Durban Climate Meet Marks Turning Point for Trade Issues

10 December 2011

DURBAN, SOUTH AFRICA - According to Robert O. Keohane and David G. Victor, "the ‘climate change problem' is actually many distinct problems-each with its own attributes, administrative challenges and distinctive political constituencies." This truism, exhaustively scrutinised by academics in search of optimal or first best solutions to international cooperative action, has been loudly attested to in Durban this week. With some dramatic tones in speeches and actions on Friday night, linkages to trade were not speared from the resulting acrimony.

Concerns that actions taken in the name of climate may create distortions to competitiveness are a main obstacle for many countries in moving ahead with mitigation efforts. And claims that mitigation measures unduly disadvantage trading partners render any such effort bitterly contentious. Indeed, any attempt to address the numerous interlinkages between trade and climate in the context of an eventual framework for an integrated, comprehensive climate regime, continues to end in rancor.

Australia faced bitter opposition to the introduction of its carbon tax - much on fears of alleged competitiveness loss - and it is well known that similar apprehension explains why it is so hard for the US to advance on its climate change initiatives. A most illustrative case is the recent decision of the EU to include aviation into its emissions trading system. The EU - frustrated over the lack of progress in addressing one crucial source of greenhouse gas emissions, international transport, through international cooperation - will include flights operating in European airspace from 2012, irrespective of the origin of the airline. In response, developing countries in particular claim that the principle of common but differentiated responsibility is being side-stepped, as no exceptions are made for their airlines, and all countries, from the largest economies to humble island states, that rely on air transport for trade are concerned about the effects on the competitiveness of their trade, including tourism.

There are a range of other issues that tie the two worlds of trade and climate change - which, incidentally, collide this year with back-to-back UNFCCC COP and WTO Ministerial Conference - together, such as subsidies, standards and labels, and free allocation of emissions allowances.

Important opportunities exist for trade to contribute to effective climate change mitigation and adaptation; these merit their place in the official debate so they are able to optimise their potential positive impacts. Among these opportunities are trade in climate friendly goods and technologies - in relation to sustainable energy in particular.

Some critics argue that discussing trade in the context of the UNFCCC is too complicated, and that climate negotiators are not trained on trade issues. While the latter may be true to some extent, this is changing. What is most difficult to understand is why some would suggest that a forum like the UNFCCC should ignore an issue that so directly influences - and is influenced by - climate change.

Indeed, not talking about concerns does not make them go away. It's hiding in a fire. The fire will not disappear if you pretend it is not there. On the contrary, the longer you hide, the more difficult it becomes to escape.

It is true that the UNFCCC is not a trade organisation, and parts of the discussions on trade and climate change should take place in other fora - most notably the WTO. Some issues do however deserve a forum for discussion in the context of the UNFCCC. Our assessment is that this is necessary in order to allow for countries to better understand the trade linkages. Preferably, this would happen at an early stage, so they can draw from lessons learned from previous experiences, building up a body of knowledge of what works and what does not. This is crucial to ensure that inefficient or even damaging measures can be avoided in favour of better options.

ICTSD has proposed that a forum on response measures - introduced as a possibility in Cancun and under discussion here in Durban - would host some of the trade discussions. This proposition resonates well in particular with the G77 and China. Developing countries are particularly concerned about the use of unilateral trade measures - such as border carbon measures - and levies on transport and carbon footprinting.

Developed countries, on the other hand, are generally more reluctant to establish a forum. First, they usually argue that trade belongs in the WTO. Second, developed countries have an aversion to the very concept of response measures; the concept has traditionally applied to compensating oil-producing economies for a projected decreased demand of petroleum products as a consequence of climate change mitigation. Thirdly, and importantly, these countries may wish to avoid a discussion that could lead to a possible strengthening of rules that could decrease their space to use the tools they deem necessary to mitigate climate change.

In Durban, intense negotiations have been stretching long into the night over establishing a forum on response measures. Positions are certainly diverse. Some developing countries are pushing for the establishment of a permanent forum, which would meet twice a year and address an open-ended range of issues. For their part, some developed country parties are insisting that the potential forum consolidate all discussions on response measures that would otherwise appear in as many as seven different places under the bodies of the UNFCCC. Yet some other parties are pushing for minimalist solutions, or none at all - tantamount to leaving it the matter to court interpretation of existing international norms.

A compromise solution has been put forward in one draft Kyoto Protocol text, which has something for everyone - a permanent forum for the G77, but the exclusion of the mention of "response measures," to satisfy those opposing Annex I countries. The question is controversial indeed, but the reason why no agreement has been reached does not necessarily depend on a polarisation on these specific issues. Instead, it may rather reflect a reluctance to agree on this until there is more clarity on the process ahead regarding the "big picture," and a wish to keep this - and other strategic issues - as bargaining chips to help strengthen their position on a final deal...when, and if, it finally materialises.

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