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 significant: 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 high-emission products. In particular, the EU trade agreements promote climate-damaging flows of goods through their undifferentiated tariff reduction.
But also in the context of the World Trade Organisation (WTO), the EU is weakening the fight against global warming, including through its lawsuits against green subsidies and other countries' localisation requirements. The EU is thus hampering the global increase in production of essential climate technologies.
The unilateral climate initiatives of EU trade policy – CBAM and the deforestation regulation – have, in principle, meaningful objectives. However, their effectiveness is weakened by the lack of support for producers in economically weaker countries to meet these new requirements.
The rules for liberalisation and investment protection imposed by EU trade policy also jeopardise climate protection. Undifferentiated investment liberalisation favours the still substantial foreign investment of European firms in fossil industries. In turn, the investor-state arbitration procedures contained in an increasing number of EU trade agreements are jeopardising progressive climate legislation.
A climate-friendly EU trade policy would therefore require a number of reforms, including:
- an up-to-date assessment of the emission intensity of EU external trade;
- renunciation of climate-damaging trade agreements;
- Prioritise leaner partnership agreements with an environmental, climate and development focus;
- reorientation of the EU-WTO policy towards the global promotion of climate technologies;
- complementing unilateral climate initiatives with technical and financial assistance;
- Non-investor-state arbitration and introduction of climate-related screening mechanisms for foreign investments.
The detailed analysis can be found in our publication “Climate Check Trade Policy”
