Evian Group Plenary meeting on “Trade, Climate Change and Development”
Scenarios for Trade and Climate Change
Speaking points by Dr. Manzoor Ahmad
Director, FAO Liaison Office in Geneva
Lausanne, 25 September 2009
I think it is very important to understand the various linkages between climate change, food security and
trade and then address them in a coordinated manner. The recent coordinated efforts of the world leaders
to deal with the economic crisis show that quick and coordinated action can be taken to deal with a crisis
where there is political will.
Let me first say a few words about the different scenarios which could emerge in the aftermath of the
Copenhagen conference. One of the most anticipated outcomes of the Conference will be to see if there
is an agreement on reducing the greenhouse gas emissions. In either case it will have consequences for
international trade.
In case no agreement on limiting GHG is reached, developed countries are likely to blame major
emerging developing countries. This could result in imposing import tariffs on countries that are
considered as not sharing the burden. Already the US and EU are moving in this direction. Recently the
US Congress passed a climate bill making provisions for such an action. The EC has also approved the
concept of an “equalization” levy on imports of countries which fail to cut emissions. This is being done
not only out of concern about climate change but also for economic reasons. There is a feeling that
putting domestic limits on carbon emissions would make their products more expensive and some may
decide to move to places where there are less stringent regulations.
Besides tariff penalties, major economies could also resort to stiffer regulations. For example, under the
EU’s Renewable Energy Directive, while the EU is encouraging energy from renewable resources,
including biofuels, at the same time they are moving towards restricting imports of biofuels from abroad.
In the case of Asian biofuels, it is claimed that they are not environmentally friendly. However, the real
reason is that biofuels made from palm oil or sugarcane by-products are far more competitive and
produce a much higher amount of energy and therefore pose a threat to the local EU biofuel industry,
which uses rapeseed oil. It is a similar situation with the US, as their corn-based ethanol is much less
competitive and could not survive without huge subsidies.
Whether it is through tariff penalties or through regulations, it will be considered as protectionism
warranting reaction. This will create a very serious situation.
My second point relates to how climate change is affecting food security and its linkages with trade.
When the climate change negotiations started in the early 1990’s, agriculture and food security were not
considered major issues. It was felt that any reduction in yields due to climate changes in temperate
regions could be offset by trade flows from better yields in the northern areas. However since then, there
has been a perceptible change. It is felt that a moderate increase in production of agriculture production
in developed countries would not be enough to meet the declines in tropical countries which are already
suffering from food insecurity. It is also accepted that agriculture is a major source of greenhouse gases
(GHG), contributing 14 percent of global emissions. When combined with related land use changes,
including deforestation (for which agriculture is a major driver), this share becomes more than one-third
of total GHG emissions compared with 13 percent from transportation. Most of these emissions come
from the developing countries, and this is where developing countries can really contribute without
seriously impacting their development or food security. Any investments could improve cultivation
practices and mitigating emissions though carbon sequestering.
As far as the linkages of climate change and international trade in agricultural products is concerned, the
likely scenario is that the current patterns of trade flows may change. Many developing countries - and
in particular LDCs - are highly dependant upon exports of certain agricultural products. For example, the
economies of West African countries are highly dependant on the export of cotton. Some developing
countries, such as Kenya, are able to make use of seasonal differences and export vegetables/flowers
during winter months in the Northern countries. These countries will not have the comparative
advantage they enjoy now. Countries, such as Pakistan, where the export of rice is a major export earner,
will find it difficult to grow any rice if the Himalayan glaciers disappear. In fact, each country would
have its specific problems, as climate change effects would vary across different countries.