Trade and Climate Change

DFAIT seminar, OttawaSeptember 14, 2009

Aaron Cosbey

Bali to CopenhagenA two-year programme of research and consensus-seeking on trade and climate change

Context: three types of linkage

• Climate change’s physical impacts on trade infrastructure, flows (infrastructure, changes in comparative advantage)

• Climate change policies with trade impacts (competitiveness and leakage impacts)

• Trade laws and policies that can obstruct or support climate change actions (EGS, subsidy law)

Key areas of linkage

• Competitiveness and leakage policies

• Subsidy law and domestic policies• Subsidy reform for climate change• Standards • IPRs and tech transfer• Low-carbon goods liberalization

A focus on competitiveness issues

• Issue 1: impacts on Canadians of measures taken by others to address competitiveness and leakage

• Issue 2: competitiveness impacts for Canada arising from the interplay of domestic and foreign climate regimes

Issue 1: Impacts of foreign C&L measures• State of play in the US and EU• Will Canada be targeted?• Are these measures WTO/NAFTA-

legal?• Are they effective?• What sectors might be hit?• What are our options?

Issue 2: Regime differentials

• Will Canada need to employ C&L policies?– What sectors are vulnerable?– What policies are available?– Why even discuss this at this point?

Issue 2: Regime differentials

• US regime on offsets– Will Canadian regime link to

international? Continental?– US regime will find significant low-cost

offsets internationally.– Canada may be put at a competitive

disadvantage

Issue 2: Regime differentials

• Pressure for a harmonized regime with US?– Problem: Canadian economic structure

is quite different– Impacts may be severe in some sectors

if a harmonized regime is adopted– But then how to achieve ambitious

targets?

Concluding thoughts

• SWOT analysis re the US: where do we stand?

• Need to engage the US on elaboration of its regime: standards, methodologies

• What Canadian measures to address competitiveness and leakage?

• Work on broader positive potential – EGS, clean energy exports

Aaron Cosbeyacosbey@iisd.ca

www.iisd.org/trade/crosscutting