- Efforts to make supply chains more sustainable are held back by rules that are not well adapted to circular business models.
- Easing the flow of environmental goods and services will be critical in the coming years.
- The WTO should ensure that there is alignment between trade rules and climate change goals.
There is a vital need for countries to intensify environmental and climate action. Existing climate policies set us on a path to global warming of about 3˚C above pre-industrial levels. Human action threatens the extinction of one million plant and animal species, compromising food security and livelihoods. Plastics and other forms of pollution are destroying land and water resources around the world.
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Business, civil society and governments have recognized the need for policies that incentivize sustainable development. Correspondingly, it can no longer be a choice, but rather an imperative for countries to make trade strategies a central part of the solution to the environmental challenges we face. Yet the World Trade Organization (WTO) has yet to commit to a robust environmental agenda.
The business community is committed to sustainable development. We believe that tackling climate change, reducing waste, and improving environmental stewardship in global supply chains is not only good for the planet, but good for business.
That is why over 3,500 representatives from all 50 US states, have supported the We are Still In declaration – a pledge that many Americans will continue to pursue the goals of the Paris Agreement to reduce emissions and stem the causes of climate change. It is also why leading businesses have developed ambitious goals related to climate and nature, such as the pledge to halt nature loss by 2030 under the auspices of the World Economic Forum Nature Action Agenda.
Walmart and many leading brands are also Core Partners of the Ellen MacArthur Foundation’s New Plastics Economy, an initiative which brings together key stakeholders to rethink and redesign the future of plastics. Beginning with plastic packaging, the Core Partners will work towards helping to build a circular economy where plastic would never become waste.
Many governments have recognized that climate change and environmental degradation pose an existential threat and are regulating with a view to combating the challenge. For example, the EU’s Green Deal includes a pledge to move to a clean, circular economy, restore biodiversity and cut pollution. The EU has also announced plans for a legislative initiative to require businesses to conduct due diligence on the environmental impacts of their global supply chains. Similar initiatives are being pursued elsewhere around the world. For example, the UK government has proposed legislation aimed at preventing commodities related to illegal deforestation from coming onto the UK market.
Some stakeholders note that efforts to “green” value chains are being held back by trade rules that are not well adapted to sustainable, circular business models. Experts have also cautioned that a lack of harmonization of green regulatory frameworks could lead to new non-tariff barriers to trade, intensifying existing North-South tensions over market access and subsidies, or give rise to trade disputes.
What actions can governments take, including at the WTO, to address these concerns? Here are five ideas:
1. Complete the fisheries subsidies negotiations
Governments must reach a deal to end harmful fisheries subsidies this year. Although one-third of the world’s fish stocks are over-exploited, an estimated $22 billion in public spending each year supports overfishing, with devastating impacts on ocean ecosystems. It is incumbent on trade policymakers to show they can collaborate to protect the oceans and for the WTO to show that it can act to promote sustainability.
2. Facilitate environmental goods and services trade, build circular economies
Easing the flow of environmental goods and services around the world will be critical in the coming years. High tariffs on clean-energy goods, for instance, add costs to sustainable development. Services trade restrictions also increase project costs in environmental areas.
To address these issues, governments should pledge to eliminate tariffs on more sustainable goods, including those related to renewable energy, energy efficiency, plastic waste disposal, materials recycling, air pollution control, etc. This could be done unilaterally or among a group of willing countries, picking up negotiations in this area that faltered back in 2016. Governments should also undertake commitments on environmental services and agree on definitions to avoid ambiguity on the scope of obligations.
Governments should also engage with industry and other experts to implement solutions to boost circular economy practices. Other areas of international governance, such as the Basel Convention on Transboundary Movements of Hazardous Wastes, play a vital role in stopping waste dumping. A focus on risky trade should be supported with measures that facilitate responsible materials flows for re-use, repair, and recycling. Paper-based procedures and complex classifications can make achieving circular plastics or circular electronics more complex than is necessary.
What is a circular economy?
The global population is expected to reach close to 9 billion people by 2030 – inclusive of 3 billion new middle-class consumers.This places unprecedented pressure on natural resources to meet future consumer demand.
A circular economy is an industrial system that is restorative or regenerative by intention and design. It replaces the end-of-life concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals and aims for the elimination of waste through the superior design of materials, products, systems and business models.
Nothing that is made in a circular economy becomes waste, moving away from our current linear ‘take-make-dispose’ economy. The circular economy’s potential for innovation, job creation and economic development is huge: estimates indicate a trillion-dollar opportunity.
The World Economic Forum has collaborated with the Ellen MacArthur Foundation for a number of years to accelerate the Circular Economy transition through Project MainStream - a CEO-led initiative that helps to scale business driven circular economy innovations.
Join our project, part of the World Economic Forum’s Shaping the Future of Environment and Natural Resource Security System Initiative, by contacting us to become a member or partner.
3. Report, reduce and eliminate fossil fuel subsidies
Governments should engage in WTO discussions on reforming inefficient fossil fuel subsidies. G20 governments committed as far back as 2009 to limit and phase out inefficient fossil fuel subsidies that encourage wasteful consumption. A WTO initiative would bolster transparency and reporting of these subsidies.
4. Promote alignment of trade rules and climate change goals
The WTO should ensure that there is alignment between trade rules and climate change goals. If implemented, carbon pricing regimes and border carbon adjustments should be consistent with international trade rules. Excessive administrative burdens, particularly for small and medium-sized enterprises, should be avoided.
5. Enhance collaboration
Governments should also work to increase cooperation between the trade, environment, and climate change policy spheres to identify opportunities for win-win outcomes. In doing so, attention needs to be given to developing country needs and the commitment to a just transition for vulnerable workers.
The WTO has a vital role to play to align and reinforce business, NGO, and government objectives related to sustainable development. Global trade has lifted millions out of poverty and accelerated innovation. Efforts must now be made to ensure that international trade and international trade rules facilitate progress towards sustainability and environmental protection, alongside continued growth.