Costs and Benefits of Climate-related Trade Polices

There are several ways to reduce GHG emissions. Governments may introduce climate policies which provide incentives to save energy or directly reduce emissions. Governments may also re-shape existing industrial or trade policies to reduce their negative impacts on GHG emissions. The case of trade policies is particularly interesting. Trade liberalization can foster economic development, thus inducing higher emissions. It can also facilitate capital and industry movements designed to avoid environmental regulations. At the same time, trade liberalization, through the elimination of subsidies and protectionist measures, can reduce the use of inefficient technologies or inefficient energy resources (e.g. coal). What is the balance between these diverse effects of trade liberalization? How do trade policies affect GHG emissions? Can a trade policy be re-designed in order to minimize its impact on emissions and above all to help climate change control? This chapter addresses these questions and delivers policy recommendations that could be useful in the WTO negotiating process.