Change Trade, Not our Climate

October 2009 

Change Trade, Not Our Climate

Statement from the OWINFS Trade and Climate Change Working Group

One way or another change is on the way: if we don’t change the rules of the global economy we won’t be able to limit climate change.

The current neoliberal economic model stands in the way of a swift and effective response to climate change. International trade and investment agreements are a driving factor behind the growth of energy-intensive industrial sectors, the continued extraction and processing of fossil fuels, and the expansion of intensive agriculture. These carbon-hungry activities also contribute to the relentless destruction of climate-regulating forests; and international transport is also responsible for a significant chunk of annual greenhouse gas emissions.

At the same time, various trade and investment rules place severe constraints on what governments can actually do to promote low-carbon alternatives or help people adapt to climate change. Rules on intellectual property rights, in particular, push up the cost of climate-friendly technologies, making it impossible for developing countries to switch to sustainable low-carbon and climate-resilient development. Rules on subsidies could also prevent financial support being made available for the development of climate-friendly fuels or technologies.

Rules on the patenting of life forms could also prevent farmers adapting food production in response to climate change, with severe impacts on food security. In addition, the world's largest seed and agrochemical corporations are already stockpiling hundreds of monopoly patents on genes in plants to be marketed as climate-resilient crops able to withstand drought, heat, cold, floods, saline soils, and more, reducing people’s control over adaptation to climate change.

A number of countries are also using the WTO to pursue the liberalization of energy services, which could place further constraints on governments’ ability to implement national policies intended to reduce reliance on energy imports or shift to sustainable energy sources. A number of countries have also used the WTO’s Non-Agricultural Market Access (NAMA) negotiations to object to climate-related ‘non-tariff barriers’, which include national energy efficiency measures already in place.

WTO rules also frustrate attempts to protect and promote sustainable small-scale forms of agriculture, even though producing food in this way has minimal climate impacts compared with industrial agriculture, enhances food security and reduces deforestation. Sustainable agriculture also helps people to diversify food production in response to changing weather patterns. Adapting food production is absolutely critical: the vast majority of the world's 1.5 billion poor and food-insecure depend on agriculture, forestry and fisheries for their livelihoods, and these are all likely to be severely impacted by climate change.

Trade and investment rules also allow corporations to fight the imposition of laws and regulations intended to protect against climate change. Bilateral investment treaties, for example, make it much easier for large corporations to shift their centre of operations (and their tax payments) to other locations. Industrial lobbyists are not slow to make this point to governments if they are thought to be considering policies that are difficult or costly for industry to implement.

Governments’ fixation on maintaining economies’ and industries’ competitiveness in the face of increased international competition also presents a major hurdle to implementing climate change mitigation policies. As countries have progressively engaged in international trade, they have also become more dependent upon it. As a result, governments are ever more reluctant to introduce costly climate-friendly policies, such as carbon taxes: these could place their domestic industries at a disadvantage, by increasing their operating costs compared to those of their foreign competitors.

Some propose addressing concerns about competitiveness by applying equalizing ‘border tax adjustments’ (BTAs) to imports, so that those imports are made correspondingly more expensive. But this approach is highly controversial as it contravenes the principle of common but differentiated responsibility for climate change, and does not address issues such as carbon budgets, climate debt and historical responsibility.

Developing countries negotiating in the UNFCCC have consistently and correctly pointed out that they are not responsible for climate change: as a result they do not have emissions reductions targets under the Kyoto Protocol, and developed countries also have a formal obligation within the UNFCCC (Article 4.3) to developing countries address the challenges of climate change.

Industrialized countries bear a historical responsibility for climate change, and this responsibility surely includes bearing the cost in terms of lost competitiveness. They are also responsible for addressing the current ‘climate debt’ they owe developing countries, because they continue to crowd out the atmospheric or ‘carbon space’ which all countries have a right to share. This is a very real debt, since the impacts of climate change are already being felt heavily in developing countries, who have done little to cause climate change, but must now develop under its adverse impacts.

However, there still remains a difficulty relating to ‘carbon leakage’ - industrial migration to countries without emissions reductions targets. If such carbon leakage occurs the imposition of tough emissions reduction standards in industrialized countries could still result in low or no carbon emissions reductions overall. It would simply drive industries from one set of countries to another (a move that is itself facilitated by trade and investment liberalization agreements). Carbon leakage could therefore bring efforts to mitigate climate change to a grinding halt: in the long-term, it would be a lose-lose solution for everyone. Dealing with climate change effectively means accounting for and addressing the emissions related to the overconsumption of products, primarily in developed countries: this is a key driver of climate change.

Ultimately, there have to be sufficient incentives built in to climate, development and other intergovernmental negotiations for developing countries to believe that their concerns are being taken seriously by rich industrialized countries, and acted upon. This is not currently the case. The EU, for example, is in the midst of Economic Partnership Agreement negotiations with some of the poorest countries in the world, in Africa, the Caribbean and the Pacific, in which it is ruthlessly seeking to open up their markets to European exports and offering very little in return. Thus people risk becoming poorer as a direct result of trade agreements, and consequently less able to cope with the impacts of climate change. It is hardly surprising that developing countries do not trust their industrialized counterparts.

Companies that feel the terms of bilateral investment agreements between countries have been transgressed are also able to challenge nation states directly, through the International Centre for Settlement of Investment Disputes (ICSID), the UN Commission on International Trade Law (UNCITRAL) and other arbitration bodies. At the time of writing, for example, there were at least 49 pending energy-related disputes before ICSID, almost all of which concern developing countries being taken to court by energy multinationals.

This tension between the worlds of trade and climate change thus creates a ‘chilling effect’ on the development of new climate change policy measures, both nationally and internationally: governments become reluctant to introduce any measures that might be challenged through the trade system. This can apply to national measures individual governments might otherwise implement; national measures that governments might use to fulfill their commitments under multilateral environmental agreements (MEAs); and even to the language agreed in MEA texts themselves.

This dilemma is compounded by the fact that many MEAs leave the precise way in which objectives are to be achieved up to individual governments. Additionally, more recent agreements go a step further and include provisions explicitly advising against trade discrimination or ‘disguised restrictions’ on international trade. The UN Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol on climate change both contain wording along these lines.

This all flies in the face of the climate change imperative: to prevent runaway climate change we need to keep fossil fuels locked up underground, as well as preventing the release of ‘over-ground’ carbon (such as that stored in forests) into the atmosphere. But governments seem to have become fixated on trade priorities, prioritizing business-friendly solutions to climate change. This means we are already banking heavily on the success of a number of ‘false solutions’, with several more in the pipeline.

The links between some of these ‘false solutions’ and WTO rules are reasonably clear (certification systems, for example, are clearly constrained by the WTO’s rules on ‘Technical Barriers to Trade’); others less so (carbon trading, for example). But all have been selected on the basis that they do not conflict with trade and investment rules, and because they minimize inconvenience to, or even benefit, industry.

Voluntary certification and labelling systems, such as the Forest Stewardship Council’s certification process, are typical of the type of sub-optimal measures that many governments prefer, because they are unlikely to be challenged within the WTO. Certification and labelling are generally developed on a sector-by-sector basis and are particularly susceptible to corporate lobbying. In some cases corporations are even involved in developing and approving the standards themselves. Labels and certificates are popular precisely because they have minimal impacts on trade and are not designed to address excessive consumption.

Similarly, whilst many governments have introduced mandatory (as opposed to voluntary) energy efficiency standards and labels which have helped to improve energy efficiency, such labels are still likely to have little or no impact on the actual purchase and use of a wide range of non-essential energy-consuming appliances. This means that such standards are still an insufficient response to climate change on their own.

Labels and certificates can also be used to ‘greenwash’ products. The use of ‘sustainable biofuels’ certificates, for example, can mask the severe negative social and environmental impacts that agrofuels can have, including increased emissions of greenhouse gases and significant indirect impacts on both people and the environment. Agrofuels certification schemes, such as the Better Sugarcane Initiative and the Roundtable on Sustainable Palm Oil, are again dominated by transnational corporations, and this clearly influences their approach.

Yet the impact of agrofuels on hunger, climate and biodiversity could be just the tip of the iceberg, if plans to roll out another business-friendly biomass-based technology – ‘biochar’ - proceed. Biochar’s proponents claim that biomass waste from urban, agricultural and forestry sources can be converted into and locked up as charcoal, a stable and long-lasting form of carbon, releasing usable bioenergy in the process.

But the production of biochar is dependent upon a supply of cheap biomass and therein lies the main problem. Without regulation, where the ‘waste’ comes from will depend on the comparative cost of different waste – or non-waste – streams, not their suitability from a social or environmental perspective. Thus the large-scale production of charcoal envisaged by some could require many hundreds of millions of hectares of land being converted for biomass production (primarily in the form of tree plantations), which would in turn have incalculable effects on global food production and biodiversity.

Many more ‘false solutions’ are being proposed and implemented, as industry moves to cash-in on climate change. The main risk is that the urgency of the situation, combined with the dominant ‘market-friendly’ approach, will lead to a hasty acceptance of untried and untested technologies, including outlandish geo-engineering experiments, a revival of the once-rejected genetic modification and nuclear industries, and reliance on as yet undeveloped ‘carbon capture and sequestration technologies’ (which is being used to justify the continued use of fossil fuels such as ‘clean coal’).

Governments have also opted to use international trading mechanisms to drive and finance all these climate change measures and technologies. Carbon trading in particular has been and remains central to current climate change efforts, in spite of the fact that it permits the rich, industrialized North to buy its way out of its commitments if necessary, and even though the outcomes of carbon markets to-date have been dubious, to say the least. In particular, the Kyoto Protocol’s Clean Development Mechanism (CDM) has failed. It is rejected by many, because it effectively privatizes the atmosphere, allocating pollution rights to those that can afford to buy them.  But even its supporters, such as the World Bank, now recognize that it is also complex, slow and cumbersome, and seems to be riddled with fraud, with “the vast majority of energy efficiency and renewable energy projects remaining stuck somewhere in the pipeline.”

A number of regions and countries have also decided to use carbon trading internally to distribute the burden of compliance ‘efficiently’ and at least cost. The biggest and most well known of these is the EU’s Emissions Trading Scheme, which clearly demonstrates some of the disadvantages of using carbon trading schemes, including a distinct susceptibility to corporate lobbying.

Carbon markets, like any other market, are also volatile. Yet instability and unpredictability are hardly desirable characteristics in a determined and structured effort to mitigate climate change. Any factor that causes the price of carbon to drop will make it cheaper for companies to pollute, and thus less likely that they will implement energy efficiency measures or develop new technologies. Uncertainty will also reduce upfront investment in desirable technologies.

The global credit crunch is one such factor: many companies now have emissions allowances they do not need because their output has fallen, so they are selling their surplus emissions allowances to generate funds. This, in turn, is contributing to a fall in the price of carbon that again can make it cheaper to pollute.

Yet many governments seem willing to continue as if nothing were amiss. Ignoring lessons that might be learned from the global financial crisis, they seem determined to press ahead with carbon markets, regardless of the consequences. There are even proposals to use carbon markets to finance a new mechanism, Reducing Emissions from Deforestation in Developing countries (REDD), which is currently being discussed in the UN’s climate change negotiations (although an increasing number of governments are beginning to oppose this form of financing, including Bolivia, Brazil, China, El Salvador, Paraguay, and Tuvalu).

Stopping deforestation could certainly make a significant dent in the quantity of greenhouse gases being emitted each year. But a closer analysis shows that some government favor a form of REDD that is not intended to stop deforestation, only to reduce it in a way that is comfortable and convenient for industry. REDD could also be used to reward those engaged in logging and industrial agriculture, whilst ignoring those countries and communities that already have low deforestation rates.

Critically, REDD could also hamper much-needed efforts to mitigate climate change if it is based on a definition of forests that includes plantations. Large-scale monoculture tree plantations cause serious environmental, social and economic problems. Furthermore, they only store 20% or less of the carbon that intact old growth forests do. It thus seems inconceivable that climate change negotiators would sanction any process that allows natural forests to be replaced with plantations. Yet this is exactly what is being proposed by some governments in the climate change talks at the moment.

REDD also refocuses attention on a key moral and legal dilemma – to whom, if anyone, do forests belong? And who has the rights to sell forest carbon credits? It is certainly clear that in the absence of secure land rights, Indigenous Peoples and other forest-dependent communities have no guarantees that they will receive any form of REDD ‘incentive’ or reward for their extensive forest conservation efforts.

Without resolving these dilemmas, REDD could join the growing list of false and futile solutions to climate change which are currently supported by governments keen to comply with international trade and investment priorities.

The WTO, keen to position itself as part of the ‘solution’ to climate change, has also proposed the liberalization of ‘environmental goods and services’ (EGS) as part of the answer. But this is yet another false solution. Unsurprisingly, WTO negotiations have taken a trade-oriented approach to the issue, with countries proposing to liberalize trade in precisely those EGS in which they have a competitive advantage. This is particularly the case in relation to technologies the US and EU hope to export, including traditional ‘end-of-pipe’ technologies such as waste disposal and wastewater treatment technologies.

But it is not clear that tariff reductions will make much difference to the diffusion of climate friendly technologies, especially compared with the benefits that could be generated by an increase in straightforward and genuine technology transfer for domestic technology development. Tariff reductions could also lead to a loss of tariff revenue, which is a key source of income in many developing countries.. Even more importantly, this EGS debate also distracts attention away from the impact that the WTO’s Trade-related Intellectual Property Rights (TRIPS) agreement has on the cost of acquiring new technologies, making them prohibitively expensive for developing countries.

The social movements and civil society organizations listed below, who are members of the Our World Is Not For Sale network, believe the answer is clear: we urgently need to change the rules of the neoliberal, corporate-based global economy, if we are to avoid the worst impacts of climate change. A new approach that puts the long-term health of the planet and the well-being of all its people before short-term considerations, would be better for our climate, better for people and better for our economies.  To achieve this transformation, governments need to:

·         Refocus trade and investment to promote the use of sustainable energy, by stopping trade and investment negotiations and agreements that promote energy-intensive industries; and by redirecting their efforts - and the very substantial public subsidies currently allocated to the fossil fuel and agrofuel sectors - into developing and implementing sustain clean, renewable, locally-controlled and low-impact energy resources and technologies, based on the principle of energy sovereignty.

·           Remove IPR rules that stop the transfer of low-carbon technologies to developing countries, and threaten food security and farmers’ ability to adapt food production to our changing climate; and ensure the transfer of technology and finance that will allow developing countries to make use of existing technologies and develop new ones. (The WTO’s turgid trade-oriented ‘environmental goods and services’ negotiation has little part to play in the development of a swift response to climate change, and is little more than a distraction from the urgent need to address these concerns about IPRs and technology transfer.)

·           Transform the way we produce food by protecting and developing sustainable low-impact food production, that promotes food sovereignty, protects family farms, and uses seasonal food to provide first and foremost for local needs, together with changing dietary habits. This would lead to a significant reduction in greenhouse gas emissions, as well as helping to combat hunger. The solutions to the current food and climate crises - both in the short and long term - require a deep and radical shift away from exported-oriented, industrial agriculture. Ultimately, WTO rules should not apply to food and agriculture.

·           Stop deforestation by stopping related trade liberalization negotiations, especially those aimed at bans on exports of timber, nailing down demand-side drivers in importing countries and resolving governance, poverty and land tenure issues in forested countries. Funding for efforts to stop deforestation should not come from carbon markets; and any agreements aimed at stopping deforestation must focus on stopping rather than reducing rates of deforestation. In order to be both effective and equitable those efforts must also exclude plantations; and recognize and fully implement the rights of Indigenous Peoples as set out in the UN Declaration on the Rights of Indigenous Peoples (UNDRIPs). Without resolving these dilemmas, proposals such as those concerning Reducing Emissions from Deforestation and Degradation (REDD) could join the growing list of false and futile solutions to climate change.

·           Stop corporations influencing policies to combat climate change, including by rescinding bilateral investment treaties, and the investor-to-state dispute resolution mechanisms (including that of the International Centre for Settlement of Investment Disputes), that underpin corporate threats to relocate their operations.

·         Abandon false market-based solutions – including problematic labelling and certification schemes, the liberalization of environmental goods and services,  agrofuels, ‘biochar’, genetic engineering, geo-engineering, as yet undeveloped ‘carbon capture and sequestration’ (CCS) technologies, and the use of carbon markets to finance and drive these various processes.

·         Instead, create a coherent rights-based framework that prioritizes long-term climate change concerns over short-term trade interests; and is based on the fact that effective and enduring solutions to the climate crisis will not come from big business, but from Indigenous Peoples, peasant communities, fisherfolk, and especially women in these communities, who have been living harmoniously and sustainably with the Earth for millennia.

·         Prioritize climate justice and climate debt, not trade and investment. The world’s greatest per capita polluters must make deep cuts in emissions by changing their polluting way of life and transforming their climate-intensive economies. It is time to reverse the export market-oriented development paradigm, and create an alternative vision of sustainable societies based on sovereignty, solidarity and sufficiency. In short, industrialized countries must repay their climate debt. This will undoubtedly impact on energy-intensive industries, and their ability to compete on global markets. But the governments responsible for climate change need to shoulder this burden; they should be rapidly restructuring their economies anyway, as they move to low-carbon economies. However, this transformation could be eased by removing the many trade restrictions and priorities that work to stop governments introducing strict energy efficiency regulations; protecting infant industries; subsidizing the development of climate-friendly technologies; and creating new, green jobs for displaced workers, who should not bear the brunt of climate change.

·         Transforming our approach to trade and investment in general could also inject significant positive momentum into global efforts to mitigate and adapt to climate change. Replacing trade and investment liberalizing agreements and negotiations with genuine collaborative intergovernmental efforts to assist developing countries to improve their economies is a prerequisite.

The current neoliberal economic system has to be replaced, if we are to combat climate change. There is no other workable option.

Endorsed by the Our World is Not For Sale Network