Clifford Chance has collaborated with the World Economic Forum on the publication, Delivering a Trade and Climate Agenda. The report finds that while businesses are actively pursuing emissions reductions, action on trade policy can help accelerate this shift. The report outlines eight ways in which trade policy can help businesses accelerate the transition to net-zero.
The urgency of the climate crisis requires greater focus on how international trade and investment policy can support climate action. To better understand how trade policy can support businesses to reduce emissions, Clifford Chance, in collaboration with the World Economic Forum (WEF), interviewed over 30 global companies about their trade and climate strategies.
The resulting white paper, ‘Delivering a climate trade agenda: Industry insights’, brings together industry perspectives on trade policy priorities, as well as offering eight recommendations for climate-focused trade policy that is fair, transparent, and has technology and innovation at its core. The report identifies numerous ways in which businesses can prepare for, and support, recommended climate-trade initiatives.
Summary of recommendations
1. Reduce tariffs on climate-friendly goods
Building on efforts such as the ACCTS negotiations, countries should create a living list of climate-friendly goods and develop open architecture for the reduction of applicable tariffs that others can join as appropriate. To support these efforts, businesses can further identify and quantify essential technologies and inputs critical for decarbonisation.
2. Reduce non-tariff distortions
Businesses have a vital role to play in identifying areas in which diverging standards such as labelling, local content requirements and differing prescriptive qualifications for certain environmental goods are holding back climate preferential trade and investment. One suggestion is for businesses and policy makers to work together on a database of ‘green’ non-tariff barriers to be prioritised for resolution, thereby ensuring a level playing field and incentivising the uptake of greener production methods through the supply chain.
3. Phase out fossil fuel subsidies
Global fossil fuel subsidies amount to at least US$475 billion. Businesses can work to encourage policy makers to eliminate harmful fossil fuels subsidies and to provide insights into energy market impacts, including bridging strategies, for industries where technology does not yet offer viable alternatives to fossil fuel.
4. Align carbon based trade policies
Corporate emissions accounting is often voluntary and there is divergence in accounting frameworks. Yet emissions accounting is increasingly intersecting with trade-related policies – such as Border Carbon Adjustments or climate-friendly labels. Business leaders we interviewed were keen to see policymakers engage in dialogue on how emissions accounting standards and related policies operate in this context, in order to ensure consistency and coherence across different jurisdictions.
5. Unpack digital and services-related trade
Trade in digital technologies, data and other services, including telecommunications, cloud storage and artificial intelligence, will play an integral role in the transition to net zero. Given the constantly evolving nature of services trade more public/private discussion is needed to help identify barriers to dissemination of these services.
6. Address climate-smart agriculture
Agriculture’s emissions profile and economic importance to developing countries means it must be included as part of the discussion on trade and the environment. The focus should include: (i) identifying goods and services that may reduce agricultural emissions through increased trade liberalisation; (ii) developing means to enable smallhold farmers to adopt equitable and sustainable agricultural practices; and (iii) identifying opportunities to reduce or eliminate subsidies that incentivise over production or consumption of higher-emissions food products.
7. Harness trade agreements to achieve climate action
The critical importance of climate change for all businesses, and all aspects of public policy, now means that trade agreements should also include ambitious, binding and enforceable commitments on climate change. Recent agreements such as the EU-UK Trade and Cooperation Agreement – which makes respecting the Paris Agreement an essential element of the agreement, provides one example of how broader climate objectives can be expressly linked to trade objectives.
8. Facilitate green investment
Many of our interviewees signalled the importance of public-sector interventions to stimulate green investment. The WTO’s Investment Facilitation for Development talks are a good place to start in understanding whether implementation can help improve investment flows to emerging economies
Please click here to read more and download the report. Do not hesitate to contact us if you would like any further insights on this topic and the report.
