Climate check trade policy

How climate-friendly is European trade policy?

An introduction

The European Union's trade policy contributes significantly to climate change. In particular, their import-related emissions are considerable: The EU is the world's largest net importer of greenhouse gas emissions.

The European Commission has announced that EU trade policy will contribute to the goal of a climate-neutral global economy. However, its trade policy undermines this objective by continuing to increase trade in emissions-intensive products. In particular, the EU trade agreements promote climate-damaging flows of goods through their undifferentiated tariff reductions.

But also within the World Trade Organization (WTO), the EU is weakening the fight against global warming, including through its lawsuits against green subsidies and localisation requirements from other countries. The EU is thus hampering the global increase in production of essential climate technologies.

The unilateral climate initiatives of the EU trade policy – the CBAM and the Deforestation Regulation – pursue meaningful objectives in principle. However, their effectiveness is weakened by the lack of support for producers in economically weaker countries to be able to meet these new requirements.

The rules for the liberalisation and protection of investments, which are being pushed forward by EU trade policy, also jeopardise climate protection. The undifferentiated liberalisation of investment favours the still considerable foreign investment of European companies in fossil industries. The investor-state arbitration procedures contained in an increasing number of EU trade agreements, in turn, jeopardise progressive climate legislation.

A climate-friendly EU trade policy would therefore require a number of reforms, including:

1. an up-to-date mapping of the emission intensity of EU external trade;
2. renunciation of climate-damaging trade agreements;
3. Prioritise leaner partnership agreements with an environmental, climate and development focus;
4. reorientation of EU-WTO policy towards global promotion of climate technologies;
5. complementing unilateral climate initiatives with technical and financial assistance;
6. Elimination of investor-state arbitration and introduction of climate-related screening mechanisms for foreign investment.

The detailed analysis can be found in our publication "Climate Check Trade Policy"