Trade Interactions of Consumption-related Climate Policy Instruments Carbon-CAP stakeholder workshop, 11 November 2015, Beijing, China Sonja Hawkins, International Centre for Trade and Sustainable Development (ICTSD) Specific issue: interactions b/w instruments and intl. trade GLOBAL PLATFORM ON CLIMATE CHANGE, TRADE & SUSTAINABLE ENERGY www.ictsd.org

¼ of emissions embedded in international trade Source: Copyright Global Carbon Atlas, www.globalcarbonatlas.org

China and EU emissions in 2012 MtCO₂ Data from Global Carbon Atlas, www.globalcarbonatlas.org

Consumption-based climate policy instruments Address embedded carbon and role of consumption as a driver of emissions Responsibility for extra-territorial emissions Opportunity for cooperation between producing and consuming countries Consider interactions with trade

Trade and climate change UNFCCC Art. 3.5: “Measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.” Preamble Marrakesh Agreement (WTO): “…while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment…”

Spillover effects on trade Trade dimensions Trade Law - A lot of space - Does not trump climate - Respect key principles Indirect (trade flows) Spillover effects on trade Direct (market access / equal treatment) Positive or negative

Indirect trade impacts All successful instruments Substitution/ Demand reduction Changes in demand patterns Changes in trade flows Some instruments would only cause indirect trade impacts. Ex: Waste and recycling instruments Infrastructure improvements Information campaigns Benchmarked carbon-intensive charge

Direct trade impacts Some instruments Market access / Discrimination Trade distortions or opportunities Some instruments could also cause direct trade impacts. Ex: Regulatory standards / Carbon labelling Voluntary supply chain requirements Carbon embodied charge Subsidies / Product tax incentives / Preferential finance terms Government procurement / Approved technology lists Product bans

Concluding remarks Consider potential trade impacts Remember Careful design and implementation can limit adverse direct trade impacts But do not rule out promising instruments Remember Not designed to specifically target imports, also affect domestic products Not only negative, can also create trade opportunities Opportunity for cooperation

Thank you for your attention Sonja Hawkins (ICTSD) www.ictsd.org shawkins@ictsd.ch