Latin America and the Caribbean are already suffering the effects of global warming. Producing a good, transporting it, exporting it, consuming it and managing (or not) its waste generates greenhouse gas (GHG) emissions that are measured through the so-called “carbon footprint.” Reducing this footprint can be an opportunity to make the region’s exports more competitive. To this end, the Inter-American Development Bank (IDB) quantifies, in a recent report, the growth of this environmental indicator related to international trade in the region.
The interesting thing – as the IDB raised in its study Footprint of Export-Related GHG Emissions from Latin America and the Caribbean– is that “greenhouse gas emissions from Latin American and Caribbean exports have increased considerably over the last 25 or 30 years,” and a key fact is that “both the production and transportation of goods are related to this increase.”
Volume, composition and destination
The IDB explains that “international trade has grown at an unprecedented rate since the mid-twentieth century, and the region did not catch up until the liberalization of the early 90s.” They point out: “Since then and until the financial crisis, Latin American and Caribbean exports soared from USD 67,000 billion to USD 869,000 billion"This volume is equivalent to an annual growth rate of 15%.
In addition, the study indicates that there has been a radical transformation in both the composition and destination of regional trade. “Mining and agricultural commodities account for more than 47% of sales, driven primarily by shipments to Asia”, he underlines. Latin American and Caribbean exports rose from 5% in 1990 to 18% in 2020.
Carbon footprint
The work points out that these changes in the volume, composition and destination of trade gave rise to a significant increase in carbon footprint related to regional sales. Carbon emissions between 1990 and 2004 rose from 136 to 1049 million metric tons of carbon dioxide equivalent (Mt CO2eq). Since the financial crisis, they gradually decreased to 640 Mt CO2eq in 2011 before increasing again to 708 Mt CO2eq in 2014.
The IDB disaggregates these emissions between those related to the production of goods and those related to the international transport of said assets.
In this regard, it indicates that in 2014, emissions related to the production of LAC exports stood at 535 Mt CO2eq and only represented 4% of the world total.
In terms of sectors, the study says that manufacturing exports accounted for 72%, agricultural exports 10% and mining exports 18%.
It also expresses that the Emissions related to export production increased by 375% between 1990 and 2014.
EThe report finds that the scale effect (significant jump in export volumes) was the main driver of this increase in emissions. In contrast, technology, the composition of goods and the composition of countries of origin reduced emissions.
Analyzing modes of transportation, the report notes that Maritime is the one that contributes the most to CO2 emissions related to Latin American and Caribbean exports. In 2018, transport-related CO2 emissions from LAC exports amounted to 234 Mt and accounted for 17% of the world total. Maritime transport accounted for XNUMX% of the total 53%, air transport 23%, road freight transport 23% and rail only 1%.
In terms of sectors, manufacturing has the greatest impact. Between 1990 and 2018, transport CO2 emissions related to LAC exports increased by 188 Mt.
The scale effect accounted for 60% of this increase, the Partner composition 27% (more distant partners, such as developing countries in Asia), the effect of technology 12%, the composition of goods 2% and the composition of origins had a negative impact on emissions (-1%), probably because countries with a greener transport matrix increased their share of exports, according to the IDB.
In this context, there is significant room for a positive business agenda in the face of climate change. According to the IDB, this opens up opportunities for policymakers to promote trade policy strategies to address climate change while “preserving the benefits of trade and integration.” Some trading partners in the region, such as the European Union, are already promoting instruments to encourage consumers to prefer low-carbon products. (Study «Footprint of Export-Related GHG Emissions from Latin America and the Caribbean») (Blog What is the relationship between international trade and the carbon footprint in Latin America and the Caribbean?)
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