Trade and Climate Change in the World Trade Organization

The document examines the intersection of global trade flows and climate change, highlighting how trade can both exacerbate emissions through 'embodied' carbon and facilitate the diffusion of green technologies. It details a variety of policy levers—including border carbon adjustments, the removal of fossil fuel subsidies, and the liberalization of environmental goods—that can align trade with climate goals. The brief analyzes the role of the WTO, noting that while existing rules generally allow for good-faith environmental policies, tensions arise over local content requirements and discriminatory measures. It highlights member-led initiatives like the Trade and Environmental Sustainability Structured Discussions (TESSD) and the Fossil Fuel Subsidy Reform group as critical paths for future cooperation, emphasizing the need for a 'just transition' for developing countries and least developed countries (LDCs).

• Trade contributes to climate change through emissions embodied in goods; countries that have reduced territorial emissions often become net importers of emissions, with some seeing imported emissions represent up to 50% of domestic levels, and as high as 77% in Sri Lanka.
• International shipping and aviation accounted for approximately 2 billion tonnes of CO2 in 2019, roughly 5% of global emissions, with two-thirds of these being international and thus not reported to the UNFCCC.
• Climate change disrupts trade by affecting infrastructure and productivity; research indicates that when trade flows are constrained, global welfare losses from climate change increase by 76%.
• Governments can use border measures to discourage carbon-intensive trade, such as border carbon adjustments to prevent carbon leakage, though these remain controversial at the WTO due to lack of consensus on determining carbon content.
• Economic incentives can be used to support climate goals by removing fossil fuel subsidies or providing subsidies for clean energy, which in 2017 accounted for $128 billion—less than a third of the support granted to fossil fuels.
• WTO rules generally permit environmental policies provided they do not constitute arbitrary discrimination or disguised restrictions on trade; however, disputes have occurred over local content requirements in clean energy programs, such as in Canada and India.
• The Trade and Environmental Sustainability Structured Discussions (TESSD), co-sponsored by 74 members including the US, EU, and China, provides a deliberative space to align trade policies with climate goals and explore the circular economy.
• A group of 47 co-sponsors is working within the WTO to advance the rationalization and phase-out of inefficient fossil fuel subsidies, emphasizing the need to minimize adverse impacts on developing countries.
• To ensure a just transition, developing countries and LDCs require enhanced trade-related capacity building, such as through the WTO-led Aid for Trade Initiative, and incentives for the transfer of climate technologies.

APA

Bellmann, C. (2022). Trade and Climate Change in the World Trade Organization. Forum on Trade, Environment, & the SDGs. https://lyrical-cormorant.files.svdcdn.com/production/assets/images/Publications/TESS-Policy-Brief-Trade-and-Climate-Change-in-the-World-Trade-Organization.pdf?dm=1695371690

Chicago

Bellmann, Christophe. Trade and Climate Change in the World Trade Organization. Forum on Trade, Environment, & the SDGs, 2022. https://lyrical-cormorant.files.svdcdn.com/production/assets/images/Publications/TESS-Policy-Brief-Trade-and-Climate-Change-in-the-World-Trade-Organization.pdf?dm=1695371690.

Wikipedia

{{cite report |last1=Bellmann |first1=Christophe |title=Trade and Climate Change in the World Trade Organization |publisher=Forum on Trade, Environment, & the SDGs |date=November 2022 |url=https://lyrical-cormorant.files.svdcdn.com/production/assets/images/Publications/TESS-Policy-Brief-Trade-and-Climate-Change-in-the-World-Trade-Organization.pdf?dm=1695371690 |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bellmann2022trade, author = {Bellmann, Christophe}, title = {{Trade and Climate Change in the World Trade Organization}}, institution = {Forum on Trade, Environment, \& the SDGs}, year = {2022}, month = nov, url = {https://lyrical-cormorant.files.svdcdn.com/production/assets/images/Publications/TESS-Policy-Brief-Trade-and-Climate-Change-in-the-World-Trade-Organization.pdf?dm=1695371690}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }