Climate governance through trade: Potential, pitfalls and power asymmetries

Reported by Abdulwahab Alshallal, CSaP Policy Intern 

Climate governance through trade: potential, pitfalls and power asymmetries

Dr Caroline Bertram, Carlsberg Postdoctoral Fellow at the Department of Land Economy at the University of Cambridge, discussed her research on the utility of climate provisions in preferential trade agreements with CSaP Policy Fellows.

For decades, trade has been a cornerstone of global economic growth, connecting markets and fostering prosperity. Yet, its environmental footprint, particularly its contribution to greenhouse gas emissions, has prompted a re-evaluation of how trade policies can serve as tools for climate governance. During her talk, Dr. Bertram explored the potential for trade policy to advance climate action, focusing on bilateral trade agreements as levers to promote sustainability. Despite the looming 2030 deadline for the Sustainable Development Goals (SDGs), progress has lagged with only 17% of the 169 SDG sub-targets on track.

Dr. Bertram’s primary focus is on bilateral free trade agreements or ‘preferential trade agreements’, particularly their Trade and Sustainable Development (TSD) chapters, which embed commitments like the effective implementation of the Paris Agreement. Since their introduction in the 2009 EU-South Korea agreement, the EU has frequently included TSD chapters in its trade deals, covering labour rights, social protections, and environmental goals. These chapters establish institutional frameworks for implementation, including civil society Domestic Advisory Groups and governmental TSD committees. Dr. Bertram highlighted why preferential trade agreements are promising: their smaller number of participants and broader scope make it easier to reach solutions to the benefit of all parties. TSD chapters also encourage compliance dispute settlement mechanisms modelled on the WTO’s procedures. Since the 2019 EU-Japan agreement, the EU has included commitments to ‘effectively implement' the Paris Agreement with increasing enforceability, particularly since the UK-EU Trade and Cooperation Agreement.

Enforcement remains a challenge

The inclusion of the Paris Agreement in trade agreements addresses several requirements for global climate governance: membership, procedural shortcomings, ambition, and implementation. Locking in membership via trade agreements may deter countries from withdrawing from the Paris Agreement. Procedurally, they reinforce obligations to submit climate action plans on time, a commitment many countries, including from the EU, have failed to meet as only 73 of 190 countries had submitted updated plans by May 2025. These binding requirements also partially address the ambition gap, where current climate plans fall short of the 1.5°C to 2°C Paris targets, and the implementation gap, where countries fail to deliver on promised actions, though their vague wording limits enforceability.

Enforcement remains a critical challenge. TSD chapters employ a dispute settlement process involving government consultations, expert panels, implementation phases, and compliance reviews. Dr. Bertram noted two additional enforcement pathways: the Paris Agreement as an ‘essential element clause’, allowing for severe measures like trade agreement suspension in cases of material breaches, and its linkage to sanctions in specific agreements. For the first time, the 2024 EU-New Zealand agreement enumerated sanctions for non-compliance in this area. However, the high legal threshold for invoking these measures, requiring actions that ‘materially defeat’ the Paris Agreement’s purpose, makes their use unlikely. Compared to the UNFCCC’s limited enforcement tools, trade agreements offer a more adversarial framework, though critics argue that the absence of sanctions in most TSD chapters weakens their impact.

Opportunities, limitations and structural constraints

Power asymmetries in trade negotiations and implementation further complicate the picture. The EU divides trade partners into two categories: ‘In-group’ countries (e.g. Canada, UK) with shared sustainability values, engaging them in mutual learning, and ‘out-group’ countries (e.g. Indonesia, Vietnam), treated as norm-takers through compliance-focused roadmaps. However, partners like New Zealand and Chile have successfully pushed issues like fossil fuel subsidies onto the EU’s agenda. This interplay raises questions about whether TSD chapters foster a genuine community of sustainable practices or reinforce existing hierarchies.

Dr. Bertram’s work underscores the potential for trade policy to bolster climate action, but also highlights pitfalls, vague commitments, enforcement limitations, and power imbalances. In the follow-up discussion, policy fellows questioned how developing countries can adopt shortcuts to sustainability. For example, can trade agreements overemphasise small emitters at the expense of major polluters like India and China? Dr. Bertram emphasised the EU’s strategic use of economic leverage to embed TSD chapters and advocated for a longer-term perspective, prioritising ambitious climate goals over short-term economic gains. As the 2030 SDG deadline approaches, trade policy remains a critical, if imperfect, tool to align economic and environmental imperatives, demanding careful calibration to maximise impact.

Photo from Ian Taylor via Unsplash