Experts warn EU of climate change 'trade war'[fr][de] 

"WTO rules do not hinder climate action," said Ditte Juul-Jorgensen of the Commission's trade directorate (DG Trade) yesterday (15 September) while in Brussels for a 'Perfect Storm' seminar on trade, finance and climate.

But "negative action" in the scope of current discussions towards a successor agreement to the Kyoto Protocol under the UN Framework Convention on Climate Change (UNFCCC) could hamper global trade discussions, said Juul-Jorgensen, who heads a unit on sustainable development in DG Trade. 

Her comments were a thinly-veiled reference to the import restrictions or border tariffs that may be imposed by developed states to prevent carbon leakage.

The seminar was organised by Globe EU, a network of Parliament members and the Institute for Environmental Security, with the media support of EurActiv.

Back to barriers?

While the EU may ultimately opt against trade mechanisms and revert instead to some level of free emissions allowances to protect its most 'vulnerable' industries (see EurActiv 18/06/08), the picture looks different in the US. Any climate bill adopted by Washington is likely to include some form of import restrictions, according to Benjamin Simmons, a legal officer at the Economics and Trade Branch of the UN Environment Programme (UNEP).

This prospect worries proponents of open markets and international trade. 

Unilateral trade restrictions such as CO2-based import tariffs are "no more than a distraction" and will never offer a solution for an international climate deal, warned Doaa Abdel Motaal, an advisor of WTO Director-General Pascal Lamy in Geneva.

Trade based measures may offer "only a second or even third best option" for dealing with climate change, said Motaal, who lamented that the current focus on such measures is "very disheartening". Proponents of free trade like Motaal argue that import barriers simply lead to a diversion of 'dirty' exports and provide no incentive for developing states to obtain clean technologies and/or to push through industrial emissions reductions. 

Trade tools

Global trade talks under the so-called Doha Round collapsed in late July, largely due to disagreements between rich and poor nations over farm subsidies and agricultural trade regimes. The failure of Doha has raised questions about whether or not a global climate change deal can be effective if the multilateral trading regime under the WTO is in tatters.

Peter Mandelson, the EU's trade commissioner, yesterday told the Parliament's International Trade Committee that "there is no plan B" for Doha. Efforts and negotiations should continue since settling for failure would impact negatively on global climate change talks, Mandelson said.

But experts disagree on the extent to which a healthy WTO is a prerequisite for a success in Copenhagen in December 2009, when international negotiators meet to finalise a possible successor deal to the Kyoto Protocol.

Pascal Lamy argues that a global climate change deal must come first, so that WTO partners can re-adjust their trading stances.

Simmons disagrees. While the future of global trade talks may remain uncertain, existing WTO rules and mechanisms could be strengthened to provide positive input into global climate talks. WTO reporting standards on the level of energy subsidies could be tightened, for example, to provide a clearer picture of how market distortions, notably continued state subsidies for the fossil fuel sector, impact and hamper the development of a global market for clean technologies, he said.   

Carrots, not sticks

Meanwhile, MEPs in the Parliament's Development Committee are pushing for a massive transfer of funds to poorer states to ensure that their industrialisation and escape from poverty is realised without a huge spike in global CO2 emissions. 

Monies should be allocated through large-scale transfer of funds derived from the spoils of emissions permit trading under the EU ETS, whereby member states should devote at least a quarter of the funds obtained through the EU ETS to developing country funds, which would allow the EU to donate €2 billion annually as of 2010 and up to €10 billion annually as of 2020, according to an own initiative report adopted by the committee yesterday (15 September).

But EU member states have already indicated their opposition to being told by Brussels how to spend the revenues from EU ETS permit auctions, and the issue is set to remain contentious as EU legislators race to finalise the EU's climate and energy package before the end of the Parliament's legislature in March 2009.