Getting the Green Light: The Legal Implications of Global Trade Rules on Achieving Global Climate Goals

Despite the fact that the climate crisis requires great international collaboration and coordination when it comes to policymaking for mitigating emissions, the most recent report from the United Nations Intergovernmental Panel on Climate Change (IPCC) demonstrates conclusively that country leaders have not taken nearly enough action. The obstacles to climate action are myriad – political, financial and legal, national and international.

Global trade and investment rules are aimed primarily at limiting obstacles to cross-border economic activity by removing trade barriers, limiting regulatory barriers and increasing transparency. Those rules may also make it harder for countries to deploy certain kinds of climate policy and to design their policies in ways that simultaneously achieve development outcomes and build political will in favor of environmental protection. Furthermore, by constraining the use of certain kinds of policymaking, trade rules may be exacerbating the already exorbitant costs of meeting climate goals. 

A new policy brief from Rachel Thrasher, Warren Kaplan and Yudong (Nathan) Liu investigates the potential legal obstacles posed by the World Trade Organization (WTO) and the network of bilateral and regional trade and investment agreements. It maps an illustrative list of diverse climate policies onto existing global trade and investment rules to act as a quick test of the extent to which international legal constraints are in tension with much of climate policy as practiced by states. Initial findings suggest that it is common for the most active countries to ignore trade rule constraints in crafting their climate policy. 

Global trade rules must be reformed in a way consistent with global climate goals – so that all countries can implement the suite of climate policies needed to mitigate climate change while continuing to grow their economies. Reform of this sort must proceed carefully, following three core principles: 

• The reform should involve actual negotiations. Some countries may be tempted to reform the trading system by violating the rules in a principled way – in order to promote sustainability and combat climate change. This approach, however, runs the risk of undermining goals of international cooperation in trade and climate by reverting to a power-based, rather than a rules-based global system.
• The reform should take place through multilateral negotiations. Other countries have advocated for moving away from consensus-based decision-making or proposed moving negotiations to plurilateral fora, finding like-minded countries with which it is easier to agree. These approaches, however, may alienate some member states, undermining support for the institution, and making them unlikely to improve the existing tension between climate action and global rules.
• The reform should take place through inclusive negotiations. Since LMICs are vulnerable to being left behind in the green energy transition due to their lack of access to particular financial and technological resources, any multilateral negotiation must place at its center the diverse voices of the Global South. 

All countries will need to cooperate to funnel financial, human and technological resources to the places where they are most needed. To facilitate and support these herculean efforts, members of the WTO can take the lead by aligning the international institution with domestic climate policy priorities.