This is a guest post from law professor Rafael Leal-Arcas
Climate Clubs for a Sustainable Future: The role of international trade and investment law (Kluwer Law International, 2021), by Rafael Leal-Arcas (Queen Mary University of London).
We know the science of climate change; we know the economics of climate change; we also know the law of climate change. However, we do not know how countries may come together to cooperate on climate change mitigation. One way of doing so successfully is by putting together the climate regime with the international trading system via the creation of climate clubs, namely the coalition of the willing. This new book aims to explain that, by building climate clubs and making use of the international trading and investment system, we can reach a better future for all.
This book is divided into an introduction, six chapters, and a conclusion. Chapter 1 explains the main concepts and typological considerations regarding climate clubs. Chapter 2 provides a comprehensive examination of the greatest threat humanity faces today: climate change. It does so by looking at the legal, political, institutional, regulatory, and economic angles of climate change from the perspective of major emitters and the most relevant actors in the mitigation of climate change. This chapter offers a fresh understanding of the international trading system as a way to reach a prosperous, modern, and sustainable society that will help decarbonize the economy effectively. This chapter offers new ideas on the creation of a climate club linked to the international trade regime as an effective way to mitigate climate change. How should policies, regulations, laws, and agreements change to get us there? What incentives will be necessary to get there effectively? What has failed and why? We conclude that innovation and clean technology will be among the key elements of this equation, without which we will miss the goal, given that innovation is a major part of dealing with climate change. This chapter also investigates the potential role of international trade in reducing fossil-fuel consumption. The use of fossil fuels contributes to climate change, so there is no excuse for continued inaction. We argue that, in light of the lack of international consensus on how to effectively tackle climate change, an upstream carbon tax with reinvestment supported by border tax adjustments should be enacted unilaterally by the biggest emitters of greenhouse gases to reduce fossil-fuel consumption and incentivize global carbon abatement.
Chapter 3 explores emission units as a linkage in climate clubs in the hope of making a remarkable difference in climate change mitigation. It analyzes emission units trading in the context of regional trade agreements as a novel, promising, and effective way to mitigate climate change. It then examines Article XX of the General Agreement on Tariffs and Trade (GATT) as a potential and encouraging remedy for the development of climate clubs. Specifically, it explores the scope of application of Article XX and investigates to what extent it can be applied to climate concerns. It then provides an analysis of climate-club measures according to the jurisprudence of the WTO on GATT Article XX.
In Chapter 4, we argue that international trade law may be the solution to decarbonize the economy and invest in renewable energy, but there must be effective measures agreed by the international community. That would require agreeing on preferential trade agreements (PTAs) with environmental and sustainable development chapters on a unilateral, bilateral, or plurilateral basis, as multilateral agreements have proven to be increasingly difficult to negotiate. This chapter will assess the feasibility of including such chapters through an analysis of existing environmental and climate change-content in recent PTAs. Equally, recent developments in newer bilateral investment treaties (BITs) show that there is a positive shift toward explicit inclusion of sustainable development issues into their wording (e.g. states’ right to adopt sustainable development-oriented regulation). Reference to sustainable development issues may appear in different parts of a BIT, e.g., as a general objective of the treaty in a preamble, as a separate obligation of the state parties or investors, or as an exception to the substantive protection standards, such as prohibition of unlawful indirect expropriation.
Chapter 5 explores three case studies of “clubs” related to climate change, energy, and environmental protection to reach sustainability more effectively: the Generalized Systems of Preferences (GSP), trading energy in the Arab world, and EU-Russia energy trade relations.
Chapter 6 links international trade, climate change, investment and a prosperous future. We argue that a transformative, integrated, and holistic approach to sustainability is necessary to reach a prosperous future for all. With growing inequality in the world, demographic change, rapid technological development, and 40% of the world’s population with no access to digital technology, access to digital technology for all and, ultimately, having a prosperous future are a must today. Doing so will give a voice to the voiceless. For that, governments, companies, and transnational institutions should invest as much as possible to make it happen and provide solutions that are rules-based, inclusive, innovative, disruptive, and simple. We the citizens should push for this human right to materialize. That way, everyone will benefit and no one will fall behind. Access to energy, mitigating climate change, and benefiting from international trade and investment all can be achieved thanks to technological advancement. These global challenges are complex, interconnected, multidimensional, interdependent, and multicausal. This chapter also explores the role citizens can play in shaping sustainable trade. Sustainability constitutes a principal concern for various regimes that, because of their nature, are in constant interaction with climate change.
