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Why trade needs to be climate-smart

The Asia-Pacific region is now the largest emitter of GHGs in absolute terms. However, a new UN report ‘Asia-Pacific Trade and Investment Report 2021’ (APTIR) reveals significant room for all economies in the region to make their trade and investment more climate-smart.
Barriers to trade in environmental goods are more prevalent than barriers to trade in carbon-intensive fossil fuels. Wasteful and regressive fossil fuel subsidies also continue to contribute to GHG emissions in the region. According to the report, their timely abolishment and replacement with more targeted support policies could provide much-needed finance for social and environmental policies in addition to reducing emissions.
“The links between trade, investment and climate change are complex. The key is to ensure that the positive effects of trade and investment are maximized, such as by promoting trade and investment in renewable energy and low-carbon technologies, while minimizing the adverse effects, like by digitalizing trade and transport systems,” said Rebeca Grynspan, Secretary-General of the United Nations Conference on Trade and Development.

Climate-smart policies

Climate pledges by several countries in the Asia-Pacific region need to be underpinned by policies and measures to drive the transformation towards lower carbon economies, including in the private sector. Some 16 million new jobs would be created in this region in the spheres of clean energy, energy efficiency, engineering, manufacturing and construction industries, more than compensating for the estimated loss of five million jobs by downscaling industries.
While implementing climate-smart policies comes at a significant cost, particularly for carbon-intensive sectors and economies, the cost of inaction is far greater with some estimates as high as $792 trillion by 2100 if the Paris Agreement targets are not met.
While policy changes are essential to change investment and business behaviours, considering the potential new market opportunities to address climate change and the risk of inaction, the APTIR report cites that a growing number of companies have become proactive in reducing emissions, as part of their social and environmental responsibility, and to stay ahead of the curve in a rapidly changing market.

Business reporting

Guided by international standards and frameworks for responsible business conduct, such as the United Nations Global Compact, the OECD Guidelines, ISO 26000 and related standards at global, national, and sectoral levels, companies have for many years been integrating sustainability into their management systems. While such frameworks have been in existence for a couple of decades, their uptake in the region has risen significantly over the past few years. For example, the number of companies issuing sustainability reports have dramatically increased, with many them also measuring and accounting for GHG emissions as part of their reporting. Efforts to reduce energy consumption in business have also become more frequent, as companies realize the strong business case for and short pay back from many energy-efficiency investments.
Some companies have also adopted an internal price on carbon, helping them to start the process of adapting their business models and investments to a low-carbon world. In addition, over the past few years, a growing number of companies have committed publicly to achieve net-zero emissions by 2050, with the most ambitious setting emission reduction targets that are aligned with what scientists say is needed to limit global warming to 1.5 degrees.