Adopting a global carbon pricing scheme could help countries streamline supply chains and mitigate concerns about competition, according to the head of the World Trade Organization (WTO).
“A shared global carbon-pricing framework would best provide certainty for businesses and predictability for developing countries,” WTO Director-General Ngozi Okonjo-Iweala said Thursday evening at the World Economic Forum’s annual meeting in Davos, Switzerland.
Today there are at least 70 different — and “fragmented” — carbon pricing setups around the world, according to Okonjo-Iweala.
That inconsistency ultimately hampers the decarbonization of trade and supply chains, the World Economic Forum stated following Okonjo-Iweala’s address.
As a result, the WTO has begun working with the World Bank, the Organization for Economic Co-operation and Development and the International Monetary Fund to streamline carbon pricing, Okonjo-Iweala confirmed.
In addition to expressing her support for shared global carbon pricing framework, Okonjo-Iweala also called for the elimination of “skewed” import tariffs that plague national borders today.
Such tariffs, she explained, favor high-carbon imports over those whose production have generated fewer emissions.
“Because of countries’ widespread tendency to impose higher tariffs on relatively clean finished goods, but lower tariffs on often more-polluting inputs and intermediates, trade policy skews in favor of dirtier products,” Okonjo-Iweala said.
This discrepancy has resulted in what Okonjo-Iweala described as “an implicit subsidy” for carbon dioxide production — equivalent to between $550 billion and $800 billion per year.
Eradicating this bias, she added, could decrease global carbon emissions by 3.6 percent while increasing global income by 0.65 percent.
Okonjo-Iweala said she has been calling upon WTO members to bolster efforts “to liberalize trade and environmental good and services, bearing in mind all the sensitivities of developing countries.”
Decarbonization of global trade and supply chains must occur in a way that is “leaving no one behind,” Okonjo-Iweala said.
Developing countries, she explained, will need to obtain both “the capacity and infrastructure to demonstrate the low carbon content of their goods.”
“Some have export baskets that are currently tilted heavily towards high carbon goods,” Okonjo-Iweala said.
At the same time, however, she identified an opportunity for developing countries “to leapfrog” past environmentally harmful stages of development.
Okonjo-Iweala emphasized the need for the scale-up and “diffusion of the green technologies that are necessary to ensure sustainable growth.”
“Trade is the missing piece of the climate puzzle,” she added. “Trade is part of the solution.”