Economies in the Asia and the Pacific region can implement climate-smart trade and investment policies to combat climate change given its exports of manufactured goods and investment in manufacturing industries, according to a study by the United Nations.
An United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) study said such policies are defined as all government regulations aiming to reduce or limit net greenhouse gas emissions that can affect foreign trade and investment.
It said eliminating fossil fuel subsidies and establishing carbon pricing mechanisms are among the main policies that internalize the environmental costs of greenhouse gas emissions.
The Race to Net Zero: Accelerating Climate Action in Asia and the Pacific said unilateral or regional carbon pricing mechanisms can help economies in the region prepare for potential border carbon adjustment taxes.
“Carbon-pricing instruments can be a powerful component of post-Covid-19 (coronavirus disease 2019) recovery packages, which could simultaneously address greenhouse gas emissions and raise much needed revenue. The proceeds from carbon-pricing schemes should be channeled towards green growth and the circular economy as well as to help those most affected by the schemes,” it added.
The UN study also recommends other climate-smart trade and investment policies, including liberalizing trade in environmental goods and services, addressing cross-border trade inefficiencies, setting emissions standards for imports, implementing non-tariff measures (NTMs), and addressing other wasteful subsidies.
“Barriers to trade in environmental goods, which include technologies vital for climate action, such as solar panels and wind turbines, are more prevalent than barriers to trade in carbon-intensive fossil fuels,” it said.
The UN study said that apart from a few notable exceptions, such as Japan and the Philippines, 21 out of the 26 economies examined are imposing more non-technical NTMs on imports of environmental goods than on imports of carbon-intensive fossil fuels.
While many countries in the region have set mandatory emissions standards on imports of vehicles, require energy ratings labels and ban trade in chlorofluorocarbons, the gaseous compounds most responsible for stratospheric ozone depletion, it added, “more should consider doing so.”
The study likewise advised economies in Asia and the Pacific to adopt climate-smart non-tariff measures and encourage voluntary eco-labelling.
“Such measures could include requirements related to energy performance, emissions from cars, and certification of the legal and sustainable sourcing of timber. Additionally, governments may want to encourage the adoption of voluntary sustainability standards, such as eco-labelling of emission-intensive goods and food products,” it said.
The UN said trade facilitation measures could result in reduced greenhouse gas intensity of trade.
Digital trade facilitation, such as the implementation of automated customs and paperless trade systems, can contribute significantly towards reducing carbon dioxide (CO2) emissions, the study said.
“Streamlining trade procedures reduces trade costs, makes trade more inclusive and significantly lowers CO2 emissions associated with a given trade transaction. Governments may accelerate their trade digitalization efforts, including by acceding to the Framework Agreement on Facilitation of Cross-Border Paperless Trade in Asia and the Pacific,” it added.
Moreover, the UN study said foreign direct investment (FDI) can help mitigate greenhouse gas emissions.
“Foreign investors can back projects that reduce emissions and use clean technology. They can support climate-friendly sectors, such as renewable energy, and water and waste management, or the conservation and efficient use of natural resources,” it said.
To encourage climate-smart investment and private sector initiatives, the UN said governments can play an important catalyst role by directing the investment bodies under their control to reorient their funds towards investing in low-carbon businesses.
“They can encourage other investors as well as companies to increase their sustainability reporting, adopt internal carbon pricing and set emission reduction goals aligned with what is needed to limit global warming to 1.5°C,” it added.