Sensible trade policy key to tackling climate change on a global scale

The climate change conference (COP29) at Baku (Azerbaijan) ended with agreements on meeting financing requirements of poorer countries for mitigation and adaptation measures to the extent of $300 billion every year. That is inadequate for the recipient countries to meet the challenges posed by global warming. So, they and other countries have to take the best of other available options more seriously.

 

A key agreement at Baku was on establishing high integrity carbon markets, following a breakthrough on establishing standards for a centralised international carbon market. Besides, the delegates at Baku agreed on country-to-country carbon market trading detailing how countries will authorize carbon credit trading, and how registries tracking this trading will operate. The arrangement may need some fine tuning but now the poorer countries must focus on building enough capacity to conceive and execute projects that will reduce the greenhouse gas (GHG) emissions and acquiring sufficient expertise to measure the extent of emissions. Thus, they can earn and trade carbon credits that will bring in some money to embark on more such projects.  Indeed, the capacity of some of the poorer countries to absorb the funds that come their way for fighting climate change is inadequate and in some countries, the outcomes from funding some projects are not too encouraging because of leakages due to inefficiencies and poor governance. So, our government can explore ways to play a bigger role in capacity building in India and some select countries through appropriate knowledge sharing and training.    

A major development in recent years is the increased availability and falling prices of solar panels, electric vehicles, lithium ion batteries, photovoltaic cells, wind turbines and so on, mainly due to massive investments and a mix of policy measures in China such as subsidies for research and development, incentives for building huge capacities, cheap land and loans, higher tariffs for power from renewable sources etc. Ideally, such goods that help fight climate change should flow freely in a world where the markets should remain open. However, many countries have imposed heavy tariffs on such items mainly with a view to protect their own manufacturers, raising the costs of such items and in a way prioritizing job creation from their own manufacturers over the fight against climate change. China, a country without much oil and gas resources, is the biggest emitter of GHG but it has also done maximum in switching to renewable sources of energy by building twice as much new solar and wind capacity as the rest of the world combined, and building massive capacities to manufacture goods that help curb GHG emissions.  

As demonstrated by China, technology, scale and government support can help flood the markets with cheaper goods needed to curb GHG emissions. Facilitating suitable capacity building to acquire and deploy such goods can slow down and eventually reverse the rate of global warming. Sensible trade policies play a significant role in getting the desired results. It is okay to extend protection to sectors or products that are strategically important from the national security angle but it is far from certain that solar panels, electric vehicles, wind turbines and lithium ion batteries fall in that category. It is the consumers who pay for the higher tariffs and if they buy less in response, battling climate change becomes more difficult.    

email: tncrajagopalan@gmail.com