The ‘Climate Trade Zero’ project will analyze the obstacles businesses face in achieving their net zero commitments and climate goals, and seek to identify policy changes governments can make to lower trade costs for climate-friendly products and services.
The objective is to share the views of business to help shape international commitments to be made at UNFCCC COP 26 to “move the needle on climate change”.
A virtual panel session on ‘Greening Trade,’ which convened as part of the World Economic Forum’s (WEF) Davos Agenda, explored the role of trade in delivering a greener, fairer global economy. The WEF and partners launched ‘Climate Trade Zero’ – an initiative to improve trade rules for climate-friendly production and consumption.
Haslinda Amin, Chief International Correspondent, South-East Asia, Bloomberg News, moderated the session. She said the 2030 Agenda for Sustainable Development calls on all countries to use trade to create a more sustainable, resilient, and inclusive world, and while international trade accounts for about 25% of global greenhouse gas (GHG) emissions, the links between trade and climate change have been “underexplored.”
Franck Riester, Minister Delegate for Foreign Trade and Economic Attractiveness of France, Ministry for Europe and Foreign Affairs of France, highlighted the role of trade in bringing many people out of poverty and delivering jobs and indispensable goods around the globe. Stressing the need for more ambitious standards to ensure consistency between trade and sustainable development, he outlined the EU’s efforts to address carbon leakage through the proposed Carbon Border Adjustment Mechanism (CBAM). Riester said trade agreements can push trading partners to do better on sustainable development, biodiversity, deforestation, and climate change.
Jeroen Ouwehand, Global Senior Partner, Clifford Chance, described trade as “a driver of environmental and sustainable productivity and efficiency,” and said the move to net zero must be supported by trade policies. He identified four areas where governments can “bring together” the World Trade Organization (WTO) and the Paris Agreement on climate change:
- Elimination of tariffs on environmentally beneficial goods and services;
- Removal of non-tariff barriers to trade in environmentally friendly goods;
- Removal of fossil fuel subsidies; and
- Carbon border adjustments.
Noting that trade is fundamental to “thinking of carbon footprint in a holistic way,” Anna Krutikov, Head, Sustainable Development, Glencore International AG, said any transition strategy must take into account the full spectrum of operational portfolio and commodity impacts. She identified regulations anchored in thinking of scrap as a hazard as a barrier to safe recycling at scale, limiting the ability of the formal sector to grow and enabling proliferation of informal practices that can further marginalize the vulnerable. Krutikov cautioned against “widening the gap of inequality” through irresponsible mining practices, and highlighted the example of the Fair Cobalt Alliance, which recognizes that artisanal mining can play a legitimate role in the supply chain, seeks to improve mining conditions, and advances efforts to eradicate child labor.
On the role of trade in better supporting sustainability, Riester said trade agreements are “good tools” to ensure consistency between climate ambition and trade. He said going forward, the Paris Agreement will be an essential component of bilateral trade agreements between the EU and third countries, and called for including sustainable development provisions in multilateral trade agreements.
On fossil fuel subsidies, Ouwehand pointed to a “significant” potential of redirecting such subsidies to other initiatives in light of limited fiscal space countries operate in as they respond to COVID-19.
On carbon border adjustments, Riester highlighted the need to convince trading partners of the CBAM’s pertinence. Ouwehand acknowledged that while adjustments can lead to protectionism, they can also level the playing field and bring together the WTO and the Paris Agreement.
The ‘Climate Trade Zero’ project will analyze the obstacles businesses face in achieving their net zero commitments and climate goals, and seek to identify policy changes governments can make to lower trade costs for climate-friendly products and services. The objective is to share the views of business to help shape international commitments to be made at the 26th session of the Conference of the Parties (COP 26) to the UNFCCC to “move the needle on climate change.” [Greening Trade] [WEF News Release] [Clifford Chance Press Release] [WEF’s Green Trade Project Webpage] [SDG Knowledge Hub Sources]