How trade policy can support our climate goals

This year, more than a million young people in more than 100 countries have called for politicians and businesses to prioritise action to slow global warming. From school strikes to the Extinction Rebellion, these demonstrations emphasise that a lack of action will be catastrophic – for the planet and the generations to come. What does this mean for globalisation? And how does it impact the way that countries – and companies – trade? 

The CBI’s report The New Frontier: Harnessing Trade Policy to Support Our Climate Goals looks at how the UK government can lead from the front, and the role international organisations can play in tackling the climate challenge.  

Using the findings from research and discussion carried out with some of the CBI’s most active members in this space, the CBI has identified five keys areas of action: 

• Free Trade Agreements as a vehicle to boost standards 
• The potential for multilateral agreements to deliver tariff reductions 
• The consumer voice as a force to drive change through domestic and international standards 
• The possibility of a WTO-compatible border tax 
• The role of the UK government to lead from the front 

Across these areas trade policy has the potential to bring enormous societal and environmental changes, if applied to the right areas.  

Businesses themselves have a significant and leading role to play delivering on a low-carbon future and the CBI is working with firms to develop this agenda elsewhere. But the scale of the climate challenge is immense. It requires the full and combined attention of firms, government and civil society. Organisations of all kinds must therefore push forward the drive for sustainable economic development. This paper represents a call to action for governments and institutions around the world to modernise and green trade policy to boost prosperity, stimulate innovation and protect the natural environment. 

Its recommendations to government include:  

• Augmenting the UK’s Export Strategy with a green trade focus ahead of COP26. 
• Committing to prioritising trade and climate action during the UK’s G7 in 2021. 
• Taking the lead in greening international institutions, including through a more systematic WTO-UNFCCC dialogue. 
• Assessing the possibility of allocating revenue obtained from the UK’s Carbon Pricing regime to the high-growth green sector and hard to decarbonise sectors. 
• Capitalising the British Business Bank with the resources needed to expand its role and create a fund that promotes green finance for SMEs. 

Its recommendation to international organisations and governments include:  

• Establishing joint governmental and non-governmental committees among FTA partners to deliver measurable and robust environmental and sustainability standards alongside FTAs.
• Committing to Sustainability Impact Assessments in FTAs, with pre and post-ratification studies to identify where progress is required on sustainability.
• Urgently finalising WTO negotiations on the Environmental Goods Agreement (EGA).
• Protecting and strengthening trade in green products by expediting bilateral or regional EGAs for goods and services, and introducing moratoria for new tariffs on such products.
• Introducing accelerated tariff reductions in FTAs and multilateral agreements for partner countries who meet or surpass their Paris Agreement emission reduction targets.
• Intensifying efforts to help smaller firms and those in developing countries transition to the opportunities of sustainable production.
• Developing bilateral and multilateral platforms through the WTO and OECD to reduce non-tariff barriers for green trade and services. 
• Commencing discussions at the WTO and OECD on the most appropriate mechanism to protect competition in hard-to-decarbonise sectors and mitigate carbon leakage.