International Trade in Carbon Units under GATT 1994 and Free Trade Agreements

Chapter 4 examines whether carbon units qualify as ‘goods’/‘products’ under GATT 1994 and free trade agreements covering goods. Despite complexities, the analysis of Chapter 4 concludes that, on balance, the better view is that ‘carbon units’ do qualify as ‘products’ and ‘goods’ under GATT 1994 and free trade agreements covering goods. This is because they can be possessed, stored, traded across borders, and hold economic value. The most challenging aspect is the lack of obvious ‘production’ involved in some classes of units. However, since some units are clearly ‘produced’, and since all units are fungible and are, to some degree, in a competitive market relationship with one another, regardless of how they are created, it would be anomalous if only some classes of carbon units were covered. If, however, the Appellate Body of the World Trade Organization were to determine—contrary to existing case law—that tangibility is a threshold requirement of ‘goods’/‘products’, it is clear that no carbon units would qualify.