Trade and Climate Change: State of Play

TRADE AND CLIMATE CHANGE: STATE OF PLAY. A discussion paper prepared for the NZIBF by Adrian Macey, June 2022.

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Update: NZ-EU FTA

The NZ-EU FTA has been finalised.  Article X.6 of the  trade and sustainable development chapter is on trade and climate change.

New Zealand and the EU are committed to “effectively implement the UNFCCC and the Paris Agreement, including commitments with regard to Nationally Determined Contributions.”  It should be noted that the contents of NDCs such as targets are not binding, so legally they are not ‘commitments’, and this language does not change their status.

A late addition by the EU creates a broad obligation “to refrain from any action or omission which materially defeats the object and purpose of the Paris Agreement.”

While in theory this could lead all the way to dispute settlement, it is better understood as political language, to reassure EU domestic interests that there is recourse against ‘free riding’ by a trading partner. It will work in the other direction too of course. The language is so vague it’s impossible to imagine it being invoked successfully except in a case of a flagrant breach of the Paris Agreement, affecting competition, such as the complete abandonment of domestic emissions reduction measures or carbon pricing.