New Zealand is leading a new trade agreement which aims to remove tariffs on environmental goods in an effort to encourage climate-friendly trade.

Prime Minister Jacinda Ardern announced the agreement at the United Nations alongside partners Fiji, Norway, Iceland and Costa Rica. 

The agreement also seeks to eliminate fossil fuel subsidies and introduce "voluntary guidelines for eco-labelling programmes and mechanisms".

"Trade can't sit outside of our work to tackle climate change," said Ardern. "In fact international trade rules are uniquely placed to be part of the solution by removing trade barriers for green products and services and stopping pollution being subsidised.

"If trade rules can require subsidies to be removed from things like agriculture, then it is only consistent that they also require subsidies to come off polluting fossil fuels.

• Mood of the boardroom: How business rates the Government
• Donald Trump tweets about 'wonderful' meeting with Jacinda Ardern
• No media allowed at Ardern's talk with Trump
• Prime Minister Jacinda Ardern snubbed from Donald Trump Twitter video

"Globally, we are subsidising fossil fuel production and consumption to the tune of over US$500 billion a year. This is the height of policy incoherence on an issue where we can't afford to carry on the mistakes of the past."

She said despite commitments from G20 nations - the world's biggest economies - there has been "dangerously little action occurring".

"Legally enforceable trade rules would change that," said Ardern, who has been in New York attending meetings with world leaders and the United Nations General Assembly.

"Equally we can use trade rules to incentivise environmentally good products and services by the immediate removal of tariffs from them. For example, wind turbine parts and solar panels attract tariffs, despite being good for the environment.

 "We are starting with a small group of like-minded countries that will produce an agreement that can be then used as blueprint for wider change."

Negotiations on the agreement - dubbed the Agreement on Climate Change, Trade and Sustainability - will begin in February 2020. 

"Our hope is that these kinds of initiatives, beginning first with a small group of countries, and then with an expanding membership, will create the momentum to eventually lead to multilateral solutions - our shared overarching goal," said Ardern