Trading in the era of carbon standards: how can trade, standard setting,and climate regimes cooperate?

- By Lim, Aik Hoe ; Holzer, Kateryna


Regulatory cooperation is indispensable for increasing the quality of carbon-related product regulations and standards (CPRS), reducing trade tensions over them, facilitating their alignment, and, eventually, promoting the convergence of different national emission reduction levels towards a universal carbon price. In this article, we explore how trade and trade-related arrangements and institutions can be used to intensify regulatory cooperation on CPRS. We focus on the following questions: when, where, and how does regulatory cooperation on CPRS take place within the international trading system, and what are the ways to strengthen regulatory cooperation on CPRS? While admitting the key role of market forces and the large market factor in the alignment of carbon standards, we argue that this de facto trade-driven alignment requires a steering from state-to-state regulatory cooperation, as well as cooperation of government agencies with private certification schemes in helping producers, especially from developing countries, to comply. Moreover, the potential for more systematic collaboration between the multilateral institutions for climate change and trade should be explored. This could include the establishment of a joint UNFCCC-WTO forum for the exchange of policy-relevant technical and scientific information on key issues surrounding CPRS and consolidation of the relevant database.