Washington, D.C. — Leading environmental organizations urged the Biden administration today to work with the European Union towards an agreement to prevent trade rules from being used to challenge each other’s current or future carbon border adjustment policies, which are fees placed on the imports of carbon-intensive goods to ensure those products are priced fairly compared with more climate-friendly products manufactured domestically. The request by the Sierra Club, Natural Resources Defense Council, Earthjustice and others came in a letter sent to President Biden as the EU’s Carbon Border Adjustment Mechanism (CBAM) takes effect this week, and also prior to a U.S.-EU Summit between President Biden, European Commission President Ursula von der Leyen and European Council President Charles Michel slated to take place at the White House on October 20.
“America’s industrial transformation can’t stop at the Inflation Reduction Act. We need trade rules that help us increase the ambition of our climate action and keep our manufacturers competitive globally. Adopting an agreement with the European Union to not use trade rules to challenge each other’s carbon border adjustment policies would do just that.” said Iliana Paul, Senior Policy Advisory at the Sierra Club.
“Recent floods in Libya, fires in Canada and extreme heat across the U.S. are all stark reminders that governments cannot afford to act timidly on climate change for fear that needed policies might not align with outdated trade rules,” said Arthur Stamoulis, Executive Director of the Trade Justice Education Fund. “The U.S. and EU have leading roles to play in ensuring that trade pacts aren’t used to undermine critical climate measures.”
The full text of the letter is as follows:
Dear President Biden,
We are encouraged by the increased bipartisan support for and movement towards a U.S. carbon border adjustment mechanism (CBAM) which is urgently needed to prevent emissions leakage and job loss to countries with lower climate and environmental standards. At the same time, we are deeply concerned to see an increasing number of countries threatening to use trade rules to challenge the European Union’s CBAM. These trade threats not only stand to weaken an important EU climate policy, but also serve as a warning sign to other countries — including the U.S. — looking to establish similar policies.
Recognizing the progress both the U.S. and EU are making towards designing and implementing much-needed CBAM policies, we call on your administration to work with the European Union towards an agreement not to use trade rules to challenge each other’s current or future CBAM policies.
With less than a decade to turn the corner on the climate crisis, we cannot afford for governments to act timidly for fear of costly trade challenges or for government policies or policy-making to be slowed or weakened due to threats or filing of trade cases. Given the complexity associated with designing a CBAM and the lack of trade jurisprudence associated with the policy, it is in the strong interest of the U.S. to work with like-minded countries on diplomatic approaches to avoid trade challenges to any future U.S. border carbon adjustment. The European Union, as a trusted ally that shares many U.S. climate goals, is an ideal partner with which to establish such an agreement. Moreover, such an approach is in line with the U.S. and India’s recent commitment to terminate outstanding trade cases, including a U.S. case challenging India’s national solar program and a case from the Indian government challenging the solar programs of eight U.S. states.
A commitment between the U.S. and the EU would be an important way for the administration to show real progress at the intersection of trade and climate. In addition, such a commitment could help set the stage towards other countries also agreeing to not challenge each others’ climate policies. Ultimately, we believe the U.S. should take leadership in pursuing a broad Climate Peace Clause — a self-enforcing commitment between nations to refrain from using dispute settlement mechanisms in international trade agreements to challenge any climate mitigation and clean energy transition measures. Agreement between the U.S. and EU not to issue trade challenges against each others’ CBAM measures offers an immediate first step towards ensuring these critical policies are able to advance unimpeded by outdated trade rules.
Thank you for your attention to this issue. We look forward to working with you to build a model of trade that supports climate action.
Sincerely,
Earthjustice
Evergreen Collaborative
Natural Resources Defense Council
Sierra Club
Trade Justice Education Fund
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For more background:
- Today’s letter calling for carbon border adjustment policies to be protected from trade attacks
- Discussion Paper: The Case for and Design of a Climate Peace Clause.
- A letter from 234 state and local environmental groups calling on the administration to pursue a “Climate Peace Clause” that would end trade disputes threatening climate initiatives around the world.
- A letter from over 150 environmental organizations urging inclusion of Climate Peace Clause in trade agreements