International trade and climate change law are two distinct realms that inevitably and increasingly interact with each other. Climate change law instruments - in particular, the UNFCCC and the Paris Agreement - constitute the legal framework within which States set emissions reduction targets and adopt climate mitigation measures to achieve the global target of limiting the increase in global average temperatures to “well below” 2°C. This legal framework leaves countries free to decide which measures they employ to achieve their targets. However, international trade law - and, in particular, the rules and principles of the WTO - determines when and how States can adopt a measure that potentially impacts international trade, even if such a measure is primarily aimed at tackling climate change. With a quarter of global CO2 emissions directly or indirectly linked to the production and distribution of traded goods and services (World Bank, 2021), trade-related measures can play an important role in promoting climate change mitigation and adaptation. Climate change-related trade measures have a significant potential of reducing GHG emissions and are increasingly being adopted. Recent discussions on combustion engine bans or carbon border adjustments have highlighted the far-reaching implications of these instruments. It is becoming increasingly crucial to ensure their compatibility with international law while also effectively allowing equitable market access for developing countries. This report provides an analysis of the most relevant and most used trade-related measures in the context of climate change mitigation strategies, assesses the challenge of increasing their compatibility with international trade law, and discusses the effectiveness, feasibility, and equity of these measures, focusing, in particular, on developing countries.
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