The foundation of the global clean energy transition

The United Nations Global Compact (the ‘Compact’) and the United Nations Sustainable Development Goals (the ‘SDGs’).

What is the Global Compact and the Sustainable Development Goals?

The Compact is a multilaterally agreed-upon promise to stimulate the development of corporate sustainability by adopting principles that remedy pressing issues relating to human rights, labour, anti-corruption, and the environment. The SDGs promote economic growth that does not compromise the ability of future generations to meet their needs.

Why is there an expectation that the Compact and the SDGs will be adopted?

The Compact and the SDGs are a global consensus on long-term sustainability that everyone will be expected to commit and comply with. Countries of the world can no longer afford to advance their development through rapid industrialisation and exorbitant carbon emissions. The way that past economic growth has been achieved is not sustainable: it is responsible for an expanding list of environmental and social burdens. Unless and until there is a shift in the way business is conducted globally, the risks posed by externalised environmental and social costs in the real global economy will grow unfettered.

The benefit to Trinidad and Tobago of joining the Global Compact

With global economic policy demanding the promotion of clean energy, Trinidad and Tobago urgently needs to accelerate the development of cleaner, climate-friendly energy solutions to avoid economic loss.

Trinidad and Tobago’s problem with transitioning from carbon-intensive fuels to cleaner energy generation is difficulty accessing climate financing. By joining the Global Compact, Trinidad and Tobago will benefit from the new and emerging sustainability market, estimated to be worth USD 12 trillion in market opportunities.

The clean energy transition demands reducing carbon emissions and substituting renewable energy resources. Political-economic blocs like the European Union have implemented carbon border adjustment trade policies to force the world to join the transition.

Trade policies like these frustrate small island developing states’ economic growth and development. They are left exposed and increasingly vulnerable to shocks and shifts in the global capital market, even when they cannot realistically afford to transition.

Relevance to Trinidad and Tobago

Carbon border trade policies like CBAM threaten to diminish Trinidad and Tobago’s dwindling export income. These trade policies are a type of carbon tax that developed countries place on foreign imported goods to reflect the cost of carbon emissions. By making imported goods with high carbon footprints more expensive, these types of trade policies incentivise domestic producers to adopt cleaner technologies and reduce their emissions.

As a primarily oil and gas territory, Trinidad and Tobago already depends on the volatility of a finite resource whose prices it does not control. With the implementation of trade policies like CBAM, the foreign exchange income earned from exporting hydrocarbons will decrease further.

The bottom line is that the country needs to accelerate its transition to clean energy. However, this is not without difficulty as sustainability development projects are often much more expensive and developing states like Trinidad and Tobago have difficulty accessing climate financing.