Economic Development and Climate Protection: Coloring, Texturing and Shading of Response Measures in Sustainable Development

The Paris Agreement recognizes that countries may be affected not only by climate change, but also by impacts of measures taken in response to it. The Agreement also requires parties to address the adverse implications arising from the use of response measures, particularly on developing countries. Parties' tool-kit of response measures to meet their pre-2020 actions and post-2020 intended nationally determined contributions (INDCs) could include trade measures such as carbon taxes, cap-and-trade schemes and related offsets, carbon border tax adjustments, carbon standards and labelling, and subsidies for low carbon goods. Aside from parties, international organizations are also developing response measures such as the ISO's carbon footprint standards (CFPs). These measures could have economic and trade implications and may possibly modify the conditions of competition in various sectors. Depending on how these measures are designed and applied, they can also be incompatible with WTO law. The inter-linkages between trade and climate response measures will become more pronounced as parties implement their pre-2020 climate actions and post-2020 INDCs. Trade disputes are more likely in a world of uncoordinated and conflicting national responses to climate challenge. What should be done to foster coherence between the WTO and UNFCCC regimes, and prevent legal inconsistencies from arising? This calls for the governance of response measures — the need for pre-emptive cooperation at the national and international levels supplemented by ex-ante and ex-post transparency and guided by parameters to foster coherence between the trade and climate regimes. While this paper discusses response measures and their implications from the trade-climate lens, the approach adopted in the paper would also be applicable in the interaction of response measures with other policy areas such as economic diversification, just transition in the workforce and development issues. In sum, as the paper highlights, from the perspective of the Paris Agreement's mandate that climate protection should be enhanced in the context of sustainable development, and response measures must also colored, textured and shaded in sustainable development.