Global businesses are calling for radical changes to the world’s trading system if they are to reach their emission targets.
The need for an adaptation of the trading system forms a key recommendation from a new report issued by the World Economic Forum (WEF) in collaboration with law firm Clifford Chance.
The six-month study, “Delivering a Climate Trade Agenda: Industry Insights Report” is based on research and interviews with global companies, across sectors including transport, energy, manufacturing, and consumer goods.
The WEF said the objective of the research process was to identify necessary changes to the current global trade system and how to better incentivise and accelerate decarbonisation. The resulting study outlines eight key actions that, if taken by governments and businesses, could make global trade a better enabler of climate action.
Sean Doherty, Head of International Trade and Investment at the WEF said: “Traditionally, trade and climate policy-making has happened in separate silos. The urgency of the climate crisis calls for us to break down these silos through public-private cooperation in order to accelerate emissions reductions while achieving prosperity for all. The good news for policy makers is businesses are ready and willing to support this change.”
Interviews revealed a range of actions for trade to support businesses to decarbonise and grow sustainably:
- Tariff reductions on key goods
- Addressing non-tariff distortions in parallel
- Phasing out fossil fuel subsidies
- Building coherence around carbon-based trade policies
- Supporting trade in digital and climate-related services
- Encouraging climate-smart agriculture
- Aligning trade agreements with climate commitments
Jessica Gladstone, Partner at Clifford Chance added: “International trade will play a key role in achieving a just transition to a low-carbon sustainable global economy. Businesses stand ready to lead in this transition, but governments can support by ensuring the right legislative and regulatory structures are in place. Our report explores global and domestic policy actions that can create climate-friendly trade that is fair, transparent, and has technology and innovation at its core.”
The report said business can take steps to encourage alignment of trade rules with climate action. The Forum also launched a two-year work programme – titled Climate Trade Zero – to support public and private exchange on these issues as part of building a more sustainable trading system.
“Many companies also recognized that the transition is taking place at different speeds and levels of intensity across countries and sectors,” added the report. “Interviewees highlighted the importance of providing support and incentives to developing countries, and to supply chain partners in developing countries, to undertake the investments necessary to reduce their emissions.”
Ngozi Okonjo-Iweala, Director-General, World Trade Organization and Patricia Espinosa, Executive Secretary, United Nations Framework Convention on Climate Change issued a joint foreword to the report in which they urged immediate action
“The latest Intergovernmental Panel on Climate Change (IPCC) report is unequivocal that unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5 degrees Celsius or even 2 degrees Celsius will be beyond reach,” they said. “The world is already experiencing extreme weather patterns, with deadly consequences for human populations. Many communities face the negative impact of climate change in their daily lives.
“Floods, droughts, wildfires, extreme temperatures and sudden storms are becoming all too common and frequent. Let there be no mistake, the climate crisis is a human crisis. And to avert a human catastrophe, we must act now.
“Only with deep and rapid cuts in emissions of greenhouse gases can we stabilise rising temperatures. Bringing this about will require significant changes by governments, businesses and civil society to transition to clean and sustainable economies across the board in a just way – affecting all sectors from energy generation, transport, manufacturing and services to agriculture.
“Fully implementing the 2015 Paris Agreement is the world’s best chance to change course. Under the Agreement, all nations committed to limit average global temperature increases, build resilience to climate change impacts, and deliver the financial flows required for their common future. This is a promise that nations now need to keep.”
The report was issued to coincide with the start of the WEF’s Sustainable Development Impact Summit which will explore how global business can tackle the threat posed by climate change.