Trade, climate change and agriculture: Towards a low-carbon future

15 December 2009

Even if the most ambitious climate change mitigation measures are adopted, global temperatures are likely to rise by at least 2O C since pre-industrial levels by the end of this century, if not sooner[1]. The resulting increase in the intensity and frequency of extreme climatic conditions and decrease in predictability of normal rainy seasons could potentially jeopardise agricultural export earnings unless alternatives are sought or climate-proof investments are made.

In the absence of action to mitigate climate change, some of the most highly dependent developing country agricultural exporters face an estimated loss of more than 50 percent of their total agricultural output before the end of this century (this includes taking into account carbon fertilisation effects, in which an increased concentration of carbon dioxide in the atmosphere acts as a stimulus to crop productivity). Less developed countries such as Malawi may need to adapt to a 20 percent reduction in agricultural export earnings, because of reduced agricultural output as a result of climate change[2]. Although rudimentary, such estimates may be grossly underestimated given population growth, which may also result in a further reduction of agricultural output (surplus) sold onto international markets.

In addition to the physical effects of climate change, developing countries will need to adapt to the changing rules and regulations (public and private) likely to shape trade in a future carbon constrained world. For example, global and national efforts to price carbon and other greenhouse gases (GHGs), at the point of production or consumption, may have related impacts on global trade flows, including that of agricultural goods and related inputs used for production (such as fertiliser).

Designing appropriate certification methodologies

The transition to a low-carbon economy is likely to include labelling or other certification schemes that describe the carbon content of products (embodied carbon). Indeed, increased trade in certified low-carbon agricultural products is a global climate change mitigation strategy; a well-designed labelling scheme could promote the production of low-carbon agricultural products in countries that are more carbon efficient because of their favourable geographic location. This could include a range of agricultural products (including those that are also processed) as well as some types of biofuels, such as bioethanol, produced from sugar cane[3].

However, without a well designed carbon accounting methodology (such as lifecycle analysis) there are risks that some low-carbon products will not be recognised. This would be a problem, for example, if costs of compliance and related financial and technical barriers remain high, thus limiting the scope of coverage of low income and less developed countries[4].

Facilitating trade in low-carbon products

Policies and appropriate trade-facilitation measures that support and promote trade in low-carbon products are vital to the mitigation of dangerous climate change. This applies to all products and sectors, but particularly in relation to agriculture: the increased stress to agricultural production systems which could result from climate change makes reform in global agricultural policies arguably even more important.

Aid for Trade aims to help developing countries design and implement trade policy effectively and to assist producers within them to be competitive given the policies, markets, products and conditions which they face now and in the future. As a recent review suggests, there is much scope for existing trade facilitation measures such as Aid for Trade and new sources of climate change mitigation finance to work together[5]. Both sources of financing are in large part about the delivery of global public goods, and many of the same donors programming Aid for Trade are also providing mitigation and adaptation finance. However, coordination between institutions and programs needs to be improved and checks and balances put into place. The need to establish and delineate financing mechanisms that can stand alone if necessary becomes even more important in the current environment of donor resource constraint.

Jodie Keane is a Research Officer in the Trade Program of the International Economic Development Group (IEDG), ODI.

[1] Anderson, K. (2009) "The Challenge of Growth: Can growth be compatible with climate change mitigation targets?" Presentation made 9th February 2009,    http://www.odi.org.uk/events/report.asp?id=426&title=challenge-growth-can-economic-growth-be-compatible-climate-change-mitigation-targets

[2] Keane, J. Page, S. Alpha, K. Kennan, J.  (2009) "Climate Change, Agriculture and Aid for Trade: How could, and should, Aid for Trade and climate change finance work together to address the challenges faced by the agricultural sector in poor countries", http://ictsd.org/climate-change/agriculture-and-biofuels/.

[3] Keane, J. and Stevens, C. I (2008a) "Biofuels and Development: Will the EU help or Hinder?" http://www.odi.org.uk/resources/download/436.pdf

[4] Ellis, K. and Keane, J.  (2008b) "A Review of Ethical Standards and Labels: Is there a gap in the market for a new Good for Development label?"  http://www.odi.org.uk/resources/download/2457.pdf

[5] For further analysis of complementarities between AFT and climate change related financing, see our lead article in this month's TNI, "Aid for Trade and Climate Change Financing Mechanisms: Maximizing Benefits from Complimentaries".

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