Using Trade Policy to Fight Climate Change
The interaction between trade and climate change is complex: In general, more economic activity means more greenhouse gas emissions. Indeed, unprecedented global expansion of trade over the past several decades has generated increased economic activity as well as increased use of transportation services, both of which contribute to higher emissions levels. However, trade can also lead to global improvements in energy efficiency—and thus declines in greenhouse gas emissions—by increasing access to environmentally-friendly technologies, goods, and services. Countries may also shift what they produce toward more or less energy-intensive sectors. Climate activists argue that trade agreements can also “shrink the ‘policy space’ available to countries to pursue environmental goals;” according to a report this year from the Economist, if these goals “prohibit, or are perceived to prohibit, a country’s ability to distinguish between products according to emissions released during their production.”
A variety of modest or voluntary climate trade provisions already exist. For example, the 21 countries participating in the Asia-Pacific Economic Cooperation (APEC) forum pledged to lower import duties on a list of “environmental goods” in 2011. Existing climate-related provisions in bilateral trade deals include support for renewable energy and energy efficiency, requirements that the parties ratify international climate agreements, harmonization of climate regulation, and measures for climate change adaptation. Additionally, a group of five small countries have pledged to negotiate among themselves an agreement that would remove barriers to trade in environmental goods and services, eliminate fossil fuel subsidies, and develop guidelines for voluntary eco-labeling.
The Paris Agreement on climate change foresees that countries will include trade-related provisions in the self-administered and self-monitored pledges they made to reduce emissions. But as a March 2017 study of trade commitments taken on in response to the Paris Agreement found, “the major emitters and net exporters of carbon do not put a strong focus on trade or trade-related measures.” The Economist report notes that “in climate policy discussions, relatively little attention is paid to the global trade architecture,” meaning that there is considerable room for improvement in this area.
Environmental organizations and academics have proposed different ways international trade rules could be used to promote the adoption of green technology, support countries struggling to adapt to climate change, or punish countries that do not meet their international commitments to reduce greenhouse gases. The universe of trade measures proposed to support climate action include eliminating tariffs and non-tariff barriers that obstruct trade in green goods, services, and technologies; harmonizing standards on environmental goods and services; eliminating distortionary subsidies in the energy and agriculture sectors; and many others.
The 2020 candidates are increasingly focused on domestic green jobs and investment in green R&D, and have made some proposals linking these Green New Deal-style policies to trade. Harris and Secretary Julián Castro have said they would encourage green exports through focused investment from the U.S. Export-Import Bank and take other measures to support exports of American green tech and eliminate funding for emissions-intensive projects. Harris has specifically said she would work to end government funding of and support for fossil fuel exports. Biden and Warren have proposed different “carbon tax” measures that would allow the United States to place fees or quotas on carbon-intensive imports, a proposal to which the incoming chief of the European Commission, Ursula von der Leyen, has also committed the EU.
Warren has also proposed a “Green Marshall Plan,” with a proposal to “dedicate $100 billion to helping other countries purchase and deploy American-made clean energy technology.”
Trump, by contrast, has not talked about fighting climate change in the context of trade policy; his administration’s "energy dominance" policy priorities seek to promote U.S. energy exports and reduce dependence on imported oil.
Some candidates have listed specific climate and environmental requirements for every new trade deal, such as requiring trade partners to be Paris Agreement signatories and to have a plan to reduce their emissions. In his “Plan for a Clean Energy Revolution and Environmental Justice,” Biden says that he would “condition future trade agreements on partners’ commitments to meet their enhanced Paris climate targets.” Harris says she would oppose any trade deal that does not raise environmental standards. Warren would require that countries be Paris Agreement signatories and be making progress toward their targets before the United States negotiated trade deals with them.
Warren proposes changing the way environmental policies and subsidies are considered under international rules, saying her administration would negotiate a rule with other countries that would prevent such policies from being challenged as unfair subsidies. She has also proposed the creation of a "non-sustainable economies” designation at the WTO that would allow the United States to impose tougher environmental standards on imports produced with large fossil fuel inputs; this too would have to be agreed at the WTO, which operates by consensus of all member states.
Candidates have also called for the creation of domestic trade enforcement mechanisms to identify and investigate violations of environmental and other standards. O’Rourke has called for “creating a Trade Enforcement Commission that is independent of the Office of the U.S. Trade Representative to identify violations of labor and environmental standards.” Warren has called for a new labor and environmental enforcement division at the USTR and the creation of automatic triggers to investigate unfair trade practices related to environmental standards. O’Rourke has also proposed assistance to developing countries to enforce environmental standards.
Finally, several candidates have indicated that they would expand the participation of environmental groups in trade negotiations, for example by including environmental interests in trade advisory committees. See our essay on reforms to how the U.S. government makes trade policy for candidates’ proposals for which constituencies should be represented in trade negotiations.