Trade and climate change are at a crossroads. For the world to meet the long-term temperature goals under the Paris Agreement, all nations must actively engage with greening their economies and energy supplies. The fastest way to achieve this is to allow, or even encourage, green industrial policies which incentivize the manufacture and diffusion of renewable energy. These policies often include elements such as renewable portfolio standards, requirements for mixing biofuels with gasoline, as well as local content requirements. These types of policies are particularly important and relevant for developing countries as they aim to reduce poverty, improve economic development and mitigate the adverse effects of climate change.
Where these policies include protectionist measures such as local content requirements, they violate basic World Trade Organization (WTO) rules and principles of non-discrimination. Emerging economies in the developing world have been on the losing end of most of the recent energy disputes at the WTO, but are an increasingly large site of greenhouse gas emissions globally. Given the existing friction between the trade and climate change regimes, countries are likely to engage in strategic compliance in order to preserve their domestic policy aims, at least in the short term.
One of the challenges facing policy makers in emerging economies at the intersection of climate and trade is how to dramatically increase manufacture, dissemination and export of renewable energy technology through green industrial policy making without violating trade rules. This article proposes a two-step advance to this problem. First it highlights a broader range of defenses under Article XX available to emerging economies connected with the climate crisis. Second, it offers a set of general principles that the WTO’s own dispute settlement mechanism could introduce in the context of climate change. These solutions ultimately have broader import than to developing countries (the locus of the case studies), as developed countries engage in their own industry policy battles and consider implementing green new deals.
Benjamin, Lisa, Renewable Energy and Trade: Meeting the Paris Agreement's Goals Through Strategic Compliance (April 3, 2020). Minnesota Journal of Law, Science & Technology, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3568192