Sustainable Trade & Climate Action
On 4 December, while launching the Trade Day at the COP28 in Dubai, global leaders mooted trade as a powerful tool in the fight against climate change. In fact, this was the first time that the annual UN Climate Change Conference sought to highlight the role of international trade and trade rules in making a positive contribution to addressing climate change, dedicating an entire day to the issue.
Hosted by the UAE Ministry of Economy, the sustainable trade forum brought together global business and investment leaders to offer private-sector perspectives on trade and its role in shaping a more climate-friendly economy.
Global supply chains have time and again been disrupted on account of events such as the Covid-19 pandemic, the Ukraine-Russia conflict and the Israel-Hamas war, exposing the ecosystem’s vulnerabilities and highlighting the urgent need for long-term sustainable and secure supply chains to escape from financial losses.
Notably, the global production and distribution of goods and services contribute to roughly a quarter of all carbon dioxide emissions. Sustainable trade can increase the flow of green goods and services and make it easier for countries to access the technologies and knowledge needed in the low-carbon energy transition.
“Climate and trade policies need to work together,” UNCTAD Secretary-general Rebeca Grynspan said at COP28. “As the world is coping with the devastating effects of global warming, it’s time for trade to play its role in shaping climate action that fosters inclusive and sustainable development.”
Leaders outlined a roadmap of trade policy options to tackle climate change as there is an urgent need to utilise the trade policy to decarbonise global supply chains, incentivise businesses to invest in a net-zero future, secure value chains and incorporate environmentally responsible practices into trade finance.
Ngozi Okonjo-Iweala, Director-General, World Trade Organisation (WTO) highlighted that the international community remains well short of the Paris Agreement targets. Currently, trillions of dollars of low-carbon investments needed to achieve those targets are now facing higher borrowing costs.
“The fact is, we cannot get to net zero without trade because it is indispensable for spreading low-carbon technology everywhere it is needed,” the WTO chief noted.
Modern-day Requirements
For climate finance, UAE President Mohammed bin Zayed Al Nahyan announced a $30 billion fund for global climate solutions that aims to attract $250 billion of investment by the end of the decade. The participants also pledged $700 million to help lower-income countries cope with the loss and damage caused by climate change.
Now, governments will have to work to close the $18 trillion investment gap, prioritising long-term gains over the costs in the short to medium term. This means setting granular, year-by-year targets to ensure pledges are met. Globally, there is also an urgent need to increase adaptation and resilience financing. In 2020, financing flows for climate adaptation and resilience reached only 10 per cent of what is needed.
In August this year, Prime Minister Narendra Modi said, “Sustainability is both an opportunity as well a business model.” He stated that it is now time to take businesses beyond the bottom line, adding, “It can be carried out by focusing on supply chain resilience and sustainability.”
At an industry event, Vineet Kumar, Head of Supply Chain Excellence, Deepak Fertilisers and Petrochemicals Corps said that achieving sustainability is a collective effort that transcends individual actions. Highlighting that the organisations have successfully transitioned 15 per cent of their energy consumption to renewable sources, Kumar added, "They should be at the forefront of taking actions to correct and improve the current state of affairs, fostering a collective commitment to making sustainability a reality."
What Happens Now?
A United Nations Conference on Trade and Development’s (UNCTAD’s) report on trade flows of critical minerals in global value chains for electric vehicle (EV) batteries see a surge in demand for these minerals, including 454 per cent for lithium and 115 per cent for cobalt, from 2022 to 2030 in a net-zero emissions scenario.
Many developing countries, especially in Africa, which boasts 19 per cent of global mineral reserves needed for EVs, stand to benefit from the green boom if they can process the minerals locally. This will prevent market concentration at various points of the supply chains and the associated risks of disruptions, price volatility and geopolitical tensions.
Le Thi Thu Thuy, Global Chief Executive Officer (CEO), Vinfast highlighted, “As we look to the future, the integration of EVs into global value chains offers a powerful strategy in our transition to a more sustainable and resilient economy."
UNCTAD’s Grynspan stressed the importance of ensuring the low-carbon transition offers opportunities for mineral-rich developing countries to diversify their economies, reduce their reliance on commodities exports and add more value to what they trade.
Meanwhile, to boost India’s position in the critical mineral arena, the first tranche e-auction of critical and strategic minerals was launched by the Centre on 29 November 2023. Out of 20 critical mineral blocks, 16 mineral blocks are being put up for grant of composite licence and four mineral blocks for grant of mining lease. “Once operational, they will help to cut down imports and build an Aatmanirbhar Bharat,” said Union Minister Pralhad Joshi.
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