World Resources Institute WRI

The bottom line on international trade & climate policy

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Courtesy of World Resources Institute WRI

By encouraging clean technology deployment and imposing new costs on commonly traded commodities, climate policy would have significant impacts on international trade flows. This document answers basic questions about climate policy and its implications for the international trade of goods.

How will climate policy impact American trade competitiveness?

Over the coming decade, countries around the world will adopt a variety of climate policies to impose costs for greenhouse gas (GHG) emissions. Since these policies will vary in form and stringency, the costs they impose on manufacturers will not be uniform across all nations.

Although a global patchwork of climate policies could disadvantage specific American industries, policy leadership would provide the U.S. economy with an early signal for rising fossil fuel costs and supply constraints, potentially improving future competitiveness of domestic industries. A global, carbon-constrained future will demand a shift to low-carbon energy technologies and business models. Past experience in renewable energy and efficient vehicle technologies has seen companies profit from strong regulatory environments at home to build competitive advantage abroad. Uncertain domestic policy will not serve companies well in the medium to long term, as other countries will build markets for low-carbon products and services. Such concerns have led many major companies to call for strong mandatory U.S. climate policy.

Nevertheless, specific industries in countries likely to experience relatively higher compliance costs are concerned that they will be placed at a disadvantage to competitors in countries with relatively lower compliance costs. They argue that aggressive climate policy could contribute significantly to factors that lead to the “offshoring” of jobs and relocation of industry to countries with lower standards and production costs.

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