  
INF/TE/SSD/R/9  
 
14 July 2022 
(22-5373) Page: 1/4 
Trade and Environmental Sustainability Structured 
Discussions  Original : English  
 
  
WTO TRADE AND ENVIRONMENTAL SUSTAINABILITY STRUCTURED DISCUSSIONS  
WORKING GROUP ON TRADE -RELATED CLIMATE MEASURES   
HELD ON 17 MAY  2022 (15:00-18:00) 
Summary of discussions1 
1  Introductory remarks by the facilitators  
1.1.  The facilitators , Göksu Tulumen  of Türkiye  and Jean -Marie Meraldi  of Switzerland , recalled that  
TESSD co -sponsors had agreed to launch dedicated discussions on how trade -related climate 
measures and policies c ould best contribute to climate and environmental g oals and commitments 
while being consistent with WTO rules and principles.  Based on the  TESSD Work Plan for 2022, the 
working group on trade -related climate measures  was guided by  three questions relating to: (i) what 
trade -related climate measures and policies Members were pursuing and their trade implications ; 
(ii) identifying best practi ces in the development of trade -related climate measures and policies to 
maximize climate and environmental benefits while al so maximizing trade benefits ; and 
(iii) challenges facing MSMEs globally and developing countries with regard to design and use of 
trade -related climate measures and policies, and how these c ould be addressed.  The facilitators also 
recalled the substantive  engagements amongst Members at the previous  TESSD meeting on 
31 March 2022.  
2  Presentation by the World Bank  
2.1.  The representative of the World Bank made a presentation titled "Measuring and comparing 
carbon pricing and the pricing of embodied and transport e missions". He explained that there were 
several ways to price carbon. These include d implicit carbon pricing like fuel and commodity taxes 
or subsidies, and traceable performance standards, as well as explicit carbon pricing such as carbon 
taxes, emissions  trading schemes ( ETS), and fees and rebates. These carbon pricing designs c ould 
accommodate different country priorities and industrial policies. It was noted that countries which 
significantly priced carbon could successfully reduce carbon intensity , and  that some developing 
countries had carbon prices not much lower than developed countries with explicit carbon pricing. 
Pricing the carbon content of production or transport did not necessarily require a global 
measurement, reporting, and verification (MRV ) system, as default values could be used with rebates 
when lower emissions were proven through sustainability certificates. Similar approaches for 
measuring carbon content  could be applied in  steel, maritime, aviation and timber sectors. Regarding 
the use  of carbon pricing, it was  observ ed that the majority of countries, particularly developing 
countries, were not pricing carbon explicitly through carbon taxes or ETS but rather implicitly through 
fuel, commodity taxes  and subsidies , which might need to be taken into  account  for border carbon 
adjustment measures . 
3  Exchange of views by Members  
3.1.  A Member  stated the importance of discussing basic concepts for trade -related environmental 
measures such as "carbon leakage " and "border adjust ment" at a time when Members were making 
voluntary efforts to reduce greenhouse gas ( GHG) emissions  under the Paris Agreement.  It 
emphasized that the WTO should be the forum where WTO Members ensur ed trade-related climate 
 
1 This summary, prepared and circulated under the facilitators' responsibility, is being shared with a 
view to providing delegations with a record of the discussions and assisting them in reporting back to their 
capitals. It provides a non -exhaustive, illustrative review of the issues addressed by Members at the meeting.  INF/TE/SSD/R/9  
 
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  measure s' conform ity with WTO trade rule s. Another Member suggested to  explore discussions on 
how to enhance cooperation in the design and implementation of environmental and climate 
measures , as well as  basic guiding principles for the design of trade -related environmental and 
climate measures, including on  whether to draw on existing multilateral environmental agreements.  
3.2.  A Member  stated that it was important to examine implicit and explicit carbon pricing policies 
that countries implement ed under different conditions . It noted t hat in the design process of 
trade -related environmental measures, including for border carbon adjustment s (BCAs) , it was 
necessary to account for  climate policies and efforts of countries in combat ting climate change within 
the framework of their national  conditions, development levels, access to finance and their common 
but differentiated responsibilities  (CBDR) . It stressed that unilateral measures, which directly 
affect ed international trade and competitiveness, would be detrimental to the  development 
processes of developing countries and LDCs . Another Member noted that it was a prerequisite for 
BCA measures to be consistent with WTO rules . 
3.3.  On carbon leakage, a  Member  stated that carbon taxes should  neither  increase distortions in 
competition nor lead to unnecessary administrative and regulatory costs or trade barriers. A 
non-discriminatory design of trade -related climate measure s was important to ensure WTO 
compatibility  and such measures should aim to redu ce global emissions . Another M ember  noted that 
TESSD should explore ways to pursue trade facilitation to reduce emissions and environmental 
impacts and accelerate progress towards a net -zero future.  
3.4.  Two Member s stated that it was important to ensure that the  CBDRs  and nationally determined 
contributions ( NDCs ) were accounted for in the ongoing discussions. Another Member  noted that the 
border tax adjustment should be discussed in a broader sense since it may be considered as a 
technical regulation or s tandards covered under the TBT Agreement, and Article III.4 of the 
GATT  1994. On measures for the future sustainability of agriculture, th e same  Member  suggested 
halting degradation of land and natural resources while reducing food ins ecurity , minimiz ing the 
impact of agriculture on climate change , and i ntegrat ing conservation of biodiversity.  
3.5.  The United States provided an overview on their discussion paper on climate change and 
circular economy ( INF/TE/SSD/W/19) , which reflected its interest in discussing both the 
measurement/tracing of emissions in trade as well as policies to address emissions in trade and 
incentivize decarbonization, including whether border adjustments and carbon clubs c ould be 
effective in achieving  environmental objectives. According to the United States, a ddressing climate 
change was not a siloed endeavour, and the topics of circular economy, preventing carbon leakage, 
and promoting trade in certain environmental goods and services all ha d a signif icant nexus to each 
other.  What matter ed was the embedded emissions of traded goods  and how  Members  used trade 
policies to incentivize decarbonization to tackle the issue of embedded emissions in trade rather than 
focusing on the merit of each other 's regu latory policies or whether a market explicitly price d carbon.  
The transition to a net -zero future w ould also require access to critical minerals, recyclable materials, 
and a transition from a linear economic model to a circular model that enable d recovery,  reuse, 
repair, refurbishment, remanufacturing and recycling with minimal barriers in international markets.   
3.6.  Several Members welcomed the United States' discussion paper . One Member noted that 
discussions should be aligned with the principles and commitme nts in the United Nations Framework 
Convention on Climate Change (UNFCCC ), the Paris Agreement and other multilateral agreements, 
especially the CBDR principle and NDCs. It further highlighted that it was important to ensure  the 
free flow of trade in low carbon related goods, technologies and services rather than establishing 
measurement of carbon emissions. Another  Member noted that any  work or discussions  on 
remanufacturing, refurbishment, repair and direct re -use should be cog nisant and supportive of 
requirements laid down in relevant multilateral environmental agreements, including the  Basel 
Convention . On the issue of carbon clubs, a Member noted that adherence to WTO rules and the 
Paris Agreement would be  important for such a club . Further, this Member noted that such a 
mechanism should be cooperative rather than exclusive.  Another Member recalled that discussions 
on carbon clubs were ongoing in the G7  forum .  
• What trade -related climate measures and policies, including regula tory requirements, are 
Members pursuing, and what are their related objectives, design characteristics, and potential 
trade implications?  INF/TE/SSD/R/9  
 
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  3.7.  The representative of Canada stated that carbon pricing was central to its plan to fight climate 
change and reduce GHG  emissions. Carbon pricing ha d been set throughout Canada since 2019 via 
a mix of federal, provincial and territorial pricing systems. The federal government had set minimum 
national standards that all systems should  meet to ensure they were fair, effective and consistent. 
Canadian firms were subject to carbon pricing systems , which create d incentives to reduce carbon 
pollution and spur red innovation. Further, since November 2020, Canada ha d been exploring the 
potential of BCAs as part of its transi tion to a low  carbon economy.  
3.8.  The representative of Japan informed Members that it was currently designing a 
"Green  Transformation League", which was a growth -oriented, flexible framework for reducing 
corporate GHG emissions. Participation in this programm e was voluntary but so far  cover ed over 
40% of national emissions. The representative of Saudi Arabia provided examples of various policies 
and initiatives that aim ed to reduce and remove GHG  emissions , focus on climate adaption , and 
manage the impacts of response measures.  The representative of China briefed Members on its 
national carbon market , which had started online trading in July 2021.  
3.9.  The representative of Chile noted that it ha d had a carbon tax in force since 2014, which 
impose d levies on fixed s ources that emit ted carbon dioxide equivalent applied to the energy and 
industry sectors. The design of the scheme was currently being reviewed to ensure greater 
effectiveness. This review was part of the broader Strategy of Economic Instruments for the En ergy 
Transition launched in March 2022 , which s ought  to internali ze the negative impacts of fossil fuel 
use in prices.  
3.10.   The representative of Switzerland briefed Members about the  innovative mechanism 
regarding sustainable production of palm oil in the Comprehensive Economic Partnership Agreement 
(CEPA) between the E uropean Free Trade Association  (EFTA) States and Indonesia. It noted that the 
major innovation of the CEPA was the es tablishment of a link between the preferential tariff rate 
quotas for Indonesian palm oil granted under the CEPA and the sustainability criteria set out in the 
chapter on trade and sustainable development. In the absence of a universally accepted standard 
for the sustainable production of palm oil, parties to this agreement had decided to rely on 
well-established voluntary sustainability standards (VSS).  
4  Presentation by the United Nations Industrial Development Organization  (UNIDO ) 
4.1.  The representative of th e United Nations Industrial Development Organization (UNIDO)  made 
a presentation on the challenges and opportunities for developing countries in decarbonizing their 
industry , as well as their Global Program for Green Hydrogen in the Industry and  the Indust rial Deep 
Decarbonisation Initiative (IDDI).  More specifically, UNIDO set out three solutions to develop 
industrialization powered by clean energy: (i) accelerating the shift of industry away from fossil 
fuels; (ii) enabling decision  makers to chart a low  carbon path to economic progress; and 
(iii) fostering the rise of local entrepreneurs and innovators. The presentation highlighted that 
climate investments were lagging behind and  there was currently a gap of USD 349 billion annually 
which need ed to be invested in low  carbon climate -resilient projec ts and business to enable 
implementation of NDCs. Barriers to accessing climate finance for MSMEs were witnessed across the 
supply and demand side. Systemic challenges highlighted in UNIDO's presentation were: 
(i) continued reliance on fossil fuels; (ii) r enewable energy's inability to produce a high-temperature 
heat; (iii)  lack of carbon pricing, emissions trading and border adjustment taxes; and (iv) weak 
policy environments.  
4.2.  According to UNI DO, the  Clean Energy Ministerial Industrial Deep Decarbonisatio n Initiative 
(IDDI) , a global coalition of public and private organi zations who were working to stimulate demand 
for low carbon industrial materials , could play a significant role in limiting carbon emissions. The  
IDDI (UNIDO -coordinated, co -led by the Uni ted Kingdom and India) aim ed at stimulating public and 
private demand for low carbon steel and cement by building capacity and guidelines for data 
collection and reporting on emissions, standardi zing carbon assessments and setting green 
procurement targets . The presentation also highlighted two key gaps in promoting the 
decarbonization of industrial sectors: data and standards a nd green public procurement policy.  INF/TE/SSD/R/9  
 
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  5  Exchange of views by Members  
• What are the challenges facing MSMEs globally, and for developing countries, with regard 
to the design and use of trade -related climate measures and policies, and how can these 
be addressed?  
5.1.  Several Members presented comments on UNIDO's presentation and highlighted  the challenges 
in the design and implementation of carbo n pricing  for MSMEs, especially in developing countries . 
One Member emphasized that WTO Members should consider employing existing technical 
assistance tools to support their participation in technical discussions on those topics.  It further 
noted that challenges related to the application of regulatory requirements may make it challenging 
to calculate actual emissions in products , which could prevent lower -emission products from 
benefitting from lower fees  or restrict ing exports altogether. To address s ome of these concerns, it 
stressed the importance of capacity  building, technical assistance, financial assistance, slow 
phase -ins and tailoring reporting requirements.  
5.2.  Two Members highlighted the important role of WTO Aid for Trade in receiving technical  
assistance.  One Member noted that the WTO Aid for Trade Initiative and other innovative financing 
mechanisms to address climate change ha d an important role to play by mobilizing funding for 
critical supply -side infrastructure, enhancing environmental sus tainability and supporting  the private 
sector to adapt to climate change. However, WTO Aid for Trade need ed to be better targeted to 
address development concerns that were  aligned to LDCs' NDCs. Another Member also highlighted 
the importance of Aid for Tra de and transfer of technologies for MSMEs.  
5.3.  A Member  noted that MSMEs m ight face additional barriers in adopting trade -related climate 
measures and policies  compared to other businesses . Introducing complex and opaque regulations 
risked compounding the challenges faced by MSMEs. Another  Member  stated that data collection, 
benchmarking and developing methodologies to measure carbon emissions across supply chains 
were necessary before Members c ould address climate change through trade. The Member also 
suggested that the ongoing discussions should focus on specific sectors that were high carbon 
emitters rather than an industry -wide assessment.  
6  Intervention by Stakeholders  
6.1.  The Forum for Trade, Enviro nment and the SDGs (TESS) suggested that  the working group 
could develop hybrid guidelines that a ccount ed for discipline s in trade as well as environment and 
climate change.   
7  Conclusion  
7.1.  The facilitators thanked Member s for their contributions which  further  enhance d transparency 
on trade -related climate measures, including on related objectives and possible trade implications.  
They also recalled that Member s had heard challenges that MSMEs and developing countries were 
facing regarding decarboni zation and th e implementation of trade -related climate measures. The 
facilitators concluded by noting that many Members had set out their  priorities for the work within 
the group  and invited interested Members to discuss their ideas further.  
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