Loading...
The Financial Express

COP26 & WTO Ministerial: Tough questions for emerging economies


WTO headquarter in Geneva, Switzerland WTO headquarter in Geneva, Switzerland

Ministers from twenty-four developing nations - including China, India, Vietnam, and Pakistan -released a statement ahead of the United Nations Climate Change summit (COP26) denouncing new net-zero standards as discriminatory. The plan asks for all countries to reach net-zero carbon emissions by 2050.

Climate negotiations have long been shaped by equity concerns; this makes sense. The recognition that different countries have different responsibilities for, and capabilities to, address climate change is at the heart of the UN negotiation process. More advanced countries not only have greater resources to devote towards the greening of their economies relative to emerging economies, they also benefitted from unlimited cheap fossil fuels throughout the 20th century to get where they are today. Many argue that is unfair for these advanced economies to "pull the ladder up behind them" now that they have reached a sufficient level of development. Not all countries can afford to make the same expensive energy transitions as their already developed neighbours. It's a tough question, and one that has plagued negotiations at COP since its inception in 1995. The answer was the "grand bargain" - a promise made by advanced economies in 2009 to contribute $100 billion for developing nation climate adaptation and mitigation financing. But those funds haven't reached their intended destinations, making the global net-zero goal a lofty one. Recent energy crisis across the world too have shown just how difficult ending dependence on fossil fuels is, even for developed countries.

The other side of the coin, of course, is that emerging economies are far more vulnerable to the impacts of climate change relative to their more developed neighbours. In this sense it would behove susceptible countries to adopt aggressive climate policies that will ensure long-term national interests as sea levels rise and extreme weather events become more frequent and severe.

Central Asia - a largely hydrocarbon revenue dependent region that also relies on agriculture and other commodities exports - is stuck between a rock and a hard place. Countries like Kazakhstan, Uzbekistan, and Turkmenistan are being asked to phase out top exports: oil and gas, to meet climate goals, but have been offered little in the way of alternatives for their economies. What's more, severe droughts brought by climate change threaten to cripple the region's agricultural production and important fresh water reserves, so inaction is not an option. The COP26 talks in Glasgow, begins on October 31, is emphasising this decade's race against time. [COP means conference of the parties. The summit is scheduled to be end on November 12, 2021, under the co-presidency of the United Kingdom and Italy.]

According to the United Nations (UN) Intergovernmental Panel on Climate Change (IPCC), if global warming is not limited to 1.5 degrees Celsius the Earth will reach a point of no return.

For nations to avoid calamity, emissions reductions of 7.6 per cent a year will be necessary for the next decade alone to stay on track to reach net zero emissions by 2050. Presently, that looks unlikely with emissions rising for many large polluters like China and India. The UN anticipates that emissions may actually rise 16 percent by 2030, instead of falling by the necessary 45 percent.

But emissions targets won't be the only focus at COP. Green free trade is set to be a hot topic at the upcoming summit, with many opinions to incentivise low-carbon and carbon-free trade frameworks.

With states' voluntary action for reducing emission stalling, Frans Timmermans, the European Union's climate czar, recently launched the Carbon Border Adjustment Mechanism (CBAM). The mechanism will tax the carbon content of goods imported into the EU, making it more difficult for cheap, high carbon goods to out-compete cleaner, but more expensive domestics goods.

In an attempt to universalise emission standards and crackdown on carbon havens, the tax would charge importers of steel, aluminium, iron, fertilizer, cement, and electricity the equivalent of the EU's domestic carbon price. Although the EU claims the mechanism is fair, international trade officials like Ngozi Okonjo-Iweala, Director General of the World Trade Organization (WTO) said that with carbon border adjustments, "the devil is in the details."

A carbon tax may raise the price of energy intensive products like steel and cement, increasing the construction costs for infrastructure projects in developing countries who import these materials. Meanwhile, countries who export these products face competitive disadvantages because of the high cost and time necessary to transition toward renewable energy. These exporters, already heavily exposed to international competition, fear further losses may occur. Supporters of carbon pricing mechanisms argue that a price applied simultaneously in all countries may help level the playing field. From the perspective of developing countries, this is far from the truth.

Not only will a carbon border tax harm developing countries, but with the current shortage of energy resources it would be self-defeating for Europe. Kazakhstan is home to the Bogatyr, the largest coal pit in the world. Every year millions of tons of coal are exported to warm Europe's homes and power its factories. In the throes of its ongoing energy crisis, China received its first shipment of Kazakh thermal coal at the beginning of this month. Imports of coal and natural gas from countries like Kazakhstan and Turkmenistan have been crucial in addressing fuel shortages and relieving inflationary pressures from Beijing to Berlin and Brussels. 

Developed countries like those in the European Union should not dictate sovereign decisions through what is functionally protectionism. Instead, they should support emerging economies like those who demonstrate leadership in areas of sustainable trade. And emerging economies can also learn to help each other: as China called for Covid vaccine giveaways, following the same logic, Beijing could help considerably by donating renewable technologies and equipment to produce green energy systems, including solar panels and wind turbines, to the world's poorest countries.

Only a few weeks after the end of COP26, is the World Trade Organization's (WTO) 12th Ministerial Conference (MC12) will meet in Geneva. The conference originally scheduled to take place in Nur-Sultan, but postponed because of the Covid-19 pandemic, will now be chaired by Kazakhstan's Minister of Trade and Integration, Bakhyt Sultanov. The MC12 offers an alternative of how developing countries can participate in international trade more equitably.

Like COP26, the MC12 will feature discussions on how to use international trade to advance climate goals. A highlight will be a dialogue on plastics pollution and sustainable trade which will explore how the WTO members can take action by sharing experiences on supply chain monitoring, strengthening cooperation on other international regulatory processes, and identifying environmentally friendly trade policies. With a diverse range of developing countries taking leadership on this initiative like the co-host Kazakhstan, it stresses the need for technical assistance for vulnerable economies.

Trade can play an important role in tackling issues like sustainability because it occurs at virtually every step in the global supply chain, but cooperation is necessary to ensure fairness. Under the right conditions leapfrogging to greener technologies is possible. Leaders across the developed world should promote renewable energy through targeted technology transfers. This will enable emerging economies to green their industries without sacrificing development and quality of life for their citizens. Protectionism will only deprive developing countries of the capital necessary to transition towards renewable energy.

Addressing other trade barriers unrelated to renewables like the obsolete Jackson- Vanick Amendment will also help facilitate the trade of important technology which can help Central Asia meet its climate objectives. The Jackson-Vanick amendment limits US trade relations with non-market economies that restricted the freedom of Jewish emigration during the Soviet era. Kazakhstan, the largest economy in Central Asia, as well as Tajikistan, Turkmenistan, and Uzbekistan are still subjected to this Cold War relic, although it is waived yearly. Restrictions are a missed opportunity to engage in trade relations with developing countries eager to be climate leaders, while the Amendment is a perennial irritant in bilateral relations.

There is no easy solution to tackle climate change equitably. Nevertheless, developing countries can still act on sustainability without sacrificing their development in the process. Instead of mandating one-size-fits-all solutions, leaders across the developed world should acknowledge the capabilities and resources of each nation, and facilitate free trade to encourage the adoption of green technologies and cooperate on its implementation.

The piece is excerpted from www.forbes.com

Share if you like