The International Institute for Sustainable Development’s (IISD) Global Subsidies Initiative (GSI) held a webinar addressing trade and climate change in the context of the COVID-19 pandemic. The event titled, ‘Trade and Climate after COVID-19: Fossil Fuel Subsidies, Stimulus and Energy Prices,’ included examples of national responses and policies being implemented.

The webinar enabled the exchange of information to enable trade and the climate change agenda to keep moving forward during recovery from the pandemic.

Moderator Peter Wooders, Senior Director for Energy, IISD, questioned whether responses to the crisis and subsequent economic recovery packages will lock the world into unsustainable paths, making meeting the goals of the Paris Agreement on climate change more challenging. He highlighted the contribution of trade policy responses in this regard, and cautioned that low energy prices, as a result of the pandemic, could hinder the transition to clean energy.

Aik Hoe Lim, Director, Trade and Environment Division, World Trade Organization (WTO), discussed the ways in which the COVID-19 pandemic has affected trade. He compared the pandemic and its impact on the global economy to a war, minus the physical damage to infrastructure and the underlying capacity of countries. Noting that trade is expected to decrease by 13-32% in 2020 as a result of the pandemic, Lim stated that: markets must remain open to facilitate the flow of essential medical goods and agricultural and food products; cooperative efforts are required to keep supply chains working, with multilateral cooperation more important than ever; and protectionist measures will not help address the crisis or help countries increase their resilience and could, in fact, slow reform and building back better.

Lim said WTO members should use the Committee on Trade and Environment (CTE) to make trade more resilient and aligned with sustainability goals and to avoid false trade-offs between immediate economic needs and long-term sustainability needs. Noting that financial responses to the pandemic are expected to exceed USD 10 trillion, Lim said lowering trade barriers could be part of stimulus measures. He said governments must be convinced that a high-growth economic recovery formula is possible with minimum environmental impacts.

Ana Lizano, Permanent Mission of Costa Rica to the WTO, provided an overview of the Friends for Advancing Sustainable Trade (FAST) group and efforts being undertaken by Costa Rica, including working with Central American countries to reopen trade. She stressed trade facilitation and solidarity as the way forward.

Lizano discussed a draft ministerial declaration on trade and environmental sustainability to be presented to the 12th WTO Ministerial Conference, which was postponed due to the pandemic with a new date yet to be confirmed. She said the declaration calls for an informal working group engaging a range of stakeholders to assert the role of trade policy and the multilateral trading system in supporting efforts to address climate change and achieve the SDGs.

Lizano said FAST compliments the CTE’s work, and is considering ways the pandemic has created a “new normal.” Highlighting positive impacts of the lockdown on nature and biodiversity such as reduced emissions and working from home, she called for an economic recovery that respects the natural environment.

Mike Webb, Permanent Mission of New Zealand to the WTO, discussed the Friends of Fossil Fuel Subsidy Reform (FFFsR), which looks at subsidies that work against sustainable development and ways to reform the system. He identified trade frameworks as a tool to support fossil fuel subsidy reform, noting that such subsidies top USD 500 billion annually. Speaking about reform efforts, Webb highlighted: SDG target 12.c on rationalizing inefficient fossil fuel subsidies that encourage wasteful consumption; UN Secretary-General António Guterres’s emphasis on fossil fuel subsidy reform; and opportunities presented by the COVID-19 recovery and low oil prices for reform as consumption subsidies decrease. He said reform could free up resources to help with the recovery, lower income taxes, and assist other sectors that have suffered.

Webb noted that Fiji, Costa Rica, Norway, Iceland, and Switzerland are working on a binding agreement on climate change, trade and sustainability (ACCTS), that would require the elimination of harmful subsidies.

Malena Sell, Senior Specialist, Circular Economy, Sitra, discussed the circular economy and Finland’s response to the pandemic. She said the COVID-19 crisis provides the opportunity to build back with a focus on a green economy and transition. She noted that the Finnish government is focused on ensuring that recovery is compatible with achieving carbon neutrality by 2030. Sell outlined trade policy options to support the transition to a circular economy, including:

continuing and strengthening dialogue and information sharing at the CTE;
a statement by the WTO General Council focused on WTO reform;
liberalizing trade in environmental goods and services, with new circular economy solutions;
addressing taxation and tax reform; and
an agreement that could include a global price for carbon.

The question and answer session was moderated by by Alice Tipping, Lead, Fisheries Subsidies, IISD.

Discussant Carlos Vanderloo, Permanent Mission of Canada in Geneva, stressed that trade and climate change issues must remain at the forefront as countries begin focusing on economic recovery. Vanderloo highlighted areas where work can be done: bringing people together virtually to continue sharing ideas until face-to-face conversations resume; continuing discussions on issues that different groups of WTO member States are pursuing; and bringing discussions from FAST into the CTE in a meaningful way.

Responding to a query during ensuing discussion, Lim said the WTO does not distinguish between essential and non-essential trade. On links between trade and the environment under the WTO and work on response measures under the UNFCCC, Lim noted that while the Secretariats engage with each other and share technical information, member States do not regularly interact on policy.

Responding to a question on ACCTS, its relationship with the FFFsF, and ongoing work and negotiations in light of the pandemic, Webb said ACCTS is working through virtual arrangements for resuming discussions, and is proposing to share information and experiences and build knowledge and understanding with the FFFsR.

Sell clarified that the circular economy model can be implemented at the global, regional, and local levels, noting links through global value chains. She stressed the importance of circular economy discussions in the CTE, and said consideration should be given to a non-growth-oriented trade agenda, given that gross domestic product (GDP) is an “inadequate” measure of well-being.

In closing, Wooders underscored the imperative of “seizing the moment” and urgently working on climate and environmental issues, given the limited window of opportunity in terms of stimulus packages. [Trade and Climate after COVID-19: Fossil Fuel Subsidies, Stimulus and Energy Prices]