Can Trade Help Deliver the Paris Agreement? Lessons learned from the G20

This year’s G20 Summit in Hamburg, Germany, saw long and heated discussion on the urgency of delivering the Paris Agreement. The so-called “G19” took a firm stance—“the Paris Agreement is irreversible”—while the United States, having recently opted out of Paris, underscored its support for an energy future with a major role for fossil fuels, freely traded.

On trade, a look at the twitter feed for the World Trade Organization’s (WTO) Director General, Robert Azevêdo shows how active he was in Hamburg. A major talking point there was how the US’s “America First” stance—examples include its withdrawal from the Trans-Pacific Partnership (TPP) “mega-regional” trade agreement and its decision to renegotiate NAFTA with Canada and Mexico—could be accommodated into the fight against protectionism.

So will trade help deliver climate change mitigation and, more widely, sustainable development? This year’s Leaders’ Declaration reaffirmed that the G20 will be “(b)uilding on the G20’s Action Plan on the 2030 Agenda for Sustainable Development, the Hamburg Update emphasises our collective and concrete commitments.”

But it is notable how weak the link made between trade and climate change was in this year’s Leaders’ Declaration, with the full text on trade and investment making only one reference to delivering on sustainable development. However, the debate is advancing elsewhere. At a specific workshop focused on trade and climate change at the WTO on June 19,[1] Director General Azevêdo welcomed the debate on the “role that the WTO can play in supporting climate action.” WTO Member and expert suggestions include those steps that could be taken now, and those that would require further focus of the WTO on climate change (and, by extension, sustainable development), potentially by restricting free trade of some goods and services—including fossil fuels and the technologies that use them.

Short-term actions with significant potential include the reform of fossil fuel subsidies, a conclusion of the Environmental Goods Agreement (EGA)—and its extension to more goods and to services—and the conclusion of a plurilateral agreement limiting subsidies to fisheries. Other options include permitting some clean energy subsidies and extending and harmonizing government practices around green procurement, standards and labelling across countries, benefitting trade.

Any of these options could have a significant impact on reducing greenhouse gas emissions. For example, models show that fossil fuel subsidy reform (FFSR) globally could lead to at least 10 per cent global reductions, with potential for more if the savings were at least partially reinvested in renewable energy and energy efficiency. FFSR has also been discussed recently at other Geneva workshops.

But implementing these options could see disputes at the WTO; countries implementing them will argue that their benefits to reducing emissions of greenhouse gases should outweigh any restrictions in trade of less environmentally beneficial options. Workshop delegates stressed how seeking to pre-emptively solve issues between WTO members before they are brought to dispute and ruled on by a small group of lawyers would be much preferred. A more ambitious option for the long term is to consider fundamentally different “alternative international economic governance,” to govern trade and investment in economies. This would need to deal both with the concerns noted in the G20 Leaders Declaration—that the benefits of international trade and investment have not been shared widely enough—but also the role WTO needs to play in delivering climate goals in general and the Sustainable Development Goals (SDGs) in particular.

The main messages emerging from the Hamburg G20 seem to be that the US position may be a first salvo in how strongly the fossil fuel industry will seek to defend itself, and that there are many competing and important demands for action by the G20’s members within which a focus on climate must compete.

But there is other good news. Deployment rates of renewable energy are exceeding projections in large parts of the world. Similarly, news that car manufacturers such as Volvo and countries including France, the Netherlands and Germany will phase out internal combustion engines over the next 15 years or so is extremely positive. Wrapping up the June 19 workshop, WTO Ambassadors Molinari (Costa Rica), Neple (Norway) and Chambovey (Switzerland) passionately noted both the urgency of acting on climate change and the fact that WTO members must step up their actions to push forward options in both the trade and climate change regimes. There is a clear role for trade to support climate change mitigation, and many paths forward to develop this role.