Webinar on Climate Change Priorities in Trade and Investment

Excellencies,

Ladies and gentlemen,

Climate change has multiplied the existing development challenges across the globe. But it is the countries in the tropics – the home of the developing world – that will be most affected. This includes many low-income countries, who have limited resources for climate action. For example, if left unchecked, rising global temperatures could lead to two-thirds of Bangladesh’s land mass being inundated with sea water within 30 years.

Climate adaptation requires an integrated policy approach aiming at low-emission sustainable economic growth. But for such an environmentally sustainable transformation, V20 countries need additional finance, green technologies, capacity building and adequate policy space to design integrated policies.

International trade is part of the challenge, but also offers solutions.  

According to the OECD, carbon emissions in internationally traded goods and services accounts for 27 per cent of total global carbon emissions and are concentrated in seven industries. Many of the products exported by LDCs and SIDS are from these identified polluting industries.

It is important that any action taken in the international trading rules arena does not undermine the export capacities of LDCs and SIDS, further limiting their progress towards climate goals. International trade provides livelihoods, generates real income and employment to a large section of population in developing countries.

But some of the initiatives taken by developed countries to address carbon emissions in international trade have been found to be counterproductive.

For instance, our Trade and Development Report examined the impact of the Agreement on Environmental Goods and Services, which aims to remove tariffs on all identified environmental goods and encourage countries to take commitments in GATS to further liberalise environmental services. The OECD has arrived at a Combined list of Environmental Goods of 268 products. Our analysis suggests that liberalizing trade in these products can lead to tariff revenue loss of US$ 15 billion per annum to developing countries. Such loss would deprive many governments of much needed resources for the recovery from the COVID crisis.

Another UNCTAD study showed that the Carbon Border Adjustment Mechanism being implemented by the EU can reduce global carbon emissions by not more than 0.1% but can have adverse distributional impacts. It will decrease global real income by US$3.4 billion. Real income will fall by $5.9 billion in developing countries, while in developed countries it will actually rise by US$2.5 billion.

We need a positive agenda on Trade and Environment in the WTO that can help developing countries, and in particular V20 countries, in their environmentally sustainable transformation. This agenda should focus on providing additional finance, facilitating patent-free green technology transfers, and building technical capacities of the environmentally vulnerable countries.

For facilitating green technology transfers, there is a need to expand TRIPS flexibilities for developing countries in relation to climate related goods and services.

To effectively provide SDT to developing countries, legal tools such as waivers and peace clauses can be of immense use. These can help in expanding the policy space available to the developing countries with respect to their climate and development initiatives.               A narrowly defined climate waiver and peace clause would also give countries the assurance that they will not face disputes for climate and development-friendly initiatives.

Let me elaborate further on the financing needs and investment.

Lack of finance is one of the major hinderances in environmentally sustainable structural transformation. But the international climate finance architecture is inherently complex and associated with multiple challenges.

A Trade and Environment Fund could be set up to provide additional support to LDCs and SIDS for financing their incremental costs of sourcing critical green technologies and setting up climate-smart trade infrastructure. Such a Fund could also help compensating these countries for additional efforts required for their export diversification towards environmentally sustainable products.

The external debt of V20 countries stands at under US$1 trillion. Debt forgiveness or relief of a substantial part would provide the fiscal space to begin to address adaptation investment and the climate related SDGs.

Robust investments and scaled up technology transfer are critical to enhance resilience in the most vulnerable countries. Despite the rebound in global FDI inflows, we are far from an even recovery. Renewable energy and utilities are the strongest growth sectors, but with a small number of large-scale projects in a limited number of countries.

The weak trend in climate change investment in developing countries contrasts sharply with the buoyant situation in financial markets. Despite extreme market volatility due to the COVID-19 pandemic, the sustainable investment market has been expanding steadily, as demonstrated by the number of new sustainability-themed products, the amount of new capital flows and the number of new initiatives developed by exchanges, security market regulators, assets owners and managers, and other market actors.

More must be one to channel funds to locations where it can have the biggest impact. Thus, the priority for climate and trade and investment policies is to build effective cooperation to enhance the climate-vulnerable countries' adaptability to a changing business environment with the necessary financial and technology transfers.

Ladies and gentlemen,

UNCTAD will continue providing analytical studies of the impact of climate-related initiatives in the international trade arena.

We also want to support countries in getting trade-climate ready, that is enhancing the resilience of their trade to climate change through adaptation actions and economic diversification.

We advocate for the support of the international community, then we all know that the climate emergency can only be lessened through global action.

Thank you for your attention.