Given that the impact of scale and technology tends to be in opposite directions and the compositional effect depends on the comparative advantage of countries, the overall effect of trade on greenhouse gas emissions cannot be determined in advance. It depends on the size or strength of the three effects. Finally, open trade can lead to improved energy efficiency – of the technical effect – so that the production of goods and services leads to fewer greenhouse gas emissions. This reduction in emissions intensity can be achieved in two ways. First, freer trade will increase availability and reduce the costs of environmentally friendly goods, services and technologies. This is particularly important for countries that do not have access to these goods, services and technologies or whose domestic industries do not produce enough or at affordable prices. Additional market access can encourage exporters to develop new products, services and technologies to mitigate climate change. Second, increased trade revenues may encourage society to demand better environmental quality, i.e. less greenhouse gas emissions. The Intergovernmental Panel on Climate Change (IPCC) has highlighted the devastating humanitarian consequences the world can expect if global warming exceeds 1.5 degrees Celsius. Despite the 2015 Paris Agreement, climate policy in most countries shows a chronic lack of ambition and the world remains on track for temperature increases above 3oC.

In this context, the world needs transformative solutions. The agreement should not be limited to national governments. City and provincial governments could be encouraged and encouraged to adhere to these elements of the policy menu within their jurisdiction, including public procurement rules and energy rules. Governments often choose to use procurement rules to support climate measures such as increased use of renewable energy and energy efficiency. Governments could also choose to use tax cuts, preferential credits, cost refunds and other subsidies to encourage the production and use of renewable energy, low-carbon products such as electric vehicles and energy-efficient goods and services. However, these measures have been called into question as an “unnecessary trade impediment” or as a discriminatory effect on foreign investors, for example by giving an advantage to domestic manufacturers who might specialize more in the design or construction of electric vehicles. The best way to make the Paris agreement succeed is to rely on it rather than rest on its laurels. And the best way to defuse the growing public skepticism about the benefits of economic integration is to focus trade negotiations more directly on the major priorities of society, of which climate change is certainly one.

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