The likelihood of carbon taxes at borders makes it imperative for countries in the Asia-Pacific region to reduce greenhouse gas (GHG) emissions to maintain trade competitiveness, a new United Nations report released on October 11 has said.
Between 1990 and 2018, while global greenhouse gas emission rose by 50 per cent, in the Asia-Pacific region it more than doubled--primarily due to increased consumption in line with rising standards of living in developing countries, stresses the Asia-Pacific Trade and Investment Report (APTIR) 2021, a biennial publication.
“As key trade partners, consider putting border taxes in place on carbon; there are strong concerns on its effects on developing countries since many economies in the region are at risk of being pushed out of key markets,” stated Armida Salsiah Alisjahbana, United Nations Under-Secretary General and Executive Secretary of ESCAP, at the launch of the report. She added that the roll-out of Covid-19 recovery packages could provide opportunities to invest in low-carbon technologies and sectors; opportunities that should not be missed considering the urgency for action.
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The APTIR, prepared by the Trade, Investment and Innovation Division of the United Nations Economic and Social Commission for Asia and the Pacific, reveals that there is significant room for all economies in the region to make their trade and investment more climate smart.
Barriers to trade in environmental goods, the report said, are more prevalent than barriers to trade in carbon-intensive fossil fuels. Wasteful and regressive fossil fuel subsidies also continue to contribute to GHG emissions in the region, it added.
Marking the World Trade Organization Environment Week, this is the first report to examine the impact of upcoming border carbon adjustment mechanisms affecting economies in the Asia-Pacific region.
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Tipu Munshi, Bangladesh Minister of Commerce, said in a message: “The recommendations in the report, like trade liberalisation in climate smart and other environmental goods, phasing out of fossil-fuel subsidies, private sector initiatives, transition to climate friendly transportation, incorporation of climate issues in RTAs, carbon pricing and carbon border adjustment taxes are very much befitting given the crises we are facing.”
The report emphasises that while implementing climate-smart policies comes at a significant cost, particularly for carbon-intensive sectors and economies, the cost of inaction is far greater, with some estimates as high as $792 trillion by 2100, if the Paris Agreement targets are not met.
Moreover, the benefits of such action would partly offset the expenditure and estimated loss of five million jobs due to downscaling industries, as some 16 million new jobs would be created in clean energy, energy efficiency, engineering, manufacturing and construction industries, more than compensating for possible job losses.
“The links between trade, investment and climate change are complex. The key is to ensure that the positive effects of trade and investment are maximised, such as by promoting trade and investment in renewable energy and low-carbon technologies, while minimising the adverse effects, like by digitalising trade and transport systems,” said Rebeca Grynspan, secretary-general of the United Nations Conference on Trade and Development.
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Climate pledges by several countries in the Asia-Pacific region need to be underpinned by policies and measures to drive the transformation towards lower carbon economies, including in the private sector, the report said. Regional trade agreements can also help address the climate crisis. The report points to a general trend towards including a higher number of environmental provisions in regional trade agreements, broadening their scope and deepening their stringency.
