Trade and Climate Change: Proposal
for Reconciling the WTO with Carbon-Reduction Treaties
Executive Summary
The relationship between climate change and the rules controlling the international players is an area that has elicited a lot of debate. Some of the trade agreements undermine the ability of governments to implement climate policies in their own countries. The fight for climate change is a battle for the policy makers in trade since if the conditions are not conducive for trade to happen; their profits will dwindle. Developing countries will have to suffer an extra cost on their exports if the playing field is not level with the international partners. All players in the provision of goods and services should price carbon emission costs correctly to ensure market efficiency. The policy and regulatory changes needed should affect both trade and climate change. This should be a global initiative and not just the leading partners. The effort and implement of proper policies by one party will not be sufficient, as their action will be watered down by the activities by the others. This paper looks at the effects climate change has had on business at the local and international level. It also looks at ways in which the World Trade Organization rules and regulations conflict with International conventions on climate change, especially carbon emission reduction. Finally, I attempt to make proposals on how this problem of climate change could be resolved without necessarily causing an imbalance in the markets.

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Trade and Climate Change: Proposal
for Reconciling the WTO with Carbon-Reduction Treaties
Introduction
Free trade could improve the welfare
of many countries. This is rarely achievable though since countries have
varying economic powers. They get into trade agreements with neighbors and have
a sort of exchange of resources. These relationships are usually a give and
take with the politics playing a major role. The inter-relation between climate
change and international trade has gravely impacted developing countries. Much
emphasis has not been given to provide a solution to a combined effort to
reduce the effects of global warming caused by human intervention. Our actions
now have far-reaching consequences and will affect generations to come.  In the quest to meet the needs of our
respective countries, we are depleting the natural resources and poisoning the
environment. This paper will attempt to highlight the potential areas of
conflict between various economic interests and the interventions proposed by
the trade partners and advocacy groups such as Wort Trade Organizations (WTO).
Background
The world stands at a crucial
juncture with respect to global economic policy development. Sustainable Development
Goals (SDGs) have been formulated through global governance to bring forth a
new perception of the issue of climate change to protect the earth’s economy,
the human race and the environment (Edouard & Bernstein, 2016).
Carbon-Reduction Treaties such as the Kyoto Protocol and the Paris Agreement on
Climate Change together with the SDGs are examples of currents ways through
which world leaders have come together for the sake of saving the world economy
by agreeing to join forces and tackle carbon emissions with one voice.
The United Nations Framework
Convention on Climate Change (UNFCCC) is a body of International partners who
have come together to engage on matters concerning the world’s climate. It
started as a call to countries to limit global temperatures and control climate
changes and working towards the impact of already existing effects of climate
change (Park, 2016).
The Paris Climate Agreement is an accord within the (UNFCCC) was adopted in December 2015. This Agreement deals with greenhouse gas emission mitigation, adoption and finance commencing 2020.  The agreement was negotiated by 196 parties and signed by 195 members. The Paris Agreement reached an agreement in 2015 where the signatories concurred to restrict global warming ‘well below 2°C and to pursue further reduction of these temperatures to 1.5 degrees Celsius (Raes, Liao, Chen & Seinfeld, 2010).
Each country is expected to
formulate policies and implement them the best way they see fit and finally
report to the UNFCCC on their contribution towards mitigation of global
warming. They agreed not to set any enforcement mechanisms of this agreement,
but they would at the minimum be expected to go beyond earlier set targets.
This stance was adopted after it was found impossible to ensure compliance
under the Kyoto Protocol (Gupta, 2014).
The concerns about this Agreement are that the current pledges by countries are not going to meet the required quota to meet the global target. Countries are not yet effecting policies to ensure carbon dioxide reduction emissions. The lack of an enforcement mechanism means nothing can be done to anyone who fails to implement policies of engage in activities that are geared towards environmental protection. The agreement was just a promise by the heads of state with no legal binding effect. No sanctions such as carbon tax can be imposed on one for failure of compliance (Park, 2016).
Private investors are to take up the
role of meeting the Sustainable Development Goal No.13 on ensuring action
concerning climate change and its impact (“Goal 13 .:. Sustainable
Development Knowledge Platform”, 2017). This involves low carbon ventures
and clean technology. The government’s role in this instance would be limited,
and hopefully, the conditions in the business environments in the countries
would be conducive.
The existing trade agreements are of
two kinds: Regional Trade Agreements (RTA) and Preferential Trade Agreements
(PTA). The RTAs are reciprocal agreements between partners. They include
customs unions, free trade agreements, etc. PTAs are unilateral preferences
that mean the developed countries are given preferential tariffs on their
imports from the LCDs and other non-reciprocal preferential systems. The most
significant area of conflict between the rules in these trade agreements and
climate change is the status of border tax adjustment within WTO’s General
Agreement on Tariffs and Trade (GATT). At the moment there is no carbon pricing
to enable meeting of the objectives of climate change under UNFCCC principles
(Park, 2016).
Strategies to combat climate change
suggested by partners are many and varied such as: (1) imposing carbon tax or
border tax adjustment. These tax caps are to offset any adverse effects of
capping carbon dioxide releases into countries that are not executing the Kyoto
protocol. (2) Increased reliance on renewable energies thereby reducing
pollution and emission of gases into the atmosphere; and offering inducements
for energy efficiency and preservation; (3) lowered subsidies for fossil fuels;
and (4) transnational transmissions, so developing countries shun burning coal
(Park, 2016).
Effects of Climate Change on
Business
Rapid climate adjustment threatens
the global economy not so much for the current generation but for future
generations. Under the earlier discussed treaties, countries are expected to
meet their targets through national intervention. Their efforts are monitored
and recorded in the International Transaction Log by the United Nations (UN)
Climate Change Secretariat to ensure compliance with the protocol. The Kyoto
Protocol presented 3 market-based instruments to realize the targets by members
(Mechanisms under the Kyoto Protocol). These instruments would motivate
sustainable growth through skill transfer and investment; remove carbon in an
affordable manner and inspire the privately owned businesses and
unindustrialized nations to support the decline struggle. These mechanisms
included Clean Development Mechanism (CDM); Joint Implementation (JI), and
Emissions Trading (ET) (“Goal 13 .:. Sustainable Development Knowledge
Platform”, 2017).
A recent study by James Hansen and
other co-authors indicated that the glaciers in Greenland and Antarctica could
be melting faster than had earlier been predicted. This would mean that within
50 years, the sea levels would rise by 10–20 feet (2015). This means that
coastal cities and countries such as New York, Haiti, etc. would suffer
tremendously. This is just a simple example of what climate change can do to a
country. This is the reason why in 2015, the Conference of Parties (COP21) met
in France to discuss International Trade in the face of climate change. The
expectation was that these partners would nurture development, create
businesses and improvement progress. Developing countries that still rely on
the natural habitat for their existence are being affected by global warming,
therefore, perpetuating more poverty. This leaves them impoverished since they
will not produce any resources to engage in trade.  For example, in Africa, tourism is the main
source of income for the countries with tourists visiting from all over the
world to see wild animals in their natural habitat. Due to the effects of
climate change, there are wildfires and drought that ravage them killing the
animals discouraging sightseers. The down at the African Coast of Indian Ocean,
the fish stock has gone down due to overfishing and the fact that the sea
temperatures have increased, it is no longer possible to support the once
attractive marine life (Reiter, 2015).
Most of the African nations rely on
agriculture for cash crops. This is slowly changing, as there has been a
massive loss of biodiversity experienced. Not only will these countries find it
difficult to feed their people, they will have nothing to trade with in
exchange for the good and services they lack. For instance, the Tanzanian coast
which is a central port for trade within the East African community is expected
to rise by 70 centimeters by 2070. This would mean the government revenue will
be affected and so will service delivery to the people.
Reconciling the WTO with
Carbon-Reduction Treaties
In 2010, parties to the Multilateral
Conventions (WTO, UNFCCC) were unable to reach consensus on reduction of
emissions of heat-trapping gases at the Copenhagen climate conference and at
the WTO Doha Round in 2001 since they involved complex issues. The issue of
cross-linking concessions did not make the discussion easier. There are those
scholars who believe that climate change is brought about by countries failing
to observe the environmental cost of production, therefore, the society bears
the brunt of these actions. There exists monopolies appear as a result of the
absence of intervention or if they do not provide a conducive business
environment. At the international level, however, market failure leads to a
dysfunctioning world economy.
As a result of the failure of the
Doha and Copenhagen meetings, the U.S and the European Union blamed China and
India whom they say are the main emitters of CO2 for failing to commit to the
reduction of the emissions under UNFCC (Hermwille, 2018). 3 Policy proposals
were fronted as follows:
BTAFU: BorderTax Adjustment based on Foreign Unrestricted Carbon Content BTADU: Border Tax Adjustment based on Domestic Unrestricted Carbon Content BTADE: Scenario Efficient Border Tax Adjustment
A tax on Carbon would guarantee
efficacy between producers from countries with high carbon taxes when compared
to with no carbon dioxide emission (Hermwille, 2018).
Other trade policy options would include the use of domestic and export subsidies to give national companies an upper hand over international companies. Subsidizing could lead to obligations and subsequently protracted proceedings through the WTO disagreement settlement procedures. If the governments then agree on rights and duties, countries with CO2 reduction policies and existing trade measures may be tempted to reaction as a result of imagined unfair price advantage from countries with policies on carbon reduction (Hermwille, 2018).
There exist general exceptions
provisions within WTO rules and agreement, which would ordinarily be considered
inconsistent with mainstream obligations, which allow trade restrictions of
trade to protect, e.g., animals, plants or health to safeguard finite natural
resources. These processes can be implemented in a general manner avoiding
tedious litigation (Hermwille, 2018).
The parties could use the
Trade-Related Investment Measures Agreement (TRIMS) as a discussed and
resuscitated idea. There was a list of export limitations, trade balancing
requirements and home-grown/ local content requirement. TRIMS were a handy
trade agreements permitting under developed countries to safeguard their
industries. It could be used to now protect industries which committed to
reduction of CO2 and dubbed Green Trims ++ (Hermwille, 2018).
TRIPS (Trade-Related Aspects of
Intellectual Property Rights) have exceptions which could be used to help the
least developed countries to advance. Technology from developed countries that
aid in carbon reduction could be acquired through the “compulsory licensing”
clause making it easier for these countries (LDCs). TRIPS could be widened to
include TRIPS++ (Hermwille, 2018).
The other solution would be by using
the Plurilateral agreements to combine three different sectors as follows:  a) energy (goods and services), b)
environment (goods and services) and c) trade (Preferential Trade Agreements)
and development (Aid-for-Trade, Enhanced Integrated Framework, TRTAs). This
would enable the countries to align their trade and development interests to a
green objective (Hermwille, 2018).
The WTO’s Agreement on Subsidies and
Countervailing Measures (SCM Agreement) may be applied to combat the excessive
fossil fuel subsidies. This Agreement has general restrictions have previously
not been effective in limiting fossil fuel subsidies since it has been seen as
an expensive endeavor (Hermwille, 2018).
Plausible Solutions to Climate
Changes at National and International levels
To end these problems, there has to
be a concerted effort, especially by all actors both in developed and
developing countries. Trade alterations, trade inducements or subsidizations
that encourage wasteful and unsanctionable trade and industry activities must
cease to exist. The predisposition to create new hurdles touching on
renewables, comprising biofuels, needs to be addressed at the local and
international level. Have strict requirements concerning the burden of trade measures,
which tend to work against sustainable development goals. Doing away with
fossil fuel subsidies such as tax breaks, loans, cheap land, etc. that encourages
big corporations to deplete the non-renewable energy sources as opposed to
investing in alternative energy sources. 

Carbon emissions have increasingly
gotten out of hand with the fossil fuels burning such as gas, oil or coal.
Carbon dioxide is released into the air when these fuels are being produced. It
should thereafter be re-absorbed by plants and animals, but it is too much in
the atmosphere making the global temperatures rise. This is global warming.
These players need to be incentivized to reduce carbon emissions. Trade and
investments are important in making a difference in markets and spreading them.
If the players could be allowed to engage in an open trading system, with
agreed rules, the producers of fossil energy would increase on efficacy and
reduce wastage.
As shown in the below, low carbon
investment may possibly be attained at domestic echelons through state
intervention, industry players, civil societies, private sector etc.
(International governance options to strengthen WTO and UNFCCC1, 2011) Source: (Saner, 2011)
At the international level,
International production organizations should go green. This should be felt at
all levels of production and putting in place a verifiable process to ensure
strict compliance of the final outcome or process. Multilateral agreements and
covenants such as Multilateral Environmental Agreements (MEAs) have attempted
to achieve this but with little success.
Financial markets both local and
international could be rewarded for investing in climate adaptation and
mitigation. They could be compelled to have an environmental and social
governance performance report. This will push them to perform in a more
responsible way.
Tariffs on environmental
technologies should be abolished to encourage innovation of environmentally
friendly technologies accessible to many. Wind turbines, solar panels are some
of the examples that come to mind that would help developing countries. The
Montreal protocol is viewed as one of the most successful multilateral
environmental agreements ever. It has received funding from UNDP, UNEP, and the
World Bank and spent this money through environmental conservation programs.
The Clean Technology Fund is guided
by UNFCC principles and finances clean technology transfers, which was to be
used for financing technology transfers. These are all good actions by the
World Bank, but this has not stopped them from also funding carbon-demanding
projects in line with their normal procedures. These funds are in the form of
loans so they will eventually have to be paid off at a steep cost especially to
the developing countries. This cannot, therefore, be said to be a self-actualization
of the Kyoto commitments.
Conclusion
To reconcile trade rules and climate
policies would require the effort of all global partners including the Least
Developed Countries. Governments must take it upon themselves to implement the
proposals stated herein and other dictates in the WTO agreements. Bearing in
mind that WTO is no longer an efficient negotiating partner, countries should
engage in regional, bilateral or Plurilateral agreements that support their
policies on climate change but at the same time do not stifle international
change. A balance can be found where positive climate provisions could find
their way in trade policies and vice versa.
References
Edouard, L., & Bernstein, S.
(2016). Challenges for Measuring Progress towards the Sustainable Development
Goals. African Journal Of
Reproductive Health, 20(3),
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Goal 13 .:. Sustainable Development
Knowledge Platform. (2017). Sustainabledevelopment.un.org.
Retrieved 22 April 2018, from https://sustainabledevelopment.un.org/sdg13
Gupta, A. (2014). Clean development
mechanism of Kyoto Protocol. International
Journal Of Climate Change Strategies And Management, 6(2), 116-130.
http://dx.doi.org/10.1108/ijccsm-09-2012-0051
Hermwille, L. (2018). Making
initiatives resonate: how can non-state initiatives advance national
contributions under the UNFCCC?. International
Environmental Agreements: Politics, Law And Economics. http://dx.doi.org/10.1007/s10784-018-9398-9
Park, D. (2016). Legal issues on climate change and
international trade law. Springer.
Raes, F., Liao, H., Chen, W., &
Seinfeld, J. (2010). Atmospheric chemistry-climate feedbacks. Journal Of Geophysical Research, 115(D12).
http://dx.doi.org/10.1029/2009jd013300
Reiter, J. (2015). What does climate change mean for
the future of trade?. World
Economic Forum. Retrieved 22 April 2018, from
https://www.weforum.org/agenda/2015/12/what-does-climate-change-mean-for-the-future-of-trade/
Saner, R. (2011). International governance options to
strengthen WTO and UNFCCC. Retrieved from
http://www.diplomacydialogue.org/images/files/20110611-International%20governance%20options%20to%20strengthen%20WTO%20and%20UNFCCC.pdf