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“Bending” Trade Rules may be Necessary for Concerted International Effort on Climate Change

NOV. 22, 2013

A report published today by The School of Public Policy concludes that trading rules are impeding international progress on climate change.  Authors Dan and Natassia Ciuriak argue that because of a lack of concerted international action, climate change policy gets “pushed down” to sub-national governments and the courts.

The trading system is not helping, argue the authors. For three reasons:  first, trade linkages undermine effective unilateral action due to industrial competitiveness concerns; second, governments looking to capture the economic benefits of publicly-funded abatement measures come into conflict with trade rules as they seek to prevent leakage through trade;  and third, while funding of climate change measures is public, delivery of solutions is private. That, in turn, leads to subsidy-driven industrial competition, distorted markets and inefficient use of public funds.  “The solution… is to bend the trade rules,” they conclude.

The authors elaborate by calling on the global trading system to find ways to exempt domestic climate change policies from traditional tariff and trade commitments, while also guarding against the potential abuse of that exemption. “Current trade rules – especially after the WTO ruling on Ontario’s feed-in tariff program – generate an incentive for governments to channel public funding into producer subsidies which cannot ‘leak’ to third parties rather than into consumption subsidies which can,” said co-author Dan Ciuriak.

The authors conclude with grim estimations of the impact of failure to find multilateral climate change policy solutions, “The situation on the ground in terms of climate change impacts is developing along the lines of worst-case scenarios, with minimal progress in arresting global warming, and a more rapid onset of consequences than had been imagined.”

The report can be found at http://policyschool.ucalgary.ca/?q=content/climate-change-and-trading-system-after-doha-and-doha

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