World Trade Organization Director-General Ngozi Okonjo-Iweala is developing a framework for carbon-pricing in order to further bolster the ongoing carbon border adjustment measures that are likely to be imposed by the European Union early next year while the United States appears to be developing a framework for imposing carbon duties, our correspondent has learned.
Several members are expressing concern that instead of focusing on the core mandated and unresolved issues from the previous ministerial meetings, including the Doha Development Agenda, the DG appears to be frittering away the limited resources of the Secretariat on developing the carbon-pricing framework, an issue that has not been formally mandated by members or by trade ministers at any previous meeting, said several Secretariat insiders who asked not to be identified.
The DG mooted the idea of a carbon-pricing framework at the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change in Sharm-el-Sheikh, Egypt, last year.
As there were no takers for the idea at that meeting, nor subsequently at the WTO, she informed members that the Secretariat is going to work on developing a carbon-pricing framework.
It appears that the Secretariat is in an advanced stage of completing the work even though many developing and least-developed countries seem opposed to the issue, said several members who preferred not to be quoted.
Further, the whole effort by the WTO Secretariat to finalize the carbon-pricing framework appears to be an attempt to further undergird moves by the European Union and the United States among others to foist the unilateral carbon border adjustment measures or penal tariffs ostensibly to bring about carbon equalization between domestic products and imported products, members said.
More worryingly, the DG’s concerted move in developing the carbon-pricing framework is somewhat incongruous with what was agreed in the Paris Climate Change Agreement of 2015. Furthermore, the proposal to impose penal duties on countries is unilateral and allegedly inconsistent with WTO rules, said people familiar with the development.
The growing questions on the framework being worked on by the WTO Secretariat and the EU’s “green” agenda could further undermine the credibility of the WTO and the rapidly fracturing multilateral trading system, they said.
It is against this backdrop that the EU seems to have dropped “a weapon of mass dislocation” on developing and least-developed countries which have a long way to go. In the absence of the promised climate finance of $100 billion per year as well as the need to provide $1 trillion towards the loss and damage suffered due to climate change, the EU seems to be undermining the entire MTS in one go, said people who asked not to be quoted.
In a restricted room document (RD/CTE/230) circulated on August 21, seen by WTD, the EU provided an update of its so-called “Green Deal” (Green Claims Directive and Sustainable Consumption of Goods – Promoting Repair and Reuse), denoting the current initiatives and their status.
The EU listed four initiatives and their current status:
Under the Green Claims Directive, the EU indicated that packaging and packaging waste will be reviewed.
Further, under the Green Deal legislation’s next steps, the EU suggests that it intends to undertake several legislative acts: (1) Green Deal Industrial Plan; (2) Rules for Renewable Hydrogen; (3) Net-Zero Industry Act; (4) Crucial Raw Materials Act (apparently to cut dependence on China); (5) Rules on the Substantiation of Green Claims and (6) Initiative on the Promotion of Repair and Reuse.
In addition, forthcoming proposals include: (1) corporate sustainability due diligence directive; (2) revision of EU chemicals legislation; (3) revision of food waste and textiles aspects of the EU waste framework directive and (4) legislative framework for sustainable food systems.
As noted above, the EU’s Green Deal legislation entering into force includes: (1) carbon border adjustment mechanism (CBAM); (2) regulation on deforestation-free supply chains; (3) ETS (Emissions Trading System) and (4) monitoring, reporting and verification regulation revision.
According to the EU’s room document, new rules for environment claims are needed to protect consumers and honest companies, enable consumers to make informed choices, improve legal certainty, and accelerate the green transition towards a “circular, clean and climate neutral economy.”
Brussels is apparently determined to embark on what analysts referred to as a proverbial “slash and burn” strategy wherein the EU seems confident on riding roughshod over multilateral institutions and developing countries.
The UN has estimated that the developed countries will need to pay around $1 trillion in climate finance to address the loss and damage due to climate change that they have been largely responsible for during the last two hundred years.
Pakistan, which led a group of 134 developing and least-developed countries, called for substantial amounts of funds for loss and damage, an issue that has largely remained unaddressed during the last several years.
As G20 leaders congregate for the final meeting under the Indian Presidency later this week, there appears little hope that the hosts will be able to stand up against the unilateral carbon border measures that are going to be imposed by the EU from next year.
The G20 trade ministers, in their “Outcome Document and Chair’s Summary” that was issued at the end of the G20 Trade and Investment Ministers’ Meeting in Jaipur, India on August 25, simply stated in paragraph nine, that “trade and environment policies should be mutually supportive, consistent with WTO and multilateral environmental agreements.”
The ministers went on to say: “We further acknowledge the essential role of multilateral cooperation to effectively address common environmental and sustainable development challenges. We will engage in further discussions on trade and sustainability.”
In sharp contrast, the Johannesburg II Declaration of the expanded BRICS (Brazil, Russia, India, China, and South Africa along with six new members - Ethiopia, Egypt, Saudi Arabia, the United Arab Emirates, Iran, and Argentina), issued on August 23 during the XV BRICS Summit in South Africa, unambiguously reaffirmed “the call for the implementation of the 2030 Agenda for Sustainable Development in its three dimensions: economic, social and environmental, in a balanced and integrated manner by mobilizing the means required to implement the 2030 Agenda.”
It urged “donor countries to honor their Official Development Assistance (ODA) commitments and to facilitate capacity building and the transfer of technology along with additional development resources to developing countries, in line with the national policy objectives of recipients.”
The BRICS members highlighted “in this regard that the SDGs (Sustainable Development Goals) Summit to be held in New York in September and the Summit of the Future to be held in September 2024, constitute significant opportunities for renewing international commitment on the implementation of the 2030 Agenda.”
The BRICS declaration re-emphasized “the importance of implementing the United Nations Framework Convention on Climate Change (UNFCCC) and its Paris Agreement and the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) enhancing low-cost climate technology transfer, capacity building as well as mobilizing affordable, adequate and timely delivered new additional financial resources for environmentally sustainable projects.”
It underscored the need “to defend, promote and strengthen the multilateral response to Climate Change and to work together for a successful outcome of the 28th Conference of the Parties of the United Nations Framework Convention on Climate Change (UNFCCC COP28).”
Further, “the Means of Implementation should be enhanced by developed countries, including through adequate and timely flow of affordable Climate Finance, Technical Cooperation, Capacity Building and transfer of Technology for climate actions,” the BRICS declaration noted.
The expanded BRICS declaration said that it has agreed “to address the challenges posed by climate change while also ensuring a just, affordable and sustainable transition to a low carbon and low-emission economy in line with the principles of CBDR-RC, in light of different national circumstances.”
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