Kimberley, Tim, welcome. Tim to you, first.
How are climate policies impacting global trade?
What are some of the key themes here?
Well, as we see the world take concrete action to get closer to
net zero, countries and companies can't ignore the fact
that we trade a lot of carbon embedded in the products that we
sell globally, and a lot of those things like steel, cement,
and so forth, are very energy intensive.
So countries are focusing much more now on this trade in
embodied carbon in products and looking at ways in which we can
decarbonize that, as well as countries' own industries.
Talk to me if you would about carbon competitiveness.
As this increased linkage between trade and climate
happens, and we're here today ahead of the first-ever Trade
Day at COP, we see companies and countries really more exposed if
they are trading a lot of these energy-intensive products.
As particularly developed economies make it harder or more
expensive for those products to be sold in their markets,
countries and companies that don't up their game on
decarbonization will increasingly find their
competitiveness reduced, and them being cut out of these
global supply chains.
Kimberley, how will these new trade policies play out, do you
think in the decade to come, what scenarios do you imagine?
Yeah, it's a complex question,
so to help us understand how both trade policies will play
out, as well as climate policies, we mapped the two
against each other to create four scenarios.
In our first scenario, you have climate on track.
This is where you have lots of good trade cooperation,
you've scaled green goods, trade, and services.
You've got green markets.
You've also got development cooperation syncing up and
working nicely with corporate supply chain efforts.
Now then, in our second scenario, this is a bit more
complicated.
You've got what we call a fractured effort.
You've got countries looking to create climate clubs, but those
outside the climate club may be not so happy-- you've got trade
tensions, maybe some trade wars, and you've got really unbalanced
levels of investment.
So developed countries have got quite a lot of green investment,
but developing countries may be a bit left behind.
In that context, we see emissions only coming down by
2030 by 30%, which puts us off track for the Paris Agreement.
In the last two scenarios, we have exponential disasters,
which I think the name is clear.
It's really a world where you've got trade wars, you've got
resource conflict over critical minerals supply.
You've also got conflict in key supply chains like food and of
course a drying up of green investment.
And the last scenario is a little bit more nuanced.
Here, you have what we call collective avoidance.
You actually see countries push off their climate policies to
midterm targets and focus a little bit less on those 2030
targets that we need, which itself actually ends up drying
up green goods markets.
You don't get that green premium that businesses are looking to
get from climate policies, and therefore, green trade policies
are left a little bit to the wayside.
We hear so much about collaboration, about private and
public sector working together.
In your mind, what is the best way to do that?
What does that look like?
I think as a lot of these policies are going to start to
evolve over the next couple of years in quite a rapid manner,
it's critical that businesses and governments talk to each
other about the balance that they want to achieve with these
policies.
I caveat that as businesses talk to governments about how to get
both climate and trade policies right, we really need to see
businesses setting strong science-based targets, targets
themselves, to give that legitimacy that they are
seriously themselves moving towards net zero in their in
their business and their supply chain.
But then once they've done that, that does give them a little bit
of credibility to come to governments and say look when
you set these trade policies, when you set these climate
policies, this is the balance that we're looking to achieve.
Think about this from a regional or global perspective, and not
just from that domestic market perspective.
Kimberley, Tim, thank you so much.
Thank you.