TWN Info Service on UN Sustainable Development (Oct21/08)
29 October 2021
Third World Network

UNCTAD calls for transformative green development policies at Glasgow
Published in SUNS #9448 dated 29 October 2021

Geneva, 28 Oct (D. Ravi Kanth) -  It is a "make-or-break" moment for developing countries on securing approval for robust green-developmental policies centered on strong adaptation policies, green industrial policies, and breaking the deadly nexus between trade and environment policies, at the UN Climate Change Conference (COP 26), which begins in Glasgow on 31 October, the UN Conference on Trade and Development (UNCTAD) has said.

In the second part of its flagship Trade and Development Report (TDR) released on 28 October, UNCTAD warned that as temperatures soar further, the developing countries will remain burdened with climate adaptation costs, which would reach $300 billion in 2030 and $500 billion in 2050.

"Fulfilling the $100 billion a year pledge for the Green Climate Fund is a must at Glasgow," said Ms Rebeca Grynspan, the Secretary-General of UNCTAD, in releasing the second part of the TDR at a press conference on 25 October.

More importantly, "aligning ambition and action will require a concerted reform effort at the multilateral level to ensure adequate funding for developing countries to adapt to the worsening impacts of ever-increasing climate change," she said.

She drove home the message that "our strategy to adapt to it must be globally coordinated."

"The report demonstrates that sufficient action to adapt to the climate challenge will require a transformed approach that is proactive and strategic rather than simply retroactive," said Ms Grynspan.

She said that developing countries, which are already being hit hardest by the Covid-19 pandemic as well as rising temperatures, are not being provided adequate funds to implement adaptation policies.

She said the developing countries need "adequate policy and fiscal space to mobilize large-scale public investment to face future climate threats, while ensuring these investments complement development goals."

Ms Grynspan argued that so far, the focus has been largely on mitigation, "leaving adaptation a poor cousin."

"This is proving short-sighted and increasingly costly, particularly for the developing world where climate shocks are damaging growth prospects and forcing governments to divert scarce resources from productive investments."

The TDR says that countries must strengthen "resilience to shocks by improving data gathering and risk assessment techniques to better protect existing assets and by providing temporary financial support when shocks materialize."

More importantly, climate adaptation "is less a matter of risk management and more one of development planning," the report emphasized.

The underlying rationale is that "risk management measures can provide partial resilience to current climate hazards, but these interventions preserve structures that leave developing countries in a state of permanent vulnerability and crowd out more forward-looking options."

The lead author of the TDR, Mr Richard Kozul-Wright, Director of the UNCTAD Division on Globalization and Development Strategies, said that "climate adaptation and development are inextricably connected and policy efforts to tackle adaptation must acknowledge this in order to have a sustainable and meaningful impact."

The only lasting solution, he suggested at the press conference, "is to establish more resilient economies through a process of structural transformation and reduce the dependence of developing countries on a small number of climate-sensitive activities."

The TDR proposes a "retrofitted" developmental state, empowered to implement green industrial policies and tuned to local economic circumstances, as the best way forward.

"Activities related to renewable energy production and the circular economy can operate at a low scale, opening business opportunities for small firms and rural areas, help to diversify economic production structures and reduce many countries' dependence on the production of a narrow range of primary commodities," he said.

Indeed, these activities could enlarge the tax base and foster domestic resource mobilization as a source of development finance.

In this regard, he emphasized the need for enhanced domestic resource mobilization, including through more active central banks, dedicated public banks and strategic fiscal policies.

Mr Kozul-Wright said that "given the systemic nature of the adaptation challenges and the need to ensure more equitable outcomes, the development state needs to become a regulator and coordinator of private green finance and go much further than being simply a de-risking vehicle."

If the central banks all over the world were able to support governments directly during the COVID-19 pandemic, that same path can be followed in a post-pandemic recovery period in support of climate-related investments, he suggested.

Ms Grynspan also elaborated on "a development-led approach to climate adaptation",which calls for breaking out of the eco-development trap.

More importantly, she said, the climate adaptation challenge in the developing world needs to be approached from a developmental perspective.

The key features of such an approach would include:

1. Abandoning austerity as the default policy framework to manage aggregate demand and switching to pro- investment policies.

2. Large-scale public investment in building a diversified low-carbon economy, powered by renewable energy sources and green technologies, and where economic activities within and across sectors are interconnected through resource-efficient linkages.

3. Adopting a green industrial policy that proactively identifies the areas where the most significant constraints to climate adaptation investment are; channelling public and private investment to these activities; and monitoring whether these investments are managed in such a way as to sustain decent employment and to increase long-term climate security and productivity.

4. Adopting a green agricultural policy that protects small producers, provides backward and forward linkages to green industrialization, protects the environment and enhances food security through increased agricultural productivity and income security.

5. Using renewable energy production and the circular economy to diversify and reduce dependence on primary commodities. Renewable energy production can economically operate at a low scale, opening business opportunities for small firms and rural areas.

DE-LINKING TRADE FROM CLIMATE ADAPTATION POLICIES

The UNCTAD report says that "many of the initiatives that are gaining momentum in the context of reforming the multilateral system continue to adhere to a view of free markets and capital flows that bears little resemblance to the deep divisions and asymmetries that structure the contemporary global economy."

It argues that "this agenda has done little to advance inclusive development nor is it likely to provide meaningful support to meeting global emission targets."

In fact, in the absence of inclusive developmental policies, the report warns, pursuing trade liberalization policies could "threaten any notion of a just transition for developing countries, by adversely impacting existing export capacities and reducing their policy and fiscal space at a time when this needs to expand to build resilience against future shocks."

Given the renewed push for liberalization of trade in environmental goods and services at the upcoming WTO's 12th ministerial conference (MC12), the report reminds that "most developing countries are net importers of environmentally related goods as identified in the combined list of environmental goods (CLEG)."

Further, tariffs on these environmentally-related goods are on average 5 to 6 per cent in developing countries with maximum tariffs exceeding 100 per cent on some products.

The report says that the tariffs on environmental goods are below 1 per cent in most developed countries.

In 2019, tariff revenue collected on these goods by developing countries amounted to USD 15 billion, the report says, suggesting that "trade liberalization in these products will therefore entail a substantial loss of tariff revenue for developing countries."

Further, environmental services, which are already listed for negotiations under the GATS (General Agreement on Trade in Services), are likely to be widened to include services like engineering, architecture, design, general management, and construction.

According to the UNCTAD report, "any resulting commitments in these services will take away the flexibility that the positive list approach in the GATS offered to the developing countries in terms of liberalizing their services trade."

Furthermore, it notes that "there is a risk that forcing the liberalization of vital public utilities would lead to negative development outcomes," creating an environment of conflicted interests, because public goods will then be delivered for profits.

This will further restrict developing countries' ability to use public procurement as a policy tool to achieve social objectives, said the report.

THE CIRCULAR ECONOMY

The WTO Director-General Ms Ngozi Okonjo-Iweala has repeatedly suggested trade liberalization policies in the context of the circular economy.

The general assumption is that trade restrictions in the form of export bans may hinder related activities to reuse, repair, refurbish, re-manufacture and recycle.

According to the UNCTAD report, "the calls for the liberalization of trade in re-manufactured or recycled goods and waste, dating back to 2004 in the WTO, have been rejected by many developing countries. "

The negative impact arising from second-hand, refurbished, or re-manufactured goods may lock developing country economies "into outdated and less efficient technological solutions and therefore would delay the achievement of environmental goals."

The developing countries had also expressed concerns over "liberalizing trade in waste and scrap as that would put additional pressure on the waste management systems of developing countries, especially those which lack a sound regulatory framework for waste management and the associated infrastructure capacities."

The TDR says that "imports of second-hand clothes and footwear were found to have significant negative impacts on the revamping of the textiles and leather industries, especially in Africa, and on consumer health, human dignity, and culture."

According to the report, greenhouse gas emissions in traded goods and services account for only 27 per cent of global carbon emissions.

Therefore, the report says that "trade policy, and in particular international trade rules, will play a secondary role in reshaping the climate agenda."

In short, it is important to build a new green-developmental agenda instead of pursuing the trade liberalization agenda.

The green-developmental agenda must focus on facilitating "green technology transfers and providing climate finance to developing countries," the report emphasized.

It underscored the need for "structural transformation in a climate constrained world" that requires "a shift from high- to low- (and no)-carbon technologies."

Such a transformation "can only be achieved when it is approached in an integrated manner by an effective developmental state, with technological change occurring alongside productivity growth, expanding employment opportunities, and rising living standards."

The report said "organization of global production through global value chains (GVCs) has caused many carbon emitting production activities to be shifted to developing countries, while associated low-carbon pre-production and post-production activities have been retained by the lead firms and mainly based in the developed countries."

"The comparative energy efficiency in the North therefore cannot be de-linked from the energy inefficiency in the South," the report says, pointing out that it implies "that measures such as [Carbon] Border Adjustment Mechanisms (CBAM), which impose carbon tariffs on imports from developing countries into developed countries, cannot be evaluated independently of these structural conditions."

Such mechanisms impose on developing countries the environmental standards that developed countries are choosing, the report says, suggesting that these standards go "against the principle of common but differentiated responsibility enshrined in the Paris Agreement."

Achieving coherence between special and differential treatment (SDT) and the UNFCCC principle of "common but differentiated responsibilities" (CBDR) can offer a better point of departure for a development-oriented approach to the trade-climate nexus, the report has argued.

"A first step in aligning SDT and CBDR would be to widen non-reciprocal SDT measures to expand policy space for climate and development initiatives," the report said.

Legal tools such as waivers and "peace clauses", according to the report, "can help to diminish the number of restrictive rules and extent of regulatory chill, as well as to expand the policy space for developing countries."

The TDR argues that "advanced economies can provide supportive incentives, such as optional preference schemes that provide ring-fenced climate financing additional to ODA or preferential market access in exchange for progress towards nationally determined contributions (NDCs), which could accelerate climate action without resorting to measures with anti-developmental effects."

These steps towards a green-developmental agenda require the international community to support "initiatives to transform rules governing intellectual property rights, such as through a WTO Ministerial Declaration on TRIPS and Climate Change, with a view to expanding TRIPS flexibilities for developing countries in relation to climate- related goods and services."

Such a novel approach "could provide a basis for innovative mechanisms for promoting access to patent-protected critical green technologies."

The UNCTAD report says that "other initiatives that could support this agenda include the open-sourcing of key green technologies as global public goods and South-South cooperation on low-emission research and design."