Last year’s Paris Agreement demonstrated the convergence of the United States and the European Union on climate change as a key issue. Greater integration of climate change into transatlantic relations should be a priority in the 21st century. The Transatlantic Trade and Investment Partnership (TTIP) presents an opportunity to take a step in this direction. Expanding trade between two of the world’s most innovative economies could be a boon in the fight against climate change. To ensure positive environmental outcomes, however, climate change must be addressed in TTIP’s regulatory provisions and not left to the market. By integrating climate protections into TTIP, the U.S. and Europe can foster green innovation, safeguard existing climate efforts, and create a more resilient trade deal in an era of growing skepticism towards globalization.
The U.S. and Europe are two of the most innovative regions in the world. Bloomberg’s innovation index ranks Germany and the U.S. as the third and sixth most innovative countries, respectively. Nine of the top twenty countries on the list are EU members. Increasing transatlantic economic activity could bolster innovation in green technologies and processes. Freer trade in environmental goods and services makes them more cost-efficient and widely available. It also increases competition among firms, creating a greater incentive for innovation. Firms would become more productive, with a greater emphasis on efficiency. In markets for goods that are dependent upon scale, such as clean technologies, this could have positive effects by driving prices downwards.
TTIP could have significant impacts on the global environment. The U.S. and the EU should ensure that it works in conjunction with climate efforts, rather than against them. The two regions account for over 45% of global GDP and 26% of global CO2 emissions. The Paris Agreement’s national pledges are still projected to fall well short of the overarching target of limiting global temperature rise to 2°C. The UN Environment Program estimates that the world must reduce projected 2030 emissions by a further 25% to achieve this goal.
Concerns about the impacts of TTIP on climate regulations must be addressed, particularly in light of international climate commitments recently made by the U.S. and the EU. The provision that has drawn perhaps the most scrutiny is the investor-state dispute settlement (ISDS) mechanism. ISDS seeks to protect investors from government overreach by providing certain rights to corporations, potentially enabling them to challenge climate change regulations. Similar rules have been used for this purpose under other treaties, including Europe’s Energy Charter Treaty and NAFTA. TTIP also runs the risk of creating barriers to clean fuel and renewable energy programs. Finally, a major EU goal in TTIP is to facilitate the import of oil and gas from the U.S., which could increase coal consumption in the U.S. and dis-incentivize renewable energy use in Europe.
An example of a solution for these regulatory risks could be an addendum that excludes climate change regulations from ISDS proceedings, and calls for review of the emissions impacts of regulatory disputes initiated under TTIP. These could fall under an overarching goal of net-negative or at least net-zero emissions.
In an era of increasing skepticism towards globalization and growing concern about climate change among the general public, proponents of free trade can no longer afford to ignore or subvert environmental concerns. Greater transparency and broader participation can facilitate an environmentally sound and politically durable agreement.
To foster a greater sense of transparency and openness, a broader base of participation should be incorporated into the TTIP process. Current public perception of the TTIP’s environmental and social impacts is largely drawn from leaked information published in the news media and interpreted by interest groups. Allowing a wider range of experts to engage in the process will foster greater legitimacy in the eyes of the public. A more robust discourse will better triangulate on the most durable and appropriate outcomes, as opposed to an agreement perceived to be made behind closed doors and influenced by special-interest lobbyists.
Technological advancements and falling renewable energy prices mean that the dichotomy between economic growth and environmental protection is breaking down. Concomitantly, the dynamics of environmental regulation in the U.S. have shifted, particularly since the beginning of President Obama’s second term. Alongside the EU, the U.S. took on a leadership role in facilitating the Paris Agreement, and has introduced or is planning major domestic measures to reduce emissions. Perhaps the hallmark of these efforts is the Clean Power Plan, which will allow states to utilize market-based policies similar to the EU Emissions Trading System to reduce power plant emissions. A durable trade agreement should work in tandem with these ambitious efforts.
Stability and prosperity are two fundamental aims of Atlanticism and its institutions. Climate change threatens these values. The U.S. and Europe can partially respond to this threat through TTIP, a trade agreement that will influence the composition and direction of the global economy for decades to come.