This chapter examines the points at which climate and climate policy intersect with the international trade system. The issue of trade and environment dates to the 1972 United Nations Conference on the Human Environment (Stockholm Conference), and the publication in the same year by the OECD of its “Guiding Principles” concerning the international economic aspects of environmental policies. At that time, the principal concerns were the effects of environmental regulations on trade: the competitive impact of differences among countries in pollution abatement stringency; the use of environmentally related product standards as covert trade barriers; and the appropriate use of trade measures to induce or coerce trade partners into altering their environmental practices. Subsequently, an additional concern was added – the effects of international trade on the environment, and more specifically for us, the effects of trade on global warming. All of these concerns are very much with us today in the debate on trade and global warming policy.

This chapter starts with the more recent issue first – the effect of trade and trade liberalization on climate change. It then takes up the important and controversial issue of the impact of global warming policies on international competitiveness, and the related carbon leakage question. The following section examines carbon labeling, “food miles,” and related issues. The final sections consider permit trading and the so-called Dutch disease, as well as the manipulation of international trade in emissions permits.