Trade and Climate Change

Trade and climate change are issues that should be handled together in order to create a better economy in a sustainable environment. Whatever trade policy is pursued by countries engaged in trade agreements will have a direct impact on the state of the world’s environment. Trade policy may mitigate or aggravate climate change which in the long run will either improve or defeat trade activities.

What is climate change?

Climate change as defined by the United Nations Framework Convention on Climate Change (UNFCCC) is “a change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to the natural climate variability observed over comparable time periods.”

What is the effect of climate change?

A major evidence of climate change today is global warming. Global warming is the accumulation of greenhouse gases (GHG)—carbon dioxide, methane and nitrous oxides in the atmosphere; these trap the sun’s heat energy thus resulting in increases in the average global temperature. It is caused by GHG-emitting human activities such as excessive burning of fossil fuels, deforestation, and growing waste dumps.

Other effects of climate change are increase in sea levels, increase in temperature and acidity of oceans, melting of ice caps, spread of climate-related diseases such as malaria, higher incidence of hurricane and forest fires, and destruction of crops.

In the Philippines, the most affected sectors of climate change are agriculture, food security, and health. (Atty. Rommel J. Casis, Professorial Lecturer at the U.P. College of Law, and Program Director of the International Environmental Law Research Program)

Is climate change relevant to international trade? How can climate change impacts affect trade and investment flows?

Yes. The Stern Report put this into perspective by calculating that the costs of action on climate change were in fact less than the costs of inaction, and noting that failing to address the problem creates the equivalent of a 20% loss of GDP globally, now and forever, with losses falling disproportionately on poor countries. In such a context, delivering on the fundamental goals of the multilateral trading system becomes impossible.

Climate change will have significant impacts on trade flows, given its expected impacts on agriculture, forestry and a number of other highly traded sectors. In general, the impacts of this type will involve changes in comparative advantage based on environmental factors.

Another sort of impact involves climate change directly affecting trade‐related infrastructure, or trading routes. The Stern Report identified several of these sorts of impacts:

• Rising sea levels may endanger coastal infrastructure that supports trade, such as ports, as well as trade‐related facilities located close to ports such as steel mills, petrochemical plants and other energy facilities.

• Rising Arctic temperatures will make Arctic sea lanes safer and more reliable as transport routes. However, melting permafrost may damage high latitude oil and gas installations, pipelines, as well as railways.

• As well, extreme weather events can be expected to disrupt markets and infrastructure. Particularly vulnerable is infrastructure located near coastlines, such as oil refineries, nuclear power plants, and port facilities. One of the predicted effects—increased flooding—will affect infrastructure as well as transport routes.

How do trade liberalization, investment agreements or other sorts of trade policy changes alter the economy in ways that impact on climate change?

1. Lowering tariffs just on particularly GHG‐intensive goods (whether intensive in production or in their end use) is likely to aggravate climate change.

2. Agreement to restrict domestic subsidies will have a positive composition impact if the subsidies in question encourage the production or use of particularly GHG‐intensive goods. On the flip side, agreement to allow domestic subsidies to support climate‐friendly goods and technologies might have positive climate change impacts, though the wider long‐term impacts of any increased subsidies would demand careful consideration.

3. The very fact of increased trade, in and of itself, will lead directly to more global GHG emissions from increased transport of goods. The GHG‐intensity of transport varies enormously from marine transport to trucks to air freight, but in the end all modes of transport have some emissions.

4. It is also conceivable that changes in intellectual property rights law could have climate change impacts. Specifically, it is possible that weakening patent protection on climate friendly technologies could have immediate climate benefits, if it led to more widespread dissemination of those technologies. The longer term impacts, however, might be negative if weakened protection discouraged investment and innovation in sectors of promise from a climate change perspective.

Are there existing international agreements that address climate change?

Yes. The following international agreements address climate change:

1. The United Nations Framework Convention on Climate Change (UNFCCC)- This was established on March 21, 1994 to set an overall framework that will address issues on climate change. The convention intends to initiate strategies that will encourage GHG emission reduction and to contribute to the preparation for adaptation to the adverse effects of climate change.

2. Kyoto Protocol- The Kyoto protocol, which was put in force on February 16, 2005, is an international agreement that sets a target reduction of GHG (carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, HFCs, and PFCs) emissions for 37 industrialized countries and European communities starting from 2008 to 2012. Specifically, it requires an average reduction of five percent from the GHG emission recorded in 1990. National targets range from 8% reductions for the European Union and some others to 7% for the US, 6% for Japan, 0% for Russia, and permitted increases of 8% for Australia and 10% for Iceland."


Are these agreements effective in addressing climate change?

The UNFCC is just a framework agreement. As for the Kyoto Protocol, according to Atty. Antonio G.M. La Viña (Dean of the Ateneo School of Government, and Professorial Lecturer at the U.P. College of Law) the same is not a complete success because some of the member countries have failed to meet the agreed targets.

Are there efforts to resolve further the problem of climate change?

Yes. A number of negotiations addressing climate change are on-going. The most recent plan presented was the Bali Road Map, which consists of decisions and future measures against climate change. The Bali Road Map includes the creation of the Ad Hoc Working Group on Long-term Cooperative Action, the long-term goal of emission reduction, mitigation actions, and adaptation funding and cooperations.

What is the Philippines response to climate change?

Philippines has participated in the discussions and negotiations leading to the ratification of various international agreements:

1. United Nations Framework Convention on Climate Change (UNFCCC) ratified on August 2, 1994 and
2. Kyoto Protocol, which was ratified on November 20, 2003.

At the national level, the Medium Term Philippine Development Plan of 2004-2010 (MTDP) underscored the need to manage the environment more effectively in order for the country to address the problem of poverty particularly in the rural areas.

Under the Kyoto Protocol, developing countries such as the Philippines are called to pass and implement national measures that shall advance the international community’s agenda pertaining to environmental preservation through the reduction of greenhouse emissions (GHGs) in the atmosphere. Pursuant to the provisions in this treaty, the Philippines passed national legislations to uphold the agreements embedded in the Kyoto Protocol:

1. The Clean Air Act of 1999, otherwise known as Republic Act 8749, was enacted in order to arrive at an effective air quality management program that will mitigate the worsening problem of air pollution in the country.
2. Reinforcing the country’s drive towards a healthier environment was the enactment of the Solid Waste Management Act of 2000 (RA 9003) that aimed at providing a comprehensive solution to the country’s garbage problem.

At the institutional level, prior to the signing and ratification of the UN Framework Convention on Climate Change, the creation of the Inter-Agency Committee on Climate Change (IACC) in May 8, 1991 under the Environmental Management Bureau of the Department of Environment and Natural Resources (DENR) was a concrete manifestation of the Philippines’ attempt to promptly address the issue of climate change. IACC was created by virtue of Presidential Order No. 220 with the secretary of the DENR sitting as chair and the secretary of the DOST as co-chair.

The ultimate aim of the committee is to harness and synergize the various activities being undertaken by the national government and civil society in response to the crisis posed by growing problem on climate change. The IACC likewise formulates policy actions and recommendations while at the same time assumes a very significant role in terms of shaping the Philippines’ national positions in the various international negotiations that aim to mitigate the effects of global climate change and prevent the worse possible consequences of this.

The IACC therefore ensures the Philippines’ faithful compliance to the mandates and principles contained in the UNFCCC and the Kyoto Protocol and sees to it that adequate public awareness campaign and initiatives are held to bring the issue to all the sectors of the country.

What campaign on international trade can be done to address climate change?

1. Ensure that the country we are dealing with complies with the multilateral environmental agreements to which the country is a party and has in force adequate environmental laws and regulations, has devoted sufficient resources to implementing those laws and regulations, and has an adequate record of enforcement of those laws and regulations;

2. Trade in goods and services- call for the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.

3. Push for provisions providing for non-actionable subsidies for the environment.

4. Push for provisions that shall provide for the reduction/removal of fossil fuel subsidies.

5. Trade agreements shall include environmental and public safety standard:

The environmental provisions shall—

(A) be included in the core text of the trade agreement;

(B) prohibit each country that is a party to the trade agreement from weakening, eliminating, or failing to enforce domestic environmental or other public health or safety standards to promote trade or attract investment;

(C) require each country that is a party to the trade agreement to implement and enforce fully and effectively, including through domestic law, the country’s obligations under multilateral environmental agreements and provide for the enforcement of such obligations under the trade agreement;

(D) prohibit the trade of goods derived from illegally harvested or extracted natural resources, at any stage of production, including timber and timber products, fish, wildlife, and associated products, mineral resources, and other environmentally sensitive goods; and

(E) allow each country that is a party to the trade agreement to adopt and implement environmental, health, and safety standards, recognizing the legitimate right of governments to protect the environment and public health and safety.


Sources:

1. Aaron Cosby, Trade and Climate Change Linkages, 2007
2. Aaron Cosby, Harnessing Globalization: Scaling Up Trade and Investment Policy’s Contribution to Climate Change Efforts.
3. Agnes Paculdar and Melissa Parreño, The Philippines’ Response to Climate Change, http://www.researchsea.com/html/article.php/aid/3638/cid/6
4. http://www.iisd.org/trade/crosscutting/bali_copenhagen.asp
5. 111th U.S Congress, 1st Session, H.R, 3012: To require a review of existing trade agreements and renegotiation of existing trade agreements based on the review, to set terms for future trade agreements, to express the sense of the Congress that the role of Congress in trade policymaking should be strengthened, and for other purposes.