Exploring synergies between environmental labelling and standards, and trade in environmental goods

Over the last few decades, policies to promote environmental goods and sustainable supply chains have proliferated. In the environment policy domain, this includes environmental labelling and information schemes (ELIS) and environmental sustainability standards and regulations (ESSR). In the trade policy domain, the focus has been on the liberalisation of trade in environmental goods. This paper focuses on how environmental policy and trade policy approaches to incentivising the uptake of environmental goods and sustainable supply chains compare, intersect, and can be mutually supportive.

The paper first compares environmental policy and trade policy approaches to identifying environmental goods. It finds that there are important differences including that ELIS and ESSR apply to a broader set of goods whereas environmental goods in trade agreements tend to focus on manufactured products. Moreover, trade frameworks often identify environmental goods based on end-use, while environmental policies emphasise life-cycle impacts and relative environmental performance. Environmental instruments frequently target final consumer goods and incorporate certification, monitoring, and periodic review mechanisms, whereas trade agreements often concentrate on intermediate goods and lack comparable update processes.

The paper finds that these divergences are driven less by competing objectives than by the actors, constraints, and policy goals that shape each framework. ELIS and ESSR are typically consumer-oriented instruments developed by governments, private actors, and civil society to signal environmental performance across a wide range of sectors, including agriculture, electronics, textiles, transport, and energy. They rely heavily on certifications, life-cycle assessments, and periodic reviews to reflect technological progress. Trade agreements, by contrast, are negotiated to facilitate market access and often prioritise industrial products in which countries hold comparative advantages, such as renewable energy technologies.

Technical constraints further reinforce these differences. Trade negotiators must operate within the Harmonized System (HS), which classifies goods based on physical characteristics rather than production methods. This limits the incorporation of non-product-related processes and production methods (npr-PPMs)—such as carbon footprint—despite their growing relevance for sustainability policy, as such attributes are difficult to verify at the border and may create legal uncertainty.

The report identifies pathways to strengthen complementarities between the two policy domains. These include expanding environmental goods lists through more granular HS classifications (“ex-outs”), cautiously integrating npr-PPM-based criteria where feasible, and leveraging the technical experience embedded in ELIS and ESSR, particularly in certification, auditing, and standard-setting. Ultimately, deeper regulatory cooperation, mutual recognition of conformity assessments, and greater harmonisation of standards could enhance the mutual supportiveness of trade and environmental policies while limiting trade frictions.