How to Align Trade and Climate Policy – an Alliance of the Willing

The fight against climate change is at the top of the agenda of global leaders, in politics and business alike. Ambitious pollution reduction targets however, only work if they are implemented globally. Trade policy can help to do this if the multilateral trade system is reformed appropriately.

Trade policy has the potential to contribute substantially to curbing climate change. However, the global trade system is suffering the deepest crisis in the history of the World Trade Organization (WTO). To revive multilateralism, it is crucial to pursue a positive approach based on the commitment to a common target like climate protection and reinforced by the urgency of that target. Hubertus Bardt and Galina Kolev propose in their newly published IW Policy Paper a Trade Club for Climate (TCC) or a Sector/Industry Climate Club (SICC) as possible alternative (if not the only) ways to address both the climate crisis and the crisis of the global trading system at the same time. TCC/SICC should be exclusive, appealing and based on the experience of the GATT and WTO negotiations. Starting the negotiations with a smaller number of countries to achieve a large progress is more feasible than involving all current WTO member states right from the beginning. TCC could draw on the potential of trade policy to contribute to climate protection and should be an attempt to liberalise trade with environmental and climate goods and services. A SICC could focus on the main producing countries of specific industries, which would make negotiations about minimum levels of carbon prices more feasible. The change of political power in the USA, the recent trade policy review in the EU and the increasing commitment of many other countries worldwide show that there cannot be a better time to initiate a TCC or SICCs for specific industries and launch negotiations.