Commentary
Minsk’s faith in the future of its larger neighbor’s economy is fading as Belarusian firms in Russia see record losses.
Olga Loiko
REQUIRED IMAGE
Paper
Can Trade Policy Support the Next Global Climate Agreement?
Recent WTO rulings indicate an increasing willingness to restrict trade based on the environmental impact of goods production. The global community should incorporate trade-related measures into any post-Kyoto multilateral climate agreement.
By Margaret Lay
Published on Oct 22, 2008
The global community should incorporate trade-related measures into any post-Kyoto multilateral climate agreement, concludes a new paper from the Carnegie Endowment.
Recent WTO rulings indicate an increasing willingness to restrict trade based on the environmental impact of goods production. However, the trade community remains concerned that such restrictions will be used to protect domestic industries, reducing efficiency, and potentially spark a tit-for-tat trade war. Margaret Lay examines the relationship between the trade and climate regimes to determine how the global community can best use trade measures to strengthen climate policy while upholding the goals of the multilateral trade system.
Key conclusions:
- Ad hoc national policies—the EU carbon tariff proposed in 2007, for example—are less effective than multilateral agreements because they target single nations, muting the incentive for firms within targeted nations to improve their production processes. Unilateral policies are also more open to challenge under WTO rules.
- With sufficient participation, trade restrictions can induce cooperation by reluctant states and discourage free riding by creating a credible threat of reduced business, as happened with the 1987 Montreal Protocol banning trade in chlorofluorocarbons (CFCs).
- Multilateral trade restrictions can also strengthen the global climate regime by preventing carbon-intensive industries from migrating to countries with looser environmental standards. A multilateral carbon tariff, for example, removes the incentive to migrate by offsetting the lower cost of operating under a lax climate regime.
Lay concludes:
“Amid concerns about protectionism and skewed incentives to firms in developing countries resulting from these national-level tariff proposals, the trade and environment policy communities appear to be headed for a major clash over climate-related trade measures. Yet previous uses of multi- and unilateral trade measures to support environmental policy suggest that trade measures could be designed to build upon the synergies between the two regimes. Climate policymakers aware of the synergies could develop trade-related measures that support climate policy and are consistent with the concerns of the multilateral trade community.”
About the Author
Margaret Lay is a former junior fellow of the Carnegie Endowment’s Energy and Climate Program and Trade, Equity, and Development Program. She is currently a research assistant to the Federal Reserve Board of Governors.
About the Author
Margaret Lay
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
More Work from Carnegie Russia Eurasia Center
- Russian Market Sours for Belarusian State Companies
- Did Putin Return From China Empty-Handed?Commentary
With no key agreement signed on the Power of Siberia 2 gas pipeline, there is a risk that the window of opportunity for Russia will close if Chinese power generation becomes so green that new gas sources are no longer of any interest to Beijing.
Alexander Gabuev
- In Russia, Private Companies Have Been Left to Pick Up the Tab for Ukrainian Drone AttacksCommentary
The cost of air defense has become an unregistered tax on revenue for businesses. While military rents are consolidated in the federal budget, the costs of defense are being spread across the balance sheets of companies and regional governments.
Alexandra Prokopenko
- Could the Iran War Push Japan to Restore Russian Oil Imports?Commentary
Tokyo would have to surmount a lot of obstacles—not least Western sanctions—if it wanted to return Russian oil imports to even modest pre-2022 volumes.
Vladislav Pashchenko
- The Much-Touted Middle Corridor Transport Route Could Prove a Dead EndCommentary
For the Middle Corridor to fulfill its promises, one of these routes must become scalable. At present, neither is.
Friedrich Conradi
