With both trade and climate talks at a near standstill, the European Union is pushing for trans-Atlantic cooperation to liberalize the movement of goods and services that will help prevent climate change, according to Denmark's trade minister.

"I do not see any real alternative. If we are to combat climate change efficiently, the global society must find a constructive way forward in green trade liberalization," said Danish Minister for Trade Pia Olsen-Dyhr at a Brookings Institution event last week.

The United States and European Union have refrained from creating bilateral deals for fear of destabilizing the Doha Round of global trade talks launched by the World Trade Organization (WTO) in 2001. But the rise of emerging economies like China and India has nonetheless put the talks into gridlock as parties struggle to share responsibilities.

With negotiations at an impasse, the time is ripe to build a comprehensive trade agreement between the United States and European Union with a strong emphasis on "green" goods and services like solar panels and wind turbines, said Olsen-Dyhr.

"The E.U. must have a strong green component in every trade agreement made with partners around the world," said Olsen-Dyhr, underscoring the necessity to address climate change. "In particular with the U.S., such a component could have a significant bearing on sustainability and job creation in our two economies."

But a bilateral trans-Atlantic agreement would also have to ensure it does not negatively affect developing nations or limit other parties from participating, said the minister.

"Let me stress, that an agreement between the E.U. and U.S. should not be a replacement for a broader multilateral trade framework that also includes developing countries," she added. "Rather, I see the launch of an E.U.-U.S. negotiation as an icebreaker for a new momentum in multilateral negotiations."

Trade in 'climate-friendly' items

A rapidly changing economic environment and the onset of climate change make the need for a "green trade" agreement particularly urgent.

The growth in all forms of trade around the world has spurred an increase in carbon dioxide emissions. But if the exchange of renewable energy-related products were cheaper, production would increase and make it easier for countries to meet and perhaps even exceed their emissions reduction goals.

Gatherings of the Conference of Parties to the U.N. Framework Convention on Climate Change have been very slow in setting targets to address climate change, said Olsen-Dyhr. Trade presents a parallel track in which to address the issue, she said.

But while almost all governments agree that trade liberalization in clean energy areas is a good thing, almost all of them are distorting trade by heavily subsidizing their renewable energy products.

Direct subsidies on export goods are prohibited under WTO regulations, said Jennifer Hillman, senior trans-Atlantic fellow at the German Marshall Fund of the United States. But one way to address this issue would be to allow subsidies that specifically help meet a country's environmental goals.

A comprehensive bilateral agreement on green trade would also benefit from a list of climate-friendly items that could traded freely, said Hillman. But determining which items belong on that list and are not simply propping up one country's economy has already proved difficult in earlier WTO negotiations.

Agenda topic for Rio+20

The upcoming U.N. Conference on Sustainable Development, known as Rio+20, could offer an important platform to discuss the role of trade in promoting green growth.

The declaration from the first Earth Summit in Rio de Janeiro in 1992 included a clause stating that trade policy measures for environmental purposes should not be discriminatory or place any restrictions on international trade. Rio+20 could build on that achievement.

"Like the 1992 Rio Declaration, this conference could develop principles that frame how trade could be supportive of climate change issues," said Joshua Meltzer, global economy and development fellow at the Brookings Institution.

Olsen-Dyhr said she fears the Rio+20 agenda may be too broad to see much progress and asserted she is keen to see an E.U.-U.S. free trade agreement that removes barriers on the exchange of climate-friendly products.

Countries are already locked in a fierce competition to be the world leader in the production of sustainable goods and services, she said. So, she asked, if the European Union and United States don't set the global standards in green trade, who will?