Potential exposure and vulnerability to broader climate‑related trade regulations: an illustration for LAC countries

Expositora  | Mariana Conte Grand | Banco Mundial y UCEMA

Es Doctora en Economía de la Universidad de California en Los Ángeles (UCLA), profesora en
la Universidad del CEMA y economista Senior en Desarrollo Sostenible en el Banco Mundial.
Ha participado en el Proyecto de Harvard de Cambio Climático y en el 5to Informe del Panel
Intergubernamental sobre Cambio Climático. Ha recibido numerosas becas y fondos para
investigación de Fulbright, el Interamerican Institute for Global Change, entre otros. Sus
trabajos de investigación han sido publicados en libros y revistas académicas y sido asesor para
distintos gobiernos y organismos multilaterales. También ha participado como experto en daños
ambientales en varios casos legales.

Analyzing the effects on Latin American and Caribbean (LAC) countries of recently proposed European Union (EU) and United States (US) carbon border adjustment mechanisms (CBAs) and bans on the import of non-deforestation-free products (DFPs), we ask: What share of LAC exports could be affected? What would be the consequences of the EU and US broadening these regulations to other commodities, or of other countries adopting similar regulations? How vulnerable are LAC countries, in terms of emissions intensity, deforestation risk, and export concentration risks? What policies could they adopt in response?

Using data from the World Integrated Trade Solutions, we find that, as the region’s productive profile is agricultural rather than industrial, CBAs have a milder effect than DFPs. Less than 0.5% of LAC exports are exposed under the EU-CBA, compared to 17% under the EU-DFP and around 6% under the US-DFP. A broader EU-CBA would impact up to 14% of LAC country exports, while expanding the consequences of the EU-DFP would be marginal.

The impact of other countries adopting CBA plans would also be small, because the EU and US are the main LAC export destinations. LAC products are vulnerable for several reasons, from having higher embedded emissions—and therefore costs—than European producers’, to having regional competitors with lower emissions intensity or deforestation risk, and lacking alternative export markets. The LAC private sector could adapt its strategies to accommodate these risks, and there is also room for public action.

Co-autores: Paulina Schulz‑Antipa y Julie Rozenberg | Banco Mundial