If climate adaptation and mitigation measures aren’t taken seriously, the United Nations Conference on Trade and Development (UNCTAD) 2021 report puts developing countries in danger.

Many developing nations, especially least developing countries (LDCs) and small island developing states (SIDS), will confront major hurdles in maintaining production, related employment, and export levels in these sectors in the future, according to the report.

“Unless developing countries enhance their trade resilience ex-ante through adaptation measures and actions that reduce exposure and risk, they will export substantially less in climate-sensitive sectors ex-post as climate change impacts accumulate over time. When adaptation is neither possible or cost-effective, diversification within the sector, or economic restructuring to move resources to other less climate-sensitive sectors, can be pursued,” the report said.

Though developing countries are paying more attention to climate change adaptation as their confidence in climate change models grows, evidence shows that international efforts to reduce greenhouse gas emissions are limited and insufficient to significantly alter emissions trajectories from a business-as-usual scenario.

While developing countries must accelerate their adaptation efforts due to their numerous and significant vulnerabilities, the costs of adaptation will be exceedingly high, the report also added.

The total cost of climate change adaptation in underdeveloped nations is estimated to be between $140 and $300 billion per year in 2030.

However, the Green Climate Fund, which rich countries pledged to mobilize $100 billion each year to address developing countries’ climate change mitigation and adaptation requirements, has yet to materialize.

Even if such funds were available, just $50 billion per year would be available for adaptation, falling short of the anticipated demands of $140–300 billion per year and creating a “adaptation gap.”

The report looks at how national governments and the domestic private sector will need to fund many adaptation activities undertaken in developing countries, indicating that export profiles of these countries will be affected not only by the physical impacts of climate change, but also by the adverse effects on ‘response measures’ aimed at mitigating climate change undertaken both domestically and other countries.

The UNCTAD Trade and Environment Review for 2021 examines the physical effects of climate change and their implications for developing country economies and trade; developing country vulnerabilities to climate change; costs and financing for climate change adaptation; and finally, ways for developing countries to improve their trade-climate readiness.

It also emphasizes possible responses, such as the termination of fossil fuel subsidies and/or the imposition of carbon taxes.

“Relative changes in producers’ competitiveness and consumer demand levels will arise from the introduction of such measures in an implementing country, affecting both its import and export levels for certain goods and services. These measures can also ‘indirectly’ affect the trade of other countries whether the latter implement similar measures or not.”

Some nations are projected to implement reaction measures with more significant ‘direct’ cross-border implications, according to the report. Some countries, for example, may introduce new product “climate standards” that must be met by imported products, or impose border taxes on imported products based on the level of CO2 emissions associated with the products’ method of manufacture, as well as CO2 emissions associated with product transportation to the importing market.

“The impacts on trade resulting from carbon taxes, border carbon adjustments, and response measures cannot be generalized. For any given configuration of measures and sets of countries implementing them, modelling studies are required to provide an indication of the direction and magnitude of trade impacts likely to be experienced by exporting countries on a sectoral basis.”

Climate change, as well as response measures aimed at mitigation, will have a variety of complex repercussions on global markets and trade, impacting transportation costs, competitiveness, sectoral comparative advantages, and trade policies.

The Trade and Development Review also aims to show how to discover and explore potential paths. National stakeholders are therefore encouraged to consider how the physical effects of climate change, as well as potential response measures, would affect local industries as well as the competitiveness and export capacity of other countries and regions that compete for the products they export.

They can plan and implement adaptation strategies to improve their country’s trade-climate resilience based on such assessments and the mobilization of essential finance.