Going into this year’s UN Climate Change Conference in Dubai, more commonly known as COP28, there’s been a lot of scepticism in the media and wider public about what can realistically be achieved in the international effort to combat climate change. This sentiment has been heightened by the fact that the host nation, the United Arab Emirates (UAE), is one of the world’s largest oil producers.
“There is a lot of cynicism in general about the progress that’s being made globally towards a low carbon transition,” says the Institute of Export & International Trade’s new head of policy, Hemita Bhatti.
However, Bhatti says that COP28 will be the first COP at which there is going to be a “collective stocktake” on progress towards the Paris Agreement target of keeping warming down to 1.5 degrees Celsius above pre-industrial levels. There will be an acknowledgement that the world is currently on track for an increase of between 2.5 and 2.9 degrees Celsius.
It will also be the first COP at which there is a dedicated day to discussing where global trade fits into the picture of the low carbon transition, something which has been welcomed by organisations including the IOE&IT, World Trade Organization (WTO) and International Chamber of Commerce (ICC).
Complex situation
This dedicated focus to trade will occur against the usual COP backdrop of ambitious targets, complex policy debate and scepticism as to whether any progress will have been made when everyone meets again in 12 months’ time.
Bhatti says there are hopes that a “tripling of global renewable capacity and a doubling of energy efficiency by 2030” could be announced, yet, many countries including the US and China have “previously overlooked these commitments”.
Bhatti also notes that the complexity of coming up with climate policies that are fair and appropriate for all countries will inevitably come to the fore.
“There’s a lot of moving parts and complexities that make it difficult for different markets to reach net zero,” she says. “Policies that also consider implications on developing nations, and those with less capabilities to adopt to low carbon, need to and will be explored at this COP.”
Trade Day
International trade has traditionally been viewed as a complex issue when it comes to the move to net zero, particularly given goods have been moved around the world by typically high-emission transport methods, including freight ships and airplanes.
Bhatti, however, says that the inaugural ‘Trade Day’ at COP28 reflects an ongoing shift in dialogue whereby trade is being seen as being as much a solution as it is a challenge.
“Trade can be a part of the problem but also a key solution to reducing emissions and reaching low carbon,” she says, adding:
“International trade contributes to carbon emissions, so aligning trade policies with climate goals through global cooperation will be crucial in reducing global emissions.
“The inaugural Trade Day will explore initiatives like the Carbon Border Adjustment Mechanism (CBAM) and integrating carbon pricing, green trade agreements, renewable energy trade, environmental standards and green tech transfers.
“Trade can certainly be a force for good, helping facilitate the global transfer of green technologies, encouraging environmentally friendly trade which is vital for a sustainable transition. As technology pushes the demand for critical minerals, the impact on biodiversity will also need to be considered in trade policy.”
The UK and COP
The UK itself goes into COP against a backdrop of debate over the current prime minister Rishi Sunak’s commitment to net zero following his decision earlier in the year to delay bans on new petrol and diesel cars, while also issuing licences for new oil and gas projects in the North Sea.
Speaking at COP, Sunak argued that this debate had become "polarised by extremes and that is not good for our country". He has also claimed that the UK’s targets on reducing emissions are generally more ambitious than peer countries.
Bhatti says that Sunak’s claim of climate leadership needs to be realised through policy, however.
“Rishi Sunak has emphasised the UK as a leader in transitioning to low carbon but this needs to be translated in to greener trade policy,” she says. “This could, for example, include seeking more committal environmental provisions in the trade agreements the UK has been negotiating.”
She also says the UK could take more of a lead role at COP by seeking to “reframe the narrative on trade and the environment, to build consensus.”
UK CBAM?
In the UK trade sphere there is also a lot of speculation about whether the government might be on the verge of announcing its own CBAM, with the FT reporting that it was being considered in the planning for the chancellor’s recent Autumn Statement.
There was no announcement in the statement, but Bhatti notes that the government has been working on the development of a UK CBAM for several months.
“Earlier this year, the UK government launched a consultation on UK introducing its own CBAM,” she says. “This closed in June, and there was much speculation since in the media that the chancellor would announce the launch of a UK CBAM for 2026, which would align with the EU mechanism would take effect.
“However, while no such announcement was made, cross-departmental negotiations are still ongoing in government,” she added. “An announcement may not materialise until the Spring Budget.”