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TWN
Info Service on WTO and Trade Issues (May23/11) Geneva, 23 May (D. Ravi Kanth) — The Group of Seven (G7) industrialized countries on 20 May failed to set a tangible target or the quantum of funds they will provide for addressing the “loss and damage” suffered by developing and vulnerable countries due to climate change. However, they promised that they will scale up “action and support to avert, minimize and address loss and damage, especially for the most vulnerable countries”. But without a clear target, such a promise seems like chasing a mirage at a time when climate change has become the most existential challenge for mankind, with nations set to surpass the Paris Agreement target of containing the increase in global temperatures below 1.5 degrees C. In the Hiroshima communique issued at the G7 summit on 20 May, the G7 members – the United States, Canada, Italy, France, Germany, the United Kingdom, and Japan – as well as the European Union, highlighted how they will aggressively pursue carbon pricing policies and promote the development of carbon markets. The communique espouses trade-related measures based on carbon-pricing mechanisms though it did not mention the carbon border adjustment mechanism being implemented by the EU or the ongoing efforts in Washington to create a similar arrangement. It has also called for kick-starting plurilateral negotiations on trade in environmental goods at the WTO. LOSS AND DAMAGE On the important commitment concerning loss and damage (L&D) that was finally agreed at the 27th meeting of the Conference of the Parties (COP27) to the UN Framework Convention on Climate Change (UNFCCC) in Sharm-el-Sheikh, Egypt, last year, the G7 leaders failed to explicitly commit to a tangible and quantifiable target for setting aside funds for addressing challenges pertaining to L&D. The G7 leaders emphasized “extreme concern at the scale of impacts that are already resulting in economic and non-economic loss and damage associated with the adverse effects of climate change and being felt globally,” particularly by the most vulnerable countries. Expressing alarm over the adverse effects of climate change globally, the G7 leaders committed to “scale up action and support to avert, minimize and address loss and damage, especially for the most vulnerable countries.” In this regard, they committed to implement “the UNFCCC-COP27/the 4th session of the Conference of the Parties serving as the Meeting of the Parties to the Paris Agreement (CMA4) decision to establish new funding arrangements, including a fund, for developing countries that are particularly vulnerable to the adverse effects of climate change, in the context of article 8 of the Paris Agreement, and providing support identified in the “G7 Inventory on Climate Disaster Risk Reduction, Response, and Recovery”.” Yet, by not spelling out a clear quantifiable target in financial terms for L&D, the G7 countries seem to have left the issue open for further negotiations. CARBON PRICING In their communique, the G7 countries are seemingly determined to create carbon markets and carbon pricing, which could morph into a new non-tariff barrier. The G7 leaders reaffirmed “the important role of high integrity carbon markets and carbon pricing to foster cost-efficient reductions in emission levels, drive innovation and enable a transformation to net zero, through the optimal use of a range of policy levers to price carbon.” The G7 leaders maintained that they would “support appropriate policy mixes including carbon pricing, non- pricing mechanisms, and incentives that effectively reduce emissions,” while noting that “these could vary reflecting country-specific circumstances.” They lent support to “the OECD Inclusive Forum on Carbon Mitigation Approaches (IFCMA)” while insisting that they would advance “the open, cooperative, and inclusive Climate Club, in collaboration with international partners, to advance industrial decarbonization.” The G7 leaders encouraged “private entities to commit to GHG (greenhouse gas) net-zero emissions throughout the value chain via credible net zero pledges and transparent implementation strategies.” They also want to promote the private sector “to foster innovation contributing to the emission reduction of other entities through decarbonization solutions.” Despite structural inequalities and the continued gap in the pace of industrialization between the developed countries on the one side, and the developing countries, on the other, the G7 leaders seem somewhat determined to perpetuate the current realities. Otherwise, it is difficult to explain why they want to advance the controversial “Industrial Decarbonization Agenda (IDA) that decided to start working on the implementation of the new Global Data Collection Framework for steel production and product emissions,” said an environment negotiator, who asked not to be quoted. In their communique, the G7 leaders reaffirmed their commitment to “a highly decarbonized road sector by 2030, and recognize the importance of reducing GHG emissions from the global fleet and the range of pathways to approach this goal in line with trajectories required for keeping a limit of 1.5 degrees C within reach.” They are seeking to achieve the goal of net-zero emissions in the road sector by 2050. CLIMATE FINANCE On the long-pending issue of climate finance, which has been left hanging since 2008, the G7 leaders said that they “will continue to scale up and enhance support to strengthen the resilience of climate-vulnerable groups through enhancing climate change adaptation and climate disaster risk reduction, response and recovery and early-warning systems including through the Global Shield against Climate Risks and other initiatives related to early warning systems and the adoption of climate-resilient debt clauses.” Further, they reaffirmed their (unimplemented) “commitments to the developed country Parties’ goal of jointly mobilizing $100 billion annually in climate finance by 2020 through to 2025 in the context of meaningful mitigation actions and transparency on implementation.” In their communique, the G7 countries said that they “will work together with other developed country Parties in order to fully meet the goal in 2023.” They plan to bring “public and private” sources into finance flows for “reaching the goals of the Paris Agreement, including making finance flows consistent with a pathway toward low GHG emissions and climate-resilient development.” “Recognizing the critical role of the G7 and that developed country parties should take the lead in mobilizing climate finance,” the G7 leaders underscored “the need for all countries and stakeholders, who have the capabilities and are not yet among the current providers of international climate finance, to contribute to global efforts in this regard.” The G7 leaders urged the multilateral development banks (MDBs) like the World Bank to increase finance “for global public goods including climate finance and support ambitious regulatory reforms in developing countries via policy-based finance in order to foster the transition to net zero and enable private sector investment.” Further, the G7 leaders committed to “realizing the transformation of the economic and social system towards net-zero, circular, climate-resilient, pollution-free and nature-positive economies and to halting and reversing biodiversity loss by 2030, in an integrated manner, while ensuring sustainable and inclusive economic growth and development and enhancing the resilience of our economies.” They endorsed “the Circular Economy and Resource Efficiency Principles (CEREP)”, ostensibly for increasing “domestic and international environmentally-sound, sustainable and efficient recovery and recycling of critical minerals and raw materials and other applicable materials while increasing circularity along the supply chains.” G7 OCEAN DEAL/FISHERIES SUBSIDIES In their communique, the G7 leaders touted their so-called ” G7 Ocean Deal,” in which they committed “to act towards realizing clean, healthy and productive oceans.” After being allegedly responsible for the global depletion of fish stocks for many years, the G7 countries committed to “end illegal, unreported and unregulated (IUU) fishing.” They said that further actions will be taken to “address this phenomenon in all its dimensions, including supporting developing countries and strengthening policy coordination among our relevant agencies and task them to take stock of their progress on this issue by the end of this year.” “In particular, we encourage non-parties to the Food and Agriculture Organization (FAO) Agreement on Port State Measures (PSMA) to join for further global acceptance and effective implementation of the PSMA.” The G7 leaders welcomed “the conclusion of the negotiations for an international legally binding instrument under the UN Convention on the Law of the Sea (UNCLOS) on the conservation and sustainable use of marine biological diversity of areas beyond national jurisdiction (BBNJ) and call for its rapid entry into force and implementation.” The G7 countries said they will “end plastic pollution, with the ambition to reduce additional plastic pollution to zero by 2040.” Significantly, they stressed “the importance of mobilizing finance especially including private finance focusing on further implementation and development of clean technologies and activities.” However, the G7 countries failed to provide a mechanism or an explicit commitment to share the new green technologies without any royalty fee or on an equitable basis. The G7 leaders said that they “look forward to an ambitious and successful second replenishment for the Green Climate Fund (GCF) and reaffirm the need for robust G7 pledges,” while urging other countries, perhaps China and other developing countries, “to do the same and underscore the need to broaden the GCF’s contributor base by encouraging all potential contributors.” They promised “to accelerate efforts to respond to the Glasgow Climate Pact that urges developed countries to at least double their collective provision of climate finance for adaptation to developing countries from the 2019 level by 2025, in the context of achieving a balance between mitigation and adaptation in the provision of scaled- up financial resources.” SILENCE ON CBDR The Hiroshima communique is replete with grand promises and commitments. Yet, it did not even mention the importance of the principle of “common but differentiated responsibilities” as reaffirmed in the Paris Agreement and whether commitments for developing countries will be implemented based on this principle. It is an open secret that the “foundational principles of the Paris Agreement are based on the principles of equity and common but differentiated responsibilities and respective capabilities (CBDR-RC), in the light of different national circumstances, and nationally determined contributions (NDCs) made by the parties to the UNFCCC.” During an intervention at a recent meeting of the WTO’s Committee on Trade and Environment, India said that the foundational principles recognize that “the largest share of historical and current global emissions of greenhouse gases originated in developed countries, that per capita emissions in developing countries are still relatively low, and that the share of global emissions originating in developing countries will grow to meet their social and development needs.” India said that “it is also important to underscore that the principles of “respective capabilities” recognize the different socioeconomic status of countries, as stated in the Preamble to the Marrakesh Agreement establishing the WTO.” It said the Paris Agreement provides for different NDCs to “effectively reflect different climate policy choices across countries”, which may be based on different national circumstances. “The policy choices include a variety of instruments like regulatory measures for conservation, afforestation, emission reductions, transition to non-fossil fuel-based energy sources, standards, taxation, carbon pricing, and carbon trading,” India argued, suggesting that the “Regulatory heterogeneity is inherent in the concept of NDCs under the Paris Agreement of the UNFCCC.” Commenting on the adverse effects of “carbon border (adjustment) measures (CBAMs) that are being considered (by the European Union and the United States) for imposition on imported products,” India said such measures “amount to prioritizing a singular policy of the importing country over those of exporting countries and will amount to imposing a unilateral vision of how to combat climate change.” Such unilateral policies go against “a country which may be fully compliant with its NDCs under the UNFCCC, [and] has to either match the importing country’s emission reduction obligations or pay a cost/price for (the) trade,” India said. Despite the recent US-EU deal on steel, where carbon pricing was suggested, India said much of the carbon border measures seem to be targeted and applied to “trade-exposed industries” such as steel, aluminum, chemicals, plastics, polymers, chemicals, and fertilizers. It seems to reflect “the underlying competitiveness concerns driving such measures,” and places an obligation on importers and exporters to comply with mechanisms of verification of whether or not deforestation occurred in the country of origin, enhancing compliance burdens, said India. Meanwhile, in its Trade and Development Report (TDR) 2022, the United Nations Conference on Trade and Development (UNCTAD) provided a blueprint for a “positive Trade and Environment Agenda”. It said that the Agenda must focus on the following objectives: 1. Facilitating patent-free green technology transfer; 2. Providing additional financial resources to promote trade of environmentally sustainable products, such as through the Trade and Environment Fund; 3. Building technical capacities, especially of least-developed countries (LDCs) and small island developing states (SIDS), in setting up climate-smart infrastructure and broader adaptive measures; 4. Providing incentives like preferential market access based on progress towards nationally committed goals or incentives for promoting trade and renewable substitutes; and 5. Ensuring adequate policy and fiscal space for developing countries to design their trade policies around environmental goals. According to the TDR, the above “multi-dimensional approach could translate into deeper economic cooperation and planning at the regional level on a series of climate-critical sectors, such as energy, waste, food, and infrastructure.” More importantly, it said that “by pooling resources, capacities, and expertise, regionally devised development plans could build in resource efficiency from the beginning.” In conclusion, it said the central aim of the UN and WTO members ought to be to “tackle ecologically unequal exchange, retaining materials, labour and land to promote developmental ambitions.” The above multi-dimensional approach proposed by UNCTAD would require developed countries to regulate and mitigate their CO2 emissions within their jurisdictions as well as tackle their dependence on over- consumption, it added. The Hiroshima communique is silent on several core issues of developing and facilitating the transfer of environmentally sound technology (EST), including financial commitments to ensure access to such technology, and investments in environmental projects. In short, aside from the pledges and promises made at their summit, the G7 leaders seem to have addressed the climate change challenges on a “self-serving” framework without addressing the core issues raised by the developing countries. +
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