Getting in on the ACCTS: How the UK can use its independent trade policy to tackle climate change
January 2021
The UK has a unique opportunity to use its newly-independent trade policy to tackle climate change.
As a first step, the UK government should join the Agreement on Climate Change, Trade and Sustainability (ACCTS), a group of six countries committed to using trade rules to support the environment.
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One page briefing
Why Britain should join the green trade agreement
The UK should join the Agreement on Climate Change, Trade and Sustainability (ACCTS), a group of six countries committed to using trade rules to tackle climate change.
What is ACCTS?
The Agreement on Climate Change, Trade and Sustainability is an agreement featuring six countries committed to using trade policy to support action on the climate.
Those countries are currently New Zealand, Norway, Iceland, Costa Rica, Fiji and Switzerland – but it’s an open agreement, meaning that other countries will be welcome to sign up.
Why should Britain join?
Post-Brexit, the UK has greater independence and flexibility when it comes to trade policy. In 2021, the UK should use its trade policy to demonstrate leadership on the vital issue of climate change.
The climate talks taking place in Glasgow in November are vital for ensuring the effective implementation of the Paris Agreement and restricting global warming to 1.5°C. In the lead-up to the talks, the UK needs to step up and show increased ambition on climate change and trade.
ACCTS is intended to be the start of something: an agreement that begins small and aims to get an ever-increasing number of countries on board. For the UK to join ACCTS in 2021 would send a clear message to the other members of the WTO that post-Brexit Britain is a champion for environmentally-sustainable trade.
What does ACCTS include?
Liberalising trade in environmental goods and services
This means cutting tariffs on environmentally-friendly products so that they can be traded more freely and reach the countries where they are most needed. This will mean that environmental products attract investment and development. The UK already charges very low tariffs, so this will be simple to comply with.
Eliminating fossil fuel subsidies
Signatories agree to phase out fossil fuel subsidies.
The UK currently offers around £10 billion of public support to fossil fuels each year, in the form of direct subsidies and tax breaks.
The UK's approach runs counter to all the UK’s climate goals. Funding should be diverted into supporting renewables
Developing eco-labels for goods
The aim is to develop a common methodolgoy for labelling goods with information about their environmental impact
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Getting in on the ACCTS: how the UK can use its independent trade policy to tackle climate change
Summary
The UK should join the Agreement on Climate Change, Trade and Sustainability (ACCTS), a group of sixcountries committed to using trade rules to tackle climate change
By becoming a member of ACCTS, the UK would be using its newly independent trade policy to showglobal leadership on the vital issue of climate change
ACCTS membership would mean that the UK would commit to trade more freely inenvironmentally-friendly goods, as well as eliminating damaging fossil fuel subsidies
Introduction
January 2021 is a critical moment. The Brexit transition period has ended and preparations for November'svital international climate negotiations are being stepped up. At this time, the UK has a unique opportunityto enact trade policies that support climate action.
After Brexit, the UK will have greater independence and flexibility when it comes to trade policy.However, there has been little discussion of how the UK’s independent trade policy can contribute tothe greatest challenge of our age, the fight against climate change.
This is a historic moment. The climate talks taking place in Glasgow in November are vital for ensuringthe effective implementation of the Paris Agreement and restricting global warming to1.5°C. In the lead-up to the talks, the UK needs to step up and showincreased ambition on climate change and trade. The UK should take this opportunity to join the Agreement onClimate Change, Trade and Sustainability (ACCTS), a small group of countries aiming to use their tradepolicies to help tackle climate change.
Climate change and trade policy
Climate change is an existential challenge. Already, its effects are being seen in rising seas, biodiversity lossand extreme weather. Scientists are clear that keeping global warming below 1.5°C is the only way to limitirreparable damage to our planet and its species.[1] The fightagainstclimate change is closely linked to other global priorities, such as ending poverty and achieving theSustainable Development Goals. Climate change is affecting every country, but it is having the most severeimpact on the lives and livelihoods of the most vulnerable.
The rules and institutions that govern global trade play a key role in shaping the world’s response to theclimate crisis. They have been pitifully slow to reform themselves. The fundamental priority of the globaltrading system, from the World Trade Organisation (WTO) itself to the web of trade agreements between countries,is to maximise the volume and value of trade. This means that countries are incentivised to make trade easier bymaking irresponsible choices, such as cutting environmental regulations and subsidising mining and fossil fuelextraction. Additionally, trade directly contributes to global warming: freight transport associated with globaltrade accounts for more than 7% of the world’s carbon emissions.[2]
The WTO has the potential to play an important role in the battle against climate change. But it has often provedan obstacle to climate action, repeatedly failing to reform its rules and procedures. The clearest demonstrationof this comes in the fact that countries are repeatedly challenged under WTO rules for subsidising their ownrenewable energy sectors: programmes in countries including the USA, India, China and Italy have all beenchallenged through the WTO.
The UK has an opportunity to use its new trade policy, and its new seat at the WTO, to provide global leadershipon climate issues. Indeed, the Trade Secretary Liz Truss has named the environment as one of thegovernment’s three priorities within the WTO.[3]Meanwhile, COP 26,the international climate negotiations, will take place in Glasgow in November 2021. These are the mostimportant such negotiations since the Paris talks in 2015. As host and chair of COP 26, the UK government has amajor responsibility to be at the forefront of efforts to ensure that the talks are a success. It will need touse all its diplomatic resources, as well as ensuring that has its own house in order. To this end, the UKshould become part of the Agreement on Climate Change, Trade and Sustainability, a small group of countriesdeveloping commitments to ensure that trade is more sustainable, and that trade rules are used to strengthenglobal action on the climate.
What is the Agreement on Climate Change, Trade and Sustainability (ACCTS)?
ACCTS was announced in September 2019. The signatories are committed to work within WTO rules to promoteclimate-friendly policies, announcing:
“…our aim is that ACCTS will demonstrate in a concrete and substantive manner how trademeasures andtrade policy can – and must – support climate and environmental objectives and provide momentumtowards an eventual multilateral set of outcomes.”[4]
The original signatories were New Zealand, Costa Rica, Fiji, Iceland and Norway. In January 2020, Switzerlandannounced that they were also participating in the negotiations. By signing up to ACCTS, countries aredemonstrating support for the reform of trade rules to prioritise the environment – a massive shift inemphasis for the global trading system. Specifically, they are also committing to act in three different areas(see below).
ACCTS is intended to be the start of something: an agreement that exists within the structures of the WTO thataims to get an ever-increasing number of countries on board. For the UK to join ACCTS in 2021 would send a clearmessage to the other members of the WTO that post-Brexit Britain is a champion for environmentally-sustainabletrade.
What does ACCTS include?
The countries that have signed up to ACCTS have made commitments in three areas.
Liberalising trade in environmental goods and services
An obvious way in which trade policy can support global climate action is by ensuring that it is easy and cheapto trade in goods and services that have a positive impact on the environment.
This means eliminating tariffs and other barriers that might prevent these goods and services being sold wherethey are most needed. Furthermore, the easier it is to sell environmentally-friendly products around the world,the more likely it is that these will receive the investment and development that they so urgently need.
Environmental goods and services are defined as ‘activities which produce goods and services tomeasure, prevent, limit, minimise or correct environmental damage to water, air and soil, as well asproblems related to waste, noise and eco-systems.’[5]This would include bicycles, wind turbines and solarpanels. But it would also include the engineering services to maintain hydroelectric plants, or consultancyservices helping governments manage pollution and waste. The proposed cutting of tariffs on these products tozero would not just apply to trade between ACCTS signatories; it would be offered to all WTO members.
This would be a simple requirement for the UK to comply with. The post-Brexit UK Global Tariff is a furtherreduction on the EU’s generally low tariffs. The UK’s liberalising commitments when it comes toenvironmental goods and services include:
Maintaining zero-tariff access for the 67 products for which the EU had already eliminated tariffs
Removing tariffs on a further 133 product categories[6]
Committing to further liberalisation in these products would bring environmental benefits, as well as beingconsistent with the UK government’s pro-free trade approach. It would also be likely to attract supportfrom the business community, given that the UK has a comparatively developed environmental goods and servicessector which is keen to export its products (and its environmental benefits) around the world.
Eliminating fossil fuel subsidies
The burning of fossil fuels is a massive contributor to global warming. 89% of global carbon emissions are fromfossil fuels and industry.[7] Yet governments around the worldcontinue tosubsidise coal, oil and gas, pouring $500bn of public money into the production and consumption of fossil fuelsevery year.[8]
ACCTS seeks to change this by requiring signatories to phase out these subsidies. New Zealand Prime MinisterJacinda Ardern has said:
‘if trade rules can require subsidies to be removed from things likeagriculture, then it is only consistent that they also require subsidies to come off polluting fossilfuels.’[9]
The UK offers the fossil fuel industry an estimated £10 billion of public support each year, mainly throughcutting VAT on domestic fuel and electricity, and through not implementing scheduled rises in fuel duty.[10] Deciding to eliminate these fossil fuel subsidies wouldbe amassive step in the right direction for the UK – and since the price of fossil fuels has been lowthroughout 2020, now is a golden opportunity to wean ourselves off these subsidies.[11] The UK government’s ‘Green Plan’ includes measuressuch asending the sale of petrol and diesel cars within 10 years; using public money to promote non-renewable fuelswill soon begin to look severely outdated.[12] Reallocatingthesesubsidies to support renewable energy, insulation, and green technologies would multiply the positive impact,and could ensure that consumers don’t end up out of pocket.
There is some debate over the definition of ‘subsidy’: the UK government claims that providing a taxbreak to fuel consumption does not constitute a subsidy, and therefore makes the argument that the UK has nofossil fuel subsidies.[13] However, the definition used byeveryone fromthe WTO to the OECD treats tax breaks as a form of subsidy.[14] Whateverthe definition, using public money to make it cheaper to burn fossil fuels is playing fast and loose with thehealth of the planet.
Despite the clear environmental and moral incentive to do so, countries have been reluctant to remove fossil fuelsubsidies, for fear of placing their industries at a comparative disadvantage. ACCTS goes some way towardsallaying this concern by committing multiple countries – including major fossil fuel producers such asNorway – to tackling subsidies at the same time.[15]
Guidelines for voluntary eco-labelling programmes
A powerful factor in encouraging more environmentally-friendly goods is consumer choice. Under ACCTS, signatoriescommit to developing a shared methodology for calculating the environmental impact of goods and displaying it toconsumers. This could become a label that would give the public information on which to base their decisions.
The responsibility for making environmentally-friendly choices should not fall solely onto the consumer. However,research has shown that the sheer variety of ethical and environmental labels on display have created consumerconfusion and damaged the credibility of the ethical claims that brands make.[16]
Developing a clear common approach to labelling goods could be a key step towards helping consumers play a morepowerful role in the battle against climate change.
Why should the UK take action?
Climate change is an urgent global priority that is irreversibly damaging the planet. All countries must playtheir part, but the UK has a particular responsibility to take the lead. As the first country to industrialise,fueled by coal and oil, the UK’s historic emissions dwarf almost every other country – it iscalculated that the UK accounts for 4.9% of all historic carbon emissions.[17] By contrast, most African countries have contributed less than 0.01% ofthe totalfigure.
Of course, the UK has already made some impressive commitments when it comes to climate change, being the firstmajor economy to have passed laws to reach net zero by 2050. The phasing out of fossil fuel subsidies will be avital step to achieving that net zero target.
Furthermore, the approach taken by ACCTS – making climate commitments, and using diplomatic networks toencourage others to follow suit – reflects how the UK is seeking to tackle other issues, such as plasticpollution.[18] The UK has promised to use its WTOseat to “lead the defence of free, fair, rules-based international trade, pioneering a route to prosperitythat lies through working together, not protectionism.”[19]It’s time to ensure that those rules help to protect the planet.
Conclusion
In early 2020, the ACCTS countries announced that they wanted the initiative to be a “template foraction”, and that membership would be open to all countries who met the standard.[20]
The UK is a G7 economy and the host of the Glasgow climate negotiations. By applying to join the ACCTS in 2021,the UK could boost the profile of the Agreement, and help bring other countries on board. Furthermore, byeliminating both tariffs on environmental products and domestic fossil fuel subsidies, the UK would be takingsignificant and meaningful steps towards tackling climate change.
In November 2020, the UK Prime Minister Boris Johnson announced a ten point plan to “create, support andprotect hundreds of thousands of green jobs, whilst making strides towards net zero by 2050.”[21] Joining ACCTS would strengthen these commitments, andwould send aclear message about how Britain plans to use its new independent trade policy.
January 2021
ENDNOTES – all accessed 14 December 2020
[1] https://www.ipcc.ch/sr15/chapter/spm/
[2] https://www.itf-oecd.org/sites/default/files/docs/cop-pdf-06.pdf
[3] https://www.gov.uk/government/speeches/elizabeth-truss-outlines-bold-new-era-for-trade
[4] https://www.beehive.govt.nz/sites/default/files/2019-09/ACCTS%20joint%20leaders%20statement.pdf
[5] Definition from OECD: p9, https://unstats.un.org/unsd/envaccounting/ceea/archive/EPEA/EnvIndustry_Manual_for_data_collection.PDF
[6] https://www.iisd.org/articles/uk-global-tariff-new-broom
[7] https://www.clientearth.org/latest/latest-updates/stories/fossil-fuels-and-climate-change-the-facts/
[8] https://www.theguardian.com/environment/2020/jun/06/covid-19-relief-for-fossil-fuel-industries-risks-green-recovery-plans
[9] https://www.beehive.govt.nz/release/new-zealand-leading-trade-agreement-driving-action-climate-change-and-environment
[10] The average of the most recent years for which data isavailable is£10 billion: p429, https://ec.europa.eu/energy/sites/ener/files/documents/energy_prices_and_costs_-_final_report_-_annexes_v12.3.pdf
[11] https://www.iea.org/articles/low-fuel-prices-provide-a-historic-opportunity-to-phase-out-fossil-fuel-consumption-subsidies
[12] https://www.bbc.co.uk/news/science-environment-54981425
[13] https://questions-statements.parliament.uk/written-questions/detail/2019-01-23/211670
[14] The WTO’s definition of subsidy, which has beenaccepted by the164 WTO Member States including all G20 countries, includes “government revenue that is otherwise due,foregone or not collected (e.g. fiscal incentives, such as tax expenditures)”: www.wto.org/english/docs_e/legal_e/24-scm.pdf
[15] The EU has also committed to remove fossil fuel subsidiesas part ofthe European Green Deal
[16] https://www.theguardian.com/environment/2010/sep/27/ethical-food-labelling-which-survey
[17] https://ourworldindata.org/contributed-most-global-co2
[18] https://www.theguardian.com/environment/2020/nov/19/uk-to-support-plans-for-new-global-treaty-to-turn-tide-on-plastic-pollution
[19] https://www.gov.uk/government/speeches/elizabeth-truss-outlines-bold-new-era-for-trade
[20] https://www.mfat.govt.nz/en/media-and-resources/ministry-statements-and-speeches/trade-ministers-express-support-for-the-agreement-on-climate-change-trade-and-sustainability-at-the-world-economic-forum-davos-2020/
[21] https://www.gov.uk/government/news/pm-outlines-his-ten-point-plan-for-a-green-industrial-revolution-for-250000-jobs
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