Publication

ALLIANCE FOR CLEAN TRADE

A low-emissions trade deal to help the United States, the European Union, and their allies harmonize approaches to the clean energy transition and incentivize China and other nations to reduce emissions.

EXECUTIVE SUMMARY

After many years of discord and false starts, the United States, the European Union, and most other major developed economies are implementing ambitious domestic greenhouse gas emissions reduction programs. U.S. and EU emissions, respectively the world’s secondlargest and third-largest flows of carbon dioxide into the atmosphere, are likely to continue to fall sharply as a result.

But their efforts won’t be enough. To avert a disastrous rise in global temperatures, the larger, necessary goal is to reduce global emissions. For this, however, China — whose emissions are now greater annually than the U.S., EU, and all other developed countries combined — must reduce its emissions, and so must other major middle-income emitting countries. So far, that isn’t happening.

Here’s a program that can help: An Alliance for Clean Trade (ACT) that minimizes climate and trade policy conflict among low-emissions economies including the U.S. and EU, accelerates the reduction of emissions in some of their major industrial sectors, and creates strong economic incentives for others, including eventually China, to reduce their own emissions.

The core idea is for the U.S. and EU, joined by other G7 countries and eventually OECD nations, to set emissions standards for high-carbon industries, and impose a fee applying to both local production and imported goods with emissions rates above an agreed emissions intensity standard. This would help them meet their emissions goals, avoid counterproductive rivalries and imposition of trade penalties on one another, and give China and large emitting, middle-income countries incentives to do the same.

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