Editing IPCC:AR6/WGIII/Chapter-14 (section)

=== Box 14.2 | Border Carbon Adjustments and International Climate and Trade Cooperation ===

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Analyses of the WTO compatibility of BCAs ( [[#Ismer--2007|Ismer and Neuhoff 2007]] ; [[#Tamiotti--2011|Tamiotti 2011]] ; [[#Hillman--2013|Hillman 2013]] ; [[#Pauwelyn--2013|Pauwelyn 2013]] ; [[#Holzer--2014|Holzer 2014]] ; [[#Trachtman--2017|Trachtman 2017]] ; [[#Cosbey--2019|Cosbey et al. 2019]] ; [[#Mehling--2019|Mehling et al. 2019]] ; [[#Porterfield--2019|Porterfield 2019]] ) gained new currency following the legislative proposal to introduce a ‘carbon border adjustment mechanism’ in the EU ( [[#European%20Commission--2021|European Commission 2021]] ). BCAs can in principle be designed and implemented in accordance with international trade law, but the details matter ( [[#Tamiotti--2009|Tamiotti et al. 2009]] ). To increase the likelihood that a BCA will be compatible with international trade law, studies suggest that it would need to: have a clear environmental rationale (i.e., reduce carbon leakage); apply to imports and exclude exports; consider the actual carbon intensity of foreign producers; account for the mitigation efforts by other countries; and provide for fairness and due process in its design and implementation ( [[#Pauwelyn--2013|Pauwelyn 2013]] ; [[#Trachtman--2017|Trachtman 2017]] ; [[#Cosbey--2019|Cosbey et al. 2019]] ; [[#Mehling--2019|Mehling et al. 2019]] ).

BCAs may also raise concerns regarding their consistency with international climate change agreements ( [[#Hertel--2011|Hertel 2011]] ; [[#Davidson%20Ladly--2012|Davidson Ladly 2012]] ; [[#Ravikumar--2020|Ravikumar 2020]] ). To mitigate these concerns, BCAs could include special provisions (e.g., exemptions) for LDCs, or channel revenues from the BCA to developing countries to support low-carbon and climate-resilient development ( [[#Grubb--2011|Grubb 2011]] ; [[#Springmann--2013|Springmann 2013]] ; [[#Mehling--2019|Mehling et al. 2019]] ). Moreover, international dialogue on principles and best practices guiding BCAs could help to ensure that such measures do not hinder international cooperation on climate change and trade ( [[#Bernasconi-Osterwalder--2021|Bernasconi-Osterwalder and Cosbey 2021]] ).

Other regulatory measures may also target the GHG emissions associated with the production of goods ( [[#Dobson--2018|Dobson 2018]] ). These measures include bans on carbon-intensive materials, emissions standards for the production process of imported goods, and carbon footprint labels ( [[#Kloeckner--2012|Kloeckner 2012]] ; [[#Holzer--2020|Holzer and Lim 2020]] ; [[#Gerres--2021|Gerres et al. 2021]] ). The compatibility of such measures with trade agreements remains subject to debate. While non-discriminatory measures targeting the emissions from a product itself (e.g., fuel efficiency standards for cars) are more likely to be allowed than measures targeting the production process of a good ( [[#Green--2005|Green 2005]] ), some studies suggest that differentiation between products based on their production process may be compatible with WTO rules ( [[#Benoit--2011|Benoit 2011]] ; [[#McAusland--2015|McAusland and Najjar 2015]] ). ( [[#Mayr--2020|Mayr et al. 2020]] ) find that sustainability standards targeting the emissions from indirect land use change associated with the production of biofuels may be inconsistent with the TBT Agreement. Importantly, trade rules express a strong preference for the international harmonisation of standards over unilateral measures ( [[#Delimatsis--2016|Delimatsis 2016]] ).

Renewable energy support measures may be at odds with the ASCM, the GATT, and the WTO Agreement on Trade-Related Investment Measures. In WTO disputes, measures adopted in Canada, India, and the United States to support clean energy generation were found to be inconsistent with WTO law due to the use of discriminatory local content requirements, such as the requirement to use domestically produced goods in the production of renewable energy ( [[#Cosbey--2014|Cosbey and Mavroidis 2014]] ; [[#Kulovesi--2014|Kulovesi 2014]] ; [[#Lewis--2014|Lewis 2014]] ; [[#Wu--2014|Wu and Salzman 2014]] ; [[#Charnovitz--2015|Charnovitz and Fischer 2015]] ; [[#Shadikhodjaev--2015|Shadikhodjaev 2015]] ; [[#Espa--2018|Espa and Marín Durán 2018]] ).

Some measures may both lower trade barriers and potentially bring about GHG emissions reductions. An example is the liberalisation of trade in environmental goods ( [[#Hu--2020|Hu et al. 2020]] ). In 2012, the Asia-Pacific Economic Cooperation economies agreed to reduce tariffs for a list of 54 environmental goods (including, for example, solar cells; but excluding, for example, biofuels or batteries for electric vehicles). However, negotiations on an Environmental Goods Agreement under the WTO stalled in 2016 due in part to disagreement over which goods to include ( [[#de%20Melo--2020|de Melo and Solleder 2020]] ). Another example is fossil fuel subsidy reform, which may reduce GHG emissions ( [[#Jewell--2018|Jewell et al. 2018]] ; [[#Chepeliev--2020|Chepeliev and van der Mensbrugghe 2020]] ; [[#Erickson--2020|Erickson et al. 2020]] ) and lower trade distortions ( [[#Burniaux--2011|Burniaux et al. 2011]] ; [[#Moerenhout--2020|Moerenhout and Irschlinger 2020]] ). However, fossil fuel subsidies have largely remained unchallenged before the WTO due to legal and political hurdles ( [[#Asmelash--2015|Asmelash 2015]] ; [[#De%20Bièvre--2017|De Bièvre et al. 2017]] ; [[#Meyer--2017|Meyer 2017]] ; [[#Steenblik--2018|Steenblik et al. 2018]] ; [[#Verkuijl--2019|Verkuijl et al. 2019]] ).

With limited progress in the multilateral trading system, some studies suggest that regional FTAs hold potential for strengthening climate governance. In some cases, climate-related provisions in such FTAs can go beyond provisions in the Kyoto Protocol and Paris Agreement, addressing for instance cooperation on carbon markets or electric vehicles ( [[#Gehring--2013|Gehring et al. 2013]] ; [[#van%20Asselt--2017|van Asselt 2017]] ; [[#Morin--2018|Morin and Jinnah 2018]] ; [[#Gehring--2020|Gehring and Morison 2020]] ). However, [[#Morin--2018|Morin and Jinnah (2018)]] find that these provisions are at times vaguely formulated, not subject to third-party dispute settlement, and without sanctions or remedy in case of violations. Moreover, such provisions are not widely used in FTAs, and they are not adopted by the largest GHG emitters. For instance, the 2019 United States–Mexico–Canada Agreement, NAFTA’s successor, does not include any specific provisions on climate change, although it could implement cooperative mitigation actions through its Commission for Environmental Cooperation ( [[#Laurens--2019|Laurens et al. 2019]] ).

A trend in international economic governance has been the adoption of ‘mega-regional’ trade agreements involving nations responsible for a substantial share of world trade, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the EU-Canada Comprehensive Economic and Trade Agreement (CETA), and the Regional Comprehensive Economic Partnership (RCEP) in East Asia. Given the size of the markets covered by these agreements, they hold potential to diffuse climate mitigation standards ( [[#Meltzer--2013|Meltzer 2013]] ; [[#Holzer--2015|Holzer and Cottier 2015]] ). While CETA includes climate-related provisions and Parties have made a broad commitment to implement the Paris Agreement ( [[#Laurens--2019|Laurens et al. 2019]] ), and the CPTPP includes provisions promoting cooperation on clean energy and low-emissions technologies, the RCEP does not include specific provisions on climate change.

Studies have discussed various options to minimise conflicts, and strengthen the role of trade agreements in climate action, although the mitigation benefits and distributional effects of these options have yet to be assessed. Some options require multilateral action, including: (i) the amendment of WTO agreements to accommodate climate action; (ii) the adoption of a ‘climate waiver’ that temporarily relieves WTO members from their obligations; (iii) a ‘peace clause’ through which members commit to refraining from challenging each other’s measures; (iv) an ‘authoritative interpretation’ by WTO members of ambiguous WTO provisions; (v) improved transparency of the climate impacts of trade measures; (vi) the inclusion of climate expertise in WTO disputes; and (vii) intensified institutional coordination between the WTO and UNFCCC ( [[#Hufbauer--2009|Hufbauer et al. 2009]] ; [[#Epps--2010|Epps and Green 2010]] ; [[#Bacchus--2016|Bacchus 2016]] ; [[#Droege--2017|Droege et al. 2017]] ; [[#Das--2019|Das et al. 2019]] ). In addition, issue-specific suggestions have been put forward, such as reinstating an exception for environmentally-motivated subsidies under the ASCM ( [[#Horlick--2017|Horlick and Clarke 2017]] ).

Options can also be pursued at the plurilateral and regional levels. Several studies suggest that climate clubs ( [[#14.2.2|Section 14.2.2]] ) could employ trade measures, such as lower tariffs for climate-related goods and services, or BCAs, to attract club members ( [[#Nordhaus--2015|Nordhaus 2015]] ; [[#Brewer--2016|Brewer et al. 2016]] ; [[#Keohane--2017|Keohane et al. 2017]] ; [[#Stua--2017a|Stua 2017a]] ; [[#Banks--2020|Banks and Fitzgerald 2020]] ). Another option is to negotiate a new agreement addressing both climate change and trade. Negotiations between six countries (Costa Rica, Fiji, Iceland, New Zealand, Norway, Switzerland) were launched in 2019 on a new Agreement on Climate Change, Trade and Sustainability (ACCTS), which, if successfully concluded, would liberalise trade in environmental goods and services, create new rules to remove fossil fuel subsidies, and develop guidelines for voluntary eco-labels ( [[#Steenblik--2019|Steenblik and Droege 2019]] ). At the regional level, countries could further opt for the inclusion of climate provisions in the (re)negotiation of FTAs ( [[#Morin--2018|Morin and Jinnah 2018]] ; [[#Yamaguchi--2020|Yamaguchi 2020]] ). Moreover, the conduct of climate impact assessments of FTAs could help identify options to achieve both climate and trade objectives ( [[#Porterfield--2017|Porterfield et al. 2017]] ). In their assessment of the feasibility of various options for reform, [[#Das--2019|Das et al. (2019)]] find that the near-term feasibility of options that require consensus at the multilateral level (notably amendments of WTO agreements) is low. By contrast, options involving a smaller number of Parties, as well as options that can be implemented by WTO members on a voluntary basis, face fewer constraints.

For international investment agreements, various other suggestions have been put forward to accommodate climate change concerns. These include incorporating climate change through ongoing reform processes, such as reform of investor-state dispute settlement under the UN Commission on International Trade Law; modernisation of the Energy Charter Treaty; the (re)negotiation of international investment agreements; and the adoption of a specific treaty to promote investment in climate action ( [[#Brauch--2019|Brauch et al. 2019]] ; [[#Tienhaara--2020|Tienhaara and Cotula 2020]] ; [[#Yamaguchi--2020|Yamaguchi 2020]] ; [[#Cima--2021|Cima 2021]] ).

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==== 14.5.1.4 South-South cooperation ====

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South-South cooperation (SSC) and triangular cooperation (TrC) are bold, innovative, and rapidly developing means of strengthening cooperation for the achievement of the SDGs ( [[#FAO--2018|FAO 2018]] ). SSC is gaining momentum in achieving sustainable development and climate actions in developing countries ( [[#UN--2017b|UN 2017b]] ). Through SSC, countries are able to map their capacity needs and knowledge gaps and find sustainable, cost-effective, long-lasting and economically viable solutions ( [[#FAO--2019|FAO 2019]] ). In the UN Climate Change Engagement Strategy 2017 ( [[#UNOSSC--2017|UNOSSC 2017]] ), South-South Cooperation Action Plan is identified as a substantive pillar to support.

In 2019, the role of South-South and triangular cooperation was further highlighted with the BAPA+40 Outcome document ( [[#UN--2019|UN 2019]] ), noting outstanding contributions to alleviating global inequality, promoting sustainable development and climate actions, promoting gender equality and enriching multilateral mechanisms. Furthermore, the role of triangular cooperation was explicitly recognised in the document reflecting its increasingly relevant role in the implementation of the SDGs ( [[#UN--2019|UN 2019]] ).

There has been a recent resurgence of South-South cooperation ( [[#Gray--2016|Gray and Gills 2016]] ). The South-South Cooperation Action Plan was adopted by the UN as a substantive pillar to support the implementation of the UN Climate Change Engagement Strategy 2017 ( [[#UNOSSC--2017|UNOSSC 2017]] ). [[#Liu--2017a|Liu et al. (2017a)]] explored prospects for South–South cooperation for large‐scale ecological restoration, which is an important solution to mitigate climate change. Emphasis is given to experience and expertise sharing, co-financing, and co-development of new knowledge and know‐how for more effective policy and practice worldwide, especially in developing and newly industrialised countries.

[[#Janus--2014|Janus et al. (2014)]] explore evolving development cooperation and its future governance architecture based on The Global Partnership for Effective Development Cooperation and The United Nations Development Cooperation Forum. Drawing on evidence from the hydropower, solar and wind energy industry in China, [[#Urban--2018|Urban (2018)]] introduces the concept of ‘geographies of technology transfer and cooperation’ and challenges the North–South technology transfer and cooperation paradigm for low-carbon innovation and climate change mitigation. While North–South technology transfer and cooperation (NSTT) for low-carbon energy technology has been implemented for decades, South–South technology transfer and cooperation (SSTT) and South–North technology transfer and cooperation (SNTT) have only recently emerged. [[#Kirchherr--2018|Kirchherr and]] [[#Urban--2018|Urban (2018)]] provide a meta-synthesis of the scholarly writings on NSTT, SSTT and SNTT from the past 30 years. The discussion focuses on core drivers and inhibitors of technology transfer and cooperation, outcomes as well as outcome determinants. A case study of transfer of low‐carbon energy innovation and its opportunities and barriers, based on the first large Chinese‐funded and Chinese‐built dam in Cambodia is presented by [[#Hensengerth--2017|Hensengerth (2017)]] .

[[#Hensengerth--2017|Hensengerth (2017)]] explores the role that technology transfer/cooperation from Europe played in shaping firm-level wind energy technologies in China and India and discusses the recent technology cooperation between the Chinese, Indian, and European wind firms. The research finds that firm-level technology transfer/cooperation shaped the leading wind energy technologies in China and to a lesser extent in India. Thus, the technology cooperation between China, India, and Europe has become multi-faceted and increasingly Southern-led.

[[#Rampa--2012|Rampa et al. (2012)]] focus on the manner in which African states understand and approach new opportunities for cooperation with emerging powers, especially China, India and Brazil, including the crucial issue of whether they seek joint development initiatives with both traditional partners and emerging powers. [[#UN--2018|UN (2018)]] presents and analyses case studies of SSTT in Asia and Pacific and Latin America and Caribbean regions. Illustrative case studies on TrC can be consulted in [[#Shimoda--2012|Shimoda and Nakazawa (2012)]] , and specific cases on biofuel SSC and TrC in [[#UNCTAD--2012|UNCTAD (2012)]] .

The central argument in the majority of these case studies is that South–South cooperation, which is value-neutral, is contributing to sustainable development and capacity building ( [[#Rampa--2012|Rampa et al. 2012]] ; [[#Shimoda--2012|Shimoda and Nakazawa 2012]] ; [[#UN--2018|UN 2018]] ). An important new development in SSC is that in relation to some technologies the cooperation is increasingly led by Southern countries (for instance, wind energy between Europe, India and China), challenging the classical North–South technology cooperation paradigm. More broadly, Parties should ensure the sustainability of cooperation, rather than focusing on short-term goals ( [[#Eyben--2013|Eyben 2013]] ). The Belt and Road Initiative (BRI) is a classic example of a recent SSC initiative led by China. According to a joint study by Tsinghua University and Vivid Economics, the 126 countries in the BRI region, excluding China, currently account for about 28% of global GHG emissions, but this proportion may increase to around 66% by 2050 if the carbon intensity of these economies only decreases slowly (according to historical patterns shown by developing countries). In this context it is important to highlight that China has already outlined a vision for a green BRI, and recently increased its commitment through the Green Investment Principles initiative, announcing a new international coalition to improve sustainability and promote green infrastructure ( [[#Jun--2019|Jun and Zadek 2019]] ).

Information on triangular cooperation is more readily available than on South–South cooperation though some UN organisations such as UNDP and FAO have established platforms for the latter which also include climate projects. Further, although there are many South–South cooperation initiatives involving the development and transfer of climate technologies, the understanding of the motivations, approaches and designs is limited and not easily accessible. There is no dedicated platform for South–South and triangular cooperation on climate technologies. Hence, it is still too early to fully assess the achievements in the field of climate action ( [[#UNFCCC%20and%20UNOSSC--2018|UNFCCC and UNOSSC 2018]] ). In order to maximise its unique contribution to Agenda 2030, Southern providers recognise the benefits of measuring and monitoring South–South cooperation, and there is a clear demand for better information from partner countries. [[#Di%20Ciommo--2017|Di Ciommo (2017)]] argues that ‘better data could support monitoring and evaluation, improve effectiveness, explore synergies with other resources, and ensure accountability’ to a diverse set of stakeholders. [[#Besharati--2017|Besharati et al. (2017)]] present a framework of 20 indicators, organised in five dimensions, that researchers and policymakers can use to access the quality and effectiveness of SSC and its contribution to sustainable development.

The global landscape of development cooperation has changed dramatically in recent years, with countries of the South engaging in collaborative learning models to share innovative, adaptable and cost-efficient solutions to their development and socio-economic-environmental challenges, ranging from poverty and education to climate change. The proliferation of new actors and cross-regional modalities has enriched the understanding and practice of development cooperation and generated important changes in the global development architecture towards a more inclusive, effective, and horizontal development agenda. South–South cooperation will grow in the future, while it is complimentary to North–South cooperation. However, there are knowledge gaps in relation to the precise volume, impact, effectiveness and quality of development cooperation from emerging development partners. This gap needs to be plugged, and evidence on such cooperation strengthened.

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