Don’t trade away the climate
Trade, environment and development featured on the agenda at the just concluded UN climate talks held in Paris. The convention talked of ensuring global benefits at lowest possible costs.
Climate policies influence how trade is conducted among countries, how businesses run and how they invest in technologies to promote more sustainable emission patterns. Even small enterprises and the agricultural sector are now adopting practices that support low carbon emission and greater resilience.
The development agenda is an increasingly important component of climate change policies as recognized by the Intergovernmental Panel on Climate Change (IPCC) under the term complementary benefits.
The United Conference on Trade and Development (UNCTAD), the World Trade Organization (WTO), the International Trade Centre (ITC), together with the Internal Fund for Agricultural Development (IFAD), the New Zealand government, Development Bank of Latin America (CAF), and the World Agroforestry Centre came together at a side event at the COP21 to discuss complementary roles of trade and development on supporting climate policies. How can global benefits be realized at lowest possible costs in relation to trade?
Climate and trade
There is no contradiction between trade and climate change. Trade can support climate change objectives of mitigation and adaptation. Agriculture is key as a means to lift people out of poverty. Smallholder farmers are often the producers of commodities that feed into global food, drink and cosmetic value chains.
“Climate policies can have an impact on trade especially if we price the cost of greenhouse gas emissions in a way that addresses competitive and linkage concerns,” said Arancha González, Executive Director of ITC. “We should not only look at the big companies, but those that represent more than 98% of the majority of economic operators.”
Trade opportunities should create opportunities for this majority and support their efforts to adapt and mitigate climate change.
“While the COP is often described as a meeting of environment and trade, it is fundamentally about climate and trade,” said Joakim Reiter, Deputy Secretary-General, UNCTAD. “Trade has the power to fight poverty. Rural communities rely heavily on the natural habitat for their basics. This determines what they produce and how they trade.”
Climate change has impacted on the livelihoods of rural communities in many ways. For example, the 2011 drought in the Horn of Africa affected over 13 million people, coffee plantations in Latin America have not been spared from disease and fish stocks in Asia are diminishing due to a stable loss of biodiversity attributed to climate change, just name a few.
A vast amount of trade is handled by sea yet many ports are not ready for rising sea levels that are expected as global temperatures increase. For example, a 17-centimeter rise in Tanzania could affect the port affecting millions of people both directly and indirectly. Our common transportation systems are not ready for climate change.
“Fossil fuel subsidies have no space in climate efficient economies. We need to put an end to distortions that fuel the use of carbon extensive production,” added Reiter.
Trade communities are joining forces to fight climate change. However, goodwill is required to ensure that this political commitment leads to lasting change.
“Trade has proved to be a strong anti-poverty instrument. It is also a cross-cutting element of the Sustainable Development Goals,” said Roberto Azevêdo, Director General.
Azevêdo suggested three actions following the COP to make trade work for poverty alleviation:
- Lower barriers to important environmental goods by improving access to climate-friendly technologies to support a low-carbon economy. The private and development sectors have a role to play in disseminating technologies to ensure they are included in production and consumption patterns
- Trade must be most efficient overall with regards to carbon emissions through transport. 80% of trade utilizes sea transportation yet only contributes 3% of global emissions. There is however room to make this more efficient. WTO’s trade facilitation agreement of 2013 can reduce trade costs by over 14% on average, benefiting poor countries
- There is a reliable, legal framework to introduce actions to reduce carbon emissions. Intended Nationally Determined Contributions (INDCs) require the adoption of policies including measures that affect trade.
The international community is facing a test as leaders to ensure that the trade, development and environmental agendas complement one another.
“The missing piece of the climate change agenda is the radical reduction of fossil fuel subsidies. We could achieve 10% less of global greenhouse gas emission,” said Mr. Tim Groser, Minister of Trade and Climate Change, New Zealand. “It is important we do this now because there is a massive infrastructure deficit in the developing counties. The next generation of infrastructure should be clean energy.”
Various financing mechanisms such as the Clean Climate Fund and private capital markets present opportunities for funding clean energy transformation. There is room for the exploitation of carbon markets to address climate mitigation and adaptation efforts.
“We should use our natural capital to develop our economies and ensure preservation of this natural capital,” remarked Luis Enrique Berrizbeitia, Executive Vice President of the Development Bank of Latin America (CAF). “Bio trade is an opportunity to preserve our biodiversity and support sustainable development.”
The Development Bank of Latin America supports bio-trade projects in the Amazonia. Green financing accounted for 24% of CAF’s approvals in 2014 with plans to grow this to 30% by 2020. “For every dollar we have invested in bio-trade, we have retained a green capital return of 14%,” he added.
Smallholder farmers and climate change
Also speaking at the session, Margarita Astralaga, Director of the Environment and Climate Division at IFAD highlighted the role of smallholders in the global economy. There are 2.5 billion smallholders working permanently in agriculture comprising 1.6 billion rural poor and another 1.3 billion employed in the sector.
“Smallholders are our key partner. For over 10 decades, IFAD has been making efforts to enable smallholder farmers improve their food production, livelihoods as well as access value chains and markets in mainly micro and small enterprises,” said Astralaga. “We need to ensure that smallholders are resilient to climate change and can access markets at a fair price.”
Agriculture as a sector and smallholders farmers in general are vulnerable to climate change. INDCs show government commitment to combating climate change through agriculture, forestry and land use. This will improve resilience and ensure that land and water sources are better managed.
The role of agroforestry
Agriculture and land use change contribute about 25% of global greenhouse gas emission. Investment in subsidies contributing to agriculture and agricultural products is more than 100 times higher than that put in forestry.
Increasing population in primarily in developing countries will continue moving to urban areas unless they can derive benefits from the rural areas. There are opportunities for small-scale rural trade opportunities with shorter value chains and more production.
At the local scale there are big challenges related to standards and tenure issues that particularly affect private sector investment in land. The enabling environment is lacking to ensure a return on their investments. Public-private partnerships have the potential to bring farmers out of poverty.
“In the agriculture sector, it is important that the standards that we are trying to introduce in production align with sustainability standards of preservation of natural resources,” said Henry Neufeldt of the World Agroforestry Centre. “Long-term dividends on the costs of production can be introduced at national and international levels to main lasting sustainability of ecosystems. International standards and trade need to organize themselves to ensure they are compatible with these standards.”
Although the new climate agreement does not specifically mention agriculture, food security, food production, human rights, gender, ecosystems and biodiversity are explicit in the text.
The preamble of the Paris Agreement makes specific reference to “safeguarding food security and ending hunger, and the particular vulnerabilities of food production systems to the adverse impacts of climate change”.
While the Agreement aims to limit global temperatures to well below two degrees C, it also mentions pursuing a 1.5 degree target, and the difference between these 2 targets creates differing scenarios for agriculture. A 1.5-degree temperature rise would produce fewer climate extremes than a 2-degree rise but this target also requires even greater mitigation efforts from the agriculture sector.
Trade, along with finance and technology, has an important role in leveraging the various complementary benefits that environment and development offer to meet the Sustainable Development Goals.
The session titled “Climate change and the role of markets and trade: leveraging co-benefits” was hosted by UNCTAD, WTO and ITC on the sidelines of the Paris COP21 on Wednesday 9 December 2015 from 13:15-14:45