27/06/2024
A growing European movement for a community-driven energy transition
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For the first time ever, the UN’s annual climate summit dedicated a part of its agenda to trade policy. The Trade Day at COP28 in Dubai offered a much-needed focus on the role that international trade can play in the transition to a net-zero emissions economy, alongside areas such as energy, transport, and deforestation.
Focusing on trade as a climate topic is long overdue. For one thing, oil, gas and coal account for a staggering 40% of the volume of maritime trade. We can expect fewer tankers on the horizon as the world phases out fossil fuels. In addition, traded goods account for around a quarter of CO2 emissions, through the fossil fuels used in their production and transport across the globe.
Countries’ carbon footprints are determined by what they buy and sell from each other, not just by their own production; a given country’s effort to reduce its emissions may just shift these emissions to its trade partners and be re-imported back, to no one’s benefit. Trade policy clearly needs to play a role in countries’ efforts to decarbonise. Trade will also be a linchpin in the exchange of environmental goods and services that will be needed to progress the climate transition.
The ECF has been working on the intersection of trade and climate for several years now. After all, Europe is one of the world’s climate action leaders, exemplified by its declining emissions coupled with its Green Deal target of net-zero by 2050; it is also a global trading power.
Against this backdrop, over the course of 2023 we teamed up with Foresight Intelligence to explore this topic in a new study, ‘The Future of Trade in a Net Zero World’. The work set out three potential explorative scenarios for 2040. To varying degrees, they all describe a world wrestling with growing climate impacts on trade infrastructure and agricultural production, as well as geopolitical tensions.
We found that the world of the next two decades is likely to contain unsettling surprises – from water shortages to supply chain chaos to reshoring of key industries. But we will have a better chance of navigating these challenges and securing climate-aligned outcomes through trade cooperation and reform of multilateral institutions.
Originally launched in the European Parliament, the report was presented to a global audience at the Trade House Pavilion at COP28 in Dubai. Both events highlighted the potential of trade policy as a tool for climate action, as well as trade’s relevance to the transition. They also prompted more focused debate on issues such as the need for an equitable, sustainable trade in critical raw materials, to demands for a more circular approach to traded goods, to climate-proofing maritime infrastructure.
Next steps
The first Trade Day at COP28 was welcome news: it opened the door to new debates on trade in the UN climate context. But we are still far from aligning climate and trade goals in a way that’s compatible with the Paris Agreement. Going forward, we aim to catalyse this alignment, first within Europe and then by engaging and inspiring others to join this effort. In 2024, we and our partners are sharing the report with new audiences to gain insights into other countries’ perspectives. For example, we recently co-hosted a dialogue in Brussels with the UK Mission to the EU to receive external feedback, including views from outside Europe.
We will also commission new analysis examining the climate vulnerability of the EU’s imports, as well as the effect of climate impacts – such as the extended drought in the Panama Canal – on trade infrastructure and global supply chains.