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Trade and Climate Change

Since 1999, IISD has explored the linkages between trade and climate change. Our work continues to focus on defining areas of linkage, and identifying ways in which trade policy might effectively support the objectives of addressing climate change.

The most obvious type of linkage is changes in trade policy that might affect (positively or negatively) climate change. For example, liberalizing trade in low-GHG-emitting goods could help reduce global emissions.

There are also competitiveness linkages, whereby action on climate change has competitiveness impacts on firms and sectors in the acting state.

As well, climate change itself affects trade patterns. Think of the impacts of rising sea levels and coastal storms on trade-related infrastructure like ports, or of the massive changes in trade flows that result from climate-induced changes in patterns of agricultural production.

Finally, there are a number of legal linkages. These largely boil down to the following question: "What constraints do trade and investment laws place on domestic government actions to address climate change?"

IISD has been a leader in this area from the outset, and continues to advise policy-makers on ways in which the two regimes might be made more mutually supportive.

Publications

• Trade and Climate Change Linkages (PDF - 251 kb)
  This paper was written as the first of a pair of background papers to the Trade Ministers' Dialogue on Climate Change Issues, held in conjunction with the United Nations Climate Change Conference in Bali, Indonesia, December 8–9, 2007 (UNFCCC COP 13, Kyoto Protocol MOP 3). It lays out the full range of linkages by which trade and climate change are interlinked, including legal linkages, physical impacts of climate change on trade and investment flows, impacts of trade and investment policy changes on climate change, and competitiveness issues.

• Trade Policy Tools and Instruments for Addressing Climate Change and Sustainable Development (PDF - 206 kb)
  This paper was written as the second of a pair of background papers to the Trade Ministers' Dialogue on Climate Change Issues, held in conjunction with the United Nations Climate Change Conference in Bali, Indonesia, December 8–9, 2007 (UNFCCC COP 13, Kyoto Protocol MOP 3). It examines in some depth the ways in which trade and investment policy might be employed to further climate change objectives. The discussion covers: liberalizing trade in low emission goods, allowing subsidies for greenhouse gas reductions, addressing domestic barriers to clean energy investment, amending intellectual property rights and lowering fossil fuel subsidies.

• Unpacking the Wonder Tool: Border Charges in Support of Climate Change. Bridges (ICTSD) Vol. 11, no. 7, November-December 2007 (PDF - 81 kb)
  Border tax adjustments and variations on the basic theme have been proposed for years as ways to address competitiveness issues when undertaking climate change policies. This article asks the following questions: Are such measures WTO-legal? Are they administratively feasible? And what would be their broader impacts on the process of international climate change agreement?

• Climate Change, Competitiveness and Trade (PDF - 133 kb)
  Chatham House working paper, 2007 (PDF - 204 kb)
  As emission reduction commitments become more stringent in future commitment periods, parties will become increasingly tempted to use overt trade measures to offset competitiveness losses. In this paper, Aaron Cosbey, IISD, and Richard Tarasofsky, Chatham House, examine what trade law might be applicable to each of the various possible instruments parties might choose to use to maintain their competitiveness.

• Harnessing Globalization: Scaling Up Trade and Investment Policy's Contribution to Climate Change Efforts (PDF - 115 kb)
  This paper was produced as a scoping document for the Seoul, Santiago and Mexico high-level regional sessions on Scaling Up Clean Investment as part of the Gleneagles Dialogue process, July 2007. It discusses four areas in which trade and investment policy might make contributions to climate change objectives: investment law, environmental goods and services negotiations, non-actionable subsidies for the environment and fossil fuel subsidies.

• Can Private Investment Deliver on MEA Objectives? The Example of the Kyoto Protocol's Clean Development Mechanism
  (PDF - 74 kb)
  This paper was prepared for the OECD workshop Multilateral Environmental Agreements and Private Investment: Promoting Business Contribution to Addressing Global Environmental Problems, Helsinki, June 16–17, 2005. It describes the Kyoto Protocol's CDM as a pioneering experiment to involve the private sector in achieving the objectives of a multilateral environmental agreement.

• Climate Change and Competitiveness: A Survey of the Issues (PDF - 181 kb)
  This paper explores the nature of concerns over competitiveness resulting from actions to reduce greenhouse gas emissions and tries to dissect them in a meaningful way and assess the need for concern. It was written by Aaron Cosbey in preparation for the expert's workshop Climate Change, Competitiveness and Trade, London, U.K., March 2005, organized by Chatham House and the International Institute for Sustainable Development.

• Implications, Including for Development, of the Interface between Environment and Trade Policies for Oil Exporting Countries. Geneva: UNCTAD, August 2003 (PDF - 155 kb)
  Chapter 4 of this longer document, extracted here, deals in some depth with the legal interface between trade and investment rules and the types of policies and measures that countries might undertake to address climate change.

• The Kyoto Protocol and the WTO: Report of a seminar organized by IISD and the Royal Institute of International Affairs, December 1, 1999, Seattle. Winnipeg: IISD/Chatham House, 2000 (PDF - 163 kb)
  This is a synopsis of discussions held at a meeting convened on the fringes of the WTO's Seattle Ministerial. The meeting addresses the various ways in which climate change and trade are linked. It concludes that on most issues, there is no immediate threat of clash, provided the potential for clash is understood and addressed.

• Trade Implications of the Kyoto Protocol Policy Matters, newsletter of the IUCN Commission for Environmental, Economic and Social Policy, Issue No. 4, Spring 1999 (PDF - 186 kb)
  This article describes some of the likely areas of conflict between WTO rules and policies and measures that countries might undertake to address climate change.

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