Western countries are shifting their responsibilities to developing countries

- Developed countries are responsible for providing financial and technological assistance to developing economies to combat climate change

When we talk about foreign trade, we only consider things like import-export, demand-supply. But now is the time to consider the effects of climate change. Climate change is perhaps one of the most important factors when discussing trade patterns and rising environmental costs, etc., which can adversely affect a country's imports and exports.

According to the Organization for Economic Co-operation and Development (OECD), climate change can affect the supply, transport and distribution chains, especially the transportation of goods by sea. More importantly, "Climate change is expected to reduce the productivity of all productive factors (ie, labor, capital and land), which will ultimately lead to a loss in production and a reduction in the size of global trade."

India is in an unprecedented position when it comes to climate change, as it is one of the top three countries in greenhouse gas emissions. But it also has a lower carbon footprint per capita, which is 20% lower than the global average.

The government is advancing India's ideology as a climate-responsible economy and this is reflected in a number of steps towards renewable energy and green manufacturing practices.

Why is climate change important in global trade? That question is natural. Because each country's trade largely depends on what other countries are doing to win the fight against climate change. Here is how the 'climate change-international trade' relationship will be implemented in the coming years.

Carbon tax

Simply put, a carbon tax is levied on industries whose operations emit carbon dioxide. The idea behind imposing such a tax is to encourage companies that do not emit greenhouse gases and emissions into the atmosphere. The International Monetary Fund believes that the carbon tax is the most effective way to reduce harmful emissions.

Carbon tax is levied on the proportion of carbon in fossil fuels. Linking the rising prices of fossil fuels will make it easier to understand how India will benefit from moving to renewable energy sources and electric vehicles.

Carbon Border Tax

Recently, a new form of carbon tax has annoyed countries like India. It is a carbon border tax of the European Union (EU). Earlier this year, the European Parliament adopted a resolution implementing the Carbon Border Adjusted Mechanism. Under the resolution, a carbon border tax will be imposed on all goods coming into the EU from countries that have not implemented strict measures to curb greenhouse gas emissions. There are reports that both the US and the UK are considering similar proposals. The European Union (perhaps the US and the UK) believes that imposing a carbon border tax would force exporting countries to adhere to clean production processes and green technology. On the other hand, countries like Brazil, South Africa, India and China have jointly opposed this carbon border tax.

Opposing countries have accused the move of being discriminatory and contrary to the spirit of international cooperation and the climate change agreement, under which developed countries are responsible for providing financial and technological assistance to developing economies to combat climate change.

The European Union is India's third largest trading partner and will account for 11% of India's global trade in 2020. According to the Commerce Ministry, India exported ખાતે 21.5 billion to the European Union in 2020-21. If the proposed carbon border tax is imposed, Indian goods will become more expensive and hence there is a risk of declining attractiveness and discouragement among foreign buyers.

Another good thing, however, is that India does not have to pay a hefty price for some of its carbon-efficient exports, especially steel. However, India still has a long way to go to ensure that all exports from the country are based entirely on green technology.

The European Union has not yet clarified how it will assess the level of carbon emissions from certain goods. However, it is clear that India may have to struggle in the near term at one of its largest export markets.

Wag of benefit

Countries can spend under the border tax in the fight against climate change, which can also benefit economies. In a report on the Sustainable Development Impact Summit, the World Economic Forum (WEF) quoted a study as saying that by 2030, major crop production could fall by almost a third if governments of various countries do not live up to the commitments made under the Paris Agreement. Currently, global corn production has declined significantly.

Climate change can make or break India. The country could emerge as a major player globally if it remained steadfast and committed to its current path of clean and green manufacturing, sustainable agriculture and reducing greenhouse gas emissions.