On 23 October 2024, the World Trade Organization (WTO) announced that five international organisations had released a landmark report outlining pathways for coordinated approaches on climate action, carbon pricing, and the cross-border effects of climate change mitigation policies to achieve global climate goals.
The report was presented by the Joint Task Force on Climate Action, Carbon Pricing, and Policy Spillovers, convened by the WTO and joined by the International Monetary Fund (IMF), the Organisation for Economic Cooperation and Development (OECD), United Nations Trade and Development (UNCTAD), and the World Bank.
Entitled “Working Together for Better Climate Action: Carbon Pricing, Policy Spillovers, and Global Climate Goals,” the report arrives when countries worldwide are scaling up actions to curb climate change. Mitigation policies, including carbon pricing policies, are on the rise, with 75 carbon taxes and emission trading schemes currently in effect worldwide, covering approximately 24% of global emissions.
The report stresses that climate action needs to be stepped up to meet global emission reduction targets while contributing to broader development goals. It also makes four important contributions to that end:
- The report provides a common understanding of carbon pricing metrics to improve transparency on how countries are shifting incentives for decarbonisation.
- The report examines the composition of climate change mitigation policies, emphasising the important role of carbon pricing as a cost-effective instrument that also raises revenues.
- It outlines how international organisations can support coordinating policies to foster positive and limit negative cross-border spillovers from climate change mitigation policies. The report also analyses the advantages and disadvantages of carbon border adjustment policies, including their impact on developing countries.
- It shows how such coordination can help to scale up climate action by closing the transparency, implementation and ambition gaps.
The report also clarifies that international organisations' future work can help fill important knowledge gaps. These include a need for more granular and better data on embedded carbon prices and embedded emissions, the design of border adjustment policies and their interoperability, and other approaches to enhance cooperation to increase ambition and ensure a just transition for all.
The WTO Director-General (DG) said: “Trade-related climate policies are on the rise, with over 5 500 measures linked to climate objectives notified to the WTO from 2009-2022. Such policies lead to cross-border spillovers, increasing trade tensions and retaliatory trade actions. Future work by international organisations should focus on concrete ways to coordinate more ambitious carbon pricing policies, which help to close the climate action gap and address their cross-border spillovers. This may require a framework to ensure interoperability between carbon pricing and other climate mitigation policies.”
The IMF managing director said: “This joint report of the five institutions highlights why carbon pricing and equivalent policies are important to scale up climate action. Global emissions need to be cut urgently to put the world on track to achieve the Paris goals, and global ambition needs to be doubled or quadrupled. Carbon pricing should be an integral part of a well-designed policy mix, complemented with public investment support and sectoral policies, and international coordination on mitigation action could unlock progress.”
The OECD Secretary-General (SG) said: “Countries currently take different approaches to reduce emissions, but achieving net zero requires us to align these efforts for a truly global impact. The OECD’s Inclusive Forum on Carbon Mitigation Approaches, now with 59 members, is bringing together national perspectives and building a common understanding of climate policies and their effects. More coherent and better-coordinated global mitigation policies can help prevent negative cross-border impacts such as carbon leakage or trade distortions while maximising opportunities for innovation, cost savings and shared benefits from the climate transition.”
The UNCTAD Secretary-General (SG) said: “To ensure a just and green transition, UNCTAD encourages and supports developing countries in crafting the right policy mix to advance climate mitigation. We are strengthening our research and providing a safe space for dialogue to ensure that climate-related measures, including Border Carbon Adjustments mechanisms (BCAs), are evidence-based and minimise negative spillovers on developing countries and other sustainable development goals. This is especially critical for less advanced economies, which often have limited productive capacity, infrastructure for monitoring, verification, reporting, and fiscal space. We are committed to helping developing countries decarbonise and diversify their economies by seizing environmental-related export opportunities and working with our member states to reduce the compliance and trade costs associated with these transitions.”
The World Bank Senior managing director said: “Through its technical assistance and financing, the World Bank helps countries make sure climate policies are tailored to each country's context, capacities, political constraints, and development priorities. Carbon pricing can play a central role in these policies because it provides the right incentive for the private sector and creates public revenues to support broad development progress and help vulnerable populations manage the green energy transition. However, with every country introducing its own climate policies, there is also a growing need for more cooperation and coordination. As the product of in-depth exchanges across five international organisations, this report provides concrete ideas to ensure climate policies are designed to benefit lower-income economies and help them accelerate their development, create jobs, and participate in global value chains.”
The 64-page Report is accessible at:
https://www.wto.org/english/res_e/booksp_e/climate_action_e.pdf