Callaway, John M.

Online Research Database In Technology

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(2010). Trade and Climate Change: International Perspective [Sound/Visual production (digital)].CPA International Conference on Climate Change, London (GB), 13 Jul., 01/01/2010Trade and Climate Change:   International Perspective Mac Callaway, Ph.D(mac callaway@risoe dk). .UNEP-RISØ CenterT h i l U i it f D kec n ca  n vers y o  enmarCPA International Conference on Climate Change      London, July 13, 2010Relationship between Trade   and Climate Change  • Effects of climate change on international trade• Effects of trade expansion on GHG      emissions growthEff t f t d i d t ti t• ec s o  ra e expans on on a ap a on o climate change• Effects of GHG mitigation on trade (Part 2)Effects of Climate Change    on International Trade  • CC influences the relative profitability of different i d t i i diff t t in us r es n eren  coun r es• Changes in location and mix of production activities• Resulting in changes trade prices and flows• Strongest in climate sensitive industries• Direct effects on supply, transport and distribution infrastructure• Increased vulnerability to climate • Increased investment = higher transport costsEffects of Trade Expansion    on GHG Emissions  • Trade allows countries to specialize in industries in which they have a comparative cost advantage      , leading to (possibly): • Increases in the amounts of GHG emissions (for a while?)         • Changes in the geographic and industry composition of emissions• More investment in and adoption of new technologies to mitigate and adapt to climate change• Changes in the relationship between GDP/capita and GHG emissions and climate change damages (How?)Environmental Kuznets  Curve or Worse ?   Kuznets Curve alternativesEffects of Trade Expansion on Adaptation• Climate change impacts are not distributed evenly over the Globe• Economies with highly vulnerable basic industry sectors (household agriculture) can not easily replace lost production and consumption with imports• Expanding international trade allows more of these losses to be offset by imports from less vulnerable countries• Many of these economies lack mature markets and product distribution systemsEffects of GHG Mitigation on Trade – Lead in to Part 2 • Unequal emissions targets increase the energy costs of producing many goods and prices of these goods: • Can hurt the competitiveness of some domestic industries in countries with targets and help those without targets• Can create incentives for energy intensive industries to move to countries without targets and ship produced goods to countries with targets (GHG leakages)     • CDM IntentR d i i d ti t i d l d t i• e uce em ss ons re uc ons cos  n eve ope  coun r es • Transfer mitigation technology to developing countriesPolicy Implications: Climate, Trade and Development• Leakages and competitiveness issues• Mitigation and technology transfer issuesF t l d l• ores ry- an  use examp es• Re-aligning mitigation burdens  • Better integration of climate, development, trade policesLeakages and  Competitiveness Issues• “Border adjustments” (BAs) may be required to address leakages in the form of imported, energy intensive goods• BAs are allowed by WTO, subject to rules       • But the real purpose may be protectionist, to keep a competitive advantage• Leakages are hard to estimate, target and eliminate• Leakages may be small• Re-aligning emissions reductions burdens will have an impactT h T f d I t tec  rans er an  nves men• CDM is not creating foreign investment in, or transfer of, climate-friendly technologies to developing countries• ODA investment in the energy sector has declined• “Barriers” to this investment in developing countries:      • High costs and produced energy prices• Low private returns  • Low emissions and energy demand (smallest countries)• Project and country risk   • Subsidies and protection abound on all sidesDeforestation Policy Issues  • Clearing forests in developing countries creates     • Local environmental harm and economic losses• Global Increases in atmospheric GHG stocks     • Lowers world log prices, increases consumption • Reduces incentives to establish plantations in developed       countries• Local income and jobs   • Local Export income/Foreign Exchange from log trade• Trade climate development and “efficient market”, ,    , policies will all have mixed effects (Example)Trade Policy and Deforestation   • All countries impose and effectively implement BAs on log and product imports from natural forests to protect local         environment and avoid deforestation.  What happens? • In Developing countries  • Cutting and exports decrease • Revenue and Tax collections fall L l li lih d d d• oca  ve oo s are epresse• Slash and burn for agricultural land may increase due to drop in land values• In Developed countries• World hardwood log prices increase• Domestic hard wood producers in developed countries harvest more, nowA d t bli h i l t ti f th f t (100 f )• n  es a s  more area n p an a ons or e u ure  years rom now• Some agricultural land may be converted to hardwood plantations• Net effects on development and climate?Trade Policy and Deforestation   • A REDD policy for developed countries to pay for the avoided damage to ecosystems of not harvesting natural forests (for         carbon credits) is Effectively implemented.  What happens? • In Developing countries  • Cutting and slash and burn decreases, so do log exports• Revenue and Tax collections from cutting fall B t REDD t i (f h ?)• u   genera es ncome or w om• Agriculture land prices increase and production, land use, ownership change• In Developed countries• World hardwood log prices increase• Domestic hard wood producers in developed countries harvest more, nowA d t bli h i l t ti f th f t (100 f )• n  es a s  more area n p an a ons or e u ure  years rom now• Some agricultural land may be converted to hardwood plantations• Net effects on development and climate?Shifting GHG Reduction Burdens   • Requiring large developing countries to reduce emissions• Reduces global emissions• Reduces leakages• Eases competitiveness concerns but  , • Who pays the “additional” costs?• Favorable trade and ODA policies for small countries + no          emissions targets• Reduce climate damages through more efficient markets• More efficient, less polluting energy sectors• Minor carbon leakagesI d i d l t/ d d t b t• ncrease  econom c eve opmen re uce  pover y, u• Who pays for technology?P li Mio cy x• Climate change policy can reduce emissions and       cause/solve leakages and competiveness issues• Trade policies can ease leakage and competiveness        issues and reduce vulnerabilityD l t li i i t t i• eve opmen  po cy can ncrease nves men  n new technology and help expand markets, esp. in small t icoun r es• Climate policy makers should not be surprised when global and domestic markets react to “shocks” and policies in predictable ways…….no one predicted.

Trade and Climate Change: International Perspective

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Trade and Climate Change: International Perspective

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