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Trade and climate change: issues in perspective

Publication date:
A. Cosbey (ed)
Type of publication:

The government of Denmark convened a seminar on trade and climate change. This report is a record of the discussions and analysis that took place there. Trade is an important channel for the diffusion of goods to mitigate climate changes. Trade liberalisation can also lower the costs of environmental goods (EGs). The Doha mandate calls for a reduction or elimination of tariffs and non-tariff barriers on EGs. However, the report wonders whether EG liberalisation can address climate mitigation efforts in a broader sustainable development context. The report notes that negotiations on the liberalisation of EGs within the Doha Round face some specific challenges. Definitional issues related to EGs remain unresolved. Complexities also exist with regard to their classification for customs purposes, making selective liberalisation of climate-friendly goods challenging. In addition, the report indicates the dual-use problem. Most DCs are hesitant to liberalise bound tariffs on dual-use products due to concerns about the impact of such overarching liberalisation on their established domestic industries. The report, furthermore, highlights the concept of embodied carbon in light of World Trade Organisation (WTO) principles. Countries implementing emissions reduction policies will have to compete with exports from countries without mandatory emission reductions, where costs of production may be lower as a result. The report wonders if considering the embodied carbon is compatible with the principle of none-discrimination. Consequently, it concludes that it is difficult to imagine how the WTO might take up issues of "leakage and competitiveness" formally.The report additionally deals with the policies and regulatory approaches, noting that they vary greatly across the globe. This can lead to different levels of greenhouse gas emission (GHG) emissions in different countries, and thus have competitiveness effects. However, the consumers usually know nothing about the product’s total contribution to climate change. Therefore, many countries are considering the adoption of trade-related measures that take into account the method of production.The reports main conclusions and recommendations are:

one  of the basic needs is to quantify the amount of actual GHG reduction that would transpire under the various liberalisation scenarios
it seems that the liberalisation of climate mitigation goods will bring benefits mainly to developed and a few middle-income DCs
beside trade liberalisation, a whole host of complementary measures will be required
intellectual property rights may act as a barrier to access, particularly in emerging climate technologies
border carbon adjustments must be designed to take into account all measures implemented by trading partners that might have an impact on climate change
intellectual property is potentially both an incentive and an obstacle to the transfer of technology. As a result, its exact role remains unclear
the contribution of existing Trade-related Aspects of Intellectual Property Rights flexibilities to climate-related technology transfer could be positively significant
it is impossible to say whether trade measures based on embodied carbon are legal or illegal from a trade law standpoint
there is considerable scope for both facilitating trade and benefiting the environment by harmonising measurement, testing, certification and accreditation procedures internationally
experience indicates that the notification process has been insufficient for assisting DCs to identify sanitary and phytosanitary measures affecting their exports