Integrating Climate and Trade Strategies: A Method-Driven Approach to Policy Alignment

Summary

• Policymakers face a crossroads of megatrends, including a revived focus on industrial policy, weaponisation of trade, and climate goals that are perceived to be increasingly challenging.

• Export Credit Agencies (ECAs) and export-import banks (EXIMs) play a bridging role in aligning climate ambition and economic competitiveness, ensuring that export policies support both sustainability and growth.

• Aligning domestic climate policies with export policies potentially allows advancement of climate goals while addressing economic growth goals and punitive trade policies.

• We develop a set of metrics to assess whether domestic climate policy and export climate policy are aligned, and apply this to rank 19 countries with the largest ECAs, complementing our analysis with case studies of best practice.

• Our metrics for ‘good’ domestic climate policy are: comprehensive target setting, policy alignment with targets (quantity, breadth and ambition), and quantitative climate protection performance.

• For ‘good’ export climate policy, we measure: comprehensive target setting for ECAs, policy/ strategy alignment between export promotion and climate action, ECA financial instruments and incentives, and the share of climate-positive financing in ECA portfolios.

• Our analysis suggests that strong ECA action begins with credible domestic climate policies. The strongest alignments appear in countries which have combined exclusionary fossil fuel f inance policies with renewables promotion policies, suggesting that a ‘carrot and stick’ approach can turn around rankings despite high historical emissions.