Trade rules are perceived by some as a barrier to stronger climate ambition, and the international trade system has often been criticised from a climate policy perspective. 

Looming conflicts between the climate regime and the trade system have been the focus for many analysts and policy-makers. With 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 issues.

Yet, as well as an obstacle, trade rules could alternatively push 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.

This project aimed to provide clear pathways to resolve these issues and capitalise on opportunity. It explored the relationship between trade and climate negotiations from a legal, institutional and policy perspective, providing resources for policy-makers. Further, it explored the need to reform fossil fuel subsidies to meet the goals of the Paris agreement and 2030 Sustainable Development Goals. 

The project systematically assessed 22 policy options in order to best inform decision-makers on how the international trade system could practically contribute to achieving climate goals, through policy briefs.

 It further brought together a range of relevant climate and stakeholders for an in-depth discussion, focusing on options related to border carbon adjustments, fossil fuel subsidies, as well as options addressing institutional relations between climate and trade.

• 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.
• 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’.
• 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.
• 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.

The research from this project has garnered international coverage across news and research outlets, including:

• Nature Comment – “Beat protectionism and emissions at a stroke“
• Climate Home / Energy Post – “Trump is wrecking the climate and free trade. Here is a common solution for both“
• Inside Climate News – “Turning Trump’s Trade War Into a Tool to Fight Climate Change“
• The Economist – “How to design carbon taxes“
• Carbon Pulse – “Experts suggest carbon border measures against US as EU, China move closer on climate“

The research was 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.