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Development Account Projects

Strengthening the national capacities of export sectors in Latin America and the Caribbean to meet the challenges of climate change

Background:

In recent years, the issue of tackling climate change has become increasingly prominent in the international agenda. In absence of a comprehensive agreement at the multilateral level, governments around the world, especially in industrialized countries, are preparing a variety of unilateral measures and regulations aimed at mitigating climate change, some of which contain provisions that could potentially affect international trade. These provisions include border adjustment duties, public subsidies for promoting the use of low-emission technologies, and energy-labeling schemes requiring imported products to carry carbon footprint data to trace greenhouse gas (GHG) emissions generated in the production and transportation to the destination market. Several provisions are directed at the prevention of carbon leakages and protection of the competitiveness of domestic carbon-intensive industries. In addition to measures adopted by governments, the private sector in industrialized countries, including several large retailers, is also implementing a wide range of climate change-related initiatives. Most of these take the form of carbon labeling schemes.

Exports from Latin America and the Caribbean (LAC) are particularly vulnerable to the type of measures mentioned above. This is due to the relatively high share of environmentally sensitive products in the region's export basket and its remoteness from several of its main destination markets. Moreover, for the many small producers in the region, measuring their emissions and complying with carbon footprint standards would imply a heavy financial burden. In addition, since several of the most sensitive products are labor intensive agricultural products (e.g. flowers, fruits), export restrictions can have important negative impacts in rural areas. The region generally presents weak institutional capacities to respond to these challenges.

The current project aims at strengthening the capacities of governments and exporters from participating LAC countries to meet the challenges, and exploit the new opportunities, arising from the growing interactions between climate change regulations and international trade. It will do so mostly by: (i) raising awareness levels and filling information gaps among stakeholders about the critical importance of incorporating the climate change dimension into their policies and strategies; and (ii) promoting public-private cooperation in order to meet requirements and exploit opportunities in third markets

The current project relates directly to Millennium Development Goals (MDG) 7 (specifically Target 1, "Integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources") and MDG 8 (specifically Target 2, "Develop further an open, rule-based, predictable, non-discriminatory trading and financial system").

The issue of how to coordinate international trade rules with the mitigation of climate change only emerged in the international agenda during the last decade. Indeed, there is still no international architecture in place specifically regulating the interaction between trade and climate change and there is uncertainty over how best to design climate change policies that are in line with existing international trade principles. Moreover, at the scientific level considerable knowledge gaps remain on how trade and climate change influence each other. At the same time, developments in this field are fast evolving at the regional, national and sub-national levels, as both governments and private actors seek ways to understand and regulate this relationship.

Objective:

To strengthen the national capacities of Latin American and Caribbean export sectors to meet the challenges, and exploit the new opportunities arising from the growing influence of climate change regulations on international trade.

Expected accomplishments:

  • Increased understanding among government entities, export associations and other relevant stakeholders within each participating country of the potential impact of climate change adaptation and mitigation measures by developed countries on participating countries' export competitiveness.
  • Improved capacity of LAC export sectors to adequately incorporate climate change-related requirements in their products and services.
  • Improved capacity of LAC export sectors to adequately identify new opportunities in the trade of low-carbon products and services.

Implementation status:

A number of consultancies were completed and another three are underway to develop the methodology that will be used for capacity building of beneficiary governments and civil society actors, through the online course and individual advisory services, upon request. In parallel, the Social Development Unit worked with the beneficiary governments in the five countries initially identified for the implementation of the project. Mexico was included as the sixth beneficiary country with a view to enrich the scope of the project and the reach of the comparative perspective amongst the countries mentioned in the project, with no changes to the logframe, activities or budget.