Written by: Yann Duval, Celine Bacrot and Simon Hardy, Article No. 79 [UNCTAD Transport and Trade Facilitation Newsletter N°92 - Fourth Quarter 2021]
Countries in the Asia-Pacific region continue to make progress in digitalizing trade procedures. When these procedures are digital, they can be made simpler, more accessible, and quicker to execute. But digital trade procedures can also contribute to protecting the environment. Digitalization can support more climate-smart trade facilitation, as discussed in the chapter dedicated to this topic in the recent ESCAP-UNCTAD-UNEP report on climate-smart trade and investment.
The logic generally goes as follows: paper is a significant source of greenhouse gas (GHG) emissions, which can be eliminated by going "paperless". Digital communication also eliminates the need to physically deliver documents. And efficiency gains from streamlined digital procedures bear out in a range of emissions reductions. Gains are at least partially counteracted by increased demand for electricity to power servers and computers, but in practice, organizations already make wide use of such facilities. Going paperless should, therefore, have a fairly unambiguous effect of reducing emissions, at least on a per transaction basis.
But how large is the environmental benefit?
Empirical evidence from private sector e-invoicing suggests it is quite large. For example, a detailed study examining the emissions generated by invoices at a Finnish logistics services company compared emissions when processing paper invoices versus digital “e-invoices”. The study found a 63 per cent reduction in greenhouse gas emissions per invoice, driven principally by efficiency gains. But trade procedures are far longer and more complex, involving many more stakeholders.
ESCAP has made a first attempt at quantifying the CO2 emissions that could be saved through trade digitalization. Taking advantage of a UNNExT database with detailed descriptions of end-to-end trade procedures for specific products and countries from across the Asia-Pacific region, the inputs needed by the various stakeholders to complete a trade transaction (things like paper, ink and petrol) could be estimated. Standard emission factors for each type of input could then be used to calculate emissions associated with existing paper-based transactions versus fully paperless trade transactions.
While necessarily imprecise, ESCAP estimates suggest that the emissions savings from digitalizing trade procedures are indeed significant. Fully digitalizing regulatory procedures around trade could save between 32 and 86 kg of CO2 equivalents per end-to-end transaction. This is despite making conservative assumptions whenever data was lacking. Scaled to trading volumes in Asia and the Pacific, this implies potential savings of 13 million tons, equivalent to planting 439 million trees!
Like with invoicing, efficiency gains from digitalization account for the bulk of emissions reductions. By “efficiency gains”, we mean reductions in the amount of work required to complete trade transactions, which implies a commensurate reduction in the amount of office space, commuting and other resources being consumed. By comparison, emission savings from eliminating paper and printing has an important but relatively small effect.
These broad results are supported by evidence from implementation of online Trade Information Portals (TIP) by UNCTAD, which is based on a step-by-step methodology. While the TIPs assist Governments in documenting trade procedures, they also help simplify them. In Kenya, simplification of 42 trade procedures has led to the elimination of 64 documents and saved 69 hours so far.
The electronic Single Window in Vanuatu, built by UNCTAD, also provides supportive empirical evidence. Automation of only two trade procedures - eliminating completely the use of paper - led to a reduction of 5,827 kg of CO2 emissions. In Timor-Leste, UNCTAD ASYCUDA World automated system for customs data has resulted in a reduction of 14,492 kg of CO2 emissions since its launch in 2015.
The estimates presented above are a good first indication of some of the tangible environmental benefits associated with paperless trade facilitation. However, more corroboration from primary research is needed. The preferred approach in emissions accounting would be to conduct detailed surveys of the inputs used by organizations involved in trade procedures, and to then divide their estimated emissions by the number of procedures they conduct. This method has proved successful in other complex industries like the postal sector, and we encourage anyone with the needed resources and ambition to try their hand. Other environmental benefits from digitalization, such as reduction in waste, would also need to be accounted for.
Leaving aside the technical difficulties associated with quantifying the environment benefit from digitalizing a trade transaction, the dynamic effects of digitalizing trade transactions may also need to be considered in future work. While large, ESCAP global estimates of CO2 saved from paperless trade facilitation amount to only about 1.2 per cent of the emissions from fuel used for transport in global supply chains. Will digitalized trade procedures, which we have shown may reduce emissions per transaction, enable more transactions, increase total emissions from international trade and transport, and further exacerbate the climate crisis? More research is certainly needed in this area.
For more discussion on climate-smart trade policies, please refer to the Asia-Pacific Trade and Investment Report 2021.
About the authors
Yann Duval | Chief of Trade Policy and Facilitation | ESCAP Trade, Investment and Innovation Division | email@example.com
Céline Bacrot | Economic Affairs Officer | UNCTAD Trade Facilitation Section | firstname.lastname@example.org
Simon Hardy | Research Associate | ESCAP Trade Policy and Facilitation Section Trade Policy and Facilitation Section | Simon.N.Hardy@protonmail.com