Countries that export carbon-intensive goods face an increasing focus on the carbon embodied in traded goods. Large economies, such as the European Union (EU) and the United States of America (USA), are considering and implementing policies to reduce the carbon embodied in certain imported goods.

This paper from the Inter-American Development Bank (IDB) reviews more than ten climate-related trade measures that are currently enacted or under discussion globally and five initiatives from large companies to source low-carbon inputs.

The document deep-dives in the assessment of Bolivia, Colombia, Ecuador, and Peru’s vulnerability to trade restrictions, based on estimated greenhouse gas intensity of their exported goods (using an input-output analysis) relative to other global producers, and an exposure analysis that assesses the likelihood that current importers of these products might implement climate-related trade measures.

Main conclusions from the analysis show that agricultural goods stand out as vulnerable, as they are the main driver of deforestation and associated emissions, but the most serious threat is the vulnerability of fossil fuel exports, primarily crude oil and gas, which dominate the four countries’ current exports.

Finally, the authors propose recommendations in terms of diversifying the economy away from fossil fuels and preparing exporters to comply with emerging climate-related trade restrictions.