Climate and trade issues lie at the intersection of two of the world's most contested, delayed and important multilateral negotiations. Climate change under the auspices of the United Nations Framework Convention on Climate Change (UNFCCC) and international trade as regulated by the World Trade Organization (WTO). This paper is a scoping assessment of the inter-relationship between international trade and climate change negotiations as it affects policy development in South Africa. The paper highlights two key variants of measures which pose a challenge to both these negotiations, specifically border carbon adjustments and the liberalization of trade in environmental goods and services.
The paper finds that while free trade in green industry products may be encouraged under a global climate agreement, it should not be reasonably required. In addition, for Border Carbon Adjustments (BCAs) under the UNFCCC, the authors recommend that BCAs be considered an issue best left to the WTO to judge as fair or not. At the same time, the authors propose a multilateral climate agreement under the UNFCCC which considers one (or all) of the following three agreements/provisions to mitigate the negative impact of response measures on non-Annex 1 countries:
- Exemption of Least-Developed Countries from BCAs;
- Inclusion of non-Annex 1 countries in a global carbon trading scheme on the basis of no-lose targets (which economic modelling suggests almost totally offsets any negative trade impact of carbon pricing on exports); or
- Provision made for an “effectively comparable” or “minimum effort” carbon price, whose implementation in a country that is a signatory of the Convention would be acknowledged and treated as a Nationally Appropriate Mitigation Action (NAMA). A global deal on climate change should then allow for Non-Annex 1 countries to be exempted from the imposition of any unilateral BCAs by other signatories of the Convention, provided they meet the “minimum effort” requirement for carbon pricing.