use of
minimum tillage could potentially be challenged
by other countries. If the subsidy were to be given
to agricultural producers, then it would probably
be covered by the AoA. If it can be shown to
have a significant output-enhancing effect, then
it might also be covered under the Subsidies
and Countervailing Measures Agreement
(SCM). The issue of where in the categories
of agricultural subsidies such incentives might
fall (i.e. in which boxes they would have to be
notified) or whether they might be subject to
the SCM is considered further below.


An instrument increasingly used in agriculture
is that of cross-compliance (i.e. conformity with
various regulations) as a pre-condition for receiving
subsidies or direct payments. Thus, for example,
EU single farm payments have now consolidated
the compensation payments given to grain and
livestock producers, as well as other direct payments
from reforms in the Common Agricultural
Policy (CAP), into one payment. To receive that
payment, farmers have to maintain land according
to good agricultural practices and to meet certain
environmental standards. Cross-compliance may
involve extra costs, so one could make the case
that the direct payment provides compensation
for those costs. But in the case of the CAP, there
is no pretence of a link between the amount of
the payment and the costs of compliance. The
possibility of loss of the payment virtually assures
compliance with the environmental regulations at
issue (providing that compliance is monitored and


sanctions are actually enforced). However, most of
the cross-compliance obligations do not contain
specific environmental objectives defined in terms
of measurable outcomes or targets. In the absence
of such targets, one would expect verification
difficulties as well as incentives to abuse the
regulations.


Although individual producers and processors
can voluntarily adopt good practices, their main
attraction comes when
buyers demand these
as a way to ensure
quality and safety as
well as other attributes,
such as “climate-
friendliness”. These
become, in effect,
collective standards
promoted by the
private sector. Among
the more recent developments in best practices
for the food and agricultural sector are specific
management codes typically promoted by
processors and retailers in order to increase the
acceptability of supplies to consumers.9 The
focus of these standards has been on “pre-farm-
gate” processes, and their application makes
use of independent certification bodies. To the
extent that consumers insist on (or are prepared
to pay a premium for) goods with a smaller
“carbon footprint”, one might expect that such
best-practice requirements will spread.10


The goal of best-practice codes is for all supplying
businesses to meet process standards, regardless
of their location. In the case of global-warming
policies, such codes might tend to conform to the
requirements of the country having the highest
level of climate-friendliness, on the assumption
that adopting that code would necessarily
meet the requirements of other countries. This
potential outcome could become contentious
and have important trade consequences. As a
parallel example, a best-practice code specifying
zero tolerance for genetically modified organisms
(GMOs) would directly conflict with the WTO’s
rulings under the SPS and could be a substantial
barrier to technological change.


Among the more recent
developments in best
practices for the food
and agricultural sector
are specific management
codes typically promoted
by processors and retailers
in order to increase the
acceptability of supplies
to consumers.9


Clearly the key question
with regard to the trade
policy implications of best
practices is: what incentives
are given to farms and
businesses to adopt those
practices?




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The use of collective private sector international
standards has increased dramatically in recent
years (Charnovitz et al. 2008). The International
Organization for Standardization (ISO; http://
www.iso.org) is the principal global player in the
establishment of guidelines for the establishment
of private sector standards. With a membership of
national standards institutes and private standards
bodies from 157 countries, it aims to bridge the gap
between the private and the public sectors.11 The
ISO standards are designed to be consistent with,
and to facilitate compliance with, multilateral
rules in the SPS and TBT. But in contrast to
the three multilateral standard-setting bodies in
the area of agriculture – the Codex Alimentarius
Commission (CODEX), the International
Plant Protection Convention (IPPC) and the
International Office for Epizootics (OIE) – the


ISO is not specifically mentioned in the WTO
SPS.12 However, with widespread acceptance
of ISO quality-management standards and the
increased importance of global environmental
regulations in international agri-food trade, the
ISO has become an important part of the global
standards environment (Knutson and Josling
2009).


The ISO has adopted four standards that involve
requirements for quantifying and reporting GHG
emissions, including lifecycle assessments. These
standards do not apply specifically to particular
products but are concerned with assessment
procedures. But there is little doubt that further
standards will be agreed and that these will have
a more direct bearing on agricultural production.
As ISO standards are not mandatory, they pose
an interesting dilemma for governments. Should


they encourage firms to adhere to these standards even if they cross the boundary lines established


by the TBT?


4.3 subsidies for Reducing GHG
emissions


Perhaps the most likely area of conflict with
WTO rules relates to subsidies. The treatment
of subsidies in the WTO has a complex legal
history built on the experience of the GATT.
Subsidies are not necessarily inconsistent with the
articles of the GATT/WTO, but they are closely
circumscribed. In so far as climate change policy
involves actions at the border, the provisions of the
GATT are relevant, particularly those that guard
against discrimination among suppliers or counter
actions against imports in general. The main part
of the WTO that deals with subsidies is the SCM,
negotiated in the Uruguay Round. For agricultural
products, there are further disciplines in the AoA.


The SCM gives a legal definition of the term
“subsidy”. According to the SCM, a subsidy
must have three basic elements:13


It must entail a financial contribution.•
It must be made by a government or •


any public body within the territory of a
Member.
It must confer a benefit.•


However, even if a measure qualifies as a
subsidy under the SCM, it is not subject
to the full disciplines of the SCM unless it
is a specific subsidy.14 Specific subsidies are
divided further into two categories: those that
are prohibited and those that are allowed,
subject to constraints. Two types of subsidy
are prohibited: export incentive subsidies
that are contingent on export performance,
and local content subsidies granted for use of
domestic inputs over imported goods. Other
subsidies are deemed “actionable” in that
they are potentially subject to challenge. The
SCM provides a clear process through which
actionable subsidies are identified. A WTO
member can initiate remedial measures if it can
prove that non-prohibited actionable subsidies
cause serious prejudice to its interests. Serious
prejudice may arise where one or more of the
following apply: displaced imports into the
market of the subsidizing country; displaced
exports to third country markets as a result of




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the subsidy; significant price suppression as a
result of the subsidy; and an increase in world
market share by the subsidizing country.15


In addition to a challenge based on serious
prejudice, a subsidy can be countervailed if it
causes injury to domestic producers. Such injury
could also trigger other safeguard actions under
Article XIX of the GATT. European biodiesel
makers have, for instance, attempted to show
that US producers were causing them harm
through allegedly subsidized exports of B99 fuel
eligible for a $1 per gallon domestic tax credit
(so-called “splash and dash” trade). Less likely,
although still plausible, is the possibility of
challenge under the “nullification or impairment”
conditions (Article XXIII): a country could
argue that ethanol subsidies were unexpected at
the time when tariff schedules were agreed and
that benefits accruing to it directly or indirectly
under WTO agreements are being nullified or
impaired.


To evaluate agricultural subsidies introduced
for climate change mitigation under the SCM,
the following questions would need to be
addressed:


Could the policy be classified as a •
“specific” subsidy and hence be covered
by the SCM? A policy that conferred
general benefits for the economy as
a whole would not be specific, but
subsidies to farmers that followed
certain husbandry practices would seem
to qualify. Hence, it is likely that the
political imperatives that would single
out categories of farmers for climate
change subsidies would also tend to
make those subsidies specific. If the
subsidies were part of a broader climate
change programme (e.g. subsidies for
the use of alternative energy), then they
might escape that definition.
Could it be classified as a “prohibited” •
subsidy, dependent on exporting or
favouring domestic over imported
products? It seems unlikely that specific
subsidies connected with climate change


would be conditional on exports. The
products themselves might be exported,
but the subsidy would be given for similar
goods sold on the domestic market. The
more likely situation would be that the
subsidy would be given conditional on
the use of domestic inputs. Subsidies for
using alternative energy would need to
avoid the charge that imported energy
sources were being affected adversely.16
Could it be considered an “actionable” •
subsidy, causing adverse effects to
other WTO members? All agricultural
subsidies will tend to cause adverse effects
for competing producers. However, as
was discussed above, the output effects of
various types of climate change subsidy
will vary widely. Subsidies for sequestering
carbon are unlikely to have a production-
enhancing effect, although they may in
some cases reduce production costs. But
a subsidy that compensates for the cost
of GHG abatement may well have a
significant impact on others competing
in the marketplace.


The definition of a subsidy falling within the
scope of the AoA is contained in Article 6, which
refers to “all of [a Member’s] domestic support
measures in favour of agricultural producers”.
These subsidies are divided into distinct categories
notionally representing a different potential
to distort trade (Orden et al., forthcoming).
The AoA exempts two categories of domestic
support measures from any commitments for
expenditure restraints. First, some measures are
considered at most minimally trade distorting
(green box). The measures included in this
category, under specific criteria delineated in
the AoA, are judged to serve a broad public
good and to be decoupled from production and
prices. By leaving the levels of support under
green box measures unconstrained, the AoA by
design encourages countries to adopt policies
that fit into this category. A second category of
measures excluded from any commitment to
limit the level of support includes potentially
trade-distorting payments under production-
limiting programmes (blue box). Criteria




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specified in the AoA for these measures relate
to fixed area, yields and head of livestock and
the level of production on which payments are
made relative to a base level.17


Remaining measures fall into a third category
(often called the amber box) of interventions and
subsidies in output or input markets. Among
these measures are certain production-related
payments to farmers. Also included is market
price support (MPS) measured specifically by the
gap between “a fixed external reference price and
the applied administered price” multiplied by the
eligible quantity of production (WTO 1995).
The sum of this trade-distorting support, the


current total aggregate
measurement of
support (AMS), is
subject to the ceiling
commitment.18


In which box would climate change mitigation
subsidies to agriculture fall? The green box is
defined in considerable detail in the AoA (Annex
2). The Annex includes both general criteria
that all exempt payments must satisfy, and
specific criteria for individual payment types.
The overarching requirement is that green box
payments should have “no, or at most minimal
trade-distorting effects or effects on production”
(Paragraph 1). Three general criteria are specified
as a way of meeting this requirement:


Support should be provided through •
a publicly funded government
programme.
Support should not involve transfers •
from consumers.
The measures should not provide price •
support to producers.


The restriction that a payment be publicly
funded reflects the need to exclude transfers
generated from consumers through the
market, by raising output prices, or as a result
of reducing input costs. Subsidies for climate
change mitigation if no border instruments are
used would seem to qualify under these criteria.
A strict interpretation of the remaining general


condition would cast doubt on the green box
conformity of government schemes that result
in the creation of a market for a previously
unpriced service, such as carbon sequestration.
However, the concept of “price support” might
be interpreted to mean support of the price of
the agricultural product. This price could even
go down if payments for previously unpriced
services became available.19 This exception aside,
most climate change subsidies are likely to fall
clearly within the boundaries of the general
conditions for the green box.


Among the particular types of subsidy defined
in Annex 2, the one that is most likely to
be used in any green box defence is that
related to environmental programmes. The
payments are not, however, unrestricted. To
be eligible for inclusion in the green box, the
payments must be part of a clearly defined
environmental or conservation programme
with specific conditions, including those related
to production methods or inputs. Moreover,
the amount of payment is limited to the extra
costs or loss of income involved in complying
with the programme. Therefore, payments for
sequestration would be allowed under a clearly
defined environmental programme (presumably
climate change legislation would qualify) if
they compensated farmers for the cost of such
actions. This would certainly serve to remove the
disincentive to participate, but it is possible that
overcompensation
for costs may in
fact be necessary
to ensure sufficient
participation in
a programme.
That could make
the payments
potentially subject to challenge.


Subsidies for the production of biofuels and their
incorporation into gasoline and diesel appear
to pose further challenges for WTO rules on
agricultural trade and policy (Howse et al. 2006).
Symptomatic of the uncertainty is a lack of
agreement on whether biofuels are covered by rules
relating to agricultural products or whether they


In which box would
climate change mitigation
subsidies to agriculture
fall?


Subsidies for the production of
biofuels and their incorporation
into gasoline and diesel appear
to pose further challenges for
WTO rules on agricultural
trade and policy.




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are industrial products and thus covered by other
rules. If biofuels are to be considered agricultural
in nature, then subsidies designed to promote
their production should be notified to the WTO
as such and may be subject to limitations under
the terms of the AoA. If not, they would still have
to be notified but would be subject to the SCM
(Josling and Blandford 2008).20
If biofuel subsidies are counted as agricultural
subsidies, then the issue arises as to whether they


should be notified as trade-distorting (under
the amber box) or as trade-neutral (under the
green box). Some biofuel subsidies could be
considered as providing indirect support to
the producers of feedstock, mainly corn and
oilseeds, and as such would be “coupled” to
production. This would place the subsidies in
the trade-distorting category and they would
fall under the amber box disciplines of the
AoA.21 But others might be consistent with


those classified as minimally trade-distorting, for example if the feedstock was a waste product


or cellulosic material that is not a “marketable
agricultural product”. In that case, biofuel
subsidies could fit within the green box, as
currently defined or one that might emerge
from a negotiated modification.


4.4 Taxes on Carbon emissions


Taxes applying to domestic producers rarely
provoke challenges from competitive exporters.
And, although importers may be the losers
from such a cost-increasing tax, the avenues for
complaining about such trade distortions are
few. In general, this accentuates the asymmetry
of the trade rules, which constrain the behaviour
of governments of importing countries to a much
greater extent than that of exporting countries


(Mitra and Josling
2009).


Taxes on domestic
producers can pose
a challenge to trade
rules when they


are accompanied by border tax adjustments
(BTAs) or other devices to offset the apparent
competitive impacts of the domestic taxes. The
political logic of granting domestic producers
relief from competing with foreign firms that do
not have the burden of the tax is compelling.
The economic rationale is more elusive. If the
domestic industry is being taxed to reduce the
use of fossil fuels or the emission of GHG,


then imports of competing goods from other
countries with similar technologies will not
help to achieve those objectives.22 This is often
called “carbon leakage”. It could be argued that
such a policy merely redistributes production of
the good in question and does not achieve the
broader global aim of GHG reduction or fossil
fuel replacement. The economic rationale is
stronger if it is assumed that other countries were
applying appropriate taxes on their producers.
A border tax will act against the tax policy by
reducing its effectiveness. Indeed, one could
argue for an import subsidy as a complement to
the domestic producer tax.


Even this analysis is inadequate when the
taxes concerned are applied widely across the
economy. A carbon tax would be such a broad-
based tax and raise issues similar to sales taxes
or value added taxes. Under such conditions,
BTAs are justified to prevent distortions to
international trade as a result of the incidence
of these taxes. If industries are taxed at the
point of production (the origin principle),
then a country’s exports will be burdened and
imports encouraged unless imports face the
same tax and exports are taxed in the country
of destination.23 BTAs are consistent with
WTO rules, although their implementation
could still cause problems.24 President Obama
has recently indicated that he wishes to
avoid potential clashes with trade rules when
developing US climate change legislation. In


The political logic of granting
domestic producers relief from
competing with foreign firms
that do not have the burden of
the tax is compelling.




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attractive politics but shaky economics, the
scope for conflicts is enlarged.


4.5 Cap and Trade schemes


The link between CT systems and trade rules is
of more immediate relevance. Emissions-trading
systems are already in place in Europe and Australia
and are being discussed for many other countries.
It is not the imposition of the cap on emissions,
which would normally give foreign competitors
an advantage, that causes trade problems but the
response of the government to requests by domestic
producers to “level the playing field”. There are two
key aspects of the administration of the policy that
can adversely influence trade partners. The first
issue is the terms of the allocation of the permits
to the sectors that require them: free distribution
of a portion of the permits may be considered by
competitors to be a subsidy to those firms that
receive them. The second issue is whether firms
exporting to the country operating the CT scheme
require permits themselves.


Consideration of the legislation currently (June


2009) before the US Congress underlines
these choices. Several of the bills that were
under consideration specifically called for
firms supplying imports to the USA to have
permits (issued in their own countries) to avoid
undercutting US firms (Hufbauer et al. 2009).
The bill that was approved by the House Energy
and Commerce Committee (the American Clean
Energy and Security Act of 2009) allows for the
possibility of border taxes at a later date (after
2020) but calls for the negotiation of binding
emission reductions with other countries before
that time. It also provides for international reserve
allowances (to begin after 2025) that would be
required for imported inputs of raw materials
(agriculture is not specifically mentioned) to
avoid carbon leakage.


CT schemes also raise subsidy concerns. A free
allocation of permits would be considered a
subsidy and subject to an evaluation as outlined in
the section on subsidies. With regard to offsets, it is
less clear that funds from the sale of offsets from a
carbon sequestration activity would be considered
as a subsidy. As mentioned above, the WTO SCM


Agreement defines a subsidy as a financial benefit that comes from a governmental or public entity;
whether leaving the operation of the carbon market to the private sector makes the offset mechanism less
of a subsidy remains to be resolved.


4.6 Research and extension


Research on the ways in which agricultural
production methods can be improved in
the interests of climate change mitigation is
generally considered to be a positive activity.
Agricultural research, in general, is viewed to
have a high payoff to society and is often the
object of public funding. Moreover, as much
of the outcome of the research is likely to enter
the public domain, overseas firms and farms can
usually make use of the research. In the AoA, the
spending of funds for agricultural research and
extension comes under the heading of “general
services” in the green box (Annex 2, Paragraph
2(a)), and research for environmental purposes


is mentioned specifically.


However, the treatment of research expenditure
under the SCM is not so accommodating. The
SCM itself exempted research expenditure
from the category of actionable subsidies for
an initial period of five years. The exception
was not renewed in 2000 and hence such
expenditures are now actionable. It has been
established that agricultural subsidies are
governed by both the AoA and the SCM,
since the expiry of the Peace Clause under the
Uruguay Agreement in 2003. Inclusion of a
subsidy in the green box has a direct benefit
to the country in that it is excluded from the
AMS and hence from reduction commitments.
But such subsidies are still actionable under the
SCM. Therefore, research subsidies that were


addition, retaliation by other countries would be virtually assured. Whether the US Congress
will follow a cautious path remains to be seen. When trade policies are based on superficially




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5. Us AGRICULTURe


AnD CLIMATe CHAnGe


LeGIsLATIon


The debate on the
incorporation of
agriculture in a CT
system is still in its
infancy. For some years,
agricultural politicians


and lobby groups have attempted to take a defensive
approach: to ensure that the sector would not be
burdened with more restrictions in addition to
other environmental and conservation regulations.
Some people may still believe that agriculture can
sit on the sidelines and be exempted from GHG
emission policies, but this seems unlikely. Indeed,
the focus of agricultural groups has changed to
one of proactive examination of how best to
position the sector to benefit from climate change
legislation. The debate revolves around the ability
of agriculture to sell “offsets” to other sectors based
on their own abatement efforts and on carbon
sequestration.


Adding to the urgency is the recent decision by the
Environmental Protection Agency (EPA) that GHG
emission is a hazard to health. This means that under
the Clean Air Act the EPA is empowered to take action
to reduce emissions. Congress will certainly wish
to wrest the initiative back from a Federal agency
in controlling GHG emissions; and an upcoming
intergovernmental meeting in Copenhagen in
December 2009 will be a test of whether the USA
can join other countries in collective action in facing
what is a truly a global problem.


The nature of potential US legislation is becoming
increasingly apparent. The clear frontrunner
among the competing bills is that sponsored
by Representatives Waxman and Markey. This
is based on a “cap and trade” approach where
many businesses (but not agriculture) have to
be in possession of (tradable) permits to allow
them to emit GHG. Agriculture is – at this


stage – not specifically included as a source of
“offsets”, although this is under discussion, as is
the possibility of using some of the revenue from
CT to encourage climate-friendly agricultural
production. Other approaches will complement
this method: tighter fuel consumption standards
are in place and subsidies for alternative fuels from
biomass have spawned a significant domestic
ethanol industry. States are ahead of the Federal
government in many respects: the California Air
Resources Board (CARB) recently agreed on a
low-carbon standard for fuel in that state, and at
least 11 other states may follow suit.


This change in approach has been given a boost by
Secretary of Agriculture Vilsack, who has speculated
that agriculture may be wise to agree to tie future
direct payments to climate change mitigation (or
accept a decrease in direct payments in exchange
for climate change mitigation payments under
CT). At present, US direct payments lack any
rationale other than maintaining income flows to
producers of a handful of crops in a way that is
consistent with the green box.25 Although the idea
has not attracted much visible support from the
agricultural community, the underlying message
– that direct payments are vulnerable in times of
fiscal frugality – has been absorbed.


So, how might the farming sector fare under
climate change legislation? The EPA issues periodic
“inventories” that highlight the contribution of
particular sectors to GHG emissions. Agriculture
and forestry taken as a sector have a positive
balance: more carbon is sequestered (taken out
of the atmosphere and stored) than is released.
But this favourable balance masks an uneven
distribution: forestry is the main carbon sink
whereas agriculture is a significant emitter of
GHG. Livestock production and fertilizer use
emit methane, a GHG, and cultivation and
harvesting of crops use energy and emit nitrous
oxide and carbon dioxide. So, a CT system,
which requires the agricultural sector to reduce
emissions, or provides for offsets to do the same
on a voluntary basis, would potentially restrict
agricultural activities and cause some shifting of


viewed to grant commercial advantage to particular firms or parts of the agricultural and food
sector could potentially be challenged in the WTO.


The debate revolves around
the ability of agriculture
to sell “offsets” to other
sectors based on their own
abatement efforts and on
carbon sequestration.




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production patterns. Including the possibility of offsets linked to sequestration may be necessary
in order to avoid restricting agricultural production in a time of increased food demand. Moreover,
mitigation actions and the build-up of soil carbon
can have advantages in terms of productivity.


6. ConCLUsIon


New climate change rules, regardless of whether
they do or do not incorporate agriculture, will
have an impact on agricultural production.
Moreover, policymakers are contemplating
the incorporation of climate change rules into
farm policies. The impact of GHG policies on
the competitive position of agriculture and
hence upon agricultural production and trade
is complex. Considering the requirement to
double food production by 2050 to meet the
needs of an expanding global population, a
better understanding of the impacts not only of
climate change itself, but also of various climate
change policies, on food production is critically
important. Pursuing climate change mitigation
without regard to food security is not sensible
for obvious reasons. The great challenge facing
agriculture is to identify effective mitigation
measures in agriculture that do not negatively
impact on, or can even contribute positively to,
agricultural productivity.


Beyond gaining a better understanding of the
interplay between climate change policies
and agricultural production, the international
community needs also to consider the interplay
between climate change policies targeted at the
agricultural sector and international agricultural
trade rules. Such rules should be kept in mind
as climate change policies are developed so that
new policies do not inadvertently contribute
to greater agricultural trade distortions.
Alternatively, if trade rules present genuine
obstacles to the adoption of climate change
policies, then the rules may need to be revisited.
Countries should be aiming for coherence in the
two sets of policies.


Policymakers are contemplating the incorporation
of climate change rules into farm policies. Three
main questions arise in this context. Should
one use subsidies to promote the reduction of


GHG emissions in agriculture or an expansion
of mitigation activities? Should one include
agriculture in a CT scheme? And should one
continue to promote biofuels? This paper has
explored the implications of these decisions in
the light of obligations under multilateral trade
agreements.


Rewarding beneficial climate change mitigation by
agriculture is both possible and likely. The approach
will probably combine best-practice promotion
with the tailoring of existing subsidy systems
to encourage change. Subsidies could be given
for such practices as minimum tillage or the co-
generation of on-farm bioenergy, or conservation
payments could incorporate incentives for carbon
sequestration. Although these could be challenged
by foreign competitors, they would appear to be
consistent with trade rules if part of a comprehensive
environmental programme.


The main constraint from the viewpoint of
trade rules is that subsidies should, in order to
qualify for the green box, under the AoA, be in
proportion to the extra costs incurred by farmers
in meeting environmental standards. So, tying
current direct payments to sequestration or
other beneficial aspects of farming activity may
be subject to challenge, as the payments would
almost certainly exceed the additional costs
involved. Moreover, such a link would seem to
weaken the claim that the payments are unrelated
to current production activity and hence trade-
neutral. In other words, care has to be taken to
ensure that climate change subsidies respect the
criteria of the green box – or, alternatively, the
green box criteria may need to be clarified to
reflect desirable policy.26


Including agriculture in a CT scheme poses a
number of technical problems, including the
fact that monitoring farming activities involves
many more firms, with a wider diversity of
technologies, than (say) electricity-generating
plants. Standard emission factors for crops and
livestock production are currently not very
reliable, and one might expect some domestic




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litigation if farmers were to be assessed on their
GHG emissions. Much of the (domestic) burden
of the CT system is lifted if initial permits are
given out rather than auctioned. Agriculture
could argue for a significant free distribution of
permits. Combined with the ability to sell these
if they reduced their own emissions, this would
constitute a subsidy. It is not unlikely that
foreign competitors might challenge the subsidy
element, particularly on export crops.27


In any case, calculating lifecycle carbon footprints
for the hundreds of different farming systems
seems to stretch both scientific knowledge and
programme administration too thin. Emissions
may be dependent on climate and other variables
outside the control of the farmer, and the
emissions related to inputs (such as animal feed)
could also vary depending on their provenance.
One would have to account for subsidies given for
fertilizer use, as this would influence emissions.
Moreover, a large proportion of the GHG
emissions from agriculture are in developing
countries – as are the opportunities for GHG
abatement and mitigation. Any global scheme
would have to take account of the fact that it
would need to be administered in developing
countries, where monitoring and verification
could pose problems.


Promotion of biofuels creates a more troubling
problem. Domestic ethanol from corn contributes
less to GHG emissions than gasoline, but if one
takes into account the expansion of cultivated
land elsewhere to offset the diversion of corn from
food to energy the balance can turn negative.
Consequently, the CARB scored domestic ethanol
low as a contributor to emissions reduction. The
ethanol lobby complained that the CARB had
forgotten to count the carbon emissions from
extracting and transporting oil from overseas –
and the energy use in the military in securing that
oil supply. This illustrates the complexities and
controversies that surround any form of lifecycle
carbon accounting, and it leaves agriculture
relying on grounds other than the contribution
to GHG emissions mitigation (such as decreased
reliance on imported fossil fuel) to justify ethanol


subsidies.


Biofuels should be included in a more general
energy strategy of the development of alternative
fuels. Using ethanol subsidies as a way to
supplement farm payments has already led to
poor policy choices, and tying these subsidies
to climate change goals is likely to confound
an already confused situation. In particular, the
question of the link between biofuel policies
and agricultural subsidies would be brought
into sharper focus. The issue is not so much
whether biofuel policies are incompatible with
WTO commitments but whether they should
be notified as subsidies to agricultural producers.
An eventual conclusion of the Doha Round
would tighten up the constraints on subsidies
and add further pressures on biofuel policies.


So where does this leave the argument for linking
farm policy with climate change strategy? The
aim should be to identify positive and negative
aspects of farming on atmospheric GHG
concentrations that are uncontroversial and easy
to measure. Large-scale livestock enterprises
are already potentially within the scope of EPA
regulations that control emissions. Reforestation
for improved sequestration could easily be given
more encouragement within current conservation
programmes. Co-generation of energy on farm
is not difficult to reward, particularly if surplus
energy can be transferred to the electricity grid.
Greater emphasis on publicly funded research
and development to foster lower GHG emissions
in agricultural production systems or to increase
sequestration could have important payoffs.


Domestic climate change legislation is
constrained by international trade obligations,
but a carefully crafted programme should not
raise too many problems. In particular, it should
be possible to devise domestic schemes that
contribute to effective international action. In
this respect, an international consensus on what
measures are likely to be effective is crucial in
order to avoid trade disputes. The move towards
“decoupled” payments unrelated to price and
current output has provided an opportunity for




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such a consensus. Recoupling these payments in such a way that climate change mitigation is
encouraged could prove a useful contribution to addressing the challenges posed by climate change
without endangering food security.


noTes


1 It is estimated that the agricultural sector accounts for roughly 8 percent of total US GHG
emissions. Nitrous oxide emissions associated primarily with the breakdown of manure and
nitrogen fertilizer make up roughly two-thirds of those emissions (Siikamäki and Maher
2007).


2 The process of tilling the soil releases carbon dioxide into the atmosphere. Minimum tillage
aims to limit this process by turning the soil only enough for planting.


3 Economists have argued that subsidies and mandates are alternative policies: that if blending
is mandated, one does not need a subsidy. Politically, the subsidy may be necessary to be able
to get agreement on the mandate.


4 As a major user of transportation, the impact of a carbon tax on agricultural production and
its location could extend far beyond the direct impacts that are the focus of this paper.


5 Note that if domestic consumers have access to imported products whose prices do not reflect
the costs of GHG emissions, then the impact will fall entirely on domestic producers (see next
section).


6 It should not be thought that the WTO activities in this area are all “defensive”, i.e. preventing
government actions that contravene rules. The Marrakesh Agreement setting up the WTO
emphasized the link between trade openness and sustainable development. A number of the
items under discussion in the Doha Round address the issue of climate change in a proactive
way. These include trade liberalization on environmental goods and services (including a
subgroup of goods and services considered to be useful in addressing climate change) and
the discussion of closer coordination between the WTO and the Multilateral Environmental
Agreements (MEAs).


7 A further distinction is often made between product-related PPMs and non-product-related
PPMs. The former are production and processing methods that are reflected in a measurable
way in the nature of the product. The latter do not change the nature of the product itself and
hence require monitoring and verification in the country of origin.


8 Dispute-settlement cases have also made a contribution, particularly in the environmental
area. A notable recent example is the shrimp–turtle case (WTO, 1998).


9 Perhaps the most successful has been the development of GlobalGAP, a private-sector body
that sets voluntary standards for the certification of agricultural products around the globe.
GlobalGAP emerged from EurepGAP, which was set up in 1997 by a group of retailers in
Europe in cooperation with some producers (Knutson and Josling 2008).


10 The concept of “food miles” promoted by some retailers highlights the difficulties with such
private standards. Focusing on transport emissions alone can seriously distort trade patterns




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and is too easily translated into protectionist rhetoric that can be costly to efficient (developing
and developed country) exporters.


11 The ISO seeks to promote a “free and fair global trading system” by providing the
management-control underpinnings for quality, technical, procedural, safety, management
and environmental process standards. The primary beneficiaries are supposed to be consumers,
workers, businesses and the general public. However, one assumes that governments also derive
some benefit from the ISO’s establishment of private-sector guidelines in standards setting.


12 Although it is referenced in the TBT, the ISO is not accorded the same standard-setting role as
the OIE, the IPPC and the CODEX are in the SPS. The ISO is given the task of monitoring
the Code of Good Practice for the Preparation, Adoption and Application of Standards that
is included as Annex 3 of the TBT.


13 SCM Article 1.


14 SCM Article 2. The definition of a specific subsidy is discussed in Howse et al. (2006).


15 SCM Article 6:3.


16 Hence, in the case of US ethanol policy, the blending subsidy (tax credit) applies on the use
of imported ethanol, but the special duty on such imports is fashioned to negate the possible
use of imported ethanol.


17 Developing countries can also exclude investment support for agriculture and input subsidies
for low-income and resource-poor farmers (special and differential treatment) that in developed
countries would be subject to constraint as trade-distorting.


18 However, provisions of the AoA allow for de minimis amounts of product-specific and non-
product-specific support to be exempt from the current total AMS.


19 The question would arise in such cases as to whether carbon credits that could be sold to other
industries for use as offsets to their own GHG emissions are “products” whose price is being
supported. It is not unreasonable to consider carbon sequestration as a part of farming activity
and the rewards as part of farm revenue.


20 The USA does indeed report its ethanol-related subsidies under the SCM as a non-agricultural
subsidy (although it has also argued in the Doha Round that ethanol should not be included
in a list of environmental goods, as it is an agricultural product). Tax credits to blenders could
be considered as subsidies to that industry and not to agriculture. (Tax credits to agricultural
producers have not, however, been notified as subsidies and are considered to be excluded
from the definition used in the AoA.) But the fact remains that these credits maintain the
demand for ethanol and hence for corn. The benefits are undoubtedly passed through to the
farmer. Normally, demand-expanding subsidies receive little criticism in trade, but in this case
it is competing corn producers that are likely to complain that a subsidy to US corn farmers
is going uncounted.


21 Inclusion of the climate change subsidies as blue box payments (i.e. tied to a base level of
production) may seem far-fetched. But both the USA and the European Union (EU) have




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considerable scope for increasing blue box payments if needed (Orden et al., forthcoming).


22 It could be argued that such a policy merely redistributes production of the good in question
and does not achieve the broader global aim of GHG reduction or fossil-fuel replacement. The
economic rationale is stronger if it is assumed that other countries were applying appropriate
taxes on their producers.


23 Taxation at the point of consumption also in principle requires BTAs in order not to favour
export sectors.


24 BTAs are allowed if the additional tax levied on imports matches any indirect tax that has
been paid on the domestic production of similar products. A regulation is not a tax, and so
an import levy designed to match the cost of compliance with domestic rules is not strictly a
BTA (see Hufbauer et al. 2009, p.66).


25 Although the green box status of current direct payments has been thrown into question by
the WTO ruling on the case brought by Brazil against US cotton programmes (WTO 2004,
2005).


26 It is possible that some clarification of green box criteria will be necessary as climate change
mitigation policies proliferate. The use of “extra costs or loss of income” may not be the best
criteria in cases where income is small but benefits from mitigation are large.


27 On the other hand, the cost of permits purchased by agriculture could be subtracted from
existing non-exempt payments in evaluating conformity with WTO domestic support
commitments (total AMS). Adjustments for commodity-specific levies and taxes are already




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included in US notifications of domestic support to the WTO. Consequently, no increase in
subsidies might be involved, and competitors would have to argue that it was a change in the
method of payments that was causing injury.


ReFeRenCes


Charnovitz, S. Earley, J. and Howse, R. (2008). “An Examination of Social Standards in Biofuels
Sustainability Criteria”. IPC discussion paper – Standards Series. International Food
and Agricultural Trade Policy Council. Washington, DC. USA. Food and Agricultural
Organization of the United Nations (FAO) (2006). “Livestock’s Long Shadow:
Environmental Issues and Options”. Food and Agricultural Organization of the United
Nations. Rome. Italy.


Howse, R., Van Bork, P. and Hebebrand, C. (2006). “WTO Disciplines and Biofuels: Opportunities
and Constraints in the Creation of a Global Marketplace”. IPC discussion paper. International
Food and Agricultural Trade Policy Council. Washington, DC. USA.


Hufbauer, G.C., Charnovitz, S. and Kim, J. (2009). “Global Warming and the World Trade System”.
Peterson Institute for International Economics. Washington, DC. USA.


Josling, T and Blandford, D. (2008). “Biofuel Subsidies and the Green Box”. International Centre
for Trade and Sustainable Development. Geneva. Switzerland.


Josling, T, Roberts, D. and Orden, D. (2004). “Food Regulation and Trade: Toward a Safe and
Open Global System”. Peterson Institute for International Economics. Washington, DC.
USA.


Knutson, R and Josling, T. (2008). “New Generation of Standards”. Presented at the NAAMIC
conference, Austin, TX, USA, May 2008.


Mitra, S. and Josling, T. (2009). “Agricultural Export Restrictions: Welfare Implications and Trade
Disciplines”. IPC position paper – Agricultural and Rural Development Policy Series.
International Food and Agricultural Trade Policy Council. Washington, DC. USA.


Orden, D., Josling, T. and Blandford D. (eds) (forthcoming). “Disciplining Domestic Agricultural
Support through the WTO”.


Siikamäki, J. and Maher, J. (2007). “Climate Change and U.S. Agriculture” in Assessing U.S. Climate
Policy Options. Resources for the Future, R.J. Kopp and W.A. Pizer.


Wang, M., Wu, M. and Huo, H. (2007). “Life-Cycle Energy and Greenhouse Gas Emission Impacts
of Different Corn-Ethanol Plant Types”. Environmental Research Letters 2: 1–13.


World Trade Organization (WTO) (1995). “Results of the Uruguay Round of Multilateral Trade
Negotiations – The Legal Texts”. World Trade Organization. Geneva. Switzerland.


World Trade Organization (WTO) (1998). “United States – Import Prohibition of Certain Shrimp
and Shrimp Products”. Report of the Appellate Body, WT/DS58/AB/R (12 October 1998).
World Trade Organization. Geneva. Switzerland.




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World Trade Organization (WTO) (2004). “United States – Subsidies on Upland Cotton”. Report of
the Panel, WT/DS267/R (8 September). World Trade Organization. Geneva. Switzerland.


World Trade Organization (2005). “United States – Subsidies on Upland Cotton”. Reports of the
Appellate Body, WT/DS265/AB/R, WT/DS266/AB/R and WT/DS267/AB/R (adopted
21 March). World Trade Organization. Geneva. Switzerland.




About the Platform


In 2008 the International Food & Agricultural Trade Policy Council (IPC) and the International Centre for Trade and Sustainable
Development (ICTSD) launched The ICTSD-IPC Platform on Climate Change, Agriculture and Trade: Promoting Policy
Coherence. This interdisciplinary platform of climate change, agricultural and trade experts seeks to promote increased policy
coherence to ensure effective climate change mitigation and adaptation, food security and a more open and equitable global food
system. Publications include:


• InternationalClimateChangeNegotiationsandAgriculture.
PolicyBriefNo.1,May2009


• GreenhouseGasReductionPoliciesandAgriculture:ImplicationsforProductionIncentivesandInternationalTradeDisciplines
IssueBriefNo.1,byD.BlandfordandT.Josling,August2009


• ClimateChange,AgricultureandInternationalTrade:PotentialsConflictsandOpportunities.
IssueBriefNo.2,byJ.Earley(forthcoming)


• CarbonStandardsPoliciesandAgriculturalTradefromDevelopingCountries.
IssueBriefNo.3,byJamesMacgregor(forthcoming)


About the Organizations


The International Centre for Trade and Sustainable Developmentwas established inGeneva in September1996 to contribute
to a better understanding of development and environment concerns in the context of international trade. As an independent non-
profit and non-governmental organization, ICTSD engages a broad range of actors in ongoing dialogue about trade and sustainable
development. With a wide network of governmental, non-governmental and inter-governmental partners, ICTSD plays a unique
systemic role as a provider of original, non-partisan reporting and facilitation services at the intersection of international trade and
sustainabledevelopment.Moreinformationisavailableatwww.ictsd.org.


The International Food & Agricultural Trade Policy Council promotes a more open and equitable global food system by pursuing
pragmatic trade and development policies in food and agriculture to meet the world’s growing needs. IPC convenes influential
policymakers, agribusiness executives, farm leaders, and academics from developed and developing countries to clarify complex issues,
buildconsensus,andadvocatepoliciestodecision-makers.Moreinformationontheorganizationanditsmembershipcanbefoundon
our website: www.agritrade.org.


Greenhouse Gas Reduction Policies
and Agriculture:


Implications for Production Incentives
and International Trade Disciplines


By David Blandford and Tim Josling
August2009


ICTSD
International Centre for Trade
and Sustainable Development


IssueBriefNo.1


ICTSD-IPC Platform on Climate Change, Agriculture and Trade




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