Analysis & Opinions - Financial Times

Trade Could Hold the Key to a Climate Deal

  • Bard Harstad
| December 3, 2009

"Our leaders' recent confession that a legally binding climate agreement is not feasible this year may be no bad thing. The hope is that the new goal for December — to reach a broader "political agreement" — will establish a better foundation for a future climate deal than we currently have.

This is important, since a climate agreement currently faces three significant obstacles. To overcome these, there might be no solution other than to link any deal to new and existing trade agreements.

The first challenge is to encourage participation in a climate agreement. The problem is that while participating countries bear the costs of reducing their own emissions, countries that chose to opt out can nevertheless benefit from these reductions and, in addition, from a lower fossil fuel price when the participating countries reduce their demand.

The Kyoto Protocol failed to motivate the US, as well as big developing countries, to take part. But Russia ratified Kyoto after the European Union promised to support its admission to the World Trade Organisation. Clearly, some carrot is needed to motivate participation, and being a favoured trading partner is one of the few powerful incentives that can realistically be offered in international politics. Alternatives such as conditional development aid might be held out to the poorest, but explicit transfers to other countries would be politically unacceptable...."

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The writer is an associate professor at Kellogg School of Management, Northwestern University and a contributor to the Harvard Project on International Climate Agreements

For more information on this publication: Please contact Harvard Project on Climate Agreements
For Academic Citation: Harstad, Bard.“Trade Could Hold the Key to a Climate Deal.” Financial Times, December 3, 2009.

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