Stopping Trade Attacks on Climate Action

Public Citizen News / September-October 2022

By Kyra Brown

This article appeared in the September/October 2022 edition of Public Citizen News. Download the full edition here.

The Inflation Reduction Act (IRA), signed into law by President Biden on Aug. 16, 2022, includes roughly $370 billion for climate programs. While far smaller than necessary, the investments in renewable energy represent the most far-reaching measures the U.S. has ever taken to meet its commitments under the Paris Climate Agreement, a legally binding international treaty that sets the goal of limiting global warming to 1.5°C by 2030. With less than a decade left to reach this goal, we are running out of time and options. Countries urgently need to access all the policy tools at their disposal to reduce emissions and ramp up renewable energy.

Before the ink dried on the legislation, however, the European Union threatened to challenge the electric vehicle tax credits passed in the IRA, claiming that the measures violate our trade obligations governed by the World Trade Organization (WTO). (All the while, EU officials were talking out of the other side of their mouths, urging tougher pledges on emissions targets.)

This is just the latest example of how outdated, destructive trade rules have been used to try to thwart bold climate action, and why Public Citizen and allies in the climate justice community are urgently calling on governments to adopt a Climate Peace Clause, or a moratorium on the use of trade and investment rules in international agreements to challenge governments’ climate policies.

“Investing in green jobs is a key way that the U.S. and other countries around the world can create the political support needed to transition to a carbon-free economy,” said Melinda St. Louis, director of Public Citizen’s Global Trade Watch. “It’s time to end the circular firing squad via trade and investment agreements, where countries threaten and, if successful, weaken or repeal one another’s climate measures.”

The global trade regime has favored large corporations and companies at the expense of workers and the environment because the corporations and their lobbyists have the deep pockets needed to join closed-door negotiations and influence trade deals. This is clearly illustrated with the rise of climate “trade disputes,” or WTO lawsuits claiming climate policies in some nations to be unfair trade “barriers.”

For example, a key policy tool governments are using to jumpstart the transition to a green economy is to incentivize local production of renewable energy. Ensuring the creation of green jobs locally helps create the political will necessary to invest in renewable energy. However, when India implemented a federal local solar production program, the United States claimed that it violated WTO rules and won. In turn, India brought its own WTO dispute against the U.S., successfully challenging several similar U.S. renewable energy programs across eight states.

Taxpayer dollars are being spent to fight these trade disputes, and governments are being ordered to roll back their climate policies by international trade tribunals that prioritize adherence to corporate-rigged rules over climate objectives.

This disconnect between the urgent imperative to act boldly for climate and outdated trade rules that can be used to challenge climate policies has led Public Citizen, along with leading environmental organizations, to urge the Biden administration and other governments around the globe to commit to a Climate Peace Clause. By committing to stop using trade disputes as a mechanism to challenge other countries’ climate policies, the Biden administration could demonstrate global leadership and ensure that our trade policy supports, rather than undermines, our climate goals.

The Climate Peace Clause is needed not only to safeguard existing climate policy, but also to ensure that countries have sufficient policy space to enact the bold future climate measures that science demands. It could be adopted in various international fora, such as the G7, the UN Framework on Climate Change, or regional discussions such as the Biden administration’s planned Indo-Pacific Economic Framework.

The CPC is not just a progressive pipedream. It already has the support of more than 150 environmental groups, and actually was included in the Fifth Intergovernmental Panel on Climate Change Assessment Report as well as in a leaked draft statement of the U.S.-EU Trade and Technology Council (TTC) earlier this year. (However, reference to the peace clause was deleted by the time the final TTC statement was released.)

Public Citizen is working with allies nationally and across the globe to educate thought leaders and policymakers about this commonsense policy that would ensure that trade and investment agreements do not stand in the way of creating sustainable climate policy for the future. While there is much work that needs to be done to address the destructive effects trade and investment agreements have on climate policy, time is running out, so we need a Climate Peace Clause now for a livable world later.