Trade, Climate Change and Global Competitiveness: Opportunities and Challenges for Sustainable Development in China and Beyond

Date period
1 March 2008

SummaryAs Annex I Parties to the Kyoto Protocol are taking up various climate change mitigation measures, concerns have been raised that industries in these countries will find themselves at a disadvantage vis-à-vis countries where such mandatory measures may not be implemented. There is growing fear that this may lead to “carbon leakage” and industrial relocation from OECD to non-OECD countries, especially for energy-intensive industries, such as steel, cement and chemicals targeted by climate policies. As a major emerging economy not bound by mandatory GHG reduction obligations, China is at the centre of some of these concerns.

In the context of international trade, some countries are worried that by implementing stringent climate change policies they will have to compete with exports from countries where costs of production may be lowered as a result of the absence of mandatory emissions reduction obligations on producers. These concerns have prompted calls within industry as well as by politicians for the introduction of measures, including trade measures, to offset competitive imbalances and level the playing field vis-à-vis “climate free riders”. Rhetoric over the use of border tax adjustments and measures with similar effects has particularly been prominent in this regard.

This collection of papers is meant to bring together views and perspectives from a wide range of experts and analysts both within China and internationally to contribute to the debate on issues in the trade-climate change relationship that may impact on global competitiveness, with a particular focus on the role of China.