Trade Policy Tools and Instruments for Addressing Climate Change and Sustainable Development

This scoping paper, produced for the Trade Ministers’ Dialogue on Climate Change Issues in 2007, explores how trade policy tools can support climate change mitigation and sustainable development. It identifies several areas for potential synergy, including the liberalization of trade in low-emission goods, the reform of subsidy rules to support green R&D, the removal of domestic barriers to clean energy investment, the easing of intellectual property restrictions, and the reduction of fossil fuel subsidies.

• Lowering tariff and non-tariff barriers (NTBs) for low-emission goods could increase the uptake of and investment in these technologies. While tariff reductions are simpler, NTBs—such as technical standards, labelling, and subsidies for domestic production—may represent more significant obstacles. Defining 'low-emission goods' is challenging, particularly for goods that require a relative standard of cleanliness compared to a baseline.
• The Agreement on Subsidies and Countervailing Measures (SCM) previously allowed 'non-actionable subsidies' for R&D and environmental protection, but these provisions expired in 1999. Reinstating and recasting these flexibilities to focus on climate change objectives—such as supporting low-GHG retrofits or renewable energy investment—could help, provided they do not grant unfair competitive advantages to domestic firms.
• Domestic barriers to foreign direct investment (FDI) in the energy sector, including customs procedures, licensing permits, and regulatory regimes (such as the lack of obligations for monopolies to buy from independent producers), can disincentivize clean energy investment. Addressing these would require voluntary host-state requests and likely financial and technical assistance.
• While some argue that strict intellectual property rights (IPRs) hinder the transfer of low-GHG technologies, others maintain that IPRs are necessary incentives for innovation. Any effort to relax IPRs would need to ensure incentives remain and would require the receiving firms to have adequate 'absorptive capacity,' including technical and managerial expertise.
• Fossil fuel subsidies distort international trade and discourage investment in alternative technologies. The IEA estimated total energy subsidies at $250 billion in 2005, with $90 billion for oil products; removing consumption subsidies in eight large non-OECD economies could potentially lower global CO2 emissions by 4.6%. However, reform is politically difficult and requires reliable data and social cushions for the poor.

APA

Cosbey, A. (2007). Trade Policy Tools and Instruments for Addressing Climate Change and Sustainable Development. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/trade_tools_climate_sd.pdf

Chicago

Cosbey, Aaron. Trade Policy Tools and Instruments for Addressing Climate Change and Sustainable Development. International Institute for Sustainable Development, 2007. https://www.iisd.org/system/files/publications/trade_tools_climate_sd.pdf.

Wikipedia

{{cite report |last1=Cosbey |first1=Aaron |title=Trade Policy Tools and Instruments for Addressing Climate Change and Sustainable Development |publisher=International Institute for Sustainable Development |date=2007 |url=https://www.iisd.org/system/files/publications/trade_tools_climate_sd.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cosbey2007trade, author = {Cosbey, Aaron}, title = {{Trade Policy Tools and Instruments for Addressing Climate Change and Sustainable Development}}, institution = {International Institute for Sustainable Development}, year = {2007}, url = {https://www.iisd.org/system/files/publications/trade_tools_climate_sd.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }