As the world moves towards a low carbon economy, transition risks appear.
The efforts to reduce GHG emissions are being approached differently by the big economies: US and China have emphasized subsidies; the EU has focused on carbon pricing. Both distort markets, disrupt supply chains and modify incentives for investors.
Exporting countries are affected by trade barriers, while investment decisions can be shifted in tradable industries.
Many of the new climate related regulations have no precedent, do not comply with multilateral rules, their effectiveness in mitigation is unclear, but have high implicit costs on third countries, many of which are developing and have difficulties in accessing capital at a competitive cost.
The session addresses the impact of transition risks, derived from arbitrary regulations, in increasing capital costs for developing countries (particularly from a South American perspective and their role in addressing two of the greatest challenges: food security and climate change).
