Priorities for the climate–trade agenda

Priorities for the climate–trade agenda How a trade ministers’ coalition for cooperation onclimate action could help Carolyn Deere Birkbeck KISBN: 978 178413 483 9 This publication has been jointly produced by Chatham House’s Global Economy and Finance (GEF) and Environment and Society (ESP) programmes Priorities for the climate-trade agenda: How atrade ministers’ coalition for cooperation on climate action could help Carolyn Deere Birkbeck 18 October 2021 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical including photocopying, recording or any information storage or retrieval system, without the prior written permission of the copyright holder. Please direct all enquiries to the publishers. Chatham House does not express opinions of its own. The opinions expressed in this publication are the responsibility of the author(s). Copyright © The Royal Institute of International Affairs, 2021 Photo credit: Copyright © Bloomberg/Getty Images Contents Summary 4 Introduction 5 Climate and trade interactions: the state ofplay 11 Six politically feasible areas for climate-trade cooperation 28 Pathways forward on climate and trade in 2021 48 Annex 53 Acronyms and abbreviations 57 Endnotes 59 Priorities for the climate–trade agenda4 Summary Tackling the climate crisis demands an urgent transformation of the global economytoward sustainable production and consumption. Trade and trade policies have acentral role to play in this effort. At the November 2021 UN Climate Change Conference all eyes are rightly now on concluding asuccessful COP26. Thispaper proposes atwo-part package of proposals to address the nexus of climate change andtrade that could be pursued alongside COP26 and in the monthsthatfollow. First, harnessing the political focus on climate in 2021, this paper argues that governments should commit to enhanced international dialogue, coordination andaction on trade and climate intersections through: 1. Ministerial attention to trade, climate and environmental sustainability on the official agenda of the 12th WTO Ministerial Conference (MC12) in late 2021 as well as through acomplementary Ministerial Statement, co-sponsored by a majority of WTO Members, that recognises the need for the multilateral trading system to enable and support climate mitigation and adaptation efforts and theimportance of multilateral cooperation on the interface of climate, tradeandsustainable development goals; and 2. The creation of atrade ministers’ coalition for cooperation on climate action toserve as focal point for the top-level dialogue needed to develop trade policy frameworks that support climate mitigation and adaptation, to solve tough and complex issues around competitiveness, fairness and transparency, and toadvance coordination on trade and climate policy intersections. The coalition could help forge ashared vision of the highest priorities at the interface of climate and trade, how these should be pursued in policy terms, and how best tocooperate and connect the dots between different international processes. Second, from among the many topics at the interface of climate and trade policymaking, the paper identifies six policy priorities at the interface of climate andtrade that could be advanced in the final months of 2021: 1. Commitments to enhanced transparency, consultation and coordination onclimate policies and regulations that impact trade, and on trade policies that impact the climate and decarbonization efforts, with special attention to addressing the needs of developing countries and unintended trade consequences; 2. Action to promote trade in climate-friendly goods and services, including attheWorld Trade Organization (WTO), with afocus on trade and supply chainsthat support climate mitigation and adaptation as top priorities; 3. Launch of talks on fossil fuel subsidy reform at the WTO that combine afocus on improved transparency, ajust transition and atimeline for cooperation onconcrete reform efforts; 4. Commitments to increase green aid for trade and finance to support trade-related climate mitigation and adaptation, and to promote climate-friendly economic diversification, productionand trade in developing countries; 5. Adoption of a2025 deadline for net zero official trade finance; and 6. Enhanced ambition and cooperation to reduce transportation emissions associated with international trade and decarbonize the transport sector. Introduction5 Introduction As governments work to prioritize climate action on ascale never seen before, questions abound on how to align trade and trade policy with climate ambition. Atthe UN Climate Change Conference (COP26) in November 2021, evidence of the intensifying climate crisis underlines the urgent need to ratchet up concrete commitments on climate change mitigation and adaptation, as well as on climate finance.1 Commitments in each of these areas are currently far below what is needed to meet the Paris Agreement’s goal of limiting global warming to wellbelow 2°C, and preferably1.5°C, above pre-industrial levels.2 There is also growing acknowledgment that trade issues– while complex and often divisive– aredirectly relevant to climate action and cannot be ignored. International trade in goods and services accounts for around 60 per cent of globalGDP.3 As no country’s economy operates in isolation, domestic efforts to decarbonize and implement climate policies will inevitably encounter trade policy issues. International cooperation will be vital to ensure the policy frameworks that underpininternational trade support the implementation of the Paris Agreement. The final months of 2021 present several political opportunities for governments and stakeholder organizations to foster the cooperation on trade policy needed to accelerate climate action. COP26 and the WTO Ministerial Conference (MC12) in November each offer diplomatic openings for cooperation on climate-trade intersections. Meanwhile, arange of ongoing bilateral and regional trade negotiations provide opportunities to sharpen the focus on trade policies that work for climate change mitigation and adaptation. Theongoing plurilateral negotiations for an Agreement on Climate Change, Tradeand Sustainability (ACCTS) also provide an important pathway foridentifyingoptionsfortrade agreements that bolster climateaction. Aligning trade policy with climate ambition will demand political vision and aconcrete policy agenda. It will also require high-level international cooperation, including through improved international processes for policy formation and coordination on trade and climate intersections. This paper proposes atwo-part package of proposals. First, it identifies six policy goals in regard to the climate-trade interface that could be advanced alongside andbeyond COP26. Second, it argues that innovations on process are vital. To strengthen multilateral cooperation on the climate-trade interface, it calls forgovernments to seize the 12th WTO Ministerial Conference (MC12) as acritical opportunity for Ministers to put discussion of climate and environment issues on the official conference agenda, and to forge aministerial statement on trade and environmental sustainability, co-sponsored by the majority and full diversity of WTO members, in which governments recognise the need for multilateral trade cooperation on the climate crisis, and commit to focused, inclusive discussions attheWTO that tackle the challenges and opportunities at the nexus of trade, climate and sustainable development. In addition, this paper calls for the creation of atrade ministers’ coalition forcooperation on climate action.4 This coalition would serve as focal point Priorities for the climate–trade agenda6 forthetop-level dialogue needed to develop trade policy frameworks that support climate mitigation and adaptation, to solve tough and complex issues around competitiveness, fairness and transparency, and to advance coordination on tradeand climate policy intersections across different international processes. Why trade policymakers must catch upontheclimate agenda Trade policymakers can no longer ignore the climate crisis. This view is gaining traction for anumber of reasons: ▪ Growing evidence of the negative impacts of the climate crisis on economies andtrade, and of climate risks to international supply chains;5 ▪ Accelerating efforts of major economies to implement climate policies, manyofwhich have implications for international competitiveness, trade, andtrading partners;6 ▪ Rising recognition that ‘business as usual’ international trade contributes to climate change and is not compatible with achieving the international community’s climate goals; ▪ Increasing understanding of the role that trade can play to scale-up the diffusion and uptake of goods andservices vital to climate mitigation and adaptation;7 and ▪ Awareness that transparency and cooperation on the trade and climate nexus isneeded to guard against trade disputes, avoid carbon leakage and advance trade policies that support, not constrain, climate action; ▪ Calls from business groups for predictable and transparent trade policy frameworks to incentivize decarbonization and support the shift to more sustainable production; ▪ Calls from developing countries for greater trade-related support to adapt toclimate change, boost their climate readiness,8 and compete in decarbonized international trade. Governments do not yet, however, have ashared vision of what the highest priorities should be at the interface of climate and trade, how these should be pursued in policy terms and how best to cooperate. Climate and trade links– and tensions– are growing Achieving the Paris Agreement goals requires enormous transformation across anarray of economic sectors in all countries. Given the international integration ofsupply chains and significance of trade in the global economy, national efforts todeliver on climate ambitions will necessarily face trade-related opportunities andchallenges, as well as questions on appropriate trade policy frameworks. As governments work to foster aclean energy transition, build green industries andtransition to low carbon, nature-positive agriculture, agrowing number ofclimate policies will have intersections with trade and trade policies, ranging from government procurement, subsidies and technology transfer to climate standards and labels. Introduction7 Atthesame time, governments face stakeholder pressures to ensure thattrade andtrade policies are harnessed as an integral part of amultipronged global effort to combat climate change. Akey concern that arises is carbon leakage, which refers to the possibility that producers and investors will relocate for cost reasons from countries with the strongest climate policies to those with less stringent requirements, which could lead to an increase in total emissions. Whiletherisk of carbon leakage is hotly debated, and current evidence of such leakage islimited, there are concerns that thispotential could grow astheimplementation ofclimatepolicies advances. Over the past year, the growing array of trade-related climate policies and measures has stimulated asurge of interest in the relationship between climate policy and trade rules. In 2020, the WTO reported that one-third of environment-related trade measures notified to the WTO were linked to climate action.9 In 2021, two of the world’s largest economic actors put the climate-trade relationship squarely on the international agenda: the European Commission published its ‘Fit for 55%’ package (i.e.,55-per-cent reduction in carbon emissions by 2030, and net zero emissions by 2050), which includesits proposal for acarbon border adjustment mechanism (CBAM),10 and the US issued anew trade strategy, which underlined that ‘putting the world onasustainable environment and climate path’ is akey US trade priority.11 Meanwhile, all governments face powerful domestic constituencies that are fearful of paying the price of climate ambition. In the absence of aglobal price for carbon, governments are under pressure to defend key economic sectors from international competition as they undertake costly measures to decarbonize. At the same time, governments face pressure to ensure that environment-related trade restrictions taken by other countries are not thinly disguised protectionism. Developing countries are particularly fearful of the impacts of both climate change as well as climate policies on their trading prospects and economic development. Governance challenges hamper climate-trade alignment The governance challenges at the intersection of climate and trade are immense. There is poor policy coherence and coordination on trade and climate policymaking at the national level; weak political leadership at the international level; andagap in appropriate political processes to facilitate an exchange of views and enable governments to develop ashared vision. In the global finance arena, government decision-makers have grasped the economic risks of climate change far more swiftly than in the trade area. The Financial Stability Board’s Taskforce on Financial Disclosures and the Coalition of Finance Ministers for Climate Action are two examples of high-level efforts to promote financial decision-making that isalignedwith the world’s climate goals and reflects the risks of climate change.12 Although action on climate will require cooperation on trade, there is no regular high-level process or institutional anchor for intergovernmental dialogue, coordination and action on trade and climate linkages. There is no official ‘climate and trade’ agenda at either the WTO or the UN Framework Convention on Climate Change (UNFCCC).13 Some governments are working through bilateral, regional or plurilateral formats, including: in the Asia-Pacific Economic Cooperation (APEC) region (with afocus on climate-related goods and services); through the OECD’s JointWorking Party on Trade and Environment (JWPTE) and the ACCTS negotiations; and through trans-Atlantic dialogue. Meanwhile, aconstellation of international Priorities for the climate–trade agenda8 organizations and processes are working on specific climate-trade intersections, suchas the United Nations Conference on Trade and Development (UNCTAD), theInternational Organization for Standardization (ISO), the International Civil Aviation Organization (ICAO) and the International Maritime Organization (IMO), albeit with limited coordination among them. In 2021, the trade and environment ministers of the G7 and G20 have acknowledged the importance of the UNFCCC andParis Agreement, and the intersection of trade and climate change agendas.14 However, the absence of aclear process to anchor inclusive diplomacy and coordination on climate-trade intersections limits the scope for the worldwide cooperation essential for meaningful results, allows uncertainty and mistrust to fester, and risks neglecting key perspectives, especially those of developing countries.15 Akey unresolved issue is where such multilateral diplomacy onclimate-trade intersections should occur; views differ on whether the UNFCCCortheWTO is the ‘right’ setting for cooperation. In 2021, the prospect for such cooperation is deeply intertwined with wider challenges facing international climate diplomacy. Although the return of the US to the Paris Agreement is apositive development, the UK and Italy– co-hosts of COP26– face an uphill battle to secure sufficiently ambitious nationally determined contributions (NDCs) from the world’s governments. Developing countries express frustration over unfulfilled promises of financial support for climate change mitigation and adaptation, despite the developed countries’ historic responsibility for the climate crisis (see Box1).16 In this context, no government has expressed astrong political appetite for adding trade issues to an already full COP26 negotiating agenda, although some trade issues will arise in the context of negotiations on Article 6of the Paris Agreement (see Box2), and the EU’s CBAM proposal is expected to spur some discussion of trade-related climate policies at COP26. Box1. Contributions to the climate crisis The top 10 emitters of greenhouse gases in 2019 were China, US, the EU 28, India, Russia, Japan, Brazil, Indonesia and Canada followed by Mexico.17 In 2019, 10countries are responsible for more than two-thirds of global emissions. By contrast, the world’s 47poorest countries (with 12 per cent of the global population) together contribute lessthan1per cent of global carbon dioxide (CO2) emissions.18 The absence of aclear process to anchor inclusive diplomacy and coordination on climate-trade intersections limits the scope for the worldwide cooperation essential for meaningful results, allows uncertainty and mistrust to fester, and risks neglecting key perspectives, especially those of developingcountries Introduction9 Box2. The Paris Agreement The Paris Agreement goals: By ratifying the 2015 Paris Agreement on climate change, 191ofthe 197 parties to the UNFCCC committed to ‘holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to1.5°C above pre-industrial levels’.19 Nationally determined contributions (NDCs): The Paris Agreement requires all participating countries to set national greenhouse gas emissions reduction targets intheirNDCs, with the targets to be ‘ratcheted’ up every five years. Common but differentiated responsibilities and respective capacities: Allparties to the Paris Agreement have an obligation to mitigate greenhouse gas emissions, but the extent of mitigation efforts and the pace of ratcheting up are differentiated, in line with the principle of ‘common but differentiated responsibilities and respective capabilities.’ Theprovision of adequate assistance to enable developing countries to meet climate targets iswidely recognized askeyto unlocking the ambition of the Paris Agreement. Article6: This article is intended help countries to raise their ambitions and achieve reduction targets through voluntary approaches to international cooperation.20 Article 6has a‘trade dimension’ in that it covers carbon markets, such as those that link international emissions trading systems (ETS) (where two or more countries transfer emission reduction credits) or the international trade of emission reduction credits achieved through specific carbon offset projects.21 On the trade diplomacy side, the prospects of cooperation on climate also face afraught political context, especially as many governments are struggling to addressthe drastic impact of the COVID-19 pandemic on trade and investment, and to respond adequately to trade tensions about access to vaccines. Geopolitical factors and concerns about competitiveness make the political economy of climate action in the international trade policy arena even more daunting. At the WTO, Members have not yet established any climate-related goals, and the range of political and institutional challenges it faces mean that multilateral consensus on any issue will betough to reach in the near future. Indeed, anumber of WTO Members argue that the UNFCCC, and not the WTO, is the right forum for climate discussions and are likely to block any multilateral effort to establish an official commitment totake upclimate issues at the WTO. In apromising move, the WTO Director-General has expressed commitment to work in support of the Paris Agreement and climate action22 and agroup of 55 WTO members has sponsored the launch of Trade and Environmental Sustainability Structured Discussions (TESSD) at the WTO,23 spurred in part by thegoal of establishing aprocess for dialogue and cooperation on climate and tradeintersections. While talk of a‘climate and trade deal’ or of rewriting global trade rules to align with climate goals is unrealistic in 2021, there are many questionsthatrequire detailed study and attention, including: ▪ Which trade flows and trade policies contribute most to the climate crisis, andconversely, how do the climate crisis and climate policies impact trade? ▪ Which trade flows and policies could help address the climate crisis? ▪ How could trade policy frameworks incentivize companies to reduce the climate impact of international supply chains, and shape them as aforce for decarbonized, sustainable production and consumption? What combination of incentives and penalties can best drive meaningful climate action? And how can trade Priorities for the climate–trade agenda16 Table2. Overview of topics arising in climate-trade policy discussions Trade-related aspects of the Paris Agreement and in UNFCCC process • Article 6and carbon trading • Carbon offsets and carbon sinks • Response measures • Technology Mechanism • Mention of trade-related issues in NDCs and National Adaptation Plans (NAPs) Climate-related trade measures at the border • Liberalization of climate-friendly goods and services • Border carbon adjustments and carbon clubs • International coordination of emissions trading systems • Restrictions or bans on high emissions-intensity products (including through differential tariffs linked tocompliance with climate-related standards or non-tariff measures) • Restrictions or bans on agricultural products associated with tropical deforestation • Reform of international energy markets and energy trade for aclean energy transition Behind-the-border measures that link climate and trade • Climate-related regulations, standards and labels (mandatory and voluntary) • Transparency and trade disciplines on fossil fuel subsidies • Greening trade rules (e.g., on subsidies and government procurement) • Investment rules for climate action • Technology transfer, intellectual property rules and licensing practices relevant to innovation onclimate technologies as well as diffusion, adaptation and affordable access • Climate-related due diligence and supply chain requirements • Investment provisions that safeguard space for climate action Using trade agreements to reinforce the Paris Agreement and its implementation • Climate waiver at the WTO • Trade provisions on ratification and implementation of enhanced commitments under theParisAgreement • Enhanced transparency of trade-related climate measures • Climate-related trade sanctions • Climate cooperation in trade and sustainable development chapters • Sustainability impact assessments that include climate impacts on trade, trade impacts on climate, andglobal carbon footprints of national trade policies Interlinked areas for trade–climate diplomacy • Trade-related transport emissions • Green aid for trade initiatives to support resilience, climate change mitigation and adaptation • Green trade finance to support low-carbon, nature positive exports • Supply chain policies, including on carbon footprint, timber products and deforestation-free commodities Note: The table is anon-comprehensive sample of options noted in policy discussions and in the literature. Someoptions, such as proposals for ‘carbon clubs’ and a‘climate waiver’, cut across anumber of these topics. Annex1provides asynopsis of some topics and options noted in this table that are not addressed in the main textofthis paper. Climate and trade interactions: the state ofplay17 Trade policy in climate diplomacy While trade has not been acentral topic in the UNFCCC process over past decades or in the Paris Agreement specifically, trade issues have arisen in several aspects ofthe negotiations. Governments have also recognized that trade policy is relevant to the implementation of the Paris Agreement– in fact, some 45 per cent of NDCs submitted in the lead-up to COP21 in 2015 included adirect reference to trade or trade elements.72 The trade topics mentioned varied widely among countries, but included reducing trade barriers, regulating trade on climate grounds, regulating timber trade, standards and labelling, fossil fuel subsidy reform, international marketmechanisms, technology transfer and response measures. This section reviews trade issues that have arisen in regard to Article 6of the Paris Agreement and carbon trading; carbon offsets, sinks and deforestation; and‘response measures’ under the Paris Agreement. Article 6and carbon trading Outstanding disagreements on Article 6of the Paris Agreement are among the major points to resolve at COP26.73 Article 6is intended to help countries to raise their ambitions and achieve reduction targets through voluntary approaches tointernational cooperation,74 and covers the use of ‘internationally transferred mitigation outcomes’ (ITMOs).75 Article 6has its origins in the emissions trading and offset mechanism under the Kyoto Protocol (which enabled countries that had not used all their permitted carbon emissions to sell this excess to other countries). Article 6has atrade dimension because it covers the transfer of mitigation outcomesfor use toward the NDC of acountry other than where the mitigation took place and because it creates aframework for carbon markets. This includes carbon markets that link emission trading systems (e.g., where two or more countries transfer emission reduction credits) or international trade in credits arising from emissions reductions achieved through specific carbon offset projects.76 At the national and regional levels, anumber of countries have adopted ETS in order to incentivize sectors to reduce emissions. In the absence of aglobal price for carbon, akey rationale for international cooperation on carbon markets in the context of Article 6is to address concerns around competitive distortions betweentrading partners with different carbon pricing systems and overall emissionlevels,andalsotosupportbetter functioning carbon markets.77 As drafted, Article 6leaves countries free to determine the manner of international cooperation, but it emphasizes that such efforts must result in overall global emissions reductions.78 To avoid double counting, Article 6requires robust accounting in accordance with guidance adopted by the Conference of the Parties inArticle6.2,79 and pledges the establishment of asupervisory body. Ongoing Article 6negotiations on these topics have been thorny, leaving key details unconcluded.80 Meanwhile, the absence of clear rules has left doubt about the way in which countries may account for carbon market linkages and the use of international offsets. There has also been extensive debate about whether government actions to implement Article 6could trigger trade disputes at the WTO. Key unresolved issues include whether internationally traded emissions ought to be characterized as goods or services under trade rules, and the WTO compatibility of approaches that discriminate between carbon credits issued by different countries (suchdiscrimination has taken place in the context of the EU ETS, for instance).81 Anumber of proposals Priorities for the climate–trade agenda18 have been advanced to clarify and address potential issues, including proposals for the development under the UNFCCC or at the WTO of aspecific protocol thatdefinesrules on ITMOs, consistent with WTO principles andnorms.82 Although international carbon offsets can help to buy time for industries that face adifficult transition, some climate advocates argue that carbon offsets should not be counted in countries’ climate change mitigation targets or progress reports; they argue that the primary focus must be on pushing for faster, concrete action from all actors to decarbonize and reduce emissions.83 Switzerland, Norway and Canada are among the countries that have indicated that they will use offsets,84 while major players such as the US, China, and the EU as well as Finland and the UK have said that they will not.85 In 2020, Peru and Switzerland announced the first carbon offset deal under the Paris Agreement.86 Through this deal, Switzerland will provide finance for sustainable development projects in Peru in exchange for credits, with which itintends to meet up to 25 per cent of its emissions reduction commitments.87 Carbon offsets, carbon sinks and deforestation There is ongoing discussion in climate diplomacy of the use of carbon-trading tosupport the functioning of forests as carbon sinks. The UNFCCC’s mechanism for ‘reducing emissions from deforestation and forest degradation and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries’ (known as REDD+) is covered under Article 5of the Paris Agreement and has spurred several government-backed carbon offset projects.88 The REDD+ process has also contributed to the emergence of adiversity ofvoluntary carbon offset initiatives led by companies, investors and NGOs focused on nature-based solutions aimed at slowing down deforestation and forest degradation, and promoting reforestation, afforestation and forest regeneration. Asmore governments, companies and individuals purchase such carbon offsets, there are growing calls for increased scrutiny of the measurement, monitoring and verification of their climate benefits (see Box1). Alongside this, the volume of offset creditstraded on the international voluntary carbon market is growing.89 In parallel, UNFCCC discussions have long had an agricultural work stream,90 wheretradepolicy considerations are highly relevant.91 In the lead up to COP26, the UK and Indonesia co-chaired a dialogue on Forest, Agriculture and Commodity Trade (FACT). At COP26, twenty-eight partners – including Brazil, the EU, Indonesia, the Republic of Congo, the UK and the US – published a joint FACT roadmap for action on trade in forest and agricultural commodities, and 100 countries – including major producer and consumer countries such as Brazil, China, the EU and the US – issued the Glasgow Leaders’ Declaration on Forest and Land Use, in which they committed to “working collectively to halt and reverse forest loss and land degradation by 2030 while delivering sustainable development and promoting an inclusive rural transformation.” 92 The political declaration also included an explicit pledge to new financing to protect forest ecosystem a promise to promote trade and development policies that do not drive deforestation and land degradation. Response measures and the Paris Agreement Another long-standing debate with an important trade dimension concerns the adverse economic and social impacts on countries of response measures undertaken by other countries to mitigate climate change.93 At COP17 in Durban in 2011, aforum was established to discuss unintended economic impacts (including changes in trade, production or investment trends, growth or reduction in different sectors, Climate and trade interactions: the state ofplay19 changes ininternational competitiveness and carbon leakage) and social impacts (including job losses in some sectors, human capacity-building needs, and exclusion of stakeholders from decision-making processes) of climate responses measures.94 Picking up on this theme, the Paris Agreement acknowledges the issue ofcross-border impacts of climate response measures. Its Article4.15 calls ongovernments to consider ‘the concerns of Parties with economies most affected by the impacts of response measures, particularly developing country Parties’. The focusof discussions on response measures has evolved over time. Whereas initially acore focus was on call from Saudi Arabia and other OPEC countries for compensation for the decline in oil sales due to decarbonization, the focus of discussion of responses measures has broadened and is widely supported by the G77political grouping (which includes the majority of developing countries).95 Further, the impact of response measures is now recognised as an issue that affects all countries. Since COP25 in Paris, both developed and developing countries have also spoken of the need for a‘just transition of the workforce’ in the context ofnational and international climate response measures. Developing countries have emphasized the need to address the challenges that response measures can present for their economic diversification.96 Looking toward COP26 and beyond, international trade issues are increasingly likely to arise in discussion of response measures, especially asthe EU moves forward with its CBAM proposal and arange of countries are actively considering how to use trade measures to support implementation oftheir climate policies.97 Trade issues also arise in the UNFCCC’s Subsidiary Body for Scientific and Technical Advice (SBSTA), which is one of the two permanent subsidiary bodies to the convention. In 2015, SBSTA formally recognized the need to coordinate on trade policy.98 SBSTA’s subsequent work on trade-related issues has included activities on the development and international transfer of environmentally soundtechnologies.99 Formal SBSTA deliberations have also been complemented byanumber of trade-related side events on topics such as climate-resilient transport infrastructure.100 The UNFCCC process has also created aTechnology Mechanism topromote transfer of climate-friendly technologies;101 the issue of green technology transfer has linkages to long-standing discussions on enabling policy frameworks fortechnology transfer to developing countries at the WTO, where governments have explored options for trade, investment and intellectual property policies to promotetechnology transfer, especially to LDCs, although with limited success. Climate policy in trade diplomacy Although governments have been slow to focus on climate change in the trade diplomacy arena, they are now attracting growing interest. Analysis over the past decades has yielded abroad range of proposals for addressing climate-trade intersections (see Table2). While proposals for border carbon adjustments (BCAs) are currently dominating commentary on climate-trade issues, anumber of other climate-trade policy intersections also warrant attention. For many trade policy-makers and negotiators, the clearest pathway for them to contribute to climate action is to promote trade in essential climate technologies and climate-friendly goods and services, including through liberalization efforts at the bilateral, regional and multilateral level, as well as unilateral liberalization. In addition, recognition that trade policies have arole to play in supporting climate action and that climate policies and climate-related Priorities for the climate–trade agenda20 trade measures have implications for trade and the competitiveness of trading partners is spurring calls for greater dialogue, consultation, transparency and action on climate-trade intersections in the multilateral trade arena and in the context ofregional, plurilateral and bilateral trade relationships. Climate in the multilateral trade arena A broad range of climate-trade topics arise in the course of the multilateral trade discussions and negotiations. At the WTO, topics raised by different groups of members and stakeholders for discussion and action include: fossil fuel subsidy reform, negotiations on environmental goods and services, trade policy frameworks for alow-carbon circular economy, climate standards, green technology transfer andgreen industrial policy, sustainable agriculture and deforestation-free supply chains, and greening the WTO Aid for Trade initiative.102 Anumber of the developing countries most vulnerable to the economic and trade impacts of climate change are increasingly vocal in calling for stepped-up climate change mitigation efforts bytrading partners and greater trade-related support for their own transition to more climate-friendly and climate-resilient production, exports and infrastructure. The Bridgetown Covenant approved by governments at the 15th UN Conference on Trade and Development held in October 2021 underscored the relevance of trade and trade policies to both climate mitigation and adaptation efforts in developing countries, while underlining the need to support the competitiveness of developing countries in agreener economy.103 Until recently, members have explicitly questioned only afew of the growing number of climate-related trade measures notified to the WTO.104 The fact that climate policy issues have arisen in some WTO disputes has, however, prompted calls from diverse experts to clarify the legal scope for climate action consistent with WTO rules and to reassure governments about the scope for taking climate action without falling foul of WTO rules. Meanwhile, climate-related issues arise in the regular work of anumber of WTO committees, including the Committee on Technical Barriers to Trade, the Agriculture Committee, the Council on Goods, the Committee on Trade and Environment (CTE), and the Market Access Committee.105 In 2021, for instance, anumber of WTO members presented concerns and questions about the EU’s CBAMproposal in several WTO Committees.106 Despite growing calls for dialogue and cooperation on climate and trade intersections in the WTO context, the refusal of some WTO members is curtailing the prospect of including climate issues formally on the agenda of any of the WTO’s regular multilateral committees. Ahandful of countries, such as Saudi Arabia, Russiaand Turkey, reject efforts to discuss climate issues at the WTO. While South Africa and India insist that progress on critical outstanding issues atthe heart of the Doha Development Agenda should be addressed before taking on additional concerns, they also oppose efforts to advance discussions through plurilateral initiatives. Meanwhile, agrowing number of developing countries– especially the poorest andmost vulnerable to climate change– have highlighted theimportance ofaddressing the trade-related impacts of climate change and tradepolicy solutions. Meanwhile, recognition of the need for more focused attention to climate-trade intersections at the WTO was aprimary factor motivating the decision by 53WTO members to launch Trade and Environmental Sustainability Structured Discussions (TESSD) at the WTO in late 2020.107 Subsequently, TESSD meetings, which are opentoall Climate and trade interactions: the state ofplay21 members, have attracted broad participation by WTO members (including both China and the US, though neither are (yet) co-cosponsors). Thecosponsors are currently working toward aministerial statement on trade and environmental sustainability at the 12th WTO Ministerial Conference, which is anticipated to includeacommitment tomorefocused discussions on climate andtrade intersections at theWTO.108 Climate in bilateral, regional and plurilateral trade agreements At the bilateral and regional levels, increasing numbers of trade agreements include explicit references to climate cooperation, in areas such as environmental goods and services, mutual recognition of energy efficiency requirements or the need to foster regulatory cooperation in climate-related areas.109 Anumber of EU trade agreements contain dedicated chapters on clean energy or call explicitly for implementation of the Paris Agreement.110 While proposals abound on how trade agreements could more proactively support climate action, such provisions remain embryonic in mostagreements and have only found their way into the most recent deals. Enforceable climate-related provisions in trade agreements are rare, including inspecific chapters on environmental cooperation (where they exist).111 At the plurilateral level, the ongoing negotiations for ACCTS between Costa Rica, Fiji, New Zealand, Iceland, Norway and Switzerland are a‘first of their kind’ effort to identify pathways on three aspects of the climate and trade agenda: eliminating barriers to trade in environmental goods and services; promoting and implementing climate standards and labels; and phasing out fossil fuel subsidies.112 Although thecountries involved are not significant in terms of their shares of global trade, the ACCTS negotiations are widely viewed as avaluable attempt to identify what might be possible legally and politically, especially as they involve both developed and developing countries. The political economy of the climate and trade policyinterface The COVID-19 context: Implications for action ontheclimate-trade policy interface The COVID-19 pandemic is shaping the political and economic context for climate and trade policy. As countries struggle to respond to the pandemic, implementation of climate action plans has slowed in many places. Despite calls to ‘build back better’, COVID-19 stimulus and recovery packages have not been as green as many advocateshad hoped.113 Rather than setting economies on amore climate-resilient path, many governments are continuing support to fossil fuel-intensive industries and infrastructure projects. Although fossil fuel demand and the growth of global CO2 emissions fell overall in 2020 as the pandemic slowed global economic activity,114 the total atmospheric burden of CO2 in 2020 was higher than at any time in the last3.6 million years.115 Further, global energy-related emissions in 2021 are forecast to reverse the decline, as recovery from the pandemic creates thesecond-largest emissions increase in history.116 The pandemic has left many governments struggling to sustain the political attention and resources needed to address climate challenges. Countries at the front line of climate impacts talk of adouble crisis of climate and COVID-19, with the unfolding climate crisis having even more severe and enduring impacts than thepandemic. Priorities for the climate–trade agenda22 On the trade front, COVID-19 has provoked asharp fall in world trade and in commodity prices.117 Along with dramatic declines in foreign direct investment,118 many developing countries have faced acollapse in their export markets and unprecedented challenges in their tourism sectors,119 reducing their ability toservicedebt and pay for food and energy imports.120 COVID-19 has also battered trade diplomacy. The erosion of trust arising fromvaccinenationalism, restrictions of trade in medical and food supplies121 and limited action to support trade recovery in the poorest and most vulnerable countries presents an important obstacle to international cooperation on trade and, by extension, on trade and climate. In 2021, few governments are actively promoting afree trade agenda, and even those calling for open trade qualify this with other commitments, such as to ‘strategic autonomy’. Pressures to defend societies against the risks of shortages of essential supplies have spurred proposals from arange ofstakeholders to reduce dependence on global markets, reshorenationalindustriesand shorten supply chains. On the environmental front, although anumber of governments talk of agreen trade recovery from COVID-19, little of substance has emerged in terms of concrete intergovernmental commitments or actions to rebuild trade in ways that support alow-carbon and circular economy.122 Aslim silver lining is that the pandemic has focused attention on the economic costs of supply chain shocks andthe need for more resilient supply chains, including in regard to environmental risksandclimateimpacts. Shifts in climate-trade approaches of key governments As the world’s largest economic players announce policies to achieve the Paris Agreement’s climate goals, there is growing focus on the potential for climate-related trade conflicts on the one hand and about trade rules impeding vitalclimate action on the other. Given the diverse range of topics and policy options in the trade and climate space,itis not surprising that government priorities on the climate-trade agenda vary and are evolving. Among developed countries, for instance, anumber of countries have been active in calling for concerted discussions on the alignment of trade and trade policy with climate goals, especially on topics such as the liberalisation of environmental goods and services; but few have joined efforts to enhance transparency of fossil fuel subsidies at the WTO. Some emerging economies oppose the use of trade agreements to compel action on climate issues such as deforestation; but others are keen to harness such agreements to support climate-friendly exports or bolster access to renewable energy technologies vitaltotheir decarbonization efforts.123 Looking ahead, all eyes are on what the EU, US, and China will do, both in terms of domestic action to implement climate commitments, and on international diplomacy on climate-trade intersections. At the same time, developing countries are calling for stronger focus on their climate-trade priorities and challenges, andtheimpacts of climate-related trade measure on their competitiveness. Climate and trade interactions: the state ofplay23 The EU’s climate-trade agenda As it works to implement its European Green Deal, the EU has vowed to put climate action at the heart of its trade agenda. In the EU’s bilateral trade deals, numerous provisions on climate cooperation appear in sustainable development chapters or in dedicated chapters dealing with renewable energy. The EU has also stated that it will only pursue trade arrangements with countries that ratify and effectively implement their commitments under the Paris Agreement. In its 2019 communication about theEuropean Green Deal, the European Commission specified that: It will propose to make the respect of the Paris Agreement an essential element for all future comprehensive trade agreements. The EU’s trade policy facilitates trade and investment in green goods and services and promotes climate-friendly public procurement. Trade policy also needs to ensure undistorted, fair trade and investment in raw materials that the EU economy needs for the green transition. It can help address harmful practices such as illegal logging, enhance regulatory cooperation, promote EU standards and remove non-tariff barriers in the renewableenergy sector.124 In 2021, the EU’s proposed CBAM is forcing attention to climate-trade policy intersections that governments around the world have long sidestepped.125 Withinthe EU, the Commission faces calls from several EU members, environmental constituencies and experts to use its trade power more assertively to leverage environmental action in trading partners, including through stronger enforcement ofsustainability provisions in EU trade agreements.126 Some EU members have voted– or have threatened to vote– against ratification of the EU–Mercosur trade agreement until they are satisfied that Brazil demonstrates appropriate action to implement its Paris Agreement commitments.127 The Netherlands and France have argued that trading partners must live up to Paris Agreement commitments to implement progressively more ambitious climate policies or risk the withdrawal of trade benefits.128 Some European countries are, however, very reluctant to link climate and trade agendas so explicitly, or are cautious in this regard, with Germany being aprime example. Alongside, anumber of European think tanks call for the EU’s climate ambitions to be pursued in ways that address challenges facing developing countries, support their efforts to improve environmental performance,129 and avoid detrimental consequences for LDCs.130 Meanwhile, at the WTO, the EU has signalled its interest in advancing discussions on climate, including through liberalization of environmental goods and services, transparency of trade-related climate measures, transparency and reform of fossil fuel subsidies, the greening of the WTO Aid for Trade initiative and the strengthening of the WTO’s institutional framework for dealing with trade and environment issues.131 Return of the US to multilateralism, but questions abound The US is back as aplayer in global climate diplomacy. As well as rejoining the ParisAgreement, the Biden administration has announced that it will enshrine climate as an ‘essential element’ of US foreign policy and national security, and adopta‘whole-of-government’ approach to reducing emissions. Biden has pledged to massively boost federal investments in clean energy and to seek to eliminate fossil fuel subsidies, and he announced anew US target for greenhouse gas emissions reductions at aUS-hosted International Climate Summit in April.132 Although it remains unclear how much the Biden administration will be able to secure the necessary support for its ambitions in congress, these pledges have generally Priorities for the climate–trade agenda24 beenwell received as steps in the right direction. The Biden administration has also signalled its intention to restore the US commitment to multilateralism on trade and declared that it deems climate issues as central to its trade strategy and diplomacy. On the climate-trade front, the US faces domestic pressures to use its trade policy asavehicle to address climate change133 and also to ensure that its trade arrangements safeguard US climate action policies, protect American jobs and do not penalize local businesses that are taking climate action. Biden’s new US trade strategy, announced in early 2021, advances aclear ‘Buy American’ agenda, committing to reshore certain supply chains to strengthen domestic resilience andemployment, and aggressively promote US export interests. It also states that the USwill ‘work with allies and partners committed to fighting climate change’, whileacting ‘against trading partners that fail to meet their environmental obligations under existing trade agreements’.134 The strategy outlines afocus on: strengthening environmental standards; exploring and developing market and regulatory approaches to addressing greenhouse gas emissions in the global trading system (including consideration of border carbon adjustments); fostering US investment and production of climate technologies; and promoting renewableenergy supply chains.135 In April 2021, US Trade Representative Katherine Tai argued that existing rules of globalization incentivize downward pressure on environmental protection and are not equipped to deliver aglobal solution to the climate challenges facing the world. Pledging to ensure that ‘we and our trading partners are engaged in fair competition that does not supress environmental protection’, she stated that the US would pursue full implementation and enforcement of environmental obligations in its trade agreements, and work to build international consensus around new rules.136 A core question is how the US will address the intersection of climate-trade issues in its relations with China. US President Joe Biden has stated that the two countries can and should work together on climate action despite differences on economic and political issues. With China stating that bilateral climate cooperation ‘cannot be separated from the wider environment of China–US relations’, some US analysts argue that competitive ‘pressure, not partnership’ will do more to spur action on climate change.137 In September, adiscussion between the US and Chinese presidents yielded acommitment to continued engagement and dialogue to advance coordination and cooperation on issues of climate change and economic recovery, among other issues; but the outlook remains uncertain.138 Meanwhile, the US and EU are exploring pathways for transatlantic cooperation on climate and trade intersections, especially in light of the EU’s CBAM proposal, though as yet with noconcrete proposals on the table.139 On the multilateral front, the US has participated in meetings of the WTO Structured Discussions on Trade and Environmental Sustainability. Although it is has not yet joined as aco-sponsor, the fact that the US has contributed to discussions and tabled proposals is viewed as apositive indication that it intends to engage with this process at the WTO. Uncertainty over China’s climate-trade agenda, despite commitments China has affirmed that it intends to be akey actor on the climate stage. Its net zero commitment, the 2021 China–US statement on climate change140 and engagement in the China–EU High-Level Environment and Climate Dialogue demonstrate this intention. Questions abound, however, about how much China is willing to do at the Climate and trade interactions: the state ofplay25 interface of climate and trade. China is likely to have astrong interest in exporting environmental goods and gaining access to environmental technologies. Given existing China–US trade tensions, the US and EU may well resist any pressures to provide greater market access to Chinese exports of climate-friendly technologies and it will raise concerns about subsidies to state-owned companies that produce them. Ongoing EU–China trade and investment talks are also areminder that difficult issues– such as the transparency of subsidies, forced technology transfer and rules on state-owned enterprises– will set the context for trade and climate discussions.141 After seven years of talks, the EU–China Comprehensive Agreement on Investment (CAI) includes provisions on each of these thorny topics, along with commitments on sustainable development, the environment and climate, including effective implementation of the Paris Agreement.142 China committed, for instance, not to lower standards of environmental protection in order to attract investment or to use environmental standards for protectionist purposes. In the agreement, the EU and China agree to facilitating and encouraging investment in environment– or climate-friendly goods and services generally (though not to prioritizing more sustainable investments).143 On climate and trade, China’s approach is likely to be informed by and entangled in broader concerns about its status and role in the global trading system.144 Like other major powers, China will continue to approach international climate cooperation within the wider framework of international economic competition and political security, and can be expected to work to avoid the EU and US joining forces against it. At the multilateral level, China has publicly stated that it is committed to working with other governments to advance sustainable development and environmental sustainability at the WTO. It participates in, but has not (yet) formally co-sponsored, the Structured Discussions on Trade and Environmental Sustainability at the WTO. Developing countries engaged but concerned about protectionism andequity A growing number of developing countries are assessing how to respond to climate-trade intersections and to integrate climate change considerations into theirtrade policies.145 One clear sign of this is that “climate and environmental crises” were identified as one of three core global challenges at the 15th UNCTAD conference in2021.146 In discussions of climate and trade issues, climate equity is high in the minds of many developing-country officials. Noting the historic responsibility of developed countries for the climate crisis, and their higher per-capita emissions, developing countries emphasize that the economic costs of climate action must be shared fairly and that discussions of trade-climate intersections and solutions must be informed by multilaterally agreed principles of the Paris Agreement, including in regard to ‘common but differentiated responsibilities and respective capacities’ (CBDR-RC) forclimate action. As the world shifts toward low-carbon economies, developing countries underline that the concept of a‘just transition’ is hollow without adequate financial support for their communities and sectors that face job losses and economic decline, and for investment for climate-friendly economic diversification.147 In the face of climate impacts on trade, as well as opportunities and challenges related to promoting more climate-friendly trade, the circumstances and interests of developing countries vary widely.148 Trade will be essential to scale up the diffusion and uptake of renewable Priorities for the climate–trade agenda32 has created the Friends of Fossil Fuel Reform to build political consensus.188 Whilesome countries have phased out certain subsidies,189 and there have been someinformal peer reviews of reform efforts,190 progress on reducing subsidies has been slow.191 Although climate campaigners have insisted that COVID-19 recovery packages should not shore up fossil fuel-dependent industries, governments continue to support heavily fossil fuel-dependent sectors, from coal producers toairlines, rather than phasing out the subsidies that sustain them.192 Options for stronger international cooperation on fossil fuel subsidy reform include: formal binding agreements; informal, soft law commitments; and pledges reinforced through peer pressure review mechanisms. The ongoing plurilateral ACCTS negotiations are expected to yield afirst concrete example of how fossil fuel subsidies could be addressed through international trade rules, including through rules to prohibit specific types of subsidies along with exceptions to address development priorities. In the APEC region, Trade Ministers have provided direction to trade officials to explore options for apotential standstill on new fossil fuel subsidies.193 Atthe WTO, governments already have aset of international rules onsubsidies (intheWTO Agreement on Subsidies and Countervailing Measures) thatcould bethebasis for multilateral rules on fossil fuel subsidy reform.194 While any country can decide unilaterally to reduce its fossil fuel subsidies, and to pursue reform through bilateral, plurilateral or regional cooperation, amultilateral approach would better address competitiveness concerns because it would apply to amuch wider set of countries.195 At the 2017 WTO Ministerial Conference, 12countries led by New Zealand issued aMinisterial Declaration on Fossil Fuel Subsidy Reform,196 arguing that governments should harness the multilateral trading system to support greater transparency in fossil fuel subsidies, share national experiences of reform and foster dialogue on how trade disciplines could support reform efforts. Recognising the limited prospects of the launch of any negotiations of WTO disciplines on fossil fuel subsidies this year, proponents are working to attract support for aministerial statement at MC12 through which cosponsoring members would commit to improved information-sharing to advance discussion ‘aimed at achieving ambitious and effective disciplines on inefficient fossil fuel subsidies… including through enhanced WTO transparency and reporting’ and elaborating concrete options to advance this issue inadvance of the WTO’s 13th Ministerial Conference.197 Themost significant recent development is that the EU has joined as acosponsor of the ministerial statement, thereby bringing the fossil fuel reform initiative attheWTOitsfirst G7 members. In addition to calling for the rationalization and phase out of fossil fuel subsidies along aclear timeline, the statement would establish aprocess for the dialogue, transparency, learning, experience-sharing vital to spurring national reforms and enhanced international cooperation. In so doing, it could shed light on the kinds of reforms that are possible, approaches to subsidy reform that could support aclean energy transition, and ways to ensure that reform does not harm the Notably, the proposed ministerial statementexplicitly recognizes that fossil fuel subsidy reform ‘needs to take fully into account the specific needs and conditions ofdeveloping countries’ Six politically feasible areas for climate-trade cooperation33 mostvulnerable communities. Notably, the proposed ministerial statement explicitly recognizes that fossil fuel subsidy reform ‘needs to take fully into account the specific needs and conditions of developing countries and minimize the possible adverse impacts on their development in amanner that protects thepoorandtheaffectedcommunities.’198 Next steps in 2021 are for cosponsors to redouble efforts to expand the number and diversity of cosponsors of aWTO ministerial statement and to ensure the statement commits cosponsors to developing atimeline for action in the post-MC12 period. Meanwhile, governments can take action unilaterally to disclose their own fossil fuel subsidies and notify these to the WTO, and to end official trade finance for fossil fuel projects (discussed below). Beyond the trade arena, parallel efforts to push for stronger action on fossil fuel subsidy reform through the G20 and at COP26 will be needed. Alongside ongoing work to develop shared definitions of what constitutes afossil fuel subsidy, continued investment in third-party independent efforts to shed light on fossil fuel subsidies, such as those of the Global Subsidies Initiative andtheOECD, will also remain vital. 3. Green aid for trade to advance climate goals andgreen trade recovery Green aid for trade initiatives will be an essential component of enhanced cooperation at the intersection of climate and trade. Akey priority for developing countries is to ensure that the push for decarbonization does not leave them further marginalized in global trade and in the shift to agreen global economy. Politically, enhanced trade-related assistance is vital to build support among developing countries for ambitious action on green trade, especially given the economic fallout of the COVID-19 pandemic.199 Economically, aid for trade is essential to drive green economic transformation in developing countries, enhance their participation in green supply chains and promote atrade recovery that does not undermine climategoals. For developing countries, top aid-for-trade priorities include support for economic diversification, supply-side capacity and meeting the growing array of standards needed to compete in global markets. Each of these priorities is equally relevant for climate action and green aid for trade. Green aid for trade can support efforts to: transition to low carbon and climate-resilient production and trade-related infrastructure (such as in the energy and transportation sectors); build national greenindustries that can serve local economies; meet emerging international climate standards; and compete in low-carbon global markets and supply chains.200 Green aid for trade can also help countries tackle the challenges of trade-related climate adaptation and boost climate readiness, including in terms of disaster preparedness, reducing vulnerability to extreme weather events and bolstering theclimate resilience of trade-related production and infrastructure.201 Critically, the efforts of many developing country businesses to scale up green production and exports are held back by asignificant gap in trade finance and investment. Alongside aid for trade, climate mitigation and adaptation efforts indeveloping countries will require significantly increased climate-friendly public and private sector investment, trade finance (which helps exporter businesses toreduce risk and ensure that they receive payment for goods shipped overseas in the event ofcustomer defaults) and affordable access to relevant technologies, especiallythosethat will enable them to leapfrog carbon-intensive production. Priorities for the climate–trade agenda34 Looking ahead, four approaches to bolstering green aid for trade would support climate action and complement efforts to promote greener trade:202 ▪ mainstreaming climate considerations into existing aid for trade portfolios; ▪ providing additional aid for trade that focuses explicitly on climate-related priorities articulated by developing countries; ▪ promoting green investments through trade-related support that occurs outsidethe framework of the WTO’s Aid for Trade Initiative, such as in the contextof the Belt and Road Initiative; and ▪ ensuring more coherence and synergies between the Aid for Trade Initiative andother international efforts to provide and boost climate and trade finance. To strengthen coherence, astarting point would be strengthened coordination between the range of international efforts relevant to the intersection of climate action, economic transformation and trade, including: efforts to boost green aid for trade, trade finance and development finance (through the World Bank and regional development banks, as well as the UN and bilateral aid agencies); climate finance (such as through the Green Climate Fund, private sector investors and private philanthropies); environmental assistance (such as through the Global Environment Facility and UNEP); and debt relief (where there is growing discussion of ‘debt for climate’ swaps).203 Bilateral projects and financing available through carbon-offsetting schemes implemented under Article 6of the Paris Agreement are also relevant in this respect, as are the growing number of private sector carbonoffsetting initiatives. In 2021, politically feasible next steps could be advanced on two fronts. First, governments could agree to convene ahigh-level, multi-stakeholder summit in 2022 on aid and finance for green trade. The summit would involve recipient countries and all the key international actors, donors and investors outlined above and would seek to promote coherence and define strategies for ramping up support to developing countries for green economic diversification, participation in green supply chains and trade-related climate adaptation and readiness. Secondly, WTO members could ensure astrong commitment to enhanced green aid for trade in the multilateral WTO ministerial declaration or ‘outcome document’ from MC12, as well as in aplurilateral WTO ministerial statement on trade and environmental sustainability, and commit to advancing work on this agenda in the lead up to the 2022 Global Aid for Trade Review. To inform both efforts, there is acritical needto invest in country-led strategies for integrating climate considerations intotrade anddevelopment plans along with assessments of national priorities forclimate-related trade assistance. 4.‘Net zero’ trade finance by 2025 A fourth element of aclimate and trade package in 2021 would be government commitments to ‘net zero’ trade finance by 2025, ending trade finance for fossil fuelprojects and scaling-up trade finance that supports climate-friendly trade. Trade finance refers to credit, guarantees and financing provided by governments, private companies, and international development banks to reduce risk to exporters. Environmental advocates have long called for governments and development banks to apply improved environmental criteria and risk assessments to trade finance. Amidst public outcry about the use of public resources in ways that exacerbate Six politically feasible areas for climate-trade cooperation35 theclimate crisis or undermine climate action, several export credit agencies have pulled out of specific fossil fuel projects and some are considering policies to eliminate orreduce their financing for fossil fuels (see Table3). In early 2021, seven European countries announced the creation of an Export Finance for Future (E3F) coalition, committing to: increase export finance support for sustainable projects, end official finance for thermal coal projects and related infrastructure andexplorehow best tophase out export finance for oil and gas.204 Table3. Examples of climate commitments among export credit agencies Country Export credit agencies’ climate commitments Sweden SEK, Sweden’s export credit agency, has committed to ensuring total lending to coal, oil and gas projects does not exceed 5per cent of its total lending portfolio and an end to support for fossil fuelexploration and extraction by 2022.205 UK In 2019, aUK Environmental Audit Committee report concluded that UK Export Finance (UKEF) support for fossil fuel energy projects in developing countries was ‘unacceptably high’ and called for the agency to align its work with achieving net zero emissions by 2050. In January 2020, the UK announced an end to support for coal mining and coal-fuelled power stations in developing countries, but gave no indication that UK funding for international oil and gas energy projects wouldend. In July 2020, following criticism of the approval of afossil fuel project in Mozambique, theUK prime minister ordered areview of overseas oil and gas projects.206 Denmark While Denmark’s export credit agency, Eksport Kredit Fonden (EKF), does not have any explicit commitment not to support fossil fuels, its reports reveal no current support for upstream or downstream coal, oil and gas. EKF reports indicate astrong focus on low-carbon technologies. Thewind energy sector, for example, secured 70 per cent of the support that EKF provided in 2018.207 Japan The Japan Bank for International Cooperation (JBIC) has supported eight coal plants since 2015 andhas not revealed any official plans to stop funding for existing projects. In 2020, JBIC stated that it ‘will no longer accept loan applications for coal-fired power generation projects’.208 (It is, however, reportedly considering supporting acoal project in Vietnam together with other banks.)209 Canada Canada’s export credit agency committed to end support for upstream and downstream coal projects from January 2019. It also committed to measure and set targets to reduce the greenhouse gas emissions intensity of its portfolio from 2020. There is as yet, however, no limit or phase-out commitment for oil andgas.210 Driving forward aclimate agenda for export credit agencies, which often have asemi-independent status within governments, will require cooperation among finance and trade ministries, along with ministries of environment. Already, anumber of important efforts to stimulate greater international cooperation to align trade finance with climate goals are under way and provide afoundation for further action. In October 2021, governments participating in the OECD Arrangement on Officially Supported Export Credits agreed to end officially supported export credits and tied aid for unabated coal-fired power plants.211 Further, at the Berne Union (whichbrings together both public and private export credit agencies, export-import banks and political risk insurers),212 some members are calling for atransition to net zero portfolios before 2050.213 The official export credit agencies of Denmark and the Netherlands have stated their intention to have the ‘greenest’ export credit agencies, while anumber of other export credit agencies, such as in Spain and Germany, havedeveloped climate-related goals.214 Priorities for the climate–trade agenda36 Aconcrete next step would be for acritical mass of like-minded governments to commit to achieving net zero official export credit portfolios by 2025, ending trade finance for all fossil fuel expansion in developing countries and agreeing on concrete targets and time frames for boosting green trade finance. Such joint pledges could underpin awider Berne Union effort as well as amendments to the OECD export credit arrangements with specific climate-related criteria.215 Governments could also agree touse their influence at the World Bank and regional development banks to end trade finance for fossil fuel projects and require stronger organization-wide policies in this respect.216 5. Transparency, dialogue and coordination onclimate and trade policies Although there is growing talk among governments on the need for action on the intersection of climate and trade policies, there have been remarkably few focused efforts at international dialogue– especially multilateral dialogue– among policy-makers and trade officials on the opportunities and challenges linked totrade-related climate policies. Across the world, countries are poised to ramp up the design and implementation of climate policies, including arange of green industrial policies to support decarbonized, resource-efficient, nature positive and circular economies.217 Inaddition to much-discussed BCAs, arange of possible climate policies and measures have trade policy dimensions and trade implications, including carbon-related standards applied to domestic and imported goods. The purposes of measures range from ensuring domestic industries are not harmed by an uneven playing field to reducing trade that undermines climate goals. Key concerns of climate action advocates are the extent to which trade and investment rules enable or constrain the scope for implementing ambitious climate policies and the risk of trade disputes that challenge domestic climate policies. Their focus is on ensuring that trade rules not only enable climate action but more proactively support and encourage it, providing clarity that empowers countries to take action without the chilling effect of uncertainty about the potential for legal challenges. From the trade perspective, key priorities are to ensure that tensions over such measures areeffective, fair and transparent, and do not unnecessarily distort markets or disguise protectionism in ways that undermine already tenuous international cooperation ontrade or provoke ‘trade wars’. In 2021, akey priority for governments should be to commit to transparency, consultation and coordination on climate policies related to trade, and vice versa; and to provide political support to high-ambition climate action within trade policy frameworks. Following is asynopsis of six areas where climate-trade cooperation isespecially vital. Border carbon adjustments and carbon pricing As countries and subnational jurisdictions move ahead on carbon pricing– andonrelated taxation and emissions trading schemes– many are also considering policies designed to: avoid ‘leakage’ of carbon-intensive production to other countries, incentivize trading partners to decarbonize and limit competitive threats from products produced beyond national borders that are not subject to equivalent carbon pricing or standards.218 Border carbon adjustments are one of the potential Six politically feasible areas for climate-trade cooperation37 policy tools actively being considered by some governments. The challenge for governments is how to: pursue such measures in ways that also address concerns about transparency, guard against unfair disguised protectionism, comply with WTO rules and avoid climate-related ‘trade wars’.219 In 2021, BCAs are akey topic on which governments should commit to increased international transparency, consultation andcooperation to manage these concerns and limit unintended consequences, especiallyfor the poorest countries. As afirst step, governments could work toward asetofagreed principles and good practices for the design and implementation ofBCAs. To date, avariety of carbon pricing schemes have been adopted around the world, includingin the EU, China (scheduled price on carbon), South Korea, Japan, Mexico, Canada,the United Kingdom, with some state – and local-level carbon pricing systems inthe US (e.g., California at the state level). These schemes vary widely, however, in terms of ambition and scope, as well as progress on implementation.220 In aworld of international supply chains and integrated economies, the significant hurdles that governments face when introducing carbon pricing systems are even more complex and difficult when internationalcompetitiveness and effectiveness are taken into account.221 WTO members actively considering BCAs include the EU, Canada, China andMexico.222 The US has also stated that it will: ‘explore and develop market and regulatory approaches to address greenhouse gas emissions in the global trading system. As appropriate, and consistent with domestic approaches to reduce US greenhouse gas emissions, this includes consideration of carbon borderadjustment’.223 Key issues for attention in the design of BCAs, and which will impact their significance for international trade, include the scope of the BCA, as well as the nature and level of the proposed tax, and whether an export rebate or adjustment is proposed.224 Afurther issue is how governments will evaluate the CO2 of imported products for the purposes of applying the appropriate taxation, as well as the interaction between national/regional carbon pricing regimes and the BCA systems of trading partners. Another issue relates to the compatibility of BCAs with WTO rules. In principle, Article XX of the General Agreement on Tariffs and Trade (which provides the possibility of environmental exceptions to the application of WTO rules) could apply to BCAs; but the scope for such exceptions will depend on the detail of how BCAs are designed.225 As no BCA has yet been implemented or contested, Article XX is untested on this issue. In order to be deemed compatible in the case of aWTO challenge, BCAs will need to be demonstrably environmental, not protectionist in intent and refrain from discriminating arbitrarily between countries where thesameconditions prevail. An additional set of issues relate to the impacts of BCAs on trading partners. Criticsargue that border carbon adjustments ‘risk becoming aclimate-based sanctions regime’ that will negatively affect developing countries, going against the Paris Agreement’s principles of equity,226 the nationally-determined nature ofNDCs and placing too much of the burden of transition to acarbon-neutral globaleconomyon the poorest countries.227 At present, the EU’s BCA proposal is the most advanced. Following its commitment to increased ambition on carbon pricing in the European Green Deal,228 theEuropean Commission has published its proposal for the introduction of acarbon border adjustment mechanism by 2023. To address the difference between the price Priorities for the climate–trade agenda38 of carbon that European goods subject to regional pricing of CO2 emissions (through acombination of an emissions trading scheme and carbon taxes) have to pay and the price of goods from countries in which lower or no carbon taxes are levied, the Commission proposes aparallel system aligned with the EU’s ETS, which will require importers to buy permits for the amount of carbon emitted through the production of imported goods.229 The proposal is to focus initially on several specific energy-intensive sectors, namely: iron, steel, cement, fertilisers, aluminiumandelectricity. In the case of CBAM, non-EU countries have called on the EU to draft its regulations in accordance with principles of fairness230 and there are calls for greater attention to addressing economic and social impacts that CBAM could have on developing countries.231 UNCTAD, for instance, has estimated that the EU’s CBAM proposal could shift trade patterns in favour of countries where production is relatively carbon efficient and impose higher trade costs on developing countries.232 While noting that CBAM could potentially serve to avoid carbon leakage, UNCTAD estimates that its impact on climate change will be limited– leading to only a0.1 per cent drop in global CO2 emissions.233 At present, although the Commission’s CBAM document proposes an initial three-year transition period, even the reporting requirements it outlines will be very burdensome for some developing country businesses. The CBAM proposal does not set out any formal exemptions or transition period specifically targeting developing countries in general or the poorest among them. Afurther issue relates tothe purposes to which the proceeds of taxes will be applied. The EC proposal has not taken up recommendations that CBAM revenues be invested in innovation fundsto help both EU and third countries in their green transition.234 A significant amount of policy analysis is being spurred by uncertainty and fear about how BCAs will work, both politically and technically, and how to ensure they incentivize other major emitters to embark on decarbonization, rather than provoke trade wars.235 To date, much of the focus has been on the options for transatlantic cooperation. The idea that countries implementing border carbon adjustments could form clubs in the form of ‘carbon customs unions’236 to simplify trade among them isprovoking considerable discussion among policy analysts and concern among those fearful of being excluded (see Box5).237 In practice, while advocates make acompelling case that aglobal carbon price would be the best way to simultaneously drive decarbonization and avert trade tensions,238 the political prospect that key global economic players such as the US will introduce effective carbon pricing systems in the short term– or that governments will agree on aglobal carbon pricing system– is limited. In the meantime, the pertinent policy question at hand is how to forge trade-related cooperation that can propel ambitious climate action in the context of different approaches to climate policy and regulation. An immediate priority should be agreater international dialogue on the A significant amount of policy analysis isbeing spurred by uncertainty and fear abouthow BCAs will work, both politically andtechnically Six politically feasible areas for climate-trade cooperation39 scope and implementation of BCAs, the opportunities and challenges they present foradvancing climate goals, and their implications for trading partners. Box5. Carbon clubs The concept of ‘carbon clubs’ is gaining attention in global climate policy discussions asaway to enhance cooperation among small groups of countries that are willing to leadon the transformation to alow-carbon economy.239 Toaddress challenges arising from the voluntary, non-binding nature of the ParisAgreement, one proposal is that higher-ambition countries could form aclub thatwould impose small trade penalties on non-participants to reduce free riding and to incentivize alarge stable coalition of countries totake stronger climate action.240 The club members would agree to atarget carbon price and impose auniform tariff on all imports from countries that refuse to join the club (thatis, acarbon customs union). Critics warn, however, that carbon club proposals overplay the problem of free riding as an obstacle to decarbonization (compared to domestic politics, for instance), and that the focus on punishing or penalising others will not necessarily generate the required green transformation intrading partners, especially where countries lack the relevant technologies, investment and trading opportunities. Critics argue that this approach risksunderminingtheinternationalcooperation requiredin the UNFCCC context.241 Green subsidies for climate action Greater attention to subsides that are harmful to the climate and those that couldsupport climate action will be vital to build understanding of policy options andconsiderations across the WTO’s membership.242 In addition to the reform of environmentally harmful fossil fuel subsidies, ongoingdiscussions at the WTO on ‘industrial subsidies’ (non-agricultural subsidies) are relevant to climate action. Moving beyond narrowly defined WTO exceptions for environmental subsidies (as envisioned in the now-expired Article8.2 of the WTO’s Agreement on Subsidies and Countervailing Measures), there are proposals for awider approach that would permit ‘green’ subsidies to support the scale-up and deployment of clean energy and climate change adaptation measures and addressnegative environmental externalities. Long-standing efforts to address agricultural subsidies at the WTO also warrant attention as part of adiscussion on trade, subsidies and climate action. Several WTO members are calling for attention to agricultural subsidies that are both trade distorting and environmentally harmful.243 At the same time, many governments seek to use subsidies to promote transition to low-carbon environmentally sustainable, regenerative agriculture and food systems, to improve sustainable land-use management and support efforts to protect, sustainably use and restore biodiversity. As the nature and climate crises intensify domestic pressures for action, governments will face important questions about what counts as agreen agricultural subsidy, how such subsidies impact trade and how governments can cooperate internationally on this intersection. A core issue in this context is to identify instances where additional flexibility is needed in existing rules to foster alow carbon transition. This would require discussion on areas where existing rules are too stringent and impeded the ability of countries to provide good faith environmental subsidies. Another fundamental aspects is that many developing countries have limited capacity to provide green Priorities for the climate–trade agenda40 subsidies, especially compared to the major economic powers. Such subsidies have implications for the international competitiveness of developing countries and their efforts to build their own green sectors and technological capacity, particularly in the face of simultaneous pressures to open subsidized green technologies from developed countries. Further, efforts to use trade rules to reduce or promote subsidies for climate reasons are likely to encounter broader political tensions related to subsidies for state-owned enterprises, atopic which is at the heart ofUS–China conflicts and WTO reform debates on how to manage China’s statusasanon-marketeconomy.244 Notably, in December 2020, the US issued an unexpected subsidies-related proposal for aWTO ministerial decision stating that the failure to adopt and enforce environmental protections at or above athreshold of fundamental standards should be considered an actionable subsidy under the WTO’s Agreement on Subsidies and Countervailing Measures.245 While it is unclear whether the Biden administration will seek to advance this proposal, it provides an important indication of how seriously governments are taking concerns about the impacts of green policies (and lack thereof) and subsidies (positive and negative) on international competitiveness. Climate standards and labels Climate-related standards have an important role in underpinning climate-friendly international trade. In 2021, governments can agree to step up work to identify where and how to strengthen international cooperation on the design and implementation of climate-related standards that are ambitious, effective, transparent and that address the varying circumstances of developing countries and the challenges theirbusinesses encounter in the shift toward sustainability. Across the world, governments, companies and NGOs are making growing use ofclimate standards and climate-related product labels that differentiate between products based on energy use, greenhouse gas emissions and carbon footprints, and sometimes establish new market requirements. Although government and voluntary efforts are especially prevalent in regard to agricultural goods, there are also efforts to develop an array of ‘carbon-neutral’, ‘net zero’ and ‘carbon-negative’ industrial goods (such as carbon-neutral aluminium and ‘carbon-free’ steel)246 andconsumerproducts.247 Although the intersection of trade rules and climate standards is not anew topic,248 the proliferation of climate standards and labels calls for more coordinated and harmonized approaches to measuring and tracking the carbon impact of products.249 Climate standards and labels can offer new market opportunities for some producers; but compliance can be costly and technically complex for small-scale producers, exporters and supply chain management.250 In the agricultural sector, for instance, measuring aproduct’s carbon footprint requires collection of data on greenhouse gas emissions from many processes in the supply chain, ranging from clearing land, ploughing fields, applying fertilisers and pesticides, harvesting and storage through to packaging, transport and consumption. Diverse businesses around the world share concerns that inadequate information on climate standards and labelling requirements will impede their market access, and many developing country exporters– especially micro, small and medium-sized enterprises– require support to meet the standards and the costs of certification.251 At present, theuseofclimate standards is less prevalent in developing countries. Meanwhile, competing schemes making arange of different climate-related claims contribute topoor understanding and scepticism among consumers.252 Six politically feasible areas for climate-trade cooperation41 Looking ahead, trade policy-makers could advocate and support greater coordination among countries around high-ambition, transparent climate standards, identifying key areas in which standards are most needed to avoid trade conflicts and support business efforts to advance climate action.253 Such coordination can occur through cooperation on government regulations that define standards, including through mutual recognition of standards and bilateral efforts to align standards. Strengthened cooperation among the range of national, regional and international bodies that set voluntary standards would also help. Here, the ISO has established ataskforce to review its entire suite of climate-related activities and the range of its standards that are relevant to climate change (which include standards on the measurement of carbon emissions). In September 2021, the ISO’s 165 members issued a London Declaration that “promises to embed key climate considerations into every new standard that is created” and to “retrospectively add these requirements to all existing standards as they are revised, a change on an unparalleled scale.254 The fact that WTO rules explicitly refer to the ISO as apotential source of international standards makes thisorganization aparticularly useful forum through which to enhance cooperation. At the same time, the development of international climate standards at the ISO or through other international environmental processes will demand far greater engagement from environmental stakeholders, scientists and government ministries responsible for climate, and far greater support for countries and businesses, especially in developing countries. Moreover, the existenceof astandard, especially avoluntarystandard, does not guarantee adoptionandimplementationbyrelevantbusinesses,norverification ofcompliance. A key issue for their attention is the interaction between trade rules and climatepolicy measures that seek to differentiate between products based on their contribution to carbon emissions. At present, international trade rules do notprovide clear guidance on the scope for trading partners to impose measures that differentiate between products on the basis of non-product-related production and process methods (PPMs) (for example, measures that discriminate among products based on production and process methods that leave no trace in the final product itself, such as the carbon footprint of production). Any update of WTO rules to address this issue would require multilateral consensus which is likely impossible to achieve in the short term (in part because it could open the floodgate todiscrimination based on abroad range of environment and social considerations). What is clear is that the trade dimensions of climate-friendly standards will require more concerted and focused discussion than currently takes place in the WTO’s Committee on Technical Barriers to Trade (whichis a key WTOprocess through which governments address issues and concerns related toenvironment-related trade measures) or the WTO CTE. Drawing on the WTO’s existing principles for the development of international standards,255 one alternativepossibility that would not require multilateral consensus is for like-minded governments to develop voluntary guidelines on PPM-based climate standards in the WTO context. This work could, for instance, be advanced through the CTE or through the Structured Discussions on Trade and Environmental Sustainability. Additional proposals that could be undertaken multilaterally (most effective but least likely) orplurilaterally could include anew ‘Rules on Methods of Production’ agreement within the WTO256 or aWTO climate waiver that would allowdiscrimination based onthe carbon footprintof products (discussed below).257 Meanwhile, cooperation on the content of such climate standards themselves is occurring outside the WTO– through inter-governmental processes like the UNFCCC, Priorities for the climate–trade agenda48 Pathways forward on climate and trade in 2021 The international trading system has acentral role to play in supporting global effortsto achieve the Paris goals. The final lead-up to COP26 provides acritical opportunity for governments and stakeholders to underscore the need for dialogue and coordination on how trade and trade policies can be harnessed to support climate ambition. In the coming months, governments can and should catalyse structured dialogue around apackage of climate-trade priorities that can galvanize action andcommit to engaging in processes to sustain political momentum. Galvanising political cooperation on climate andtrade Fostering stronger international cooperation to align trade policy with climate goalswill require countries to get their own houses in order. Atop priority must be to break down silos domestically between trade and climate policy-making processes by strengthening consultations among ministries, engaging actively withstakeholders from business and civil society and assessing the climate impactsof trade policies and rules, as well as the risks of afailure to act.289 On the international front, the time has come to weigh up the many climate-trade proposals on the table, tackle the various emerging tensions and promote coordination. There is no one place where climate change will be integrated into trade policy, or trade considerations into climate policy-making. For trade policy tosupport meaningful climate change mitigation and adaptation, tough and complexissues must be broached around competitiveness, fairness, transparency and coordination. International cooperation will be needed in numerous forms– on trade rules and regulatory cooperation as well as policy dialogue and financial assistance– and through multiple processes, multilateral, plurilateral, bilateral and national. Making progress on the policy goals highlighted above will require high-level political leadership and coalitions that that can raise political momentum and drive climate-trade cooperation across international processes andpolicyforums. Although the COP26 agenda is already too full to handle the added complexity ofclimate-trade issues, the conference is an occasion to secure political commitment to cooperation and action on the intersections of trade and climate policy-making, and to devise pathways forward. Plurilateral efforts to address climate-trade issues, like the ACCTS negotiations, along with regional, transatlantic and bilateral efforts (e.g., US–EU, US–EU–Japan, EU–China and US–China), all provide important stepping stones toward more effective engagement and cooperation. Processes like the G20 should also be seized as an immediate opportunity for the world’s leading economies and highest emitters to demonstrate political leadership on climate and trade policy intersections.290 But the G20 like theG7 lacks inclusivity. International cooperation on climate and trade must include the wider group of countries that are impacted by policy-making on these issues and have distinct contributions tomakeontrade-related priorities for both climate mitigation and adaptation. Pathways forward on climate and trade in 202149 In these final months of 2021, two concrete efforts to galvanise intergovernmental action and coordination are needed: first, the creation of atrade ministers’ coalition for cooperation on climate action; and secondly, an ambitious ministerial statement on trade and environmental sustainability at the WTO Ministerial Conference inNovember 2021. Harnessing the political focus on climate in 2021, governments should work this year to bolster international policy dialogue and coordination on trade and climate intersections on two fronts: Atrade ministers’ coalition for cooperation on climate action Governments should agree to create atrade ministers’ coalition for cooperation on climate action. Drawing on the example of the Coalition of Finance Ministers for Climate Action and their Helsinki Principles,291 this coalition would serve as afocal point for the top-level dialogue needed to solve tough and complex issues around competitiveness, fairness and transparency, and to incubate and advance coordination on trade and climate policy intersections. It could help forge ashared vision of the highest priorities at the interface of climate and trade, howthese could be pursued in policy terms and how best to cooperate and connectthedotsbetweendifferent international processes. Together, the ministers could demonstrate leadership through ajoint statement that recognizes the need for urgent action to meet the Paris climate goals, the imperative of agreen and just recovery from the COVID-19 pandemic, and the need to achieve the Sustainable Development Goals (SDG) by 2030. The ministers should commit to operate within their national frameworks, competences and mandates to integrate ambitious climate goals into national trade policies and to promote an enabling, transparent and inclusive global trade policy framework that supports and incentivizes climate mitigation and adaptation, including bycatalysingaction acrossrelevant international processes. Ministers joining the new coalition would commit to undertake six actions: ▪ Promote coordination on national trade policies and practices that support implementation of the Paris Agreement and SDG commitments. ▪ Share experiences and expertise to provide mutual encouragement and promote collective understanding of how trade and trade policies and practices can support the transition to alow-carbon global economy, climate-friendly and resilient supply chains and more resource-efficient, circular, and nature-positive consumption andproduction. ▪ Build understanding of the economic and trade implications of climate change, including international supply chains. ▪ Identify and share lessons on best practices and proposals for concrete individual andcollective efforts to advance new approaches to trade and trade policy toadvance environmental sustainability. ▪ Mobilize and enhance green aid for trade initiatives to support trade-related climate change mitigation, adaptation, climate resilience and readiness in developing countries, and to help their businesses and communities compete in and generate greater value from climate-friendly supply chains, including through enhanced South-South cooperation. Priorities for the climate–trade agenda50 ▪ Promote stronger, more engaged dialogue among trade, climate and sustainability ministries and greater alignment of trade policies with climate and environmental goals at the national level and in international diplomacy, including through an annual summit of trade and environment ministers, and across relevant international processes, such as the annual G7 and G20 meetings (where they could agree to combined meetings of climate and trade ministers), and at the WTO and UNFCCC (where they could work for joint meetings of relevant UNFCCC and WTO bodies and officials). These combined meetings would play acritical role in breaking down silos across international processes and within governments that thwart coherence. The coalition could support information-sharing and dialogue on bilateral processes of cooperation, such as those that occur throughtransatlantic cooperation, and US/EU–China cooperation. For strategic effectiveness and impact, the coalition should ideally engage 40tradeministers, including G20 members which are the main contributors to global greenhouse gas emissions,292 as well as diverse countries of different levels ofdevelopment from all regions. This approach would offer abroader set of countries aseat at the table on climate-trade agenda-setting than is possible through existing processes. It would enable the much-needed involvement of countries most vulnerable to impacts of the climate crisis, alongside those particularly impacted by trade-related action on climate and those championing efforts to align trade with climate goals. It would also strengthen the prospect that climate-trade intersections are pursued in sync with the UNFCCC principle of ‘common but differentiated responsibilities and respective capabilities’, and it would ensure that the critical focus on rapid decarbonization is coupled with ajust transition. While adding complexity, acoalition that brings together countries with different interests and approaches to tackling climate and trade intersections would offer Ministers the opportunity tograpple directly on ways forward on some of the toughest issues on the table. To sustain momentum, ministers could agree to meet quarterly, convened bytwo or three highly motivated ministers as co-chairs, with organizational and analytical support from their respective governments and interested international organizations. Asecretariat could be housed either within awell-resourced government that provides adesignated sherpa or an international organisation ortrusted independent entity that can serve as an ambitious but neutral convenor. To sustain momentum, ministers could agree to meet quarterly, convened bytwo or three highly motivated ministers as co-chairs, with organizational and analytical support from their respective governments and interested international organizations Pathways forward on climate and trade in 202151 Ministerial attention to climate at MC12 At the WTO, Ministers must ensure that discussion of the nexus of trade, climate change and sustainable development is on the official agenda of MC12. The relevance of climate change to the work of the WTO and the importance of trade-related cooperation to support the goals of the Paris Agreement should be clearly mentioned in any official, multilateral ministerial declaration or outcome document of the Conference, including the importance of work on these topics through the WTO’s regular committees. Alongside, the WTO Trade and Environmental Sustainability Structured Discussions (TESSD) provide an opportunity to bolster much-needed multilateral information-sharing and dialogue on climate-trade intersections and to spur more focused attention on these issues in the work of the WTO’s regular committees. AtMC12, the anticipated TESSD ministerial statement on trade and environmental sustainability should clearly emphasise the importance of achieving the Paris goals and of multilateral cooperation on the interface of trade, climate and sustainable development goals.293 Ideally cosponsored by the majority of WTO members, the statement should commit like-minded countries to focused discussions on ways thatthe multilateral trading system can enable and support climate action, includingon topics and concerns advanced by developing countries. Six policy goals to focus minds In the final months of 2021, governments can lay the foundations for advancing sixpolicy goals, as outlined in Chapter3of this paper: ▪ Commit to greater transparency, consultation and coordination on climate policies and regulations that impact trade, and on trade policies and policies that impact the climate and decarbonization efforts, with special attention to addressing the needs of developing countries and unintended trade consequences. This should include focused dialogue on border carbon adjustments and carbon pricing, climate standards, subsidies, government procurement, sustainable agriculture and apotential WTO climate waiver. ▪ Promote trade in climate-friendly goods and services. The priority should beonsolving specific climate mitigation and adaptation challenges, focusing on those goods, services and supply chains with the highest potential positive impact on the climate. In 2021, like-minded governments could agree to: promote trade inenvironmental goods and services vital to climate mitigation and adaptation that would address tariff and non-tariff barriers, address developing countries’ export interests, focus on supply chains critical to climate action and tackle trade-related barriers to affordable access to critical climate technologies indeveloping countries. ▪ Launch of talks on fossil fuel subsidy reform at the WTO that combine afocus onimproved transparency of fossil fuel subsidies, ajust transition and atimeline for forging cooperation on concrete reform efforts. ▪ Commit to bolstering green aid for trade and finance to support trade-related climate change adaptation, participation in green international supply chains and the transition to climate-friendly production exports, including through economic diversification. This will require mainstreaming climate considerations across aid for trade portfolios, providing additional resources for trade-related climate action, and fostering coordination between actors responsible for trade, development and climate finance. Priorities for the climate–trade agenda52 ▪ Adopt a2025 deadline for net zero official trade finance. ▪ Enhance ambition and cooperation to reduce trade-related transport emissions and decarbonize transportation. As 2021 draws to aclose, governments can and should take advantage of the political attention and momentum provided by COP26 to accelerate the dialogue and action needed to ensure that trade and trade policy play their part in supporting significant, positive climate outcomes– both in terms of mitigation and adaptation– and to tackle trade tensions that threaten to impede ambitious climate action. Success will require active engagement from environmental stakeholders through advocacy, the development of concrete policy proposals and active participation inprocesses of dialogue and consensus-building. Critically, efforts to secure practical, short-term solutions to trade–climate challenges must be informed by the reality that systemic change is urgently needed of the way we produce and consume– most fundamentally in relation to our energy and food systems. Ourimmediate efforts must be driven by arecognition that achieving theParis goalswill require fundamental global economic transformations, engaging allcountries as partners. Annex53 Annex Sample of further climate-trade policy options Description Level of action Border-related measures Quantitative restrictions on certain ‘climateunfriendly’ imports294 Quantitative restrictions include bans or other trade restrictions on certain types of products. Some governments and stakeholders, for instance, seek to ban imports associated with tropical deforestation295 as well as specific products like highly polluting second-hand vehicles.296 Quantitative restrictions are permissible under WTO law provided that they meet certain conditions, including non-discrimination and equal treatment of imported and locally produced goods. National, but international cooperation desirable Removing tariff bias in favour of high emissionsintensity trade and There are proposals for differential tariff structures, where governments would reform prevailing tariff structures that favour high emissionsintensity trade and that constrain trade more climate-friendly products. Here, options to reduce or punish trade in high carbon-intensive imports include raising tariffs or imposing other levies, restrictions or bans ontrade. This would be coupled with efforts to reduce tariffs for tradeinessential climate technologies and climate-friendly goods. National, but international cooperation desirable Behind-the-border measures and green industrial policy Greening government procurement Governments spend $9.5 trillion annually in procuring goods, services and public works/infrastructure, and anumber of governments are working to channel public procurement towards sustainable energyrelated works, supplies and services to help achieve their climate goals.297 ‘Greening’ government procurement to support climate goals has important trade policy dimensions.298 Many international trade agreements incorporate rules on government procurement, and several of these include provisions with environmental dimensions (such as the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, atrade agreement among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam (CPTPP).299 Further, at the multilateral level, the 20 parties (and 48 members) of the WTO’s Government Procurement Agreement300 have adopted awork programme on sustainable procurement301 in the context of their efforts to improve implementation of the agreement andpotential updates. National action possible, but international cooperation required ‘Green’ climate subsidies– agricultural and non-agricultural goods Green subsidies can include support for research and development on clean energy technologies, refitting of production facilities to meet supply chain requirements, and climate change adaptation. In the agricultural sector, green subsidies can also include spending on environmental programmes and ecosystem services that aim to advance climatesmart approaches to agricultural production, reduce agricultural emissions, improve land-use management and support ecosystems that provide nature-based solutions to climate change mitigation and adaptation. Drawing on the example of WTO approaches to agricultural subsidies, asystem of ‘boxes’ that classify specific subsidies according to their trade-distorting impact (red, amber, green) could be adapted toreflectthenegative (red) or positive (green) climate. National action possible but international cooperation required Priorities for the climate–trade agenda54 Description Level of action Technology transfer and intellectual property rules to spur innovation and increase access to climate technologies The diffusion and use of affordable, frontier climate technologies worldwide, especially in rapidly growing developing countries, is key to both climate change mitigation and adaptation.302 This has prompted discussion on the extent to which international intellectual property rules (such as the WTO’s Agreement on Trade-Related Intellectual Property Rights (TRIPS)) as well as intellectual property (IP) provisions in bilateral and regional free trade agreements are regulatory barriers to affordable access to and uptake of climate technologies. It has also revived interest in how trade rules and processes relevant to technology transfer might contribute to climate action.303 Technology transfer is also akey aspect of the UNFCCC process, which includes aTechnology Mechanism topromote transfer of climate-friendly technologies.304 A number of proposals are on the table for reform of IP rules to facilitate broad dissemination and use of climate technologies, drawing on lessons from efforts to promote IP reforms to facilitate access to medicines.305 Afirst issue is to determine the terms and cost of transferring frontier technologies for countries and companies, especially in developing countries, that are keen to leapfrog carbon-intensive development pathways.306 Proposals focus on creating abalance between the incentives that IP regimes provide for innovation and disclosure of newinventions, and the need for affordable access to new technologies. Specific options that have been suggested include: aTRIPS waiver for certain climate technologies (similar in spirit to the waiver of certain TRIPS obligations for certain countries to increase access to essential medicines); collaborative patent pledges of climate change technologies;307 and efforts to encourage more flexible, non-exclusive, andaffordable licensing arrangements for climate technologies.308 National action possible, international cooperation required for some elements International cooperation and linking of domestic emissions tradingsystems Article 6of the Paris Agreement provides apolicy foundation for the use ofinternational carbon markets to reach emissions targets (see Box1).309 To date, there is only one international system in place for carbon trading, CORSIA, an emissions trading regime related to aviation. Afurther proposal is for the jurisdictions that currently have domestic emissions trading systems to forge international cooperation among themselves through what some describe as ‘carbon market clubs’.310 The larger vision is for afully international system through which countries with low emissions would be able to sell their exceeding allowance to larger emitters. Proponents argue that this would promote anet emissions reduction, advance progress toward aglobal price on carbon and reduce the cost ofemissionsreductionsby focusing first on the lowest-cost reductions.311 Requires international cooperation Efforts to use trade policies and agreements to reinforce the Paris Agreement and its implementation Provisions on ratification and implementation of the Paris Agreement intrade agreements A growing number of regional trade agreements contain environmental provisions that range from non-binding objectives to more specific obligations, including in regard to multilateral environmental agreements, such as the Paris Agreement. The EU–Mercosur Agreement, for instance, transforms the voluntary nature of the Paris Agreement into abinding commitment. In addition, the European Commission has proposed that effective implementation of the Paris Agreement should be considered an ‘essential element’ or clause of any EU trade agreement, with countries such as France and the Netherlands arguing that abreach of this clause should result in the suspension of the agreement. The Biden administration has also indicated that climate action will be an essential element of any future international trade cooperation. In the UK context, the government faces growing pressure from the environmental community to harness post-Brexit trade deals as atool for advancing climate ambition and implementation of the Paris Agreement, includingthrough specific climate-related commitments.312 International cooperation Annex55 Description Level of action Climate-related tradesanctions As concern grows about the climate crisis and the inadequate efforts to implement the Paris Agreement, some governments and stakeholders are calling for the withdrawal of trade benefits and/or sanctions for noncompliance. In 2020, for instance, France and the Netherlands called for tougher enforcement of environmental and labour standards in EU trade deals,313 urging the EU to be prepared to impose higher tariffs against countries that do not respect sustainable development commitments. Options proposed include not only tariffs on imports that do not respect, de facto or de jure, the Paris Agreement,314 but also abroader range of retaliatory tariffs on arange of strategic products. In the context of the EU–Mercosur trade deal (where the increasing rate of deforestation in the Brazilian Amazon is akey concern), there are also calls from civil society to incorporate sanctionable clauses requiring the EU and Mercosur torespect climate or environmental protection in the trade deal.315 National Climate cooperation intrade and sustainable development chapters and climate impact assessments The trade and sustainable development chapters included in agrowing number of trade agreements offer important institutional mechanisms that could be harnessed to boost trade cooperation that supports climate action.316 There are numerous calls from environmental advocates to strengthen such chapters, including through stronger enforcement and dispute settlement provisions, as well as mechanisms to boost public accountability, such as through provisions that enable the public to file complaints and seek recourse to address environmental impacts oftradeagreements. Sustainable development chapters can also be used as mechanisms to spur impact assessments that assess the climate impacts of new trade flows and regulatory changes flowing from these agreements. Importantly, assessments should look at impacts on the national carbon footprint as well as the carbon footprint of trading partners (both those involved in the agreements and third parties). Critically, theassessments should be vehicles for soliciting stakeholder input andengagement and be subject to public scrutiny via specific surveillancemechanisms involving NGOs. Moreover, they must be linkedto the policy-making process, including with the potential to reviewthecontentofanagreement if its impact is found to be negative. National, but international cooperation desirable Enhance transparency and information-sharing on trade-related actions Nationally determined contributions under the Paris Agreement could be used to enhance transparency and information-sharing on traderelated actions and to boost reporting of climate-related actions and risks through WTO notification procedures and trade policy review processes. National Flanking and interlinked areas for climate-trade diplomacy Trade, investment andclimate In terms of agreements on investment protection and promotion– including investment chapters and rules in trade agreements– there are numerous proposals to ensure that such arrangements do not frustrate climate action. In addition, there are proposals to use such agreements as instruments to positively promote climate-friendly investment in alow-carbon economy, and to screen out investments that undermine climate action. There are also specific calls for reform of the investor– state dispute settlement (ISDS) provisions in trade and investment agreementsto better safeguard regulatory space for climate action.317 While not motivated primarily by climate-specific concerns, anumber of recent international investment agreements have incorporated efforts to implement ISDS reform or indeed omitted ISDS provisions altogether, thereby highlighting the potential for new approaches.318 Inaddition, proposals for more transparent and balanced approaches to the settlement of investor–state disputes, including in ways that that would support environmental goals and policies, are under discussion atthe International Centre for Settlement of Investment Disputes, theUnitedNations Commission on International Trade and Law (wheresome governments have proposed anew multilateralinvestmentcourt),319 and the Energy Charter Treaty.320 National and international cooperation Priorities for the climate–trade agenda56 Description Level of action Ongoing negotiations on modernization of the Energy Charter Treaty (ECT), for instance, have featured specific calls to address barriers to climate action policies and clean energy transition.321 Specifically, climate advocates call for removing legal provisions that protect foreign-owned fossil fuel assets, arguing that this would reduce the cost-competitiveness of new and existing fossil fuel projects by altering their risk profile.322 They also argue that restrictions on fossil fuel investments must be allowed, including through targeted de-risking.323 Among ECT member states, however, there is uneven awareness of issues and options, and while some parties (such as the EU) are pushing for reform, others (such as Japan) remain opposed (the US is not aparty to the ECT).324 While the ECT secretariat is keen to increase membership, theEUhasthreatenedpotential exit if modernization does not occur. Reform of energy markets and trade Cooperation on international markets for energy and fuels occurs under the framework of international organizations such as the International Energy Agency, regional arrangements such as the Energy Charter Treaty (a European initiative open to any interested parties, which establishes specific regulations for energy, such as on investment and transport), and actions of plurilateral groupings such as OPEC. Although trade in fuels such as oil and gas are not directly addressed by WTO rules,325 several aspects of the WTO’s legal framework apply to problems presented in the energy sector and there have been numerous proposals on how themultilateral trading system could respond,326 including proposals foraSustainable Energy Trade Agreement at the WTO.327 Amid pressures for alow-carbon energy transition, numerous proposals have been tabled to improve regulation of international energy markets in ways that would support the expansion of renewable energy, energyefficient technologies and sustainably produced biofuels, and discipline subsidies for fossil fuel-intensive energy, including through reform oftheEnergy Charter Treaty (discussed above). Requires international cooperation. Supply chain regulations and due diligence requirements Building on existing regulations related to the timber trade and the illegal trade in forest products, there are proposals for new initiatives to better regulate trade in deforestation-risk commodities. Proposed due diligence requirements on global supply chains call for greater attention to environmental issues, including climate. The European Commission is pursuing the development of alegislative proposal in 2021 that will require EU companies to conduct mandatory human rights and environmental due diligence on their operations and global supply chains. Provisions for corporate liability, with possible sanctions imposed for non-compliance, are also under consideration.328 Numerous voluntary supply chain initiatives and partnerships also exist (including on issues of procurement, standards, carbon footprint accounting, sustainable sourcing and labelling of products) which are relevant to efforts toreducethe carbon footprint of trade flows. National, but international cooperation desirable Acronyms and abbreviations57 Acronyms and abbreviations ACCTS Agreement on Climate Change, Trade and Sustainability APEC Asia-Pacific Economic Cooperation BCA Border Carbon Adjustments CAI Comprehensive Agreement on Investment (EU–China) CBAM Carbon Border Adjustment Mechanism CBDR-RC Common but differentiated responsibilities and respective capacities (United Nations Framework Convention on Climate Change) COP26 26th Conference of Parties, 2021 UN Climate Change Conference (Glasgow, UK) CORSIA Carbon Offsetting and Reduction Scheme for International Aviation (ICAO) CTE Committee on Trade and Environment (WTO) E3F Export Finance for Future (coalition of seven European countries) ECT Energy Charter Treaty EGA Environmental Goods Agreement (WTO) ERCST European Roundtable on Climate Change and Sustainable Transition ETS Emissions Trading Scheme (EU) FES Friedrich Ebert Stiftung HFC Hydrofluorocarbon ICAO International Civil Aviation Organization ICTSD International Centre for Trade and Sustainable Development IEA International Energy Agency (OECD) IIF Institute of International Finance IISD International Institute for Sustainable Development IMO International Maritime Organization (UN) IPCC Intergovernmental Panel on Climate Change (UN) ISO International Organization for Standardization ISDS Investor–State Dispute Settlement ITMO internationally transferred mitigation outcomes (Paris Agreement) JWPTE Joint Working Party on Trade and Environment (OECD) MC12 12th Ministerial Conference (WTO) Priorities for the climate–trade agenda64 80 Chandramouli,K. (2019), ‘Talks on carbon markets put climate future in afix’, Mongabay, 20December 2019, https://india.mongabay.com/2019/12/article-6-cop-25-talks-on-carbon-markets-put-climate-future-in-a-fix/ (accessed 19 Feb. 2021); UNFCCC (2021), ‘Emissions Trading’, https://unfccc.int/process/the-kyoto-protocol/ mechanisms/emissions-trading (accessed19Feb.2021). 81 See European Roundtable on Climate Change and Sustainable Transition (ERCST) (2021), ‘Informal Forum on theImplementation of Article 6of the Paris Agreement’, https://ercst.org/article-6-pa/ (accessed 5May 2021). 82 GreinerS. et al. (2019) Moving Towards Next Generation Carbon Markets: Observations from Article 6Pilots, Climate Focus and Perspectives, www.climatefinanceinnovators.com/wp-content/uploads/2019/06/Movingtoward-next-generation-carbon-markets_update-june-2019–1.pdf (accessed 5Aug. 2021). Also see OECD (2016), Views on “guidance on cooperative approaches referred to in Article6, paragraph2, of the Paris Agreement” (FCCC/SBSTA/2016/2, para. 96), Joint OECD/IEA submission to UNFCCC, September 2016, www.oecd.org/ env/cc/CCXG-Submission-Art6-final.pdf (accessed 5Aug. 2021); and Cosbey,A. and Marcu,A. (2020), ‘The Paris Agreement’s Article6and the WTO: Points of Convergence’, April 27, 2020, Centre for International Governance Innovation, www.cigionline.org/articles/paris-agreements-article-6-and-wto-points-convergence (accessed5Aug. 2021). 83 UNEP (2019), ‘Carbon offsets are not our get-out-of-jail free card’, UNEP News and Stories, 10 June 2019, www.unep.org/news-and-stories/story/carbon-offsets-are-not-our-get-out-jail-free-card (accessed 5Aug. 2021); Irfan,U. (2020), ‘Can you really negate your carbon emissions? Carbon offsets, explained’, Vox, www.vox. com/2020/2/27/20994118/carbon-offset-climate-change-net-zero-neutral-emissions (accessed 5Aug. 2021). 84 The Institute of International Finance (IIF) (2020), ‘Taskforce on Scaling Voluntary Carbon Markets’, Washington, DC: Institute of International Finance, www.iif.com/tsvcm (accessed 21 Feb. 2021). 85 Farand,C. (2019), ‘What is Article6? The issue climate negotiators cannot agree’, Climate Home News, 2December 2019, www.climatechangenews.com/2019/12/02/article-6-issue-climate-negotiators-cannot-agree (accessed 21 Feb. 2021). 86 Lo,J. (2020), ‘Peru and Switzerland sign “world first” carbon offset deal under Paris Agreement’, Climate Home News, 21 October 2020, www.climatechangenews.com/2020/10/21/peru-switzerland-sign-world-first-carbonoffset-deal-paris-agreement/ (accessed 21 Feb. 2021). 87 Lo (2020), ‘Peru and Switzerland sign “world first” carbon offset deal under Paris Agreement’. 88 CDP (2014), Deforestation-free supply chains: From commitments to action, CDP Global Forests Report 2014, London: CDP Worldwide, https://unfccc.int/files/cooperation_and_support/financial_mechanism/standing_ committee/application/pdf/cdp-global-forests-report-2014.pdf (accessed25Apr. 2021). 89 Stower,K. (2021) ‘The Voluntary Carbon Offset Market– Can We Support Rapid Growth?’ 12 April, Cleantech, www.cleantech.com/the-voluntary-carbon-offset-market-can-we-support-rapid-growth (accessed 21 Aug. 2021). 90 UN Climate Change (n.d.), ‘Issues related to agriculture’, https://unfccc.int/topics/land-use/workstreams/ agriculture (accessed 25 Apr. 2021). 91 Häberli,C. (2018), Potential conflicts between agricultural trade rules and climate change treaty commitments: Background paper for The State of Agricultural Commodity Markets (SOCO) 2018, Rome: Food and Agriculture Organization, www.fao.org/3/CA2345EN/ca2345en.pdf (accessed 25 Apr. 2021); Elbehri,A., Genest,A. and Burfisher,M. (2011), Global Action on Climate Change in Agriculture: Linkages to Food Security, Markets and Trade Policies in Developing Countries, Rome: Food and Agriculture Organization, www.fao.org/3/i2533e/i2533e00.pdf (accessed 25 Apr. 2021). 92 FACT Dialogue, (2021), Forest, Agriculture and Commodity Trade Dialogue – A Roadmap for Action, www.factdialogue.org/fact-roadmap (accessed 2 November 2021); UNFCCC (2021), “Glasgow Leaders’ Declaration on Forest and Land Use” https://ukcop26.org/glasgow-leaders-declaration-on-forests-and-landuse (accessed 2 November 2021). 93 UN Climate Change (n.d.), ‘Response Measures’, https://unfccc.int/topics/mitigation/workstreams/responsemeasures#eq-3 (accessed 25 Apr. 2021). 94 International Institute for Sustainable Development (IISD) (2011), ‘UNFCCC Publishes Report on Response Measures Forum’, 16 November 2011, http://sdg.iisd.org/news/unfccc-publishes-report-on-response-measuresforum/ (accessed 26 Feb. 2021). Also see UNFCCC (2011), ‘Report on the special event held in the context of the forum on the impact of the implementation of response measures at the thirty-fourth sessions of the subsidiary bodies’, Note by the secretariat, https://unfccc.int/resource/docs/2011/sb/eng/inf05.pdf (accessed 26 Feb. 2021). 95 Vidal,J. (2021), ‘Saudi Arabia to seek compensation for climate pact oil losses’, The Guardian, 4August, www. theguardian.com/environment/2010/aug/04/saudi-arabia-climate-change-compensation (accessed 15 Aug. 2021). 96 UN Climate Change (2016), ‘Response measures– Workshop on sharing views and experiences on economic diversification and transformation, and just transition of work force and creation of decent work and quality jobs, in context of sustainable development’, https://unfccc.int/event/response-measures-workshop-on-sharingviews-and-experiences-on-economic-diversification-and (accessed 25 Apr. 2021). Endnotes65 97 Subramanian,K. (2019), ‘Climate Emergency CoP 25: Saudi Arabia to delay oil fossil fuel phase-out’, Down To Earth, 2December 2019, www.downtoearth.org.in/news/climate-change/climate-emergency-cop-25-saudiarabia-to-delay-oil-fossil-fuel-phase-out-68215 (accessed 25 Apr. 2021). 98 UNFCCC (2017), ‘Report of the Subsidiary Body for Scientific and Technical Advice on its forty-fifth session, held in Marrakesh from 7to 15 November 2016’, FCCC/SBSTA/2016/4 (31 January 2017), para. 61, https://unfccc.int/ resource/docs/2016/sbsta/eng/04.pdf (accessed 28 Feb. 2021). 99 UNFCCC (2021), ‘Climate Technology: The UNFCCC home for technology’, https://unfccc.int/ttclear (accessed25Apr. 2021). 100 UNCTAD (2019), ‘UNFCCC COP 25 Side Event: Climate resilient transport infrastructure for sustainable trade, tourism and development in SIDS’, High-Level Panel discussion at COP 25, Madrid, 10 December 2019, https://unctad.org/meeting/unfccc-cop-25-side-event-climate-resilient-transport-infrastructure-sustainabletrade (accessed 25 Apr. 2021). 101 UNFCCC (n.d.), ‘Technology Mechanism’, TT Clear, https://unfccc.int/ttclear/support/technology-mechanism.html (accessed 28 Feb. 2021). 102 WTO (2021), Trade and Environmental Sustainability Structured Discussions – Meeting held on 5March 2021 – Informal summary by the Coordinators. INF/TE/SSD/R/1, https://docs.wto.org/dol2fe/Pages/SS/directdoc. aspx?filename=q:/INF/TESSD/R1.pdf&Open=True; Balino,S. (2021), Trade and Environment Structured Discussions Among WTO Member Group Get Underway, IISD SDG Knowledge Hub Policy Brief, 10 March 2021, https://sdg.iisd.org/commentary/policy-briefs/trade-and-environment-structured-discussions-amongwto-member-group-get-underway/ and WTO (2021), Trade and Environmental Sustainability Structured Discussions – Meeting held on 26, 27 and 28 May 2021 – Informal summary by the Coordinators, INF/TE/ SSD/R/2, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/INF/TESSD/R2.pdf&Open=True (accessed1Aug.2021); European Commission (EC) (2020), ‘European Commission non-paper on possible trade and climate initiative in WTO’, 30 October 2020, Brussels: European Commission, https://trade.ec.europa.eu/ doclib/docs/2020/november/tradoc_159117.pdf (accessed 28 Feb. 2021). Also see EC (2021), Reforming the WTO: Towards aSustainable and Effective Multilateral Trading System, Brussels: European Commission, https://trade. ec.europa.eu/doclib/docs/2021/february/tradoc_159439.pdf (accessed 28 Feb. 2021). 103 UNCTAD (2021), The Bridgetown Covenant: From inequality and vulnerability to prosperity for all, Fifteenth Session of the United Nations Conference on Trade and Development, 6October, 2021, https://unctad.org/system/files/ official-document/td-l-435_en.pdf (accessed 15 Oct. 2021). 104 WTO (2020), ‘Environmental Database’, https://edb.wto.org (accessed 21 Feb. 2021). 105 WTO (2020), ‘Goods Council considers EU plans for carbon taxes on certain imports’, WTO News, 11June, www.wto.org/english/news_e/news20_e/good_11jun20_e.htm (accessed 15 Aug. 2021); WTO (2020), ‘Brexit, EU’s carbon border adjustment mechanism take centre stage at Market Access Committee’, WTO News, 6November, www.wto.org/english/news_e/news20_e/mark_16nov20_e.htm (accessed 15 Aug. 2021). 106 WTO (2021), ‘WTO members discuss measures to tackle climate change and strengthen sustainability’, WTONews, 30 March, www.wto.org/english/news_e/news21_e/envir_30mar21_e.htm (accessed 15 Aug. 2021); WTO(2020), ‘Goods Council considers EU plans for carbon taxes on certain imports,’ WTO News, 11 June, www.wto.org/english/news_e/news20_e/good_11jun20_e.htm (accessed 16 Aug. 2021); WTO (2020), ‘Brexit,EU’s carbon border adjustment mechanism take centre stage at Market Access Committee,’ WTO News, 16Nov2020, www.wto.org/english/news_e/news20_e/mark_16nov20_e.htm (accessed 15 Aug. 2021). 107 WTO (2020), ‘New initiatives launched to intensify WTO work on trade and the environment’, WTO (2021), ‘Firstmeeting held to advance work on trade and environmental sustainability’, News item, 8March 2021, www.wto.org/english/news_e/news21_e/tessd_08mar21_e.htm (accessed16March.2021). 108 WTO (2021) ‘Members review draft MC12 declaration on trade and environmental sustainability’, News item, 19July, www.wto.org/english/news_e/news21_e/tessd_21jul21_e.htm (accessed15Aug.2021); Balino,S. (2021), WTO Members Assess MC12 Options for Trade, Environmental Sustainability Work, IISD SDG Knowledge Hub Policy Brief, 3June 2021, https://sdg.iisd.org/commentary/policy-briefs/wto-members-assess-mc12-optionsfor-trade-environmental-sustainability-work (accessed 15 Aug. 2021). 109 Meléndez-Ortiz,R. (2016), Enabling the Energy Transition and Scale-Up of Clean Energy Technologies: Options for the Global Trade System, E15 Expert Group on Clean Energy Technologies and the Trade System– Policy Options Paper, E15 Initiative, Geneva: International Centre for Trade and Sustainable Development and World Economic Forum, https://e15initiative.org/publications/enabling-energy-transition-scale-clean-energy-technologiesoptions-global-trade-system (accessed 25 Apr. 2021). 110 Kettunen,M., Bodine,E., Davey,E., Gionfra,S. and Charveriat,C. (2020), An EU Green Deal for trade policy and the environment: Aligning trade with climate and sustainable development objectives, Brussels/London: Institute for European Environmental Policy, https://ieep.eu/uploads/articles/attachments/9c951784–8c12–4ff5-a5c5ee17c5f9f80b/Trade%20and%20environment_FINAL%20(Jan%202020).pdf?v=63748123099#:~:text=The%20 Green%20Deal%20reaffirms%20EU,concerns%20in%20EU%20trade%20agreements (accessed 19 Feb. 2021); Morin,J-F., Bialais,C. and Michaud,N. (2016), Trade negotiations and climate governance: the EU as apioneer, but not (yet) aleader, Paris: Institut du Développement Durable et des Relations Internationales, www.researchgate.net/ publication/311039641_Trade_negotiations_and_climate_governance_the_EU_as_a_pioneer_but_not_yet_a_ leader (accessed 19 Feb. 2021). Priorities for the climate–trade agenda66 111 ICTSD (2013), ‘Climate Change and Sustainable Energy Measures in Regional Trade Agreements (RTAs): AnOverview’, International Centre for Trade and Sustainable Development, https://ictsd.iisd.org/themes/ climate-and-energy/research/climate-change-and-sustainable-energy-measures-in-regional-trade (accessed 19 Feb. 2021); Morin,J. (2018), ‘The untapped potential of preferential trade agreements for climate governance’, Environmental Politics, 27(3): pp. 541–46, doi:1080/09644016.2017.1421399 (accessed19Feb.2021); Berger,A., Blümer,D., Brandi,C. and Chi,M. (2020), ‘Towards Greening Trade? Environmental Provisions in Emerging Markets’ Preferential Trade Agreements’, in NegiA., Pérez-PinedaJ., BlankenbachJ. (eds) (2020), Sustainability Standards and Global Governance, Singapore: Springer, https://link.springer.com/ chapter/10.1007/978–981–15–3473–7_4 (accessed 19 Feb. 2021). 112 Steenblik,R. and Droege,S. (2019), ‘Time to ACCTS? Five countries announce new initiative on trade and climate change’, www.iisd.org/articles/time-accts-five-countries-announce-new-initiative-trade-and-climate-change (accessed 19 Feb. 2021). 113 Vivid Economics and Finance for Biodiversity Initiative (2021), Greenness of Stimulus Index, July, https:// a1be08a4-d8fb-4c22–9e4a-2b2f4cb7e41d.filesusr.com/ugd/643e85_f712aba98f0b4786b54c455fc9207575. pdf (accessed 15 Aug. 2021); Harvey,F. (2021), ‘Emissions willhit record high by 2023 if green recovery fails, says IEA’, The Guardian, 20 July, www.theguardian.com/environment/2021/jul/20/emissions-record-high-by-2023if-green-recovery-fails-says-iea (accessed15Aug. 2021); Jaeger,J. (2020), ‘Lessons from the Great Recession for aCOVID-19 Green Recovery’, World Economic Forum, 26 November 2020, www.weforum.org/agenda/2020/11/ great-recession-covid-19-green-recovery-coronavirus-stimulus-package-environmnet-climate-change (accessed 19 Feb. 2021). 114 Tollefson,J. (2021), ‘COVID curbed carbon emissions in 2020 – but not by much’, Nature, 15January2021, www.nature.com/articles/d41586–021–00090–3 (accessed 28 Feb. 2021). 115 National Oceanic and Atmospheric Administration (NOAA) (2021), ‘Despite pandemic shutdowns, carbon dioxide and methane surged in 2020’, NOAA Research News, 7April 2021, https://research.noaa.gov/article/ArtMID/587/ ArticleID/2742/Despite-pandemic-shutdowns-carbon-dioxide-and-methane-surged-in-2020 (accessed 7May 2021). 116 IEA (2021), ‘Global carbon dioxide emissions are set for their second-biggest increase in history’, Press Release, 20 April 2021, International Energy Agency, www.iea.org/news/global-carbon-dioxide-emissions-are-set-fortheir-second-biggest-increase-in-history (accessed 1May 2021). 117 Escaith,H., Sangeeta,K., MacGregor,J., Vickers,B. and Ali,S. (2020), The Potential Impact of COVID-19 on Commonwealth Trade, Recovery and Resilience, London: The Commonwealth, www.thecommonwealth.io/wpcontent/uploads/2020/07/COVIDTradeRecoveryResilience_THT161.pdf (accessed 19 Feb. 2021). 118 UNCTAD (2020), World Investment Report 2020: International production beyond the pandemic, Geneva: United Nations Conference on Trade and Development, https://unctad.org/system/files/official-document/wir2020_ en.pdf (accessed 19 Feb. 2021). 119 Committee for the Coordination of Statistical Activities (2020), How COVID-19 is changing the world: astatistical perspective, Geneva: Committee for the Coordination of Statistical Activities, https://unstats.un.org/unsd/ccsa/ documents/covid19-report-ccsa.pdf (accessed 19 Feb. 2021). 120 Coke Hamilton,P. (2020), ‘COVID-19 and food security in vulnerable countries’, United Nations Conference on Trade and Development, 14 April 2020, https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2331 (accessed 19 Feb. 2021); FAO (2020), Small Island Developing States. Response to COVID-19: Highlighting food security, nutrition and sustainable food system, Rome: Food and Agriculture Organization, www.fao.org/3/ca8994en/ CA8994EN.pdf (accessed 19 Feb.2021). Also see Rashid,H., Lynn Ng,P. and Hoi Wai Cheng,J. (2020), UN/DESA Policy Brief #64: The COVID-19 pandemic puts Small Island Developing economies in dire straits, New York: United Nations Department of Economic and Social Affairs, www.un.org/development/desa/dpad/publication/ un-desa-policy-brief-64-the-covid-19-pandemic-puts-small-island-developing-economies-in-dire-straits (accessed 19 Feb. 2021). 121 Espitia,A., Rocha,N. and Ruta,M. (2020), ‘Trade and the COVID-19 crisis in developing countries’, VoxEU.org, 9April 2020, https://voxeu.org/article/trade-and-covid-19-crisis-developing-countries (accessed 19 Feb. 2021). 122 UNCTAD (2021) Climate Change, Green Recovery and Trade, Geneva: UNCTAD, https://unctad.org/system/files/ official-document/ditcted2021d2_en.pdf (accessed 15 Aug. 2021). Also see Charveriat,C. and Deere Birkbeck,C. (2020), Greening Trade for aGlobal, Green, and Just Recovery, Global Governance Centre, the Hoffmann Centre for Sustainable Resource Economy, and the Institute for European Environmental Policy (IEEP), https://ieep.eu/ uploads/articles/attachments/10a0999c-06d5–4972 – 914a 251b2b02b3ef/Greening%20trade%20for%20 a%20green%20 recovery.pdf?v=63756597346 (accessed 15 Mar. 2021). 123 ESCAP, UNCTAD and UNEP (2021), Asia-Pacific Trade and Investment Report 2021: Accelerating Climate-smart Tradeand Investment for Sustainable Development, www.unescap.org/kp/APTIR2021 (accessed 11 October 2021). 124 European Commission (2019), Communication from the Commission to the European Parliament, theEuropean Council, the Council, the European Economic and Social Committee and the Committee ofthe Regions– The European Green Deal, 11 December 2019, https://ec.europa.eu/info/sites/default/files/european-green-dealcommunication_en.pdf (accessed 15 Aug. 2021). Endnotes67 125 European Commission (2021), Proposal for aRegulation of the European Parliament and of the Council establishing acarbon border adjustment mechanism, 14 July, https://ec.europa.eu/info/sites/default/files/carbon_border_ adjustment_mechanism_0.pdf (accessed 14 Aug. 2021). 126 See, for instance, Bronckers,M. and Gruni,G. (2021), ‘Retooling the Sustainability Standards inEUFree Trade Agreements’, Journal of International Economic Law, 24(1), March: pp. 25–51, https://doi.org/10.1093/jiel/jgab007 (accessed 14 Aug. 2021). 127 BBC News (2019), ‘Amazon fires: Brazil threatened over EU trade deal’, 23 August 2019, www.bbc.com/news/ world-latin-america-49450495 (accessed 26 Feb. 2021). 128 Ambassade de France aux Pays-Bas (2020), Non-paper from the Netherlands and France on trade, social economic effects and sustainable development, https://nl.ambafrance.org/Non-paper-from-the-Netherlands-and-Franceon-trade-social-economic-effects-and (accessed 26 Feb. 2021); Brunsden,J. and Mallet,V. (2020), ‘France and Netherlands call for tougher EU trade conditions’, Financial Times, 4May 2020, www.ft.com/content/e14f082c42e1–4bd8-ad68–54714b995dff (accessed 26 Feb. 2021). 129 Gore,T. et al. (2021), ‘What Can Least Developed Countries and Other Climate Vulnerable Countries Expect from the EU Carbon Border Adjustment Mechanism (CBAM)?’, Institute for European Environmental Policy, IDDRI, IIED, IISD and ODI, www.iisd.org/publications/europe-union-carbon-border-adjustment-mechanism (accessed 14 July 2021); Bernasconi-Osterwalder,N. and Cosbey,A. (2021), ‘Carbon and Controversy: Why we need global cooperation on border carbon adjustment’, International Institute for Sustainable Development blog, 18 May 2021, www.iisd.org/articles/carbon-border-adjustment-global-cooperation (accessed 15 Aug. 2021). 130 Keane,J., Colenbrander,S. and Kelly,L. (2021), ‘How can the EU’s border carbon adjustments avoidunintended consequences for LDCs?, Trade for Development News, 6June 2021, https://trade4devnews.enhancedif.org/en/oped/how-can-eus-border-carbon-adjustments-avoid-unintended-consequences-ldcs (accessed 14 July 2021). 131 European Commission (EC) (2020), ‘European Commission non-paper on possible trade and climate initiative in WTO’, 30 October 2020, Brussels: European Commission, https://trade.ec.europa.eu/doclib/docs/2020/ november/tradoc_159117.pdf (accessed 28 Feb. 2021). 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(2021), ‘USTR speech on Trade and the Environment’, 15 April 15 https://currentthoughtsontrade.com/ category/climate-change (accessed 15 Aug. 2021). 137 Erickson,A. andG. Collins (2021), ‘Competition with China Can Save the Planet: Pressure, NotPartnership, Will Spur Progress on Climate Change’, Foreign Affairs, May/June, www.foreignaffairs.com/articles/unitedstates/2021–04–13/competition-china-can-save-planet (accessed14Aug.2021). 138 Ni,V. and Davidson,H. (2021), ‘Biden tells Xi US and China must not ‘veer into conflict’’, TheGuardian, 10September, www.theguardian.com/world/2021/sep/10/joe-biden-xi-jinping-us-china-phone-call-veerconflict (accessed 15 Aug. 2021). 139 Abnett,K. and Volcovici,V. 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(2021), The EU-China Comprehensive Agreement on Investment: An in-depth reading, Brussels: Centre for European Policy Studies (CEPS), www.ceps.eu/ceps-publications/the-eu-china-comprehensive-agreement-oninvestment/(accessed10Aug.2021). 144 Lee,B. and Vaughan,S. (2020), ‘Inevitable Clash When Climate Meets Trade at the Border’, ChathamHouse Expert Comment, 8November 2020, www.chathamhouse.org/2020/11/inevitable-clash-when-climate-meetstrade-border (accessed 19 Feb. 2021). 145 Deere Birkbeck,C. (2021), Greening International Trade: Pathways Forward, Geneva: Global Governance Centre and the Forum on Trade, Environment &the SDGs, https://wedocs.unep.org/bitstream/handle/20.500.11822/36281/ GITPF.pdf (accessed 1Aug. 2021). 146 UNCTAD (2021) The Bridgetown Covenant: From inequality and vulnerability to prosperity for all, Fifteenth session of the United Nations Conference on Trade and Development, 6October, 2021, https://unctad.org/system/files/ official-document/td-l-435_en.pdf (accessed 15 Oct. 2021). 147 Dagnet,Y., Waskow,D., Bergen,M., Levin,K., Leprince-Ringuet,N., Thwaites,J., Marie Mendoza,J., Cogswell,N., Elliott,C., Bouyé,M. and Worker,J. 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The ICC, for instance, commissioned the EIU report: TheEconomist Intelligence Unit (2019), Climate change and trade agreements: Friends or foes?, London: TheEconomist Intelligence Unit, https://iccwbo.org/content/uploads/ sites/3/2019/03/icc-report-trade-and-climate-change.pdf (accessed 21 Feb. 2021). 155 Ouwehand,J. and Layton,M. (2021), ‘4 ways to improve trade rules and support climate action’, World Economic Forum, 2March 2021, www.weforum.org/agenda/2021/03/4-ways-improve-trade-rules-support-climate-action (accessed 25 Apr. 2021) 156 Deere Birkbeck,C. (2021), Greening International Trade. 157 Aldersgate Group (2020), Aligning the UK’s trade policy with its climate and environmental goals, London: Aldersgate Group, www.aldersgategroup.org.uk/asset/1671 (accessed 21 Feb. 2021); DeereBirkbeck,C. (2021), Greening International Trade; UK Board of Trade (2021), Green Trade: ABoardof Trade Report, July, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1008120/ board-of-trade-report-green-trade.pdf (accessed10Aug.2021). Endnotes69 158 WTO (2021), ‘First meeting held to advance work on trade and environmental sustainability’; European Commission (2020), European Commission non-paper on possible trade and climate initiative in WTO. 159 EC (2021) Speech by Executive Vice-President Dombrovskis at the EU Sustainable Investment Summit, https://ec.europa.eu/commission/commissioners/2019–2024/dombrovskis/announcements/speechexecutive-vice-president-dombrovskis-eu-sustainable-investment-summit_en (accessed 7October 2021). 160 Vossenaar,R. (2014), Identifying Products with Climate and Development Benefits for an Environmental Goods Agreement; Issue Paper No. 19, Geneva: International Centre for Trade and Sustainable Development, www. greengrowthknowledge.org/sites/default/files/downloads/resource/Vossenaar_Identifying_Products_with_ Climate_and_Development_Benefits_for_an_Environmental_Goods_Agreement.pdf (accessed 25 Apr. 2021). 161 De Melo,J. and Solleder,J.-M. (2018), ‘The EGA Negotiations: why they are important, why they are stalled, and challenges ahead’, Working Papers P236, FERDI, https://ideas.repec.org/p/fdi/wpaper/4558.html (accessed 25 Apr. 2021); ICTSD (2008), ‘Liberalization of Trade inEnvironmental Goods for Climate Change Mitigation: The Sustainable Development Context’, Geneva: International Centre for Trade and Sustainable Development, www.iisd.org/system/files/publications/cph_trade_climate_liberalization_trade.pdf?q=sites/default/files/ publications/cph_trade_climate_liberalization_trade.pdf (accessed 21 Feb. 2021). 162 Monkelbaan,J. and Sugathan,M. (2021), ‘Environmental Goods and Services: Questions and WaysForward in the TESSD’, Working Paper No. 1in Trade and Environmental Sustainability Series, Geneva: Quaker UN Office (QUNO), Friedrich Ebert Stiftung (FES). 163 De Melo,J. and Solleder,J.-M. (2019), ‘What’s wrong with the WTO’s Environmental Goods Agreement: Adeveloping country perspective’, VoxEU.org, 13 March 2019, https://voxeu.org/article/what-s-wrong-wto-senvironmental-goods-agreement (accessed 21 Feb. 2021). 164 S&P Global (2020), ‘Market growth, trade flows eyed as hydrogen reaches inflection point’, www.spglobal.com/ platts/en/market-insights/latest-news/electric-power/090920-market-growth-trade-flows-eyed-as-hydrogenreaches-inflection-point (accessed 25 Apr. 2021); International Renewable Energy Agency (2020), Green Hydrogen: Aguide to policy making, Abu Dhabi: International Renewable Energy Agency, www.irena.org/-/media/ Files/IRENA/Agency/Publication/2020/Nov/IRENA_Green_hydrogen_policy_2020.pdf (accessed 25 Apr. 2021). 165 Cottier,T. and Espa,I. (eds) (2017), International Trade in Sustainable Electricity: Regulatory Challenges in International Economic Law, Cambridge, UK: Cambridge University Press; Marhold,A. (2021), Energy in International Trade Law: Concepts, Regulation and Changing Markets, Cambridge, UK: Cambridge University Press. 166 Ouwehand and Layton (2021), ‘4 ways to improve trade rules and support climate action’. Also see WEF (2021) Delivering aClimate Trade Agenda: Industry Insights, World Economic Forum, www.weforum.org/whitepapers/ delivering-a-climate-trade-agenda-industry-insights (accessed 21 Sept. 2021). 167 Ibid. 168 Nordås,H. andR. Steenblik (2021), Trade in Environmental Services: The Quiet Revolution, Council on Economic Policies, www.cepweb.org/trade-in-environmental-services-the-quiet-revolution/ (accessed 8Apr. 2021). Also see Bernabe,J. (2013), ‘Pushing the Renewable Energy Agenda Forward: Some Select Lessons from the GATS’, E15Initiative Expert Group with Friedrich Ebert Siftung and Chatham House, Geneva: International Centre for Trade and Sustainable Development and World Economic Forum, http://e15initiative.org/wp-content/ uploads/2015/09/E15-CETs-Bernabe-Final.pdf (accessed 1Jul. 2021) 169 APEC (2021), Environmental Services in the APEC Region: Definition, Challenges and Opportunities, APEC Group on Services, May, www.apec.org/Publications/2021/05/Environmental-Services-in-the-APEC-Region (accessed 1Aug. 2021); WTO (2021) ‘Members review draft MC12 declaration ontrade and environmental sustainability’. 170 WTO (2020), ‘Members discuss proposals on trade in environmental and agricultural services’, News item, 20October 2020, www.wto.org/english/news_e/news20_e/serv_23oct20_e.htm (accessed 21 Feb. 2021). 171 UNCTAD (2020), Negotiating Liberalization of Trade in Services for Development, Geneva: United Nations Conference on Trade and Development, https://unctad.org/system/files/official-document/ditctncd2019d2_ en.pdf (accessed 21 Feb. 2021). 172 UNFCCC (n.d.), ‘Technology Mechanism’, TT Clear, https://unfccc.int/ttclear/support/technology-mechanism. html (accessed 28 Feb. 2021). 173 Srivastava,A. (2020), ‘Why India can’t afford to lose the new solar race’, 25 February, https://economictimes. indiatimes.com/industry/energy/power/why-india-cant-afford-to-lose-the-new-solar-race/ articleshow/74295085.cms?from=mdr (accessed 15 Aug. 2021). 174 Shapiro,J. (2020), ‘The Environmental Bias of Trade Policy’, National Bureau of Economic Research Working Papers, www.nber.org/papers/w26845 (accessed 21 Feb. 2021). 175 Horseman,C. (2021), ‘UK ‘net zero’ report makes case against carbon border tax, for conditional tariffs’, Borderlex, 20 October, https://borderlex.net/2021/10/20/uk-net-zero-report-makes-case-against-carbon-border-taxfor-conditional-tariffs/ (accessed 20 Oct. 2021); UK government (2021), Net Zero Strategy: Build Back Greener, 19October, www.gov.uk/government/publications/net-zero-strategy (accessed 21 Oct. 2021). Priorities for the climate–trade agenda70 176 Steenblik,R. (2020), ‘TheU.K.’s Global Tariff: Anew broom sweeps green? In liberalizing the trade of dozens of environmental goods, theU.K. signals its commitment to tackling climate change. But is this enough?’, IISD blog, 10 June 2020, www.iisd.org/articles/uk-global-tariff-new-broom (accessed 21 Feb. 2021). 177 Office of the United States Trade Representative (2012), ‘APEC List of Environmental Goods: Promoting Exports, Creating Jobs, and Advancing Green Growth and Sustainable Development’, https://ustr.gov/about-us/ policy-offices/press-office/fact-sheets/2012/september/apec-environmental-goods (accessed 21 Feb. 2021). Also see UNEP (2018), Trade in environmentally sound technologies in the ASEAN region, Nairobi: United Nations Environment Programme, https://wedocs.unep.org/bitstream/handle/20.500.11822/30616/ESTASEAN. pdf?sequence=1&isAllowed=y (accessed 21 Feb. 2021). 178 APEC (2021), ‘APEC Advances Environmental Goods Tariffs Cut’, 11 March, www.apec.org/Press/NewsReleases/2021/0311_MAG (accessed 1Aug. 2021). 179 APEC (2020), Environmental Services Action Plan (ESAP): Final Review, Singapore: Asia-Pacific Economic Cooperation, www.apec.org/Publications/2020/12/Study-for-Final-Review-of-Environmental-Services-ActionPlan (accessed 1Jul. 2021). 180 Ouwehand and Layton (2021), ‘4 ways to improve trade rules and support climate action’. Alsosee,Samans,R. (2019), ‘Give climate and trade negotiators anew joint mission: Low-carbon trade agreements’, VoxEU.org, 22September 2019, https://voxeu.org/article/low-carbon-trade-agreements-new-joint-mission-climate-andtrade-negotiators (accessed 21 Feb. 2021). 181 International Energy Agency (2021), ‘Low fuel prices provide ahistoric opportunity to phase out fossil fuel consumption subsidies’, 2June 2020, www.iea.org/articles/low-fuel-prices-provide-a-historic-opportunity-tophase-out-fossil-fuel-consumption-subsidies (accessed 14 Aug. 2021); Resich,P. (2019), ‘Stop Fossil Fuel Subsidies Campaign’, Global Subsidies Initiative, blog, 12 September 2019, www.iisd.org/gsi/subsidy-watch-blog/stop-fossilfuel-subsidies-campaign (accessed 21 Feb. 2021). 182 Bridle,R., Merrill,L., Halonen,M., Zinecker,A., Klimscheffskij,M. and Tommila,P. (2018), SwappingFossil Fuel Subsidies for Sustainable Energy, Copenhagen: Nordic Council of Ministries, https://norden.diva-portal.org/ smash/get/diva2:1269051/FULLTEXT01.pdf (accessed 21 Feb. 2021). 183 IISD and Global Subsidies Initiative (2019), Raising Ambition Through Fossil Fuel Subsidy Reform: Greenhouse gas emissions modelling results from 26 countries, Winnipeg: International Institute for Sustainable Development, www.iisd.org/system/files/publications/raising-ambition-through-fossil-fuel-subsidy-reform.pdf (accessed21Feb. 2021). 184 Gallagher,K.P. and Kozul-Wright,R. (2019), ANew Multilateralism for Shared Prosperity: Geneva Principles for aGlobal Green New Deal, Boston and Geneva: Boston University Global Development Policy Center and United Nations Conference on Trade and Development, www.bu.edu/gdp/files/2019/04/A-New-MultilateralismGDPC_UNCTAD.pdf (accessed 21 Feb. 2021). 185 US Government (2021) Executive Order 14008: Tackling the Climate Crisis at Home and Abroad, www.energy.gov/ nepa/articles/eo-14008-tackling-climate-crisis-home-and-abroad-2021 (accessed15Sept. 2021). 186 Merrill,L. and Funke,F. (2019), ‘All Change and No Change: G20 Commitment on Fossil Fuel Subsidy Reform, Ten Years On’, International Institute for Sustainable Development, https://sdg.iisd.org/commentary/guest-articles/ all-change-and-no-change-g20-commitment-on-fossil-fuel-subsidy-reform-ten-years-on/ (accessed 21 Feb. 2021); IEA (2017), Tracking fossil fuel subsidies in APEC economies. Toward asustained subsidy reform, Paris: International Energy Agency, https://euagenda.eu/upload/publications/untitled-86781-ea.pdf (accessed 21 Feb. 2021). 187 World Bank (2019), The Coalition of Finance Ministers for Climate Action, Washington, DC: World Bank, http://pubdocs.worldbank.org/en/646831555088732759/FM-Coalition-Brochure-final-v3.pdf (accessed25Apr.2021). 188 Friends of Fossil Fuel Subsidy Reform (2021), ‘What is the Friends of Fossil Fuel Subsidy Reform’, http://fffsr.org (accessed 21 Feb. 2021). 189 Gerasimchuk,I. (2018), ‘G20 Countries Must Speed Up Fossil Fuel Subsidy Reforms’, IISD blog, 14December 2018, www.iisd.org/articles/g20-fossil-fuel-subsidy-reforms#:~:text=China% 2C%20Saudi%20Arabia%20and%20 South,government%20revenue%20and%20reducing%20consumption (accessed 21 Feb. 2021). 190 Gerasimchuk,I., Wooders,P., Merrill,L., Sanchez,L. and Kitson,L. (2017), AGuidebook to Reviews of Fossil Fuel Subsidies. From self-reports to peer learning, Winnipeg: International Institute for Sustainable Development, www.iisd.org/system/files/publications/guidebook-reviews-fossil-fuels-subsidies.pdf (accessed 21 Feb. 2021). 191 IEA and OECD (2019), Update on recent progress in reform of inefficient fossil-fuel subsidies that encourage wasteful consumption, Paris: International Energy Agency and Organisation for Economic Co-operation and Development, www.oecd.org/fossil-fuels/publication/OECD-IEA-G20-Fossil-Fuel-Subsidies-ReformUpdate-2019.pdf (accessed 21 Feb. 2021); IISD and Global Subsidies Initiative (2019), Raising Ambition Through Fossil Fuel Subsidy Reform: Greenhouse gas emissions modelling results from 26 countries. Endnotes71 192 OECD (2020), ‘Governments should use Covid-19 recovery efforts as an opportunity to phase out support for fossil fuels, say OECD and IEA’, News item, 5June 2020, www.oecd.org/newsroom/governments-should-usecovid-19-recovery-efforts-as-an-opportunity-to-phase-out-support-for-fossil-fuels-say-oecd-and-iea.htm (accessed 21 Feb. 2021); IISD (2020), ‘G20 Backtracks on Fossil Fuel Funding Phase-Out in COVID-19 Recovery’, Press release, 9November 2020, www.iisd.org/articles/g20-backtracks-fossil-fuel-funding-phase-out-covid-19recovery (access 28 Feb. 2021) 193 APEC (2021), ‘APEC trade ministers unite on COVID-19 vaccine steps and rejuvenating the WTO’, APEC News, 6June, www.apec2021nz.org/apec-nz-2021/apec-news/apec-trade-ministers-unite-on-covid-19-vaccine-stepsand-rejuvenating-the-wto (accessed 15 Aug. 2021). 194 Van Asselt,H. (2014), Governing the transition away from fossil fuels: The role of international institutions, Stockholm: Stockholm Environment Institute, https://mediamanager.sei.org/documents/Publications/Climate/SEI-WP2014–07-Fossil-fuels-intl-institutions.pdf (accessed21Feb. 2021). 195 Trachtman,J. (2017), Fossil Fuel Subsidies Reduction and the World Trade Organization, Geneva: International Centre for Trade and Sustainable Development, www.greengrowthknowledge.org/sites/default/files/downloads/ resource/Fossil%20Fuel%20Subsidies%20Reduction%20and%20the%20World%20Trade%20Organization.pdf (accessed 25 Apr. 2021). 196 Permanent Mission of Norway in Geneva (2017), ‘MC11 Ministerial Declaration on Fossil Fuel Subsidy Reform’, 19December 2017, www.norway.no/en/missions/wto-un/our-priorities/trade/wto-world-trade-organization/ mc11-ministerial-declaration-on-fossil-fuel-subsidy-reform/ (accessed 21 Feb. 2021). 197 WTO (2021), ‘Proposed Fossil Fuel Subsidies Ministerial Statement’, JOB/GC/264, 16 July 2021, www.mfat.govt. nz/assets/Environment/Climate-change/Ministerial-Statement-on-FFSR.pdf (accessed 15 Aug. 2021). 198 Ibid. 199 UNCTAD (2020) Impact of the COVID-19 Pandemic on Trade and Development: Transitioning to aNewNormal, Geneva: UNCTAD, https://unctad.org/system/files/official-document/osg2020d1_en.pdf (accessed 20 Aug. 2021). Also see Deere Birkbeck,C. (2021), Green Trade and Economic Transformation in Developing Countries: Green Aid for Trade and Beyond, International Institute forSustainable Development (IISD) and the Forum on Trade, Environment &the SDGs (TESS). 200 ICTSD (2013), Bridges Africa: Special Edition on Aid for Trade: Into the Future, Geneva: International Centre for Trade and Sustainable Development, https://ictsd.iisd.org/sites/default/files/review/bridges-africa-review/2–4.pdf (accessed 22 Feb. 2021); Dey Ancharaz,V. and Sultan,R.A. (2010), Aid for Trade and Climate Change Financing Mechanisms: Best Practices and Lessons Learned for LDCs and SVEs in Africa, Geneva: International Centre for Trade and Sustainable Development, www.environmentportal.in/files/aid-for-trade-and-climate-changefinancing-mechanisms.pdf (accessed 22 Feb. 2021); Dey Ancharaz,V. (2009), ‘Aid for Trade and Climate Change Financing Mechanisms: Maximizing Benefits from Complementarities’, Trade Negotiations Insights, 10(8), Geneva: International Centre for Trade and Sustainable Development, https://ictsd.iisd.org/sites/default/files/ review/tni/tni_en_8–10.pdf (accessed 22 Feb. 2021). Also see Keane,J., PageS., Kergna,A. and Kennan,J. (2009), Climate Change and Developing Country Agriculture: An Overview of Expected Impacts, Adaptation and Mitigation Challenges, and Funding Requirements, Geneva: International Centre for Trade and Sustainable Development and International Food &Agricultural Trade Policy Council, www.files.ethz.ch/isn/110742/j-keane-web_final.pdf (accessed 22 Feb. 2021). 201 See, for instance, an event co-hosted by UNEP and the EU: UNEP (2019), ‘Aid for Trade Global Review 2019 side event– Aid for trade: avehicle to build climate resilience’, www.unep.org/events/conference/aid-trade-globalreview-2019-side-event-aid-trade-vehicle-build-climate (accessed 22 Feb. 2021). Also see UNEP (2020), Aid For Trade: AVehicle to Green Trade and Build Climate Resilience, Nairobi: United Nations Environment Programme, https://wedocs.unep.org/handle/20.500.11822/32204 (accessed 25 Apr. 2021). 202 Each of these proposals is elaborated in greater detail in Deere Birkbeck,C. (2021), Green Trade andEconomic Transformation in Developing Countries: Green Aid for Trade and Beyond. 203 See Akhtar,S., Gallagher,K.P., Griffith-Jones,S., Haas,J., and Volz,U. (2020, August 17), ‘The need for debt-forclimate swaps’, Project Syndicate, 17 August, www.project-syndicate.org/commentary/debt-for-climate-swapsby-shamshad-akhtar-2-et-al-2020–08 (accessed 15 Aug. 2021); Volz,U., Shamshad,A., Gallagher,K.P., GriffithJones,S., Haas,J., and Kraemer,M. (2020), Debt relief for agreen and inclusive recovery: Aproposal, presentation, Heinrich Böll Foundation, Center for Sustainable Finance (SOAS) University of London, Global Development Policy Center Boston University, https://drgr.org/files/2020/11/Presentation-Debt-Relief-for-a-Green-andInclusive-Recovery-comp.pdf (accessed 15 Aug. 2021). 204 Atkins,J. (2021), ‘New European export credit alliance nixes fossil fuel support’, Global Trade Review, 14 April 2021, www.gtreview.com/news/europe/94353 (accessed 15 Apr. 2021). 205 Shishlov,I., Weber,A., Stepchuk,I., Darouich,L. and Michaelowa,A. (2020), Study on external andinternal climate change policies for export credit and insurance agencies, Freiburg: Perspectives Climate Group, https://unfccc.int/ sites/default/files/resource/20–03–11_Perspectives_ECA_Study_Final_revised.pdf (accessed 22 Feb. 2021). Priorities for the climate–trade agenda72 206 Lang, J. (2020), ‘UK Export Finance funding abroad’, London: Energy and Climate Intelligence Unit, https://eciu.net/analysis/briefings/uk-energy-policies-and-prices/uk-export-finance (accessed22Feb. 2021). 207 Ibid. 208 White,M. (2020), ‘Mixed messages on fossil fuel funding by export credit agencies’, Global Trade Review, 13May2020, www.gtreview.com/news/sustainability/mixed-messages-on-fossil-fuel-funding-by-export-creditagencies (accessed 22 Feb. 2021). 209 SCMP Reporters (2021), ‘Vietnam coal project supported by Japan, South Korea, to continue despite investor pressure’, www.scmp.com/week-asia/economics/article/3123786/vietnam-coal-project-supported-japansouth-korea-continue (accessed 1Aug. 2021). 210 White, M. (2020), ‘Mixed messages on fossil fuel funding by export credit agencies’. 211 The ban applies to: “1) new coal fired power plants without operational carbon capture, utilisation and storage (CCUS) facilities; and 2) existing coal-¬fired power plants, unless the purpose of the equipment supplied is pollution or CO2 abatement and such equipment does not extend the useful lifetime or capacity of the plant, or unless it is for retrofitting to install CCUS.” Participants in the OECD arrangement are Australia, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland, Turkey, the United Kingdom, and the United States. See OECD (2021), ‘Agreement reached at OECD to end export credit support for unabated coal-fired power plants,’ OECD Newsroom, 22 October, https://www.oecd.org/newsroom/agreement-reached-at-oecd-toend-export-credit-support-for-unabated-coal-fired-power-plants.htm (accessed 22 Oct. 2021). 212 Berne Union (2021), ‘The Berne Union is the leading global association for the export credit andinvestment insurance industry’, www.berneunion.org (accessed 22 Feb. 2021). 213 Bronswijk, A., Gabriel, R., Hale, T. and Klasen, A. (2020), ‘Working Toward a Commitment toNetZero’, Berne Union Yearbook 2020, pp. 153–57. 214 OECD (2020), Arrangement on officially supported export credits, Paris: Organisation for Economic Co-operation and Development, www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?doclanguage=en&cote=tad/ pg(2020)1 (accessed 22 Feb. 2021). 215 Ibid. 216 Vesey,C. and Connell,L. (2021), ‘How can the Biden administration prioritize climate action at the IFIs?’, Bank Information Center, 20 January 2021, https://bankinformationcenter.org/en-us/update/how-can-the-bidenadministration-take-ambitious-action (accessed 25 Apr. 2021).; Sinani,N. and Pred,D. (2019), ‘Opinion: Can the World Bank clean up its fossil fuel problem?’, Devex, 16 July 2019, www.devex.com/news/opinion-can-the-worldbank-clean-up-its-fossil-fuel-problem-95254 (accessed 25 Apr. 2021). 217 UNCTAD (2019), Trade and Development Report 2019: Financing aGlobal Green New Deal, Geneva: United Nations Conference on Trade and Development, https://unctad.org/system/files/official-document/tdr2019_en.pdf (accessed 21 Feb. 2021). Also see, United Nations (2019), Financing for Sustainable Development Report 2019, NewYork: United Nations, https://developmentfinance.un.org/sites/developmentfinance.un.org/files/ FSDR2019.pdf (accessed 21 Feb. 2021). 218 Medhora,R. and Panezi,M. 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(2012), It Ain’t Easy: The Complexities of Creating aRegime for Border Carbon Adjustment, Stockholm: Entwined, https:// papers.ssrn.com/sol3/papers.cfm?abstract_id=2163203 (accessed 21 Feb. 2021); Lamy,P., Pons,G. and Leturcq,P. (2019), ‘Time to green EU trade policy: but how?’, Paris: Jacques Delors Institute, https://institutdelors.eu/wpcontent/uploads/2020/08/190903-PP-EN-Time-to-green-EU-policy-but-how-1.pdf (accessed 21 Feb.2021); Lamay, Pons and Leturcq (2019), Greening the European Union’s Trade Policy: The Economics of Trade and the Environment, Paris: Jacques Delors Institute; Lowe,S. (2019), Should the EU tax imported CO2?, London: Centre for European Reform, www.cer.eu/sites/default/files/insight_SL_24.9_19.pdf (accessed 21 Feb. 2021); Mehling,M., Van Asselt,H., Das,K., Droege,S. and Verkuijl,C. (2019), Designing Border Carbon Adjustments for Enhanced Climate Action, American Journal of International Law, Vol. 113, Issue3, pp. 433–481, www.cambridge.org/core/ Endnotes73 journals/american-journal-of-international-law/article/designing-border-carbon-adjustments-for-enhancedclimate-action/BF4266550F09E5E4A7479E09C047B984 (accessed 25 April 2021); Prag,A. (2020), The Climate Challenge and Trade: Would border carbon adjustments accelerate or hinder climate action?, Paris: Organisation for Economic Co-operation and Development, www.oecd.org/sd-roundtable/papersandpublications/The% per cent20Climate% per cent20Challenge% per cent20and% per cent20Trade…% per cent20background% per cent20paper% per cent20RTSD39.pdf (accessed 21 Feb. 2021); Sandbag (2020), The Path of Least Resistance: How electricity generated from coal is leaking into the EU, London: Sandbag, https://ember-climate.org/wpcontent/uploads/2020/01/2020-SB-Path-of-least-resistance-1.2b_DIGI.pdf (accessed 21 Feb. 2021). 220 See Plumer,B. and Popovich,N. (2019), ‘These Countries Have Prices on Carbon. Are They Working?’, NewYork Times, 2April 2019, www.nytimes.com/interactive/2019/04/02/climate/pricing-carbon-emissions.html (accessed 19 Feb. 2021). 221 Mildenberger,M. and Stokes,L. (2020), ‘The Trouble with Carbon Pricing’, Boston Review, 24September2020, http://bostonreview.net/science-nature-politics/matto-mildenberger-leah-c-stokes-trouble-carbon-pricing (accessed 21 Feb. 2021). 222 European Parliament (2021), ‘Carbon Border Adjustment Mechanism as Part of the European Green Deal /Before 2021–7’, Brussels: European Parliament, www.europarl.europa.eu/legislative-train/theme-a-europeangreen-deal/file-carbon-border-adjustment-mechanism (accessed25Apr.2021). 223 Office of the United States Trade Representative (2021), ‘2021 Trade Policy Agenda and 2020 Annual Report of the President of the United States on the Trade Agreements Program’,p.3, https://ustr.gov/sites/default/ files/files/reports/2021/2021 per cent20Trade per cent20Agenda/Online per cent20PDF per cent202021 per cent20Trade per cent20Policy per cent20Agenda per cent20and per cent202020 per cent20Annual per cent20Report.pdf (accessed 3Mar. 2021). 224 Mehling,M., Van Asselt,H., Das,K., Droege,S. and Verkuijl,C. (2019), ‘Designing Border Carbon Adjustments forEnhanced Climate Action’. 225 Bacchus,J. (2021), ‘Legal Issues with the European Carbon Border Adjustment Mechanism’, CATO Briefing Paper, August9, Number 125, CATO Institute, www.cato.org/briefing-paper/legal-issues-european-carbon-borderadjustment-mechanism (accessed 15 Aug. 2021). 226 Ravikumar,A. (2020), ‘Carbon border taxes are unjust’, Opinion, MIT Technology Review, 27 July 2020, www.technologyreview.com/2020/07/27/1005641/carbon-border-taxes-eu-climate-change-opinion (accessed21 Feb. 2021). 227 Derviş,K. (2020), ‘Carbon taxes: Acause for conflict and control, or astep toward global sustainability?’, World Economic Forum and Project Syndicate, 13 February 2020, www.weforum.org/agenda/2020/02/carbon-bordertaxes-sustainability/ (accessed 21 Feb. 2021); Falcão,T. (2020), ‘The EU’s Carbon Border Adjustment Mechanism: An Opportunity for the EU to Assume Leadership over Environmental Protection Standards’, Kluwer International Tax Blog, 24 August 2020, http://kluwertaxblog.com/2020/08/24/the-eus-carbon-border-adjustmentmechanism-an-opportunity-for-the-eu-to-assume-leadership-over-environmental-protection-standards (accessed21 Feb. 2021). 228 Von der Leyen,U. (2019), AUnion that strives for more: My agenda for Europe, Brussels: European Union, www.europarl.europa.eu/resources/library/media/20190716RES57231/20190716RES57231.pdf (accessed21Feb.2021). 229 European Commission (2021), Proposal for aRegulation of the European Parliament and of the Council establishing acarbon border adjustment mechanism, Brussels: European Commission. 230 Mehling,M., Van Asselt,H., Das,K. and Droege,S. (2019), ‘What aEuropean ‘carbon border tax’ might look like’, VoxEU.org, 10 December 2019, https://voxeu.org/article/what-european-carbon-border-tax-might-look (accessed 21 Feb. 2021). 231 UNCTAD (2021), AEuropean Union Carbon Border Adjustment Mechanism: Implications for Developing Countries, Geneva: UNCTAD, https://unctad.org/system/files/official-document/osginf2021d2_en.pdf (accessed 14 Aug. 2021); UNCTAD (2021) ‘EU should consider trade impacts of new climate change mechanism’, 14 July, UNCTAD, https://unctad.org/news/eu-should-consider-trade-impacts-new-climate-change-mechanism (accessed 14 Aug. 2021). Also see Keane, Colenbrander and Kelly (2021), ‘How can the EU’s border carbon adjustments avoid unintended consequences for LDCs?’; Grimm,S., Reiners,W., Helwig,N., Siddi,M. and Mourier,L. (2021), The Global Dimension of the European Green Deal: The EU as aGreen Leader?, Konrad Adenaur Stiftung, the German Development Institute (DIE) and the Finish Institute of International Affairs, www.die-gdi.de/ uploads/media/The_Global_Dimension_of_the_European_Green_Deal_-_The_EU_as_a_Green_Leader. pdf (accessed14Aug.2021); Gore,T. et al. (2021), ‘What Can Least Developed Countries and Other Climate Vulnerable Countries Expect from the EU Carbon Border Adjustment Mechanism(CBAM)?’ 232 UNCTAD (2021,) AEuropean Union Carbon Border Adjustment Mechanism: Implications for Developing Countries. Also see UNCTAD (2018), Climate Policies, Economic Diversification and Trade, UNCTAD: Geneva. https://unctad.org/system/files/official-document/ditcted2018d4_en.pdf (accessed14Aug. 2021). Priorities for the climate–trade agenda80 About the author Carolyn Deere Birkbeck is an associate fellow at Chatham House, jointly in theGlobalEconomy and Finance Programme and the Sustainability Accelerator. She isthe Director of the Forum on Trade, Environment and the SDGs (TESS), apartnership of the Graduate Institute Geneva and the United Nations EnvironmentProgramme (UNEP). Acknowledgments The author is grateful for feedback from Creon Butler, Bernice Lee, Marianne Petsinger, Antony Froggatt and Ana Aberg within Chatham House, as well as two anonymous peer reviewers. The paper also benefited from comments by Kimberley Botwright, Christophe Bellmann, Andrei Marcu, Mahesh Sugathan and Ricardo Meléndez-Ortiz. The author thanks Jamie Wang for research assistance and the Chatham House editorial team. The analysis and proposals also draw on arich process of discussions on ‘Aligning trade and investment with climate governance’ held in 2020 in the context of the Future of Climate Cooperation project, ajoint initiative launched by the Blavatnik School of Government at Oxford University, ClimateWorks Foundation and Mission 2020. For asynopsis of proposals generated by climate and trade experts through that project, see Hale,T. (2021), ‘11 ways to align global economic governance with agreen new deal’, WEF Agenda blog, 4May, www.weforum.org/agenda/2021/05/global-economic-governance-green-new-deal (accessed 5May 2021). www.cascades.eu