UNCTAD warns against carbon leakage to poor countries

Northern economies are tempted to move polluting industries to countries in the South to meet increasingly stringent environmental standards, but such an operation can then block exports from least developed countries, UNCTAD warns.

Least Developed Countries (LDCs) must not become “carbon havens” as polluters in rich countries eliminate high-emission industries from their economies, a new report from the United Nations Conference on Trade and Development (UNCTAD) has warned.

“Effective and increasingly restrictive environmental laws” in industrialized countries to reduce emissions of carbon dioxide (CO2), which causes pollution and global warming, push companies to pollute abroad, the report said.

And any policy by trading partners targeting carbon emissions generated by the production of exported goods could have a strong moderating effect on LDCs’ exports, even indirectly if LDCs are exempt from it.

Rebeca Grynspan, Secretary-General of UNCTAD, warned of “serious consequences” if such policies “displaced polluting industries from developed countries to LDCs to enable LDCs to meet their carbon emission reduction commitments.”

LDCs “disproportionately bear the burden of climate change impacts,” Grynspan said.

“The international community must take into account their development needs and fully support them to ensure a just, balanced and sustainable low-carbon transition,” he added.

“Least developed countries bear disproportionately the burden of climate change impacts. The international community must take into account their development needs and fully support them to ensure a just, balanced and sustainable low-carbon transition.” – Rebeca Grynspan

According to UNCTAD, carbon leakage occurs when countries with strict carbon emission policies cause an increase in emissions in other countries, as a direct result of the increased cost of reducing emissions in the regulated country.

It is concerned that LDCs, which are marginalized in global trade, will now face additional headwinds due to the environmental policies of their trading partners.

The 46 LDCs – almost all in Africa, Asia, the Pacific region, and Haiti in the Caribbean – are home to 1100 million people and generate minimal CO2 emissions: in 2019, they accounted for less than four percent of total global greenhouse gas emissions.

However, over the past 50 years, 69% of global deaths from climate-related disasters have occurred in LDCs.

On the other hand, the economies of LDCs are heavily dependent on exports of commodities such as minerals, metals and fuels, which cause high CO2 emissions.

Their products are often inputs to carbon-intensive global value chains, such as metals, cement, fertilizers or electricity.

Between 2018 and 2020, about 80 per cent of LDCs were classified as commodity dependent, meaning that more than 60 per cent of their merchandise exports consisted of primary products.

Therefore, the push to reduce carbon emissions could have a negative impact on LDCs’ export sectors, the report warns.

The more than two thirds of LDCs whose economies depend on carbon-intensive commodity exports could face severe fiscal constraints and losses in economic output if carbon extraction were significantly reduced.

Given the vulnerability of LDC economies, UNCTAD urges development partners to grant special and differential treatment to these 46 countries, with targeted, sufficiently flexible and long-term funding.

At the same time, LDCs need national policies for the transition to a low-carbon economy. The aim is to promote the adoption of green technologies and innovations and to create an enabling environment for technological upgrading and broader innovation, according to UNCTAD’s analysis.

The report was released shortly before the start of the 27th Conference of the Parties (COP27) on climate change at Sharm el-Sheikh on Egypt’s southern coast on 6 November.

Source: IpsNoticias