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Activities of the WTO and the challenge of climate change

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On this page:

Negotiations on environmental goods and services
Negotiations on MEAs/WTO relationship
Agricultural and non-agricultural negotiations
Climate change issues in WTO's regular work

  

Note: This webpage is prepared by the Secretariat under its own responsibility and is intended only to provide a general explanation of the subject matter it addresses. It is in no way intended to provide legal guidance with respect to, or an authoritative legal interpretation of, the provisions of any WTO agreement. Moreover, nothing in this note affects, nor is intended to affect, WTO members' rights and obligations in any way.


In the Marrakesh Agreement establishing the WTO, members established a clear link between sustainable development and disciplined trade liberalization — in order to ensure that market opening goes hand in hand with environmental and social objectives. In the ongoing Doha Round, members went further in their pledge to pursue a sustainable development path by launching the first ever multilateral trade and environment negotiations.

Aimed at furthering trade opening, a number of aspects of the Doha Round have a direct bearing on sustainable development and can therefore contribute positively to efforts to mitigate and adapt to climate change. As well, WTO's regular work provides a platform for addressing the linkages between trade and climate change.

  

Negotiations on environmental goods and services    back to top

Liberalizing environmental goods

Under the ongoing negotiations on mutual supportiveness of trade opening with the environment, WTO members are working to eliminate trade barriers in the goods and services that can benefit the environment. Facilitating access to products and services in this area can help improve energy efficiency, reduce greenhouse gas emissions and have a positive impact on air quality, water, soil and natural resources conservation. A successful outcome of the negotiations on environmental goods and services could deliver a triple-win for WTO members: a win for the environment, a win for trade and a win for development.

Environmental goods can cover a number of key technologies that may contribute positively to the fight against climate change. Reducing or eliminating import tariffs and non-tariff barriers in these types of products will reduce their price and make them more accessible. Increased competition will foster technological innovation in areas related to protection of the environment and combating climate change. According to a recent World Bank study on trade and climate change, elimination of both tariffs and non-tariff barriers to clean technologies could result in a 14 per cent increase in trade.

To illustrate, the Intergovernmental Panel on Climate Change has identified a range of mitigation and adaptation technologies that can assist in the challenge of climate change. Many of these technologies involve products currently being negotiated in the Doha negotiations. These include wind and hydropower turbines, solar water heaters, tanks for the production of biogas, and landfill liners for methane collection. A submission by the European Communities and the United States in December 2007 proposes to give priority in the WTO negotiations to climate-friendly goods and to services linked to addressing climate change. These climate-friendly products comprise about one-third of the environmental goods already identified by a group of delegations.

Liberalizing environmental services

In the negotiations on environmental services, WTO members are seeking GATS specific commitments on activities which may be directly relevant to policies aimed at mitigating climate change.

During the Uruguay Round, negotiations focused on sewage services, refuse disposal services and sanitation services, which are listed in the environmental services sector of the Services Sectoral Classification List (MTN.GNG/W/120). Other environmental services, which are commonly understood to be covered by the category “Other” in this list, attracted limited attention at the time. Among them, services such as “cleaning of exhaust gases” and “nature and landscape protection services” are directly relevant to climate change mitigation measures. Cleaning of exhaust gases includes emission monitoring and services aiming to control and reduce the level of pollutants in the air, whether from mobile or stationary sources, which are mostly caused by the burning of fossil fuels. Nature and landscape protection services entail various services aimed at protecting ecological systems as well as studies on the inter-relationships between environment and climate.

In recent years, these “other” environmental services have expanded as a consequence of increasingly demanding environmental regulations and have gained in prominence both from an environmental and economic point of view. They are supplied mainly on a business-to-business basis and offer niche markets for small and medium-sized enterprises. These services are now on the negotiating table and should offer good prospects for new GATS commitments.

  

Negotiations on MEAs/WTO relationship    back to top

WTO members are currently discussing ways to ensure a harmonious co-existence between WTO rules and specific trade obligations in various agreements that have been negotiated multilaterally to protect the environment. Given the present consensus in the international community for multilateralism and concerted actions to combat climate change, the importance of these negotiations aimed at a harmonious relationship between trade and environment regimes cannot be overemphasized.

While, up to now, there has been no evidence of conflict between the trade and environmental regimes, a successful outcome to these negotiations will nevertheless reinforce the relationship between the two legal regimes. The negotiators have drawn from national experiences in the negotiation and implementation of multilateral environmental agreements (MEAs) at the national level. They are seeking ways to improve national coordination and cooperation in this respect. Such mechanisms may be central to the success of climate change mitigation and adaptation efforts undertaken at national and international levels.

Moreover, it is clear from the rules of the WTO and the UN Framework Convention on Climate Change (UNFCCC) that both regimes do not operate in isolation. First, Article 3.5 of the UNFCCC and Article 2.3 of the Kyoto Protocol provide that measures taken to combat climate change should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade and should be implemented so as to minimize adverse effects, including on international trade, and social, environmental and economic impacts on other Parties. Moreover, WTO rules leave sufficient policy space to accommodate under certain conditions the use of trade measures to protect the environment.

At the inter-institutional level, members are also exploring ways of enhancing information exchange and cooperation between the WTO and MEA secretariats. Concrete elements are being discussed to improve or complement existing practices and cooperation mechanisms. This information exchange extends to participation in respective meetings and also to the organization of information exchange sessions and joint technical assistance and capacity-building activities. Cooperation is already taking place between the WTO and climate change bodies. The UNFCCC participates in meetings of the WTO Committee on Trade and Environment (CTE) and is an ad hoc observer to the Committee overseeing the specific trade and environment negotiations (CTESS).The WTO Secretariat attends UNFCCC Conference of Parties meetings.

  

Agricultural and non-agricultural negotiations    back to top

Some benefits to climate change mitigation and adaptation, albeit indirectly, may result from the negotiations on agriculture and market access for non-agricultural goods. First, the elimination of tariff and non-tariff barriers and a reduction in agricultural support in developed countries may lead to a more efficient allocation of global resources and production.

Second, trade negotiations will lead to increased trade opportunities for developing countries which could lead to important income gains for these countries. Increased incomes may enable poorer countries to reduce their vulnerability to the effects of climate change by investing in irrigation, for example. In the longer term, the enhanced predictability associated with WTO commitments from the Doha Round, and associated monitoring and surveillance activities, could help to offset the less predictable shifts in weather and productivity. This will ensure that developing countries do not suffer disproportionately from the negative impacts of climate change.

The challenge of climate change has also contributed to the development of the biofuel sector, as many countries see that biofuels can assist them in meeting their reduction commitments for greenhouse gas emissions under the Kyoto Protocol. Since the production of biofuels is concentrated mostly in the consuming countries, trade in biofuels is not currently very significant. Trade in biodiesel tends to take place between EU countries as production and consumption is currently concentrated in the EU. However, trade in bioethanol has been growing over the last few years, with Brazil emerging as the leading exporter. Since 2000, 37 measures on biofuels have been notified by 20 WTO members in the context of the Agreement on Technical Barriers to Trade.

HS classification of biofuels has implications on how WTO disciplines apply to domestic measures aimed at these products. Until recently, both biodiesel and bioethanol used to be traded as agricultural products. In 2005, the World Customs Organization decided to put “biodiesel” in Chapter VI on “products of chemical and allied industries” (HS 382490). Bioethanol is still traded under HS 2207 in Chapter 22 on “beverages, sprits and vinegar”. Any outcome of the Doha negotiations on agriculture and non-agricultural market access will apply to the biofuels sector.

  

Climate change issues in WTO's regular work    back to top

The Committee on Technical Barriers to Trade (TBT Committee)

The TBT Committee provides an important forum to discuss technical regulations adopted by governments to mitigate climate change. Technical specifications and labelling requirements related to climate change are not new to the WTO. Indeed they fall squarely within the disciplines of the TBT Agreement which imposes, among other things, rules on avoidance of unnecessary obstacles to trade and harmonization. In addition, the TBT Agreement requires members to share information on technical regulations that may have an impact on trade.

In recent years, a number of product standards and labelling requirements targeted at energy efficiency or emissions control were notified. The climate change-related technical regulations discussed in the TBT Committee so far appear to principally concern product requirements. Examples of regulations discussed so far include: fuel economy standards for cars; eco-design requirements for energy-using products; energy efficiency programmes for consumer products and emission limit values for diesel engines.

The Committee looks at climate change measures to ensure they do not pose unnecessary obstacles to international trade, while still achieving the legitimate objective of protecting the environment, and encourages harmonization.

As for international standards, the International Organization for Standardization (ISO) has adopted four standards (14064 — 1, 2 and 3:2006 and 14065:2007) that include requirements for quantification and reporting of greenhouse gas emissions and reductions. These standards are related to conformity assessment procedures and do not include any product-specific requirements on emission levels.

An increasing number of private sector standards might include production or labelling requirements, with the stated objective of mitigating or adapting to the negative effects of climate change. Though non-mandatory, they may affect market access conditions for a range of products.

The Committee on Trade and Environment (CTE)

The work programme of the Committee on Trade and Environment (CTE) covers the main issues at the intersection of trade and environment. A number of issues indirectly relating to climate change, such as the environmental benefits of removing trade restrictions in the energy and forestry sectors and the effect of energy efficiency labelling on market access, have been discussed in the CTE. The Committee serves as an incubator for ideas to advance the trade and environment agenda and is the main gateway should members decide to explore further the linkages between climate change and trade.

Introduction
The impact of trade opening on climate change
> Climate change and the potential relevance of WTO rules

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