Well-managed trade and coordinated carbon pricing can help give clean products a leg up and speed the post-pandemic recovery, according to new analyis by the World Trade organization.

Here is a key part of a new report, which is reproduced below for download in full:

“The WTO Director-General [Dr Ngozi Okonjo-Iweala, the first African and the first woman to lead the organization] has called for increased global cooperation on tackling climate change,
to ensure that climate-related measures, such as carbon pricing, are not misused as a pretext
for protectionism, especially against developing countries.

“Just and inclusive carbon pricing mechanisms will take into account the histories, responsibilities and needs of developed and developing countries.

“For developing countries, there are many potential benefits of just carbon pricing mechanisms, as they can help facilitate the transition towards new sectors,
and ultimately offer significant revenue-creation opportunities, as well as the means to respond to pressing developmental challenges, while futureproofing investments. However, the participation of the developing world in the transition to a global low-carbon economy requires access not only to technology, but to climate finance.

“Tackling these issues cooperatively would help with finding effective solutions. The same can be said for carbon pricing, itself a key pillar for an effective and just transition to a low-carbon world. About 65 different carbon pricing initiatives currently exist in around 45 national jurisdictions.

“Coverage and prices vary from less than US$ 1 per ton of CO2 in certain countries to more than US$ 135 in Sweden. Still others are taking different approaches: supporting
green innovation, regulating fuel efficiency, and pursuing sectoral policies.

“As the Director-General has said in her participation in the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow in 2021, and at other key events, such as the 7th Ministerial Meeting of the Coalition of Finance Ministers for Climate Coalition
in 2022, fragmentation of this kind will weaken our efforts to reach the Paris Agreement targets.

“Carbon prices are more efficient when applied globally. WTO projections show that the carbon price needed to stay on a 2°C degrees warming trajectory would be 25 percent lower by 2030 if coordinated at a global level instead of being introduced regionally.

“Moreover, multiplying approaches to carbon pricing and border adjustment is likely to increase costs and confusion for businesses, as well as give rise to trade
frictions.

“A “fair and just transition” for developing countries could fall by the wayside. Today, getting
access to green technology and the US$ 100 billion of climate finance promised is urgent.

“While proposals exist for both global carbon prices, few have been able to garner significant support.

“However, the IMF has proposed a differential carbon pricing scheme which may be able to mitigate the adverse real income effects of global carbon policies for low-income regions.

“In fact, according to WTO estimates, a differential carbon pricing proposal could reduce the negative welfare effects for most low-income countries to a limited extent.

“With a differential carbon price, as proposed by the IMF (US$ 25, US$ 50 and US$ 75, respectively, for low-income, middle-income and high-income regions), developing countries would have a smaller real income reduction than under a uniform carbon price.

[CarrZee note — carbon prices only hurt polluting industries/companies. Products made via clean energy / solar / wind / batteries are made more attractive following the enactment of carbon pricing — this will allow emerging countries to leap frog dirty OECD nations, economically speaking]

“Whatever scheme is adopted, the WTO, as a forum, can help in those discussions and debates and find solutions …”

Fossil Fuel Subsidy Reform

There’s also the WTO member-driven initiative on Fossil Fuel Subsidy Reform (FFSR).

“The FFSR initiative is supported by 45 WTO members, and other WTO members can join as co-sponsors. Globally, fossil fuel production and consumption subsidies amount to US$ 500 billion annually.

“The FFSR initiative encourages the rationalization and phase out of inefficient fossil fuel subsidies that encourage wasteful consumption.”