Trade and the environment: oil and water?

Tim Nicholls/ @tim_nicholls

John Prescott was right when he wrote in The Independent last this week that the developed world would need to commit to greater cuts in greenhouse gas emissions in order to bring the developing world on board at Copenhagen, as well as to achieve environmental security in the long run.

Would that this were the whole story, but that is only one of many measures (as I am sure Mr Prescott is more than aware) which will have to be included in “Kyoto II” to support the global South towards a environmentally sustainable future. The most important thing to do for the global South is to bring together the competing interests of trade and the environment in order to recognise that they are actually mutually dependent.

Kyoto, although much-maligned, was a work of genius in that it fixed targets based on emissions for each and every country and left the developing world scope to actually increase their emissions, while achieving overall reductions, thus beginning the idea of a carbon reduction economy. But it was only a start. Now we need to move to integrate the environment further into our trade policy to reap the real fruits of fighting climate change.

There are a number of things Copenhagen must push forward: information sharing and technology transfer must be increased to allow developing economies to progress in a carbon-free way. Allowances must be made for existing carbon sinks in developing countries, not just for newly created ones. But there’s more that is necessary to bring the developing world fully into the global environmental regime.

Here comes the killer: as much good as the UN environmental regime can do, and does, it cannot exist in a vacuum. International trade is the great leveller if it is done properly (which is, admittedly, a very large caveat); but the conflict that exists between existing trade rules and environmental rules threatens this. Because of this, there is a real danger that developing countries could be forced to abandon their environmental policies if they affect the trade interests of richer nations.

Moves must be made to assimilate the environmental regime with the international trade organisations so that their rules can compliment each other, rather than conflict. When there is sufficient political will, the environment will outweigh trade (hence why no-one has ever kicked up a fuss that the Montreal Protocol on CFCs contravenes the General Agreement on Trade and Tariffs by stopping countries trading in certain goods). But climate change is different. The problem is not seen as immediate as a hole in the ozone layer: it is the curse of political economy that stops meaningful progress on climate change as the dire effects are still up to a century away.

Those who lose out at Copenhagen may, therefore, seek to challenge environmental laws that go against WTO rules. For example, current WTO law prohibits bans or tariffs on goods based on the way goods are made, which is often the most carbon-intensive part of production. So a country that taxes goods manufactured in a carbon-intensive way could find itself feeling the rough end of existing trade ‘justice’. This could have dire consequences on any environmental regime. Only by creating a holistic environmental trade regime that transcends these traditionally distinct areas can progress be made against climate change. Such a system should be seen as the next step and Copenhagen must lay the foundation for its development.

Copenhagen is a huge opportunity to begin the reconciliation of trade and the environment. The two are not mutually exclusive, nor are they irreconcilable. Indeed, they cannot be viewed as such if we are to win the climate change fight.