Standards and labelling schemes serve to correct market information failures and principal agent problems, which hinder the ability of consumers to identify or access energy-using products with optimized energy costs and environmental performance characteristics.
Efficiency standards and labels are reported to be the single largest cause of national notifications to the World Trade Organization under the Agreement on Technical Barriers to Trade (TBT Agreement). Given their importance in stimulating highly cost-effective energy and emissions savings, this is likely to continue. Whatever costs these regulations imply for industry and trade, it can be argued that they are generally less than the value of the energy savings they foster, and so there is a strong argument that trade regimes should not focus on discouraging or prohibiting such measures as non-tariff barriers to trade.
This paper will look at two types of standards: product standards that describe a good’s characteristics, such as energy efficiency; and standards that describe how a good was made, based on processes and production methods (PPMs), such as carbon-intensity for manufacturing. For both types, the paper asks how they might be better used to aid efforts to address climate change, and what types of obstacles might need to be considered. In the area of process standards, the obstacles that trade policy might address are primarily challenges of international cooperation. In the area of PPM-based standards, in addition to the lack of international cooperation, the obstacles also relate to international trade law.