By Prof. Caroline E. Foster
Professor Caroline E. Foster is based at the University of Auckland, New Zealand, and specialises in international law. She was formerly employed with the New Zealand Ministry of Foreign Affairs and Trade.
The impending Global Commodities Forum is a reminder of a core challenge presently confronting the global trade community: how to use international trade policy as a tool for climate and sustainability action? This is what the Agreement on Climate Change, Trade and Sustainability (ACCTS or the Agreement), concluded between Costa Rica, Fiji, Iceland, New Zealand and Switzerland in July 2024, is all about.[1] The ACCTS’ overall aim is to give better effect to the commitment to sustainable development reflected in the preamble to the Agreement establishing the World Trade Organisation (WTO) and help States achieve ambitious outcomes under the Paris Agreement. The Agreement is ahead of the game, reflecting the vital understanding that changing the international trade rules will be a critical pillar in making the Paris Agreement work effectively, alleviating the pollution crisis and making decent progress toward world biodiversity targets.[2]
Special Character of the ACCTS
It is clear that the Agreement is a unique and promising contribution in many ways, although the text of the ACCTS is not yet available for scrutiny at the time of writing. It is an “open plurilateral” agreement and also a dynamic or “living” agreement. The ACCTS is open and plurilateral because only a small self-selected group of countries have come together to negotiate the initial agreement, in order to make progress fast in areas where the parties can see their way clear to achieving trade and sustainability gains, yet it is open to accession by other countries should they be ready to join. It is a dynamic and living agreement in that additional substance in new areas of trade policy can be added into it over time. While the current scope of the Agreement is limited, it provides flexibility to expand its application to other areas in the future. This means that even though the Agreement addresses at present only three selected core areas, it has the potential to embrace both a wider membership and further substantive coverage over time.
These characteristics of the Agreement are a double-edged sword. They mark the Agreement’s significant potential as a trailblazer and yet its dependence for ultimate success in making further necessary gains, in membership especially. Although only Costa Rica, Fiji, Iceland, New Zealand and Switzerland were in a position to join as founding members, the UK, Canada and the EU are possible future parties. Norway may also be a contender, having been among the negotiating parties. In terms of coverage, as it stands the three core areas the ACCTS addresses are: increasing market access for environmental goods and services; reducing fossil fuel subsidies; and developing guidelines for voluntary eco-labelling schemes.
The ACCTS’ Three Core Areas
Market liberalisation in environmental goods and services couples with efforts to promote climate change mitigation and adaptation by making such goods and services more readily available and affordable, as well as incentivising investment in relevant technologies. When the Agreement enters into force, the parties will eliminate tariffs on over 300 recognised environmental goods. An environmental good is a good benefiting the environment. Examples include solar panels, wind and hydraulic turbines, electric vehicles, wool fibre, recycled paper, electric static converters, and wood products.[3] There is a special focus on “land-based” or natural renewable goods, obviously of economic interest to ACCTS parties. The ACCTS will expand concepts of what may count as environmental services beyond previous instruments as well as listing over 100 environmentally related services subsectors.[4] An environmental service is a service benefiting the environment. Examples include waste management and remediation services.
Addressing fossil fuel subsidies is arguably the most essential of the three trade policy areas the ACCTS presently addresses. This sits within the broader global need to reduce inefficiency in the energy sector and to decouple energy security from reliance on carbon technologies. We are told that the Agreement defines “fossil fuel subsidies”, and introduces specific prohibitions on these subsidies along with certain exceptions for fundamental policy goals, including for energy security and disaster resilience.
The third policy area is the ACCTS’ development of principles-based guidelines for voluntary eco-labelling mechanisms and their accompanying institutional mechanisms. Eco-labelling schemes help consumers to recognise environmentally more beneficial products by allowing accredited producers and traders to affix an eco-label to their product. Examples include eco-labels identifying the sustainable origins of fisheries products, or the energy usage of whiteware. Principles-based guidelines will help ensure that such schemes do not apply arbitrary or unfair criteria, and encourage trade in sustainable products.
Comparing the ACCTS With Regional and Bilateral Agreements
The ACCTS thus complements the more gradual, softer-edged processes underway through the commitments under the 2023 Indo Pacific Economic Framework (IPEF)’s Pillar III on a green and fair economy and more generally market-based “green regionalism”.[5] At the same time, because the ACCTS embodies deep new commitments targeted to specific action areas, it also goes beyond the important new range of hard law commitments on environmental issues in the 2018 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).[6] The CPTPP addressed liberalisation in environmental goods and services, and also a wide range of areas including marine capture fisheries, vessel source pollution, alien invasive species, trade and biodiversity, conservation and trade, and transition to a low emissions and resilient economy, as well as corporate social responsibility.
In the meantime, avant garde bilateral agreements have made important new strides into trade and sustainability. Stand-out instruments include various EU agreements, particularly the EU-New Zealand Free Trade Agreement (EU-NZ FTA),[7] with its environmental goods list, believed to be a first for the EU, though we find a longer list in the NZ-UK Free Trade Agreement (NZ-EU FTA).[8] The Australia-Singapore Green Economy Agreement also merits a mention.[9] Though only provisionally in force, the EU-Canada Comprehensive Economic and Trade Agreement (CETA) also features progressive rules in a range of areas. CETA includes chapters on regulatory cooperation, sustainable development and the environment, considering sustainable development ‘for the welfare of present and future generations’ and asserting that trade should promote sustainable development.[10] CETA seeks facilitation of trade in environmental goods and services, as well as lifecycle management of goods including carbon accounting and recycling.
Comparing the ACCTS with Developments in the WTO
The value of the ACCTS can be understood best when we consider the Agreement in the context of such broader initiatives, as well as developments in the WTO. In the WTO, trade and sustainability developments are still in their infancy. The Trade and Environmental Sustainability Structured Discussions (TESSD) have given birth to four differently composed Working Groups, each with different numbers and combinations of WTO Members.
The Working Groups deal respectively with (a) Environmental Goods and Services, (b) Subsidies, (c) Trade-related Climate Measures, and (d) the Circular Economy. The two TESSD Working Groups overlapping with the ACCTS are the Working Group on Environmental Goods and Services and potentially the Working Group on Subsidies. All four working groups will be important loci for developments on the environment-trade connection. Certainly the launch of the WTO Secretariat’s Trade Policy Tools for Climate Action at UNFCCC COP28 communicates an institutional awareness of the need for concrete action.[11] However it must be recalled that participation in the TESSD Working Groups is voluntary and not all WTO members are choosing to participate.
The Working Group on Environmental Goods and Services has been focusing initially on how to liberalise trade in goods and services that are key for the renewable energy sector, including solar, wind and hydropower. The Working Group on Subsidies deals with one of the most challenging aspects of traditional international trade policy. WTO law disciplines subsidies heavily because they are generally considered inconsistent with maintaining a level playing field for open competition and can give industries in one country a market lead over industries in another country. Yet, as an economic tool, subsidies can be used to promote environmental policies enabling trade to work for the environment.[12] Current disputes over countervailing duties on electric vehicles from China illustrate the tensions.
In parallel, certain subsidies need to be reduced and eliminated in order to protect the environment. As seen in the ACCTS, fossil fuel subsidies are a clear target, and multilateral disciplines are long overdue.[13] The sums involved are substantial. Fossil fuel subsidies were estimated by the OECD and the International Energy Agency (IEA) at a figure of USD 1,481.3 billion in 2022, doubling from 2021.[14] Given the entrenched interests in play at all levels, we can expect slow progress for a little longer on fossil fuel subsidies in the global arena. So far, attempts to address fossil fuel subsidies in the WTO have been dismally disappointing, despite longtime efforts by the WTO Members belonging to what is now the Fossil Fuel Subsidy Reform (FFSR) Initiative. Gaining transparency through increased reporting of energy subsidies will be an important first step. The 2024 WTO Ministerial Statement included an annex on planned work, including working together on roadmaps for fossil fuel subsidy elimination.[15] Some bilateral agreements address fossil fuel subsidy reform, with, for instance, stronger wording in the NZ–UK FTA and weaker language in the EU–NZ FTA. Yet, as we will see in the ACCTS, energy subsidies are a complex matter, with people around the world reliant on government interventions to help deal with energy poverty.
Thus, we can see that the ACCTS is indeed highly distinctive Progress in aligning trade and climate policy globally is still expected to be slow. The EU and New Zealand have led the way towards an inclusive Coalition of Trade Ministers on Climate manifesting a commitment to ensuring that progress is made, joined by Kenya, Ecuador and the United Kingdom. However, generating the necessary momentum on trade and sustainability in the WTO is challenging. Multilateral action will be powerful, but as an open plurilateral the ACCTS is able to achieve more, faster, among its adherents.
Putting the ACCTS into Perspective
The appearance on the scene of instruments such as the ACCTS is no accident. Government strategists’ and certain international relations’ scholarship work converges in seeing considerable promise in smaller, deeper international agreements that can be expanded over time. The ACCTS is a key initiative and it’s highly likely that it will be efficiently implemented, setting a new tone and manifesting the commitment to bring sustainability increasingly and effectively into the trade policy.
Yet globally there remains much work to be done. High quality dedicated statecraft is needed to revolutionise the world economy, and day-to-day living, in ways that will truly address the current, critical sustainability crisis. International trade law is a vital part of the fabric of international law, and only with change in international trade law can 21st century sustainability and climate challenges adequately be confronted.
As to criticism of the ACCTS, critics are not wrong when they point out that, in a carbon-based economy, trade agreements can be expected to increase trade and that increased trade and economic growth are drivers of rising greenhouse gas emissions. Neither are they wrong in highlighting the need to equip developing countries with capacities and technologies for green production, which is not a focus of the ACCTS. Further, the progress that is evident in the ACCTS has occurred because there are certain areas where trade and environmental interests coincide. For instance, the ACCTS was hailed in the New Zealand media as the agreement on wood and wool. When trade and environmental interests are in competition, as they often are, it will not be so easy to secure outcomes. Social pressure and the fuller realisation of what is at stake will play an important part, but the road is uphill and will be steep and hard for governments to climb.
However, as the transition to a global carbon economy goes forward, new areas of complementarity between trade and environmental policy can be expected to emerge. The nurturing of a circular economy is just one example: a model of production and consumption which involves reusing, repairing and recycling existing materials and products as long as possible in order to make better use of the enormous volumes of resources presently funnelled through economies and discarded. Ultimately, change will have to be transformational to turn present realities into new ways of living, and, with the vision and the will, the extent of the contribution that can be made by strategic initiatives within the international trading system is vast.
Conclusion
Governments and citizens are coming to understand the overwhelming need to develop international economic policy in ways that help address environmental and sustainability objectives. As is widely recognised, it will be important to bear in mind the many integrated aspects of sustainability that go beyond the environmental, including labour standards, economic development, and concerns including gender equality and animal welfare.[16] The ACCTS makes a valuable and timely contribution to this important agenda.
About the author:
Professor Caroline E. Foster is based at the University of Auckland, New Zealand, and specialises in international law. She was formerly employed with the New Zealand Ministry of Foreign Affairs and Trade.
[1] Foster, C.E. (2021) ‘The Agreement on Climate Change, Trade and Sustainability’ in P. Delimatsis and L. Reins (eds) Encyclopedia on Trade and Environmental Law 479-482 Edward Elgar: Cheltenham, UK/Northhampton MA USA; see also Foster, C.E. (2025), ‘Trade and Environment’ in V. Vadi and D. Collins (eds), Routledge Handbook on International Economic Law Routledge: forthcoming (open access).
[2] Kunming-Montreal Global Biodiversity Framework 2022, UN Doc CBD/COP/15/L25, available at https://www.cbd.int/article/cop15-final-text-kunming-montreal-gbf-221222
[3] Ministry of Foreign Affairs and Trade of New Zealand, “What is the Agreement on Climate Change, Trade and Sustainability (ACCTS)?” available at
[4] Idem.
[5] P. L. Hsieh, (2024) ‘Shaping Green Regionalism: New Trade Law Approaches to Environmental Sustainability’ Review of European Community and International Environmental Law’ (33) 172-182. On developments in the APEC context see also Foster, C.E. (2025).
[6] Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) 2018 UNTS 3346.
[7] New Zealand–European Union Free Trade Agreement 2023, available at https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/new-zealand/eu-new-zealand-agreement/text-agreement_en, Annex 19.
[8] New Zealand-United Kingdom Free Trade Agreement 2022, available at https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-in-force/new-zealand-united-kingdom-free-trade-agreement/resources, Annex 22A.
[9] Australia-Singapore Green Economy Agreement 2022 available at https://www.dfat.gov.au/geo/singapore/singapore-australia-green-economy-agreement#:~:text
[10] EU-Canada Comprehensive Economic and Trade Agreement (CETA) 2014, available at https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc
[11] WTO Secretariat, Trade Policy Tools for Climate Action (WTO 2023) available at https://www.wto.org/english/res_e/publications_e/publications_e.htm
[12] See R. Ismer et al (2023) ‘Supporting the Transition to Climate-Neutral Production: An Evaluation Under the Agreement on Subsidies and Countervailing Measures’ Journal of International Economic Law (26) 216-232.
[13] See A. Marhold, ‘SCM: Fossil Fuel Subsidies’ in P. Delimatsis and L. Reins (eds) Encyclopedia on Trade and Environmental Law 479-482 Edward Elgar: Cheltenham, UK/Northhampton MA USA, 347-352 at 347.
[14] ‘Cost of Support Measures for Fossil Fuels almost Doubled in 2022 in Response to Soaring Energy Prices’, 1 December 2023, available at https://www.oecd.org/newsroom/cost-of-support-measures-for-fossil-fuels-almost-doubled-in-2022-in-response-to-soaring-energy-prices.htm
[15] Ministerial Statement on Fossil Fuel Subsidies, MC13, Abu Dhabi, WT/MIN(24)/19, 26 February 2024, available at https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/MIN24/19.pdf&Open=True
[16] G. Vidigal and K. Claussen (2024) The Sustainability Revolution in International Trade Agreements Oxford: Oxford University Press. See also Villars Framework for a Sustainable Trading System 2023, available at https://remakingtradeproject.org/villars-framework
