In mid-November 2024, four small trading states entered into an historic agreement. Its purposes are stated as follows (Art. 1.1):
- removing tariffs on environmental goods;
- liberalising trade in environmental and environmentally related services;
- disciplining and eliminating harmful fossil fuel subsidies in order to mitigate their adverse impact on the environment and contribute to global efforts to rapidly reduce greenhouse gas emissions resulting from production and consumption of fossil fuels; and
- providing guidelines for voluntary eco-labelling programmes and mechanisms.
The ACCTS provides a general definition of “environmental goods,” Parties undertake to eliminate import and export duties on listed environmental goods. (Arts. 2.5, 2.6)
The ACCTS provides a general definition of “environmental and environmentally related services,” as well as an Annex listing specific services to be included. (Art. 3.3(c)). Parties make market access (3.5), national treatment (3.6), and domestic regulation (3.10) commitments similar to those contained in the WTO GATS Agreement in relation to these services.
As to fossil fuel subsidies (FFS), the ACCTS begins by providing a definition of FFS. It follows the WTO Agreement on Subsidies and Countervailing Measures definition of a “subsidy,” except that it defines FFS as subsidies having a specific “benefit.” Art. 4.3(b). The special benefit definition relates generally to subsidies that target generation, production, transport, marketing, or consumption of fossil fuels (as defined). Parties are prohibited from introducing or maintaining listed FFS, and may not introduce other new FFS beyond a de minimis limit. Art. 4.5. There are a number of exceptions to these commitments, set out in Art. 4.6(2), including certain support to low-income, remote or vulnerable communities or population groups and public stockholdings for energy security.
Perhaps most importantly, the ACCTS introduces a “’Standardised Carbon Rate Measurement’ (SCRM), [which] means the net total price applying to Carbon Dioxide (CO2) emissions from fossil fuel use as a result of policy instruments that increase or decrease the CO2 price, including carbon and energy taxes.” (Art. 4.4). The SCRM mechanism is a facility pursuant to which parties may make binding commitments.
Finally, Art. 5.4 set out a list of guidelines that the parties agree to promote for voluntary ecolabeling programs.
Chapter 7 provides for binding arbitration as a form of dispute settlement regarding implementation of ACCTS.
The ACCTS is open to accession by any WTO member, “subject to such terms and conditions as may be agreed between the Parties and the accession candidate and approved in accordance with the applicable legal procedures of each Party.” (Art. 8.6)
The environmental goods and services trade liberalization obligations seem to operate on an MFN basis, as appears to be confirmed by Art. 1.5: “the Parties affirm their intention to apply this Agreement in accordance with their obligations under paragraph 1 of Article I of GATT 1994 and paragraph 1 of Article II of GATS.”
This is an encouraging initiative that addresses important issues. Especially intriguing is the possible utility of the SCRM, which is simply a facility for now. The Remaking Trade Project has addressed the issues addressed by ACCTS in detail and identified a number of additional important issues that might be included in ACCTS in the future, or in other agreements. These additional areas include reducing environmentally harmful subsidies beyond FFS, promoting sustainability-promoting subsidies, establishing standards for carbon border adjustments (here the SCRM provides an interesting basis for interoperability), establishing and ensuring permission for production standards to promote sustainability, and several others.
