Alessandra Arcuri

Emissions Trading and the Polluter-Pays Principle: Do Polluters Pay under Grandfathering?

Emissions trading is becoming increasingly popular in environmental law. Allowances to trade emissions can either be auctioned off or handed out free of charge by means of grandfathering. Although grandfathering is frequently used in emissions trading schemes, it is a popular view in the economic and legal literature that grandfathering is inconsistent with the polluter-pays principle. We come to a different, more nuanced view. The question of whether polluters pay under grandfathering depends on how the polluter-pays principle is interpreted. We present a taxonomy of interpretations. Based on an efficiency interpretation of the principle, consistency is demonstrated by emphasizing the economic impact of the opportunity costs of gratis allowances and the lump sum nature of the subsidy that is inherent to grandfathering. Inconsistency can only be claimed based on an equity interpretation of the polluter-pays principle. Allocating allowances free of charge means that polluting firms receive a capital gift making their shareholders richer, which may be perceived as unfair. We draw two conclusions. First, contrary to what some have claimed, grandfathering is compatible with an efficiency interpretation of the polluter-pays principle. Second, only auctioning is consistent with an extended form of this principle. Auctioning ensures not only that pollution costs are internalized (efficiency), but also that producers buy their allowances before they pass on those costs to consumers (equity).

Centralization versus Decentralization as a Risk‐Return Trade‐Off

This paper characterizes the choice between centralization and decentralization as a risk‐return trade‐off and examines it in a model that integrates ideas from committee decision‐making and portfolio theories. Centralization, by pooling expertise, rarely yields erroneous decisions; however, when it fails, the consequences are global. In contrast, in a decentralized system, erroneous decisions are more frequent, but their consequences are locally confined. We assess the relative desirability of (de‐)centralization in various scenarios with independent versus interdependent risks. We further discuss the robustness of the model and the relevance of our results for policymaking.

The TBT Agreement and Private Standards

By ‘standardizing’ different and otherwise incompatible products, transnational private standards have contributed to enhancing the process of economic globalization. Today, however, questions are raised as to whether the burgeoning phenomenon of (transnational) private regulation is working as an impediment to free trade. One of the few international agreements explicitly addressing the standards adopted and implemented by ‘non-governmental bodies’ is the Agreement on Technical Barriers to Trade (‘TBT Agreement’). Given the unremitting growth of private standards in the global regulatory space and their relevance for international trade, it is important to understand the role of the TBT Agreement in the ambit of private regulation. The main aim of this contribution is to clarify whether and/or to what extent the TBT Agreement can or should be applied to regulate private regulatory regimes, and in what ways the TBT Agreement already confers legal normativity on international private standards.

Back to the Future: US-Tuna II and the New Environment-Trade Debate

The so-called Tuna-Dolphin case is of one the icons of the trade-environment debate. The case, originally raised before a GATT Panel in the early nineties, dealt with a US import ban of tuna fished in Mexico. The main issue was a controversial fishing technique, entailing the accidental kill of dolphins. After almost 20 years, Tuna-Dolphin is being disputed anew. This time the measure disputed is a (voluntary) labeling regime concerning ‘dolphin-safe’ tuna. A World Trade Organization (WTO) Panel Report was issued on 15 September 2011. The Report condemns the US labelling regime for being more trade restrictive than necessary. This Report is interesting because it offers an occasion to reflect on some provisions of the Technical Barrier to Trade (TBT) Agreement, which may be crucial for the assessment of the legality of environmental labelling regimes. This article discusses a number of pitfalls of the Panel Report. It is argued that the reasoning that has led the majority of the Panel to conclude that the measure is a ‘technical regulation’ is founded on a questionable conceptual architecture. The most troubling part of the Report is the one dealing with the trade-restrictive nature of the measure. The Panel seems to have relied on a test by which if a measure does not reach its objectives perfectly, any other ineffective measures adopted with allegedly the same goals can be judged as a valid less-trade restrictive alternative. In other words, two wrongs seem to make a right in the view of the Panel; a conclusion that, for obvious reasons, will not be greeted with enthusiasm by environmentalists.

Risky Apples Again? Australia – Measures Affecting the Importation of Apples from New Zealand

The section on WTO law highlights the interface between international trade law and national risk regulation. It is meant to cover cases and other legal developments regarding the SPS, TBT and TRIPS Agreements and the general exceptions in both GATT 1994 and GATS as well as to inform about pertinent developments in recognized international standardization bodies and international law. Of recurrent interest in this area are questions of whether precautionary policies can be justified under WTO law, the standard of review with which panels and the Appellate Body assess scientific evidence and the extent to which policy can and should influence risk regulation.

Reconfiguring Territoriality in International Economic Law

Recent scholarship in international law has studied the phenomenon of deterritorialization and, in this context, has framed territoriality and functionality as competing modes of organizing the global political order. In this chapter, we challenge this vision by exploring the hypothesis that territoriality and functionality, rather than mere substitutes or competitors, impart meaning to each other. To test this hypothesis, we identify different modes by which functionality and territoriality interact in the reconfiguration of the international legal space, and in particular in the trade and investment regimes. In the context of international trade law, we show how territoriality is multiplied, and how it gives meaning to functionality, in particular at the intersection of the trade regime and regimes for the protection of health and environment. We further develop the idea of the emergence of techno-territoriality, where norms allegedly promoting global technocracy are being shaped by territoriality. The analysis of the international investment regime engages with the threats that contractual clauses exert on territoriality in the context of investment operations, the significance of the territorial nexus requirement in the definition of investment, when intangible financial instruments are involved, as well as the ‘international-territoriality’ mode conveyed by the activities of sovereign investors abroad. We conclude by arguing that territoriality is not subsumed by functionality, but is rather undergoing a process of transformation into ‘non-modern’ territoriality: the reassertion of territoriality in investment and trade regimes, albeit in different forms, should be looked at as a positive development to keep alive the ‘public’ core of international law.

Opening editorial to the special issue on 'Transnational risks and multilevel governance transnational risks and multilevel regulation : a cross-comparative perspective'

This Special Issue of the European Journal of Risk Regulation is the offspring of a conference held at the European University Institute (EUI) in May 2012, where an interdisciplinary group of established scholars and practitioners in the field of risk regulation and governance debated for two days questions related to the governance of risks in a globalised society. The conference was organised within the framework of the HIIL project on transnational private regulation and tried to describe the changes of actors, instruments and effects of risk regulation at the transnational level.1

What Price for the Community Enforcement of WTO Law

Under the World Trade Organization (WTO) legal framework, when a violation is deemed to occur, Members have recourse to a quasi-automatic dispute settlement system. If the breach persists after the WTO Dispute Settlement Body (DSB) has adopted a ruling, Members hurt by the illegal measures can be authorized to retaliate against the scofflaw Member. Rights and obligations are, thus, centrally enforced within the WTO. The object of this article is the decentralized enforcement of WTO law, and more precisely of DSB rulings through the ECJ. The aim is to explore whether it is in the Community (EC) as well as in the WTO’s interests to ensure that these acts are enforced before the Luxembourg Courts. Notoriously, the European Courts have been resistant to Community enforcement of DSB’ rulings. Unlike many legal commentators that have criticized the European Courts, we conclude that the approach of the Courts is justified both from a purely legal standpoint and from a Law and Economics perspective. In relation to the latter, we develop a theoretical framework, building on Calabresi and Melamed’s ‘Cathedral’, and show that the Community enforcement of DSB’s decisions bears costs that outweigh the benefits.