5 October 2021
Swedish Event Explores Possibilities for Trade and Climate Agreement
Photo credit: @EnvatoElements
story highlights

Participants discussed how trade might help achieve the Paris Agreement objectives through multilateral and plurilateral efforts.

They heard an update on the negotiations towards the Agreement on Climate Change, Trade and Sustainability, and considered challenges faced by developing countries in achieving the necessary climate ambition embodied in low-carbon development strategies.

The Swedish Ministry for Foreign Affairs Sweden (MFA) organized an event that explored how the World Trade Organization (WTO) can contribute to tackling climate change and to a green recovery from the COVID-19 pandemic through multilateral or plurilateral negotiations on issues important for the climate transition. Participants discussed the possibilities for a trade and climate agreement, and what it might include.

The session convened as part of the WTO Public Forum 2021 on 1 October.

Robert Watt, Stockholm Environment Institute (SEI), moderated the session. He noted the urgent need and opportunity for international trade institutions to help achieve climate change objectives.

Krister Nilsson, State Secretary, Minister for Foreign Trade and Nordic Affairs, Sweden, highlighted the upcoming WTO Twelfth Ministerial Conference (MC 12) and the Glasgow Climate Change Conference (COP 26), the arenas that present opportunities to focus on the substance. He pointed to the pioneering example of Sweden, which decreased its greenhouse gas (GHG) emissions by 24% between 1990 and 2019 while tripling gross domestic product (GDP), and reformed its export credit regime in line with climate objectives.

Emilie Eriksson, Swedish National Board of Trade, relayed the findings of their forthcoming report on how the trade regime might help achieve the Paris Agreement objectives. She said the report focuses on liberalization of trade in environmental goods and relevant services—by reducing tariffs and non-tariff barriers and by market access concessions—and on reducing fossil fuel subsidies. On environmental goods and services, the paper explores which goods and services might be included in an agreement, and proposes several new categories. It also discusses how to address non-tariff barriers, for example through mutual recognition of conformity assessments, and international harmonization of product standards. In thinking about the legal avenues for an agreement, Eriksson argued that a plurilateral agreement would be preferable, but perhaps hard to achieve since it requires consensus, and therefore alternatives, such as a reference paper-type approach, are also explored. She said the paper will be available in the coming months here.

In subsequent discussion, Eriksson noted that the need for a critical mass of parties is low in the case of an agreement on environmental goods and services, since parties would benefit from commitments among themselves. By contrast, she said critical mass is crucial in fossil fuel subsidy reform efforts, to ensure that commitments do not result in leakage of emissions to other producers.

Brett Longley, Ministry of Foreign Affairs and Trade, New Zealand, offered an overview of the work carried out on the Agreement on Climate Change, Trade and Sustainability (ACCTS) – a plurilateral negotiating effort currently in progress among six WTO members – New Zealand, Costa Rica, Fiji, Iceland, Norway, and Switzerland. The rationale for ACCTS, he said, is a belief that trade policy and law can contribute to climate solutions, and a recognition that multilateral negotiations are “daunting and lengthy, if they can be completed at all.” Negotiations, which after six rounds are at the stage of consolidated text, focus on environmental goods, environmentally relevant services, fossil fuel subsidies, and voluntary ecolabeling. Longley listed preliminary lessons, including the need for a broad spectrum of participants, a focus on providing in-depth information to negotiators, the value of virtual negotiations, and having developing countries lead the discussions on development aspects. He noted the ACCTS is designed to be ultimately open to any willing WTO members, and to be supportive of multilateral rules and institutions.

Claudia Mvula Pollen, Consumer Unit Trust Society, Zambia, described the challenges faced by developing countries in achieving the necessary climate ambition embodied in low-carbon development strategies. Least developed countries (LDCs), she argued, are primarily preoccupied with development and with achieving middle-income status. To the extent that climate objectives overlap with this pursuit, much of it relates to adaptation to climate impacts, rather than mitigation of GHG emissions, of which there are typically few. Nature-based solutions, such as forestry and agriculture, and blue carbon ecosystems that provide coastal and marine capture of carbon are in line with this thrust, she noted.

Among the significant challenges, Mvula Pollen noted the lack of access to finance, a crippling digital divide, and external debt that has ballooned during the COVID-19 crisis. Given their relative lack of fiscal and technical capacity to facilitate a low-carbon transition, she argued, few LDCs are keen to link trade and environmental issues at the WTO, assuming that their export flows will ultimately suffer.

In subsequent discussion, she noted that while reduced tariffs on environmental goods and services might benefit LDCs, the main obstacles to deployment and dissemination are at the national level. On that question, Longley pointed out that many LDCs disproportionately rely on tariffs as a source of government revenue. [SDG Knowledge Hub Sources] [WTO Public Forum 2021]

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