Climate Change Mitigation Policies in Selected OECD Countries: Trade and Development Implications for Developing Countries

Date period
10 December 2009

SummaryTo view the Executive Summary, please click here.

Many governments around the world are adopting progressively more demanding policies and measures in an attempt to reduce greenhouse gas (GHG) emissions. Activity to date has been patchy and slow, and many governments are failing to live up to past commitments. It is unlikely, for example, that many Parties to the 1997 Kyoto Protocol will manage to achieve their GHG emission reduction or limitation targets. Nonetheless, policies to mitigate climate change are becoming increasingly widespread, especially among countries of the Organisation for Economic Co-operation and Development (OECD), and such policies have increasingly obvious ramifications on trade competitiveness and development in developing countries. However, many developing country trade policy-makers and negotiators remain on the fringe of the climate change debate. This paper seeks to provide trade negotiators and policy-makers with an overview of domestic climate change measures being implemented or considered in OECD countries that may have trade and development implications for developing countries. The paper focuses on a group of selected OECD countries: Australia, Canada, the European Union, Japan and the United States. In the case of several of the countries, legislative proposals are still under consideration.

Therefore, this paper aims to give a "snapshot" of the current state of play along with an indication of the policy process towards adoption of climate change mitigation programmes in the countries concerned. Having given a broad overview of the climate change mitigation policies enacted orunder consideration in the countries listed above, this paper focuses on five key issues as they relate to the trade and development concerns of developing countries.

Foreword

Article 2 of the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) sets quantified emissions limitations and reduction commitment for its Annex I Parties, and specifies policies and measures that could be implemented to that effect, in accordance with national circumstances. Such policies and measures include, among others, the enhancement of energy efficiency; the promotion of sustainable forest management practices, afforestation and reforestation; the promotion of sustainable forms of agriculture in light of climate change considerations; development and increased use of renewable energies and other clean technologies; and the progressive reduction or phasing out of market imperfections, fiscal incentives, tax and duty exemptions and subsidies in all greenhouse gas (GHG) emitting sectors that run counter to the objective of the Convention and application of market instruments.

While mandating such measures, the Protocol requires of Annex I Parties that they strive to implement such policies and measures “in such a way as to minimize adverse effects, including the adverse effects of climate change, effects on international trade, and social, environmental and economic impacts on other Parties, especially developing country Parties.”

In pursuing the objectives of climate change mitigation, governments around the world have adopted policies and measures, many of which are in line with those contained in the Kyoto Protocol, to reduce their emissions of GHGs. As the core of the Annex I countries, member countries of the Organisation for Economic Co-operation and Development (OECD) play an important role in this context, owing to the fact that they account for most of the emissions reduction expected in the first phase of the Kyoto Protocol, but also because their mitigation actions may have impacts on other countries, including developing countries. Understanding the nature of such potential effects and their consequences for trade and development in developing countries is an important question.

In the past few years, the literature on climate change and trade has documented, in an extensive manner, the inter-linkages between trade and climate change policies. Studies have showed that certain policies to reduce carbon emissions, such as the enactment of energy-efficiency standards, measures aimed at promoting low-carbon production processes in industry and agriculture, or changes in consumer preference for climate-friendly goods and services may have extrajurisdictional implications. Increasingly, certain policies being considered in OECD countries are expressly extra-jurisdictional in their design, with the objective of triggering abatement effort by other countries that may be considered not to be doing enough on mitigation. The discussion on border measures to achieve climate change objectives is a case in point. While not bound by mandatory carbon reduction obligations under the Kyoto Protocol, developing countries are concerned by the potential impact of these policies.

On the other hand, through measures taken in their jurisdictions and through the channel of international trade, developing countries have opportunities to contribute to abatement efforts in OECD countries, thereby contributing indirectly to global carbon reduction, while playing a role in meeting reduction commitments for Annex I Parties. The Kyoto Protocol has in fact created flexibility mechanisms, including the Clean Development Mechanism (CDM), expressly designed to that effect.

This paper explores a few of the policies and measures enacted, or being considered in OECD countries, and discusses their potential implications for trade and development in developing countries. This paper is produced under ICTSD Global Platform on Climate Change, Trade and Sustainable Energy (Global Platform or GP).  The Global Platform mobilizes the technical and political expertise to foster strong multilateral regimes on trade and climate change that effectively promote a transition to a low-carbon economy and a sustainable energy future. The Global Platform advances the analytical capacity of stakeholders; supports their interaction with policy-makers; and builds effective cross-disciplinary understanding so that solutions can be built and agreed by the international community in the climate change and trade policy processes. It pursues an inclusive path towards the refinement and implementation of negotiating outcomes and their political viability as the world moves towards establishing a post-2012 regime and the basis for a future low-carbon economy.

We hope you will find this paper stimulating and informative reading and useful for your work.


Ricardo Meléndez-Ortiz
Chief Executive, ICTSD