Brussels seeks ‘international coalition’ on trade in green goods

“I commit to building a coalition of trade ministers across the globe who want to take action to promote trade in green goods and services,” said the Commission’s vice-president in charge of the economy, Vladis Dombrovsiks. [@VDombrovskis / Twitter]

The European Commission will convene a ministerial meeting next year to promote trade as a way of reaching climate and environmental objectives in what could be the first step towards the creation of a “climate club” called for by Germany.

“I commit to building a coalition of trade ministers across the globe who want to take action to promote trade in green goods and services,” Valdis Dombrovskis, the Commission vice-president in charge of the economy, said on Thursday (7 October)

“To take this forward, I will call for a ministerial meeting devoted to trade, climate and sustainability next year,” the Latvian Commissioner said at the EU sustainable investment summit in Brussels.

The initiative could be the first step towards creating a “climate club” that Germany has been calling for. Olaf Scholz, the country’s finance minister, has urged the EU to create a climate club with other countries like the United States, Japan, and possibly even China.

The move would seek to ease trade frictions linked to green tariffs such as the EU’s planned carbon border levy, aimed at protecting European industries against cheaper imports of high-polluting goods.

“And to do this, it’s a good idea to discuss about having a sort of a club of people willing to do similar things and not competing each other,” Scholz said earlier this year.

Scholz’s left-wing SPD party came out first in the September German federal election and he is in pole position to become the country’s next chancellor after sixteen years of rule by Angela Merkel.

Germany's Scholz proposes ‘climate club’ to avoid trade friction

Germany wants the European Union to create a “climate club” with other countries like the United States, Japan and possibly even China to avoid trade friction linked to green tariffs such as a planned carbon border levy.

The Commission’s initiative on trade comes as world leaders prepare to meet in November at the COP26 climate summit in Glasgow. Governments there are expected to make new commitments to cut greenhouse gas emissions, in line with the Paris Agreement objective of containing global warming “well below 2°C”.

And trade deals will play a key part in achieving decarbonisation goals, Dombrovskis said.

“We are proposing the inclusion of Paris climate commitments as a key element of trade negotiations. And we seek commitments for climate-neutrality in our negotiations with G20 countries,” the Commission vice-president said.

The EU has already started including climate clauses in its bilateral trade agreements, starting with the EU-Japan trade deal in 2018. In May this year, Brussels and Tokyo sealed a “green alliance”, reaffirming their “shared ambition of reaching net-zero greenhouse gas emissions by 2050”.

These alliances are now becoming standard in EU trade talks.

Europe “will use its trade agreements to speed up cooperation on climate action and other environmental challenges – such as biodiversity and sustainable food systems,” Dombrovskis said.

The United States are another key potential partner for Europe on green technologies. In the wake of Joe Biden’s election to the White House last year, the Commission proposed establishing “a comprehensive transatlantic green agenda” to coordinate EU-US positions on climate change.

At a summit in June, the two sides outlined plans for a transatlantic alliance to develop green technologies, pointing to sustainable finance as an area for closer transatlantic collaboration.

EU, US eye 'Green Technology Alliance' at Brussels summit

The United States and European Union pledged closer cooperation on fighting climate change but steered clear of setting a date to stop burning coal, at a bilateral summit on Tuesday (15 June).

But there are frictions too. In July, the Commission tabled a carbon border adjustment mechanism as a way of protecting European companies facing higher carbon prices than foreign competitors.

Coming into force from 2026, it will mean some companies importing into the European Union will have to pay pollution costs at the border on carbon-intensive products, such as steel.

China has criticised it, saying the proposed levy “violates WTO principles” and will “seriously undermine trust” in the global trading system.

The US has expressed reservations too, saying that implementing a border levy on carbon-intensive imports will be “extremely complicated”.

US raises concerns over Europe’s planned carbon 'border tax'

Implementing a border levy to price carbon-intensive imports and protect European industries will be “extremely complicated,” warned Jonathan Pershing, a member of the US climate envoy’s team.

Brussels hopes that trade agreements will help lower the cost of access to clean technologies that are needed for the green transition.

Europe’s climate goals “won’t be cheap” to attain, Dombrovsiks warned. Achieving the EU’s 2030 climate targets – a 55% cut in greenhouse gas emissions – “calls for additional annual investments of some €355 billion over the next decade,” coming from both private and public sources, he remarked.

This will come in addition to the €130 billion that Europe will need for other environmental goals, he added.

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