GEM Papers
Climate Change and Trade Policy: From Mutual Destruction to Mutual Support
Published By: Patrick Messerlin
Subjects: WTO and Globalization
Summary
Contrary to what is still often believed, the climate and trade communities have a lot in
common: a common problem (a global “public good”) common foes (vested interests using
protection for slowing down climate change policies) and common friends (firms delivering
goods, services and equipments which are both cleaner and cheaper). They have thus many
reasons to buttress each other. The climate community would enormously benefit from
adopting the principle of “national treatment” which would legitimize and discipline the use
of carbon border taxes adjustment and the principle of “most-favored nation” which would
ban carbon tariffs the main effect of which would be to fuel a dual world economy of clean
countries trading between themselves and dirty countries trading between themselves at a
great cost for climate change. And, the trade community would enormously benefit from a
climate community capable to design instruments supporting the adjustment efforts to be
made by carbon-intensive firms much better than instruments such as antidumping or
safeguards which have proved to be ineffective and perverse. That said, implementing these
principles will be difficult. The paper focuses on two key problems. First, the way carbon
border taxes are defined has a huge impact on the joint outcome from climate change, trade
and development perspectives. Second, the multilateral climate change regime could easily become too complex to be manageable. Focusing on carbon-intensive sectors and building “clusters” of production processes considered as having “like carbon-intensity” are the two main ways for keeping the regime manageable. Developing them in a multilateral framework would make them more transparent and unbiased.