1. Trade and Climate Change DFAIT seminar, Ottawa September 14, 2009 Aaron Cosbey Bali to Copenhagen A two-year programme of research and consensus-seeking on trade and climate change

2. Context: three types of linkage Climate change’s physical impacts on trade infrastructure, flows (infrastructure, changes in comparative advantage) Climate change policies with trade impacts (competitiveness and leakage impacts) Trade laws and policies that can obstruct or support climate change actions (EGS, subsidy law)

3. Key areas of linkage Competitiveness and leakage policies Subsidy law and domestic policies Subsidy reform for climate change Standards IPRs and tech transfer Low-carbon goods liberalization

4. A focus on competitiveness issues Issue 1: impacts on Canadians of measures taken by others to address competitiveness and leakage Issue 2: competitiveness impacts for Canada arising from the interplay of domestic and foreign climate regimes

5. Issue 1: Impacts of foreign C&L measures State of play in the US and EU Will Canada be targeted? Are these measures WTO/NAFTA-legal? Are they effective? What sectors might be hit? What are our options?

6. Issue 2: Regime differentials Will Canada need to employ C&L policies? –What sectors are vulnerable? –What policies are available? –Why even discuss this at this point?

7. Issue 2: Regime differentials US regime on offsets –Will Canadian regime link to international? Continental? –US regime will find significant low-cost offsets internationally. –Canada may be put at a competitive disadvantage

8. Issue 2: Regime differentials Pressure for a harmonized regime with US? –Problem: Canadian economic structure is quite different –Impacts may be severe in some sectors if a harmonized regime is adopted –But then how to achieve ambitious targets?

9. Concluding thoughts SWOT analysis re the US: where do we stand? Need to engage the US on elaboration of its regime: standards, methodologies What Canadian measures to address competitiveness and leakage? Work on broader positive potential – EGS, clean energy exports

10. Aaron Cosbey acosbey@iisd.ca www.iisd.org/trade/crosscutting