Making the International Trade System Work for Climate Change

Context

The international trade system , including the World Trade Organization (WTO) as well as regional and bilateral trade agreements, has often been criticised from a climate policy perspective. Trade rules are often perceived by some as a barrier to stronger climate ambition.

Looming conflicts between the climate regime and the trade system have been the focus for many analysts and policy-makers. With the the bottom-up system now emerging under the Paris Agreement, each country is determining its own national contribution to global climate protection. This could lead to uneven implementation and potential trade related issues.

One of the most controversial issues is the idea that some countries could try to safeguard strong national climate policies by adjusting carbon prices at the border to protect competitiveness of their industries. However, some fear this may become a form of disguised protectionism.

Yet, as well as an obstacle, trade rules can also be viewed as something that could potentially help to achieve a transformation in climate policy. Examples of this include challenging environmentally and economically damaging fossil fuel subsidies, or by liberalising trade in environmental goods and services.

Progress on these issues has been slow and pathways remain unclear. This is due partly to a lack of communication between trade and climate policy communities and uncertainty about impacts on developing countries.

Research Team

The research is being conducted by four Climate Strategies members: Harro van Asselt (lead researcher), Kasturi Das, Susanne Droege and Michael Mehling. The project is managed by the Climate Strategies secretariat and funded by the KR Foundation.

Publications

The first working paper for the project ‘The Trade System and Climate Action: Ways Forward Under the Paris Agreement‘ was published in November 2013. It highlights several options for addressing the relationship between the trade and climate regimes from a legal, institutional and a policy perspective.

Events

The first workshop, ‘Border Carbon Adjustments: A Renewed Role after Paris?‘ was held in Bonn in May 2016. The event discussed the evolving rationale of border carbon adjustments in the  climate regime, and their design implications.

The second workshop, ‘Reforming Fossil Fuel Subsidies through the WTO and International Trade Agreements‘ was held in Geneva in May 2017. The event discussed the many different types of fossil fuel subsidies and options for addressing such measures through the WTO and other trade agreements. A follow-up report and blog post were published.

About the Project

The project will consist of four work packages (WPs), which will be rolled out during the course of two years.

  1. Mapping climate-trade interactions – an extensive review of the legal, economic and policy-oriented literature on climate and trade, including the Paris Agreement and the outcome of the WTO Ministerial Conference in Nairobi in December 2015.
  2. Designing border carbon adjustments (BCAs) for climate protection – A legal and political analysis of options for BCAs in the trade regime, to identify how they can be designed to ensure political buy-in from a wide range of countries and avoid ‘carbon leakage’.
  3. Eliminating fossil fuel subsidies through trade agreements – An analysis of the numerous fossil fuel subsidies under international trade law and determine what type of subsidies may get challenged within the WTO.
  4. Making the international trading system work for climate change – Proposal of options for adjusting trade rules and practices to promote climate protection. This will build on findings from WP 1-3.

Climate Strategies will organise a series of workshops for each of the research outputs. It will also hold larger events at COP22 and COP23, or the WTO Ministerial Conference (MC11) in 2017.  For updates on events follow us on twitter @climatestrat or check our event page.

 

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