A new trade vision for a Green New Deal

To get the just transition right, we need to defang trade and investment treaties that give polluters a veto on responsible and sustainable economic transformation.

In August, the Intergovernmental Panel on Climate Change (IPCC) warned that without huge reductions in greenhouse gas emissions, global warming will dangerously exceed 1.5 to 2 degrees celsius by the end of the century. Such a scenario would render much of the world uninhabitable due to extreme heat, drought, flooding and other catastrophic weather events.

We can avoid the worst of this possible future, but only if we find ways to rapidly decarbonize our CO2-intensive energy grids, transportation systems, manufacturing processes, and agricultural practices. It may sound like an overwhelming task but it’s a manageable one. Done right, the social and environmental benefits of this positive economic transformation will be enormous.

This is the idea behind campaigns for a Green New Deal in North America and beyond. Market-based solutions, including national or even a global price on carbon, will not get us nearly close enough to our climate targets. Climate justice activists are instead increasingly demanding that the shift to a zero-carbon economy be led by governments more than the private sector and based on improving living standards for all—not the bottom-line profits of a few.

Unfortunately, while world leaders make optimistic new commitments in Glasgow to halt and reverse deforestation and tackle methane emissions, they continue to cling to outdated international trade and investment rules that deliberately hold governments back from setting strong environmental policies, creating good jobs, and ensuring a fair distribution of wealth between workers and their bosses. 

To meet the promise of these and other Green New Deal type policies, we need to radically change the trade agenda, too.

For example, in 2009, Ontario launched a landmark Green New Deal–type energy transition with the goal of rapidly phasing out coal-powered electricity. To secure maximum social and economic benefits from this policy, the government put local content requirements on the procurement of solar, wind and other new-build renewable energy projects—a proven strategy for ensuring local benefits and public support for phasing out the province’s coal-fired power plants.

The Ontario policy succeeded in allowing coal-fired power to be eliminated in the province and attracted new investment in renewables manufacturing and installation services. Unfortunately, it also attracted a trade fight from Japan and the European Union. Both countries challenged the policy at the World Trade Organization and won. Canada was ordered to remove the “discriminatory” local content rules in the Ontario policy.

Several years later, another WTO dispute panel ruled that renewable energy policies that supported local green jobs in eight U.S. states also violated international trade rules. The case was brought by India against U.S. incentives to use local content in new renewable energy projects.

What’s significant here is not only the outcome, but also the reasons behind the dispute. India brought the case in response to an Obama administration challenge at the WTO to India’s own solar program that was decided in favor of the U.S. in 2016.

Why are countries wasting so much time and effort fighting each other’s efforts to build greener economies instead of going after corporations for evading regulations and stalling on greenhouse gas emissions cuts?

Why are trade rules being used by countries to defend the profit-seeking interests of companies instead of the sustainable development needs of all countries?

Another example of how trade and investment rules get in the way of climate action is the proliferation of investor–state disputes against dirty energy phaseouts and harmful extractive projects.

Fossil fuel companies are benefiting from free trade agreements and bilateral investment treaties (BITs) to sue governments when Green New Deal measures interfere with their profits. They can do this through a supranational arbitration system known as investor–state dispute settlement, or ISDS.

ISDS tribunals don’t care whether a government’s policy is legally enacted or legitimately designed for public interest purposes, but only if it violates an investor’s treaty rights in a free trade deal or BIT (i.e., Foreign Investment Protection Agreement, or FIPA, in Canada). Those rights include vague and unevenly adjudicated guarantees to “fair” treatment and to have one’s “legitimate expectations” (to make a profit, for example) met.

This is exactly what the U.K. firm Rockhopper is claiming in its ISDS case against Italy for that country’s decision to deny the firm an offshore drilling permit. It’s also the kind of argument the U.S. coal mining firm Westmoreland has accused in its ISDS case against the province of Alberta’s planned phaseout of coal-fired power plants. Canada’s TC Energy is demanding an eye-popping US$15 billion in compensation for the Biden administration’s cancellation of the Keystone XL pipeline.

These and many other needless, and needlessly expensive, investor–state cases are putting a “regulatory chill” on government transitions off fossil fuels.

This month, the Canadian Centre for Policy Alternatives with the Institute for Policy Studies (IPS), Institute for Agriculture and Trade Policy (IATP), and Rosa Luxemburg Stiftung–New York launched a new web resource, GreenNewTrade.org, to illustrate the trade and investment treaty threats to strong climate action—and how we can fix this situation. The site was developed to coincide with this month’s consecutive COP26 negotiations in Glasgow and the 12th WTO ministerial conference in Geneva.

Visitors to GreenNewTrade.org will learn about these and other trade and investment challenges to green transitions in the energy sector, along with newer threats to plastics management and other environmental and food security measures in new free trade deals like the USMCA. Key trade and investment disputes are mapped to show the global impact of corporate trade rules on positive environmental and just transition policies.

The website is both a resource for climate justice activists on current trade challenges to Green New Deal–type policies around the world and a call for a just trade transformation—at the World Trade Organization (WTO) and among our own countries. Our main hope in launching the site now is not just to draw attention to these threats but to show how easy it would be to diffuse them so that all countries can pursue Green New Deal–type policies that benefit everyone.

The GreenNewTrade.org project follows a webinar series that the co-signing organizations jointly held in Spring 2020, titled “With Everything Up For Grabs: The Global Green New Deals the World Needs Now.” The website builds on recommendations in the organizations’ July 2019 publication, “Beyond NAFTA 2.0. – A Trade Agenda for People and Planet.”

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