Trade in a World Where Goods Carry Carbon Passports

Abstract

In a world of rising commitments to reverse the build-up of greenhouse gas emissions and to rally behind the ultimate goal of stabilizing the planet, goods moving to and from jurisdictions with diverse climate change policies and energy structures may need to reveal where they are from and what they are made of as a way to validate their consistency with both national and global climate change action commitments. Requiring internationally traded goods to carry a "carbon passport" containing such information could help to build a climate-friendly global economy grounded on well-informed markets that have reliable data on the greenhouse gas (GHG) emissions embodied in goods-tracked throughout their supply chains and across borders. To make the trading system reinforce -and not undermine- the global response to climate change, we need all goods moving across borders to be identified in ways that reflect their GHG emissions impact: the balance between emissions caused over their relevant products and processes, plus or minus their respective GHG cost internalization efforts. Carbon passports aim to remedy a critical information failure in relation to traded goods-notably, helping buyers to better understand how aligned the products they are purchasing are with global (and national) climate change action commitments. This information can both influence purchasing decisions and enable differential treatment of goods in international trade based on their GHG emissions profiles.

Keywords: Climate Change, International Trade, Sustainable Development, Environmental Policy and Governance, WTO, Global Economic Governance