Climate Change: An Emerging Trade Opportunity in South Asia

Abstract

This article investigates emerging opportunities in climate change mitigation in South Asia through trade. Trade can mitigate the climate change issues of a country, region or the world as a whole. Through international agreement (or pressure), trade also creates the opportunity for green jobs that produce environment-friendly goods (EFG), which have less damaging impact on environment. This article examines possible potential trade opportunity of climate-friendly goods (CFG) in South Asia. Applying the gravity model, this article estimates potential trade of CFG in South Asia. It also measures the trade gap as to how well bilateral trade flow performs relative to the mean value of trade as predicted by the model. Here, ‘potential trade gap’ means the gap between actual trade and the predicted trade value. It suggests that there is a scope to improve the export of CFG with trading partners. This article suggests and also highlights an alternative possibility for a climate-friendly export-led growth model in South Asia. It also identifies the potential trade gap of CFG for each regional member and its partners within region and developed countries such as the European Union (EU) and North America (the USA and Canada). JEL Classifications: Q5, C23, F1