Green Trade: Navigating through Prosperity and Perils

By Sabrine Ajroudi Department of Research and Strategic Studies of International Relations 03-05-2024

International trade has profound implications for climate change, as ships, trucks, and planes transporting goods between countries worldwide emit gases responsible for global warming.

This highlights one of the most prominent economic factors contributing to climate change, posing a challenge to the world. Just as international trade can be an effective element in fostering growth and enhancing the economy and development domestically and internationally, its role can completely reverse, becoming a major threat to maritime infrastructure and transportation routes or affecting production and consumption in terms of the quality, prices, and transportation methods, along with its external effects on the climate.

Basic traded commodities between countries such as foodstuffs like wheat, corn, iron, steel, and cement are sources of emissions. Overall, 25% of greenhouse gas emissions are attributed to global trade movement, according to a report by the World Bank in December 2023.

Certainly, there can be no abandonment of global trade, given its importance in resolving countries’ crises, whether related to climate change or wars. During floods, storms, global pandemics like COVID-19, or wars, trade intervenes by providing full supplies of food, medicine, and goods to meet countries’ needs and facilitate reconstruction.

Trade also plays a crucial role in mitigating climate change crises by distributing services, technologies, and goods that contribute to reducing carbon emissions, such as solar panels and wind turbines.

The World Bank report also pointed out that economically weak countries do not balance the relationship between climate and trade, as they do not rely on environmentally friendly mechanisms and strategies in their trade exchanges. As a result, their emissions grew at a faster rate than the global average between 2010 and 2018, due to their pursuit of developmental goals at the expense of promoting environmentally friendly trade.

Returning to green trade, this concept did not emerge from vacuum. The issue of climate change has prompted the world to rethink various mechanisms that can mitigate crises resulting from these changes, including production and consumption networks and sustainable supply chains. Consequently, many trends have emerged supporting all practical methods that promote what is called green trade, capable of creating a green economy that provides opportunities for food security, job creation, and poverty reduction.

The United Nations Environment Programme has defined green trade as “marketing activity that promotes sustainable measures to engage in environmentally friendly trade,” primarily focusing on engaging in renewable energy markets and energy efficiency.

The value of green trade reached approximately $1.3 trillion in the United States in 2019, with positive effects, creating 9.5 million full-time jobs.

According to the International Monetary Fund, China has the potential to increase its gross domestic product by about 0.7% and create 12 million job opportunities by 2027 by promoting green investment and implementing what is known as “carbon taxes.”

It is worth mentioning, that according to the Information and Decision Support Center at the Cabinet, that green trade faces many environmental challenges. Emissions from international freight transport could increase by 160% by 2050.

Companies may not respond to high-standard green trade trends and may turn to parties that do not adhere to green trade standards in their business, which can also apply to exporters who face obstacles due to high standards in green markets, making it difficult to enter these markets.

Global trade contributes to climate change through freight transport means like ships, planes, and trucks emitting greenhouse gases. In 2021, the United States and China emitted approximately 11.5 billion metric tons and 5 billion metric tons of carbon emissions, respectively. China’s carbon emissions increased by 33% in 2021 compared to 2010.

Low- and middle-income developing countries rely on agriculture and tourism sectors, highly affected by climate change through global warming, which contributes to reducing agricultural production levels. The report indicates that a one-degree Celsius increase could lead to a 39% decrease in exports from these countries, while for high-income countries, their exports could decrease by about 6%.

The report also stated that by 2030, about 70 million people in sub-Saharan Africa and South Asia could face hunger as a result of climate change.

However, solutions can be found to mitigate the negative effects of climate change through enhancing trade, which has the ability to distribute services and technologies that reduce carbon emissions, such as solar panels and wind turbines.

Green trade also has the potential to help low-income countries reduce their emissions and transition to a green economy. This transition can bring many benefits to these countries, where poverty and unemployment rates are high, meaning the involvement of developing countries in modern future economic trends and the reduction of their weak economic policies, entering a more advanced global trade pattern.

Regarding food security, green trade can contribute by promoting sustainable agriculture through providing modern techniques capable of increasing crop yields unaffected by climate change, as well as relying on high-quality digital technology and data that control the number of farmers and reduce tariffs and non-tariff barriers on food, arbitrary factors that waste time and require significant effort across borders.

Green trade also contributes to reducing mandatory tariffs on goods and services that comply with standards. However, it is necessary to reduce restrictions imposed by countries on exports during crises to prevent their expansion, affecting primarily goods that meet green trade standards.