Hear from Programme and Networks Associate Inés Jimenez Rodriguez about why international cooperation remains a critical bottleneck to climate-trade policy ambitions.
Trade received an unprecedented amount of attention during COP28. Although not explicitly featured in official negotiations, it was attributed its own themed day for the first time – Trade Day – and recognised with a Trade House pavilion explicitly dedicated to climate-trade policy interaction.
This was a welcome yet unsurprising development. Climate-trade policy interactions have rapidly intensified in recent years, accompanied by growing concerns that such policies will be deployed as a protectionist tool – or result in the penalisation of third parties, particularly developing countries. The unilateral, uncoordinated implementation of controversial climate-trade policies, such as carbon pricing and Border Carbon Adjustments (BCAs), risk exacerbating trade tensions and souring diplomatic relations.
The most notable example – the EU’s Carbon Border Adjustment Mechanism (CBAM) – is unlikely to be the last or only policy of its kind. Despite pushback, many countries are following suit. The latest example being the UK’s announcement of its new carbon tax on imports such as cement and steel. As this intersection between trade and climate action becomes increasingly tense, COP28 was considered a crucial crossroads.
Discussion on finance, trade, gender equality and accountability at COP28. Credit: UN Climate Change
Trade at COP28: small victories and sore points
During the first week, COP28 delivered a series of promising trade-related initiatives, including the World Trade Organisation’s ‘Trade Policy Tools for Climate Action’ (which expressed the need to improve coordination on climate-related internal taxes, including carbon pricing) and the Steel Standards Principles for decarbonization which will facilitate the comparable measurement of steel sector emissions.
Also notable was the official launch of the Climate Club: a high-level forum to facilitate exchange on climate ambition, industrial decarbonisation, and collaboration with developing countries. As assessed in our recent report, ‘Bridging the Divide: Assessing the Viability of International Cooperation on Border Carbon Adjustments’, the Climate Club entails a move towards international cooperation on climate-trade policy and, potentially, towards cooperation on the contentious topic of BCAs.
Parallel to these positive developments, there were also points of contention. Throughout multiple COP28 negotiations, concerns and ambitions related to climate-trade became a persistent point of debate.
This was salient during negotiations on the forum on the impact of the implementation of response measures. There appeared to be a stark divide between developed and developing countries, as the latter reiterated the need to acknowledge the cross-border, transnational, and adverse impacts of the implementation of mitigation policy – such as carbon pricing and BCAs. This is a sore point carried over from the Bonn climate talks of last June, and is yet to be resolved among the involved parties.
Similar concerns were voiced during negotiations over the Global Stocktake, with the final draft reached at COP28 recognising that mitigation policies, including unilateral ones, should not enable ‘arbitrary or unjustifiable’ discrimination, or a disguised restriction on international trade.
Altogether, these developments at COP28 demonstrate the growing realisation that, as climate-trade ambitions ramp up, we operate in a delicate ecosystem where uncoordinated action can bring unexpected impacts and trigger tensions – and where cooperation is increasingly needed.
Ines speaking at our Trade event at COP28. Find out more here.
Over the past few years, Climate Strategies members have been at the intellectual forefront on climate-trade policy research. Our first project on the matter – ‘Making the Trade System Work for Climate Change’ (finalised in 2018) – released insightful and internationally-recognised work on BCAs a year before the EU announced their intentions to propose CBAM. This year, as CBAM was implemented, our project ‘Making the Trade System Work for Climate 2.0’ provided a systematic stocktake of recent BCA cooperation initiatives.
Now, as we think of future steps in this field, our attention remains on the importance of facilitating dialogue and cooperation on climate-trade policy between countries implementing these measures and, importantly, countries potentially affected by them.
As demonstrated throughout COP28, there is an increasing need for cooperative and collective solutions to the climate crisis. In 2024, we will gather the expertise and forward-thinking of our members to research how we can build an inclusive climate club. By gathering a critical mass of countries (encompassing enough global imports), a de facto international price on carbon could be collectively established. This is an exciting avenue to investigate and address current challenges for climate-trade policy.