SPEECHES — DG NGOZI OKONJO-IWEALA
Good afternoon. Welcome to this “Trade 4 Climate” dialogue.
My particular thanks to our co-hosts, John Denton and the International Chamber of Commerce, for excellent collaboration on this Dialogue series. I also want want to thank my team — Hoe Lim, Director of the Trade and Environment Division. I am very pleased that my friends Mari Pangestu and Minster Tom de Bruijn were also able to join us.
This is the fifth Trade Dialogue with Business and already the second one this year. These Dialogues are a very valuable platform for WTO to hear the perspective from business and other stakeholders, and to engage on the way forward.
We are meeting at a critical time. COP26 will start in a few days and we need to ramp up ambition to address the climate crisis. We must act now across every economic sector and every country to shift the global economy to a low-carbon development pathway.
Our conversation today needs to be purposeful and lead to action in at least 3 areas. These include:
- Using trade policy to support Nationally Determined Contributions under the Paris Agreement;
- Mainstreaming trade solutions into climate adaptation strategies and climate proofing supply chains; and
- Ensuring a just transition as trade and supply chains adjust to net zero strategies.
To kick start discussions, I would like to offer four ways by which such progress could be made.
First, let's work on promoting trade in goods, services and technology needed for a low carbon future. This will accelerate the transition to clean and affordable energy for all.
Average tariffs on goods needed for renewable energy and heat pumps are still between 10% and 14%. And non‑tariff measures also often hinder the deployment of clean energy technologies. These include inefficient fossil fuel subsidies which favour polluting technologies and slow down the transition to sustainable energy systems. The playing field is also not level. Tariffs and non-tariff barriers on clean goods are often higher than on dirty goods.
The trade pathway would be to reduce tariffs and reduce non‑tariff barriers that hinder the scaling-up, affordability and dissemination of goods and services needed for the transition to clean energy.
Second, we need greater transparency, dialogue and cooperation on trade-related carbon measures.
Since 2009, over 100 WTO members have formally notified more than 4,500 climate-related trade measures, from direct taxes to regulation, support programmes and public tender requirements. Developing countries account for 42% of all measures notified. It is good to see that Members are being so active.
As climate measures continue to be taken, we will need to foster transparency, dialogue and cooperation. Businesses need predictability. Take the case of carbon prices. Countries are moving at different speeds towards decarbonising their economies. A patchwork of more than 60 carbon pricing schemes already exist globally. Prices vary from less than USD 1 per tonne of CO2 to more than USD 130.
Concerns about carbon leakage have given rise to plans for border carbon adjustment measures to ensure that imported products are subject to the same carbon costs as domestic production. Fragmentation and potential trade frictions are a concern.
The point is that we all and business is really better off with a global carbon price. Let us bring in academia and other experts as necessary to work on methodologies. This is a call for greater cooperation and common solutions to make this happen. We need to have this dialogue at the WTO, and also collaborate with other international organizations working on this issue.
Thirdly, we need to increase the resilience of international supply chains to a changing climate.
Climate change is increasing the frequency and intensity of extreme weather events. Extreme hurricanes, for instance, already disrupt supply chains and predictions are that it will get worse.
But we can do something about it. The Global Center on Adaptation estimates that investing in more climate-resilient infrastructure has a cost‑benefit ratio of around one to four.
Open trade is itself a powerful adaptation tool that helps cushion the negative impacts of climate change. For example, a recent study estimates that phasing out agricultural tariffs and implementing other trade facilitating measures could reduce the climate change impact on undernourishment by up to 64% in 2050, saving 35 million people from hunger due to climate change.
We also learnt the importance of keeping supply chains open in the Covid 19 crisis.
These lessons can help us.
We can use trade facilitation and other trade policies to strengthen countries' response and resilience to climate‑related natural disasters.
We can identify challenges and opportunities for building supply‑chain resilience, remove bottlenecks and ensure restraint with regard to the use of export restrictions and other restrictive trade policies.
Fourth, in all of this, we have the vital responsibility to ensure a just and inclusive transition. We need to support trade-related climate action in developing countries.
Climate finance will be essential for supporting the transition to a low‑carbon economy. This will have to come from both public and private financing vehicles. The challenge is massive with annual climate financing requirement expected to exceed USD 1 trillion over the coming years. There is great expectation at COP26 for the 100 billion that was promised earlier. Here, the WTO Aid for Trade Initiative can help by mobilizing funding for green infrastructure and supporting the private sector in developing countries to adapt to climate change. In 2018, climate‑focused aid for trade amounted to USD 15 billion, representing one third (33%) of overall aid for trade.
But this falls still short of what is needed. So, it is important that we develop greater synergies between aid‑for‑trade and climate‑finance programming. Hope this is something that we can discuss at COP 26. There is an opportunity here that has not been fully exploited.
I believe that these pathways can help us to develop a meaningful trade for climate agenda. I look forward to your views and suggestions to strengthen and improve on these pathways.
Let me conclude by urging all of you to make the most out of this Dialogue. We need your input on how trade and the WTO can best support efforts to raise the ambition on climate change mitigation and adaptation, and contribute to a just transition.
I wish you all a productive discussion. Thank you.