Making the International Trade System Work for the Paris Agreement: Assessing the Options
| Date | 01 June 2019 |
| Author | Kasturi Das, Harro van Asselt, Susanne Droege, and Michael Mehling |
6-2019 NEWS & ANALYSIS 49 ELR 10553
ARTICLES
December 2015 saw the adoption of the Paris
Agreement1 at the 21st session of the Conference
of Parties (COP 21) to the United Nations Frame-
work Convention on Climate Change (UNFCCC). e
Agreement aims to keep the global temperature increase
from pre-industrial levels to well below 2 degrees Celsius
(2°C), and to pursue eorts to limit it to 1.5°C.2 e Paris
Agreement entered into force in November 2016, follow-
ing the historically swift ratication by a critical mass of
countries. Subsequently, at COP 24 held in December
2018 in Katowice, Poland, Parties to the Paris Agreement
adopted a detailed ru lebook for implementing the treaty,3
thus heralding a new era of international cooperation on
climate change.
e Paris Agreement established a new international
framework for the Parties to the UNFCCC from 2020
onwards. e new regime is characterized by more univer-
sal eorts on climate change compared to its predecessor,
the Kyoto Protocol, with the new treaty applying to both
developed a nd developing countries. At the sa me time, the
Agreement marks a transition toward a more bottom-up
1. U.N. Framework Convention on Climate Change (UNFCCC), Report of
the Conference of the Parties on Its Twenty-First Session, Held in Paris From
30 November to 13 December 2015 Addendum Part Two: Action Taken by the
Conference of the Parties at Its Twenty-First Session, Adoption of the Paris Agree-
ment, U.N. Doc. FCCC/CP/2015/10/Add.1, Decision 1/CP.21 (2016),
https://unfccc.int/resource/docs/2015/cop21/eng/10a01.pdf.
2. For an assessment of the impacts of global warming of 1.5°C above pre-industrial
levels and related global greenhouse gas emission pathways, see I-
P C C (IPCC), G W 1.5°C:
S P (2018), available at https://www.ipcc.ch/site/
assets/uploads/sites/2/2018/07/SR15_SPM_version_stand_alone_LR.pdf.
3. See UNFCCC, e Katowice Climate Package: Making the Paris Agreement
Work for All, https://unfccc.int/process-and-meetings/the-paris-agreement/
katowice-climate-package (last visited Apr. 2, 2019).
Making the
International
Trade System
Work for the
Paris Agreement:
Assessing the
Options
by Kasturi Das, Harro van Asselt,
Susanne Droege, and Michael Mehling
Kasturi Das is a Professor of Economics and Sustainability at
the Institute of Management Technology in Ghaziabad, Delhi-
NCR, India. Harro van Asselt is a Professor of Climate Law
and Policy at the University of Eastern Finland Law School.
Susanne Droege is a Senior Fellow in the Global Issues Research
Division at the German Institute for International and Security
Aairs in Berlin. Michael Mehling is Deputy Director at the
Massachusetts Institute of Technology Center for Energy and
Environmental Policy Research, and a Professor of Practice
at the University of Strathclyde Law School in Glasgow.
Summary
If the Paris Agreement’s 2°C goal is to be achieved,
unprecedented eorts across all areas of socioeco-
nomic activity are needed. National climate policy
measures with direct or indirect trade implications
stand the risk of colliding with the rules and require-
ments put forward by international trade agreements.
Leaving the fate of climate measures to the WTO
dispute settlement system is associated with risks
and uncertainty, and could lead to a chilling eect
on investment in climate mitigation and adaptation.
is Article identies a set of options for improved
alignment of the trade and climate regimes, and oers
recommendations for policy reform.
Authors’ Note: e authors gratefully acknowledge funding from the
KR Foundation for this study as part of the project “Making the
Trade System Work for Climate Change” (2016-2018). e authors
express particular gratitude to the interviewees (see Annex 2) for
their thoughtful suggestions and feedback. e authors also thank
the participants in various workshops and meetings organized in
the context of the project, including: “Border Carbon Adjustments:
A Renewed Role After Paris?” (Bonn, May 25, 2016); “Reforming
Fossil Fuel Subsidies rough the WTO and International Trade
Agreements” (Geneva, May 22, 2016); “Making the International
Trade System Work for Climate Change: Assessing the Options”
(Crozet, Oct. 19, 2017, cosponsored by the Friedrich Ebert Stiftung);
“Market Instruments for More Ambitious Climate Action” (Mexico
City, May 22, 2018); and a meeting at the European Commission
(Brussels, May 31, 2018). Finally, the authors are thankful to Cleo
Verkuijl and editors of this journal for providing valuable comments
on a draft version of the Article.
Copyright © 2019 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.
49 ELR 10554 ENVIRONMENTAL LAW REPORTER 6-2019
architecture for international climate cooperation. Central
to this bottom-up approach is a system of national cli-
mate pledges, called nationally determined contributions
(NDCs). In other words, the Paris Agreement requires its
Parties to make their own plans on climate change mitiga-
tion, adaptation, and other related areas.
Importantly, the built-in exibility and bottom-up
nature of the Paris architecture a re characterized by at least
two major risks: (1)there is no cert ainty that the bottom-up
pledges made by Parties will add up to what is required to
achieve the Paris Agreement’s 2°C goal; and (2)the archi-
tecture may be a recipe for some Parties to move ahead
with ambitious climate action while others lag behind. In
such a scenario, countries doing little may end up benet-
ing from the actions taken by others. For instance, in the
ultimate free ride, the United States intends to withdraw
completely from the Paris Agreement in 2020, eectively
demanding others do more.
Indeed, Parties to the UNFCCC have pledged climate
actions that dier widely in ambition, nature, and scope
and, absent strong centralized enforcement, will arguably
face very uneven implementation. e extent of challenges
becomes clearer when judged in light of the fact that the
aggregate pledges are far from adequate to keep the global
temperature rise well below 2°C, let alone the more ambi-
tious 1.5°C goal.4
Still, the Paris Agreement also creates room for coun-
tries to ratchet up ambition in the future. e question
then is how to strengthen actions so that emissions drop
sharply once the Paris framework takes eect in 2020.
is will require considerable reductions in fossil fuel use,
widespread improvements in energy eciency, a signi-
cant scale-up in the production of renewable energy, and
enhanced access to clean energy technologies. Advancing
such a multipronged agenda calls for unprecedented eorts
across all areas of socioeconomic activity. It also requires
support from other international regimes, as rules that are
working at cross-purposes may hamper climate action.
Policy and regime coherence are particularly important
in the context of the international trading system. is is
due to the multiple interlinkages between the tra de and cli-
mate change regimes. Trade has an important role to play
toward the achievement of the Paris goals— both indirectly
and directly. Indirectly, taking the requisite degree of cli-
mate action will require a major overhaul of domestic poli-
cies and measures, which may end up having signicant
cross-border trade eects even though they a re primarily
intended as domestic measures. Besides, in implement-
ing their NDCs, countries may opt for applying various
“direct” trade measures, such as removing or reducing
taris on environmental goods a nd services; developing
technical standards for low-carbon products traded across
borders; international transfer of climate-friendly technol-
ogies; application of border carbon adjustments (BCAs);
and so on.
4. U N E P (UNEP), E G R-
2018 (2018).
Notably, trade-related elements feature prominently in
climate contributions under the Paris Agreement. Accord-
ing to one study,5 45% of the NDCs submitted included a
direct reference to trade or trade measures , wherea s around
22% included trade measures that were specica lly geared
toward fostering mitigation. While around 6% of NDCs
mentioned a reduction of trade barriers, around 11%
entailed a reference to the regulation of trade on climate
grounds. Indeed, with more ambitious NDCs expected
in the future, trade-related climate measures are not only
likely to remain in the spotlight, but may also assume
increasing signicance.
National climate policy measure s with direct or indirect
trade implications stand the risk of collidi ng with the rules
and requirements put forward by international trade agree-
ments. Such concerns have emerged particularly in the
context of the World Trade Organization (WTO). is is
not unexpected, given that there are certain fundamental
dierences between t he UNFCCC and the WTO regimes.
Climate change could be considered as an extreme case
of market failure—the failure to incorporate the damage
done by greenhouse gas emissions into the prices of goods
and services— creating grounds for government interven-
tion to correct these market failures.
Governments generally prefer to retain exibility in the
choice of national instruments to correct market failures.
is is mainly because they need to balance the economic
characteristics of alternative measures against their politi-
cal acceptability. By contrast, the trade rules embodied in
the WTO agreements presuppose a world of market econo-
mies, and attempt to discipline government failures that
lead to economic distortions with the avor of mercan-
tilism and protectionism. Such fundamental dierences
underlying the two regimes entail potential for conicts.6
As climate policy has become a major international
policy eld in its own right, its standing vis-à-vis the well-
established WTO regime is changing rapidly, with climate
policymakers increasingly becoming apprehensive that
WTO law is curtailing their room for maneuver to imple-
ment domestic climate policies eectively.7 On the other
hand, concerns have also been raised by some countries
about the use of trade-related climate measures for alleged
protectionist purposes.8 e signicant surge in W TO dis-
putes pertaining to climate change and clean energy over
the past several years9 is indicative of the tension that is
increasingly brewing at the interface between national cli-
5. C B, I C T S D-
(ICTSD), T E C’ C C-
U P A (2017).
6. G C H J K, P I I-
E, T W T O C
C: C O 5 (2009).
7. See, e.g., H D, E15 I, ICTSD W E
F, W H C F F T (2015).
8. See, e.g., M K, C G E C
P C S D, P,
E, http://purochioe.rrojasdatabank.info/transition-4.pdf.
9. For a list of recent disputes, see Susanne Droege et al., e Trade System and
Climate Action: Ways Forward Under the Paris Agreement, 13 S.C. J. I’ L.
B. 195, 219 (2017).
Copyright © 2019 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.
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