Joost Pauwelyn agrees with Drezner, Dingel, and Trachtman that countervailing duties aren’t appropriate for tackling climate change, but he does advocate a carbon levy on imports:
In terms of WTO law, it would be extremely difficult, for example, to qualify a country’s failure to adopt climate legislation as a “subsidy” or environmental “dumping”. If China does not impose climate legislation in the first place, it is hard to speak of either a subsidy or dumping.
Better options would be to justify a carbon levy on imports as “border tax adjustment” or, better still, to excuse it directly under the environmental exception in GATT Article XX(g).
It’s far from easy, but Pauwelyn thinks that “a carbon levy on imports, when designed carefully, can survive WTO scrutiny.”
UPDATE: Bhagwati and Mavroidis have an article on this topic in the latest issue of World Trade Review. They reach similar conclusions on the legality of various instruments, but argue against imposing such a carbon levy. Thank you to Stephanie Switzer in the comments for the pointer.
BHAGWATI and MAVROIDIS have an article in the ‘snipings’ section of the World Trade Review (2007), 6: 299-310 Cambridge University Press which tackles the question as to whether ‘action against US exports for failure to sign Kyoto Protocol is WTO-legal?’