COP29: Climate agenda clashes with trade demands

At the COP29 Climate Summit, trade tensions are escalating. According to U.N. documents, and negotiators, China, Brazil, and a number of other developing countries have complained that perceived barriers, like the European Union’s carbon border levy will undermine climate efforts.

Nearly 200 nations are fighting over the climate talks about a deal that would provide hundreds of millions of dollars per year to help poorer states cope with climate changes.

The countries who would receive the money claim that the new climate-related policies of the richest economies in the world are limiting their ability to invest. Some developing countries want to scrap these policies.

The cost of doing business in these countries could increase if Donald Trump decides to impose tariffs on U.S. imported goods.

The G77-China group, which includes Brazil, South Africa and nearly all developing countries in the world, has issued a statement that echoes the concerns first expressed by China before the COP29 Summit.

The group, in a previously unreported closed-door statement at COP29 discussed climate-related trade policies such as the European Union’s carbon border tax, and described them as punitive, and as an "unpleasant attempt to continue to expose our developing countries' to underdevelopment".

The statement stated that "the use of a heavy stick to hit our hands and heads is not a way to combat climate change."

A document published by the U.N. on Thursday showed that diplomats are discussing putting the trade policy concerns of a U.N. Committee on the agenda for the next five year. It would create a permanent forum for discussions on trade tensions during the global climate negotiations.

Attempts to bring up climate-related trade concerns at the U.N. Climate talks and World Trade Organization had previously been blocked.

Adonia Ayebare of Uganda, chairperson of the G77/China group, said: "It is high time that we deal with them." She was referring to unilateral policies such as border carbon tariffs. "We want to cancel them."

The developing countries are right to believe that they can succeed in their challenges.

The European Union proposed last month, after Brazil, the United States, and other trading partners resisted, to delay by one year its law that bans soy and beef imported linked to deforestation, until the end of 2025.

Ana Toni, Brazil's Climate Secretary, said: "I believe they heard us." "They delayed and hopefully now we will go into detailed discussions" about the impact of the deforestation laws on the concerned countries.

The EU quickly rejected a draft of the COP29 summit’s central agreement on climate financing that was circulated early Thursday. It did include trade issues but the EU quickly rebuffed it as being outside the scope of talks.

RISKS TO STRATEGY

The diplomatic spat over trade exposed a mismatch between the global climate agenda and trade practices.

Pascal Lamy (former head of the WTO) said that the clash would be inevitable as the global consensus on trade rules, which apply to all countries, runs against the U.N. Paris Climate Accord's requirement for governments to quickly implement individual CO2-cutting policies.

The EU has been more aggressive than other countries in translating its climate change goals into policy.

The EU's carbon border levies will begin in 2026 and charge imports of steel, cement, and other products for their CO2 emission, subjecting them the same carbon price that European industries pay.

Brussels insists that the levy does not represent a measure to promote trade, but rather a way of ensuring a level playing ground and preventing European companies from avoiding EU pollution costs by moving abroad.

Austrian Climate Minister Leonore Gewessler said: "It is a measure that prevents the European Union from making someone else's emission problem worse than it already is."

The carbon border tax has been overwhelmingly supported by European industries, many of which are suffering from high prices and cheaper imports.

These arguments haven't allayed the fears of countries who are bracing themselves for an economic blow. The London School of Economics conducted a study last year that suggested the carbon border tax could reduce the African continent's GDP by 0.91%.

Businesses warn that policies such as taxing emissions at the border could encourage global emission reductions, but that if they are not carefully designed, companies who struggle to comply may be excluded from the market.

Andrew Wilson, the deputy secretary general of the International Chamber of Commerce, said: "We are concerned about the risk of fragmenting global trade, which could knock SMEs (small business) out of global supply chain."

MORE TARIFFS

Not only developing countries worry about trade barriers preventing climate progress.

If Trump pursues tariffs on green energy components and raw materials that are largely sourced from China, it could disrupt the energy transition of some of the world's richest countries.

Trump ran his campaign on a promise of imposing 60% tariffs for Chinese imports, and lower tariffs for all other goods. Businesses in the United States have warned that such policies may slow down the deployment of green technologies and threaten climate targets.

Abby Hopper CEO of the Solar Energy Industries Association said that it would slow down the deployment of solar energy and green energy by increasing their cost.

Pedro Pizarro said that U.S. utilities could pass on tariff costs to consumers when it comes to imported parts for expanding electricity grids, and other infrastructure. These parts are no longer manufactured in the United States.

You cannot buy a high-voltage transformer in the U.S. He said that most of the batteries are from China. "In the end, it may be the end-user customers who end up paying the most for the tariffs." Reporting by Kate Abnett, with additional reporting from Valerie Volcovici and Philip Blenkinsop (both in Brussels) in Baku; editing by Katy Daigle & Jane Merriman

(source: Reuters)