Opinion

How turning value chains green can accelerate the global transition to net-zero emissions

Covid-19 has wreaked havoc on global value chains, but it could also spark a rethink of how to organise them and where to locate production

Going green can become a competitive advantage for emerging economies seeking to join global production systems and fulfil climate commitments

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Cargo containers are seen at the Port of Los Angeles in San Pedro, California, on October 20. The Los Angeles-Long Beach port complex will begin fining shipping companies if they let cargo containers stack up as the nation’s busiest twin harbours deal with an unprecedented backlog of vessels. Photo: AP

Erik Berglöf is chief economist of the Asian Infrastructure Investment Bank and a former director of the Institute of Global Affairs at the London School of Economics and Political Science.

Published: 1:30am, 7 Nov 2021

Clogged ports, long shipping delays and skyrocketing transport costs are all evidence of the havoc Covid-19 continues to wreak on global value chains. Firms are reconsidering where to locate production, whether and how much redundancy their operations need and which inventories to hold as a buffer against future shocks.

The effects are rippling through the global economy, creating additional uncertainty and slowing recovery. Moreover, with policymakers in Glasgow for the UN Climate Change Conference, there is increasing pressure to decarbonise production and transport along global value chains.

How quickly this happens is of great importance. Global value chains account for about half of global exports, and emerging and developing economies’ share of these production networks has increased significantly since the 2008 global financial crisis.

For example, a low- or middle-income economy no longer needs to produce a whole car to enter the global automobile supply chain. It is enough to specialise in one small component.