How EU trade policy can enhance climate action

By Phil Hogan, Commissioner for Trade, European Commission

In today’s world, EU trade policy is about much more than trade; it is a vehicle for promoting our values and standards around the world.

Europe is the global leader in climate action and all our policies, including those on international trade and investment, have a part to play.

The EU has been instrumental in the negotiation and entry into force of the Paris Agreement; we are a driving force behind worldwide implementation of the COP21 targets; and our ambition has now been turbo-charged by President von der Leyen’s flagship initiative, the European Green Deal.

Our target is to be the first climate neutral continent by 2050. Meeting this objective will require nothing less than a transformation of the EU economy, necessitating deep changes to our energy mix, mobility and transport, industrial processes and consumption.

All EU policies and actions should pull together to help the EU achieve a successful and just transition towards a sustainable future, ensuring that EU initiatives ‘do no harm’.

Trade policy can make a vital contribution to the European Green Deal in a number of ways:

Firstly, our trade policy helps to diffuse green investment and technologies (goods and services)  necessary for the transition to a carbon-neutral economy.

As green trade increases and environmental goods are sold around the world, we will help others to use less energy and lower their emissions.

Trade policy contributes to internationalising EU standards and regulations,

shaping production and investment patterns worldwide, such as energy efficiency rules and labelling, green investment frameworks or carbon pricing methodology.

This also has indirect positive spill-overs on the climate mitigation efforts such as encouraging innovation, spurring investment in low-carbon technologies in other countries, and lowering the costs of environmental technologies and skills throughout the global economy.

This is important in a world where Europe accounts for less than 9% of global greenhouse gas emissions.

We have also been “greening” our trade agreements more generally, through, inter alia: tackling non-tariff barriers affecting the green renewable energy sector (trade and investment) in our chapters on energy and raw materials; provisions on green public procurement; and the elimination of tariffs for green goods.

On the latter point we have strived for systematic “frontloading” of green goods including climate friendly technologies (such as renewable energy, heat and energy management) which means that the tariffs are immediately eliminated for these goods with no transition periods.

This leads on to the second important point: climate and environment priorities feature prominently in the dedicated Trade and Sustainable Development Chapters of our comprehensive trade agreements.

These include legally binding commitments to effectively implement the Paris Agreement, and other climate-relevant Multilateral Environmental Agreements, including the Montreal Protocol on Substances that Deplete the Ozone Layer.

This means that trade policy contributes to the Green Deal by leveraging access to the Single Market to encourage our partners to increase their climate ambition.

For example, Brazil agreed to bind its commitments under the Paris Agreement in the Mercosur agreement which is all the more remarkable given that there was a risk of Brazil going in the opposite direction, and exiting the Paris Agreement.

While these are important elements, the Commission now proposew that we go even further in future agreements, tying in respect for the Paris Climate Agreement as an essential element of our international agreements.

In that same context and to ensure that our trade agreements are consistent with our climate, environment and sustainable development objectives we conduct for each a Sustainability Impact Assessment.

This helps us analyse the climate impact of our trade policy and provides real tools for further action where necessary.

Of course, agreements are only as strong as their implementation. To ensure that we are walking the walk as well as talking the talk, we need to strengthen the implementation and enforcement of climate, environmental and labour provisions enshrined in our trade agreements.

That is why we are appointing a Chief Trade Enforcement Officer later this year.

Finally, trade policy may be called upon to ensure the efficiency of our climate policy. Climate change is a global challenge that requires a global response.

If, however, differences in the levels of ambition persist worldwide while the EU increases its climate ambition, the Commission will propose a carbon border adjustment mechanism for selected sectors to reduce the risk of carbon leakage.

This would ensure that the price of imports reflect more accurately their carbon content.

Before any proposal is made, all measures will first have to be carefully assessed in terms of economic efficiency, environmental, social and financial impacts and legal feasibility, in particular with respect to WTO rules and other international commitments, and of complementarity and possible interaction with the Emission Trading System.

Designing a WTO-compatible measure will be challenging, but it is crucially important if we are to succeed in our ambitions. We intend to make a proposal in 2021.

New policies will of course be compatible with our international obligations, including those under the World Trade Organisation and our trade deals.

The European Green Deal can only succeed if we bring others with us. This means working with our partners around the world to design global solutions.

In summary, when it comes to the climate agenda and the Green Deal in particular, trade policy can make a real positive difference.

We have a lot of work ahead of us, with many different options on the table, and we need to make the right choices to build a values-driven, sustainable trade policy that drives a positive climate agenda both at home and abroad.