The intersections between trade and climate change have captured the attention of researchers and policymakers alike. As global challenges such as environmental degradation and economic development become increasingly intertwined, it is essential to explore whether the regimes governing trade and climate action can work in harmony or if their objectives are fundamentally at odds. The World Trade Organization (WTO) oversees global trade, while the United Nations (UN) climate regime focuses on mitigating climate change. But can these two global institutions cooperate, or do they inevitably clash?

This article will explore the evolving relationship between the WTO and the UN climate regime, addressing whether their interactions are synergistic or conflictual and what the future may hold.

Trade and climate: a delicate balance

Economic activity is one of the primary drivers of greenhouse gas (GHG) emissions. From the production, transportation, and consumption of goods to industrial activities, trade has a direct impact on climate. Different modes of transport, such as air versus sea freight, can lead to varying levels of carbon emissions. Meanwhile, global trade liberalization has encouraged specialization in emission-intensive industries like steel and cement, exacerbating the climate crisis.

At the same time, climate change affects trade. Unpredictable weather events can disrupt agriculture, tourism, and other key sectors, while rising sea levels threaten maritime trade routes. In this context, it is crucial to examine whether the trade and climate regimes can effectively cooperate to address these overlapping challenges.

The world trade organization and the environment

Established in 1995 as a successor to the General Agreement on Tariffs and Trade (GATT), the WTO governs international trade. Although its primary mandate is economic, the WTO has been increasingly drawn into environmental debates. Environmental protection and sustainable development goals are mentioned in the preamble of the WTO's founding agreement, and it recognizes that open trade can foster sustainable development if managed correctly.

The WTO has also developed specific agreements related to the environment. For example, the Agreement on Sanitary and Phytosanitary Measures aims to protect human, animal, and plant life, while the Agreement on Technical Barriers to Trade addresses product regulations with potential environmental implications.

Despite these provisions, the WTO’s role in addressing climate change remains limited. While some environmental disputes have been resolved through the WTO’s dispute settlement mechanism, such as the famous Shrimp-Turtle and Tuna-Dolphin cases, climate-specific rules have yet to be fully integrated into the WTO framework.

Climate change and the UN climate regime

On the other side of the equation, the UN climate regime, particularly through the United Nations Framework Convention on Climate Change (UNFCCC), sets the global agenda for combating climate change. The Kyoto Protocol and the Paris Agreement represent major milestones in global climate governance, aimed at reducing GHG emissions and supporting sustainable development.

Interestingly, the UN climate regime recognizes the importance of trade in achieving its objectives. The UNFCCC’s Article 3.5 specifically calls for cooperation to promote an open international economic system, ensuring that climate policies do not constitute disguised restrictions on trade. The Kyoto Protocol also acknowledges that climate measures should minimize adverse effects on international trade.

While both regimes acknowledge the need for coherence, institutional coordination between them has been limited. The UNFCCC has observer status at WTO meetings, and the WTO participates in climate discussions, but these interactions remain largely symbolic.

Synergies between trade and climate regimes

Despite the challenges, there are clear synergies between the trade and climate regimes. Both institutions support sustainable development and recognize the need for special provisions for developing countries. This alignment provides a foundation for cooperation.

One key area of synergy is the promotion of environmentally friendly goods and technologies. The UNFCCC encourages the transfer of low-emission technologies to developing countries, and the WTO’s rules on intellectual property rights, particularly the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, can facilitate this process. The TRIPS agreement promotes innovation and ensures that climate-friendly technologies are shared globally.

Regional trade agreements, such as the Environmental Goods Agreement (EGA), have further demonstrated the potential for trade and climate regimes to work together. The EGA, which emerged from the WTO, promotes the trade of climate-friendly goods and services, offering a glimpse into how trade policy can support climate action.

Conflicts between trade and climate regimes

However, conflicts between the WTO and UN climate regimes are also evident. One of the primary points of contention is the issue of subsidies. Governments often provide subsidies to industries, including those that are carbon-intensive, which can conflict with climate goals. For example, the distribution of free emission allowances under the European Union’s Emissions Trading System has been criticized for acting as an unfair subsidy that distorts trade.

Another conflict arises with the WTO’s Agreement on Trade-Related Investment Measures (TRIMS), which seeks to protect investment goods. Some climate measures, such as the Clean Development Mechanism under the Kyoto Protocol, promote local goods and services, which can clash with TRIMS provisions.

Furthermore, the issue of carbon leakage—where companies relocate their emissions-intensive production to countries with lax environmental regulations—poses a significant challenge. This practice undermines global climate efforts, yet trade rules do not sufficiently address the offshoring of emissions. Additionally, non-participating countries, or free riders, gain a competitive advantage over those that comply with climate rules, further complicating the relationship between trade and climate regimes.

Future outlook: synergy or conflict?

Looking ahead, the relationship between the WTO and the UN climate regime may face increased friction as countries take more aggressive action on climate change. Heightened climate policies, particularly those targeting carbon-intensive industries, could lead to trade disputes and further tension between the two regimes.

Yet, there is also potential for greater cooperation. One promising area is the development of climate-based trade preferences, where countries that demonstrate climate leadership could be rewarded with preferential trade terms. Such measures could incentivize climate action and encourage greater participation in global climate agreements.

Additionally, ongoing discussions within the WTO about reducing subsidies for fossil fuels and promoting trade in environmental goods could help align the trade and climate regimes. If the WTO can integrate climate considerations into its legal framework, it may become a more active player in the fight against climate change.

Conclusion

The relationship between the WTO and the UN climate regime is complex and evolving. While there are clear synergies, particularly in areas such as technology transfer and sustainable development, conflicts related to subsidies, carbon leakage, and investment measures present significant challenges.

As the global community intensifies its efforts to combat climate change, the interactions between trade and climate policies will become even more critical. Moving forward, both regimes must find ways to enhance cooperation, avoid conflicts, and ensure that trade and climate goals can be pursued in tandem.

Only by bridging the gap between trade and climate regimes can we hope to create a truly sustainable global economy.