Not long ago, through the platform provided by Jefferies, a renowned investment bank, I delivered a webinar on tariffs and the surging issue of trade protectionism to a group of professionals focused on sustainability. The primary insight garnered from this interactive session is the genuine intrigue surrounding how regulatory parameters, such as tariffs, serve to mold our responsiveness to an increasingly warm planet. The timing of this growing curiosity couldn’t be more apt, as the previous few months have unveiled a global trade scene that is practically unique in its complexity. The US has initiated tariff impositions on numerous countries, only to retract or suspend them just weeks later.
Evidently, what is becoming most affected amidst this tariff turbulence is our strategic approach to adapting to an ever-warming world. The term ‘climate adaptation’ is employed by scientists to denote the act of diminishing climate risk and susceptibility, primarily through modifications to existing systems. A related conceptual phrase is ‘climate-resilient development’, encompassing steps taken towards adaptation and facilitating factors like governance, financial strategy, capacity enhancement, and decision-making mechanisms. Both climate adaptation and climate-resilient development form the crux of our resilience strategies in the face of global warming.
The Intergovernmental Panel on Climate Change’s predictions ominously indicate that an escalation in protectionism would result in carbon emissions threefold higher than those predicted in a sustainability-oriented scenario. This increase is attributed to the dampening effect the protectionist outlook has on the rate of necessary transformative actions we should take to tackle impending climatic upheavals. As it stands, financial support for climate adaptation is painfully insufficient, predicted to reach a shortfall of $215 to $387 billion by 2030, according to the UN Adaptation Gap Report’s estimates.
These estimates, calculated from nations’ submitted adaptation plans and projected adaptation outlays, indicate the gravity of the situation. The greatest financial requirements are concentrated in sectors such as agriculture, water, and infrastructure. Scrutinizing it geographically, low-income countries show exceptional vulnerability, but it’s the developing countries at large where the gap in climate adaptation finance is most profound.
The escalation of tariff imposition could indirectly further constrain funding accessibility for adaptation in the most susceptible sectors and regions. Astonishingly, only a third of companies have disclosed their strategies to adapt to the physical ramifications of climate change, driven by concrete climatic threats such as intensifying heat, water scarcity, and drought. The need to amplify investment in climate adaptation is crucial to counterbalance the increasinng costs associated with aggravating climate-related hazards.
However, a wave of retaliatory tariffs is pushing companies towards a survival mentality, prioritizing the maintenance of steady margins amidst trade conflicts, usually at the expense of other aspects. As tariffs rise, they could potentially distract us from addressing the inherent vulnerabilities embedded in our systems. A case in point is witnessed within the world’s soy markets, where trade uncertainties with the US have bolstered Brazil’s supply of soybeans to China in recent years.
China is the world’s largest soybean importer, accounting for approximately 62% of total global soybean imports, with the US being one of the primary suppliers to the Chinese market. Nevertheless, the turbulent issue of retaliatory tariffs has begun altering this previously stable status quo. To put things in perspective, in 2000, Brazil’s share in the Chinese soybean market stood at just 20%, while the US claimed approximately 50%. Fast-forward to the present day, and Brazil now dominates with a 71% share, leaving the US trailing with just 21%. Clearly, these figures highlight how tariff policies are reshaping the channels of soft commodity supply.
Unfortunately, these shifts in trade dynamics carry with them deleterious effects on our environment. According to metrics derived from the Coller FAIRR Protein Producer Index, a part of the FAIRR Initiative, most major Chinese corporations are significantly deficient in their reports on deforestation, with 75% of companies in the Index even lacking a deforestation-free target for soy.
Deforestation exacerbates atmospheric carbon levels by releasing carbon sequestered in trees and poses significant challenges to climate adaptation initiatives by increasing the likelihood of drought. This increased risk intensifies the difficulties experienced by local communities grappling with escalating temperatures. To illustrate, an alarming 69% of municipalities throughout the Amazon are presently experiencing drought intensities that even surpass those of recent years.
The essence of the issue here is that tariff policies are serving to misdirect focus from the transformations we ought to be implementing to mitigate the impacts of climate change and protect our environment. It is imperative that those who wield decision-making influence in both the private and public arenas strive to prevent short-term tariff conflicts from hindering the indispensable long-term progress needed to equip our world for a warmer future.