Perspectives on LDC Environment – Friendly Trade and
Trade-related Climate Challenges

Communication from Djibouti on behalf of least developed countries (LDCs)

The following communication, dated 4 February 2025, is being circulated at the request of Djibouti on behalf of LDCs.

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1  Introduction

1.1.  Trade, environment and development intersect in crucial ways for least developed countries (LDCs), which are mainly natural resource exporters and have limited integration into regional markets. They are therefore particularly sensitive to new environmental policies by major trading partners. It is therefore essential to ensure that environmental considerations in trade policies do not disadvantage LDCs. Equitable and inclusive policies are needed to help LDCs adapt to and mitigate climate impacts, while promoting sustainable development.

1.2.  LDCs face significant economic and environmental challenges despite their minimal contribution to global greenhouse gas (GHG) emissions. Accounting for about 13% of the world’s population, LDCs contribute less than 2% of global GDP and 1% of global trade. Their vulnerability to climate impacts is severe, with 69% of deaths from climate-related disasters occurring in these countries over the past 50 years[1]. Combined with limited access to education, health care and infrastructure, the development of LDCs is further threatened by their increased climate vulnerability

1.3.  The LDC Group advocates for equitable trade and environmental policies, taking into account their limited capacities and specific vulnerabilities. The Group stresses the need for increased support for technology transfer to adopt cleaner and more efficient technologies, which are essential for sustainable development and reducing GHG emissions. Sustainable production methods patterns in LDCs should be supported. There is also an urgent need to support the development of sustainable agricultural practices to improve food security and minimize environmental impacts.

1.4.  The LDC Group advocates for equitable trade and environmental policies, taking into account their limited capacities and specific vulnerabilities. Thus, in the short and medium term, the Group stresses the need for increased support for the mobilization of climate finance and technology transfer in order to adopt cleaner and more efficient technologies, which are essential for sustainable development and the reduction of GHG emissions. Ecological production methods deserve support. In the long term, it is also important to support the structural transformation of LDC economies towards models based on the enhancement and development of sustainable agricultural practices in order to improve food security and minimize environmental impacts.

1.5.  This communication highlights the climate challenges faced by LDCs, their opportunities and prospects in the area of ​​trade and environment.

2  Trade-Related Climate Challenges in LDCs

2.1  Limited Access to Technologies and Innovations

2.1.  Although LDCs do not bear the same responsibility as industrialized nations, it is crucial to identify gaps in access to climate-friendly technologies and practices, as well as major barriers to their adoption. These barriers significantly hamper the ability of LDCs to effectively address climate change and mainstream sustainable practices. Lack of access to appropriate technologies increases their vulnerability to climate impacts, while limiting their economic growth, structural transformation and diversification of their economies.

2.2.  With limited financial resources, LDCs often struggle to mobilize the necessary investments and prioritize innovations that are aligned with their capacities and economic constraints, which are essential for sustainable development. However, their potential to attract green investments remains considerable, which could serve as a lever for them to adopt sustainable development trajectories and successfully address climate challenges.

2.2  Trade-Related Climate Measures (TrCMs)

2.3.  The landscape of TrCMs is vast and complex, encompassing Carbon Border Adjustment Mechanisms (CBAMs), eco-labelling, deforestation-free supply chains and green government procurement, among others[2]. These measures have a significant impact on LDC exports and economies, particularly in resource-based sectors such as agriculture, energy and fisheries. While aiming to reduce carbon footprints[3], these policies can disadvantage LDCs, which often rely on carbon-intensive exports produced with older and less efficient technologies.

2.4.  The CBAM, for example, imposes carbon-based tariffs to prevent carbon leakage and promote cleaner production methods globally[4]. However, LDCs often lack the infrastructure and financial resources to comply, which risks reducing their export competitiveness and economic growth[5]. The additional costs generated by the CBAM can make LDC products less competitive, leading to lower export earnings, which are essential for their economies[6]. These measures should be supported by a broader set of development policies to guide the most vulnerable Members towards their own net‑zero carbon emission reduction strategies, particularly in light of the fact that LDCs are not the main contributors to the negative impacts of climate change. The mitigation pathway should include industrial development efforts in LDCs that are adapted to climate change and climate-friendly products. In a broader context, they should contribute to helping LDCs achieve the United Nations Sustainable Development Goals.

2.5.  Eco-labelling schemes guide consumers towards sustainable choices, but they can be challenging for LDC producers due to the enormous costs and complexities of obtaining and maintaining these labels[7]. While such labels can open up new markets, they can also limit access due to high compliance costs. While deforestation-free supply chain policies aim to curb deforestation and promote sustainable land use, these measures can pose insurmountable challenges for LDCs. Improving forest conservation requires a combination of measures that are tailored to the specific country context and address the root causes of deforestation[8].

2.6.  Recognizing the right of Members to take action to address the climate crisis, the LDC Group believes that it is essential to avoid green protectionism, where environmental measures are used as, or result in, trade barriers that disadvantage developing countries[9]. Such practices can lead to unfair trading conditions, limiting LDCs’ market access. Transparent and inclusive design and implementation of TrCMs are essential to prevent the misuse of environmental measures as protectionist tools.

2.7.  The implementation of TrCMs must adhere to the principles of equity and justice, alongside the principle of national treatment, to ensure that LDCs do not suffer disproportionate burdens. The principle of common but differentiated responsibilities (CBDR) is essential in this regard, as it recognizes that while all Members share responsibility for environmental protection, their capacities and historical contributions to environmental issues differ[10]. Therefore, LDCs, with their historical emissions are minimal and their resources limited, should benefit from special and differential treatment measures to achieve their climate objectives[11]. The Doha Agenda for Action for LDCs 2022-2031 outlines the support needed for LDCs to achieve their sustainable development goals, emphasizing the catalytic role of trade and technology.

3  Opportunities in the Climate Sector

3.1.  LDCs have natural resources, abundant biodiversity and sustainable production patterns, offering significant potential in the climate sector. By capitalizing on these assets, they can become key players in ecotourism, renewable energy and carbon markets, as their forests and wetlands can serve as carbon sinks and generate carbon credits[12]. They cannot only contribute to meeting global energy needs, but also obtain economic benefits.

3.1  Valorisation of Ecological and Artisanal Products from LDCs

3.2.  Beyond natural resources and commodities, LDCs produce a number of environmentally friendly goods for intermediate or end use, relying on traditional production methods rooted in their history and natural practice. These products are sometimes referred to as artisanal goods or organically produced products. They include stationery, wooden utensils, handbags, furniture, hats, clothing, soaps, essential oils, shea butter creams and products (e.g. in Benin, Togo and Mali), etc. Such products are becoming popular in Western countries as organic or bio products, particularly attractive to their consumers because of their quality, environmental friendliness, naturalness and health benefits. The technology used in the manufacture of these products is generally traditional and local.

3.3.  Given the attractiveness of traditional, bio or organic products from LDCs in developed markets, significant opportunities for LDCs could be exploited and developed in the form of value-added exports, in association with the generation and diffusion of technologies that facilitate LDC trade. Therefore, LDCs should be given the necessary support and flexibility to adapt and develop their own standards, capable of meeting international standards while respecting consumer safety and existing WTO rules.

3.2  Sustainable Agriculture

3.4.  Agriculture is crucial to the economies of LDCs. It provides livelihoods, food security, foreign exchange and economic activity. Many LDCs have developed organic agriculture and agroforestry practices, which contribute to climate change mitigation and adaptation, improving soil health, increasing resilience to climate variability and reducing environmental degradation. However, agriculture remains highly vulnerable to climate change and many LDCs are commodity-dependent, exporting mainly raw materials and resource-based intermediate products with minimal value addition[13]. Despite these challenges, LDCs have put in place practices and developed sustainable, climate-friendly agricultural products that are adapted to their environmental and regulatory specificities. For example:

·_        In addition to sustainable jute farming in Bangladesh, floating gardens use water hyacinth and local plants to create floating beds for growing vegetables, thereby improving soil fertility, providing shade, reducing erosion and diversifying income sources[14];

·_        In Malawi, conservation agriculture involves minimal soil disturbance, crop rotation and maintaining soil cover with crop residues, which improves soil health, reduces erosion and increases drought resistance[15];

·_        In Nepal, terraced farming on hilly land prevents soil erosion, manages water runoff, improves water retention, prevents landslides and increases arable land[16];

·_        In Uganda, mulching uses plant residues and organic materials to cover the soil, retain moisture, suppress weeds and add organic matter[17];

·_        The Zaï technique in Burkina Faso helps to expand arable land and improve cereal crop yields […]. It thus plays a role in reducing the adverse effects of climate variability and in securing agricultural production[18];

·_        In Cambodia, the System of Rice Intensification (SRI) involves planting fewer, healthier and more widely spaced rice plants, which improves water management, increases yields, reduces water consumption and reduces reliance on chemical inputs[19].

3.5.  It is crucial to ensure that trade and environmental policies do not restrict LDCs’ market access but provide adequate support. Sustainable agriculture in LDCs can be improved with technological support from both developed and developing countries that are in position to do so.

4  Perspectives

4.1.  The LDC Group advocates for a cooperative approach to addressing trade-related climate challenges. As climate change is a global threat, Members should work together to find comprehensive and multilateral solutions that promote sustainable development, including industrial development policies, and pursue climate objectives, taking into account the specific needs of LDCs, in accordance with Paragraph 14 of the MC12 Outcome Document. The following steps should be taken as a way forward:

4.1  Strengthening Existing Mechanisms for Technology Transfer at the WTO

4.2.  To bridge the LDC technology gap, it is essential to strengthen the technology transfer mechanisms at the WTO. A key strategy includes improving the implementation of Article 66.2 of the TRIPS Agreement, which requires developed countries to provide incentives to enterprises and institutions in their territory to promote and encourage technology transfer to LDC Members in order to enable them to create a sound and viable technological base[20]. Strengthening implementation and support under this article can improve access to critical climate technologies, thereby facilitating the green transition tailored to LDC mechanisms.

4.3.  Strengthened cooperation and partnerships are also needed to bridge the technology gap and help LDCs achieve their climate and sustainable development goals[21]. Such initiatives could help LDCs implement sustainable agricultural practices and sustainably exploit their natural resources to achieve the transition to a low-carbon economy. Furthermore, it is essential to encourage partnerships and collaboration between developed countries and LDCs. Such collaborations can facilitate the exchange of expertise, enabling LDCs to effectively adopt and implement climate-friendly innovations that complement their ecosystems[22].

4.2  Technical and Financial Assistance

4.4.  To help LDCs address trade-related climate challenges, targeted technical assistance and local capacity building activities through training and knowledge sharing, helping LDCs to better benefit from sustainable agriculture, in order to leave no LDC behind in the fight against climate change. Capacity building could also help to better understand and comply with international environmental standards and standards, facilitating the integration of LDCs into green global value chains.

4.5.  Articles 9 and 11 of the Paris Agreement indicate that the establishment of robust financing mechanisms for technology transfer could enable LDCs to acquire and deploy clean and efficient technologies that are essential for sustainable development and climate resilience[23]. Such mechanisms could also facilitate the promotion of green investments and the development of resilient infrastructure in LDCs to support the adoption of sustainable practices, particularly in agriculture.

4.3  Deepening Discussions on the Trade, Environment and Sustainable Development Nexus

4.6.  It is crucial to deepen discussions on trade, environment and development in the CTE to improve mutual understanding among Members on issues such as TrCMs, technology transfer and sustainable agriculture. This includes addressing capacity building, knowledge sharing and financing mechanisms. These discussions should be guided by principles such as CBDR, the precautionary principle, the polluter pays principle and non-discrimination.

4.7.  Members should seek to foster international cooperation and coherence between trade policies and climate agreements. The CTE should invite international organizations and experts to provide insights, in order to help the Committee better understand the impact of environmental measures on trade and the green transition, in a manner consistent with WTO rules and international environmental law.

4.4  Developing Trade-related Environmental Guidelines and Standards

4.8.  Discussions in the CTE should enable Members to develop guidelines and standards that take into account the limited resources and specific vulnerabilities of LDCs, ensuring that TrCMs respect the principle of CBDR and avoid becoming disguised trade barriers.

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