Climate change will have a major impact on agricultural production, comparative advantages, and trade flows. A greater divergence between regions in terms of agricultural output is likely. For the most part, countries in the tropics and subtropical zones, mostly developing economies, are expected to lose in terms of agricultural production whereas countries in temperate zones, mostly developed economies, are expected to gain. Many of these developing countries are highly dependent on the production and exports of agricultural goods, climate change will therefore cause considerable losses of growth and export opportunities. In addition, most of the worst affected countries are characterized by current crippling infrastructure, feeble rural and agricultural markets and, weak integration to the global economy.
It is generally agreed that the countries in Africa will experience declining yields in the long run. For example, agricultural production in Guinea-Bissau, which agricultural sector adds value of 62% of GDP, is estimated to decrease with 32.7 % (without carbon fertilization) by 2080. The impacts on development and food security, as well as on nutrition, will be enormous.
The international community has agreed to give priority to mitigation and adaptation efforts geared towards addressing such distress. Moreover, securing adequate resources and identifying ways and means to redress a trend towards an eventual catastrophe is urgent and imperative. Th e current paper investigates ways in which the affected developing countries can secure alternative sources of export earnings. In doing this, the paper goes beyond the option of ‘climate change proofing’ of existing products, methods of production and logistics; it also investigates the possibilities of diversifying into new products, methods of production and new tradable services. As a part of the transition towards a low carbon global economy, new products, such as carbon, and services, such as standard setting and verification of carbon emissions, are demanded.
However, the question remains with respect to how projects supporting these efforts can be financed. Current available and proposed mitigation finance remains considerably lower than the projected costs of mitigation in developing countries. The paper discussed the possibility of linking Aid for Trade and aid directed at mitigating and adapting to the effects of climate change on agricultural production in developing countries. It is shown that these two forms of aid have many similarities and that linking them is viable, and could create more coherence. Further, it is stressed that these two forms of targeted aid should be additional from normal ODA, but that, at the same time, they should not be separate.
Creating coherence with respect to aid is especially important considering the current lack of coordination between the overall international regimes dealing with trade and climate change. Such a lack will unnecessarily punish the receivers of financial aid.