1、2022WORLD TRADE REPORT Climate change and international tradeWhat is the World Trade Report?The World Trade Report is an annual publication that aims to deepen understanding about trends in trade,trade policy issues and the multilateral trading system.What is the 2022 Report about?The 2022 World Tra

2、de Report explores the complex interlinkages between climate change and international trade,revealing how international trade and trade rules can contribute to addressing climate change.Find out moreWebsite:www.wto.orgGeneral enquiries:enquirieswto.orgTel:+41(0)22 739 51 11Cover image:Kamarjani,Bang

3、ladeshTechnicians travel with their equipment by rickshaw to install a solar power system at a rural house built on Kharzanir Chor,an island on the Jamuna River.These islands come and go over a period of around 10 to 20 years and thus connecting them to the national grid is impractical.However,a pro

4、gramme of rural electrification is being rolled out using solar panels and batteries installed at individual homes.Laurent Weyl/Argos/Panos Pictures.ContentsAcknowledgements and disclaimer 2Abbreviations 4Foreword by the WTO Director-General 6Key messages 8Executive summary 9 A.Introduction 16 1.The

5、 next great transformation 18 2.Harnessing the transformative power of trade 20 3.Overview of the report 23 B.The role of trade in adapting to climate change 26 1.Introduction 28 2.Why does climate change adaptation matter?28 3.International trade and trade policy can support climate change adaptati

6、on strategies 34 4.International cooperation is essential to assist countries in adapting to climate change 39 5.Conclusion 47 C.The trade implications of a low-carbon economy 50 1.Introduction 52 2.Achieving a low-carbon economy is an imperative but faces challenges 52 3.A low-carbon economy would

7、change trade patterns and provide new trading opportunities 57 4.International cooperation is essential to achieve a low-carbon economy 65 5.Conclusion 74 D.Carbon pricing and international trade 78 1.Introduction 80 2.Carbon pricing policies can be an important strategy to reduce carbon emissions 8

8、0 3.Uncoordinated carbon pricing policies may undermine climate action and lead to trade tensions 85 4.Greater international cooperation is required to advance ambitious carbon pricing policies 90 5.Conclusion 94 E.The decarbonization of international trade 98 1.Introduction 100 2.Accounting for car

9、bon emissions originating from international trade is complex 100 3.International trade affects carbon emissions in multiple ways,both positive and negative 102 4.Reducing trade-related carbon emissions requires greater international cooperation 106 5.Conclusion 112 F.The contribution of trade in en

10、vironmental goods and services 116 1.Introduction 118 2.There is scope for intensifying trade in environmental goods and services 118 3.Trade in environmental goods and services can contribute to climate change mitigation 123 4.The development and deployment of environmental goods and services requi

11、re greater international cooperation 127 5.Conclusion 131 G.Conclusion 134Opinion pieces Danae Kyriakopoulou,“Climate inaction:implications for international trade”30 Gauri Singh,“Green hydrogen requires an appetite for action”60 Daniel C.Esty,“Trade implications of GHG pricing”92 Sophie Punte,“Buil

12、ding momentum for zero-emissions freight movement”110Bibliography 136CONTENTS1WORLD TRADE REPORT 20222AcknowledgementsThe World Trade Report 2022 was prepared under the general responsibility and guidance of Anabel Gonzlez and Jean-Marie Paugam,WTO Deputy Directors-General,and was coordinated by Jos

13、-Antonio Monteiro and Ankai Xu.Director-General Ngozi Okonjo-Iweala,Chef de Cabinet Bright Okogu,Yuvan Beejadhur and Trineesh Biswas from the Office of the Director-General,Robert Koopman,former Director of the Economic Research and Statistics Division,and Aik Hoe Lim,Director of the Trade and Envir

14、onment Division,provided valuable advice and guidance.The lead authors of the report are Marc Bacchetta,Eddy Bekkers,Cosimo Beverelli,Mateo Ferrero,Emmanuelle Ganne,Rainer Lanz,Jos-Antonio Monteiro,Roberta Piermartini,Daniel Ramos and Ankai Xu.Other authors are Absar Ali,Antonia Carzaniga,Svetlana C

15、hobanova,Lory Iunius,Jonathan Hepburn,Thomas Kruchi,Juneyoung Lee,Kathryn Lundquist,Sajal Mathur,Hanh Nguyen,Yves Renouf,Victor Stolzenburg,Enxhi Tresa,Ayse Nihal Yilmaz,Khadija Zaidi and Ruosi Zhang.Other written contributions were provided by Marc Auboin,Christophe Degain,Peter Donelan,Kartikeya G

16、arg,Simon Hess,Gergana Kiskinova,Katharina Laengle,Reto Malacrida,Jeanne Metivier,Marie Isabelle Pellan,Philippe Pelletier,Rishab Raturi,Melvin Spreij,Ludivine Tamiotti,Antony Taubman,Jessyca Van Weelde and Xiaoping Wu.The following colleagues in the WTO Secretariat provided valuable written comment

17、s on drafts of the report:Ratnakar Adhikari,Antonia Carzaniga,Mireille Cossy,Violeta Gonzalez,Ulla Kask,Arne Klau,Gabrielle Marceau,Clarisse Morgan,Juan Pablo Moya Hoyos,Marie Isabelle Pellan,Cdric Pene,Michael Roberts,Stela Rubinova,Melvin Spreij,Karsten Steinfatt,Sainabou Taal,Antony Taubman,Crist

18、ian Ugarte and Xiaoping Wu.Valuable research assistance was provided by Francesco Bellelli,Basile Feller,Tracy Frei,Benjamin Ignoto,Socrates Kraido Majune and Xiao Yang.External contributions were received from Daniel C.Esty(Yale Law School),Danae Kyriakopoulou(London School of Economics and Politic

19、al Science),Sophie Punte(We Mean Business Coalition)and Gauri Singh(International Renewable Energy Agency).Background research were also received from the following WTO Chairs,in coordination with Mustapha Sadni Jallab and with support from Sandra Rossier of the Knowledge and Information Management,

20、Academic Outreach and WTO Chairs Programme Division:Soledad Aguilar(Latin American Faculty of Social Sciences),Osman Gulseven(Sultan Qaboos University),Nada Hazem,Myriam Ramzy and Chahir Zaki(Cairo University),Sufian Jusoh(National University of Malaysia),Zhang Lei and Jiang Yue(University of Intern

21、ational Business and Economics),Thuto Lucy Matobo(National University of Lesotho)and Boopen Seetanah(University of Mauritius).The following individuals from outside the WTO Secretariat also provided useful comments on early drafts of the report:Rolando Avendano,Magnus Benzie,Chad Bown,Paul Brenton,V

22、icky Chemutai,Brian R.Copeland,Rob Dellink,Klaus Desmet,Yann Duval,Koffi Aseye Makafui Elitcha,Robert J.R.Elliott,Daniel C.Esty,Marco Fugazza,Ian Douglas Gillson,Christian Gollier,Jean-Marie Grether,Stephane Hallegatte,Katy Harris,Dirk Heine,Bernard Hoekman,Michael Jakob,Euijin Jung,Stephen Karingi,

23、Alexander Kasterine,Alexey Kravchenko,Vesile Kulacoglu,Bruno Lanz,Jia Li,Jeremy Lucchetti,Tatiana S.Manolova,Nicole Mathys,Jason McCormack,Nanno Mulder,Hildegunn Kyvik Nords,Ralph Ossa,Joseph Pryor,Bernard Sinclair-Desgagn,Ronald Steenblik,Aleksandar Stojanov,Shawn W.Tan,Mara Tayag,Robert Teh,Shunta

24、 Yamaguchi and Irina Zodrow.Gratitude is also due to the speakers of the World Trade Report 2022 Webinar Series on Trade and Climate Change for their insightful presentations:Brian R.Copeland,Klaus Desmet,Katy Harris,Maria Huge-Brodin,Jenny Minier,Joseph Sarkis,Misato Sato,Joseph S.Shapiro,Bernard S

25、inclair-Desgagn and Tatiana S.Manolova.Special thanks also go to Isabelle Albrow Gerard,Carole Boureux,Viktoriya Lazorenko and Anne Lescure for helping with the organization of the webinars.Jos-Antonio Monteiro and Ankai Xu of the Economic Research and Statistics Division managed the drafting of the

26、 Report.The text production of the Report was managed by Diana Dent and Anne Lescure of the Economic Research and Statistics Division.The production of the Report was managed by Anthony Martin and Helen Swain of the Information and External Relations Division.William Shaw and Helen Swain edited the

27、report.Gratitude is also due to the translators in the Language and Documentation Services Division for the high quality of their work.3DisclaimerThe World Trade Report and its contents are the sole responsibility of the WTO Secretariat,except for the opinion pieces written by the external contribut

28、ors,which are the sole responsibility of their respective authors.The Report does not reflect the opinions or views of members of the WTO.The authors of the Report also wish to exonerate those who have commented upon it from responsibility for any outstanding errors or omissions.ACKNOWLEDGEMENTS AND

29、 DISCLAIMERWORLD TRADE REPORT 20224AbbreviationsAoA Agreement on AgricultureAPEC Asia-Pacific Economic CooperationBCA border carbon adjustment CBDR principle of common but differentiated responsibilitiesCPC United Nations Central Product ClassificationCO2e CO2equivalentCTE Committee on Trade and Env

30、ironmentEDB WTO Environmental DatabaseEG environmental goodsEGS environmental goods and servicesEIF Enhanced Integrated FrameworkEITE emission-intensive trade-exposedEKC Environmental Kuznets CurveEPP environmentally preferable productsEREG energy-related environmental goodsES environmental services

31、ETS EU Emissions Trading SystemEU European UnionET environmental technologiesEWE extreme weather eventFFEDC fossil fuel export-dependent countryFFSR Fossil Fuel Subsidy ReformG7 Group of SevenG20 Group of TwentyGATS General Agreement on Trade in ServicesGATT General Agreement on Tariffs and TradeGDP

32、 gross domestic productGGP green government procurementGHG greenhouse gasesGPA Agreement on Government ProcurementGTM WTO Global Trade ModelGVC global value chainHS Harmonized SystemICAO International Civil Aviation OrganizationIDP Informal Dialogue on Plastics Pollution and Environmentally Sustaina

33、ble Plastics TradeIEA International Energy AgencyIMF International Monetary FundIMO International Maritime OrganizationIP intellectual propertyITC International Trade CentreI-O input-outputIPCC Intergovernmental Panel on Climate ChangeIRU International Road Transport UnionLDC least-developed country

34、MFN most-favoured nationMSME micro,small and medium-sized enterpriseNDC nationally determined contributionNGO non-governmental organizationNAFTA North American Free Trade AgreementNTB non-tariff barrierNTM non-tariff measureOECD Organisation for Economic Co-operation and DevelopmentR&D research and

35、developmentRCA revealed comparative advantageRTA regional trade agreementSCM subsidies and countervailing measuresSDGs United Nations Sustainable Development GoalsSIDS small-island developing statesSPS sanitary and phytosanitarySTC specific trade concernSTDF Standards and Trade Development FacilityT

36、BT technical barriers to tradeTeCO2 Trade in embodied CO2TESSD Trade and Environmental Sustainability Structured DiscussionsTFA WTO Trade Facilitation AgreementTPRM Trade Policy Review Mechanism5TRIMs trade-related investment measuresTRIPS WTO Agreement on Trade-Related Aspects of Intellectual Prope

37、rty RightsUNCTAD United Nations Conference on Trade and DevelopmentTRAINS UNCTAD Trade Analysis Information System databaseUNDRR United Nations Office for Disaster Risk ReductionUNECE United Nations Economic Commission for EuropeUNFCCC United Nations Framework Convention on Climate ChangeUN United N

38、ationsUS United StatesWCO World Customs OrganizationWMO World Meteorological OrganizationWTO World Trade OrganizationABBREVIATIONSWORLD TRADE REPORT 20226Climate change is an existential threat to peoples lives and is dramatically reshaping economic activity and trade.This year alone,from the Horn o

39、f Africa to China,from Europe to the Americas,we have seen increasing heat and prolonged drought damage crops and reduce electricity production,while low water levels in major rivers have made it difficult to transport industrial and agricultural goods.Severe flooding left a third of Pakistan under

40、water,devastating key export crops and putting the countrys food and economic security at risk.The climate crisis is a problem of the global commons,and one that demands a collective and effective multilateral response.The World Trade Report 2022:Climate Change and International Trade reviews the ro

41、le of trade,trade policy and international trade cooperation in addressing climate change.It discusses how changing temperature and weatherand the low-carbon transition required to contain rising greenhouse gas emissionsare likely to impact the welfare of nations populations and alter their comparat

42、ive advantages.The report argues that trade is a force for good for climate and part of the solution for achieving a low-carbon,resilient and just transition.While trade itself does generate emissions from production and transport,trade and trade policies can accelerate the dissemination of cutting-

43、edge technologies and best practices,and enhance incentives for further innovation while creating the jobs of tomorrow.Trade is instrumental for investments in clean energy to have the greatest reach and impacts,at lowest cost and where they are needed the most.These are returns we would be unwise t

44、o forego,especially now that the big green investment push we need will coincide with rising real costs of capital and looming uncertainty about energy security due to geopolitical tensions and war.Trade and trade policies are also part of any sound strategy for climate change adaptation,helping ind

45、ividual countries,especially vulnerable developing ones such as small-island developing states,least-developed countries and land-locked developing countries,better respond to and protect themselves from extreme weather events,and,in the longer term,to adjust to shifts in agricultural productivity a

46、nd changes in wider international competitiveness.At the global level,what we call“re-globalization”more diversified and deconcentrated goods and services production,drawing in formerly marginalized countries and communities with the right business environment would promote supply resilience and inc

47、lusion in a world of ever more frequent climate induced shocks.This would provide better risk management than reshoring,nearshoring or friend-shoring.In tandem with other public policies,trade has already been playing an important role in the global climate response.For example,the cost of solar pan

48、el systems has plummeted in the last three decades,and about 40 per cent of the cost decline has been attributed to scale economies made possible in part by international trade and value chains.The capacity of solar panels traded across borders in 2017 reached almost 80GW,equivalent to over 9percent

49、 of global electricity generation.Further opening up trade in environmental goods and services could do more.The WTO estimates that reducing tariffs and non-tariff measures on energy-related environmental goods could increase total exports of these products by 5 per cent by 2030 and,at the same time

50、,lead to a net reduction in carbon emissions.There are employment benefits,too:the International Energy Agency estimates that the shift to clean energy could generate 14 million new jobs in clean energy sectors and 16 million jobs in related sectors globally by 2030.Foreword by the WTO Director-Gene

51、ral7FOREWORD BY THE WTO DIRECTOR-GENERALBeyond amplifying the impact of climate policies and financing,greater international trade cooperation is key to manage and minimize potential trade frictions associated with climate action.For instance,close to 70 carbon pricing schemes are presently in opera

52、tion worldwide.Without common approaches for prices and comparing equivalence,there is a significant risk that unilateral measures aiming to prevent carbon leakage and loss of competitiveness could stoke trade tensions and create high administrative costs for firms and governments.Uncoordinated clim

53、ate actions could also hamper decarbonization efforts by raising uncertainty and discouraging much-needed investment.The ongoing proliferation of decarbonization initiatives and standards there are more than 20 different decarbonization standards in the steel sector alone creates confusion for produ

54、cers and could potentially lead to trade frictions.In line with its longstanding role of promoting transparency vis-vis policy measures affecting trade and encouraging cooperation in the direction of comparability,compatibility and harmonization,the WTO could play a similar role for carbon pricing a

55、nd standards.The WTO is working with other multilateral agencies the International Monetary Fund,the Organisation for Economic Co-operation and Development and the World Bank on bringing in a trade perspective to discussions and research on carbon mitigation approaches.Clear,predictable and shared u

56、nderstandings about trade-related climate measures would serve the needs and development opportunities of businesses and consumers in developing countries far more effectively than the high transaction costs that would come with a mess of varying rules for different markets.But a just transition to

57、a low-carbon economy demands additional measures,including financial support,to help low-income regions address and overcome the potential adverse effects of carbon pricing.The case for delivering on the US$100 billion climate financing pledge remains strong,and a robust response on loss and damage

58、is urgently needed.The Aid for Trade initiative which is increasingly about investment for trade can and should help developing and least-developed countries build climate-friendly critical trade infrastructure.This would support a resilient and inclusive low-carbon transition.This report is being l

59、aunched at the same time as the 27th United Nations Climate Change Conference(COP27).What I hope to see emerge there and elsewhere is a trade and investment facilitation pathway in support of a just transition to a low-carbon economy.Finance is one part of the equation but it is not the only part.A

60、good trade policy framework is necessary to turn climate investment into climate transformation.We must start to talk about trade not as a threat but as a solution to the climate crisis.Achieving better trade and climate outcomes is possible but we will need strong political leadership.Our success a

61、t the WTOs 12th Ministerial Conference in June 2022 where members unanimously agreed that trade must be part of the solution to climate change and struck an accord on curbing harmful fisheries subsidies that is the WTOs first agreement with environmental sustainability at its coreshows that this is

62、possible.Looking ahead,the WTO has an opportunity to use the present moment to strengthen its role as a forum for coordination on trade and climate change,to address trade policy barriers holding back the dissemination and use of low-carbon technologies,and to support structural changes needed to de

63、carbonize the global economy.I hope we will make the most of this opportunity.Dr Ngozi Okonjo-IwealaDirector-GeneralWORLD TRADE REPORT 20228Key messages Climate change is reshaping countries economic and trade prospects,and is a major threat to future growth and prosperity.Higher temperatures,rising

64、 sea levels and more frequent extreme weather events bring the prospect of productivity losses,production shortages,damaged transport infrastructure,and supply disruptions.Without significant reductions in global greenhouse gas(GHG)emissions,many countries are likely to find their comparative advant

65、ages changing,with agriculture,tourism and some manufacturing sectors particularly vulnerable to climate impacts.Trade is a force multiplier for countries adaptation efforts,reducing costs and increasing impact.Climate shocks will remain costly and disruptive,but trade can help countries better prep

66、are and respond,through access to technologies and critical goods and services,such as food and healthcare products.This is particularly relevant for the most vulnerable economies least-developed countries,small-island developing states,and landlocked developing countries.In the longer-run,open inte

67、rnational markets would help countries smooth necessary economic adjustment and resource reallocation,and more diversified sources of supply for key goods and services would translate into greater resilience against localized weather events.Trade can reduce the cost of mitigation and speed up the lo

68、w-carbon transition and the creation of green jobs.Though trade,like most current economic activity,generates GHG emissions,it also contributes to reducing them,by enabling access to cutting-edge climate technologies;incentivizing innovation in low-carbon technologies by expanding market size;and fo

69、stering competition and scale economies that help drive down costs.Trade and value chains have been major factors in the dramatic fall in the cost of generating solar and wind energy.With renewable energy now cheaper than fossil alternatives in some places,the adoption of renewables has accelerated.

70、But there is scope to do more:WTO simulations suggest that eliminating tariffs and reducing non-tariff measures on a subset of energy-related environmental goods could boost exports by 5 per cent by 2030,while the resulting increases in energy efficiency and renewable uptake would reduce global emis

71、sions by 0.6 per cent.To the extent trade helps speed up the low-carbon transition,it would contribute to job creation:one estimate suggests the global shift to clean energy will generate as many as 30 million new jobs in clean energy and related sectors by 2030.International trade cooperation can m

72、ake climate actions more effective,and the low-carbon transition more just,by minimizing trade frictions and investor uncertainty.As governments ramp up climate action towards nationally determined contributions,there is a risk that unilateral measures aiming to prevent carbon leakage and the loss o

73、f competitiveness of domestic industry could stoke trade tensions,create investment-discouraging uncertainty,and impose disproportionate costs on firms and governments in developing countries.International cooperation on trade-related aspects of climate policy,such as carbon pricing and decarbonizat

74、ion standards,would reduce these risks.The WTO could play a more valuable role as a venue for transparency,comparability and potential harmonization of such measures.Aid for Trade,as well as trade-oriented private investment,can help developing and least-developed countries build climate-resilient t

75、rade infrastructure,contributing to making the low-carbon transition more just and fair.9EXECUTIVE SUMMARYExecutive summaryClimate change represents a severe,pervasive and potentially irreversible threat to people,ecosystems,public health,infrastructure and the global economy.Left unabated,it could

76、undo much of the progress made over recent decades in development,poverty reduction and prosperity creation.Developing countries in particular small-island developing states and least-developed countries(LDCs)are likely to suffer the most,due to their greater exposure and vulnerability to climate ri

77、sks and natural disasters,and their more limited capacity to adapt to climate change.Leveraging trade to tackle climate change presents several development and growth opportunities and will require significant policy actions to advance a just transition towards a low-carbon,inclusive and resilient f

78、uture.In the face of this existential threat,the 2022 World Trade Report explores the multifaceted relationship between international trade and climate change.It looks at how international trade might exacerbate climate change,how the consequences of climate change might alter trading patterns and r

79、elationships,and how trade could be a force multiplier for the global response to the climate crisis.The report spells out various ways international trade cooperation,fostered by the WTO,could support and lower the cost of implementing the Paris Agreement and fulfilling the Glasgow Climate Pacts go

80、al of net-zero greenhouse gas(GHG)emissions by mid-century(IPCC,2022a).The reports core message is clear:trade is a critical point of leverage for transforming the global economy and putting the planet on a sustainable trajectory.Climate change is a problem of the global commons.Markets do not suffi

81、ce to address the threats from GHG accumulation in the atmosphere because firms and consumers often do not directly face the costs of the emissions they cause.To correct these market failures,carefully constructed climate change mitigation policies are needed to incentivize behavioural change and in

82、creased investment in energy efficiency and climate-friendly technologies.Ambitious GHG mitigation policies face a wide range of challenges,including conflicting economic and development priorities,divergent energy strategies and geopolitical competition.Fragile economic recovery from the COVID-19 p

83、andemic,rising inflationary pressures,increasing food security challenges and the war in Ukraine have added further uncertainties.While the transition to a low-carbon economy entails substantial short-term investment and adjustment costs,it will yield major economic dividends and create wide-ranging

84、 opportunities for more sustainable and fair development.A well-managed low-carbon transition can limit climate risks,promote biodiversity and improve food security.Investments in clean energy also promise better air quality,public health and quality of life for people across the world.Bold climate

85、actions could yield a cumulated economic gain of US$26 trillion between 2018 and 2030(Garrido et al.,2019).The low-carbon transition could also create millions of new jobs in clean energy and energy-related sectors and support a more inclusive economy,not least because more women work in the renewab

86、le energy sector than in the fossil fuels sector(IRENA,2021).Because the existing build-up of GHGs in the atmosphere makes some degree of climate change unavoidable,adaptation strategies are also required to make communities more resilient in the face of sea level rise,more intense storms and change

87、d rainfall patterns leading to more floods,droughts and wildfires as well as significant effects on agricultural productivity.These consequences will profoundly impact international trade and coping with them requires adaptation efforts to identify,prevent and reduce climate risks,and minimize unavo

88、idable losses and damages(IPCC,2022b).The report makes clear that trade and climate change are deeply intertwined,and that more effective responses to mitigate and adapt to climate change will require stronger and better international trade cooperation.The report makes three key points.First,while c

89、limate change can have profound negative impacts on international trade,trade and trade policies are essential elements of sound climate change adaptation strategies.Second,although trade generates GHG emissions,trade and trade policies can foster the transition to a low-carbon economy by providing

90、access to and spurring innovation in low-carbon technologies,disseminating best practices and helping clean energy investments achieve the greatest reach at the lowest cost.Third,improving the ambition and effectiveness of climate action requires greater international trade cooperation at the WTO.WO

91、RLD TRADE REPORT 202210Even though climate change can have profound negative impacts on international trade,trade and well-designed trade policies are essential elements of sound climate change adaptation strategies.Climate change can cause productivity losses,supply shortages and transport disrupti

92、ons,severely impacting trade.Because these impacts will differ across regions,some economies will be at a disadvantage.Export growth of agricultural products and light manufacturing from LDCs have been found to decrease,on average,by between 2 and 5.7 per cent in response to a rise in the countrys t

93、emperature by 1C(Jones and Olken,2010).Extreme weather events can also affect key transport corridors and infrastructure,potentially creating vulnerabilities in the global trade network.Maritime transport which accounts for 80 per cent of world trade by volume is particularly exposed to climate chan

94、ge,while other modes of transport can also be impacted.Small economies and landlocked countries,which trade through a limited number of ports and routes,can suffer major trade bottlenecks from climate-related disruptions.For instance,the Paran River transports 90 per cent of Paraguays international

95、trade of agricultural goods,but recurrent droughts have in recent years frequently lowered water levels,diminishing the weight barges can carry,causing congestion and delays.Climate-induced disruptions tend to be more severe in heavily concentrated global value chains(GVCs)where intermediate inputs

96、are difficult to replace in the short run.For example,in 2011,flooding in Thailand disrupted the global electronic and automotive industries,causing an estimated 2.5 percentage point decline in the rate of growth of global industrial production(Kasman,Lupton and Hensley,2011).Climate-induced supply

97、chain risks are often exacerbated by firms limited capabilities to assess climate risks and implement risk management strategies.Without significant reduction in GHGs,climate change is likely to alter countries comparative advantage and trade patterns by changing endowments in natural resources or a

98、ltering the efficiency with which land,labour,capital and other production factors can be deployed to produce goods and services.Commodity dependence and lack of diversification can exacerbate vulnerabilities to climate change,underscoring the need to support efforts to accelerate economic diversifi

99、cation.Agriculture,tourism and some manufacturing sectors are particularly vulnerable to climate change.Agriculture is the most exposed and vulnerable sector to changes in temperature and precipitation,raising serious concerns about future food security.Sub-Saharan Africa and South Asia are expected

100、 to experience larger adverse agricultural yield shocks than other regions;and given their high share of agricultural employment,they may face more severe labour market disruptions.Changes in climate might also reduce the touristic appeal of long-favoured destinations,while sea level rise and extrem

101、e weather events could permanently damage tourism infrastructure.Manufacturing sectors dependent on climate-sensitive inputs,such as food processing,could suffer from reduced access to raw materials.Labour-intensive production could also be adversely affected as rising temperatures diminish capacity

102、 to work and raise risks of accidents and heat exhaustion.Adapting to climate change is a sustainable development imperative.Without understating how costly and disruptive adaptation will continue to be,trade can make an important contribution to climate risk prevention,reduction and preparedness.Tr

103、ade can facilitate the development and deployment of pro-adaptation technologies,such as climate-resistant crop varieties,early warning systems and water conservation and storage systems.By fostering higher economic growth,trade can generate additional financial resources to invest in adaptation str

104、ategies such as climate-resilient infrastructure.Trade openness also allows for wider access to services that help prepare for climate-related shocks,such as weather forecasting,insurance,telecommunications,transportation,logistics and health services.Access to imported essential goods and services,

105、such as food and medical supplies,can help economies cope and recover after an extreme weather event hits.Facilitating imports of construction materials can contribute to post-disaster reconstruction.Allowing trade to resume faster after climate-induced shocks can also support economic recovery.Even

106、 in the absence of extreme weather events,long-term shifts in weather patterns can still cause crop yields to fall,and trade can help alleviate food insecurity by allowing regions to import food to fill demand gaps.Overall,countries more open to trade tend to have a greater capacity to adapt to clim

107、ate change(see Figure 1).The role of trade in coping with climate change underlines that trade policies must be an integral 11EXECUTIVE SUMMARYFigure 1:Greater capacity to adjust to climate change tends to be associated with greater openness to tradeSources:Authors calculations based on ND-GAIN Clim

108、ate Readiness Index and the trade openness index for 2020 from the World Development Indicators.Note:The climate change readiness index measures a countrys ability to leverage investments and convert them to adaptation actions.The trade openness measures the sum of a countrys exports and imports as

109、a share of that countrys GDP in percentage.part of climate change adaptation strategies.A small but increasing number of trade measures notified by WTO members between 2009 and 2020 are related to climate change adaptation,though these measures which mostly take the form of support in theagricultura

110、l sector account for less than 4per centof all notified climate-related trade measures(161 outof 4,629).Trade and trade policy are,however,not a panacea to adapt to the highly disruptive consequences of climate change.Addressing the factors and conditions underpinning the vulnerabilities and exposur

111、es to climate risks is essential.In addition,well-functioning markets,including in the areas of infrastructure,finance,food and labour,are important to facilitate adjustment.Although trade generates GHG emissions,trade and trade policies can be part of the solutions to support a low-carbon transitio

112、n.Trade,like most economic activities,emits GHGs.The world share of carbon dioxide(CO2)emissions embodied in world goods and services exports peaked in 2011 and was estimated to account for around 30 per cent of global carbon emissions in 2018.This share indicates the close relationship between prod

113、uction,trade,consumption and the consequent emissions under current technologies and production processes.International trade has complex effects,both positive and negative,on GHG emissions,going well beyond the emissions released during the production and 0.10.50.711.421.21.62.2Trade openess index(

114、in logarithm)1.82.42.60.20.30.60.80.4Climate change adaptation readiness indexLow-incomeMiddle-incomeHigh-incomeWORLD TRADE REPORT 202212transportation of the exported goods and services.The overall impact of trade on carbon emissions depends,among others,on the sector and countries involved as well

115、 as the energy sources,production methods and modes of transport.On the positive side of the ledger,international trade increases the worldwide diffusion and deployment of lower-emission goods,services,capital equipment and know-how.It also reduces the costs of these products through efficiency impr

116、ovements,economies of scale and learning-by-doing.For instance,the cost of solar electricity has plunged by 97 per cent since 1990.A significant part of the cost decline of solar panel systems has been attributed to GVCs,which have enabled producers to lower production costs and reap economies of sc

117、ale by locating different production stages in different countries(WTO and IRENA,2021).Market opportunities for low-carbon exports can also spur more investment and innovation in new low-carbon technologies and encourage efforts to better adapt these technologies to local conditions.In addition,trad

118、e opening can reduce the carbon intensity of economic output by shifting resources to more productive and cleaner firms,as firms engaged in international trade tend to be more competitive and energy efficient than purely domestic firms.The higher incomes typically associated with greater integration

119、 into global trade also give individuals the space to demand higher environmental quality and to pressure governments to adopt more stringent climate regulations and provide additional financial resources for environmental protection.International trade in renewable energy and electricity has also t

120、he potential to help compensate for the uneven geographical distribution of usable sunlight and wind,though this will hinge on important technological breakthroughs notably in energy storage.More developing countries are already moving to harness their abundant renewable energy potential.For instanc

121、e,Morocco hosts the worlds largest solar power station,while Egypt is building a solar photovoltaic park touted to become the worlds largest.On the negative side of the ledger,trade opening raises GHG emissions by increasing the production,transportation,consumption and disposal of products.The frag

122、mentation of production represented by GVCs involves more transport and therefore more emissions.Trade mayin the absence of relevant policies incentivize emissions-boosting deforestation.Changes in the sectoral composition of productiona standard result of trade openingcan also increase or reduce GH

123、G emissions,depending on whether the country in question has a comparative advantage in carbon-intensive industries,which in turn depends on factors including resource endowments,technological level and environmental and energy policies(WTO,2021a).Rising concern about trade-related GHG emissions has

124、 led to calls to limit imports in favour of producing and consuming local goods and services.But if countries close their borders to trade,meeting demand for previously imported goods and services would cause domestic production and associated GHG emissions to rise;while foregoing the broader gains

125、from trade would cause living standards to fall.Instead of re-shoring,the low-carbon transition would be better supported and accelerated by cleaner trade,which would involve reducing the carbon intensity of production,transportation and GVCs,developing and deploying climate-friendly technologies an

126、d promoting trade in climate-friendly goods and services.Major decarbonization pathways for international transport include switching to lower-carbon fuels,improving vehicle efficiency and phasing-out carbon-intensive vehicles.Well-designed trade policies must support the role of trade in deploying

127、and disseminating climate mitigation technologies.Trade and trade policies are an integral part of a limited but increasing number of countries plans to achieve carbon emission-reduction targets under the Paris Agreements nationally determined contributions.Complemented by other policies,trade polic

128、ies can help countries diversify away from reliance on carbon-intensive sectors,create new jobs and increase the ambition of mitigation efforts.Between 2009 and 2020,WTO members notified 3,460 trade-related climate change mitigation measures explicitly addressing climate change mitigation,energy con

129、servation and efficiency,and alternative and renewable energy.Support measures and technical regulations are the main types of notified trade-related climate change mitigation measures(see Figure 2).Despite the benefits of opening trade in the environmental industry,barriers to trade in environmenta

130、l goods and services remain significant.In addition,tariff and non-tariff barriers tend to be lower in carbon-intensive industries than in clean industries(Shapiro,2021).Removing barriers to trade in environmental products can contribute to addressing climate change.WTO 13EXECUTIVE SUMMARYsimulation

131、 analysis suggests that eliminating tariffs and reducing non-tariff measures on some energy-related environmental goods and environmentally preferable products could increase global exports in these products by US$109 billion(5 per cent)and US$10.3 billion(14 per cent),respectively,by 2030.The resul

132、ting improvements in energy efficiency and renewable energy adoption are estimated to reduce net carbon emissions by 0.6 per cent,while the knock-on effects of accelerating the spread of environmental innovation would do much more,including increasing the demand for ancillary services relating to th

133、e sale,delivery,installation and maintenance of environmental technologies.That said,harnessing the full potential of international trade in renewable energy and other environmental goods and services also requires ambitious climate policies and actions to upgrade power-generation,transmission and d

134、istribution infrastructure as well as to build a well-functioning quality infrastructure.Improving the ambition and effectiveness of climate change action requires greater international trade cooperation.Addressing climate change requires global cooperation on all fronts,and international trade coop

135、eration,at the WTO and elsewhere,is an integral part of the efforts.The bottom-up international climate regime,with nationally determined contributions and mitigation actions,encourages broad-based participation and underlines the urgency of climate action.But it also results in widely varying level

136、s of climate ambition across jurisdictions,with the attendant risks of carbon leakage and competitiveness loss,especially in carbon-intensive and trade-exposed sectors.These risks have prompted some countries to consider border carbon adjustment measures.Uncoordinated trade-related climate policies,

137、however,could give rise to trade tensions and heighten marketplace uncertainty in ways that discourage much-needed Figure 2:Support measures and technical regulations are the most common trade-related climate change mitigation measuresSources:Authors calculation,based on the WTO Environmental Databa

138、se.Note:The category“technical regulations”includes conformity assessment procedures.One notified measure can cover more than one type of policy.Support measuresTechnical regulationsOther measuresNotified climate change mitigation measures20020200044441394

139、360231160187WORLD TRADE REPORT 202214low-carbon investment.Avoiding such outcomes calls for leveraging every opportunity at the WTO and elsewhere for improving cooperation on the trade-related aspects of climate change policies.At the regional level,a limited but increasing number of trad

140、e agreements,namely 64 out of 349 notified regional trade agreements(RTAs),explicitly contain climate change-related provisions.Some of these RTAs commit parties to effectively implement the Paris Agreement and adopt climate change policies,including carbon pricing,while a few others remove some tra

141、de and investment barriers to climate-friendly goods,services and technologies.At the global level,as noted above,the open and predictable international markets underpinned by the multilateral trading system already facilitate access to environmental technologies,food and other critical supplies.WTO

142、 members notify climate-related measures and discuss potential concerns,as well as the underlying environmental rationale,in various WTO bodies such as the Committee on Trade and Environment.These discussions are also a venue for exchanging national experiences and practices.The WTO agreements expre

143、ssly recognize the rights of members to adopt measures to protect the environment,so long as they are not applied arbitrarily and are not more restrictive than necessary to meet the objective in question.Climate objectives,rather than the protection of domestic producers,must be the central rational

144、e for the development and implementation of trade-related climate policies.Trade-related climate policies should also consider their impact on other nations climate efforts.The protection and enforcement of intellectual property rights,as provided by WTO rules,is also essential to support innovation

145、 in environmental technologies while promoting the transfer of technology.But WTO members can do much more to enhance the contribution of trade and trade policy to their climate objectives.First,with the increasing number of trade-related climate measures being taken nationally,there is a strong cas

146、e for strengthening the role of the WTO as a forum for coordination and dialogue,and for identifying potential action on trade and climate change.The committee process could be used to identify transparency and knowledge gaps,opportunities for coordination,capacity needs and perspectives of developi

147、ng countries,and areas for further work,including potential negotiations.At the 12th Ministerial Conference in June 2022,WTO members concluded an agreement that prohibits certain types of fisheries subsidies.Continuing work on additional provisions for a comprehensive agreement on fisheries subsidie

148、s would further contribute to sustainable management of marine resources and biodiversity.Second,members are already beginning to pursue a new generation of sustainability driven initiatives aimed more at using trade as a means to help achieve global public goods than at correcting a particular trad

149、e distortion.These initiatives include the Trade and Environmental Sustainability Structured Discussions,the Informal Dialogue on Plastics Pollution and Environmentally Sustainable Plastics Trade,and the Fossil Fuel Subsidy Reform initiative.Some of these discussions focus on traditional fare for tr

150、ade negotiators,namely tariff and non-tariff policies.For instance,removing trade barriers on environmental goods and services would lower costs,expand markets and boost the deployment of climate-friendly technologies.Pursuing greater alignment on low-carbon standards would lower compliance costs an

151、d encourage greater scale and investment.Other initiatives focus instead on generating new knowledge that can inform and improve governments efforts to integrate trade into their environmental and climate change strategies.This could involve a better understanding of the environmentally harmful impa

152、cts of subsidies or of trade-related linkages with the circular economy.Finding a balance between support incentives for low-carbon technologies while minimizing negative spillovers on trading partners would also provide more predictable and credible market signals for low-carbon investment and cons

153、umption.The dialogue on plastics seeks to generate knowledge on plastic trade flows in order to support negotiations on an international plastics treaty under the auspices of the United Nations Environment Programme.Third,WTO members could work on supply side factors to enhance the climate resilienc

154、e of their supply chains.Deepening and diversifying supply and transport networks would not just help reduce vulnerability to the kinds of supply chain disruptions seen since the start of the pandemic;it would also enhance resilience in the face of localized climate events.Stronger information shari

155、ng and monitoring would help food and energy security for all members,while helping them manage risks related to supply chain bottlenecks.An example of how this might work in practice is the Agricultural Market Information System,which is a platform of international agencies,including the WTO,which

156、tracks the supply of key agricultural commodities and provides a forum for 15coordinated policy responses when needed to prevent markets from seizing up.At the 12th Ministerial Conference,WTO members vowed to address the global food security challenges by exempting from export restrictions food boug

157、ht by the World Food Programme for humanitarian purposes and pledging to facilitate trade in food,fertilizers and other agricultural inputs.Implementing these decisions could contribute to managing the knock-on effects of surging food prices during a crisis,thus increasing food security.Fourth,impro

158、ving the ability to understand and manage climate-related risks and investment opportunities would improve the synergies between climate finance and Aid for Trade.Climate finance to developing countries continues to fall short of the US$100 billion goal for 2020(OECD,2022a)and has not achieved the b

159、alance between adaptation and mitigation finance set out in the Paris Agreement(UNEP,2021a,2021b).However,the Aid for Trade initiative,supported by the WTO and other organizations,can help developing countries,particularly LDCs,to build climate-resilient trade capacity and infrastructure,and support

160、 trade policies to foster a low-carbon transition.Between 2013 to 2020,Aid for Trade disbursements related to climate action totalled US$96 billion,with a larger share of the disbursements directed at climate mitigation(see Figure 3).Finally,reinforcing the WTOs existing cooperation with internation

161、al and regional organizations,including in the areas of climate risk prevention,climate-induced disaster relief,transport decarbonization and climate finance,is important to advance trade cooperation on climate change.Over the past few years,WTO members have started to address some of these issues.H

162、owever,the scale and urgency of the climate crisis demand additional efforts in support of a more inclusive and just transition to a low-carbon economy and a more resilient future.Figure 3:Aid for Trade disbursements related to climate change have increased over the past decade Sources:Authors calcu

163、lations,based on Organisation for Economic Co-operation and Development DAC-CRS(Development Assistance Committee Creditor Reporting System)Aid Activities Database.Note:Only projects with an explicit objective of adapting to or mitigating climate change and projects identifying climate change as impo

164、rtant but secondary objective are considered as climate change-related official development assistance.Projects can be cross-cutting and have both adaptation and mitigation objectives.EnergyTransport and storageAgriculture,forestry and fishingOthersClimate change adaptationAid for Trade disbursement

165、s related to climate change(current US$billion)Climate change mitigation20001920206.56.67.99.512.012.213.412.32.93.44.14.64.94.94.95.7EXECUTIVE SUMMARYAIntroductionTackling climate change requires a transformation of the global economy.While limiting consumption and changing li

166、festyles would help,reducing greenhouse gas emissions to net zero will be impossible without technological and structural change on a global scale.This transformation will involve costs,but also opportunities not just to head off an environmental catastrophe,but to reinvent the way the world generat

167、es energy,manufactures products and grows food.Just as trade helped to drive economic progress in the past by incentivizing innovation,leveraging comparative advantages and expanding access to resources and technologies trade can play a central role in driving progress towards a low-carbon global ec

168、onomy.But harnessing the potential of trade will demand new policies and more cooperation.Contents1.The next great transformation 182.Harnessing the transformative power of trade 203.Overview of the report 2318WORLD TRADE REPORT 20221.The next great transformationParadoxically,economic progress is b

169、oth the cause of and the solution to the climate crisis.To head off dangerous climate change,the Paris Agreement aims to limit the global warming to 1.5C this century.This means that greenhouse gas(GHG)emissions need to be cut by roughly 50 per cent by 2030 and reach net zero by 2050.1 The most real

170、istic way modern economies can achieve this goal without cutting back living standards in richer countries and cutting short development in poorer ones is by modernizing even more,harnessing human innovation,ingenuity and entrepreneurship to advance low-carbon technologies and to use the planets res

171、ources more sustainably.Dramatic advances in automation,transportation and industrialization all powered by fossil fuels have driven the exponential growth of the global economy over the past two and half centuries,resulting in rising living standards,increased mobility,and improved material well-be

172、ing for a fast-growing global population.In important ways,the industrial revolution was also an energy revolution(Wrigley,2010).By discovering how to convert fossil fuels into mechanical energy,starting with the steam engine,humanity unlocked seemingly limitless supplies of energy to power seemingl

173、y limitless economic growth and development.But ever-expanding growth has also released ever-greater amounts of heat-trapping GHG emissions into the atmosphere from electricity generation,transportation,industry,agriculture and deforestation which in turn has contributed to the warming of the planet

174、 and its negative climactic and environmental knock-on effects.Almost three-quarters of global GHG emissions come from energy consumption;another 18.4 per cent from agriculture,forestry and land use;5.2 per cent from industrial processes;and 3.2 per cent from waste(Ritchie,Roser and Rosado,2020).As

175、long as the world remains dependent on high-carbon technologies,increasing economic production will almost inevitably lead to increasing GHG emissions.Yet,while technological and economic progress has“fuelled”the climate crisis,it is also indispensable to mitigating and overcoming it.Replacing fossi

176、l fuels with renewable energies solar,wind and geothermal power,and others is essential to avoid and reduce GHG emissions,as are steps to decarbonize transportation,steel production,cement manufacturing and agriculture,and to make economic ecosystems less wasteful and more resource-efficient overall

177、.Adapting to the adverse effects of climate change will also require technological solutions from developing drought-resistant crops and resilient water supplies,to building flood defences,improving weather forecasting and setting up early warning systems(UNFCCC,2016a).Given that many lower carbon t

178、echnologies from solar panels and electric cars to vertical farms and electric arc furnaces already exist,the challenge is to scale up their production and deployment.One influential study argues that two-thirds of economies,including major emitters like the United States,the European Union and Chin

179、a,could reduce their GHG emissions by 80 per cent by 2030,and achieve carbon neutrality by 2050,through the mass adoption of electrification based on existing wind,hydro and solar technologies(Jacobson et al.,2017).Even more cutting-edge technologies,such as green hydrogen or direct air carbon captu

180、re and storage,are also advancing rapidly.Then there are the myriad“soft”climate technologies data-crunching,information-sharing,training and education which are easier to adopt,and which will be just as critical to shift economies towards low-carbon alternatives.It is also important to focus not ju

181、st on what technologies are needed,but on how they are used.It has long been recognized that it is only by using new technologies that we learn how to optimize and exploit their full potential(Arrow,1962).This“learning-by-doing”dynamic can take time(David,2002).In the same way that it took decades f

182、or the invention of the dynamo to translate into mass electrification,it could take years to realize the full potential of solar power or carbon farming.Thus,it makes sense to scale up new,clean,low-carbon technologies now,even if the initial investment costs are high,as expanding capacity early on

183、can encourage usage,improve performance,drive down prices,and ultimately make renewable technologies more attractive and competitive.Realizing the potential of one innovation also often hinges on marrying it to another innovation(Harford,2017).Just as the explosion of the internet after the mid-1980

184、s depended on parallel innovations in satellite and fibre optic telecommunications,electric vehicles are now poised to revolutionize clean-energy transportation because they are benefitting from other technological breakthroughs,including the mass production of affordable lithium-ion batteries,the r

185、oll-out of electric vehicle charging networks and more readily available renewable energy.Conversely,the absence of synergistic technologies can significantly slow or block economic progress.CLIMATE CHANGE AND INTERNATIONAL TRADEA.INTRODUCTION19For example,the lack of affordable and efficient techno

186、logical solutions to the challenge of long-term,large-scale energy storage a challenge arising from the intermittent nature of some lower carbon energy technologies such as solar and wind power is a key missing piece of the renewable puzzle which urgently needs to be“discovered”if renewables are to

187、become a reliable replacement for fossil fuels worldwide.This positive process of technological interaction,cross-fertilization and mutually reinforcing innovation takes place at the global,not just the firm,level.The fact that photovoltaic(PV)cells,which convert solar energy into electricity,are in

188、creasingly affordable and available is the result of mutually supportive back-and-forth innovations across several continents,including US investments in PV cell research and development(R&D)in the 1960s and 70s;European policies to accelerate domestic solar panel installation in the 1990s and 2000s

189、;and Chinese efforts to improve and scale production after 2011(IEA,2022a).Technological cooperation,competition and cross-fertilization do not just spur innovation;they also encourages needed technological diffusion.Many developing countries have abundant renewable energy potential that access to l

190、ow-carbon technologies and infrastructure could unleash(IRENA,2022).This is starting to happen.Kenya is already a world leader in the number of solar panel systems installed per person,while 90 per cent of Nepals electricity comes from hydro-electric power.Locally generated renewable energy allows d

191、eveloping and least-developed countries to bypass many of the logistical difficulties and high costs involved in the transmission and distribution of fossil-fuel energy,improving their energy access and self-sufficiency.Bringing clean energy to the 759 million people in the developing world who stil

192、l lack access to electricity would not only stimulate economic growth and job creation and reduce poverty,but would significantly improve essential services,such as healthcare,education and the internet.The shift to low-carbon farming especially climate-smart agriculture techniques that focus on int

193、ercropping,crop rotation,agroforestry,and improved water management can bring similar benefits to developing-country farmers in terms of improved productivity,greater resilience,less deforestation,and reduced reliance on fertilizers and fuels(Brakarz,2020).In short,the diffusion of low-carbon techno

194、logies can provide poorer countries with the essential tools they need both to limit GHG emissions and to accelerate their development.Achieving a shared and“just”transition to a low-carbon global economy is not just the right thing to do;it is also in everyones interests.Climate change will not be

195、stopped if only wealthy economies have access to low-carbon technologies while poor economies continue to have to rely on fossil fuel-fired power plants and internal combustion engines.Since everyone is impacted by climate change,everyone has an interest in ensuring that the technological tools and

196、resources to reduce emissions are as widely available as possible.Wealthy economies can also benefit in more direct ways from technological development in poorer countries.A striking example of North-South technological collaboration is the ambitious plan to deliver Moroccan solar and wind farm elec

197、tricity to UK consumers via an underwater cable stretching 3,800 km the worlds longest cable of this kind.When completed in 2030,it is hoped that the Xlinks Morocco-UK Power Project will deliver low-cost,clean power to over 7 million UK homes,representing 8 per cent of current UK electricity needs(H

198、ook,2021).Indeed,the transition to a low-carbon global economy will create enormous investment,employment and growth opportunities not just adjustment costs for developed and developing countries alike.For example,global investment in the low-carbon energy transition across sectors ranging from powe

199、r generation,energy storage and electric vehicles,to sustainable materials,electrical efficiency and carbon capture already totalled US$1.3 trillion in 2021,doubling the investment of US$655 billion in 2017(IEA,2022b).In order to reduce GHG emissions to net zero by 2050,cumulative investment in rene

200、wable energy would need to reach US$131 trillion over the next 30 years(McKinsey&Company,2022).Similarly,massive investment opportunities are opening up in the steel,cement,farming,forestry and waste management industries as they shift to low-carbon technologies and processes.Building low-carbon ind

201、ustries and infrastructure will not only require new investment and equipment;it will also require new workers and skills.Shifting to clean energy,for instance,could generate 14 million new jobs in clean energy sectors and 16 million additional jobs in energy-related sectors globally by 2030(IEA,202

202、1).In short,the transition to a low-carbon economy will entail the construction of a new economy.The good news is that low-carbon technologies are expanding and at a faster pace than many predicted(Naam,2020).2 For example,renewables accounted for roughly 11 per cent of global primary energy and 30

203、per cent of electricity generation in 2021(IEA,2022b).Despite supply chain bottlenecks,rising raw material prices and growing geopolitical tensions,20WORLD TRADE REPORT 2022the International Energy Agency(IEA)projects that renewables are on track to account for almost 95 per cent of the increase in

204、global power capacity through 2026,with solar power alone providing more than half of that increase.The IEA expects the amount of renewable capacity added between 2021 and 2026 to be 50 per cent higher than between 2015 and 2020 and even these optimistic forecasts may underestimate the speed and sca

205、le of the transition.The bad news is that although global renewable energy capacity is growing rapidly,overall global energy demand is growing almost as fast,so fossil fuel consumption continues to rise(see Figure A.1).Nearly 80 per cent of the worlds energy is still generated by burning fossil fuel

206、s,notably oil,coal and gas,partly because supplies of renewable energy need to be scaled up,and partly because fossil fuel consumption is still subject to strong path dependence due to technological,infastructural,institutional and behavioural lock-ins.Global energy-related carbon emissions rose by

207、6 per cent in 2021 to 36.3 billion tonnes their highest level ever,and 65 per cent higher than they were in 1990(IEA,2022c).The IEA estimates that the current pace of renewable power capacity growth will need to double over the next decade if the global economy is to stay on a pathway to net zero em

208、issions by mid-century.Other sectors also face the challenge of accelerating the shift to low-carbon technologies and practices.The challenge is especially daunting in agriculture compared to power generation or transportation,for example because the emissions-reduction technologies are more amorpho

209、us and the sector is more diffuse,requiring changes to how over two billion people farm and how billions more eat(McKinsey&Company,2020).At the same time,the challenge is intensified because of agricultures unique vulnerability to climate change including extreme weather events,frequent droughts,and

210、 invasive species and pests and because of an expanding global populations growing need for food.2.Harnessing the transformative power of tradeWhat role will trade play in the transition to a low-carbon global economy?In the past,trade has been part of the problem,contributing to climate change both

211、 directly,by generating increasing transport emissions(shipping,air freight,trucking and rail),and indirectly,by helping to drive carbon-intensive global growth.But in the future,with the right policies in place,trade can be a major part of the solution.Figure A.1:Fossil fuels remain the dominant en

212、ergy source despite increasing use of renewablesSource:Authors calculations,based on Smil(2017)and BP Statistical Review of World Energy(2017).Traditional biomassCoalOilNuclearRenewableGas160,000140,000120000100,00080,00060,00040,00020,000208641

213、890864208201020162004Terawatt-hours0A.INTRODUCTION21CLIMATE CHANGE AND INTERNATIONAL TRADETrade can increase counties access to lower-emissions goods,services and capital equipment,and can help to diffuse critical technologies and kno

214、w-how.It can drive down the costs of environmental products by encouraging efficiency,economies of scale and learning-by-doing.Perhaps most importantly,it can spur innovation by opening up new market opportunities for low-carbon exports and investments and by incentivizing entrepreneurs and industri

215、es to compete to fill them.If low-carbon production reaches the point where it beats high-carbon production on price and performance because environmental costs are internalized in high-carbon production through taxes and other policies or because technological advances alone make low-carbon alterna

216、tives cheaper and better then market forces will increasingly drive the transition and progress will accelerate.This is already happening.Scientific advances,more efficient production processes,and rising global demand all supported by open world trade have driven an astonishing reduction in price a

217、nd improvement in performance of low-carbon technologies(see Figure A.2).The price of solar power,for example,has fallen by almost 90 per cent since 2010,while the efficiency of solar panels has doubled since 1980.Last year alone,the cost of electricity from onshore wind fell by 15 per cent,and from

218、 offshore wind by 13 per cent.The price of lithium-ion batteries has plunged by 97 per cent since 1990,while their energy density has nearly tripled in just 10 years.Even more challenging sectors,such as steel production,managed to cut energy use in half between 1975 and 2015 with reductions continu

219、ing because of technological advances and a shift from traditional blast furnaces toward electric arc furnaces(IEA,2020).As a result of these dramatic price and performance improvements,low-carbon technologies are becoming more economically competitive,not just more environmentally sustainable,alter

220、natives.For example,almost two-thirds of the worlds new wind and solar power plants are able to generate electricity more cheaply than the worlds cheapest new coal plants(IEA,2022a;WTO and IRENA,2021).The fundamental driver of this change is improvements in technology and production,which are in tur

221、n being driven by strong learning-by-doing effects.As the world gets better at building,installing and using solar panels,for example,the price falls and the technology improves.It has been estimated that every time the number of solar panels installed doubles,their price drops another 30 to 40 per

222、cent(Naam,2020).By helping to create a competitive,dynamic and integrated a global marketplace for solar and other clean technologies,trade plays a central Figure A.2:The price of renewables has plunged in the last 10 yearsSource:Authors calculations,based on Lazards Levelized Cost of Energy Analysi

223、s(2019).Solar photovoltaicOnshore windGas peakerSolar thermaltowerGas(combined cycle)NuclearElectricity price from new power plants(US$per megawatts)35940901922WORLD TRADE REPORT 2022role in underpinning and accelerating this process.It is significant that between 20

224、10 and 2020,exports of solar panels increased and their prices fell sharply(see Figure A.3).But the contribution of trade and trade policy to a just low-carbon transition could be strengthened and improved.One positive step would be to reduce trade-distorting measures on climate-friendly goods,servi

225、ces and technologies and to strengthen supply chains.Opening up trade across a range of low-carbon products and services would expand global access,increase competition and lower prices,making it easier and cheaper for economies to transition to low-carbon energy,mobility and production alternatives

226、,and thus reducing overall emissions.Conversely,by making it more difficult to import key environmental technologies,e.g.,by raising tariffs or imposing restrictions,the shift from a high-to a low-carbon economy will only be slowed and impeded.Another key issue is the interface between trade and env

227、ironmental subsidies and other support measures.A growing number of countries use subsidies either to encourage producers to invent,adopt and deploy low-carbon technologies,or to encourage consumers to purchase environmentally sustainable products and services.If they are well-targeted and non-discr

228、iminatory,environmental subsidies can play a positive role in scaling up new technologies and making climate-friendly products more affordable.Government incentives to insulate homes,install solar panels or buy electric vehicles are increasingly common examples.But subsidies can also be used to supp

229、ort carbon-intensive production and consumption,making the climate crisis even worse.In the case of fossil fuel subsidies which amounted to US$440 billion in 2021(IEA,2022d)many governments find themselves in the contradictory position of encouraging oil,gas and coal industries even as they are disc

230、ouraging them with carbon taxes and regulations.Moreover,subsidies can negatively impact other trade partners by distorting markets or unfairly boosting exports.The challenge is to find an optimal balance between maximizing positive spillovers from environmental support measures both nationally and

231、globally and minimizing negative ones.One of the most challenging issues is the relationship between trade and carbon pricing.Environmental Figure A.3:As the use of solar panel exports increases,their price fallsSource:Authors calculations,based on data on solar PV module costs from Kavlak,McNerney

232、and Trancik(2018)and Bloomberg Terminal and trade figures from the UN Comtrade database.Note:The trade data covers the Harmonized System(HS)code 85414.03,which does not distinguish between solar PV cells and modules and other products such as light-emitting diodes.Imports of solar PV panels(cells an

233、d modules)Average solar PV module price8796543200200520900800700600500400300200100Trade in solar PV panels in real US$million(2015)0Solar PV module price in real US$(2015)per wattCLIMATE CHANGE AND INTERNATIONAL TRADEA.INTRODUCTION23subsidies and carbon prices are essentially t

234、he opposite sides of the same coin.The former makes environmentally friendly purchases cheaper,while the latter makes environmentally damaging ones more expensive,all with the aim of persuading firms and consumers to switch to less carbon-intensive alternatives.Ideally there would be a global agreem

235、ent on carbon prices.Instead,close to 70 separate carbon pricing initiatives have been adopted in 46 national jurisdictions worldwide which risks creating a patchwork of different systems,tax rates,covered products and certification procedures.As a result,countries with high carbon taxes worry that

236、their industries will shift to low-or no-carbon tax countries i.e.,“carbon leakage”concerns.Conversely,countries with no carbon taxes worry that their exports will be unfairly shut out of carbon-taxing countries i.e.,“hidden protectionism”concerns.Although WTO rules especially those concerning natio

237、nal treatment allow tax adjustments at the border,adjusting taxes for carbon could prove far more complex than adjusting them for alcohol,for example.The challenge is to find a policy mix that balances the need to discourage carbon emissions with the need to encourage trade to support a low-carbon t

238、ransition.Arguably the most important way trade can contribute to a“just”transition to a low-carbon global economy is by helping to expand,diffuse and share technological progress.Todays world economy is an increasingly interdependent system,and climate change is the most challenging collective acti

239、on problem it has ever faced.It is unrealistic,not to mention unfair,to expect poorer countries to take the same steps to curb carbon emissions as advanced ones if they lack the technological and financial resources to do so.Indeed,this is explicitly recognized in the core concept of“common but diff

240、erentiated responsibilities”set out in the Paris Agreement.The developed world has a direct stake in helping the developing world to manufacture,deploy and maintain low-carbon technologies,if only because no one country can solve the climate crisis on its own.Trade cooperation is key to driving this

241、 global transformation;trade fragmentation would invariably set it back.3.Overview of the reportThis years World Trade Report looks at the relationship between climate change and trade,examines why trade is an indispensable part of the solution to tackling climate change,and discusses areas where po

242、licies need to improve.A core message of the report is that solving the climate crisis depends on a far-reaching transformation of the global economy,and that trade will be critical to driving the needed technological and economic shift to a low-carbon future.The other core message is that this unpr

243、ecedented global shift will require unprecedented international cooperation and that there is no alternative to achieving a just transition where the costs and benefits are more evenly and equitably shared.Thirty years after the adoption of the United Nations Framework Convention on Climate Change(U

244、NFCCC),this report underscores how the goals of environmental sustainability and economic development are not only compatible,but inextricably and mutually dependent.Although the issue of trade and climate change is by no means new,the relationship is complex,multifaceted and fast-evolving.This is p

245、artly due to the fact that the relationship not only involves the interplay between international trade and climate change,but also covers linkages with trade policies and climate policies(see Figure A.4).Their interactions occur in several directions,with both direct and indirect mechanisms which a

246、re in part determined by geographical,institutional,socio-economic and technological conditions.The global nature of climate change further amplifies this complexity(WTO and UNEP,2009).The report opens with a chapter on adapting to the consequences of climate change.While reducing GHG emissions to l

247、imit the rise in global temperature to well below 2C and preferably to below 1.5C is essential to limit the consequences of climate change,past GHG emissions have already caused,and continue to cause,global temperatures and sea levels to rise,and have increased extreme weather events.Many consequenc

248、es of climate change are already hard to reverse.Adapting to the changing climate and its cascading impacts is therefore a sustainable development imperative.Chapter B explores how the geophysical effects of climate change will affect international trade,and identifies the effects of such changes on

249、 trade costs,supply chains and the most vulnerable regions and sectors.It discusses ways in which international trade and trade policy can help with climate change adaptation strategies,and outlines how international cooperation,and the WTO in particular,can contribute to helping countries,and in pa

250、rticular developing and least-developed countries,adapt to some of the disruptive consequences of climate change.24WORLD TRADE REPORT 2022Mitigating climate change by reducing GHG emissions is essential but requires a large-scale transition to a low-carbon economy.Chapter C examines the role of ambi

251、tious climate change mitigation policies and well-functioning financial markets in supporting and accelerating the transition to a low-carbon economy.It discusses how the transition to a low-carbon economy could change trade patterns and provide new economic opportunities,as well as certain initial

252、disadvantages for some economies.Such changes require enhanced international cooperation,and the WTO can play an important role in supporting climate-change mitigation efforts.Among the many policies to mitigate climate change,carbon pricing has attracted increasing attention as it puts a price on c

253、arbon emissions as a means of reducing emissions and supporting investment into lower-carbon alternatives.Chapter D explores the role of carbon pricing in reducing GHG emissions and the relationship between carbon pricing,trade and trade policies.The necessity of developing a solution to the current

254、 patchwork of uncoordinated carbon pricing policies,which could lead to tensions in the global trading system,is discussed,as well as the importance of international cooperation to achieve convergence on global carbon pricing approaches.While international trade separates production and consumption

255、across space,the emissions generated in one country to produce goods and services are not necessarily the same as the ones required for its consumption.Chapter E analyses how the emissions originating from international trade can be measured,and examines how trade both contributes to GHG emissions a

256、nd diffuses the technology and know-how needed to make production processes cleaner.The necessity for greater international cooperation to establish adequate carbon measurement and verification,improve carbon efficiency in transportation,and ensure the environmental sustainability of global value ch

257、ains,is reviewed.The development and diffusion of climate-friendly technologies,including renewable energy and energy efficient technologies,are key to tackle climate change.Chapter F discusses how trade in environmental goods and services can enable access,deployment and diffusion of environmental

258、technologies,which are instrumental in mitigating carbon emissions and developing ways in which people and trade can adapt to climate change.While the WTO agreements ensure that trade in environmental technologies flows as smoothly and predictably as possible,the WTO could make an even greater contr

259、ibution to promoting trade in environmental goods and services.Figure A.4:The relationship between climate change and trade is complex and multifacetedSource:Authors elaboration.+/-TradepoliciesClimatepoliciesTradeClimate change+/-+/-+/-+/-GeographyInstitutionSocio-economyTechnologyA.INTRODUCTION25C

260、LIMATE CHANGE AND INTERNATIONAL TRADEEndnotes1“Net Zero”involves reducing greenhouse gases(GHGs)to as close to zero as possible,so that any GHGs that are produced can be absorbed from the atmosphere.GHGs are gases in the atmosphere such as water vapour,carbon dioxide(CO2),methane(CH4)and nitrous oxi

261、de(N2O)that can absorb infrared radiation,trapping heat in the atmosphere.This greenhouse effect means that emissions of GHGs due to human activity cause global warming.The species of gases reported under the common reporting format of the United Nations Framework Convention on Climate Change(UNFCCC

262、)are:CO2 from fossil fuel combustion and industrial processes(CO2-FFI);net CO2 emissions from land use,land-use change and forestry(CO2-LULUCF);methane(CH4);nitrous oxide(N2O);and fluorinated gases(F-gases),comprising hydrofluorocarbons(HFCs),perfluorocarbons(PFCs),sulphur hexafluoride(SF6)and nitro

263、gen trifluoride(NF3)(IPCC,2022a).Although carbon dioxide is the primary GHG emitted through human activities,methane has become an emerging GHG given its more potent heat-trapping ability.2 It has been pointed out that economic authorities have dramatically underestimated the rapid expansion and dec

264、lining costs of renewables every year since 2000(Beinhocker,Farmer and Hepburn,2021).BThe role of trade in adapting to climate changeWhile reducing greenhouse gas emissions is essential to limit the consequences of climate change,climate change is already having a major impact on the environment,peo

265、ple and,as a result,the global economy.This chapter explores the impacts of climate change on international trade and discusses the role that trade,trade policy and international cooperation can play in supporting climate change adaptation strategies.Climate change increases trade costs and disrupts

266、 production and supply chains.However,trade and trade policies,in conjunction with relevant policies and international cooperation,can help to alleviate some of the impacts of climate change,including on food security,by contributing to enhancing economic resilience.Contents1.Introduction 282.Why do

267、es climate change adaptation matter?283.International trade and trade policy can support climate change adaptation strategies 344.International cooperation is essential to assist countries in adapting to climate change 395.Conclusion 47Key facts and findings Climate change can impact international t

268、rade by affecting trade costs,altering comparative advantages,and disrupting global value chains.A rise of 1C has been found to reduce the annual growth of developing countries exports by between 2.0 and 5.7 percentage points.Climate change adaptation encompasses actions that reduce the negative imp

269、acts of climate change,while taking advantage of potential new opportunities.International trade can help support climate change strategies,such as prevention and reduction of,and preparedness for,climate risk,as well as recovery and rehabilitation from climate disasters.Trade can also contribute to

270、 strengthening food security during climate-induced supply-side disruptions.Although climate change adaptation initiatives are mostly locally-led,international cooperation is essential to enhance the resilience of international trade with regard to climate-induced shocks and to improve economies cap

271、acity to adapt to climate change.28WORLD TRADE REPORT 20221.IntroductionThe consequences of climate change,including global warming,rising sea levels and extreme weather events(EWEs),are already tangible and are affecting lives,livelihoods and ecosystems around the world.The future holds higher glob

272、al temperature,a faster sea level rise,more frequent and intense EWEs,and other short-and longer-term climate hazards(IPCC,2021).Although reducing greenhouse gas(GHG)emissions is necessary to mitigate climate change and limit the most severe consequences of climate change,finding ways of adapting to

273、 climate change and its current and future consequences is a sustainable development imperative.This chapter discusses how climate change can affect international trade through productivity alteration,supply chain disruptions,changes in trade costs and modified comparative advantages.It then reviews

274、 how international trade and trade policy can support climate change adaptation strategies.The chapter concludes by examining the role of international cooperation,and in particular that of the WTO,in helping with climate change adaptation.2.Why does climate change adaptation matter?Climate change i

275、s not only an environmental problem,but also a systemic risk affecting people and the economy.Its effects on international trade can already be seen.Global warming reduces capital and labour productivity,and EWEs can disrupt transport infrastructure.Without adaptation and mitigation,these effects wi

276、ll continue to increase in the future,impacting trade costs and factors of comparative advantage.(a)Climate change has severe effects on people and the economyClimate change affects almost all aspects of human life.Between 2030 and 2050,climate change could cause 250,000 additional deaths per annum

277、as a result of malnutrition,malaria,diarrhoea and heat stress alone(WHO,2018).It may also have severe social and political implications,including domestic or communal violence,resulting,for example,from forced migrations from one region to another due to rising sea levels or drought,especially in co

278、untries with weak property rights(see Box B.1)(Burke,Hsiang and Miguel,2014).Climate change poses a severe threat to the global economy.Projections by the OECD suggest that a warming of between 1.6C and 3.6C above pre-industrial levels by 2060 could cause global annual GDP losses of between 1 and 3.

279、3 per cent relative to a hypothetical reference scenario in which climate change damages do not occur(Dellink,Lanzi and Box B.1:Climate change impacts on security in the SahelThe Sahel is a semi-arid transition zone dividing the Sahara Desert to the North and tropical Africa to the South.Agriculture

280、 and cattle-herding remain the main economic pillar of the region.Food,water and energy availability,and ultimately security in the region,are at risk as a consequence of climate change(Rose,2015).Successive years of poor rainfall and frequent droughts have pushed pastoralist populations to migrate

281、to more humid regions for longer periods of time(Brottem,2016;Nyong,2007).Migrations of herders to land occupied by sedentary farmers can lead to conflicts over land use and other resources(Nyong,2007).Confrontations tend to occur periodically,particularly around water resources and fodder,and in ar

282、eas with a lower level of agricultural productivity(Nyong,Fiki and McLeman,2006).Climate change is expected to exacerbate these issues by extending the annual dry season and,thus,the period during which the same land is used both for maturing crops and for roaming cattle,further increasing the risk

283、of conflict.A 1C rise in temperature has been found to increase the probability of conflict between farmers and herders by 54 per cent in the Sahel,compared to a 17 per cent increase in the probability of conflict in places where farmers and herders do not have to compete over access to limited land

284、 and water resources(Eberle,Rohner and Thoening,2020).Such conflicts limit the ability of local communities to adapt to climate change,potentially creating a“climate-conflict trap”(Granguillhome et al.,2021).Climate change-induced instability can also affect trade,including small scale cross-border

285、trade.Conflicts destroy food supply and the production capacity of farms,and ultimately deter investment across the agricultural value chain(Kimenyi et al.,2014).Such instability in agricultural markets often translates into increased food prices,which affect the poorest households disproportionatel

286、y.In this context,risk management strategies,including climate-resistant agricultural investment,crop diversification,insurance and safety nets,can help farmers adapt to climate change,while mitigating conflict risks.29CLIMATE CHANGE AND INTERNATIONAL TRADEB.THE ROLE OF TRADE IN ADAPTING TO CLIMATE

287、CHANGEChateau,2019).Although the range of projected GDP losses at the global level is broadly consistent in the literature,1 such projections are necessarily speculative,due to the uncertainty of how climate change will progress and how economies will adapt.Projections also vary based on modelling a

288、nd calibration approaches.There is also considerable heterogeneity in projections across regions.For example,GDP losses are expected to be much higher in regions highly exposed and vulnerable to weather-related hazards and with lower resilience to losses,such as the Middle East and North Africa,Sout

289、h and Southeast Asia,and Sub-Saharan Africa(Dellink,Hwang,et al.,2017).The most vulnerable populations,in particular those in developing countries and in small-island developing states(SIDS),are likely to bear a disproportionate share of the burden due to their higher exposure and lesser capacity to

290、 adapt to climate change.(b)The impacts of climate change on trade are heterogenous across regions and sectorsClimate change,both in terms of gradual changes such as temperature and sea level rise or changes in precipitation regimes and in terms of the increasing frequency and intensity of EWEs,can

291、have severe effects on trade.In the short term,the damage caused by EWEs can reduce productivity,increase trade costs and disrupt supply chains.In the long term,climate change can affect trade through its impact on factor endowments and comparative advantage.As discussed by Danae Kyriakopoulou in he

292、r opinion piece,the risk of inaction in climate change has profound implications on international trade.(i)Climate change will alter patterns of comparative advantage,leaving some economies at a disadvantageThe availability and productivity of arable land,water,capital and labour are being affected

293、by climate change,and the effect differs across regions.Higher temperatures and the increased frequency and intensity of droughts,floods and rain are degrading land quality in some regions and reducing crop yields(Sleeter et al.,2018).Rising temperatures and sea levels and melting glaciers are alter

294、ing the hydrological cycle(i.e.,the circulation of water between the ground and the atmosphere),leading to flooding and loss of land.Meanwhile,groundwater reservoirs are declining in regions with low water runoff.Overall,the distribution of water is expected to become even more uneven(Lall et al.,20

295、18;World Bank,2016).Human exposure to increased temperatures reduces labour productivity by diminishing capacity for physical work and mental tasks and by increasing the risks of accidents and of heat exhaustion or stroke(Kjellstrom,Holmer and Lemke,2009;Somanathan et al.,2021;UNDP,2016).Empirical e

296、vidence suggests that for every 1C temperature rise above 25C,labour productivity falls by 2 per cent(Seppanen,Fisk and Faulkner,2003).One measure of adaptation to counteract the impact of increasing temperatures on human capital productivity is an increased use of energy-efficient air conditioning

297、in workplaces.But this would entail higher costs both in terms of acquiring air conditioning systems and of energy costs to run them,with a consequent loss of competitiveness for firms.2Rising temperatures may also reduce capital productivity.For example,higher temperatures can cause heavy machinery

298、 to overheat more often,requiring more frequent and longer cool-down periods.Outdoor infrastructure may depreciate faster,which would reduce its lifespan(IPCC,2014a).Overall,the impact of climate change on trade through changes in productivity channels depends on the geographical localization of cou

299、ntries and on what they produce,and this is likely to alter comparative advantages.Changes in the patterns of demand,beyond changes in production specialization,will also matter to shape the impact of climate change on trade.In this respect,a countrys reliance on trade with climate-vulnerable countr

300、ies and communities,and its levels of global integration more broadly,will also matter,as they determine the exposure of that country to climate impacts from abroad.In this regard,trade can be a channel through which climate change damages can spread across countries(Schenker,2013;Schenker and Steph

301、an,2014;WTO,2021c).The impact of climate change is expected to be stronger on countries in lower-latitude regions,many of which are developing economies whose comparative advantage stems from climatic or geophysical factors.Based on projections,an increase in global temperatures of 2.5C by 2060 coul

302、d decrease export volumes by as much as 5 to 6 per cent for countries in South Asia and Sub-Saharan Africa,3 to 4 per cent for the Middle East,North Africa,and South-East Asia,and 2 per cent in Latin America,compared with less than 1 per cent in Europe and North America(Dellink,Hwang,et al.,2017).Ho

303、wever,the complex set of linkages that exist within and across economies makes it particularly difficult to predict to what extent an economy will gain or lose competitiveness in a given sector in response to a climate-related shock.At 30WORLD TRADE REPORT 2022OPINION PIECEBy Danae KyriakopoulouSeni

304、or Policy Fellow at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science,Advisory Council member at the Official Monetary and Financial Institutions Forum Sustainable Policy Institute,and Young Global Leader of the World Econom

305、ic ForumClimate inaction:implications for international tradeThe pandemic-related disruption of supply chains and the political imperative to reorient partnerships following the outbreak of the Ukraine war have exposed the vulnerability of global trade to risks originating outside of the economy.Cli

306、mate-related risks are increasing in frequency,intensity and geographic spread.Unlike the pandemic and the war,we can anticipate and manage them,albeit against a diminishing window of opportunity.Policies aimed at mitigating climate change and adapting to its effects are occasionally dismissed as“to

307、o costly”.In a post-pandemic environment of stressed finances for governments,businesses and households,an“expensive and unaffordable green transition”makes an easy target.Such narratives are dangerously short-sighted:delaying climate action bears the much greater opportunity cost of inaction.Contin

308、uing with“business as usual”is becoming visibly more costly,not only in terms of the natural environment,but also in the global economic,financial and trade system.The trade implications of more frequent and intense extreme weather events(EWEs),of gradual climatic changes and of policy adjustments,s

309、uch as climate-driven taxes and regulation,are already manifesting through multiple channels.EWEs,such as hurricanes and floods,are directly damaging critical infrastructure,including roads,bridges,ports,railway tracks and airports.More frequent disruptions hurt both goods and services trade,such as

310、 tourism.Food and agriculture trade is particularly exposed to heatwaves and droughts that can affect crop yields and tempt countries to restrict exports.In May 2022,India a major wheat producer banned exports on the grounds of national food security amid a heatwave.But there doesnt have to be a nat

311、ural disaster for there to be an economic one:gradual changes in temperature that expose capital equipment and labour to heat stress,or increase cooling costs in storage facilities,can also hurt productivity and disrupt global value chains(GVCs).Economies whose comparative advantage is tied to clima

312、tic processes are highly exposed:degraded land and water stress will impact agriculture,while ecosystem damage and shifts in weather conditions will affect tourism in sea or ski resorts.Such processes can shift patterns of comparative advantage and structurally change global trade.While some risks c

313、an be partly managed by diversifying supply chains and building buffer stocks,these strategies have limits and would involve compromising on the fundamental building blocks of the modern trade system:specialization according to comparative advantage,economies of scale,and optimizing of global value

314、chains(GVCs).And it is not just the physical climatic disruptions that threaten global trade,but also the so-called“transition risks”inherent in the changing strategies,policies or investments needed in the green transition.The uneven pace of climate action across countries has led some governments

315、to consider border carbon adjustment measures involving charges on imports and/or export rebates,to level the playing field among firms subject to different climate-related regulations and taxes.Such measures,while addressing carbon leakage,can unravel trade patterns by incentivizing re-shoring or s

316、hort-circuiting supply chains.The risks of inaction highlight the urgent need to redesign our economies in a way that works for the planet and its people,now and for the future.But this is not only a negative story about risks.It is a growth,investment and trade story of change towards a future that

317、 is enormously attractive,with more productive economies,healthier societies and more fruitful ecosystems.30WORLD TRADE REPORT 202231CLIMATE CHANGE AND INTERNATIONAL TRADEB.THE ROLE OF TRADE IN ADAPTING TO CLIMATE CHANGEthe same time,understanding the mechanism through which this happens provides in

318、sights as to which economies are most at risk.Whether an economy gains or loses comparative advantage in a given sector depends broadly on its initial productivity,and how its productivity and prices respond to a climatic change relative to other competing economies.It also depends on the linkages b

319、etween different economic sectors,both within and across regions.For example,an analysis of the relative ability of a country to produce food products vis-vis its trading partners,commonly known as revealed comparative advantage(RCA),3 shows that,in the case of an increase in global temperatures of

320、2.5C by 2060,RCA could increase for some economies.However,it could also decrease for other economies faced with a similar agricultural yield shock if the latter depend more on domestic agricultural output for exports of manufactured food products.These impacts could be further amplified by the nega

321、tive effect of climate change on income and,thus,on final demand(Dellink,Hwang,et al.,2017).Geography-related temperature levels are a driving force behind the disproportionate impacts of climate change on developing economies and least developed countries(LDCs).Since the current temperatures in man

322、y developing economies and LDCs are already higher than in developed ones,the marginal negative impact of increasing temperatures on the former is also higher(while some developed countries in colder northern regions may even experience productivity gains in some sectors).A given temperature increas

323、e is likely to cause productivity to decline more in developing economies and LDCs,as their productivity in non-agriculture sectors is often lower than in developed economies,meaning these economies would lose not only their existing comparative advantages,but would also find it particularly challen

324、ging to develop comparative advantage in other sectors(Conte et al.,2021;Schenker,2013).Since productivity losses and gains tend to be geographically concentrated,and neighbouring economies tend to trade more with each other than with more distant economies,losses and gains in trade are likely to be

325、 shaped by geographical patterns of productivity changes,which could increase international inequalities(Dingel,Meng and Hsiang,2019).These impacts can be amplified by economic factors such as commodity dependence or a lack of diversification(UNCTAD,2019).Countries that have less diversified exports

326、 tend to be generally more vulnerable to climate change(see Figure B.1).For instance,Sub-Saharan Africa,in which most countries exports are dominated by the agriculture,energy or mineral sectors,is one of the regions most exposed to climate change.(ii)Climate change is likely to increase trade costs

327、 unevenly across regionsTransport infrastructure is dangerously at risk of damage both from gradual climatic changes and from EWEs(Koks et al.,2019;WTO,2019).Increasing temperatures can cause roads,bridges,runways and railway tracks to depreciate faster.Transport infrastructure and inland waterways

328、can become partially or completely inoperable due to EWEs and sea level rises in coastal regions(EEA,2017;IPCC,2014b).Climate change will increase infrastructure maintenance and repair costs,indirectly adding to trade costs.The unpredictability of damages related to EWEs is a source of uncertainties

329、 and high operational risks that can increase disruptions and delays,and in turn create additional costs,such as requirements for freight insurance(Barrot and Sauvagnat,2016;Boehm,Flaaen and Pandalai-Nayar,2019;WTO,2021c).In particular,climate change can affect strategically important junctures on t

330、ransport routes through which exceptional volumes of trade pass in the global trade network,4 and this can create vulnerabilities for the trade system(Bailey and Wellesley,2017).While all modes of transport are likely to be negatively affected by EWEs,maritime transport which accounts for 80 per cen

331、t of world trade by volume is particularly vulnerable and exposed to climate change.In a worst-case“high emission”scenario where GHG emissions continue to rise unchecked and global temperatures rise by around 4C by 2100,the number of ports at extremely high,very high or high risk from multiple clima

332、te hazards could almost double,from 385 to 691 key ports globally(out of 2,013 examined)(Izaguirre et al.,2021).Greater heat stress and increased coastal flooding and overtopping due to sea level rise,can have a strong impact on waterways and port capacity,and negatively impact trade by exacerbating

333、 bottlenecks,capacity constraints,congestion and delays,thereby increasing trade costs.For example,in the three months following Hurricane Katrina in 2005,Gulfport and the Port of New Orleans saw a direct reduction of between 71 per cent and 86 per cent of both exports and imports due to the destruction of their port facilities,although there was no overall impact on aggregate US trade because oth