Although a new European Union (EU) climate initiative unveiled on Wednesday could change global trade patterns to favour countries where production is relatively carbon efficient, its value in mitigating climate change will likely be limited, the UN trade and development agency, UNCTAD, has warned.
The Carbon Border Adjustment Mechanism (CBAM) comes into force in 2023 as part of new measures to cut carbon dioxide (CO2) emissions, including taxes on imports such as oil, coal and gas.
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In tandem with the EU announcement, UNCTAD has published a report examining the potential implications for countries both within and outside the regional bloc.
“Climate and environmental considerations are at the forefront of policy concerns, and trade cannot be the exception. CBAM is one of these options, but its impact on developing countries also needs to be considered,” said Isabelle Durant, the UNCTAD Acting Secretary-General.
Cutting ‘carbon leakage’
The CBAM will help reduce “carbon leakage”, a term that refers to transferring production to jurisdictions with looser constraints on emissions, the report confirmed.
However, its value in mitigating climate change is limited, as the mechanism would cut only 0.1% of global CO2 emissions.
“While the mechanism seeks to avoid the leakage of production and CO2 emissions to the EU’s trading partners with less stringent emissions targets, it’s so far unclear how it can support decarbonization in developing countries,” UNCTAD said.
“Reducing these emissions effectively will require more efficient production and transport processes.”
Support green production
UNCTAD also addressed concerns expressed by EU trade partners who believe the CBAM would substantially curtail exports in carbon-intensive sectors such as cement, steel and aluminium.
Changes may not be as drastic as some fear, the agency said.
Exports by developing countries would be reduced by 1.4 per cent if the plan is implemented with a tax of $44 per tonne of CO2 emissions, and by 2.4 per cent at $88 per tonne.
Effects would vary significantly by country, depending on their export structure and carbon production intensity.
At the $44 per tonne price, developed countries would see their incomes rise by $1.5 billion, while income in developing countries would fall by $5.9 billion, according to the report.
UNCTAD encouraged the EU to consider using some of the revenue generated by the CBAM to accelerate cleaner production technologies in developing countries.
“This will be beneficial in terms of greening the economy and fostering a more inclusive trading system,” said Ms. Durant, the agency’s interim chief.
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Do you think developing countries will be able to effectively adapt to the changes introduced by the new EU climate initiative?
Hey EmilySmith97, developing countries may face challenges in adapting to the changes brought by the new EU climate initiative, especially considering the varying levels of resources and capacities across different nations. It’s crucial for the international community to support these countries in their transition towards more sustainable practices.
Climate and environmental considerations are at the forefront of policy concerns, and trade cannot be the exception. CBAM is one of these options, but its impact on developing countries also needs to be considered.
Do you think the new EU climate initiative will actually benefit developing countries as intended, or will it primarily impact global trade patterns?
As per the UNCTAD report, while the new EU climate initiative may shift global trade patterns to favor countries with lower carbon footprints, its effectiveness in benefiting developing nations remains uncertain. It is crucial to monitor how these changes will impact the economies of countries with less carbon-efficient production systems.
Do developing countries have the necessary resources to adapt to the changes brought by the new EU climate initiative?
Yes, developing countries must prioritize adaptation strategies to cope with the implications of the new EU climate initiative. Strengthening infrastructure and investing in green technologies are crucial steps forward.
As an advocate for sustainable development, I believe it’s crucial for the EU to carefully assess how the new climate initiative will impact developing countries. While the Carbon Border Adjustment Mechanism may promote carbon-efficient production, its effectiveness in combating climate change might be limited, as highlighted by UNCTAD. It’s essential to prioritize inclusive solutions that consider the unique challenges faced by developing nations on the global stage.
Will the new EU climate initiative actually benefit developing countries, or will it mainly affect trade patterns and emissions within the EU itself?
Do you think the new EU climate initiative will actually benefit developing countries or just shift the burden elsewhere?
Considering the implications of the new EU climate initiative on developing countries is crucial. While the Carbon Border Adjustment Mechanism could favor carbon-efficient production, its overall impact on mitigating climate change might be limited. It’s essential to assess how these measures will affect developing nations.