The Trade System and Climate Action: Ways Forward Under the Paris Agreement

Abstract

The relationship between trade policy and climate policy needs to improve in the future, in particular with a view towards implementing the Paris Agreement. With the aim of making trade policy supportive of climate action, this working paper discusses the relationship between the regimes established by the World Trade Organization (WTO) and the United Nations Framework Convention on Climate Change (UNFCCC), the provisions and pending disputes, the role of regional trade agreements as well as upcoming issues emerging from the Paris Agreement. It highlights several options for addressing the relationship between the two regimes from a legal, institutional and a policy perspective. The suggested options relate to those fields where national climate policy action has been taken during the last years and which are part of the intended nationally determined contributions (INDCs) submitted in the run-up to the Paris Agreement.

Already today, many regional trade agreements include climate and environmental provisions, and could thus help prevent a regulatory race to the bottom. Moreover, the increasing number of WTO disputes over national renewable energy policy regulations points to the case-by-case nature of WTO rule application on the one hand, and to a more systemic conflict of national approaches with the WTO obligation of non-discrimination on the other.

Keywords: trade and climate, WTO, Paris Agreement

JEL Classification: F18, Q27, Q54, Q58