Global trade and promotion of cleantech industry: a post-Paris agenda

Abstract

The Paris Agreement adopted in December 2015 puts the world on a new footing for global solutions to the issue of mitigation of climate change. In the formulation of climate policy, the issues of trade in cleantech goods, and the promotion of cleantech industries through industrial policy measures such as local content requirements, now loom large. The case for reconciliation between the United Nations Framework Convention on Climate Change (UNFCCC) and World Trade Organization (WTO) is now becoming stronger, and calls for specific steps to enable trade to accommodate green industry promotion strategies. Specifically, it is proposed that the next Conference of the Parties under the UNFCCC, to be staged in Morocco late in 2016, adopt a resolution calling on the WTO to recognize the authority of the UNFCCC in recognizing climate change mitigation as a ‘public good’, whose pursuit might allow for temporary use of industrial development policies such as local content requirements, if countries wished to follow such a strategy.

Policy relevance

Countries’ trade policies are currently formulated without reference to climate change, while climate change strategies are formulated without reference to principles of fair trade. The article proposes means through which the two regimes, governing trade and climate change, and the two principal bodies involved, the WTO and UNFCCC, can be brought to a state of mutual recognition and (prospective) harmony. The implications for climate policy are traced.

Keywords:

• World Trade Organization
• trade policy
• mitigation scenarios
• UNFCCC

Acknowledgements

I wish to acknowledge the very helpful comments made by the Editor in Chief at the proofs stage of the article which facilitated the argument being presented with greater clarity.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. The Paris Agreement was adopted by the 21st Conference of the Parties (COP) meeting in Paris in December 2015, under the auspices of the UNFCCC. For background, see the Editorial in Nature Climate Change in December 2015 (Plotting a course from Paris, Nature Climate Change, 5, 1021 (Dec 2015), as well as the text of the Agreement, available at the UNFCCC webpage: http://www.cop21.gouv.fr/wp-content/uploads/2015/12/l09r01.pdf.

2. On China’s build-up of renewable energy industries, see Lewis (2014) or Mathews and Tan (2015), and on the sources of trade friction with other countries in the PV sector, see Dai and Xue (2015).

3. For the text of the WTO Appeal decision, see WTO (2014), and for comment, see Charnovitz and Fischer (2015).

4. On India’s strategies including the use of LCRs, see Johnson (2016) and Chaudhary, Krishna, and Sagar (2015). For the report of the Appellate Body on the dispute involving India’s LCRs as part of its NSM, see WTO (2016). It is worth noting that India has long used LCRs in other industries such as its automobile industry until discontinuing them after losing an appeal at the WTO. The LCRs framed more recently for the solar PV industry can be said to have embodied lessons learned in these earlier disputes – but still encountered resistance at the WTO.

5. The proposed Environmental Goods Agreement to be ratified by the WTO has been followed closely by the International Centre for Trade and Sustainable Development (ICTSD). See commentary on the G20 meeting statement and the initiative by the chair of the ‘Group of 14’ meeting in Geneva at: http://www.ictsd.org/bridges-news/biores/news/environmental-goods-agreement-negotiators-agree-roadmap-for-conclusion.

6. The process started as the IT Agreement reached by 29 participants at the Singapore Ministerial meeting in 1996; see the WTO record of this agreement at: https://www.wto.org/english/tratop_e/inftec_e/inftec_e.htm.

7. The green goods were identified as part of a schedule: http://apec.org/Home/Meeting-Papers/Leaders-Declarations/2012/2012_aelm/2012_aelm_annexC.aspx.

8. For overviews of the issues, see Rubini (2012); Low, Marceau, and Reinaud (2012); Cosbey and Mavroidis (2014); Kuntze and Moerenhout (2014); Wu and Salzman (2014); Meyer (2015); Leal-Arcas and Filis (2015) and Weiss (2016). For a recent discussion in light of the Paris Agreement of December 2015, see Hawkins (2016).

9. See the text of the General Agreement on tariffs and Trade (1947), GATT Art XX, at: https://www.wto.org/english/docs_e/legal_e/gatt47_02_e.htm#articleXX

10. Existing environmental measures not involving climate matters would remain unchanged.

11. See Esty (2016) for a recent comprehensive discussion of ways open to the WTO to expand its consideration of sustainability issues such as climate change mitigation.