Adapting to climate change: how trade and trade policy can make a difference


The climate community is now in its second week of talks in Sharm el-Sheikh, Egypt, for the UN climate talks, seeking to mobilize greater ambition to tackle climate change and the factors driving it. motivate, while encouraging greater efforts and funding to help countries. adapt to the impacts of climate change and reduce their vulnerability. This is a conversation that cannot stay within the confines of the climate community: it can, and must, involve actors from other policy areas, including trade.

Traditionally, the focus of the trade policy community when crafting responses to the climate crisis has been on mitigating climate change. This typically means examining how trade policy measures, from unilateral approaches to trade agreements, can help reduce greenhouse gas emissions and encourage a shift towards more sustainable production processes and methods. The liberalization of trade in environmental goods and services, the establishment of carbon border adjustment mechanisms to deal with the risk of climate leakage and the fight against fossil fuel subsidies are all topics that come up in these political debates and where extensive work has taken place over the decades.

While these are crucial conversations, trade policy can and should do much more. Trade can also help governments adapt to the impacts of climate change they are already facing, while building resilience and preparing for those impacts yet to come.

What climate change means for trade

Events of recent years have only reinforced the fact that extreme weather events, and the disruptions they cause, will increase in frequency and severity in the future. Over the past twelve months, Pakistan has suffered devastating floods which have killed more than a thousand people and left millions without shelter or drinking water, while Europe has once again been hit by heat waves and drought. For Small Island Developing States (SIDS) from Tuvalu to the Marshall Islands, the risks posed by rising sea levels, tropical cyclones and changing weather conditions are part of their daily reality. And many of these problems can no longer be reversed. Science confirms it: the Intergovernmental Panel on Climate Change (IPCC) confirmed earlier this year that much of the damage caused by climate change to our ecosystems, including crucial biodiversity, is permanent.

In addition to damage to the ecosystem and human health, climate change is already affecting what and how countries trade with each other. For example, changing temperatures and weather patterns impact crop yields, and therefore agricultural trade. Climate change can lead to severe and costly disruptions to trade-related infrastructure, as rising sea levels threaten seaports and rising temperatures affect and degrade railways. Tourism is another sector that is both crucial to trade and where changing weather patterns affect where people travel and the infrastructure that tourism relies on.

Why national adaptation plans are key to formulating trade policy responses

These developments are sobering, but there is also plenty of data and analysis available on what adaptation measures are needed and in what contexts, which can and should inform business decision makers as they determine their next steps. This information can be found in the National Adaptation Plans (NAPs) that developing country governments develop and implement. These NAPs are comprehensive policy instruments, outlining governments’ adaptation priorities, as well as national strategies and actions to translate these priorities into practice. The process of developing these plans is invaluable. This involves a thorough analysis of a country’s climate-related risks and vulnerabilities and measures to help reduce and manage these challenges, while building adaptive capacity. It also draws on the expertise of a wide range of stakeholders. Developing a NAP means trying to integrate climate change adaptation into standard development decision-making, rather than advancing it through isolated, one-off efforts. Once a NAP is published, governments can work on allocating and/or securing the necessary funding and other resources to put the plan into practice, evaluate results, and determine where related strategies and actions have to change.

To date, 38 NAPs have been submitted by governments to the United Nations Framework Convention on Climate Change (UNFCCC) through its NAP Central portal. Out of 154 developing countries, 129 have an ongoing NAP process. In addition, more than half a dozen countries have submitted sectoral NAPs or other products. Four of the NAPs submitted by June 30, 2022 designate trade and/or finance as a priority sector, according to the latest data from the NAP Global Network’s NAP Trends database.

Even outside of those NAPs that single out trade and/or finance as an outright sectoral priority, NAPs cover the sectors hardest hit by climate change – from agriculture and forestry to tourism and infrastructure – which in turn have implications for trade. These NAPs therefore have important lessons for the business community, as do the teams that have worked diligently to develop these NAPs, translate these plans into reality and evaluate their effectiveness.

Organizing trade policy around three tracks

A 2021 report by the International Institute for Sustainable Development (IISD) identifies three global pathways where trade could support efforts to adapt to climate change. One pathway involves unilateral actions that governments can take at the national level, such as lowering prices for adaptation goods and services, subsidizing those goods and services while tackling subsidies that complicate adaptation efforts and updating public procurement policies and rules to support “green or sustainable procurement. Many of these measures can serve the dual purpose of helping countries adapt to climate change, while supporting mitigation of climate change.

The second pathway outlined in the IISD report involves the role of trade-related financing mechanisms, such as the role of the WTO-led Aid for Trade Initiative in improving governments’ access to much-needed adaptation financing, as well as the Enhanced Integrated Framework diagnostic tools, which countries use to determine their trade priorities and the support they need to achieve them. The third way defines the need for platforms and forums where governments can come together and determine where they can cooperate and collaborate when developing trade policy responses for climate adaptation.

For these pathways to be successful, they can and should rely on the NAPs and the teams that prepare, implement and monitor these plans. Their expertise is key to ensuring that the trade policy measures that emerge from these pathways are tailored to their local contexts and take into account how the impact of these measures may change over time. This is an important exercise, but necessary in light of the existential threat that communities around the world already face, and where those who suffer the most impacts are often those who bear the least responsibility for the climate crisis.

This article is part of a series on climate and trade.


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