by Zsófia Győrfi (Hungary)AbstractThe deglobalization of trade is a growing trend that could have significant implications for efforts to mitigate climate change. While a shift towards more localized trade structures could reduce transportation-related emissions and promote sustainable consumption, reduced trade could also make it harder to achieve economies of scale in green technologies and to coordinate international climate action. I examine the potential implications of trade deglobalization on climate change mitigation and identify key challenges and opportunities for policymakers in promoting a decarbonized and localized trade structure. Carbon pricing may encourage businesses to localize, while funding green research and development will allow more agility in the transition to renewable transportation methods. In addition, I make policy recommendations to combat the negative impacts of globalization on vulnerable communities, to mitigate climate poverty, with the establishment of global funds and resilience building programs. This policy statement highlights the significance of international cooperation and the urgency to act.
"There can be no effective climate policy without the peace ... There are still many for whom climate change is just rhetoric or marketing ... but not real action ... They are the ones who start wars of aggression when the planet cannot afford a single gunshot because it needs global joint action” stated Volodymyr Zelenskyy, the President of Ukraine at COP27 in Sharm El-Sheikh last year. The urgency to act has become more and more prevalent in recent years, although the acts themselves seem to follow only scarcely. To this day, climate change mitigation is an act of superficiality for many as the economic factors of growth and the status quo of false well-being indicators such as GDP persist to rule the opinion of the general public. Decoupling economic growth from climate change mitigation requires a fundamental shift in how we think about and approach economic development.
The deglobalization of trade is a growing trend that could have significant implications for efforts to mitigate climate change. While a shift towards more localized trade structures could reduce transportation-related emissions and promote sustainable consumption, reduced trade could also make it harder to achieve economies of scale in renewable energy technologies and to coordinate international climate action. The aim of this project is to explore the options deglobalization offers on the road to achieving a 55% reduction in greenhouse gases (GHG) by 2030. This policy statement highlights the social and ecological consequences of globalization and climate change. It then offers policy proposal remedies.
Trade Deglobalization and Climate Change MitigationResearch shows the current trend of global trade and geopolitics is taking a turn from a globalized world to something called „Fragmentegration” (Korteweg, 2022). As the COVID-19 pandemic and Russia’s war on Ukraine, as well as global vulnerabilities of supply chains and international relationships have highlighted, it has become clear for many that economic dependencies are no longer the future. The unstable nature of geopolitics is putting supply lines at risk. International trade is taking on a more normative approach – the production and delivery of goods and services is receiving an increased amount of attention. This shift towards a modern day protectionism is encouraging countries to strengthen regional relationships like Asia’s Regional Comprehensive Economic Partnership agreement (Takefman, 2023) Meanwhile, the rest of the world is looking at the United States, China or the EU to establish the pattern for the current trends, as these economies are influential in standard practice setting. A new headwind is blowing – limits to openness; because more governments are recognizing the threats and crimes of their trade partners, be that the Russian invasion of Ukraine or the human rights violation that is being committed in China’s Xinjiang region. Volatile partners pose serious liabilities in an already difficult environment (Korteweg, 2022).
The relationship between trade and climate change is an intricate one. On one hand, the free movement of goods and information, plus international collaboration, can accelerate climate change mitigation. On the other hand, climate change poses a large threat for trade, and the globalized world has been emitting far beyond our limits. A reduction in trade will lead to a significant decrease in emissions, especially in the transport sector. It should be noted that shifting to more local production will put more pressure on domestic economies in terms of emissions, therefore severe environmental regulations must be adopted everywhere (UNCTAD, 2022). In theory, deglobalization could halt the adoption of global climate change mitigation efforts and renewable energy technologies. International cooperation is urgent and indispensable.
Neoliberal trade that prioritizes economic growth inevitably leads to unsustainable practices and is detrimental to the environment. However, some claim that purely seeking to achieve environmental objectives will have serious economic consequences such as a higher unemployment rate. (It is important to note that others envision the transition to a renewable energy economy creating millions of jobs.) The prices of goods will increase, making the overall situation difficult, especially for marginalized people. There must be an equilibrium on the scale that is balancing the world economy and sustainability, and for this innovation is crucial.
Challenges and Opportunities for a Decarbonized and Localized Trade StructureTime is not on our side, as a little over 6 years is left until our CO2 budget is exceeded in the scenario where global temperature change is limited to 1.5 degrees Celsius (MCC Berlin, 2021). The era of high-impact decision making has arrived. While necessary policies and their implementation are costly, the costs and damages associated with low-impact policies in the long run are much higher to anyone who values life. A holistic approach is needed with equally distributed efforts – carbon pricing, research and development (R&D) and compensation complementing each other.
Currently, the green R&D sector is lacking momentum. The key here is incentivizing the private sector with the right tools, as the COVID-19 pandemic showed with the development of vaccines. Therefore a new UN agency could be established to promote green technologies , just as the US set up the DARPA (Blanchard et al., 2022). The United Nations Agency for Green Research and Development could be a collaborative effort of world-class scientists cofunded by private investors, funding projects with risk-return tradeoff. With the gray matter of the entire world available, future technological advancements would have more chance to flourish with proper funding and strict governance to avoid lobbying. Projects could be distributed to universities and other research entities as well. It is important to prioritize the role of scientists and involve them maximally in decision making.
Circling back to trade regulations, carbon market policy is urgent. The European Union has just introduced its Carbon Border Adjustment Mechanism (CBAM) complementary to its Emission Trading Scheme (EU ETS) as part of the EU Green Deal to cut emissions by 55% in 2030. Carbon pricing has an incredibly unpopular nature – it’s enough to take a look at the Gilets Jaunes in France. People are less likely to oppose policy decisions they cannot directly experience affecting them, compared to one that they themselves deem negative (for example causing higher fuel prices). The CBAM aims to capture carbon leakage coming from Europe and offsets that by putting a carbon price on imported goods based on their carbon content, thus propelling industries to reduce emissions (European Council, 2023). However, the CBAM falls short in some areas. With a more ambitious proposal, the Commission should expand the list of sectors covered to include all heavy polluters and indirect emissions as well (Ruggiero, 2022). Incorporating these entities into the CBAM would lead to greater environmental benefits, since it would motivate importers to switch to cleaner production methods and invest in renewable energy to power their processes. Targeting direct and indirect emissions would successfully stimulate manufacturers to keep production sites local, therefore shortening supply lines. Shorter supply chains would allow the transportation sector to cut back on emissions and leverage green technologies as they have more possibilities using renewables on shorter distances.
Mitigating Climate PovertyIt is not only the CBAM that fails to address the potential harm it may cause to developing countries and how to mitigate these risks. Globalization has been a double-edged sword. While economic growth and living standards have been climbing, it capitalized off of local labor, destroying domestic industries and degrading the environment. The benefits of globalization have been distributed unequally, resulting in further social polarization. The risks of climate change jeopardize the future of developing countries as they are more exposed to the imminent environmental and health threats and their economies are highly dependent foreign markets. Climate policies coming from the Global North must be highly considerate of other countries and effectively mitigate all burdens new initiatives might cause, ensuring a fair and just climate change mitigation process.
Climate poverty stems from existing inequalities caused by the exploitation of the Least-Developed Countries (LDCs). It is forecasted that 1.2 billion people will be displaced by 2050 due to severe weather changes, the degradation of agriculture, high sea levels, natural disasters, and loss of biodiversity. Although 2050 seems far away, for millions of people this is already reality, and they are experiencing climate change first-hand. Currently, only temporary relief is available, as we are yet to come up with feasible and just long-term solutions (Guivarch et al., 2021)
The disproportionate risk these communities face requires well-rounded, high-impact resilience building strategies, so the climate change related national and international security threats don’t reverse the gains the Sustainable Development Goals have made. There is a stronger need than ever for international cooperation, which has finally made a step forward at COP27 with the establishment of the loss and damage fund (UNFCCC, 2020). Time is of the essence in this case, although the parties have pledged to work out the details over the coming year with the COP 27 Loss and Damage Fund, the necessity for quicker and more progressive plans is there. Efforts should be made to redistribute carbon price revenues for mitigation purposes and resilience building in LDCs. Programmes for high-resilience should include better insurance systems, especially in the regions with severe weather incidents and a standardized regulatory system for construction. To further green R&D advancements, patents regarding regional issues should be locally distributed. Wealthy countries must ensure the transition to a low-carbon economy in a far way in poorer regions, otherwise all mitigation efforts are an exercise in futility.
Towards a Sustainable FutureDeglobalization could be either the savior or destoryer of our world as we know it. There is a fine balance to be found in utilizing what a globalized world can offer to accelerate climate change mitigation efforts and successfully establish a well-functioning and fair international cooperation.
The suggested policy proposals serve to demonstrate a more vigorous attempt at achieving the goals of the Paris Agreement by 2030. Emission reduction in the transport sector, as well as carbon pricing have to become more rigorous and durable. Money needs to be redirected into green R&D to ensure new green technological innovation. Developing countries require external help as their situation is more dire. Climate change is a race against the clock but it is not a race of countries against each other – it is the developed countries’ duty to make sure climate policy is implemented without burdens or constraints on developing countries.
Works Cited
Korteweg, R. (2022). “Fragmentegration”: a new chapter for globalisation | ISPI. (2022). ISPI.
https://www.ispionline.it/en/publication/fragmentegration-new-chapter-globalisation-36614
Takefman, B. (2023, March 22). Exploring Asia’s Major Free Trade Agreement: The Regional Comprehensive Economic Partnership (RCEP) - ResearchFDI. ResearchFDI. https://researchfdi.com/resources/articles/rcep-asia-free-trade-agreement/
Remaining carbon budget - Mercator Research Institute on Global Commons and Climate Change (MCC). (2021). Mcc-Berlin.net. https://www.mcc-berlin.net/en/research/co2-budget.html
Making trade work for climate change mitigation: The case of technical regulations. (n.d.). Retrieved May 12, 2023, from https://unctad.org/system/files/official-document/ditctab2022d7_en.pdf
I., Blanchard, O. J., Gollier, C., & Tirole, J. (2022). The portfolio of economic policies needed to fight climate change. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4276886
Fit for 55: how does the EU intend to address the emissions outside of the EU? (2023, April 26). Europa.eu; European Council. https://www.consilium.europa.eu/en/infographics/fit-for-55-cbam-carbon-border-adjustment-mechanism/
Ruggiero, A. (2022). How to make the EU’s carbon border tax effective and fair - Carbon Market Watch. (2022, January 20). Carbonmarketwatch.org. https://carbonmarketwatch.org/2022/01/20/how-to-make-the-eus-carbon-border-tax-effective-and-fair/
Guivarch, C., Taconet, N. & Méjean, A. (2021). Linking Climate and Inequality. IMF. https://www.imf.org/en/Publications/fandd/issues/2021/09/climate-change-and-inequality-guivarch-mejean-taconet
Establishing a dedicated fund for loss and damage | UNFCCC. (2020). Unfccc.int. https://unfccc.int/establishing-a-dedicated-fund-for-loss-and-damage
The Climate Conundrum: Assessing Implications of Deglobalization for Climate Change Mitigation
by Bruce Murray, Professor and Director of Illinois in Vienna Programs, retired.
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