As nations worldwide commit to net-zero emissions targets to combat climate change, the integration of trade policies with climate strategies is emerging as a vital component in achieving these ambitious goals. Despite commitments from countries responsible for 88 percent of global carbon emissions, current efforts remain insufficient to meet the objectives outlined in the Paris Agreement, which aims to limit global warming to below 1.5 degrees Celsius above preindustrial levels.
More than 140 countries, including leading emitters such as China, the United States, India, and the European Union, have pledged to reach net-zero emissions by mid-century, with some extending their timelines to between 2060 and 2070. However, their current Nationally Determined Contributions (NDCs), designed to reduce emissions and slow global warming, fall short of what is needed to achieve the global climate targets.
The critical role of trade policies in filling this gap has been largely overlooked in the development of NDCs. Yet, the integration of trade with climate initiatives presents a compelling economic rationale, offering solutions through the promotion of renewable energy, technology transfer, and investment in green sectors.
Developing countries, in particular, stand to benefit from leveraging green trade and investment to facilitate their energy transition and fulfill their NDC commitments. However, the growing trend toward geoeconomic fragmentation and protectionism poses significant challenges to this approach, with unilateral actions and trade restrictions threatening the global supply chain and energy security.
The complex interplay of global value chains means that protectionist measures not only create uncertainty but can also lead to supply chain disruptions, impeding the transition to clean energy technologies. To counteract this, trade policies must be more closely aligned with climate goals, focusing on promoting investment, improving the business environment, and preserving open trade.
Asia and the Pacific, a region rich in natural resources and with established bases for clean energy technologies, is strategically positioned to lead this transition. Policymakers must undertake coordinated efforts to reduce uncertainties, support reforms, and encourage private and foreign investment to capitalize on the economic potential of the global energy transition.
Strengthening trade agreements with robust environmental provisions can also increase NDC ambitions and facilitate efficient implementation by aligning private sector incentives with climate goals. Ultimately, coherent policies and collaborative actions are crucial to bolstering NDC targets and accelerating progress towards net-zero emissions, highlighting the urgent need for trade policy reforms that support climate action and sustainable development.
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