International trade law and climate

International trade law and climate

How failure to bring the Kyoto Protocol into force will lead to trade conflicts

This paper argues that climate change policies are mostly compatible with international trade law and that ratifying the Kyoto Protocol will close existing gaps or uncertainties for the benefit of participating Parties. It also suggests several ways in which international cooperation can serve both climate protection aims and reduce potential trade conflicts.

Main conclusion: governments which are seriously committed to addressing the challenge of climate change are well advised to bring the Kyoto Protocol into force, since the adoption of this multilateral agreement will considerably reduce remaining uncertainties about the WTO-compatibility of domestic and international climate policy measures. Furthermore, if in force, the Kyoto Protocol would constitute an important international forum in which progressive governments can move forward to address specific issues and tensions that may arise between international trade law and the climate change regime.

In contrast, failure to bring the Kyoto Protocol into force will raise the likelihood of trade-conflicts arising from climate change policies. This would not only put at risk the effectiveness of domestic climate change programmes, in some cases it would also require resorting to second best climate policy-options, which would substantially raise the aggregate economic costs for “internalising” climate change externalities. Furthermore, a range of international trade disputes about climate change measures would pose a very serious challenge to achieving a mutually supportive relationship between trade and climate change policies. An open and transparent international economic system, with a long-term commitment to sustainable development is, however, key for a rapid diffusion of new climate change-related knowledge and technologies and for lower aggregate costs of stabilising greenhouse gas concentrations in the atmosphere at a level that may suffice to prevent dangerous anthropogenic interference with the climate system. The diffusion of safe and sustainable technologies and favourable conditions for the transfer of finance and technology, particularly to developing countries, is also what is needed to secure credibility with and support by the many developing countries that will suffer most from the negative impacts of climate change if no effective measures are taken. [Author]

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