Four Changes to Trade Rules to Facilitate Climate Change Action

Aaditya Mattoo (The World Bank) and Arvind Subramanian (PIIE)
Policy Brief
April 2013

Generating technological progress requires deploying the full range of policy instruments, including those related to trade policy. The authors consider four areas: subsidization of green goods and technologies; border-tax adjustments (BTAs) related to carbon content; restrictions on the export of fossil fuels, especially natural gas; and intellectual property protection of new technologies and products related to climate change. They propose changes to trade rules that would promote climate change goals. The proposed changes have an underlying political economy logic and consistency. Changes would allow global environmental "bads" to be penalized (by permitting border taxes on less clean imports), global environmental goods and technologies to be promoted (by relaxing the constraints on the use of production and export subsidies and strengthening IPR protection), and prevent global environmental "goods" being penalized (by eliminating the export restrictions on natural gas).