Álvaro Santana Acuña

“Free trade can be conceived as pro-environment” –Rafael Leal-Arcas

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Rafael Leal-Arcas: Climate Change and International Trade

Rafael Leal-Arcas is a Senior Lecturer in Law at Queen Mary, University of London. He is currently the Director of the LLM Research and Dissertations at the Centre for Commercial Law Studies (CCLS). expert on international economic law and the external relations law of the European Union, he also serves as a Marie Curie Senior Research Fellow at the World Trade Institute (University of Bern). In addition to his scholarly activities, he has acted as a judge in the 4th annual International Moot Court competition at Gujarat National Law University (India), as a consultant to the World Trade Organization’s legal affairs division, has served in the United States Court of International Trade, and has clerked at the European Court of Justice as well as the Court of First Instance of the European Communities.

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Your first two books, Theory and Practice of EC External Trade Law and Policy (Cameron May, 2008) and International Trade and Investment Law: Multilateral, Regional and Bilateral Governance (Edward Elgar, 2010) deal with the external economic relations law of the European Union and international economic law. In your new book, Climate Change and International Trade (Edward Elgar, 2013), you connect international trade regulation to climate change mitigation. Can you explain the origin of this project? And how does it fit in your larger trajectory?

As a student at Columbia University Law School in New York City, I followed Professor Ambassador Richard Gardner’s seminar Legal Aspects of U.S. Foreign Economic Policy. He suggested I write a paper on whether the Kyoto Protocol was an adequate environmental agreement to solve the climate change problem. It was my first encounter with climate change law. It was only years later that I realized the link between Ambassador Gardner’s suggestion to write a paper on climate change law and my personal interests in trade regulation. To a large extent, this is how the idea of writing this book started. I am therefore very grateful to Ambassador Gardner for pushing me to write about what was then a new field for me and what has become an important and emerging area: how to reconcile environmental protection with economic objectives.

Creating effective enforcement mechanisms is crucial.

Interest in climate change is on the rise across the humanities and social sciences. This tendency does not only include discussions about current environmental affairs, but also researchers are interpreting the past anew. I recently read an interesting paper offering an “environmental” explanation of a foundational text on modern trade, Adam Smith’s The Wealth of Nations. What is the added value of the “law approach” you propose to the debates on climate change?

The ambition to reduce greenhouse gas (GHG) emissions to safe levels cannot be reached without equity in the process, similar to the argument of ‘no peace without justice,’ with the purpose to get to climate justice. This is where a law approach becomes so important. Finding solutions that are fair to all, and, more importantly, creating effective enforcement mechanisms is crucial. In my view, there is no need to have a global solution/universal agreement to climate change so long as the major GHG emitters reduce their GHG emissions locally, taking into account the historic responsibilities of the developed world in order for the process to be equitable. In other words, if China’s (or any other major emitter’s) GHG emissions decrease, it will benefit the rest of the world. But if these emissions increase, it will affect the rest of the world. Therefore, a local solution can have a global effect. So from an economic and environmental point of view, it is vital that China decreases its GHG emissions. Here, legal enforcements can help bring about these kinds of changes.

Throughout the book you detail how international trade can be the solution to climate change. Yet, is not the global growth of trade precisely one of the major causes of climate change?

It is true that free trade can be perceived as anti-environment. For example, there are transport externalities resulting from trade; lowering environmental standards gives countries a competitive advantage in trade; and reduced biodiversity may lead to greater ecological risk. However, in other ways, free trade can be conceived as pro-environment. It generates resources that can be devoted to environmental protection; it increases the efficiency of resource use; by correcting market failures, free trade increases welfare both nationally and globally; free trade encourages the development of climate-friendly technologies and their dissemination; it fosters the multilateral cooperation needed to address transboundary environmental problems; and as per capita income increases, the environment worsens, although up to a point, as illustrated in the environmental Kuznets curve. This curve shows an n-shaped (or an inverted U-shaped) relationship between per capita income (GDP) and the quality of the environment. Environmental degradation worsens as per capita GDP increases until we reach a turning point, after which the situation gets better. According to Steven Horwitz, measures of the quality of the environment do indeed fall in the initial stages of economic growth, but this trend turns around at about US$5,000 per capita GDP, with many measures of environmental damage showing improvement from US$8,000 onwards.

What I propose is the creation of a new mechanism similar to the WTO Trade Policy Review Mechanism that would monitor national commitments to cut GHG emissions.

You call for a global governance of environmental matters, yet you are also fully aware of the difficult of achieving it. In particular, you often mention the limitations of the Kyoto Protocol of 1997, designed to reduce GHG emissions among industrialized countries despite its little enforcement mechanisms. Could not the creation of an international court of environmental rights (or a similar institution following the framework of the International Criminal Court) solve the problems of enforcing laws, agreements, and protocols on climate change?

Certainly, I believe such an institution could work. What I propose is the creation of a new mechanism similar to the WTO Trade Policy Review Mechanism that would monitor national commitments to cut GHG emissions. Using the WTO monitoring system as a model would be perfectly feasible so long as the monitoring is carried out by an international body with environmental expertise. There may be lessons to be learned from the General Agreement on Tariffs and Trade (GATT) techniques as regards compensatory adjustments for violations. Clearly, it would not be acceptable for country A to feel free to disregard its own GHG emission commitments because country B has (in the opinion of country A) already disregarded its commitments. The monitoring problem arises only once commitments are made, even if sometimes states are reluctant to undertake commitments because they believe that others will cheat and not be caught out. It would be useful to see how the WTO Trade Policy Review Mechanism worked in trade policy for a possible replica in the case of climate change.

But, how would a new mechanism modeled on the WTO Trade Policy Review Mechanism monitor national commitments to cut GHG emissions?

Unlike the Kyoto Protocol, which would have subordinated a state’s policies to the decisions of an international organization, a future General Agreement to Reduce Emissions (GARE) would perform in the same manner as the GATT 1947 in terms of setting rules, non-binding dispute settlement, and creating incentives (such as financial incentives for environmental technology transfer) for countries to coordinate their efforts in reducing GHG emissions. Just as it was the case in the GATT, the advantage of the proposed GARE is that it would not have to be established or enforced by a legally binding treaty. Countries could join the GARE by adopting their own ambitious and verifiable reductions targets based on domestic legislation. So although the international dimension of the GARE would be politically binding, the GARE would be based on legally binding national obligations.

However, you also make the case for regional trade agreements (RTAs) as a better mechanism for mitigating climate change than the Kyoto protocol?

Yes, I propose the introduction of a regional model for promoting climate change mitigation as an alternative to the present structure of the UNFCCC/Kyoto Protocol framework. Given the proliferation of RTAs—especially in the form of bilateral treaties—in the international trading system, creating RTAs with strong climate change chapters can offer an innovative approach to the problem and embed climate goals within bilateral/trilateral/plurilateral trade agreements. Involving major GHG emitters through RTAs and economic partnership agreements, with climate chapters included, can be an effective avenue towards reducing GHG emissions, and therefore it could facilitate the ultimate goal of creating an effective global climate regime.

Given this proliferation of free-trade agreements (FTAs) in the international trading system, could not a sectoral approach in FTAs might help move the climate change agenda forward?

Indeed, but a high degree of coordination and coherence would be necessary for this web of sectoral agreements to have a global impact on GHG emissions reduction. Depending on the economic incentives, developing countries may be in a position to agree to take on GHG emissions limitations commitments for some sectors, in the understanding that they are unable to take on economy-wide commitments. Another idea I discuss in the book is a bottom-up approach to climate change mitigation, which envisions the international climate change effort as a gradual aggregation of nationally or regionally defined programs put forward by countries on a strictly voluntary basis. This approach aims at economic change towards a low-carbon future through promoting energy efficiency and inducing technological breakthroughs throughout the economy. The purpose of such an approach is to make bottom-up climate arrangements a useful supplement, and not a replacement, to top-down climate policies. Each country would determine what is socially, economically, politically, and technically feasible based on national circumstances. Given the fragmented nature of international law generally, bringing together a group of countries—as opposed to the entire global community—seems to make sense as a stepping stone towards the eventual creation of a future global climate change agreement.

You thoroughly discuss the scores of conferences and protocols on climate change, but at the end of the day, has not been the global economic crisis a more effective mechanism to reduce GHG emissions in many countries and regions responsible for the larger amount of GHG emissions?

It is a fact that the global economic crisis, which started in 2008, has resulted in mitigation of emissions because of low economic growth in major GHG emitters. But I would not think of it as the more effect mechanism to reduce GHG emissions, since the crisis has had (and continues to have) terrible social consequences.

A perceived lack of evidence or uncertainty should not be a reason for inaction.

A surprising revelation you refer to is that some segments of the adult population in developed countries care less nowadays about climate change than they did a decade ago (for example, the Generation X). Is this due to the fact that climate change is too big an abstraction for most people? It seems that statements such as, last May, “the average carbon dioxide reading surpassed 400 parts per million, [an amount] not seen for at least three million years” are not getting to the heart of the matter, which is to change people’s behavior. How can the problem of climate change be made more concrete?

Indeed, climate change is for many too much of an abstraction. In addition, not everyone is clear regarding the causes, effects, and magnitude of climate change. This uncertainty seems to stand in the way of behavioral changes. Sherwood Rowland, Nobel Prize laureate for his research into the effects of chlorofluorocarbon gases on the ozone layer, asked: “what is the use of having developed a science well enough to make predictions if all we are willing to do is stand around and wait for them to come true?” Furthermore, as the UK’s climate envoy John Ashton put it, “we now need to stop talking about talking and start deciding about doing.” So a perceived lack of evidence or uncertainty should not be a reason for inaction.

With good governance, geoengineering could be a promising solution.

One of the most fascinating chapters in your book deals with the global governance of geoengineering, which you claim is far from becoming a reality soon. You also mention that geoengineering has old history (e.g., it was used in the Vietnam War). And you argue that it can be used in less controversial ways (e.g., reforestation). However, recent actions, such as the dumping of one hundred tons of iron dust in Pacific waters off western Canada (by a California businessman seeking to fertilize the ocean), show that the boundaries between private and public initiatives are blurry, and, for numerous critics, it proves that geoengineering can be counterproductive. Keeping in mind the case of several countries transformed into the carbon sinks of rich countries (what some call “carbon colonialism”), could not geoengineering become a Machivellian mechanism for some powerful groups to profit from environmental disasters?

As it is the case with many technologies, geoengineering comes with the threat of being exploited by special interest groups. I call for strong governance in all aspects of the climate regime, and geoengineering is no exception. With good governance, geoengineering could be a promising solution. Shortwave Radiation Management (SRM) is accepted as the least expensive method of manipulating the climate after reforestation. It also avoids the land-use issues of reforestation. Moreover, implementing SRM could be fairly quick, and it could be conducted in a way that rapidly reduces global mean temperature (which not even the fastest imaginable system of GHG emissions reductions could achieve). Still, it is true that options for SRM have given rise to a variety of questions regarding morals, technology, governance, and certain legal aspects of international trade.

To what extent the increasing number of environmental disasters can be due, not to actual climate change, but rather to an increasing interconnected world and media and also to an overpopulated planet (which means that increasing amounts of people now inhabit environmentally unsafe areas)?

Although there are inevitable inaccuracies in any climate-related prediction, the consensus is that without any preventive action, many small island nations around the world could become uninhabitable in a matter of decades.

Better connectedness has improved our response times to natural disasters, though of course it can do nothing towards preventing the disaster itself. In terms of climate change, better awareness is playing a crucial role in how countries can adapt to its expected impacts. One of the main effects of climate change is the increase in sea levels. This raises legal questions for small island nations. Several of these questions remain unresolved in international law. Although there are inevitable inaccuracies in any climate-related prediction, the consensus is that without any preventive action, many small island nations around the world could become uninhabitable in a matter of decades. Sea level rise will be particularly acute in the Pacific region, where the supply of water and the infrastructure in the region may be affected by the severity of weather patterns. A further climate impact that will harm these Pacific nations will come from ocean acidification, which could “deplete fish reserves and potentially further undermine the physical stability” of the islands. The better aware and thus prepared these countries are for these changes, the less damaging the consequences of climate change will be for them.

Critics of environmentally friendly state policies argue that consumers are the ones paying the bill of climate change mitigation strategies. For instance, in 2008 the EU adopted the aviation Directive, which provided that from January 1, 2012, major airlines and carriers using EU airports would have to pay carbon charges for any flights that land or take off in the EU. As a result, most affected airlines and carriers have passed these charges onto their clients. This does not seem a sound strategy to convince consumers to be on the side of climate mitigation policies.

Often, the burden falls to consumers and the inclusion of aviation in the EU ETS is a good example. This policy was meant to apply to EU and non-EU airlines (subject to a potential exemption), to passenger and cargo flights, to flights between EU airports, and between EU and non-EU airports for the entire length of the incoming or outgoing flight. However, there is a moratorium on the inclusion of aviation in the EU ETS until the fall of 2013. Those against the EU policy argue that carriers should only be charged for the portion of the flight within the EU airspace, and not for the entire flight. The EU has insisted that including only EU airlines will not be effective, as the resulting GHG emissions reduction may well be offset by a growth in GHG emissions by non-EU airlines. There are currently serious shortcomings to the inclusion of aviation in the EU ETS. Since Switzerland is not yet a member of the EU ETS, one way for airlines to minimize their financial duties imposed by the aviation Directive is for out-of-the-EU flights to land in Switzerland (or any other non-EU airport near the EU) and, from there, to their final EU destination. For instance, a flight that originally would have flown from Kennedy airport in New York to Frankfurt would have an incentive to change its route so that it would land in Zurich and, from there, to its final EU destination in Frankfurt. It is surprising that the legislator did not contemplate the case of Swiss airports in the Directive, because allowing flights to land in Switzerland, whose final destination is somewhere in the EU near Switzerland, defeats the environmental goal of reducing CO2 emissions.

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