COP 30: Key issues on trade and climate agenda

As the world gears up for COP30 in Belém, a new storyline is emerging at the intersection of climate and trade. From border carbon adjustments to deforestation-free import rules, governments are using trade tools to advance their climate goals—and to protect domestic industries from unfair competition. However, these same measures are sparking debate: Can they drive genuine emissions cuts without exacerbating global divides? And how can countries ensure they remain fair, transparent, and cooperative? 

Why talk about trade when we talk about climate mitigation?

Because climate mitigation doesn’t happen in isolation—it happens in an economy that trades. Every measure to cut emissions, from carbon pricing to green subsidies, affects competitiveness, production patterns, and international markets. Trade is the channel through which climate policies in one country ripple across borders, changing who produces what, where, and with what carbon footprint.

If trade policy ignores these effects, climate action risks becoming fragmented—some countries move ahead, others fall behind, and emissions simply shift rather than decline. But if trade and climate are considered together, that friction can be transformed into alignment: trade rules can help disseminate clean technologies, scale up green industries, and ensure that climate ambition is not penalized but rewarded.

The goal is to manage the global transition, not just national emissions, ensuring that as the world decarbonizes, the rules of commerce evolve to support that shift.

What is a border carbon adjustment or carbon border mechanism, and why are they attracting attention now?

A border carbon adjustment (BCA), or carbon border adjustment mechanism (CBAM) charges a carbon price on imports equivalent to what would have been paid if they were produced domestically. It aims to curb carbon leakage, where production shifts to countries with weaker climate rules. Studies suggest that for every 100 tonnes of CO₂ cut domestically, 13–25 tonnes may reappear elsewhere. Attention is rising as the European Union’s (EU’s) CBAM starts its definitive phase in 2026, followed by one in the United Kingdom in 2027. Norway is expected to align around the same time, with Iceland, Chinese Taipei, Canada, Australia, and the United States exploring similar measures.

What are the main design challenges and trade-offs when constructing a BCA?

Designing a BCA is complex. The first challenge is administrative: BCAs require product-level emissions data, unlike most carbon pricing systems, which focus on installations. Flexibility through default values or exemptions for small operators can reduce this burden. Another trade-off concerns product scope: including more downstream products could further prevent leakage but greatly increases complexity. Finally, as BCAs multiply worldwide, ensuring interoperability across systems and harmonized reporting will be crucial to avoid a patchwork of incompatible procedures.

How effective can a BCA be in reducing emissions globally? What are its limitations?

No full-scale BCA has been implemented yet, so evidence remains limited. Modelling by the ifo Institute suggests that, in the EU, a comprehensive CBAM could reduce carbon leakage from 22% to about 7%, preserving domestic climate ambition. Yet its direct global impact will be modest, as it covers only about 0.3% of global emissions. Still, BCAs can influence others indirectly, since carbon prices already paid in exporting countries are deducted from BCA liabilities, creating incentives for partners to introduce their own carbon pricing.

What are the risks or criticisms against BCAs, especially from emerging or developing economies?

A key criticism of BCAs is their possible clash with the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC), which recognizes that countries have different historical responsibilities for emissions and varying capacities to mitigate current ones. Because BCAs typically apply uniform treatment to all trading partners, they can appear unfair and risk deepening divides when cooperation is most needed. To bridge this gap, BCAs could integrate the interests of developing countries by offering targeted flexibilities, supporting broader decarbonization efforts, and facilitating compliance.

How should a BCA be phased or scaled to minimize harm and enhance acceptability?

Transition periods are key. The EU CBAM’s initial phase (2023–2025) required importers to report emissions without payment, giving industries time to adapt. The United Kingdom, by contrast, plans no such phase-in, which has prompted criticism from industry stakeholders. Extending flexibilities—such as longer timelines or simplified procedures for small and medium-sized enterprises in developing countries—could improve fairness and acceptance.

What other trade tools do governments use when introducing green policies?

Countries are deploying a range of trade-related instruments to green their economies. Green subsidies and incentives are reshaping global value chains by promoting domestic production of low-carbon goods, from batteries and wind turbines to clean hydrogen. Product standards and sustainability certifications set conditions for market access, making trade a channel for climate ambition. Public procurement is another lever, as governments increasingly demand low-emission materials for infrastructure projects. 

Not all of these measures have the same impact on trading partners, and some have generated substantial concerns about fairness and implementability.

Forests and land use are a focal topic for COP 30. How can trade measures help curb deforestation and support climate goals?

Trade can drive deforestation, especially when global demand for forest-risk commodities fuels agricultural expansion. Soy, palm oil, beef, cocoa, coffee, and timber are prime examples. When commodity production expands unsustainably to meet export demand, forests disappear. Ignoring trade’s role risks undermining global forest conservation efforts and the broader climate agenda.

But trade can also preserve forests. Linking market access to sustainability criteria can create incentives for more sustainable practices and encourage companies to invest in deforestation-free supply chains. 

In short, aligning trade with forest protection is essential to achieving global climate and biodiversity objectives.

What kinds of trade or regulatory tools are being proposed or used to tackle deforestation through trade?

Approaches fall into three categories: public-led, private-led, and public–private approaches.

Public-led measures include domestic regulations such as the European Union Deforestation Regulation, which prohibits imports linked to deforestation, and international-level commitments, such as the provisions on forest conservation in free trade agreements. The European Union Deforestation Regulation operates as a market access regulation, prohibiting the import or export of products that cannot be verified as deforestation-free.

Private-led initiatives include voluntary sustainability standards like the Rainforest Alliance, Forest Stewardship Council, and Roundtable on Sustainable Palm Oil, which set verifiable environmental and social requirements for producers and traders. Numerous companies have also made corporate commitments to eliminate deforestation from their supply chains.

Lastly, public–private partnerships such as the Cocoa and Forests Initiative in West Africa, combine both approaches, promoting sustainable sourcing and restoration.

Together, these tools form a growing ecosystem of measures linking trade and forest conservation.

How do you ensure such deforestation-related trade measures do not inadvertently penalize smallholders or marginalized producers?

Deforestation-related trade measures risk excluding smallholders, who often lack the resources, technology, or institutional support needed to meet strict market requirements. Because small farmers produce much of the world’s forest-risk commodities, their inclusion is vital.

Governments and companies can support this by providing training, finance, and access to traceability tools. Investing in data systems and monitoring infrastructure can enhance transparency across supply chains. At the same time, promoting agroforestry and diversified livelihoods can make forest-friendly practices more viable.

Fair and inclusive implementation is key—trade measures can protect forests only if responsibility is shared across the value chain.

At COP 30, what key “asks” should the trade and climate community push for?

COP 30 presents an opportunity to align trade and climate agendas. The priority should be ensuring that trade policy becomes a lever for climate ambition, not a loophole or a source of new divides. Three broad asks stand out.

First, countries should be open to greater transparency and dialogue on climate-related trade measures—including BCAs, green subsidies, and deforestation-free import rules. Without open information and cooperation, these policies risk fragmenting markets and triggering disputes.

Second, the community should push for supportive mechanisms for developing countries—financial, technical, and institutional—to help them shape, as well as adapt to, evolving trade requirements. Climate change, and the economic tools to tackle it, are a collective responsibility in which everyone has a stake. 

Third, trade and climate communities should explore cooperative frameworks that harmonize standards and reduce regulatory friction. Trade and climate measures should help businesses and societies everywhere decarbonize: climate ambition cannot be credible if it deepens inequities.