Unilateralism in trade calls for a new approach to build a green future

*By Stefania Relva, Ryan Mulholland and Luísa Bianchet

**The views expressed in this piece are those of the authors alone and do not necessarily reflect the views of the INETTT Secretariat or the wider INETTT membership.

The latest United Nations climate conference, COP30, made clear that cooperation between like-minded countries is still possible. Big ideas like phasing out fossil fuels can galvanise policy-makers around the world. 

But the climate talks, hosted by Brazil in Belém, also highlighted the limits of consensus-based decision making in a world defined by geopolitical rivalries, rising economic nationalism and the current United States administration’s disengagement from traditional forms of international cooperation. 

No issue demonstrated this more clearly than trade, where unilateral measures became a key sticking point. 

Climate and trade policy are usually treated as separate disciplines, handled by governments through different ministries with divergent approaches. The unhelpful and unnecessary climate-trade divide is often evident in academic and civil society circles as well. COP30 marked an important turning point, with trade featuring in almost every major conversation in Belém. 

Negotiators grappled with how trade policy can incentivise climate action and facilitate – or conversely, hinder – the deployment of clean energy technologies and the decarbonisation of heavy industries. 

Many policy instruments are available to align climate and trade objectives, including tariff reductions on environmental goods, green public procurement standards and coordinated investment frameworks. Of particular concern, however, was the European Union’s carbon border adjustment mechanism (CBAM). For months beforehand, developing country negotiators had raised concerns that the EU was using the CBAM to advance a protective industrial policy dressed up as climate action. 

The EU’s carbon pricing and border tax mechanism generated intense criticism from the Global South. Firstly, it offers no exceptions based on lower levels of economic development. Nor does it redirect the revenue it generates for the EU budget to international climate objectives or additional climate finance. 

Several delegates warned that the CBAM would shift adjustment costs onto developing economies with fewer historical emissions and more limited fiscal capacities, while constraining the export competitiveness of countries like Brazil, South Africa and other emerging markets. In short, it could hinder cooperation rather than drive positive climate action.

The EU’s counter arguments – that the CBAM is designed to prevent carbon leakage; that domestic suppliers in EU countries are also charged for emissions; and that trade issues belong at the World Trade Organization (WTO) – largely fell flat with the Global South. 

Beyond concerns about implementation and certification rules, the emissions reductions impact of the CBAM outside of Europe is marginal at best. Even within Europe, the associated emissions reductions are likely less than what would be possible with an open, plurilateral approach to climate and trade policy. 

International trade cooperation, as facilitated by the WTO, has also simply not advanced fast enough to address the accelerating climate crisis. Furthermore, the dispute settlement process at the WTO has been broken for a decade, raising doubts about how the organisation could help address CBAM-related concerns. 

But the CBAM was far from the only example of unilateralism on the minds of COP delegates. The US administration’s unprecedented country-specific tariffs and China’s planned export controls on rare earth minerals could also place Brazil, South Africa and other developing countries at a disadvantage in global trade. It is also impossible to ignore the persistent failure by the world’s wealthiest countries to deliver on earlier climate finance and economic development commitments, many of which would have made the production of low-carbon products, that could have benefited from policies like the EU’s CBAM, more prevalent. 

COP30 marked a turning point

After several attempts to put unilateral trade measures on the agenda at previous COPs, the “global mutirão” in Belém recognised the need to address climate-related trade issues. Delegates opted to hold three dialogues on climate and trade policy in Bonn, Germany, in 2026, 2027 and 2028 and reaffirmed that climate measures, “including unilateral ones”, should not become arbitrary or discriminatory trade restrictions. 

In short, Brazil and other Global South countries succeeded in creating new mechanisms – like the Belém Declaration on Global Green Industrialisation – that could help align climate and trade policy in the future. Of course, while politically significant, these outcomes are voluntary commitments rather than negotiated, binding text. So they represent a “coalition of the willing” approach rather than a consensus-based multilateral obligation. It is not a guarantee of progress, but an opportunity – one Brazil and others should seize.

To be clear, the EU deserves credit for using trade policy to incentivise and reward climate action, particularly in hard-to-decarbonise sectors like steel, aluminium, cement, chemicals and fertilisers. The CBAM has spurred policy changes in Türkiye and China, for example, where governments pointed to it as a driving force in pushing their domestic industries to decarbonise. Perhaps more importantly, the EU’s actions linked climate and trade policy far more directly than ever before, showing a way to hold companies engaged in international commerce accountable for negative externalities. These are all important contributions.

Yet the CBAM is far from sufficient. Nor is it the only option to align climate and trade policy. Its administrative complexities place a significant burden on developing countries. It does not account for the carbon emissions associated with upstream feedstocks like iron ore. And its focus on carbon pricing can obstruct a clear-eyed focus on carbon reductions – whether accomplished through pricing, regulation, investment, consumer demand, or corporate responsibility. 

In essence, the European CBAM requires countries outside of the EU to use the EU’s method for promoting decarbonisation (i.e., carbon pricing) rather than a model more conducive to their own local politics, traditions or culture. And, while the EU pairs its CBAM with a domestic price on carbon emissions, other proposed carbon adjustment mechanisms around the world may do less to incentivise purely domestic firms to decarbonise. 

This raises an important question: could countries work together to create an even larger market for low-carbon metals, rather each acting independently? We believe the answer is yes. 

The challenge for climate and trade negotiators is to deliver more than actions at the domestic level, to develop something more impactful for workers, the climate and the future of international engagement.

The plurilateral opportunity

That is why world leaders should embrace the timely (and important) opportunity to negotiate a new plurilateral green trade pact. An agreement open to any country that can meet firm requirements for climate action, worker empowerment and fair pricing would boost ambitions. It would show that collaborative climate action is possible, that high standards can be met and that new forms of cooperation are achievable. 

The steel and aluminium industries provide a good example of how an open plurilateral green trade pact could work. These sectors account for roughly 11% of global CO₂ emissions, meaning they need urgent modernisation to meet climate goals. And, because both sectors are greatly exposed to world trade, high-standard producers often feel the heaviest impact from carbon-intensive competition, meaning they need economic support as well. 

This is especially true in the Global South, where dumped dirty steel and aluminium not only accelerate the climate crisis, they also hold back important local economic development opportunities.

A plurilateral approach is particularly well-suited to these sectors, because the major producing and consuming countries – including Brazil, the EU, Japan, South Korea and Australia – already share concerns about unfair competition from subsidised, high-carbon producers. By creating a preferential trading zone among willing partners, such an agreement could establish a significant market for green metals while putting competitive pressure on non-participants to raise their standards.

So, what could such a green trade pact entail? 

Here are four potential pillars: 

1. Preconditions for partners to join, including a commitment to economy-wide decarbonisation, labour and human rights standards, and address overcapacity.
2. Differentiated carbon-based tariff structures that eliminate import duties on low-carbon metals imported from partners; assesses a duty on higher-carbon steel or aluminium imported from partner markets; and assigns larger duties to imports from markets outside the agreement (to encourage countries to join).
3. Clear carbon-based benchmarks to determine which imported metals qualify for zero-tariff trade – benchmarks that should grow more stringent over time to encourage ongoing investments in sustainability.
4. A coordinated investment strategy to ensure that partners decarbonise their own domestic industry in a manner that reinforces investments made by other partners in their own markets.

Beyond these four pillars, a comprehensive green trade pact should also incorporate customs facilitation and demand de-risking mechanisms. Streamlined customs procedures would reduce administrative barriers and transaction costs for green products, making it easier for developing country producers to access partner markets. Demand de-risking, meanwhile, could include guaranteed offtake agreements or advance market commitments that provide the investment certainty producers need to justify major decarbonisation expenditures. 

These complementary elements would significantly enhance the pact’s effectiveness in driving both climate action and economic development.

In countries across the Global South, a green trade pact designed along these lines would create new, potentially lucrative export opportunities for low-carbon producers – particularly if it created a guaranteed offtake mechanism for green metals produced in low- and middle-income economies. Moreover, a portion of the revenue generated from implementation of the agreement could (and should) be reinvested in sustainable development of industry in the Global South – directly benefiting places like Minas Gerais, Espírito Santo, Bahia and Pará, in Brazil. 

Yet it is not just Brazil or the Global South that would benefit. In Japan and South Korea, where domestic steel and aluminium industries are heavily export-driven, common carbon-based import duties would provide clear signposts to shape industrial decarbonisation investments going forward. In Australia, which, like Brazil, enjoys vast iron ore resources, a collaborative green trade pact would ensure strong global demand for low-carbon metals, backstopping state investments in green iron production. 

And importantly, in Europe, which is struggling to determine how to protect its local steel producers from a flood of dirty foreign-made steel after its safeguards expire, the pact would offer the opportunity to build a global trade architecture that accomplishes the goals of the CBAM without so much international angst. 

Some may question why participants would have to address overcapacity, noting that such language is often code for “ganging up” on China. The reality is that China’s subsidisation rate in the steel sector is ten times that of OECD countries, enabling it to flood world markets with its steel exports regardless of carbon content. In Brazil and elsewhere, this reduce profits in the steel and aluminium industries, limiting the availability of capital to invest in low-carbon technologies and processes, raise wages and benefits or improve working conditions. 

What is more, given the longevity of steelmaking equipment, major new investments in decarbonisation require confidence that market conditions will remain fair and viable for the foreseeable future. That is why strong, clear rules that guarantee a market for green metals, green iron, and green products more broadly are so critical. 

Clear, transparent standards for carbon accounting are a topic that climate and trade leaders need to strongly consider in the months ahead. 

Brazil positioned to lead

Brazil’s President Lula has helped move these issues forward at a time when many countries must navigate changes in the global economy, ongoing tariff threats from the US, and other geopolitical challenges. Without Lula’s credibility on economic development, industrial investment and climate issues, COP30 would never have delivered this key opportunity to shape the future of global commerce. It is an opportunity that the world needs to embrace. 

Responding to unilateralism with reinvigorated international cooperation is a worthwhile endeavour in its own right. But even more so, a green trade pact that positively rewards industrial decarbonisation, incentivises fair pricing, and strengthens labour protections provides a chance for countries disadvantaged by decades of neoliberalism to reposition themselves in sustainable global value chains. 

Brazil is currently the largest consumer market and the largest steel producer in Latin America. It is also a leading producer and exporter of iron ore, surpassed only by Australia. This means Brazil can influence the global steel industry from an upstream, mid-stream and final consumption perspective. 

But Brazilian influence would be greatly enhanced if the country led the creation of a global trading bloc providing new and advantageous export opportunities for green products. The goal should not be to simply keep out high-carbon products imported from elsewhere (although that is worthwhile), but rather to create new opportunities to export low-carbon products to places that share Brazil's ambitions on climate, workers’ rights and market competition. 

A recent report by RMI indicated that if Brazil were to capture 30% of the global green iron market by 2035, it could attract USD 16 billion in foreign investment and add over 7,000 new jobs. And if the global market for green steel and green products grew faster, the opportunity would be amplified considerably. 

Why? Because no other country has the potential to produce green steel at a lower price point. 

Brazil’s combination of enormous renewable energy resources, its strong industrial base, and its vast natural resources, including iron ore, sets it apart from others. But fully capitalising on these immense advantages requires investing in them, building additional resilience in Brazil’s electricity grid, and further decarbonising domestic steel production. It also means improving working conditions in factories across the country – and creating new global trade rules that ensure a reliable, growing market for green products. 

The Global South may lament the “unilateral” impulses associated with Europe’s CBAM, the Trump administration’s tariffs or China’s restrictions on critical mineral exports. But leaders with other visions need to offer more effective ways to reorient global production and development patterns – and not simply reinforce existing structural asymmetries.

As the climate crisis intensifies, new systems must advance the green transition for everyone.

An open plurilateral green trade pact would do just this. It is the type of renewed international cooperation the world needs now more than ever.

* Stefania Relva is director and Luísa Bianchet is analyst at E+ Energy Transition Institute; Ryan Mulholland is senior fellow at Center for American Progress.