General Issue
Vol. VI, No. 1
(Summer '14)

Everybody talks about the weather, but nobody does anything about it - Mark Twain

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This article examines various mechanisms through which international trade can address climate change mitigation. It proposes the introduction of a regional model for promoting climate change mitigation, technology transfer and sustainable energy for all via the vast, ever-expanding network of preferential trade agreements (PTAs) across the globe. These PTAs present a more efficient vehicle to promote environmental protection than the multilateral trading platform. The article also explores the potential of more cohesive energy governance in promoting sustainable energy and discusses the World Trade Organization’s (WTO) role in supporting renewable energy. It discusses the impact of subsidies on different forms of energy and whether feed-in tariffs count as subsidies in the WTO context. The role of emissions trading schemes (ETS) is also examined, with particular focus on the European Union’s ETS and its expansion to the aviation sector. Another area where trade can feed into climate change mitigation efforts is eco-labelling. Lastly, the article focuses on the need to invest in innovative solutions and take creative approaches to environmental protection. It emphasizes the need for a flexible approach on the part of both the trade and climate change regimes, and the need to work together more closely.

Substantive overlap between the UNFCCC and the WTO legal regimes is already considerable and such links can be expected to increase if governments undertake serious efforts to achieve the global climate target of limiting temperature increase to below 2°C from pre-industrial times. The article seeks to challenge scholarship which tends to approach the relationship between the WTO and UNFCCC with a focus on such (currently non-existent) climate policies that are potentially problematic from the point of view of WTO law. It highlights that while trade bans and border carbon adjustments targeting processes and production methods feature among the most prominent topics in the academic debate, there are currently no concrete examples of such climate policies. The article emphasizes that a focus on potential conflicts risks conveying the false impression that climate policies are typically problematic viewed from the WTO perspective. The author also argues that the most common climate policies affecting international trade, such as energy efficiency requirements, can often be designed and implemented in a way that is fully compatible with WTO law. Finally, the article highlights the important role that renewable energy is estimated to play in achieving the global 2°C climate target. It argues that this is an area where links between the WTO and climate policies have been most pronounced thus far, as illustrated by the recent surge of WTO dispute settlement consultations and anti-dumping disputes relating to the use of renewable energy.

In January 2014, the WTO broke the longstanding impasse in trade negotiations over environmental goods. It abandoned a decade-long effort to reach an agreement as part of a comprehensive Doha Round package. Instead, the WTO declared that it would commence new negotiations for a standalone plurilateral agreement. While a quarter of the WTO membership has expressed their intention to participate in these negotiations, very few developing countries have done so. This Article examines the question of why this is the case. The conventional belief is that developing countries have export interests at stake in environmental goods, but are avoiding the talks because of competing desires to preserve high tariff rates to protect domestic industries and/or to express their dissatisfaction with the current mode of negotiations.

This Article proposes an alternative interest-based explanation: Most developing countries stand to gain very little from the talks, as they are currently structured. More important than the countervailing forces emphasized by the conventional explanation is the simple fact that developing countries, other than China, simply do not have sufficient interests at stake to join the negotiations.

Drawing on original analyses of recent trade flows in environmental goods from various developing countries, the Article highlights the following: First, very few developing countries have much at stake in terms of exports. Second, among those that do export, many already have reaped significant tariff benefits through negotiations in other fora. Third, developing countries can achieve remaining objectives through free riding. Finally, the predominance of intra-developing country trade minimizes gains from a treaty dominated by advanced economies. Together, these explanations account for why most developing countries have little to gain – contrary to the conventional belief that many have interests at stake.

For those who may find the lack of developing country participation to be troubling, this Article explores several potential options to entice more developing countries to join the negotiations. Overall, the Article suggests that the key to increasing the participation of developing countries will be to expand the scope of the negotiations beyond what is currently on offer, to include other environmental goods, services, and/or non-tariff barriers.

The main thesis of this article is that the WTO need not be captured by one mode of expertise in its approach to the relation between trade and the environment. It should resist reducing the totality of the relationship to a win- win narrative as there may be certain areas of conflict where trade interests need to give in to environmental interests.

This Note makes the case for recognizing developing country-led ‘sui generis’ labelling schemes linked to carbon offset measures, after due verification, as equivalent to or replacing requirements related to product carbon labelling schemes. Such labelling schemes are increasingly being explored in many OECD countries and even if, de jure, voluntary for both domestic producers and importers, they could potentially have an adverse impact on developing country exports due to their ‘de facto’ mandatory nature and the competitive advantage that products labelled as ‘climate-friendly’ enjoy in the market. While product carbon labelling schemes are still in their early days, they have the potential to evolve rapidly through private-sector or supermarket-led schemes. ‘Sui generis’ voluntary positive labelling initiatives launched by developing countries themselves could tap into their inherent advantages in terms of the lower carbon footprint of their products, particularly for labour- intensive products. Such schemes could also benefit from the Clean Development Mechanism (CDM) and other carbon offset projects for developing countries, including those channelled through the ‘Green Fund’ that could be set up under the auspices of the UNFCCC. Given the positive benefits of such schemes for both the environment as well as in promoting export-led development in developing countries, ways must be found to ensure a ‘legitimate space’ for such schemes under WTO rules, most notably under the TBT Agreement.