Trade and the Environment

Despite several attempts and significant progress, broad agreement on the most appropriate way to manage conflicts between international trade and environmental issues has yet to emerge. Consequently, this Working Paper begins with a search for a set of principles to guide the use of border adjustment mechanisms to ameliorate global environmental problems or, as economists call them, global externalities.

Ten principles are developed, and then applied to the European Union's current CBAM design, and recommendations for improving that design are put forward. As this CBAM is rooted in the EU's Emissions Trading System, broad recommendations for aligning the ETS with the principles are also offered.

Governments around the world are implementing emissions reduction policies to mitigate the impact of global warming, however the application of climate policies will occur at different speeds and depth due to varying levels of development and degrees of ambition. There are inherent dangers from unilateral expansion of carbon tax regimes, not least protectionism, hence this Policy Brief argues for a cautious and multilateral approach to carbon taxation.

HILT needs a deep understanding of global opportunities, threats and emerging best practice so that it can develop its program in a manner that takes advantage of merging knowledge and experience in other countries. In partnership with HILT CRC Limited, South32 Group Operations Pty Ltd, FMG Procurement Services Pty Ltd, G P A Unit Trust, and Curtin University, this project aims to provide a detailed understanding of the current and emerging policy considerations with careful attention to trade, emission control policies, industry support and regulatory arrangements that may have a significant influence on industrial development to enhance opportunities for Australia’s heavy industry as it reduces greenhouse gas emissions.

Although the linear “take-make-discard” approach is still the dominant approach to economic activity, there is an increasing interest in a more circular approach – especially as an additional policy option in the drive towards greater sustainability worldwide. The initial focus of discussions on the circular economy was on minimising waste management, and on a local, community approach. This has now evolved into a broader based approach with the objective of making resource use more sustainable on a global scale – with a focus on the design and the lifecycle of products as well as waste reduction. In this context, it is becoming increasingly clear that attention needs to be given to the role of trade and trade policies in promoting a more circular economy. This project, conducted for the International Chamber of Commerce, filled a gap in research on how trade policies can drive, and potentially hinder, the development of a circular economy, and provide concrete recommendations for WTO negotiators on how to use the tools available within the WTO to promote the circular economy. The report informed the deliberations of the countries participating in the Structured Dialogue on Trade and Environment taking place in Geneva

The Institute for International Trade recently undertook an assessment of literature on the environmental impacts of production and trade-distorting agricultural subsidies. We identified key areas where information gaps exist and more research is needed to strengthen the evidence base for agricultural subsidies reform. Related reports and materials can be found here.