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Climate change: the impact of trade on the environment

Updated: Nov 5, 2021

Image by Tom Fisk on Pexels

It is undeniable that trade has the ability to meet the vast needs of the world in terms of goods and services and that it leads to the subsequent growth of world economies. Take for example the new Free Trade Agreement in Africa, which created the African Continental Free Trade Area in 2018, and commenced its trading activities on January 1st, 2021. It is indisputable, that this trade deal will help towards the economic growth the African Continent craves for, as envisioned in the African Union Agenda 2063. The states that are participating in the Free Trade Area, like South Sudan, will be able to benefit from their natural resources, like oil, to advance their economies.

It should be acknowledged, that despite the benefits that trade has to offer, it poses a great threat to the future of the environment. Certain activities that are involved in trade through the transport chain of commodities and services, which produce carbon emissions, are especially challenging for states to control and to regulate efficiently.

The historical development of the relationship between trade and climate change

The global awareness of the impact that trade has on climate started from the World Trade Organization (WTO) Seattle Ministerial Conference 1999, during which protesters overcrowded the streets raising their voices about the impact that trade has on the environment. It should be emphasised that the WTO trading system is based on the General Agreement on Tariffs and Trade (GATT), which aims at liberalizing trade in the world by eliminating barriers such as the imposition of high tariffs.

For this reason, WTO was accused of environmental harm, since by definition trade means the exchange of goods and services through the supply chains, whether domestic or international, between countries or people. By eliminating trade barriers, like high tariffs, the WTO acts as an organisation that promotes trade, which overall has been damaging the environment through the emissions from industries and transport chains. As a result, the promotion of international trade by the WTO has been a major contributor to the rise of greenhouse gas emissions that cause climate change.

The WTO, after the Seattle meeting, decided to take the global issue of climate change into serious consideration in the Doha Development Round 2001. It is essential to note that the creation of goods and services through the agents of international trade, the transport and the industrial sectors, have been the posing threat in fighting against climate change.

Efforts made by the United Nations in the fight against climate change

The United Nations, an international organization established in 1945 which has over 193 members, has been working to make the world more sustainable through the creation of international policies and treaties that influence the fight against climate change, like:

  • The Montreal Protocol of 1987

  • The Rio Conventions of 1994

  • The Kyoto Protocol of 1997

  • The Paris Convention of 2016

The effects of climate change to the future of trade:

  • It can lead to unfair competition in international trade

The less binding national policies on climate change some states adopt, in comparison to other states’ stricter rules, lead to unfair competition. In general, having less taxes in relation to climate change leads to a high volume of investments and to the faster growth of the economies of those countries that have loosened policies. Empirically, this can cause the migration of many companies located in states which have high taxes to other states abroad, the so called ‘pollution havens.’

  • Carbon taxes will be the new tariff barrier to trade

The countries which made 5-year pledges to the Paris Convention, in meeting their emission reduction goals, have set taxes to reduce the effects of climate change. For instance, it is common to impose carbon taxes in the aviation industry, as this trade transport medium causes a lot of emissions. This will gradually become the new barrier to trade since to avoid such taxation many firms will opt to migrate, while consumers will prefer goods produced in the domestic market due to their lower prices. This will cause a major clash in international trade because it will hinder the efforts made by the WTO in trade liberalization through tariff reduction as carbon taxes will be the new trade barrier.

Steps that can combat climate change:

  • Mitigation

It entails the accelerating of long-term plans on climate change, that are to be implemented through the enactment of policies at the national and international level. For example, Tanzania has the Environmental Management Act 2004, which tries to reduce emissions by emphasizing on the ‘polluter pays’ principle, which is a form of taxes on emissions. The policies can be international, serving a binding purpose to the parties to it like the Kyoto Protocol, and the Paris Convention which is less binding, aiming at reducing the effect of carbon dioxide emissions and greenhouse gas emissions globally.

  • Reforestation

Reforestation can be another form of a mitigation technique. Many African states that are still highly depended on coal have been trying to make efforts in planting trees. For instance, Tanzania has not been far behind in its existing ‘cut a tree, plant a tree national campaign.’ Reforestation can act as a sink for carbon dioxide emissions; hence, forests are essential in fighting the long-term effects of climate change and herein acting as a mitigation way to combat climate change effects in the world.

  • Adaptation

Short-term measures to reduce the effects of climate change like the planting of trees can make the land to be fertile, which avoids land degradation. The United Kingdom has been focusing on the improvement of its aviation industry, as its territory faces the increased risk of becoming a high source of pollution, through initiatives like the use of electric air crafts, low carbon aviation fuels and aircraft engine improvements, which all are thought as adaptation ways to combat climate change. France and Germany are not quite far behind, with the passenger transit connection transport mode route option for trains and aircrafts as an adaptation technique to combat climate change.

Ways free trade agreements address climate change through non-trade issues

Image by Singkham on Pexels

The relevant efforts to combat climate change by states when negotiating trade deals, cannot be ignored. Free trade agreements through non-trade issues included in their chapters are trying to aid the global work for climate protection. These efforts have been globally criticized as a protectionist strategy of states negotiating FTAs, rather than addressing the actual aim to protect the non-trade issues at hand, to secure the open and fair competition. Going further, free trade agreements that include non-trade issues such as climate change, the environment and labour in sustainable development chapters have been proven of having no legal enforcement, or to phrase it in lay language as having ‘no teeth’.

Other international efforts to address climate change

The United Nations through its Agenda 2030, which aims to fight poverty with goal 13 which champions climate change, intends to assist the world efforts through advocating, enhancing education, awareness raising, adaptation and providing the institutional capacity on mitigation and measurable national policy on climate change. This clearly shows that the United Nations with its 193 member states are taking extra steps to fight against the impacts of climate change.

China, a state which faced severe smog in 2011 is not far behind in trying to make policies to combat climate change. It created its national plan aiming at halting the growth of coal consumption and improving its air quality, while helping the country reduce its remissions. China is suffering because it is considered as a ‘pollution haven’, while many overseas companies are located there making it by 75% responsible for the global emissions, as mentioned in the report done by Carbon Trust.

African efforts are not far behind as many states like Ghana, Algeria, Uganda have adhered to the Paris Convention. This shows that Africa as a developing continent is making efforts in mitigating climate change. States like the UK are not far behind from assisting this continent in fighting climate change as seen from its efforts to fund the Future Climate of Africa (FCTA) project by the UK Department for International Development and Natural Environment Research Council.

Final remarks

The global efforts in the fight against climate change have thus far led to great progress. The United Nations having enacted treaties like the Paris Convention, which has 189 members so far, should perhaps take into consideration that working to raise global action is a great goal, but it could instead seek to form a more binding treaty that will make its members more accountable. This is because the 5-year voluntary pledges will lead to progress but not in the promised original manner, as it can be seen with the withdrawal of the USA from the Paris Agreement, during the former President Trump’s term. This led to the US’ failure to reduce the agreed emissions, though the current President Biden rectified the situation with the US re-joining the Paris Convention.

A final opinion suggests that countries should work together to combat climate change. This can be achieved by championing the United Nations goal 17 of partnership and reaching the goals therein, and by deeming goal 13, which aims at combatting climate change, as a decisive factor in meeting the United Nations’ sustainable development goals in Agenda 2030. On that note, states should work together in the fight against the potential damaging future that the negative effects of trade can have on the climate. This could be achieved by working together in joint alternatives through policies, funding and adopting a unified global action.


-The United Nations Framework Convention on Climate Change (UNFCCC) 1994

-The United Nations Convention to Combat Desertification (UNCCD) 1994

-The United Nations Convention on Biological Diversity (CBD) 1993

- Montreal Protocol 1987

- Paris Agreement on Climate Change 2016

- The General Agreement on Tariffs and Trade (GATT) 1947

- The Kyoto Protocol 1997

- Tanzania Environmental Management Act 2004

- United Nations Charter 1945

- Lester S, Mercurio B. and Davies A. World Trade Law (3rd ed Hart 2018)

- House of Commons, The UK-EU future relationship negotiations: level playing field (CBP 8852 2020)

- UK Parliament Post, Climate change and aviation (Post note no. 615 2020)

- The Agreement establishing the African Continental Free Trade Area

- White House Statement and Releases, Acceptance on behalf of United States of America (20th January 2021)

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Gloria Masuki
Gloria Masuki

Very interesting

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