Post-Brexit, UK Trade Must Work for Climate Goals

08/07/2016 15:03 | Updated 08 July 2016

Following the UK's decision to leave the EU, one of the most important things on the agenda is the renegotiation of our trade relationships with the rest of the world. There is mounting evidence that current trade rules are a significant barrier to achieving climate change goals. Brexit provides the UK with an opportunity to change this.

It is now widely accepted that transitioning away from a dependence on fossil fuels and towards renewable energy sources is critical to reducing CO2 emissions. As a new Trade Justice Movement report shows, trade and investment rules cover a significant proportion of activity in the energy sector but do much to prevent a transition to renewable energy. For example, under World Trade Organisation (WTO) rules, countries have challenged programmes to promote the use of renewable energy. Governments including Canada, India, the US, China, Italy and Greece have all been challenged. In contrast, and despite both strict WTO restrictions on subsidies and international commitments to phase them out, not one challenge has been brought against fossil fuel subsidies.

Probably the biggest threat comes in the form of the investment protection provisions that are included in many of the world's trade and investment agreements. These provisions allow companies to sue states if a policy or its implementation negatively impacts on the profitability of their investment. For example, under the North American Free Trade Agreement (NAFTA) TransCanada are suing the US in response to the denial of a permit for the Keystone XL oil pipeline. When President Obama denied the Presidential permit, one of the reasons he gave was that the pipeline was at odds with US climate goals. Despite this and the fact that not one centimetre of pipeline has been laid, TransCanada are able to use the provisions to seek US$15 billion in compensation.

The UK has around 100 of its own Bilateral Investment Treaties (BITs), which contain the similar investment provisions to those found in NAFTA. It is also a member of the Energy Charter Treaty (ECT) - the number one treaty for investment disputes. In all of these areas there are opportunities to make the rules work for climate goals. Our BITs are seriously out of date, pre-date UK climate legislation and say nothing about investor obligations in respect of climate change. These could be scrapped and a new approach designed to support climate goals. A new version of the Energy Charter Treaty (the International Energy Charter) is under negotiation. As part of these negotiations, the UK could insist that the deal's primary objective is to support the transition away from fossil fuels.

Beyond its existing treaties, the UK will have to establish new trade relations with the EU and the rest of the world. There are some basic things that the UK could do now to ensure our these relations support climate goals. It could commit to ensuring that trade rules are subordinate to climate agreements. This would mean for example that investors would not be able to challenge measures taken to meet CO2 reduction targets or to transition to renewable energy production. It could ensure that trade negotiations are democratic and transparent, so that those with expertise on trade and climate change would be able to scrutinise the likely implications of deals for climate goals.

Perhaps predictably, the early indications are that climate change will not be high on the agenda of the new trade negotiations. Instead, both business and government are scrambling to 'cut red tape' in order to 'make the UK more competitive' - often code for getting rid many of the rules and regulations that help achieve climate and other important goals. If we want to invent a climate-friendly future for trade, we need to make our voices heard now - saving the battle for another day will be too late.