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- Cross-border commerce and better integrated economies will play a crucial role in the global fight to combat climate change.
- Developing countries need access to supply chains for green-tech solutions, and trade in Environmentally Preferable Product (EPPs)
- Developing countries must be included in the dialogue to negotiate trade regulations for a low-carbon world.
Trade can sometimes get a bad reputation because it conjures up images where goods are crisscrossing the globe via land, water, or air. This contributes to transport emissions. New evidenceOn The intersection of trade and climate changeIt is clear that trade plays a significant role in creating more inclusive, resilient, and sustainable economies.
Trade is the access to green solutions to problems in remote areas
Ann is a Kenyan farm workerShe was struggling to irrigate her fields. A few years ago, she switched from solar-powered irrigation water pump designs to irrigate her fields. Futurepump. Futurepump, a British company, builds water pumps that are environmentally friendly in India. They also field test them in Nepal and Kenya and then sell them to smallholder farmers in Africa and Asia. This switch has allowed her halved her monthly expenses and eliminated her need to use polluting diesel pumps.
Her example is a great example of how trade promotes environmentally friendly goods and services that reduce emissions and improve environmental management. These climate-friendly products are now valued at over $1 trillion. It has also spurred demand for a range of environmental service providers who equip people like Ann with the skills necessary to do business in environmentally-conscious ways.
Trade can have multiple impacts on our fight against climate change
Image: World Bank
The importance of trade in developing economies’ climate change adaptation plans
The impact of climate change on countries’ ability to produce and export is severe. Agriculture-dependent nations are extremely vulnerable to weather patterns and need green-tech solutions to adapt.
Crop yieldsThe population of regions near the Equator has fallen while those in dry-land areas of Africa, Asia, and South America are more vulnerable to food insecurity. Madagascar is sufferingDue to the double shock of crop loss and the Covid-19 recessive, there was famine throughout the nation’s southern regions.
These countries need to adapt to climate change. Global trade systems can provide access to new technologies which can help increase their economic resilience.
A seat at the green tables
It is crucial that trade policies are transparent and predictable during a crisis. Imports are essential for immediate recovery when food and medicines are scarce. Trade measures should not hinder but aid crisis response.
Many countries and companies are becoming more concerned about sustainability in the supply chain. Currently, in many countries, tariffs on goods with a high carbon content are mostly lower than those on “cleaner” goods.
Removing this preference for imports of carbon-intensive “dirty” goods is an easy way to create cleaner supply chains and reduce carbon emissions. Trade can be made more efficient by ensuring that production is moved to regions with lower carbon footprints, if the appropriate environmental policies are in place. This will improve competitiveness and promote greener solutions in the supply chain.
As the world moves to lower-carbon growth, developing countries will reap the benefits of new economic opportunities. Developing countries often hold a natural advantage in producing Environmentally Preferable Products (EPPs) – regular products made more cleanly. These products are subject to high tariffs. The opportunity to liberalize EPP trade between developing and least developed countries is huge, especially for agricultural products.
Another area of growth is the creation of a proper infrastructure for carbon tracking. Calculating carbon footprints is more difficult in developing countries, where there are limited data and digitalization is still in its infancy.
To reap the benefits of multilateral trade negotiations, developing countries must be represented at the table. These negotiations should be focused on EPP tariffs as well environmental goods like solar panels, which have a specific environmental goal. They should also discuss non-tariff barriers that affect these goods as well as regulations regarding trade in climate-responsive goods and services. They can ensure that their interests will be considered by contributing to the rules governing environmental commerce.
Chance to create a more inclusive and greener global economy
As we enter the third year after the pandemic, we need to imagine the world we want for the future. Climate change is causing extreme weather that can disrupt transport, logistics, digital infrastructure, and more. It also damages capital stock and export capabilities, as well as agricultural land, disrupting food security and reducing capital stock.
This has serious consequences for our long term development goals. Already, this has severely affected the progress made in development over the past 20 years. Despite all this, inequality is increasing.
While trade can be a significant part of addressing these many issues, business-as usual approaches will not suffice. These are critical issues. Global cooperation is now more important than ever.
We can ‘reset’ trade to being a green, resilient and inclusive development mechanism, actively promoting climate-ready solutions to vulnerable economies. Trade must be made work for all, so that developing nations can thrive and adapt in a low-carbon future.
Visit the website to learn more about trade and climate change. World Bank’s dedicated Trade and Climate Change research Section.
