11 September 2019: Climate change threatens the economies of commodity-dependent developing countries, according to a report published by the UN Conference on Trade and Development (UNCTAD). The report argues that these countries need to diversify economies and exports to avoid economic collapse.

The 2019 edition of the UNCTAD Commodities and Development Report titled, ‘Commodity Dependence, Climate Change and the Paris Agreement,’ seeks to enhance understanding of the interactions between climate change and the commodity sectors. Climate change, the report finds, has increased the risk for commodity-dependent developing countries since they often rely on sectors that are exposed to extreme weather events. The report contends that in such countries, economic and export diversification is the best response to the climate challenge.

Speaking about the publication, UNCTAD Secretary-General Mukhisa Kituyi said that countries must assess their diversification potential and reduce their commodity dependence, which has left them exposed to volatile markets and climate change.

Countries must reduce their commodity dependence, which has left them exposed to volatile markets and climate change.

Small island developing States (SIDS) are among the worst affected, according to the report. Rising sea surface temperatures pose risks to SIDS that benefit from export earnings from fisheries, such as Kiribati, Maldives and the Federated States of Micronesia (FSM). The negative impacts of climate change on crop and fisheries production are more severe in low-latitude regions, where most commodity-dependent developing countries are located, the report observes.

The publication notes that fossil fuel-dependent countries, such as Brunei Darussalam, Kuwait and Qatar, are being affected by the push towards greener energy sources. In addition to underscoring the need for commodity-dependent countries to adapt, diversify and modernize their economies, the report says they must adapt to the effects of climate change response measures undertaken by other countries as well, which will reduce demand for some commodities on which they depend.

The report also highlights opportunities for commodity-dependent developing countries that tackle climate change. For example, the trend towards renewable energy and energy efficiency can help countries with reserves of resources used in clean technologies, such as solar photovoltaic (PV) cells, wind turbines and electric vehicle batteries. As an illustration, in 2018, the Democratic Republic of Congo (DRC) accounted for 58% of the global supply of cobalt, which is used to produce electric vehicle batteries, while Chile and Argentina jointly accounted for 71% of global reserves of lithium, also a battery component.

Climate action has also led to investments in technological innovations that could benefit commodity-dependent countries, including the adoption of cost-efficient solar PV cells, which could bolster energy security and support commodity sectors in remote areas not connected to national power grids.

Additionally, the report calls for, inter alia: reforming fossil fuel subsidies to further green fiscal policies, given that the wealthiest 20% of households in developing countries receive 43% of fossil fuel subsidy benefits, while the poorest 20% only receive 7%; and financial and technical support from developed countries to help commodity-dependent developing countries implement their Nationally Determined Contributions (NDCs). [Publication: Commodities and Development Report 2019] [Report Landing Page] [UNCTAD Press Release] [UN Press Release]