Climate change and trade

As an appetizer for the next issue which will look at trade, Making It spoke to Patricia Francis, Executive Director of the International Trade Centre (ITC), about the carbon footprint of trade and the implications for Least Developed Countries

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How do you see climate change having an impact on development, and what do you see as the role of trade?

Climate change is one of the gravest threats facing humanity, and thus the major development challenge this century. Least Developed Countries (LDCs) have done little to cause climate change, yet face its harshest impacts and have the weakest capacity to adapt to these impacts. Trade can help developing countries with adaptation, through generating export earnings and accessing technologies. Trade also has a role in mitigation of climate change, through disseminating low carbon technologies.

Keeping trade open and without discrimination is thus an effective climate change policy. ITC’s mission – Export Impact for Good – very much encompasses that goal.

Should we be concerned about the carbon footprint of trade?

Trade is an increasingly important proportion of the world’s GDP. It stimulates economic growth, and thus the emissions of greenhouse gases. As a result, trade, and particularly transport of goods around the world is associated with causing climate change. However, 90% of internationally traded goods are carried by sea. Maritime transport is an efficient mode of transport, with only 10-15 grams of CO2 emissions per tonne kilometre.

The response of consumers in the northern hemisphere to “buy local” in order to reduce emissions from transport may, at first glance, seem an intuitive decision. However, studies show that food products imported from the southern hemisphere can often have a lower carbon footprint than products grown in the northern hemisphere. This is the case for counter-seasonal fruits and vegetables from some developing countries which benefit from more favourable growing conditions than in the northern hemisphere. Depending on specific cases, the low emissions from agricultural production in warmer climates can more than compensate for emissions from their transport to markets in the North.

The key driver of carbon-intensive growth is not trade, but the lack of regulation governing carbon use. Fundamental obstacles that we still face to reducing this level of dependence are the continued existence of fossil fuel subsidies, and the lack of a multilateral agreement to put a price on carbon.

What do you mean by carbon-intensive growth?

Economic growth is linked to the emissions of carbon dioxide and other greenhouse gases because the type of technology used to drive economic growth has a direct bearing on the level of emissions per unit of GDP. Developed countries that have more advanced technologies, thus produce at lower levels of carbon intensity.

However, they are also net importers of consumer goods from China, and other emerging economies, where the carbon intensity of production is higher. Although these products are consumed in Europe, the emissions from their production count in China’s inventory of emissions. We know from the Carnegie Institution for Science’s research that Europe is thus effectively “outsourcing” over a third of its emissions to the developing world. Assigning responsibility for these emissions needs more debate. It has obvious implications for climate change negotiators, but also at the consumer level, where people increasingly want to know more about how much carbon is emitted in making a consumer item and in providing services.

South African oranges being prepared for export | Photo: Maersk Line

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Are barriers to trade emerging in response to climate change?

The fastest developments are taking place at the private sector level. Retailers are putting information about carbon on products, particularly food. This means they require their suppliers to provide information on emissions in the supply chain.

Leading corporations now report publicly on their emissions, and make investments to reduce them. This decision is driven both by the need to reduce costs, but also to demonstrate environmental responsibility, along with other ethical commitments. I think this trend will intensify, and become part of the mainstream of doing business.

What does this mean for exporters in LDCs?

The agri-food exporters with whom we work in Africa are concerned that carbon labelling standards are being developed without their involvement. There are many different schemes, usually employing their own methodologies. As they are not harmonized, and do not recognize each other as “equivalent”, exporters are faced with the costs of multiple certifications, even in the same destination markets. The methodologies for certification are also complex, and require data that does not always exist in developing countries, which can lead to uncertain measurements.

Does that make the consumer ‘king’?

The consumer and retailer are indeed setting some important “rules of the game” in trade. Consumers are bringing about positive change, but can also cause negative impacts and fail to address core issues.

Product carbon footprint labels may seem reassuring for the ethical consumer, but do not include emissions from driving to the supermarket or preparing the food, which are both carbon-intensive activities. Ethical consumers are also prone to “moral offsetting”, whereby they make one ‘green’ shopping choice, but then feel licensed to make a more damaging one, like buying a plane ticket for a weekend city break.

How does this issue relate to poverty reduction and ITC’s work?

The sustainability consumer market is growing. The organic food and certified timber markets for example, are worth around US$50bn, with developing countries having a 2% share of this. Farmers and their communities both benefit from these higher incomes and a cleaner environment. However, we must be careful that consumers and retailers do not damage these prospects through misplaced advocacy and standards that develop in discriminatory and non-transparent ways.

ITC, along with its development partners, is working hard through its environmental technical assistance programme to strengthen the capacity of developing countries to compete in this demanding new marketplace.