Sweden’s exposure to climate risks via global trade requires a strong climate adaptation agenda

The analysis in “New risk horizons: Sweden’s exposure to climate risk via international trade” shows that Sweden’s most stable trade relations tend to be with countries that are both close to Sweden and relatively resilient to climate change. However, by adopting innovative data-driven methods, it also reveals the true extent of the country’s dependence on more vulnerable countries – particularly emerging economies in Asia and Africa – that play an increasingly critical role in Swedish supply chains.

The report provides a number of recommendations to decision-makers ahead of the revision of Sweden’s national strategy for climate adaptation, COP27 climate negotiations and Sweden’s EU presidency in 2023.

“With new and more detailed research results, we see how vulnerable Sweden is, as a small, open country in the global market, to the effects of climate change in countries far away,” said SEI Research Associate and Mistra Geopolitics project leader Frida Lager.

The report shows that traditional methods for assessing Sweden’s climate risk exposure present a relatively reassuring picture and highlights the dominant role played by geographically close trading partners such as Germany and its Nordic neighbours, some of the least vulnerable countries in the world. In addition, Sweden trades largely with EU countries and other relatively resilient markets.

“Trading partners earlier in the supply chain, such as producers of agricultural commodities, manufacturing inputs and critical minerals, are more difficult to track in the statistics, but they play a crucial role in the Swedish economy,” noted Lager. “The risks of climate change disruptions via trade are greatest in these economies and their influence on Sweden’s climate vulnerability has not been visible until now.”

Global trade and climate vulnerability

The effects of the pandemic and ongoing interlinked food and energy crises have opened and continue to open the eyes of Sweden. They serve to remind Swedes of the country’s deep interconnections with and dependence on far-flung parts of the global economy. They also renew questions about the level of preparedness in Sweden to external shocks and remind stakeholders across business, government and society of how international events and trade disruptions can impact life in Sweden.

The report highlights what climate adaptation should really be about for countries like Sweden, where trade issues, business and international cooperation should be the key components. As similar research results from Germany and Austria show, the impact on trade of climate change in Sweden may be greater than the risks faced within the country’s own borders.

Climate risks linked to global trade are a relatively unexplored area of ​​research and the climate vulnerability of countries is challenging to map. The report is a significant milestone in terms of innovation in methods for evaluating transnational climate risks. It provides new insights on the importance of climate adaptation policy and global governance.

The study examines Sweden’s dependence on soy from Brazil as an example of a commodity where climate risks in production (on Brazilian farms) and transport (via Brazilian inland road, rail and shipping networks) are expected to drive risks for consumers and businesses in Sweden. The flow of risk from farm to fork is mapped and analyzed.

Ahead of the COP27 annual global climate conference in Egypt and the revision of Sweden’s national strategy for climate adaptation, as well as Sweden’s upcoming EU presidency, the authors make the following recommendations to the country’s decision-makers:

• Prioritize cross-border climate risks as a risk area in the new climate adaptation strategy.
• Establish a new working group that spans several sectors to improve and clarify the management of cross-border climate risks, especially those related to trade. It should include decision-making bodies for trade and foreign policy as well as civil contingency planning.
• Establish a department responsible for coordinating adaptation efforts across governments and other actors in Sweden to cross-border climate risks.
• Sweden should press for the ambitious operationalization of the Global Goal on Adaptation (part of the Paris Agreement) as part of the Glasgow-Sharm El-Sheikh work programme, which will be discussed at COP27. Sweden is in a unique position to lead international coalitions and raise the level of understanding and management of cross-border climate risks.