Bridges Trade BioRes • Volume 9 • Number 14 • 21st August 2009

Trade Issues Step to the Forefront of Climate Negotiations

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Recent discussions during informal UN negotiations toward a new climate deal, set to conclude in Copenhagen this December, highlighted the importance of economic and trade issues for resolving the climate crisis.

Countries met from 10-14 August in Bonn, Germany to advance negotiation discussions in both the Kyoto Protocol (KP) and the Long-term Cooperative Action (LCA) working groups.

Discussions were parcelled out according to the sections and subsections of the Bali Action Plan - a decision taken by Parties in 2007 that kicked off these negotiations and which provides the framework for the text - into smaller meetings led by an appointed facilitator, whose role was to manage, but not guide, discussions.

Trade issues came to the forefront of discussions related to mitigation, technology transfer, and even on the shared vision. In a number of groups, trade implications arose explicitly and in others implicitly.

Developed-developing country divide apparent in mitigation discussions

While the economic and social consequences of response measures discussion is usually heavily dominated by the OPEC concerns, India proposed the following language be inserted in the text:

“Developed country Parties shall not resort to any form of unilateral measures including countervailing border measures, against goods and services imported from developing countries on grounds of protection and stabilization of the climate. Such measures would violate the principles and provisions of the Convention, including, in particular, those related to the principle of common but differentiated responsibilities (Article 3, paragraph 1), to trade and climate change (Article 3, paragraph 5), and to the relationship between mitigation actions of developing countries and the provision of financial resources and technology by developed country Parties (Article 4, paragraphs 3 and 7).”

The suggestion received support from dozens of developing countries and was opposed by the US, Japan, and EU. Notably, the language referencing the UNFCCC agreement is clearly included to cover Boarder Tax Adjustments - as laid out in the US Waxman Markey bill that is now approaching the stage of Senate approval - even if they are WTO compatible.

The discussion of sectoral approaches is a continuation of a debate to consider sectoral targets applicable to all countries. This position is opposed by developing countries on the basis that it would generate significant trade conflicts and consequences, especially as it relates to competitiveness.

The solution of developing countries has been to focus the issue on voluntary sectoral approaches for implementation of Article 4 (relating to financing and technology development and transfer), whereby funding and tech would be channelled through sectors, instead of to a general pool. Sectoral efforts by developing countries are being considered as one option for nationally appropriate mitigation actions, or NAMAs.

On guiding principles, the current text already contains the following noteworthy statement:

“The implementation of cooperative sectoral approaches should not replace the national targets of developed country Parties [or lead to [new commitments for developing country Parties, [trans-national or national emissions reduction targets,]] arbitrary or unjustifiable discrimination or disguised restriction on international trade [, or the application of global uniform and equal standards for Parties]].”

A lively discussion in the subgroup covering approaches, including opportunities for using markets, to enhance the cost-effectiveness of, and to promote, mitigation actions emphasised the keen hunger that developed countries - especially Europe - have for a global carbon market. The relevance to trade is the many ways that the creation of an enormous market would have on the commodities and activities that it is based upon. Some observers say the carbon market could generate trillions of dollars and possibly surpass the global real estate market.

Technology development and transfer - much ado about IPRs

The current negotiation text has nearly two full pages on issues relating to intellectual property rights (IPRs). This tiny two-page fact has led many countries to underline in their interventions the importance of having a focused discussion on this issue in particular. The US initially stated in plenary that they considered IPRs to be a critical part of the discussions and wished to explore the issue further. Then, when intervening in the technology discussion group, they said they would not accept a decision within this process that in any way hindered or otherwise affected other IPR agreements.

Nevertheless, a number of developing countries continue bringing up the issue, in particular as relates to compulsory licensing and patenting, and the question of IPRs will certainly stay in the debate. It is an area where more information and analysis is needed within the negotiations.

Moving the shared vision forward

In addition to a request by India to insert the paragraph on unilateral measures here, there was also reference to development rights and respect for the international economic system. A number of developing countries assert that the respect for countries’ sustainable development, their right to development, and an acceptance of an open economic system are critical to the shared vision.

While the issue of agriculture did not get special treatment at this session, there were many reports that a small group of ‘like-minded’ countries , may be planning a side meeting - possibly in Bangkok - on the issue.

On financing, discussions went more swiftly than in other groups - which was likely due to the agile facilitation of Luiz Figueredo, who headed this group. The details are coming together. Notably, outside the negotiation forum the G20 members present met to discuss the upcoming heads of state meetings and its focus on climate financing. A number of countries were taken by surprise and are concerned about what this grouping dynamic might mean for the negotiations.

In an interview following the negotiations Executive Secretary, Yvo de Boer laid out “four essential” questions he hoped Copenhagen would be able to answer including the emissions cuts industrialised countries would be willing to take, the actions major developed countries would be willing to do, the sources of financing to support necessary financing and technology transfer in developing countries, and the means for managing that financing.

These questions will certainly receive attention in Copenhagen, but striking a balance of positions among the widely varying national circumstances and interests so as to arrive at a consensual outcome will require more insight than answers than these can provide. It is not simply so much what developed countries will do, but how they will do it. The financing sources and management questions are political ones that are not limited to where and how, but - to catalyze a negotiated decision - need to be accompanied by a “how much”. The financing issues will only find resolve in conjunction with demonstrated actions by developed countries on their own mitigation and delivery of past commitments on technology and financial support.

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