Ngozi Okonjo-Iweala: Decoupling is not the answer to climate crisis

The writer is the director-general of the World Trade Organization

Climate change is an existential threat. Left unabated, we will see more scenes of desolation like in Pakistan, where recent flooding left a third of the country under water and put food and economic security at risk.

Tackling this crisis is an inescapably global issue requiring urgent and bold leadership. Despite forces threatening to pull apart the world community, we simply cannot fragment, decouple economies and create separate trade blocs. At the COP27 UN climate summit this week, I will ask leaders to join forces in creating a trade-related agenda for a just and ambitious response to climate change.

The message is clear: the multilateral trading system has much to contribute. But this cannot be delivered without co-operation between countries. At the WTO’s Ministerial Conference in June, nations on opposite sides of deep divisions were able to come together and agree on several trade issues. Most notably, WTO members agreed to curb harmful fisheries subsidies that led to over-exploitation of our oceans. This agreement demonstrated that multilateral co-operation is possible when emphasis is placed on saving our global commons. It must stay that way.

Last year’s COP produced serious reflection on the trade community’s contribution to the climate transition. This year, the 2022 World Trade Report on trade and climate change confirms that the cost and disruption inflicted by climate shocks on global commerce are high and rising. For example, the increasing heat pattern in the Horn of Africa has caused crop damage and profound food insecurity. Similarly, low water levels in major rivers are making it difficult to ship goods, from the Danube to the Yangtze and beyond.

Ramped-up financing will also be indispensable to a successful response to climate change. Developing countries need the long-promised $100bn of annual climate financing to ensure a just transition to a clean energy future. But even this will not be sufficient. To meet the challenge of moving to net zero emissions by mid-century, we need open and predictable global markets to ensure access to technologies at affordable prices. Expanded trade will also promote sustainable global food systems and resilient supply chains.

Fragmentation and decoupling would do just the opposite.

The sustainability benefits of an open trading system are clear. In fact, about 40 per cent of the sharp decline in the price of solar panel systems since 2001 was made possible due to scale economies generated by international trade, competition and global supply chains. By lowering tariff and regulatory barriers to trade in environmental goods and services, we can further drive costs down and accelerate even broader clean energy deployment.

Likewise, the potential for exports expands the incentives for private companies to invest in renewable power innovation and all of the other cleantech breakthroughs needed to shift the global economy on to a sustainable trajectory. We must trigger a virtuous circle of expanding green trade, investment and innovation. The International Energy Agency estimates that the shift to clean energy could generate 14mn new jobs in renewable power and energy efficiency and 16mn in related sectors globally by 2030.

Finally, I call on leaders to join the WTO in laying out a trade road map for a just and ambitious global response to climate change. Building on work that is already under way, we envision a menu of trade actions for countries to draw upon when revising their national climate targets (or nationally determined contributions) — in line with their different levels of development.

The menu might include concrete actions to help facilitate trade in environmental goods and services, put a price on greenhouse gas emissions, decarbonise supply chains and make them more resilient to climate shocks, scale up circular business models and promote secure and sustainable food systems. At the WTO, we can transform our Aid-for-Trade initiative into a programme that expands opportunities for sustainable trade, especially in places that have not seen the full benefits of international commerce.

COP27 offers an opportunity for us all to commit to a unified response to climate change and to bring the power of the trading system behind the global efforts to reduce emissions and deliver sustainable livelihoods. In the face of the overarching threats posed to the human species, I see no other path forward.