References to the Paris Agreement in FTAs are intended to hold trading partners to promises to reduce their fair share of GHG emissions, but they also reflect concerns that EU and US climate policies could make domestic industry less competitive unless trading partners reciprocate. Although it is not clear that carbon leakage has increased significantly to date (see Figure 2), there is concern that it could do so as the EU and the USA further increase their climate ambition, and with it their domestic carbon prices. The challenge for transatlantic trade policy-makers is to integrate trade and climate policies in a way that ensures a level playing field in both.
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