Climate and trade

Written by Robert Watt

Friday, 03 November 2017 00:00

climate and trade event promo COP23

Side event: Trade and Climate Change – New Potentials, New Pitfalls?

8 November, 14:00-16:00, DIE interconnections

This event explores the potentials and pitfalls of trade and climate policy. Climate-related trade disputes are emerging in the context of the World Trade Organization, and using trade policy to address climate change is contemplated directly or indirectly in various Nationally Determined Contributions. It’s time to work out how to maximize consistency and cooperation between these policy areas.


  • Aik Hoe Lim, WTO: International trade and climate change: What are the opportunities and challenges from the WTO perspective?
  • Axel Berger/Sikina Jinnah (tbc): How are climate-related issues incorporated into trade agreements? How are trade-related elements incorporated into NDCs? Who are the pioneers?
  • Susanne Dröge, SWP: How can the interplay between the trade and the climate regime be made more mutually supportive?
  • Aaron Cosbey, IISD: Trade as a driver of the implementation of the 2030 Agenda?
  • Michael Mehling, MIT: A “view from the other side”: Unilateralism, border adjustments, and threats to multilateral trade and climate cooperation

Organised with the German Development Institute / Deutches Institut für Entwicklungspolitik and Climate Strategies.


SEI is working on two key areas for climate and trade:

Fossil Fuel Subsidies

Reforming fossil fuel subsidies may be a way to meet the objectives of both the Paris Agreement and the 2030 Agenda for Sustainable Development.

Lowest estimates of these subsidies are several hundred billion dollars a year, and they have a range of negative socio-economic and environmental effects. But tackling them has remained challenging, despite high-level commitments to do so.

The World Trade Organization (WTO) could take the fossil fuel subsidy reform agenda forward. A recent policy brief, written together with Climate Strategies, identifies five steps to address fossil fuel subsidies in international trade:

  1. Technical assistance and capacity building
  2. Improved transparency
  3. Pledges and follow-up through reporting and review
  4. Political declaration
  5. Expansion of category of prohibited subsidies

Read more about why fossil fuel subsidies persist and what can be done»

Border Carbon Adjustments

There are many ways to tackle climate change, and the Paris Agreement mobilized a broad coalition to act. But this means climate actions are asymmetrical - climate policy in one country is not necessarily replicated elsewhere. The result can be some form of emissions leakage (where emissions reductions achieved by a country are offset by an increase in emissions elsewhere) and competitiveness impacts.

Border carbon adjustments (BCAs) could be an answer, as they can level the competitive playing field, reduce emissions leakage, and incentivize trade partners to strengthen their own climate efforts.

What are BCAs?

BCAs are instruments that address the problem of uneven climate efforts by including imports in, or exempting exports from, a carbon constraint. In their most elementary form, they can be a tariff or other fiscal measure applied to imported goods. They can also be implemented by extending other regulatory obligations to imports, such as the requirement to purchase emission allowances. Or they can be applied to exports, for instance through tax or regulatory relief.

Design steps and related processes for border carbon adjustmentsDesign steps and related processes for border carbon adjustments

Read more about border carbon adjustments, including how to design an effective BCA»

SEI is also involved with Climate Strategies. Learn more about "Making the International Trade System Work for Climate Change"»