Wisconsin International Law Journal

Gap in Environmental Accountability for Imposing Trade Barriers to Low-carbon Energy Technologies

By Martin Kwan

Gap in Environmental Accountability for Imposing Trade Barriers to Low-carbon Energy Technologies

 

Martin Yat-cheung Kwan*

 

 

Introduction

 

Low carbon transition, a global priority, refers to, “the process by which a country changes from using both high carbon energy and low carbon energy to just using low carbon energy.” This article examines if the trade measures in one country hinder low carbon transition in another country, can and should the restriction-imposing country be accountable for the impact of the restriction.

 

It will be argued that, despite there not being a trade law provision that can be squarely applied to address this environmental concern, there are a number of existing international environmental law doctrines that hold the imposing country legally accountable. States should take due account of:

 

 

These legal considerations and the interplay between trade and environmental law should be explored in greater detail by policymakers and the academic community. They help promote a rules-based order, sustainable development, and multilateralism.

 

The trade restrictions on low-carbon energy technologies

 

This part will explain the background situation regarding the trade restrictions imposed on low-carbon energy technologies. They extend to electric vehicles (EVs) and solar panels, but also raw materials like rare earths metals that are essential to renewable energies. These metals are of substantial importance to sustainable environmental transitions. Other emerging technologies like artificial intelligence (AI) chips can also have fundamental applications to address climate change.

 

Yet, a number of countries have imposed trade control measures on many of these products. For example, the European Union (EU) and the United States (US) are undertaking investigations against China’s manufacturing of electric vehicles on anti-subsidy and forced labor grounds. If these investigations determine that China impermissibly subsidized its EV exports in a way which caused material injury to domestic EV industries, they may impose tariffs. If they find forced labor, a ban against imports will follow. In October 2024, the EU has imposed substantial tariffs against EVs from China. Other actions are being taken, for example, the US government recently declared Internet-connected EVs a threat to national security. Apart from EVs, the EU and US are undertaking similar investigations against other low-carbon technological goods such as solar panels.

 

Trade restrictions cover not only low-carbon technologies, but also the essential raw materials involved in their creation. While nickel is critical to the production of chargeable batteries, Indonesia banned the export of nickel for economic interests, particularly to encourage domestic processing of nickel ores into higher-value exports.

 

The legality of these trade measures, however, has been disputed. The World Trade Organization (WTO)’s Appellate Body is responsible for resolving disputes between members states and “clarify[ing] the meaning of the WTO legal obligations.” Its ruling is “final and binding” to the parties in dispute, and the same legal issue will be resolved in the same manner “absent cogent reasons.” Despite having the effect of undermining the transition to sustainable and cleaner energy sources, the trade measures mentioned above can often be lawfully imposed pursuant to a number of legal grounds under the WTO’s General Agreement on Tariffs and Trade (GATT), for example in the interest of national security. Not to mention, an export ban on other, non-legal grounds could still endure due to the paralysis of the WTO Appellate Body. Without a fully functional Appellate Body, disputes between parties “remain pending”. Reportedly, “the appellate-body impasse has coincided with a sharp rise in trade restrictive measures, like tit-for-tat tariffs, illegal subsidies and other harmful barriers to trade.” Former WTO Appellate Body Chair James Bacchus and Baker Institute’s Simon Lester commented that:

 

“The disappearance of the Appellate Body would be a significant loss for the world trading system. The ‘security and predictability’ provided by an Appellate Body independent of political pressures and intimidation is necessary to the continued success of the WTO dispute settlement system. An impartial dispute settlement system that upholds the rule of law in trade is essential to the continued existence of the multilateral trading system.”

 

Low-Carbon Transition Depends on Trade, yet Outside the Governance of Trade Law

 

As previously explained, green transition is susceptible to international trade in low-carbon technologies. However, there is not a direct trade law provision that holds the restriction-imposing country accountable for the environmental consequences that arise indirectly out of low-carbon technology trade measures. The motive of the trade measures mentioned above is socio-economic and is not meant to harm the environment despite this being a possible effect.

 

Former WTO Director General Lamy, in discussing the gap between trade and environmental laws, suggested that this WTO framework should “be further improved, given rapid changes in the energy policy landscape and the international community’s goals regarding energy.” But instead of pondering on how to reform, the remainder of this piece will explore the existing international legal principles and normative obligations that call for accountability for the incidental environmental implications of the trade measures.

 

 

Accountability in What Sense?

 

Accountability, as a term used in this article, does not necessarily mean that the imposing country cannot implement the trade measures. After all, international trade law allows trade defense measures to be imposed on “green products such as solar cells and wind turbines”.

 

However, just because these practices are lawful under international trade law, it does not mean that the environmental implications should be ignored. When low-carbon technologies are included in a country’s trade defense agenda, and those trade measures have a material impact on the environment and climate change, that impact should be considered when determining a country’s trade-related emissions. This ensures that the imposing country is fully aware of the actual environmental impact without isolating it from international trade. States are obligated to conduct an environmental impact assessment to comply with their duty to not cause environmental harm—a “well-established” and “procedural” obligation, which is both a customary international law obligation affirmed by the International Court of Justice and a signatory’s obligation under Principle 17 of the Rio Declaration.

 

 

The International Law Maxim of sic utere tuo ut alienum non laedas

 

The maxim of sic utere tuo ut alienum non laedas (“use your right without harming others”), as applied in the international law domain, governs interstate relationships. Specifically, whilst exercising its rights, a state should not cause harm to another country. This notion has been accepted as a “norm” in the international environmental law context, having been applied in a transboundary environmental injury arbitration. A breach of the maxim results in strict liability, meaning that liability is triggered upon the occurrence of damage irrespective of fault and due diligence on the part of the injurer. This strict liability standard seeks to ensure the outcome of not causing damage to other’s territory.

 

This maxim applies not just to transboundary disputes, but also to extraterritorial acts for two reasons. This would cover the above-mentioned trade control measures (such as tariffs and export ban) against the low-carbon energy technologies. First, as reflected in Principle 21 of the Stockholm Declaration, the maxim broadly covers any activities, stating that “[s]tates have…the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction.” Although the Stockholm Declaration is not binding, its Principle 21 “is widely considered as having become a rule of customary international law” with a binding effect. It “has actually evolved from merely being a soft law to customary international law through general principles of international law as regards to environment such as state responsibility, territorial integrity and good neighborliness principles.”

 

Gray’s research underlined the broad acceptance of Principle 21, pointing to similar provisions like Principle 2 of the Rio Declaration and the Preamble of the “binding” 1979 Convention on Long-Range Transboundary Air Pollution. Despite the Rio Declaration was “not negotiated as legally binding rules,” its Principles 2 and 17 have crystallized to become “binding” rule under customary international law.

 

Secondly, the maxim is considered to form part of the customary international law principle of “no-harm,” which means a country’s activity should not cause environmental harm to others.

 

The Supreme Court of Louisiana in Fontenot v. Magnolia Petroleum Co. have noted the no-harm principle as a “maxim of the common law” that “is so well established and so universally recognized that it needs neither argument nor citation or authority in its support.” The same understanding was further applied by Louisiana courts in Gullatt v. Ashland Oil Refining Company and Gotreaux v. Gary. Although this statement was declared in a tort case, the judicial reasoning still highlights the no-harm rationale that, just because an act is lawfully performed, it does not mean others should bear the consequences of such act:

 

“It has been universally recognized that when, as here, the defendant, though without fault, is engaged in a lawful business, conducted according to modern and approved methods and with reasonable care, by such activities causes risk or peril to others, the doctrine of absolute liability is clearly applicable. There can be no legal justification for relieving it of liability and thereby deny compensatory damages to one having no relation to the conducting of such business and thus compel him to bear the unwarranted loss.”

 

This reasoning can also be applied to interstate relations. Hindering low-carbon transition affects the targeted country and its innocent neighbors. Environmental well-being is a common concern and extends beyond state borders. One could argue that the imposing countries are not at fault for undermining environmental progression, because these measures are meant to serve economic or political purposes and not harm the environment. However, the above quote confirms that the absence of fault is not an excuse, as it does not change the fact that the trade measures are posing environmental risks.

 

Doctrine of Common Concern

 

The above legal maxim emphasizes (1) not to harm others (a negative obligation to refrain from taking an act); and (2) that an act within one state could affect bordering neighbors because our environment is interconnected. But the responsibility not to harm the environment should not be limited only to adjacent or connecting borders. Instead, we need a broader principle that captures the transboundary nature of the environmental issues, which justifies shared and collective responsibility beyond borders. This leads us to the doctrine of common concern which rightly conceives environmental challenges as a common concern of humankind. It requires all states to cooperate and share the burden in addressing these problems, which is a positive obligation that requires states to take action (as opposed to a negative obligation).

 

The duty to cooperate is “one of the key elements of the emerging doctrine of Common Concern.”  The duty applies as a “central” principle in climate change law, calling for collective and cooperated effort. This important doctrine “is evident in a wide range of international instruments”, such as Principle 24 of the Stockholm Declaration and Principle 7 of the Rio Declaration. The duty has been expressly recognized by the Inter-American Court of Human Rights, which emphasized that this responsibility is to be complied with in good faith as it is essential to the protection of human rights affected by environmental harm.

 

Importantly, Art.4(1)(c) of the United Nations Framework Convention on Climate Change (UNFCCC)—a set of “binding” commitments which further resulted in the binding and similarly-worded Art.10(c) of the Kyoto Protocol—provides that states have to “cooperate in the development, application and diffusion, including transfer, of technologies, practices and processes that control, reduce or prevent anthropogenic emissions of greenhouse gases.” The Paris Agreement—“a legally binding international treaty on climate change” that has been adopted by 196 state parties—emphasizes cooperation in multiple aspects, with Art.10(2) particularly relevant for the present context which stipulates the obligation to “strengthen cooperative action on technology development and transfer.” Given the indispensable role of technology, hindering low-carbon energy transition, via trade measures, would arguably go against these international law expectations as Art.4(1)(c) of the UNFCCC explicitly mentions cooperation in technologies.

 

 

The Emerging Concept of Global Public Goods

 

Sustainable environmental transition should not be narrowly seen as a common “concern” only. It is also an intergenerational and international benefit that motivates international cooperation. This leads to the emerging concept of Global Public Goods (GPG), essentially “benefits [that] affect all citizens of the world.”

 

Over time scholars worldwide have begun defining climate adaptation as a GPG: Kopiński explained that “[t]he example of GPGs includes climate stability [and] knowledge”, given it “can  be  collectively  consumed  by  most  and  ideally  all  countries.” Khan & Munira defined “climate stability as a life-support global public good” because “the benefits of which are available to everyone and nobody can be excluded” and “the [global public bad] of climate change has…direct and indirect effects across boundaries and around the globe.” Although GPG itself is not an international law concept, GPG—as an incentive and common interest—vitally serves to “a basis of legitimacy for international law.”

 

Whilst a habitable climate as an end result is certainly a GPG, it is arguable that low-carbon energy technologies themselves are also a GPG. From the economic perspective, Wang et al. highlighted “low-carbon technology (LCT) innovation as a key enabler for economies to reduce their carbon footprint while maintaining growth.” Accordingly, low-carbon technology transfer should be promoted.

 

It was argued above that the climate impact caused by trade hindrance should count negatively towards the net zero target of the imposing country. The reverse of this argument should also be upheld, meaning that if a country fosters the international transfer and/or implementation of low-carbon technologies, that country’s positive contribution to global climate adaptation should be credited for the realization of its net zero emissions target.

 

 

Right to a Clean Environment

 

The human right to a healthy environment has been repeatedly emphasized by the United Nations. Given widespread recognition, it has arguably attained the status of customary international law. It has been enforced by the Inter-American Court of Human Rights, affirming that the right “belongs to present and future generations.” This right is obligatory in the sense that it requires governments to take positive steps to realize this right. For example, it encompasses the “positive obligation to mitigate climate change and ensure that all persons have the necessary capacity to adapt to its consequence.” The United Nations General Assembly Resolution (A/76/L.75) highlighted that this right is necessary to the enjoyment of “all” other human rights. It matters to the most fundamental “rights to life, health and culture”, because “all human rights ultimately depend on a healthy biosphere” and “clean air to breathe, safe water to drink or nutritious food to eat.” This right should therefore be one of essential considerations in the formulation of trade policies.

 

But the environmental right is not just about the positive obligation to take actions. Instead, it also encompasses a “negative obligation to abstain from acts contrary to human rights principles.” Under international human rights law, this means that “states must refrain from interfering with or curtailing the enjoyment of human rights”. Given that low-carbon energy technologies are essential to sustainable transition, the trade measures constitute a direct interference with the right to a healthy environment.

 

 

The Efficiency Goal of Trade and Sustainable Development

 

The seminal Marrakesh Agreement, which established the WTO, stresses in its preamble that trade should allow for “the optimal use of the world’s resources in accordance with the objective of sustainable development.”

 

Nonetheless, there have been export controls of lithography chip-making equipment (for manufacturing semiconductors that are crucial to AI). This hinders AI applications, which in turn could have been utilized to limit climate change. For example, AI can be applied to monitor “emissions from specific sources accurately in near real-time” and thereby accelerate the adoption of measures for climate mitigation. Without this chip-making equipment, the yield rate in domestic production reportedly can be “as low as 15 percent”, not to mention whether the end product can match the technological needs. Such inefficiency creates additional waste due to low yield rate, and this goes against the goal of “optimal” use as contemplated by the Agreement.

 

 

Conclusion

 

The present context involving low-carbon energy technologies is an interesting illustration that reinforces the challenging nature of the interplay between trade, technology, and the environment. Given the applicability of the above broad principles and norms, there are adequate justifications that warrant the introduction of an international mechanism for accountability.

 

It is important to emphasize again that taking due account of the potential environmental implications does not mean the trade measures can never be imposed. Without doubt, their legality is primarily governed by trade law. Even though “trade rules do not proactively respond to the urgency of combatting climate change,” states remain obligated to make an environmentally-informed trade decision, as trade law does not absolve environmental accountability.

* Known for his expertise in China affairs, technology regulation, and international & comparative business law, Martin Yat-cheung Kwan has acted as a strategic advisor to international institutions and corporations. He recently contributed as a Consultant to the United Nations Economic and Social Commission for Asia and the Pacific, offering his policy insights on sustainable business development. He is actively engaged in transnational and interdisciplinary research, notably as an Honorary Fellow at the HKU Asian Institute of International Financial Law and an Associate at Fairbank Center for Chinese Studies, Harvard University. His analyses have been cited internationally by public institutions, the judiciary, practitioners, and academics. He wishes to thank the team of dedicated editors at the WILJ for their professional support. Contact: martinresearch11@gmail.com.

Read the full article at: https://wilj.law.wisc.edu/wp-content/uploads/sites/1270/2025/02/Kwan-Feider-2-23-2025.docx