Impact of climate change on international trade

Impact of Climate Change on International Trade

This article on ‘Impact of Climate change on International trade‘ was written by an intern at Legal Upanishad.


Hot summers, the melting of glaciers, and rising sea levels are contributing to the shrinking of our planet. The existence of living organisms has come under threat. The imbalance caused in the environment by the rising sea level and temperature becoming warmer by 1.2°C has created a shift in the temperature and weather patterns.

The result of this shift has affected numerous factors one of them being trade. The importance of trade can be well assessed by the role it plays in driving economic growth globally, which helps drive innovation and competition.

The following article discusses the impact of climate change on international trade in small developing nations.

What is climate change?

The consistent temperature of a particular location over the years is defined as climate. The change in this temperature or conditions is termed climate change.10,000 years ago the changes in the temperature were relatively slower but systematic studies on climate that had begun in the 1970s have stated that the acceleration in the change of climate is influenced by human activities.

The reason this change is caused due to various factors, some of which are contributed by the use of oils, gases, coals, and other such substances alike have led to the shifting in the temperature.

There is no doubt that human activity contributed to the atmospheric gases that have trapped more solar energy in the Earth’s system. The atmosphere, ocean, cryosphere, and biosphere have all undergone rapid and extensive changes as a result of this increased energy. Additionally, the atmosphere, water, and land have all warmed.

Impact of climate change on international trade

Globalisation has increased the international exchange of goods and services, low-cost labour, and business opportunities which have significantly increased.

The change in the climate not just has an impact on the environment but also on the factors of trade. Climate change will have an impact on trade in a number of different ways, not all of which will be obvious and readily measurable.

Some instances of the consequences of climate change on international trade can be determined by the rising cost of food globally, which will increase global hunger rates.

The following is the impact of climate change on international trade:

  • The effects of climate change-related extreme weather can reduce productivity, increase trade prices, and destabilise supply chains. By altering nations’ comparative advantages and, as a result, their production specialisation, long-term climate change may have an effect on commerce.
  • As a result of climate change, trade costs are projected to rise unevenly among regions. One of the causes of this is that transportation infrastructure, such as roads, inland waterways, and railway lines, is more likely to deteriorate quickly and sustain damage, requiring greater operating, maintenance, and repair costs. Small economies or landlocked nations that receive trade flows through a limited number of ports and trade routes are more sensitive to the effects of climate change on transport infrastructure. Critical intersections of transport routes are those most vulnerable to trade disruptions.
  • In contrast, the tourism sector is still quite vulnerable to climate change. Popular summer destinations can lose some of their allure as summers get hotter, and winter and mountain resorts might see less pleasant winters. The infrastructure of the tourism industry could be irreparably damaged by extreme weather conditions and increasing sea levels, with countries that strongly rely on tourism, like SIDS, likely to be the most severely impacted.
  • In the manufacturing industries, supply chain disruptions could be brought on by climate change. Although the manufacturing sector is usually thought to be less vulnerable to climate change, labour-intensive industries, companies that rely on climate-sensitive inputs (like the food processing industry), and industries that are deeply woven into global value chains are more vulnerable. Extreme weather occurrences are more likely to affect industrial areas, which could have significant effects on supply networks farther down the supply chain.
Impact of climate change on international trade
Impact of climate change on international trade


Climate change is real and it’s a threat to the existence of the planet. One must not just depend on the government alone to reduce the impact of climate change. There are specific ways in which the individual can also contribute a bit to help reduce the impact of climate change on international trade.

Following are a few suggestions that can be utilised to reduce the impact of climate change on international trade.

  1. Using solar panels helps in reducing the emission of greenhouse gases.
  2. In order to deal with extreme climate change events such as hurricanes and other natural disasters can be tackled with the governance of environmental policies formulated in a way that will foster resilience against the changes in climatic conditions.
  3. Promote ethical behaviour, environmentally friendly manufacturing and consumption, environmental investments, and the creation of green technologies.
  4. Multilateral environmental protection programmes like the Paris Agreement must advance and become a true ally of global trade governance. Carbon pricing could be used as a measure to reduce trade’s environmental impact and to encourage investment in green businesses.


The phrase “a stitch in time saves nine” perfectly describes the state of climate change today. One of the largest environmental issues the world is currently experiencing is climate change. Lack of adaptive capacity is the main factor making many poor countries vulnerable to climate change.

Although experts believe that we have passed the point where we can no longer protect ourselves from the effects of climate change, the only viable option given the current situation is to adapt to the changing climate.

Increased efforts should be made to cut greenhouse gas emissions in industrialised countries in order to reduce future climate change.