TWN Info Service on UN Sustainable Development (May24/03)
23 May 2024
Third World Network

Dear friends and colleagues,

We are pleased to share with you an UNCTAD report titled: “A Positive Trade and Environment Agenda for the BRICS”.

UNCTAD’s Unit on Economic Cooperation and Integration among Developing Countries received a request from the BRICS Presidency in 2022 (China) and 2023 (South Africa) to prepare inputs for the deliberations amongst the group on trade and environment. Based on these inputs, the report was prepared.

Below is the Executive Summary and the full report is available at: https://twn.my/title2/wto.info/2024/ti240510/BRICS%20Trade%20and%20
Environment%20Agenda.pdf

With best wishes,

Third World Network

Executive Summary 

The economic weight of the BRICS countries has grown steadily over the past decades, with their combined GDP reaching 26% of the world’s output in 2022 and their share of global trade reaching 21%. Inevitably, greenhouse gas (GHG) emissions from BRICS have also increased over the years with each individual BRICS economy now on the list of top 20 emitters. However, based on overall emissions and on a per capita basis, the BRICS contribution remains much lower than that of the developed economies.

The accelerating pace of climate change demands a collective effort across all countries based on the principles of the Paris Agreement and in line with the Sustainable Development Goals. However, the resort to unilateral, trade-related measures to address climate change in the developed world risks damaging development prospects in developing countries, including the BRICS. One such unilateral measure is the use by the European Union of a Carbon Border Adjustment Mechanism (CBAM) which would impose a carbon tariff on imports into the EU from non-EU countries, based on the level of carbon emissions generated in the production of the imported products.

UNCTAD estimate that the impact of CBAM on reduction in GHG emissions will be small (less than 0.1%) but would significantly impact energy-intensive exports from BRICS countries to the EU, with falls from between 15% to 26% depending on the carbon pricing scenarios adopted. The real income of BRICS may fall between $4 billion to $7 billion with maximum fall in Russian Federation ($2.5 billion), followed by India ($1.6 billion) and South Africa ($1.3 billion). Such measures which reduce real incomes in BRICS will make it more challenging for these countries to progress on their climate goals.

With the pace of climate change accelerating, the costs of adaptation are becoming enormous. Undoubtedly, economic diversification, technological progress, robust government finances and reliable sources of foreign exchange are the preconditions for successful climate change adaptation and mitigation strategies in the developing world. The economies of the BRICS, taken together, can offer considerable leverage, on both environmental conditions and those shaping trade and finance, to the benefit of other developing countries.

This paper assesses the evolution and extent of trade and financial interactions within the BRICS, and by extension within the Global South, given the pivotal role of BRICS economies in their respective regions. While BRICS economies have steadily increased their contributions to global growth in recent decades, these countries and their partners must do more to promote and support growth models that are more consistent with endogenous capacities and with a production matrix that uses physical and labour endowments to the fullest extent possible. This transformation will require a more balanced approach between domestic productive sectors in each economy and more cooperation between BRICS members to benefit from each other’s capacities as well as to alleviate financial and technological constraints. While trade integration has been palpable, a more balanced approach will need to integrate plans for climate change mitigation and adaptation, more fully with policies to promote green industrialization and structural transformation, to enhance the development of affordable technologies, and increase investments in physical and social infrastructure.

In this vein, BRICS member states could consider a Positive Trade and Environment Agenda for BRICS Cooperation, fleshed out in this paper, that creates a policy framework to provide incentives, rather than punitive measures, to promote environmentally sustainable trade both, both among BRICS and in their trade globally. This agenda could include cooperation in green industrialization to build resilient supply chains; expand climate financing; facilitate affordable green technology transfers; encourage collaboration in R&D; and carve out incentives and policy space for green transition in international fora such as the UNFCCC and the WTO.

Inevitably, the scope for success of a development, growth and environmentally sustainable agenda mediated by the BRICS is limited if multilateral trade and financial arrangements, where the support of advanced economies is critical, are not altered. In this respect, the BRICS members, and developing economies more generally, must not lose sight of influencing the role exerted by the major economies. Crucially, BRICS and the Global South should strive to interact with the rest of the world from a position of strength, with sufficient policy space, as well as with a spirit of cooperation firmly anchored in the fact that the natural environment and particularly its climate are intrinsically global.