As the first truly universal climate deal, where all countries will contribute to the climate action effort, the Paris Agreement marks a significant shift for international climate governance.
Under the bottom-up agreement, countries will define the level and nature of their contributions, expressed in so-called NDCs. Climate policies may then be implemented unilaterally or in cooperation with other countries and non-state actors. The Paris Agreement explicitly recognises countries’ ability to engage in “cooperative approaches” in Article 6, both through market- and non-market approaches.
The mention of “internationally transferred mitigation outcomes” specifically opens up for different forms of carbon market cooperation, including linking and the emergence of carbon market clubs.
Collaboration on climate action can provide for some degree of convergence between national efforts as well as for enhanced ambition by reducing costs of implementation and concerns of free-riding. A broad uptake of climate mitigation measures and collaboration in their implementation can thus help lower competitiveness and leakage concerns, and decrease the perceived need for potentially trade-distortive and often sub-optimal protection measures.
The trade system has an important role in supporting the implementation of the Paris Agreement, not least by fostering a scale-up of climate friendly technologies and supporting the development of plurilateral action. At the same time, the myriad of climate polices under the bottom-up approach will likely generate spillover effects on other countries through trade and will in some cases test the limits of the trade rules.
There is hence a need to reconsider the role of trade in relation to the implementation of the NDCs and the Paris Agreement in order to ensure that trade is supportive of climate action and to recognise that trade flows will be altered by climate action; such changes will need to be well-understood and measures implemented to prevent them from undermining climate goals.
Against this background, ICTSD convened a private roundtable discussion with chief climate negotiators and/or country ambassadors in Bonn at the occasion of the UNFCCC meeting, which served to assess the emerging trade-climate change interlinkages in the post-Paris context.