It goes without saying that we want to take care of our planet as best we can for the sake of future generations. We’ve been keeping a close eye on climate change, and it’s important to do our best to erect policies so that we can live how we wish to without negatively affecting our planet. To that effect, global trade policies have an impact on climate change, since there are ways that policies can help climate change for the better.
The Positive and Negative Effects of Global Trade Policies
Climate goals can be aided or hampered by trade policy. International commerce helps spread green technology and knowledge and encourages economic efficiency. However, investing in a greener economy may result in higher expenses. Domestic companies could, therefore, potentially be at a competitive disadvantage.
To prevent a transfer of climate challenges across nations, the green transition must involve greening international trade regulations as well. High domestic standards might be compromised by less expensive imports made in countries with lower standards and may drive business and employment to nations with lower standards. It has been proposed that this problem, referred to as carbon leakage, is the reason why nations are hesitant to make bigger climate commitments. However, the depletion of natural resources and a rise in trade in carbon-intensive items like fossil fuels and lumber are issues that both academics and governments are worried about as a result of free trade and investment.
The Direct Effects of Climate Change on Global Trade
More frequent extreme weather events and increasing sea levels might have an immediate impact on trade. The infrastructure supporting supply, transportation, and distribution networks are anticipated to be increasingly susceptible to interruptions as a result of climate change. Negative effects, such as more frequent port closures because of severe occurrences, might affect maritime transport, which accounts for around 90% of world trade by volume.
More significantly, climate change is anticipated to reduce the productivity of all production elements (including labour, capital, and land), which would eventually cause output losses and a decline in the amount of international commerce.
What Can Be Done?
There are several ways to encourage green commerce. Countries may foster worldwide environmental cooperation and global climate accords by establishing regulations at multilateral organizations like the WTO. In addition, they have the option of acting alone and pursuing green bilateral and multilateral trade agreements. Countries can decide to restrict fossil fuel subsidies and make it simpler to access renewable energy as well.
Canada is also one of the countries that are considering taxes or tariffs at the border to help combat carbon leakage.
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