The global climate regime, as represented by the Kyoto Protocol, may be on a collision course with the global trade policy regime, as represented by the WTO (World Trade Organization). Environmentalists fear that international trade will undercut efforts to reduce greenhouse gas (GHG) emissions as carbon-intensive production migrates to non-participating countries-a phenomenon known as leakage. Meanwhile businesspeople fear the adverse effects of disparate climate policies on their own competitiveness. These fears have now become prominent in the policy-making process. In early 2008, legislation to enact long-term targets for reduced GHG emissions included provisions for possible barriers against imports from countries perceived as non-participating-both in Washington, DC (where climate legislation has not yet passed) and in Brussels (where the EU Commission Directive has gone into effect). Such provisions could be interpreted as violating the rules of the WTO, which poses the nightmare scenario of a WTO panel rejecting a major country's climate change legislation. In light of the hostile feelings that such a collision would unleash, it would be a disaster for supporters of the WTO and free trade as much as for supporters of the Kyoto Protocol and environmental protection.
Frankel, Jeffrey A. "Global Environment and Trade Policy." Belfer Center for Science and International Affairs Discussion Paper #09-01, September 2009.