With extreme weather events sweeping across the planet to devastating effect, a series of climate records shattered, and no end in sight to the rising trend of emissions of climate-heating gases, stakes at the 2023 UN Climate Change Conference (COP28) could not be higher.

As governments gather in the United Arab Emirates from 30 November to 12 December for COP28, a safe and liveable future for all will require concerted action on several key agenda items, including critical issues like operationalizing funding arrangements for a loss and damage fund and new collective quantified goals on climate finance. Informed by the IPCC’s Sixth Assessment Report, COP28 will see the completion of the first global stocktake under the Paris Agreement, intended to inform the next round of climate commitments. The latest UNEP Emissions Gap Report finds that the world is heading for a temperature rise of 2.5–2.9^oC, far above the Paris Agreement goals.

If we are to avert a climate catastrophe and limit global temperature increase to below the Paris Agreement goal, a radical course correction is beyond urgent. Against this background, a core question is how can cooperation on trade and trade policies accelerate efforts to phase out fossil fuels, decarbonize our economies, support climate adaptation, respond to climate-related loss and damage, and foster climate-resilient development? In short, how can we harness the global trading system as a driver for climate action?

For the first time, trade will have a higher profile at a UN Climate Change Conference. On 4 December, the host state and UNFCCC will hold the first-ever Trade Day, and a Trade House Pavilion hosted by ICC, ITC, UNCTAD, and WTO will provide a dedicated space for discussions on the role of trade in driving climate action throughout COP28. Among other activities, the Trade House partners will host an event on ministerial leadership, where members of the Coalition of Trade Ministers on Climate will share their views on the importance of high-level leadership for a trade-related contribution to the climate agenda that is ambitious, inclusive, fair, and effective. In the words of coalition member Hon. Keisal Peters, Minister of Foreign Affairs and Foreign Trade of St. Vincent and the Grenadines, “global cooperation on trade and climate is not and cannot be an option, but an imperative.”

Indeed, faced with the urgent need to take action on the climate crisis, adapt to its impacts, and build climate-resilient development pathways, many governments are exploring where and how trade and trade policies can play a role. Already, some are implementing or considering a range of trade-related climate measures and policies, ranging from green industrial policies and initiatives to support decarbonization of supply chains to measures that promote the scale-up, diffusion, and uptake of environmental goods, services, and technologies key to climate mitigation and adaptation. The measures and policies under consideration also include border charges as well as internal taxes, regulations, standards, and subsidies. Alongside such measures and policies there are calls to reform the trading system and international trade rules to better enable and support responses at speed and scale to the climate crisis.

Trade has to be part of the climate solution. It plays a crucial role in enabling countries to access critical goods, such as food supplies, that they can no longer produce due to climate-induced changes in production patterns, and is also essential to scaling up the diffusion and uptake of renewable energy for instance. Yet trade is also part of the problem. In the absence of effective regulatory frameworks and prices that internalize environmental externalities, for example, trade can exacerbate and globalize challenges such as deforestation, land degradation, and greenhouse gas emissions.

A core challenge for governments, however, is how to advance climate ambition through trade-related actions, while ensuring approaches that are fair, equitable, and account for different national circumstances and capacities, including levels of development and climate vulnerabilities.

While there is growing recognition of the need for trade policies to support ambitious climate action, the expanding array of trade-related climate measures and policies, and range of approaches to them, are generating international tensions, which could ultimately undermine, or even derail, efforts towards ambitious climate action and sustainable development.

Some governments are expressing concerns, for instance, that the evolving patchwork of efforts will fragment trade in ways that undermine collective international climate action. Questions also arise about the effectiveness of trade-related climate measures and policies at achieving climate goals alongside concerns about their implications for development. Some countries express fundamental misgivings about the use of unilateral approaches in lieu of multilateral cooperation on the climate-trade nexus. Trade-related climate measures and policies are also entangled in a wider geopolitical context in which major powers and allies are seeking to enhance their competitiveness in the green economy, secure access to critical raw materials, build or reinforce political alliances, and ensure the resilience of supply chains.

A cross-cutting concern is that trade-related climate measures and policies can disadvantage developing countries and their businesses, marginalizing them in the transition to a low-carbon economy and failing to foster the international cooperation urgently needed to ensure the dual priorities of climate action and sustainable development are met. Here, the concerns are especially high in developing countries that face significant costs and obstacles in meeting new climate-related requirements, lack affordable access to relevant technologies and finance, or do not have the fiscal space and resources to support large-scale economic transformation, in part due to high levels of debt and debt-servicing requirements.

And yet, developing countries are acutely aware of their vulnerability to the climate crisis and most are active as partners in support of the global climate agenda. Many developing countries are already advancing efforts to transform their energy systems and to position themselves as players in the global effort to decarbonize and build a more sustainable economy. Some recognize that they are the stewards of critical resources for the climate transition and are keen to partner with others to seize the economic opportunities in ways that generate lasting returns in terms of sustainable development for their countries. For many, investment and financing are key to that effort. As climate-trade discussions advance, if we are serious about sustainable development commitments as well as climate goals, it will be key to focus more attention on designing and implementing trade and trade policies that support the diverse national and regional climate goals and sustainable development priorities of developing countries.

Together, such tensions risk undermining the international cooperation required to achieve the world’s climate and sustainable development goals and that underpins the multilateral trading system. Despite growing recognition that trade, and cooperation on a range of trade-related policies, will be vital to an effective response to the climate crisis, the worlds of climate and trade diplomacy, and their respective spheres of international law, currently advance largely as parallel tracks, with few effective institutional processes for cross-fertilization.

As a contribution to bridging these silos, TESS convened an international legal expert group to provide guidance on principles of international law relevant for consideration in the design and implementation of trade-related climate measures and policies. Shared understandings around such principles could go a long way in reducing tensions and avoiding politically charged disputes at the WTO, while facilitating inclusive cooperation on trade policies that support climate action and advance sustainable development. Alongside, consideration of these principles could also help support dialogue on trade-related responses in the context of UNFCCC discussions and negotiations.

In the current negotiations on the global climate regime, trade-related climate measures attract little direct attention, although discussions (and tensions) do arise, such as in the UNFCCC’s Katowice Committee of Experts on the Impacts of the Implementation of Response Measures and forum on response measures. At the WTO, discussions (and tensions) about such measures and policies arise in a range of committees, including the Committee on Trade and Environment and the Committee on Technical Barriers to Trade. While views vary, sometimes sharply, a broad diversity of WTO members concur that greater trust and dialogue is required for members to cooperate in an inclusive, fair, transparent, and effective manner on the nexus of trade, climate, and sustainable development.

Here, we can recall the Marrakesh Agreement establishing the WTO, which envisages a global trading system that protects and preserves the environment in accordance with sustainable development; the challenge for governments and stakeholders alike is to move from repeated assertions of this objective to an agenda that can result in concrete action. Alongside efforts to reinvigorate the WTO’s Committee on Trade and Environment, recognition of the need to find cooperative pathways informs the ongoing work of 77 WTO members in the context of the Trade and Environmental Sustainability Structured Discussions (TESSD), launched at the WTO in 2021, which has catalysed productive exchanges on issues ranging from trade-related climate measures to environmentally harmful subsidies and trade in technologies, goods, and services that can support climate mitigation.

As governments and stakeholders engage in discussions on how trade rules and policies need to be rethought, reformed, updated, or clarified to drive ambitious climate action at speed and scale, key will be doing so in ways that support the inclusive international cooperation vital to climate-resilient development, and fair and just transitions.

Engagement on trade and trade policies can occur at the regional and bilateral levels, but multilateral engagement will also have a central role to play in sustaining trade-related cooperation across the decades of climate action ahead. Here, it is critical for all governments and stakeholders to note that while immediate action is urgent, the process of transformation to net zero economies will take decades, requiring an approach to trade and trade policy that fosters partnerships and cooperation that can endure and evolve over time. Effective, coherent international economic cooperation, underpinned by commitments to fairness and sustainability, will be critical to avoiding a climate disaster, and so sustaining the institutions, rules-based systems, and principles that underpin them is both a short- and long-term priority. Gathering a growing diversity of trade ministers from countries in all regions from all levels of development and climate vulnerabilities, the Coalition of Trade Ministers on Climate should also be seized as a vehicle for sustaining high-level political dialogue and leadership.

In light of the litany of broken commitments in the face of the bold agenda on climate mitigation, adaptation, and finance that the world so urgently needs, there are good reasons to view the upcoming COP28 with some degree of scepticism. Yet, as the IPCC’s Sixth Assessment Report shows, there remains an opportunity to scale up climate action, enable climate-resilient development, and secure a safe planet through the rapid deployment of existing solutions “enabled by political commitment, well-aligned multilevel governance, institutional frameworks, laws, policies and strategies and enhanced access to finance and technology.”

Trade is relevant across this agenda and it is vital that we move faster to align trade and the trading system with climate goals. To seize the opportunity at hand, the pursuit of inclusive international cooperation on trade, climate, and sustainable development must be our North Star.

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Carolyn Deere Birkbeck is Founder and Executive Director, TESS.

Christophe Bellmann is Head of Strategy and Policy Analysis, TESS.

Fabrice Lehmann is Senior Editor and Publications Manager, TESS.

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Synergies by TESS is a blog dedicated to promoting inclusive policy dialogue at the intersection of trade, environment, and sustainable development, drawing on perspectives from a range of experts from around the globe. The editor is Fabrice Lehmann.

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