International conference "Climate Change Policies and the World Trading System: The Challenges Ahead"

June 24, 2011, Paris

Conference organized by Ferdi and Iddri

For the first time in the three-year long ministerial-level negotiations on the successor to the current Kyoto protocol that is up for renewal in 2013, in Cancun in December 2010, all countries have just agreed to reduce Green House Gas (GHG), to comply with external checks on their emissions, and to continue multilateral negotiations under the auspices of the UN.

The worst has been avoided, but few concrete decisions have been taken and there is much to be negotiated at the forthcoming G-20 and Climate ministerials. The sheer magnitude of the task still ahead justifies the fears that trade and climate change objectives may be on a collision course. Firms fear that mitigation policies will affect their competitiveness while environmentalists fear that trade (“leakage”) will undercut domestic policies to reduce GHGs emissions.

Progress on designing successful mitigation policies hinges on a well-functioning World Trading System (WTS). This conference is to inform on how the interaction of trade and climate policies in the WTS will help or hinder the adoption of successful mitigation policies.

The format of the one-day conference seeks to elicit a lively debate on the steps needed to avoid a ‘collision course’ between trade policies and the operation of the WTS on the one side, and climate change policies, on the other. Each invited speaker will prepare and present a paper to be discussed at the conference.

Main themes

1. The dual criteria of fairness and efficiency will have to be met in any successful mitigation strategy to reduce Greenhouse Gas Emissions. The possibility that a global carbon credit trading system could be part of the architecture of forthcoming climate agreement is subject to controversies. Even in the case it plays a central role, how can international trade contribute to these objectives in a world where countries are reluctant to acquiesce to subsidiarity on tax matters?

2. Trade has entered successfully in the architecture of the successful Montreal Protocol with trade sanctions playing the role of a participation mechanism. Can this system apply to the broader problem of climate change? Would sectorial Treaties with trade sanctions (transport, energy-intensive manufacturing sectors) ease the collective action problem?

3. The pressure to address the ‘leakage’ problem via border tax adjustments will be great as the price of energy will follow different paths and the gaps in energy prices will remain. Trade wars are a real possibility as the parties involved are major players in international trade (EU, US, China). How can this be avoided? What changes within the current WTO system would help handle the conflict between trade and climate policies at the WTO?

4. A subset of WTO members could form a new international agreement with new principles that could be drawn up for a climate change treaty rather than relying on the current complicated rules governing the use of border adjustment measures to address competitiveness effects. Is this a viable path ahead?

The invited speakers will produce a paper to be presented at the conference in which one or several of these (and other trade-related) themes will be addressed. These themes will be addressed in the wake of COP-17 taking as a starting point that the outcome of negotiations confirmed that the next climate change accord will be more “bottom-up” than “top-down”. This change of emphasis starting at COP-16 might favor sectorial rather than global approaches (e.g. agreement on halting deforestation) in the design of the architecture for the succession to the current Kyoto Protocol.