Climate Change and Trade

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How has the perception of trade’s role in addressing climate change evolved, and what key changes have brought trade and climate discussions closer together? Ralph Ossa, is the Chief Economist and Director of the Economic Research and Statistics Division at the World Trade Organization (WTO). Dr Ossa joined the WTO in January 2023 after a career in academia with appointments at Princeton University, the University of Chicago, and the University of Zurich. Professor Piers Forster is Professor of Physical Climate Change and the founding Director of the Priestley Centre for Climate Futures at the University of Leeds. He has played significant roles authoring Intergovernmental Panel on Climate Change (IPCC) reports and is Currently Chair of the UK Government’s Climate Change Committee (CCC), advising on emissions targets and reporting on progress in adapting to climate change.

Image courtesy of interviewee. January 1, 2025

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This video is a transcript from a discussion about the evolving relationship between international trade and climate change. It addresses the growing acknowledgment of trade's potential to support climate action, particularly in the dissemination of green technology like solar panels. Ralph Ossa, the Chief Economist at the WTO, emphasizes that trade can be part of the climate solution rather than just a contributor to the problem, as trade has been historically viewed. He discusses the concept of environmental comparative advantage, arguing that countries can achieve environmental gains through specialization in green technologies, provided there is supportive climate policy.

The conversation also touches on the challenges created by climate negotiations, especially between developed and developing nations regarding emission targets and responsibilities. Professor Pierce Forster highlights the need for international cooperation to rebuild trust and strengthen global commitments to the Paris Agreement amid tensions in climate financing and expectations.

Both speakers advocate for adaptive climate strategies that avoid trade tensions and encourage collaborative efforts among progressive nations to support developing countries in their transitions toward greener economies. The dialogue concludes by recognizing the barriers remaining for countries, like the UK, in reaching their climate targets and the importance of facilitating the transition to low-carbon technologies, ensuring that environmental policies do not disadvantage domestic economies.

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Here are five key points extracted from the video on the changing perception of trade's role in addressing climate change:

1. **Shift in Perception of Trade**: Traditionally, international trade has been viewed skeptically concerning climate change, primarily associated with transportation emissions from vehicles like trucks and ships. However, there is a growing recognition that trade can contribute positively to climate solutions by facilitating the dissemination of green technologies, such as solar panels.

2. **Interoperability of Climate Policies**: The World Trade Organization (WTO) plays an essential role in ensuring that various climate policies, including over 75 carbon pricing schemes, interact without causing trade tensions. It is crucial to develop frameworks that allow these policies to coexist and support international trade.

3. **Environmental Gains from Trade**: Environmental comparative advantage posits that countries can achieve environmental benefits through trade by specializing in goods that they can produce more sustainably. This requires supportive environmental policies that foster such specialization and helps reduce overall greenhouse gas emissions.

4. **Collaboration between Developing and Developed Countries**: Climate negotiations, exemplified by the Paris Agreement, highlight the need for cooperation between developed and developing nations on emission reductions. Trust-building efforts are necessary to address concerns over climate financing and ensure equitable responsibilities in combating climate change.

5. **Barriers to Meeting Climate Targets**: Despite progress in reducing emissions, significant challenges remain for countries like the UK in meeting future climate goals. Key barriers include the need to decarbonize transportation and industry and deploy low-carbon technologies at a larger scale. Accelerating government policies and investments in infrastructure and renewable energy solutions are crucial to achieving these targets.

These points reflect the evolving dialogue around the intersection of trade and climate policy, emphasizing the importance of cooperation and innovative solutions to address common challenges.

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Here are some of the key quotes from the video that highlight the evolution of trade's role in addressing climate change, the challenges involved, and the necessary steps to strengthen international commitments:

1. **Evolution of Trade's Role:**
- "Five years ago, trade was not part of the climate conversation and climate was absent from trade discussions at the WTO."
- "Most people when they think about international trade, they think about transport emissions... if you come from that angle, you start perceiving trade as part of the problem."

2. **Positive Aspects of Trade:**
- "What has changed is that people increasingly realize trade can also be an ally... the dissemination of green technology."
- "The reason [solar panels] are now so widely adopted and so cheaply available is because of international trade and global production chains."

3. **Role of the WTO:**
- "The most important objective [for the WTO] is to make sure that climate policies do not create trade tensions."
- "These environmental gains from trade come from countries specializing in what they're relatively green at."

4. **Environmental Gains from Trade:**
- "More than one third of this emissions reduction is due to these environmental gains from trade."
- "You need to ensure that climate policies do not lead to unnecessary disruptions in international trade."

5. **Trust and Cooperation:**
- "Where these international negotiations have got us... to progress climate action... we wouldn't have achieved what we had today without these international negotiations."
- "This is where I really think we have to think about really something brand new ways of collaborating."

6. **Challenges Ahead:**
- "We have to decarbonize our transport systems... decarbonize our industry."
- "We only have about a third of the policies in place to deliver to that 2030 target."

7. **Investment and Fair Competition:**
- "Investing in climate change is also going to lead to a competitive disadvantage."
- "The purpose of this border carbon adjustment would be to protect the UK economy from these pressures."

These quotes illustrate the nuanced discussion regarding trade's integral role in addressing climate change, the collaboration needed among countries, and the importance of developing effective climate policies without hindering international trade.

X-TIMESTAMP-MAP=LOCAL:00:00:00.000,MPEGTS:90000

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How has the perception of trade's role in addressing

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climate change evolved and

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what key changes have brought the trade

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and climate discussions closer together?

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These are some of the key

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questions we'll be addressing today.

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Welcome to the Exchange.

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This week we look at how global trade evolves

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to address climate change, balancing economic growth,

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carbon reduction, and fairness across nations.

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Joining me today are two prominent voices in the field.

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Professor Pierce Forster is Professor of Climate Change

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and the founding director for the Priestly Center

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for Climate Futures at the University of Leeds.

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Ralph Ossa is the Chief economist

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and Director of Economic Research

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and Statistics Division at the World Trade Organization.

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Welcome to you both. Uh, let's begin with you, Dr. Osa.

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Five years ago, trade was not part

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of the climate conversation and climate was absent.

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Trade discussions at the WTO.

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You recently blogged

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that international trade is often viewed

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as skepticism when it comes to climate change.

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Why is that? Is that view flawed?

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Well, you know, most people when they think about

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international trade, they think about transport.

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And when they think about transport,

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they think about transport emissions.

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They think about the dirty trucks, the planes,

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the ships, and so on.

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So, of course, if you come from that angle,

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you start perceiving trade as part of the problem.

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I think what has, changed is

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that people increasingly realize the trade can also be an

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important part of the solution.

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And the most obvious sense,

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and much this is true, is the

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dissemination of green technology.

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For example, if you think about solar panels,

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the reason they're now so widely adopted

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and also so, cheaply available is

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because of, international trade

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and, global production sheets. So

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Can I ask, what would be the role of the WTO

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and the multilateral trading system

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in advancing these goals?

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Well, I think for the WTO, the most important objective is

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to make sure that climate policies

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that countries are implementing now, now don't lead

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to trade pensions.

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So we have more than 75,

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more than 75 carbon pricing schemes,

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for example, in the world.

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Some of them have border carbon adjustments.

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We have countries that, have non pricing policies.

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And all these policies, of course,

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meet each other here at the WTO,

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and the key will be to find some way

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to make them interoperable.

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Okay. Just to push you a bit further on that point, Dr.

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Osa. Mm-hmm. Um, you argue in a recent WTA working paper

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that when economies specialize based on their environmental

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comparative advantage,

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there are environmental gains from trade.

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Can you tell us what you mean

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by environmental comparative advantage

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and what's your argument here?

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Yeah. So the idea is very simple.

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We all know that there's economic gains from trade

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and the economic gain.

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Some trade come from countries specializing in

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what they're relatively good at.

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And by exactly the same logic,

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there's also environmental gain some trade,

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and they, they come from country specializing

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and what they're relatively green at, the key difference

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between the two though is that these environmental gain,

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some trade needs, some help, in the form

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of supportive environmental, policies,

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supportive climate policy.

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So what we have, for example, as a simulation,

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where we, looked at, it's a quantitative model of the,

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of the world economy, and we

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imposed a worldwide, carbon price.

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And of course, what this carbon price does is it,

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reduces greenhouse gas emissions.

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That's not so surprising.

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But what we do find is that more than one third

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of this emissions reduction is due

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to these environmental against some trade.

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And what this means is

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that trade can be a very powerful force multiplier

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for climate policies.

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What are the key policy takeaways from this?

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Well, one policy takeaway is that you need,

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good climate policies.

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But the other policy takeaways that you need to make sure

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that the climate policies that you impose don't,

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lead to trade tensions, don't, don't lead to,

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unnecessary disruptions in international trade.

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Because of course, you need, as I just argued,

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exactly that trade for the,

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for the climate policies to be effective.

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And if I may link it to what I said at the,

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at the beginning, I was saying that people focus so much on,

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transport emissions.

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But what this, argument also shows is

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that you should also think about production emissions,

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because of course, production emissions are much more

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important than transport emissions.

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And there's a lot of variation on

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production emissions across countries.

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And this is exactly,

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where these environmental against some trade, come from

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that, that that goods are produced, and,

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and countries, that are relatively,

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green at producing these goods.

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Okay, thank you Dr. Rosa, professor Forrester.

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As the world inches closer

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to critical climate tipping points,

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international CR collaboration remains essential.

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Yet recent climate summits have shown tensions

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between developed and developing nations over emissions

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targets and responsibilities.

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What steps can be taken to rebuild trust

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and strengthen global commitments

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to achieving the Paris Climate goals? I

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Think it's good to think about

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where these international negotiations

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have got us currently.

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Um, things like the Paris Agreement,

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they've been incredibly successful, really trying to

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bring countries together in that spirit of cooperation to

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progress, climate action.

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Uh,

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and I do think we wouldn't, we,

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we wouldn't have achieved

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what we had today without these inter international

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negotiations, but you are absolutely correct.

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The, the, the, they, they, they aren't, they aren't

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working with the same person.

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See as we do see all,

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all around us with the devastating

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impacts of climate change.

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Um, but, but,

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but, but, but,

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but if you look at the Cop 29 negotiation where,

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where I was, I think you have to think about

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what are the expect expectation at

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that particular negotiation.

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I mean, that particular negotiation was really about climate

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financing, and that always proved one of the most

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difficult things to get co cooperation on,

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and the developed countries to try

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and manage the expectations of the developing well,

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the company who impacted climate change.

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We are experiencing, and the, and the,

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and, and, and, and,

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and at the same time doing that,

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the developing countries do always,

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They're under delivery of climate finance,

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is, is, is really

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quite disingenuous by the country

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that paid the most significant contribution

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to causing climate change.

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And,

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and so I just just think

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that we have to think about or,

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or alternative way as well,

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the Martin agreements are really trying

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to support operation.

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Uh, and I think I'm really interested in looking at the

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role of clubs

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of these more progressive countries to try and work together.

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We have things like the just energy transition partnership,

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for example, that are groups of countries that try

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and try

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and support particularly particular developing countries

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to decarbonize their energy supply.

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And, I just think when the

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trade that Ralph talked about, for example,

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there are particular opportunities there with trade

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with China, where, we perhaps in the uk,

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for example, would benefit from some

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of the PV panels in that cheap electric cars for,

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for example, to try

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and support our own journey to decarbonization.

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So, so, so y

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the yes, to come back to what your original,

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why original question really was, the, the, the,

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there is definitely a bit of a divide

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between developing developing countries.

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But, but,

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but this is where I really think we have

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to think about really something

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Brand new ways of collaborating,

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Um, add to something that, that Pierce was just saying

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or was saying before about, importance to manage,

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north, south tensions, in that, in that regard.

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And this is something that I can just, report,

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is also a big topic here at the WTO, where of course,

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you know, some of the broader carbon adjustments,

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for example, that are put in place, at the moment,

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are coming from, from richer economies.

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And then some of the poor economies, of course,

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also feel, sometimes that this, that, that,

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that this is unfair because it makes them, makes them,

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accountable

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or makes them have to pay for, for something where they,

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where they perhaps were not the main, the main culprits

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of the problem in the first place.

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So, I mean, this is without me saying that this is right

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or wrong, but just to report that these tensions that,

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that we were talking about,

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that you see them, here, also

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My follow up on a UK setting as chair

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and chief advisor to the UK government,

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UK emissions data confirmed

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that the UK has achieved its third carbon budget.

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Low carbon technologies like electric vehicles, batteries

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and solar panels are cheaper than ever.

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But the CCC suggests the UK will not meet its 2030 target.

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So what are the barriers that remain to development? If

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You look at where we've come, we've all already reduced

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our emissions by 50% compared to

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where we were in 1990.

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But, but, but a lot of that was done

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through decarbonizing our electricity supply.

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And this is where things get a lot more challenging.

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We have to decarbonize our transport systems.

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We have to put heat pumps

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into people's homes, taking out their gas boilers.

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Uh, and we have to decarbonize our industry.

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And the, these are things that are more personal.

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Uh,

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and if you do have a look where we are only a,

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we only have about

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third of policies in place to deliver to that

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2030 target.

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So,

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and so really what we require the government to do is

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to really, to really accelerate this delivery.

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So, for example, we need to

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Triple the deployment of offshore bin.

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We have to install heat, heat, heat

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tons, which are currently less than 1% of home.

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Currently. We have to get them into about 10%

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of people's home by that 2030 target.

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And in terms of sales of electric cars, we have to

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go from about

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16% of new cast sales today

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to a a hundred percent of your new cast sales by

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that 2030 target date.

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So we do really have to

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see things accelerate them.

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There, there is, there is definitely

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renewed ambition there from the current government,

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particularly to deliver on decarbonizing the

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electricity supply.

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W will, will,

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what I would encourage our politician to do,

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and what I encourage 'em to do in all our conversations

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is to really try

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and make it easier possible for people

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to take up these electric solutions.

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And one of the better way of doing that is to

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reduce the price of electricity

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to the consumer compared to gas price.

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And, and by reducing price, you, you,

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you can encourage people to buy an electric car

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or heat pump,

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and you can, you can encourage industry

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to invest in these electrical solutions.

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So, so the policy like, like

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that, that I would really encourage the government to,

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to kind of step up

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and deliver, to really accelerate the transition.

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And so this brings me back to your earlier point. Dr.

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OSA greening the UK economy will require investment

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and may increase cost of firms,

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but won't displace domestic businesses at

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a competitive disadvantage.

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How do we promote a fair playing field?

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Look, I can, completely understand the concerns that,

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investing in climate change is also going to lead

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to a competitive disadvantage.

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So, for example, if you have a high carbon price,

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in the uk, and it's also understandable that,

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the UK government is in that context,

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considering a border carbon adjustment.

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Uh, and,

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and the whole purpose, of course,

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of this border carbon adjustment would be, to,

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to protect, the UK economy a little bit,

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a little bit from these pressures.

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Um, I would like to say also though that of course,

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what would be even better is a, is a,

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is a globally coordinated solution,

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or at least a solution that is, coordinated among a,

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among a subset of countries, perhaps, around,

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some sort of, carbon pricing, carbon pricing framework.

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Because what we also see here at the WTO on this links to

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what, what Pierce was saying

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before is we do see, tensions between the global North

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and the global south in terms of, you know, the,

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the big questions of who caused the problem

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and, who's, paying for it now.

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And I think you have to take the, the political costs of,

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this into account as well.

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That does it for this episode of The Exchange.

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I'm Julia Forshaw.

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Join us next week for more discussions on policy

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and research.

Evolving Perspectives: Trade's Role in Combating Climate Change

00:00:00 - How has the perception of trade's role in addressing climate change evolved and what key changes have brought the trade and climate discussions closer together? These are some of the key questions we'll be addressing today. Welcome to the Exchange. This week we look at how global trade evolves to address climate change, balancing economic growth,

00:00:35 - Joining me today are two prominent voices in the field. Professor Pierce Forster is Professor of Climate Change and the founding director for the Priestly Center for Climate Futures at the University of Leeds. Ralph Ossa is the Chief economist and Director of Economic Research and Statistics Division at the World Trade Organization. Welcome to you both. let's begin with you, Dr. Osa. Five years ago, trade was not part of the climate conversation and climate was absent. Trade discussions at the WTO.

00:01:03 - that international trade is often viewed as skepticism when it comes to climate change. Why is that? Is that view flawed? Well, you know, most people when they think about international trade, they think about transport. And when they think about transport, they think about transport emissions. They think about the dirty trucks, the planes, the ships, and so on. So, of course, if you come from that angle, you start perceiving trade as part of the problem. I think what has, changed is that people increasingly realize the trade can also be an

International Trade and Environmental Gains

00:01:33 - And the most obvious sense, and much this is true, is the dissemination of green technology. For example, if you think about solar panels, the reason they're now so widely adopted and also so, cheaply available is because of, international trade and, global production sheets. So Can I ask, what would be the role of the WTO and the multilateral trading system in advancing these goals? Well, I think for the WTO, the most important objective is to make sure that climate policies

00:02:06 - to trade pensions. So we have more than 75, more than 75 carbon pricing schemes, for example, in the world. Some of them have border carbon adjustments. We have countries that, have non pricing policies. And all these policies, of course, meet each other here at the WTO, and the key will be to find some way to make them interoperable. Okay. Just to push you a bit further on that point, Dr. Osa. Mm-hmm. you argue in a recent WTA working paper

00:02:37 - comparative advantage, there are environmental gains from trade. Can you tell us what you mean by environmental comparative advantage and what's your argument here? Yeah. So the idea is very simple. We all know that there's economic gains from trade and the economic gain. Some trade come from countries specializing in what they're relatively good at. And by exactly the same logic, there's also environmental gain some trade, and they, they come from country specializing and what they're relatively green at, the key difference between the two though is that these environmental gain,

Impact of Carbon Pricing on Emissions and Trade

00:03:08 - of supportive environmental, policies, supportive climate policy. So what we have, for example, as a simulation, where we, looked at, it's a quantitative model of the, of the world economy, and we imposed a worldwide, carbon price. And of course, what this carbon price does is it, reduces greenhouse gas emissions. That's not so surprising. But what we do find is that more than one third of this emissions reduction is due to these environmental against some trade. And what this means is

00:03:39 - for climate policies. What are the key policy takeaways from this? Well, one policy takeaway is that you need, good climate policies. But the other policy takeaways that you need to make sure that the climate policies that you impose don't, lead to trade tensions, don't, don't lead to, unnecessary disruptions in international trade. Because of course, you need, as I just argued, exactly that trade for the, for the climate policies to be effective.

00:04:09 - at the beginning, I was saying that people focus so much on, transport emissions. But what this, argument also shows is that you should also think about production emissions, because of course, production emissions are much more important than transport emissions. And there's a lot of variation on production emissions across countries. And this is exactly, where these environmental against some trade, come from that, that that goods are produced, and, and countries, that are relatively, green at producing these goods.

Rebuilding Trust in Global Climate Cooperation

00:04:43 - As the world inches closer to critical climate tipping points, international CR collaboration remains essential. Yet recent climate summits have shown tensions between developed and developing nations over emissions targets and responsibilities. What steps can be taken to rebuild trust and strengthen global commitments to achieving the Paris Climate goals? I Think it's good to think about where these international negotiations have got us currently. things like the Paris Agreement,

00:05:18 - bring countries together in that spirit of cooperation to progress, climate action. and I do think we wouldn't, we, we wouldn't have achieved what we had today without these inter international negotiations, but you are absolutely correct. The, the, the, they, they, they aren't, they aren't

00:05:48 - See as we do see all, all around us with the devastating impacts of climate change. but, but, but, but, but, but if you look at the Cop 29 negotiation where, where I was, I think you have to think about

Navigating Climate Financing Challenges

00:06:20 - that particular negotiation. I mean, that particular negotiation was really about climate financing, and that always proved one of the most difficult things to get co cooperation on, and the developed countries to try and manage the expectations of the developing well, the company who impacted climate change.

00:06:50 - and, and, and, and, and at the same time doing that, the developing countries do always, They're under delivery of climate finance, is, is, is really quite disingenuous by the country

00:07:19 - to causing climate change. And, and so I just just think that we have to think about or, or alternative way as well, the Martin agreements are really trying to support operation. and I think I'm really interested in looking at the role of clubs

Collaborative Pathways for Decarbonization in Developing Countries

00:07:51 - We have things like the just energy transition partnership, for example, that are groups of countries that try and try and support particularly particular developing countries to decarbonize their energy supply. And, I just think when the trade that Ralph talked about, for example, there are particular opportunities there with trade

00:08:24 - for example, would benefit from some of the PV panels in that cheap electric cars for, for example, to try and support our own journey to decarbonization. So, so, so y the yes, to come back to what your original, why original question really was, the, the, the,

00:08:54 - between developing developing countries. But, but, but this is where I really think we have to think about really something Brand new ways of collaborating, add to something that, that Pierce was just saying or was saying before about, importance to manage, north, south tensions, in that, in that regard. And this is something that I can just, report, is also a big topic here at the WTO, where of course,

Equity in Climate Responsibility and Development Challenges

00:09:27 - for example, that are put in place, at the moment, are coming from, from richer economies. And then some of the poor economies, of course, also feel, sometimes that this, that, that, that this is unfair because it makes them, makes them, accountable or makes them have to pay for, for something where they, where they perhaps were not the main, the main culprits of the problem in the first place. So, I mean, this is without me saying that this is right

00:10:00 - that we were talking about, that you see them, here, also My follow up on a UK setting as chair and chief advisor to the UK government, UK emissions data confirmed that the UK has achieved its third carbon budget. Low carbon technologies like electric vehicles, batteries and solar panels are cheaper than ever. But the CCC suggests the UK will not meet its 2030 target. So what are the barriers that remain to development? If You look at where we've come, we've all already reduced

00:10:33 - where we were in 1990. But, but, but a lot of that was done through decarbonizing our electricity supply. And this is where things get a lot more challenging. We have to decarbonize our transport systems. We have to put heat pumps into people's homes, taking out their gas boilers. and we have to decarbonize our industry.

Urgent Action Needed for 2030 Climate Targets

00:11:03 - and if you do have a look where we are only a, we only have about third of policies in place to deliver to that 2030 target. So, and so really what we require the government to do is to really, to really accelerate this delivery.

00:11:37 - Triple the deployment of offshore bin. We have to install heat, heat, heat tons, which are currently less than 1% of home. Currently. We have to get them into about 10% of people's home by that 2030 target. And in terms of sales of electric cars, we have to

00:12:08 - 16% of new cast sales today to a a hundred percent of your new cast sales by that 2030 target date. So we do really have to see things accelerate them. There, there is, there is definitely renewed ambition there from the current government,

Encouraging Electric Solutions through Policy and Investment

00:12:40 - electricity supply. W will, will, what I would encourage our politician to do, and what I encourage 'em to do in all our conversations is to really try and make it easier possible for people to take up these electric solutions. And one of the better way of doing that is to reduce the price of electricity

00:13:08 - And, and by reducing price, you, you, you can encourage people to buy an electric car or heat pump, and you can, you can encourage industry to invest in these electrical solutions. So, so the policy like, like that, that I would really encourage the government to, to kind of step up

00:13:41 - And so this brings me back to your earlier point. Dr. OSA greening the UK economy will require investment and may increase cost of firms, but won't displace domestic businesses at a competitive disadvantage. How do we promote a fair playing field? Look, I can, completely understand the concerns that, investing in climate change is also going to lead to a competitive disadvantage. So, for example, if you have a high carbon price, in the uk, and it's also understandable that,

Navigating Carbon Adjustments and Global Cooperation

00:14:12 - considering a border carbon adjustment. and, and the whole purpose, of course, of this border carbon adjustment would be, to, to protect, the UK economy a little bit, a little bit from these pressures. I would like to say also though that of course, what would be even better is a, is a, is a globally coordinated solution, or at least a solution that is, coordinated among a, among a subset of countries, perhaps, around, some sort of, carbon pricing, carbon pricing framework.

00:15:09 - what, what Pierce was saying before is we do see, tensions between the global North and the global south in terms of, you know, the, the big questions of who caused the problem and, who's, paying for it now. And I think you have to take the, the political costs of, this into account as well. That does it for this episode of The Exchange. I'm Julia Forshaw. Join us next week for more discussions on policy and research.

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