Carbon pricing and international trade

Although different instruments can be used to mitigate climate change, carbon pricing has attracted increasing attention. This chapter explores the role of carbon pricing in reducing greenhouse gas emissions and its implication on international trade and trade policies. Carbon pricing puts a price on carbon emissions, which can motivate firms and individuals to make more climate-friendly investing and purchasing decisions. While the proliferation of carbon pricing schemes highlights the urgency to tackle climate change, they may lead to an unnecessary complex patchwork of domestic and regional schemes. Greater international cooperation is essential to find common solutions to carbon pricing, and the WTO remains an appropriate forum to contribute to these efforts.