Trade in 25 technologies can help climate action. What's needed to make it happen?

Recent extreme weather events are a painful reminder of the urgent need for climate action. Energy security concerns have also increased the need for change. We have less than a decade to cut emissions in half to stay on track with the 1.5°C warming threshold of the Paris Agreement. Last year at the COP26 Glasgow climate summit nearly 200 countries agreed to strengthen their climate targets. There’s a need to move very rapidly on implementation, which increasingly makes economic sense.

A new report by the World Economic Forum’s Climate Trade Zero initiative calls for trade to be scaled up in support of climate action. It outlines what's needed in terms of technology, trade, energy efficiency, and digitalization to make meaningful steps towards decarbonizing our economies.

In terms of technology, the International Energy Agency has called for the 2020s to be a decade of massive clean energy technology expansion and increased energy efficiency. Most of the technologies needed to achieve deep emissions cuts by 2030 already exist. In the long-term many new innovations will be required, but today we have the technology systems to make progress. It is possible. What’s needed is more adoption, scale and optimising use over time. And while business have the tools, governments can work to send clear, encouraging signals to markets.

In terms of trade, some of those signals could be directed at international flows of goods and services. Trade collaboration between governments can help get more climate-friendly goods to market. One study found that reducing trade barriers on clean energy and energy efficient technologies increased trade volumes by 14% and 60%, respectively. Trade, through economies of scale, can also reduce technology costs. More trade in climate-friendly goods would offer choice within countries for industries and consumers making emissions cuts.

There’s growing interest from trade ministers to help with climate action. Six countries are negotiating a deal on trade, climate change and sustainability. The EU is working with Ecuador, Kenya and New Zealand to launch a Coalition of Trade Ministers on Climate. Over 70 nations are discussing trade and climate at the World Trade Organization, and the G7 has launched the early contours of a climate club.

To guide these efforts, the World Economic Forum’s Climate Trade Zero community – which focuses on trade for climate action – has identified 25 climate technologies trade ministers could prioritise. That includes items like wind and solar power, heat pumps, alternative refrigerants, insulation, biogas stoves, and efficient motors. Trade ministers could cut tariffs and align regulatory requirements to boost distribution.

Regulatory differences can be a real challenge in some areas, particularly in the push for improved energy efficiency and applications such as efficient motors. Energy efficiency will be as important for cutting emissions as scaling up renewable energy. A net-zero emissions pathway by mid-century requires annual energy intensity improvements averaging 4% from now to 2030 – three times the rate over the last two decades. Widespread upgrading to efficient motors could reduce global electricity consumption by 10%. Yet many governments do not yet require the use of higher energy-efficient motors. Countries also have different testing, certification and registration requirements around the sale of energy-efficient motors.

More regulatory cooperation in this area could be a real driver of uptaking climate action. It could fan business efforts, like ABB’s Energy Efficiency Movement, a multi-stakeholder initiative to raise awareness and take steps to reduce energy consumption. Leading companies like Microsoft, Deutsche Post, DHL Group and Alfa Laval have joined the movement, making a public pledge as a way of inspiring others to act.

The technology systems we need for climate action – whether efficient motors or wind power – are not just about physical items. Digitalisation, and the accompanying services it unleashes, is vital. Digitalisation can drive industrial Internet of Things solutions, which optimize energy use, among other applications. It can help equipment operators, technicians, facilities managers, among others, work more effectively. It can help billions of users make better decisions on energy savings and resource preservation. Digital services combined with grid aggregation technology will also be vital in managing the “smart” electricity networks we need.

Many digital services linked to climate technologies will be provided across borders. For example, after-sales services powered by ICT can help customers overseas run efficient systems. Sensors and big data aggregation can ensure replacement parts or ordered and available on time. At first glance, digital services are not viewed as “environmental services”, but the climate benefits they bring merit significant attention. There are many actions trade ministers can also take to ease digital flows as well as related services trade.

We must accelerate our climate actions, urgently. We must also do so in a way that brings opportunities and meets the challenging geopolitical economic landscape we now face head on. More trade in climate technologies, and items that drive energy efficiency, is proving to be an effective way to support green, low-carbon growth.