OVERVIEW
A quarter of global greenhouse gas emissions are embedded in goods that are traded internationally. Yet the current trade system hinders climate progress by failing to reward ambitious investments in decarbonization by prioritizing least-cost, often high-emitting goods. If we are to succeed in addressing this global challenge, we must leverage global trade tools and pursue cooperation with climate-ambitious trading partners. Doing so has the potential to substantially lower global emissions, create worldwide incentives for cleaner manufacturing, and encourage all countries to do their part.
Why It Matters
The environmental opportunity
A quarter of global emissions are embodied in goods traded internationally. But currently, there are no trade policies in effect that reward cleaner production. Correcting this omission offers enormous environmental upside. For example, if all U.S. imports were as carbon efficient as what we make at home, we would lower consumption-related emissions by 600 million tons—more than 10%. And with the right policies in place, there can be a clear economic reward—domestically and abroad— for driving emissions ever lower.
The competitiveness opportunity
The global economy is 80% more carbon-intensive than the U.S. economy, on average. U.S. businesses and workers in sectors across the economy are already among the most efficient in the world. And yet, we have no policies in place to reward cleaner firms or encourage more ambitious climate policies globally. Assessing a carbon import fee at our border would level the playing field and benefit more carbon-efficient firms. Partnering with other climate-ambitious partners to do the same will create new, growing markets abroad for the most efficient, often U.S.-made products. Climate policy can drive a manufacturing resurgence, if designed appropriately.
The geopolitical opportunity
A global economy that favors lower-carbon goods would benefit the economies and firms most effectively addressing the climate challenge. It will also strengthen the market and geopolitical position of those doing the most to address climate change. Too often, authoritarian countries use their positions as major global suppliers of strategic resources to advance geopolitical interests that clash with our own. They also tend to be among the most carbon-intensive economies. Climate-aligned trade policy can diminish the competitive and strategic position of economies that use exports to exact international leverage.
The opportunity for international cooperation
Countries representing more than half of the global consumer economy are independently considering policies to align climate and trade interests. By collaborating on climate and trade policies, climate leaders can introduce a powerful new signal to the international system, build closer trade ties among aligned markets, and incentivize companies globally to compete for an ever-growing portion of global market share based on lowering carbon emissions.