Sharm el-Sheikh — A key component of equitable global development and poverty reduction is dealing with the climate crisis. International trade can play a vital role in this.
Trade plays a critical role in building inclusive, resilient, and sustainable economies, and to keep global supply chains moving. However, it is being affected by extreme weather and climate events that are disrupting critical systems, raising operating costs, reducing crop yields, and destroying transport infrastructure.
The climate crisis, the Covid-19 pandemic, financial crisis, and insecurity and conflict have brought global economic activities to a near-standstill as many countries, seemingly gearing towards growth and stability, fall into debt and uncertainty. The effects of climate change are slowing down the production and export capabilities of countries, especially those countries that depend on agriculture.
Trade can be part of the solution to help countries adapt to climate change because it fosters investment and economic development and provides opportunities. Estimates show that annual climate adaptation costs in developing countries could reach U.S.$300 billion in 2030 and, if mitigation targets are breached, as much as U.S.$500 billion by 2050. Businesses and governments are under increasing pressure from investors, regulators, consumers, and society to reduce carbon emissions.
So what is Low Carbon Transition?
The concept of ‘Low Carbon Transition’ refers to a shift from an economy that depends heavily on fossil fuels to a sustainable, low-carbon economy. Increasing climate impacts are highlighting the need for rapid emissions reductions and to meet the Paris Agreement goals, the world needs to reduce greenhouse gases by unprecedented levels over the next eight years. A report by United Nations Environment Programme (UNEP) finds that the international community is still falling far short of the Paris goals, with no credible pathway to a 1.5°C increase above pre-industrial emission levels in place. The Emissions Gap Report 2022: The Closing Window – Climate crisis calls for rapid transformation of societies and finds that urgent sector and system-wide transformations – in the electricity supply, industry, transport and buildings sectors, and the food and financial systems – would help to avoid climate disaster.
In developing countries, where relevant data is scarce and digitalisation is still emerging, calculating carbon footprints is more difficult. The World Bank reports that “fighting climate change is vital to equitable global development and poverty reduction – and international trade can have an important role to play in this endeavour.
“Trade can help countries adapt to higher average temperatures and more extreme weather events by offering consumers lower-emissions goods and services and facilitating the use of climate-friendly technology. But climate change may also negatively affect trade as extreme weather events raise the cost of trade, by destroying or degrading transport infrastructure and reducing agricultural production”.
The countries that are most vulnerable to the climate emergency – including least developed countries, landlocked developing countries, and small island developing states – are among those that contributed the least to the current situation. They will need access to finance, technology and skills to make the low-carbon transition. A high-level expert panel met to discuss how sustainable trade can be facilitated to accelerate the low-carbon transition, with a focus on small businesses in developing countries. The key question they addressed is about how we can use trade policy to promote the low-carbon transition and support developing countries in their efforts to tackle climate change and also respond to the many impacts the climate crisis has on their economies and trade.
Pamela Coke-Hamilton, Executive Director of the International Trade Centre, says that we need to help small businesses go global, especially firms led by women and young entrepreneurs. “First, we want to talk about the missing voices, the silent majority. They’re a lot of low voices here in COP. There’s a silent missing majority here. One missing voice here is that we noted at COP26 last year of small businesses. Essentially we know that small businesses constitute 90% of all trade across the world and 50% of all jobs.
“They’re also responsible for 80% of greenhouse gas emissions along the supply chains of bigger firms. So they’re an important constituency and they matter. These things have to be taken into account in any discussion on climate change and managing the process. The other missing voice is that of women, young people, and vulnerable communities.
“So if we’re going to accelerate low carbon transition, if we’re going to keep the hope of keeping our planet alive. We need to get elevate those voices. We need to get those businesses, especially those run by women, young people, and vulnerable communities the tools, the training, and market access so that they can see the green transition as an opportunity, not to just survive, but to thrive. Rather than get another cause that could lead to bankruptcy or something worse.
“There will be no climate justice for countries that are left to struggle alone to survive with rising energy and food prices, rising debt, rising unemployment. But what matters more is who has access to that money and who’s it spent on. In other words, money is not necessarily the full problem is the ability to access that money that becomes a huge challenge for many small businesses in the developing world,” Coke-Hamilton says.
The UN reports that small businesses are in need of support to cope with the impact of climate change which includes clearer, internationally aligned standards, transparency mechanisms, and investment to access green technologies and participate in low-carbon value chains. With the right incentives, including intellectual property rights, small businesses can play a key role in lowering emissions, thus raising NDC ambitions. Small businesses make up 90% of businesses and half of jobs worldwide. Of the big corporations that produce most of the goods commonly used every day – including food, electronics, and apparel – more than 80% of their emissions come from their supply chains, and the biggest bulk of that comes from small businesses.
The climate change clock is ticking, and trade in many developing countries depends on sectors that are severely affected by climate change, such as agriculture, fisheries, or tourism. With warming temperatures, the survival of these sectors is under question. Trade has the power to stir economies towards the track of sustainability and resilience, says Rebeca Grynspan, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD). She added that developing countries, and their MSMEs, must explore options to diversify within sectors, and into new sectors, where their comparative advantage is expected to increase, also when considering future climate impacts. “And there are opportunities. Many developing countries have much potential to participate in the production and trade of non-fossil fuels, such as those based on solar, wind, geothermal, hydro, or biomass energy.”
UNCTAD’s latest Trade and Development Report calls for a transformative approach to climate adaptation, with green industrial policies to drive growth and job creation along more resilient and greener value chains. A green industrial policy should proactively identify the areas that present the most significant constraints to climate adaptation investment, channel domestic and foreign investment to these activities, and monitor whether these investments are managed in such a way as to sustain decent employment and to increase long-term climate security and productivity.
Three international agencies that make up the Geneva trade hub are making strides in addressing the climate crisis and reaching net-zero emissions. The Geneva-based trade agencies, World Trade Organization (WTO), the International Trade Centre (ITC), and the UN Conference on Trade and Development (UNCTAD) joined forces and launched a revamped Global Trade Helpdesk that helps businesses by bringing key trade and business information into a single portal. The platform also allows businesses to get updated detailed information about imports, trade statistics, regulatory requirements, and tariffs and compare export potential estimations across different prospective target markets.
The expansion of global trade is increasingly recognized as playing an important role in climate change. A positive step to ensure that least-developed countries become stepping-stones to wider and more inclusive regional value chains and trade-led growth is the Africa Continental Free Trade Agreement (AfCFTA). The agreement helps to focus on those countries whose trade and development needs are highest, particularly least developed countries (LDCs), landlocked developing countries ( LLDCs ) and Small Island Developing States (SIDS), that they become stepping-stones to wider and more inclusive regional value chains and trade-led growth.
The climate crisis is a threat to the future of our planet, and by reducing emissions now, we will be able to adapt more easily to the changes we can’t avoid in the future.
This story was produced as part of the 2022 Climate Change Media Partnership, a journalism fellowship organized by Internews’ Earth Journalism Network and the Stanley Center for Peace and Security.