Substantial room for Apac to improve on climate-smart trade investments

KUALA LUMPUR: All countries in Asia Pacific (Apac) inclusive of Asean have substantial room to improve on climate-smart trade investments following recommendations to achieve greater common smart policies, said an expert.

Economic affairs officer at the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) Dr Alexey Kravchenko said his team has analysed barriers to be climate smart in trading and other environmental goods and found that average tariffs applied to carbon-intensive fuels in Apac were lower than the tariffs applied to environmental goods.

“So our first recommendation is to liberalise climate-smart trade investment and buy environment-friendly goods and services.

This can be done unilaterally or as part of trade agreements, perhaps as part of Asean or ideally at a multilateral level.

“Our next recommendation is to phase out fossil fuel subsidies as this is one of the most low hanging fruits to climate action,” he said during the Panel Discussion 1: Asean 2030 – Changing Landscapes for Sustainable Trade at the Go Environmental, Social, and Governance (ESG) Asean Conference held virtually yesterday.

Kravchenko said the latest data in the Finding of Asia

Pacific Trade, Investment Report 2021 showed that Asia Pacific economies spend more than US$175 billion annually on fossil fuel subsidies.

“These funds can potentially be used better and more directly to support people in need,” he added.

He said Apac and Asean also need to encourage climate-smart investment and private sector initiatives.

These include the need to transform four key economic sectors identified in the report and to make them more climatesmart and will take a lot of effort.

“The energy sector supports all other sectors and the key to make it climate-smart is to increase the share of renewable energy generation.

“While the production of cement, iron and steel are all emission intensive and there’s urgent need to decarbonise them, different actions can be taken to reduce emissions in the transport sector when we choose to invest in cleaner modes of transport,” he said.

Kravchenko said the region should accelerate trade digitalisation because based on the report findings, if we go from the current relatively inefficient set of trade procedures to full paperless trade for each transaction, it can save the equivalent of one-and-a-half trees.

“This looks relatively small, but if you multiply this by all the trade transactions in the Apac region, that’s 100 million trees through trade utilisation,” he explained.

“Other than that, Apac must incorporate climate-smart considerations in regional trade agreements (RTAs) and investment agreements.

For example, one agreement worth mentioning is the agreement on climate change, trade and sustainability supported by New Zealand in collaboration with Costa Rica, Fiji, Iceland, Norway and Switzerland,” he added.

He said the next recommendation is to prepare for carbon pricing and carbon boarder taxes because existing carbon pricing does come at an economic cost when it’s implemented with marginal windfalls to economies without those carbon prices due to the carbon leakages.

“Finally, the region needs to strengthen capacity for climatesmart trade and investment policies. Policymakers and analysts should upskill in order to design and negotiate climatesmart trade and investment policies and agreements that meet the need of their countries as well as mitigate the impact of third-party climate-change policies,” he said.