Trade in 25 technologies can help climate action. What’s needed to make it happen?

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Kimberley Botwright, Head, Sustainable Trade, World Economic Forum, Joachim Monkelbaan, Lead, Climate Trade, World Economic Forum

• Urgent climate action is needed to halve global emissions by 2030.
• Trade in climate-friendly technologies can help cut emissions.
• A new report highlights how trade can accelerate decarbonization efforts.

Recent extreme weather events are a painful reminder of the urgent need for climate action. Energy security concerns have also increased the need for change. We have less than a decade to cut emissions in half to stay on track with the 1.5°C warming threshold of the Paris Agreement. Last year at the COP26 Glasgow climate summit nearly 200 countries agreed to strengthen their climate targets. There’s a need to move very rapidly on implementation, which increasingly makes economic sense.

A new report by the World Economic Forum’s Climate Trade Zero initiative calls for trade to be scaled up in support of climate action. It outlines what’s needed in terms of technology, trade, energy efficiency, and digitalization to make meaningful steps towards decarbonizing our economies.

1. Massive clean technology expansion

In terms of technology, the International Energy Agency has called for the 2020s to be a decade of massive clean energy technology expansion and increased energy efficiency. Most of the technologies needed to achieve deep emissions cuts by 2030 already exist. In the long-term many new innovations will be required, but today we have the technology systems to make progress. It is possible. What’s needed is more adoption, scale and optimising use over time. And while business have the tools, governments can work to send clear, encouraging signals to markets.

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There is no time to waste to limit global warming to 1.5 degrees: we need to decarbonize three times more, three times faster. The good news is that we have the technologies to do it. Solutions are not limited to renewable energy. It actually starts with energy efficiency, electrification, and digitization. If deployed at full potential, we can eliminate 70% of what we’re emitting today.”— Jean-Pascal Tricoire, Chairman and Chief Executive Officer, Schneider Electric

2. Trade collaboration between governments

In terms of trade, some of those signals could be directed at international flows of goods and services. Trade collaboration between governments can help get more climate-friendly goods to market. One study found that reducing trade barriers on clean energy and energy efficient technologies increased trade volumes by 14% and 60%, respectively. Trade, through economies of scale, can also reduce technology costs. More trade in climate-friendly goods would offer choice within countries for industries and consumers making emissions cuts.

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What is the World Economic Forum doing to ensure that trade benefits people and the planet?

COVID-19 has shocked global markets already strained by trade tensions. With trade and investment undergoing rapid change, businesses and governments need to ensure strategies for open and resilient markets.

The World Economic Forum’s Platform for Shaping the Future of Trade and Investment informs business and policy action towards dynamic, inclusive and sustainable trade and investment – which drives growth and development. It aims to facilitate the flow of goods, services and investments, ensure open and stable commerce, support sustainable and equitable value chains and grow cross-border digital business.

• The Forum has piloted sustainable investment facilitation in Cambodia, Ghana and Kenya to help tackle shortfalls in sustainable foreign direct investment and boost capital for development.
• The Global Alliance for Trade Facilitation is a public-private partnership making cross-border trade simpler, faster and more cost-effective. To date, it has contributed to the implementation of a significant global trade agreement that could reduce trade costs by up to 18% and is delivering 28 trade facilitation projects in 30 countries in Latin America, Africa and Asia.

Contact us for more information on how to get involved.

There’s growing interest from trade ministers to help with climate action.Six countries are negotiating a deal on trade, climate change and sustainability. The EU is working with Ecuador, Kenya and New Zealand to launch a Coalition of Trade Ministers on Climate. Over 70 nations are discussing trade and climate at the World Trade Organization, and the G7 has launched the early contours of a climate club.

To guide these efforts, the World Economic Forum’s Climate Trade Zero community – which focuses on trade for climate action – has identified 25 climate technologies trade ministers could prioritise. That includes items like wind and solar power, heat pumps, alternative refrigerants, insulation, biogas stoves, and efficient motors. Trade ministers could cut tariffs and align regulatory requirements to boost distribution.

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Climate change knows no borders and encouraging better trade between countries can ensure the transfer of valuable knowledge, new technologies and skills to improve energy efficiency in homes around the world. It is critical to our ultimate goal of achieving net-zero targets.”— Hakan Bulgurlu, Chief Executive Officer, Arcelik

3. Global regulatory cooperation

Regulatory differences can be a real challenge in some areas, particularly in the push for improved energy efficiency and applications such as efficient motors. Energy efficiency will be as important for cutting emissions as scaling up renewable energy. A net-zero emissions pathway by mid-century requires annual energy intensity improvements averaging 4% from now to 2030 – three times the rate over the last two decades. Widespread upgrading to efficient motors could reduce global electricity consumption by 10%. Yet many governments do not yet require the use of higher energy-efficient motors. Countries also have different testing, certification and registration requirements around the sale of energy-efficient motors.

More regulatory cooperation in this area could be a real driver of uptake. It could fan business efforts, like ABB’s Energy Efficiency Movement, a multi-stakeholder initiative to raise awareness and take steps to reduce energy consumption. Leading companies like Microsoft, Deutsche Post, DHL Group and Alfa Laval have joined the movement, making a public pledge as a way of inspiring others to act.

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Our transition to a low-carbon economy will hinge on the deployment of a number of key technologies that are both mature and widely available, as detailed in this important report on the nexus of decarbonization and international trade, including energy efficiency, electric vehicles, green hydrogen, smart buildings and more.”— Björn Rosengren, Chief Executive Officer, ABB

4. Enabling digitalisation

The technology systems we need – whether efficient motors or wind power – are not just about physical items. Digitalisation, and the accompanying services it unleashes, is vital. Digitalisation can drive industrial Internet of Things solutions, which optimize energy use, among other applications. It can help equipment operators, technicians, facilities managers, among others, work more effectively. It can help billions of users make better decisions on energy savings and resource preservation. Digital services combined with grid aggregation technology will also be vital in managing the “smart” electricity networks we need.

Many digital services linked to climate technologies will be provided across borders. For example, after-sales services powered by ICT can help customers overseas run efficient systems. Sensors and big data aggregation can ensure replacement parts or ordered and available on time. At first glance, digital services are not viewed as “environmental services”, but the climate benefits they bring merit significant attention. There are many actions trade ministers can also take to ease digital flows as well as related services trade.

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Through thoughtful trade collaboration, we stand a better chance of realizing a net-zero economic future.”— Borge Brende, President, World Economic Forum

We must accelerate our response to climate change, urgently. We must also do so in a way that brings opportunities and meets the challenging geopolitical economic landscape we now face head on. More trade in climate technologies, and items that drive energy efficiency, is proving to be an effective way to support green, low-carbon growth.