Greening transport: Implications for low-income-country exports

Hence, the challenge is how to ensure that poor countries’ interests are reflected in the development of carbon-accounting standards and methodologies and that the realities of their conditions are reflected in the databases used in emissions reduction initiatives.

There is a general lack of knowledge of how low-income-country value chains perform in terms of carbon emissions and how poor countries will fit into future value chains under business carbon management. Low-income countries need to understand their “carbon competitiveness” in key exports, including the pattern of their emissions compared with those of other countries, and the ability of their producers to benefit from “carbon efficiencies,” through instruments such as sustainability criteria, standards, and certification. Further research on this emerging policy issue is required. This effort needs to be combined with the much richer literature on standards and low-income-country exports to address the question of how climate-friendly global value chains can also be turned into inclusive global value chains.

Climate change mitigation includes a series of measures that are likely to increase the transport costs of traded goods, including the exports of low- and middle-income countries. There is a popular perception that the emissions from international transport are a hotspot in supply chains and that they should be reduced as much as possible. To this end, exports from countries that use carbon-intensive transport modes and are located far from global markets could be penalized—for example, by limiting the transporting of fresh produce exports to market by air or tourism in remote low-income countries. Two key questions arise in this context: (1) Will low- and middle-income countries be able to exploit new, more carbon-efficient transport modes? and (2) If, and how, will low-income countries be exempted from policy measures that affect the transporting of traded goods? On the plus side, mitigation may also open new export markets, exemplified by the opportunity for low- and middle-income countries to start producing and supplying zero-emission fuels (Englert and Losos 2020).

This section briefly reviews the evidence on how transportation costs affect the volume and structure of exports and how mitigation measures might affect costs. It also looks at the export structure of low-income countries and how emissions are distributed in the global supply chains of which low-income countries are a part. This discussion should lead to a better understanding of how vulnerable poor countries are to increased transport costs caused by mitigation. While the discussion focuses on air and sea transport, several low- and middle-income countries are investing heavily in rail transport, which can be both more cost-effective and less emissive than road transport.

Sea transport costs may be affected by mitigation measures. Both the International Maritime Organization (IMO) and individual firms have been active in developing mitigation measures. In April 2018, the IMO committed to reducing the 2008 levels of emissions in the shipping sector by 50 percent by 2050. Some firms have set higher targets: the world’s biggest container shipper, Maersk, aims to be carbon-neutral by 2050. Shipping companies also work collectively outside of the IMO. Maersk has pledged to work with industry players like ABS, Cargill, MAN, Mitsubishi, and Siemens to establish a research center of 100 scientists to support a reduction in carbon emissions from shipping.

Policy makers are considering instruments to incentivize the shipping industry to adopt low-carbon forms of sea transport. The Paris Agreement did not include specific language on shipping and air travel. Some observers argue that this omission is explained by the fact that the two relevant United Nations agencies, the International Civil Aviation Organization (ICAO) and the IMO, are working with countries to mitigate the emissions associated with international transport. Of course, individual countries may still include targets for these two international activities in their national mitigation plans and might be able to act more effectively than the two United Nations agencies. The EU, for example, has proposed to include shipping in the EU ETS if talks with the IMO to reduce emissions fail. This inclusion would put a price on emissions from shipping.

Aviation, for both freight and passengers, is also under pressure to reduce emissions, as illustrated by the “flight shame” consumer phenomenon and no-fly campaigns. The ICAO has adopted a mitigation policy based on technological improvements, including setting emissions standards and introducing biofuels, supporting operational improvements through fuel efficiency monitoring and more direct flight paths, making airports more fuel-efficient, and capping CO2 emissions at their 2019 level21 and offsetting aviation’s CO2 emissions22 above this level through the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). CORSIA is the centerpiece of the aviation response, at least in the short run, as—contrary to shipping—new technologies that may mitigate aviation’s contribution to global warming are far from fully developed.

Airlines from 80 countries, representing 77 percent of international air traffic, have joined CORSIA’s voluntary first phase (2021–26). Joining will become mandatory in 2027 for states with large aviation industries. The United States has joined the program, while China has not. Routes that depart from or land in poor, small island, and landlocked low- and middle-income countries are exempt from the offsetting requirement. CORSIA also exempts countries with very small aviation industries, very small operators, and very small planes, as well as flights for medical emergencies, disaster response, and other humanitarian purposes. Furthermore, CORSIA only covers civil aviation; presidential, police, customs, and military flights are excluded. Given these and other exceptions, CORSIA will only cover about 40 percent of global aviation (Hedley and Rock 2016).

National efforts may be more important than the ICAO policy. The EU and European Economic Area formally included the aviation industry in its ETS as of January 2012. Initially, all flights from and to EU airports were included, except for those of low-income countries. The inclusion of out-of-EU flights, however, gave rise to strong protests from the EU’s trading partners, like China and the United States, and subsequently, the EU included only intra-EU flights. The EC has argued that it reduced the scope of its aviation policy to give the ICAO time to agree on a global measure. The exemption of flights out of Europe has been extended to 2024, after which the EU may decide to include all flights if it is not satisfied with the level of ambition and operation of CORSIA.

The costs of the emerging mitigation measures in international transport are not easy to assess, as the policy and business instruments are still under discussion, new technologies are still under development, and COVID-19 has (at least temporarily) changed travel habits. What is clear, however, is that the cost implications will be more manageable in shipping than in aviation. Shipping already is a relatively carbon-efficient way to move goods and can be made less emissive in many ways—by lowering vessel speed and developing carbon-neutral fuels, among others. In aviation, potential