COP21 must address the trade cost of carbon pricing: Don Pittis

This story is part of apackage of special coverageof climate change issues by CBC News leading up to the United Nations climate change conference (COP21) being heldin Paris from Nov. 30 to Dec. 11.

When we lived in a hilly part of Belgium,the kids at our localschool playedsoccer on a field with a pronounced slope from one goal to the other. It always made me think ofthe "levelplaying field" in international trade.

As world leadersstruggle to negotiate new cuts to greenhouse gases in Paris at COP21,one of the stumbling blocks isthat when it comes to trade, countries making the biggest cuts in carbon output are always playinguphill.

If they really want to cut carbon, delegates must begin to address that problem.

• Canada warming at twice the global rate, scientists say
• Canadians say they are willing to pay to cutemissions
• Insurersaimto reduce huge losses from climateextremes

That the problem is obvious does not make it easyto solve. Whenone country imposes strict limits on carbon,whether through taxes or regulation, the cost of doing business in that country rises, at least in the short term.

Trade comes first

Russian leader Vladimir Putin, for instance, has taken a skeptical view on climate change,an opinion shared by much of the media in that fossil-fuel-dependent country. So what happens ifAlberta adds a carbon tax of $30a tonneby 2018as it has promisedwhile Russia does nothing?

James Coleman at Calgary'sHaskayneSchool of Business points outthat carbon is different from localized forms of air and water pollution, because carbon dioxide is a globally distributed pollutant.

"If oil production just moves from Canada to Russia, there's no advantage for Canada," says Coleman.

It is very possible that in the longer term, developing new technology to replace fossil fuels will make advanced economies more efficient and successful.

But in the medium term, countries that areclimate leaders bearthe cost ofswitching away from cheap and familiar power sourcessuch as coal.

Thatgives the laggards an advantage. Their industriescan sell their products atlower prices on world markets. With the current state of the world economy, that matters. And currently there is no trade law to fix it.

"The problem historically was that the trade people didn't want to have anything getting in the way of their objective,which was to put trade priorities first," says Gus Van Harten, aspecialist in international trade law at Toronto's Osgoode Hall Law School.

Carbon tariffs?

He says trade lawsactually conflict withgreen laws. Large corporations have used trade agreements to challenge environmental rules, suing national governments for losses caused by environmental, health and labour laws.

Van Harten says a first prioritywill be an international treatysuperseding suchtrade challengesin the case of domestic laws intended to cut greenhouse gases.

Based on Van Harten'sresearch, the European parliament hasvoted to include such a rule inclause 80 ofits formal demands atCOP21.

Van Harten says there is no legal reason negotiators at Paris couldn't go much further, writing trade agreements thatlink greater access to international trade to performance in meeting climate targets. Using trade ruleswould be highlyeffective, he says, becausetrade and investment laws are more strictly enforced than other international agreements.

The ultimate result might be to put tariffs on a country's exports if a lot ofcarbonwent into making them

Colemansays the complications of using trade laws to imposecarbon tariffs remainenormous. Determining the exact carbon content of another country'sproducts means examining the entire production chainand could lead to massive disputes andyears of litigation.

"It's a very complicated scientific problem and in the few places where it's been adopted, it oftenends up being a guise for protectionism," says Coleman. Nevertheless, Canada has signed on to the UN'sstandard way of calculating carbon usewithout which climate targets would be meaningless.

Cheaters prosper

Coleman says the whole process of measuring carbon for trade purposesremains political. For instance, while India continues to expand itsuse of coal, it quite reasonably claims its historic contribution to global carbon is dwarfed by that ofthe industrialized West.

Developing countries with low carbon output per person claim a simplistic carbon tariff would be unfair. Carbon policy, even among carbon leaders,is littered with exemptions for their most importantindustries. Other countries claim to be hittingcarbon targets when the reason is only that theireconomieshave weakened.

Complexity by itself is not necessarily an issue, says Coleman. We use complex policies all the time.

"The problem is when you marry a complex policy with a strong protectionist impulse that we know exists in every country."

The countries attending COP21must facethefact thatthey need to add teeth to international carbon limits. In a weak global economy when everyone depends on their trade advantage, they must begin developing a set of rulesto level theplaying field.

Because when it comes to cuttingcarbon, no one will play ball when only cheaters prosper.

Follow Don on Twitter@don_pittis

More analysisby Don Pittis