Trade and investment play an outsized role in the economic development story of the Asia and Pacific region, but it has come with environmental costs. Asia and the Pacific is on the frontline of climate change and is responsible for about half of global annual carbon dioxide emissions. The theme chapter of the Asian Economic Integration Report 2023 seeks to better understand how trade and investment contribute to climate change, and how trade and investment policies can become part of the climate solutions.


Asia and the Pacific is on the frontline of climate change, with high exposure to extreme weather and many people living in low-lying coastal areas.

Almost 40% of disasters worldwide have occurred in Asia and the Pacific.

With its rapid expansion of production capacity, Asia has become the major producer and exporter serving growing global demand.

Asia is also a net exporter of carbon dioxide emissions.

The region’s rapid economic growth and industrialization has increased carbon emissions,  despite the carbon-reducing effects of technological advancements. 

The region needs to embrace “climate smart” policies to ensure trade and investment can be part of the climate solutions.

Policy makers can focus on four pillars: promoting trade in environmental goods and services; nurturing green businesses; enhancing international cooperation on regulations; and developing carbon pricing mechanisms.

Environmental goods and services such as solar panels, wind turbines, and wastewater technologies can help use resources more efficiently and reduce environmental impacts.

International and regional cooperation is essential for the development of a green and sustainable trading system.

It’s crucial to ensure that certification systems are interoperable and that regulations are coherent.    

It’s also important to strengthen collaboration on a green economy through trade agreements, investment treaties, and other initiatives.

While considering border carbon adjustments mechanisms, governments must carefully calibrate the impacts.

Economies in the region need to be prepared for a changing trade environment.

Ultimately, the most efficient measure for reducing carbon emissions and carbon leakages across borders is to foster international carbon markets.

To discover more, read the latest Asian Economic Integration Report.