Strengthening climate-friendly trade elements in future nationally determined contributions

10 May 2017

There is great potential to incorporate trade elements in nationally determined contributions (NDCs) that has not been taken advantage of to date. This blog post argues that decision-makers’ awareness of the advantages of using trade opportunities in supporting the objectives of the Paris Agreement should be increased. There should also be better guidance for drafting future NDCs and the guidelines could describe the opportunities that trade elements offer.

 

Having celebrated the adoption of the Paris Agreement as a historical step, the world must now move to making progress to achieving its goals to hold the increase in global average temperature to “well below 2°C” compared to pre-industrial levels and to “pursue efforts” to limit the increase to 1.5°C, achieving net zero emissions in the second half of this century.

Going forward, one key option is to better harness international trade approaches that encourage and support the transformation to a low-carbon economy by incorporating more climate-friendly trade elements into country’s climate contributions. In that context, the UNFCCC negotiations in Bonn and Warsaw can play an essential role. Which opportunities does the inclusion of trade elements in the NDCs entail and how could this be done?

Raising awareness on the benefits of incorporating trade elements

In the run-up to the Paris negotiations, countries publicly announced their post-2020 climate targets, or intended nationally determined contributions (INDCs). These contributions are essential for reaching the goals of the Paris Agreement: the ambition of the climate targets and actions communicated in these contributions, and the extent to which they are implemented, in principle decide whether or not the world achieves the agreement’s long-term goals. More than 190 countries have submitted their INDCs in 2015, of which more and more are being converted into NDCs once a country ratifies the Paris Agreement.

In the future, countries will be required to submit updated and more ambitious NDCs every five years. All parties are asked to submit new or updated NDCs by 2020 and every five years after that. In 2018, for the first time, the parties of the UNFCCC will take stock of their collective efforts towards achieving the goals of the Paris Agreement. In the same year, the parties will also inform the preparation of future NDCs, thereby providing more clarity and better guidelines for countries’ submissions. In this context, raising awareness of the benefits of incorporating trade elements represents a tremendous opportunity.

International trade flows are central for fostering the availability of climate-friendly technologies and of products with relatively lower levels of embedded carbon at competitive costs and at larger scale. A huge shift to climate-friendly technologies is essential to reach the objectives of the Paris Agreement. However, a number of trade barriers undermine their diffusion and deployment. The liberalisation of international trade can thus significantly stimulate the development of this market and increase the spread and affordability of, for instance, clean energy or energy efficiency technologies. In particular, the reduction of trade barriers for environmental goods and services can contribute to climate change goals by facilitating the switch to renewable energy, as well as in improving energy efficiency and thus reducing fossil fuel usage. Moreover, climate-related provisions in trade agreements can act as stimulating framework conditions for decarbonising economic activities. Trade can also help compensate for or adjust to altered productive capacities caused by climate change, for example to ensure access to food or to support economic diversification.

Trade-related elements feature frequently in climate contributions under the Paris Agreement. Yet, there is tremendous untapped potential: while around 45 percent of all climate contributions include a direct reference to trade or trade measures, only around 22 percent include trade measures that are specifically geared towards fostering mitigation. There are thus not many direct references to the use of trade measures to foster climate protection, although trade elements offer substantial opportunities for increasing mutual supportiveness between trade and climate objectives.

Harnessing the potential of trade to contribute to the aims of the Paris Agreement

There are a number of steps that can be taken to increase the potential of trade and trade measures to support climate protection and to foster synergies between the trade and climate regimes. One key option for the pathway forward is to make sure that climate-friendly trade elements are more systematically incorporated into future NDCs.

Since trade measures can contribute to combating climate change and to fostering the implementation of the NDCs under the Paris Agreement, in the next NDC cycle of the ratcheting-up mechanism governments should take better account of and make more use of trade elements in their NDCs. Trade measures can significantly complement and leverage emissions abatement and climate change mitigation efforts, above all if they are supported by other domestic policies, regulations and incentives.

This potential should be harnessed – and UNFCCC guidance in the context of future NDC cycles can contribute to this endeavour. One reason for the untapped potential of trade elements in the climate contributions so far might be a lack of certainty about what should or could be included in the NDCs. Better guidance by the UNFCCC on how to prepare updated NDCs and more standardised submissions, and more awareness of the potential of trade elements as well as more expertise in that regard, can foster the synergies between trade and climate objectives in future NDC cycles under the Paris Agreement.

A trade measures “toolbox”

Moreover, trade opportunities in future NDCs can be taken up more systematically if countries are aware of the various potential trade elements and related opportunities through a trade measures “toolbox.” For example, low-carbon markets can offer new trade opportunities and help countries gain market shares. Against this background, national assessment of specific trade opportunities can help in the design of tailor-made trade elements. For instance, conducting national assessments of the sectors with potential comparative advantage can be helpful in leveraging export opportunities.

In sum, trade elements that facilitate co-benefits should feature more prominently in future NDCs. Decision-makers’ awareness of the advantages of using trade opportunities in the NDCs should be increased. There should also be better guidance for drafting future NDCs and the guidelines should describe the opportunities that trade elements offer.

Overall, there is considerable room for a stronger emphasis on climate-friendly trade elements, especially among the major emitters and exporters of embedded carbon. This would ultimately help achieve the aims of the Paris Agreement and the Sustainable Development Goals, contributing to a more sustainable future for all.

 

This article is derived from the paper Trade Elements in Countries’ Contributions under the Paris Agreement authored by Clara Brandi and published by ICTSD.

Dr Clara Brandi is a Senior Researcher and Project Leader at the German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE).