Environmentally friendly products are proving to be a bright spot in global trade as overall growth remains weak, according to the United Nations Conference on Trade and Development (UNCTAD).

Although global trade increased to a record US$32tn in 2022, UNCTAD’s March 2023 update finds that the second half of 2022 saw lacklustre growth.

Trade in goods declined by around US$250bn in Q4 compared to Q3 2022, with all major economies seeing a substantial drop in levels, aside from Russian imports. Volumes, however, continued to grow in Q4 and are expected to rise in Q1 2023.

The decrease in global trade during Q4 2022 hit lower-income countries harder, with south-south trade between developing countries around 6% lower than in Q3 2022, driven largely by negative trade growth in East Asia.

Yet the trade of environmental goods remained robust in 2022, outperforming global trade overall and totalling US$1.9tn, which represents 10.7% of trade in manufactured goods.

According to UNCTAD’s Technology and Innovation Report 2023, “frontier technologies” – such as artificial intelligence and green hydrogen – represented US$1.5tn in market value in 2020, with the report predicting that this could grow to over US$9.5tn by 2030.

In terms of green exports like biofuels and solar photovoltaic energy, some developing countries are making good progress, according to UNCTAD’s readiness index, which ranks countries according to how prepared they are to capture the economic benefits of new technologies, based on indicators such as research and development, industrial capacity and finance.

While high-income economies dominate the index, Brazil, China and India appear in the top 50.

Overall, though, developing countries are not increasing their green exports as quickly as developed nations, despite starting from a similar point.

In developed countries, total exports of green technology rose from US$60bn in 2018 to over US$156bn in 2021, while exports from developing nations increased from US$57bn to around US$75bn.

The report adds that there is a limited window of opportunity for developing countries to take advantage of renewable energy products. Otherwise, they risk being “firmly locked into fossil-fuel pathways, leaving the markets entirely to foreign investors”.

UNCTAD says that few developing countries have the capacity required to adopt and adapt to these technologies, suggesting that one solution would be to review trade rules so as to allow developing countries “to protect infant green industries through tariffs, subsidies and public procurement”.

The report also points out potential export opportunities, including bioethanol from Brazil and green hydrogen from solar- and wind-rich countries, like those in Africa, Southern Asia and South America.

Courtesy: Global Trade Review