AID FOR TRADE
At a plenary session on the second day of the Aid for Trade event, speakers focused on how this initiative can help develop critical trade infrastructure while supporting resilient, climate friendly and inclusive trade outcomes. The session benefited from the expertise and practical insights of experts and financing partners engaged in green transition activities.
In his opening remarks, WTO Deputy Director-General Xiangchen Zhang told participants that climate change is one of the most pressing challenges of our time. The World Bank estimates that natural disasters already cost low- and middle-income countries USD 390 billion per year regarding damage related to water, transport and power infrastructure.
“In that context, adapting to climate change by reducing climate-related risks and vulnerability is a key economic strategy. International trade can contribute to climate change adaptation efforts by enhancing economic resilience to extreme weather events through diversified supply chains, timely provision of essential goods and services, improved food security, and greater access to climate-related adaptation technologies,” he said.
DDG Zhang stressed that the transition to a low-carbon economy entails a substantive transformation of energy, production, transport and land-use systems. While climate change mitigation measures may incur short-term economic costs and cause short-term job losses, he noted, a just transition to a more sustainable economy offers long-term potential.
He cited estimates by the International Energy Agency (IEA) which indicate that meeting the Paris Agreement targets would require annual clean energy investments to triple to USD 4 trillion by 2030. Ensuring sustainable infrastructure is also critical for future growth and prosperity. A green transition also brings employment opportunities. The International Labour Organization (ILO) estimates that 24 million jobs worldwide could be created by the green economy by 2030, a net increase of 18 million.
DDG Zhang emphasized that 51% of Aid for Trade commitments made in 2020 include climate-related objectives. A majority of this climate-tagged funding, around 40%, has been allocated to LDCs. He also noted a realignment of priorities on a sectoral level, with Aid for Trade disbursements to renewable sources projects increasing by 36% between 2019 and 2020. During the same period, the share of disbursements to non-renewable sources projects decreased by 26%.
Initiatives such as the Trade and Environmental Sustainability Structured Discussions, the Informal Dialogue on Plastics Pollution and Sustainable Plastics Trade and the Fossil Fuel Subsidy Reform show the WTO's commitment to bring forth change, said DDG Zhang. The Agreement on Fisheries Subsides adopted at the WTO's 12th Ministerial Conference in June this year is another example of this commitment.
DDG Zhang emphasized, however, that more can be done to use the full potential of the multilateral trading system to accelerate the pace of change in adapting to and mitigating climate change. “Though we see progress in Aid for Trade, and momentum at the WTO, the rate of change is not enough. We continue to fall short of the 100 billion a year target that we set for climate finance by 2020. There remains a substantial gap between what is required and what has been provisioned,” he said. Read his full remarks here.
Concrete examples were showcased at the session to illustrate the far-reaching impact of environmental projects. Felix Rottman, Environmental, Social and Governance (ESG) manager of the Lake Turkhana Power Project in Kenya, made a presentation on the largest windfarm in Africa, which has produced cheap and clean energy since 2018. Last year, the plant produced 1.7 million megawatt hours (MWh), equivalent to powering half a million European city homes on a daily basis.
Beyond the efficiency benefits, Mr Rottman highlighted the spillover effects of this project in terms of development, education, employment and security for the population of Marsabit County, where the project is located, one of the most remote and poor regions in the country.
Song Dongsheng, independent advisor and former chairman of SinoHydro, showcased the benefits of hydropower — or hydroelectric power — not only for cutting down on emissions but also for contributing to the reduction of natural disasters, particularly droughts and floods, caused by global warming.
Pressure on governments to reduce emissions is increasing and promoting hydropower is part of the solution, said Mr Song. He called for the construction of more dams and urged developed countries that have already fully developed their hydroelectric potential to assist developing countries in this task. “Modern technology can already solve the negative impact of dams. The international community should support developing countries to develop more hydropower projects,” he said.
Sarah Ahn, Director-General of International Economic Affairs at the Ministry of Foreign Affairs of the Republic of Korea, explained how her government is harnessing Official Development Assistance (ODA) to support climate transition and promote the green economy in recipient countries. These elements are an increasingly important part of Aid for Trade and ODA more broadly.
Ms Ahn echoed the words by WTO Director-General Ngozi Okonjo-Iweala in the opening plenary of the Aid for Trade Global Review, where she suggested rebranding “Aid for Trade” as “Investment for Trade” in order to underline the importance of greater public-private sector cooperation.
“Investment for trade is based on the assumption that the private sector is an indispensable partner. Partnering with the private sector is vital not only to mobilize additional resources for development projects but also to enhance their effectiveness,” she said.
Kate White, Director of Economic Security at the Foreign, Commonwealth and Development Office of the United Kingdom, also outlined the role of trade as an integral part of the transition to a low-carbon economy that contributes to economic growth and development.
Recognizing in particular that many LDCs and small economies are the most vulnerable to the effects of climate change, Ms White welcomed the emphasis of this year's Aid for Trade Global Review on climate and sustainability. “Trade and investment policies profoundly affect climate change and our emission trajectory, and in multilateral Geneva we have to collectively work towards avoiding siloed approaches so that we can minimize the impacts of trade on climate, and vice versa,” she said.
Luis Vayas, Vice Minister of Foreign Affairs and Cooperation of Ecuador, said his country has made the green transition a priority strategy, being mindful of the need to preserve its unique biodiversity. This has translated into active international engagement in various fora, such as the WTO, where Ecuador coordinates the Informal Dialogue on Plastics Pollution and Sustainable Plastics Trade.
Mr Vayas stressed the need to address the green transition at national and international levels but also with different stakeholders and across generations. “It is important to work with the private sector and civil society in general as well as with academia and the scientific community. Gender and intergenerational approaches are also important,” he said.
Patrick Schröder, senior research fellow at the Chatham House Environment and Society Programme, focused on the interconnection between the circular economy and trade, stressing the need to achieve an absolute reduction in waste pollution and unsustainable resource consumption.
Mr Schröder underlined the social dimension of a circular economy, which should contribute to poverty eradication and human development objectives. “This is where trade comes in. To have this inclusive circular economy, international trade will play a key role in the delivery. No country or company can achieve a circular economy transition in isolation,” he said.
In a video message, Patrick Verkooijen, CEO of the Global Center on Adaptation, urged countries to leverage trade to massively and urgently scale up climate adaption efforts, particularly in light of the most recent report by the Intergovernmental Panel on Climate Change (IPPC), which states that the Earth will reach critical global warming levels earlier in the century than previously thought.
Africa will be especially vulnerable to climate impacts, exacerbated by the food, fuel and fiscal crisis provoked by the war in Ukraine and the ongoing COVID-19 pandemic, said Mr Verkooijen. To face that, he said: “Trade is vital because it crushes the volatility of food markets by providing a vital flow of supplies when domestic crops decline because of the climate emergency. And trade builds resilience through job creation and raising incomes. In essence, it puts food into mouths.”