TThe United Nations climate conference, now in its final days in Baku, has heightened long-standing tensions between countries on the path to decarbonizing the global economy. The role of fossil fuels, the financial obligations of rich countries, and political tensions have all contributed to well-founded fears that this year’s talks—known as COP29—could collapse.
These obstacles are just the beginning. A COP29 delegate who blinked through the chaos of this year’s negotiations may have missed the emerging aspects of international climate cooperation and conflict: climate communication and trade policy. In Baku, a dispute over policies such as a carbon-targeted tax fueled negotiations before the summit officially began—and an evolving trade climate relationship has hung over talks ever since. With US President-elect Donald Trump poised to take the hammer to the status quo, trade policy is set to play an even bigger role in the climate debate in the coming years.
These issues are so controversial that many around the world on climate policy are quick to brush them off lest discussing them hinders progress elsewhere. But such an approach is not short-sighted: the climate trade nexus is an important part of the future of climate action. “There should be a discussion about laws, ultimately, that will deal with the way countries trade, and its impact on the climate,” said Pamela Coke-Hamilton, a trade lawyer who works as the head of the International Trade Center, told me. at the top. “Hiding will not solve anything.”
First of all for several decades of international climate policy negotiations, trade policy took a back seat. Many academics have suggested that penalizing imports for their carbon emissions could serve as an effective tool to reduce emissions, but policymakers prefer to follow a more cooperative approach.
But, as climate policies diverged, linking emissions and trade policy became a major priority. Countries that spend the most to cut carbon—the European Union—wanted to level the playing field as other trading partners dragged their feet. And so during the first Trump administration the EU said it would go ahead with a carbon tax on imports. The policy is currently in the implementation phase, and other areas are considering how to follow suit. The United Kingdom, Australia, and Canada all have similar policies in place.
Surprisingly, countries that export to these markets are not happy. In talks to set the agenda before the start of COP29, a group of major emerging market countries has threatened to delay the opening of negotiations if trade issues are not put on the official agenda. “Those measures increase the cost of climate change around the world [and] hindering the efforts of developing countries to advance their climate commitments,” said China in a statement addressed to COP leaders sent on behalf of Brazil, South Africa and India. There are elements of truth in this statement given that carbon pricing inevitably increases costs and industries affecting developing economies, but how these changes will play out is difficult to predict.
Eventually, the group backed off and let the problem kick in. But, whatever happens in the coming months, any observer should expect these issues to resurface, especially since Brazil will host the UN climate talks next year.
One of the big questions that will be played after COP29 is what will happen in the US. Although the US has not put a price on carbon emissions like some of its developed economies, the country’s convergence of environmental laws means that many of its products have a low carbon content. In the view of some climate activists, that fact creates an opportunity for policymakers to penalize high-carbon imports. Democrats and Republicans alike have enacted legislation to monetize the carbon cap. And in April the Biden administration announced a task force to consider how the policy might work. Most interestingly, Trump’s trade policy nominee — Bob Lighthizer — said he supports the US to follow this path.
Proponents of linking climate and trade policy see an opportunity. “I think there’s real hope for something to emerge,” said Sheldon Whitehouse, a Democratic Alliance official from Rhode Island, in Baku. Whitehouse cited a Capitol Hill task force seeking bipartisan consensus on the issue.
There are many reasons to doubt that the future of the Trump Administration would follow such a path. Trump, of course, favors restrictive trade practices, but he has never mentioned a carbon-focused tax, instead promising to impose tariffs on all exports — at high prices to China. And there’s no reason to think his love of taxes will be enough to overcome his rejection of all things climate-related.
Will climate and trade linkages really help reduce global emissions? Experts say it depends on how these policies are used. If done right, they can level the playing field, ensuring that global companies pay the costs of their emissions regardless of where they are located. But, if done wrong, loopholes can lead to global trade without fully realizing the benefits. A major concern for many is that the US could impose a carbon tax on exports without mandating a domestic carbon price, which could give some American firms a chance to pay the cost of their exits.
In any case, as the climate is full of uncertainty in the second iteration of the Trump Administration, the discussion is a reminder that the economic changes caused by the energy transition are moving—and perhaps trade is playing a more important role than we might realize. expected ten years ago.
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