Trade and Climate Change: Issues in Perspective

The report examines the nexus of trade and climate change, focusing on the liberalization of environmental goods, border carbon adjustments, embodied carbon, intellectual property rights, clean energy investment, and product standards. It argues that while trade policy can facilitate the diffusion of low-carbon technologies, it must be carefully aligned with development goals to avoid creating non-tariff barriers for developing nations. The document highlights the tension between protecting domestic industrial competitiveness and maintaining WTO compliance, particularly regarding processes and production methods (PPMs). It concludes that trade liberalization alone is insufficient and must be complemented by financial assistance, technology transfer, and regulatory frameworks to achieve significant emissions reductions.

• Trade liberalization of low-carbon goods can reduce mitigation costs by making technologies more affordable, with a World Bank estimate suggesting that removing tariffs on wind, solar, clean coal, and efficient lighting in high-emitting developing countries could boost trade by up to 13% if non-tariff barriers are also removed.
• The WTO Doha Round negotiations on environmental goods and services (EGS) are hindered by a lack of a universal definition for 'environmental goods' and the 'dual-use problem,' where products like pumps or pipes have both environmental and non-environmental applications.
• Border Carbon Adjustments (BCAs) are proposed to prevent 'carbon leakage' and protect the competitiveness of domestic industries facing high carbon costs, but they face significant WTO legal hurdles regarding the non-discrimination of 'like' products.
• For a BCA to be WTO-legal under GATT General Exceptions, it must consider all comparable climate policies of the exporting partner and allow individual producers to prove their specific carbon efficiency rather than using national averages.
• Embodied carbon—the CO2 emitted throughout a product's entire manufacturing and distribution chain—reveals that Annex B countries are generally net importers of emissions, while countries like China are net exporters.
• Intellectual property rights (IPRs) are viewed as both an incentive for innovation and a potential barrier to technology transfer; however, evidence suggests they are less of a barrier in the climate sector than in the pharmaceutical sector due to more fragmented markets and competitive pricing.
• Existing TRIPS flexibilities, such as compulsory licensing and exceptions for experimental use, could be utilized to facilitate the transfer of climate-related technologies to developing countries.
• Global energy investment needs are immense, with the IEA citing a requirement of $22 trillion by 2030, but public funding is insufficient, meaning the private sector must be the primary driver of clean energy infrastructure.
• International Investment Agreements (IIAs) may inadvertently chill climate action if their 'fair and equitable treatment' or 'indirect expropriation' clauses allow investors to sue governments over new environmental regulations.
• Product energy performance standards and labeling are highly cost-effective mitigation tools; for example, phasing out inefficient lighting could save 16.6 billion metric tons of CO2 and US$1.6 trillion for end-users by 2030.
• Standards based on Processes and Production Methods (PPMs) are controversial because they can be used as disguised protectionism and may impose unfair financial burdens on exporters from developing countries.

APA

Cosbey, A. (2008). Trade and Climate Change: Issues in Perspective. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/cph_trade_climate.pdf

Chicago

Cosbey, Aaron. Trade and Climate Change: Issues in Perspective. International Institute for Sustainable Development, 2008. https://www.iisd.org/system/files/publications/cph_trade_climate.pdf.

Wikipedia

{{cite report |last1=Cosbey |first1=Aaron |title=Trade and Climate Change: Issues in Perspective |publisher=International Institute for Sustainable Development |date=2008 |url=https://www.iisd.org/system/files/publications/cph_trade_climate.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cosbey2008trade, author = {Cosbey, Aaron}, title = {{Trade and Climate Change: Issues in Perspective}}, institution = {International Institute for Sustainable Development}, year = {2008}, url = {https://www.iisd.org/system/files/publications/cph_trade_climate.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }