Page 13 - Policy Economic Report - September 2024

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

UN Trade and Development (UNCTAD) plays a central role in advancing these principles, promoting fair
and inclusive commerce that supports the Global South while addressing the growing intersection
between trade, climate change and digital transformation.

The rise of the Global South is reshaping global power dynamics, with developing nations playing an
increasingly significant role in international trade and economic governance. Calls for reform - such as
Brazil’s recent push for a more inclusive global governance system at the G20 - underscore the South’s
growing influence.

This shift offers opportunities for developing countries to access global supply chains, partnerships, and
investments. However, these must be carefully managed to ensure that growth is sustainable and
inclusive, aligning with the goals of the Pact for the Future.

As the world transitions to a more sustainable economy, critical minerals such as lithium, cobalt, and
nickel are vital for renewable energy technologies and digital infrastructure. While countries like the
Democratic Republic of the Congo and Chile are rich in these resources, relying on raw material exports
leaves them vulnerable to commodity price fluctuations. To avoid this, these nations must focus on value
addition and economic diversification, ensuring local communities’ benefit and environmental impacts
are minimized.

Simultaneously, climate-related regulations are reshaping global trade. For instance, the European
Union’s Carbon Border Adjustment Mechanism seeks to reduce carbon emissions but also presents
challenges for developing countries with less carbon-efficient production processes. These regulations
could undermine the export competitiveness of least developed countries and small island developing
states, which rely heavily on trade. A coordinated international effort is needed to provide these nations
with the financial and technical support required to decarbonize their economies while remaining
competitive.

5. How Europe Can Make Carbon Pricing Policies Less Regressive- IMF

According to IMF analysis, poor households in Germany and France pay up to $2 more per ton of emitted
carbon dioxide than their higher-income compatriots. That is because products and services that
wealthier people are likelier to consume—such as imported goods and travel outside the European
Union—are exempt from carbon pricing. In other words, carbon pricing is regressive, meaning the poor
pay proportionally more than the rich, as a share of their income.

New IMF research shows that correcting that distortion, in other words, equalizing carbon prices across
countries, would spread the economic burden of emission reductions more evenly across households and
alleviate the weight on poorer Europeans.

This would also be economically more efficient. It would ensure that cheaper emissions reduction options
are implemented first, which would lower the cost of achieving European countries’ emission targets and
it would also distribute the cost of emissions reduction across firms, sectors, and countries.

September 2024 Page | 12