IG-R-2: Exposure of Germany’s foreign trade to global climate change

By contrast, roughly a third of the 35 most important trade partners outside the EU are among the countries exposed to a particular climate risk. The proportion of exports to countries with a particular climate risk compared to exports overall declined significantly since 2015. For the other time series, it has not been possible to identify a trend. Among the 10 most important foreign trade partners in Europe there are no countries exposed to a particular climate risk.

Climate risks to Germany’s foreign trade

Germany’s economy is strongly intertwined with the economy of other countries. In 2021 companies based in Germany exported goods and services totalling a value of 1,379 billion Euros, while imports amounted to 1,204 billion Euros. Roughly 30 % of the Gross Domestic Product is due to demand from abroad, while roughly one quarter of the working population in Germany is active in export-related occupations. In other words, Germany has on one hand opened up international markets for her products at a major scale. while on the other, the country obtains, also at a major scale, raw materials, intermediate and end products from other countries. The strong export focus has for decades been a successful model for the German economy. Apart from geopolitical risks – such as armed conflicts or international legal conflicts – the impacts of global climate change therefore entail particular risks for the German economy.

Climate change is a global phenomenon. Extreme weather events and associated impacts have been occurring worldwide more frequently and with greater intensity. In the same way as gradual climatic changes, they affect all countries, regardless of political borders. As far as the globalised economy with its far-reaching worldwide interrelations is concerned, this can bring about both direct impacts, for instance at sites close to home, but also indirect impacts, for instance when supply chains or sales channels are affected or entire sales markets are permanently weakened. This applies all the more, the more closely trade relations are intertwined and especially when trade partners are countries which are exposed to a particular climate risk. In respect of Germany, scenario-based analyses have shown via the world trade that climate change impacts arising outside Europe have a greater impact on Germany’s national economy than climate change impacts within Europe. Furthermore it came to light that imports are more exposed to risks than exports.^{188 188}

The indicator examines the question – which actual trade volume and which percentual proportions of exports from and imports to Germany regarding the trade with partner countries are exposed to a particular climate risk. The assessment of the climate risk prevailing in individual countries is based on the ND-GAIN Index which is calculated by the Global Adaptation Initiative at the University of Notre Dame (USA). The index is determined based on indicators, and it encompasses the vulnerability of countries to climate change and other global challenges as well as their preparedness to confront those challenges in terms of investments and by increasing the countries’ resilience vis-à-vis those challenges. A particular climate risk has been attributed to those countries which are not among the first-named 75 countries covered by the ND-GAIN Index. European countries have comparatively strong opportunities at their command enabling them to deal with climate change. Consequently, there is usually no particular risk attributed to EU countries. In due consideration of the relevance of the countries involved in trading with Germany, the data on exports and imports as contained in the StBA foreign trade statistics are incorporated in the indicator. Taken into consideration are the 10 most important trade partners within the EU who have a proportion of Germany’s foreign trade volume with EU states amounting to roughly 84 % as well as the 35 most important trade partners outside the EU with a proportion of Germany’s foreign trade volume with non-EU states amounting to approximately 96 %. Exports and Imports are each dealt with separately and with reference to individual years. On the basis of this aggregate information it is possible to see in what way – with reference to the most important trade partners – the exposure of Germany’s exports and imports to climate change is developing.

The findings show that none of the 10 most important trade partners within the EU have a low ND-GAIN index. By contrast, roughly a third of the most important trade partners outside the EU are among the countries with a particular climate risk, such as India or the Republic of South Africa. Overall, there are more countries supplying Germany with goods than countries importing goods from Germany. Owing to a methodological change that involved a sub-indicator of the ND-GAIN Index from 2014 onwards, there are limitations to the assessment of the chronological development of the indicator. The change resulted in a higher risk assessment of three major foreign trade partners of Germany: Brazil, Mexico and Indonesia. Consequently, a higher climate risk was attributed to a major part of the foreign trade. This is the reason for the discontinuity in the time series covering 2014. With regard to the short period since 2014 it is possible to see that the proportion of exports in respect of countries exposed to a particular climate risk to exports overall decreased significantly. As far as the other time series are concerned, it has not been possible to discern a trend for the period in question. The decrease in the period from 2019 to 2022 can be attributed to a decline in the foreign trade volume in the course of the Covid-19 pandemic.

Another point to be borne in mind regarding the interpretation of the indicator is the fact that the indicator covers a purely theoretical, potential exposure to climate change impacts. The indicator does not make a statement regarding the extent to which imports to or exports from countries exposed to a particular climate risk have actually been or still are affected by climate change impacts. Neither does the indicator permit to assess whether imports from or exports to particularly vulnerable regions within the countries concerned are indeed emanating from those regions or are to be supplied to these regions. The indicator considers the countries in question in their entirety, regardless of climate risks that might differ from region to region. Furthermore, even imports from and exports to countries not currently considered to be exposed to increased climate risk, may become affected by climate change impacts, either on location or on the supply channels used for the products in question.

That notwithstanding, an increasing volume of potentially affected goods flows can be seen as an indication of a greater need to focus specifically on cross-border risks of climate change and to plan appropriate measures – for example, greater differentiation of trade relations at the company level¹⁸⁹ or – at the political level – financial aid for risk-mitigating measures to countries that are particularly at risk from climate change and are relevant to Germany’s foreign trade¹⁹⁰. However, there are also export opportunities for Germany if it can supply goods to countries particularly exposed to climate change if these goods can be used there for adaptation to climate change.

^{188 - Peter M., Guyer M., Füssler J. 2020: Impact CHAIN: Folgen des globalen Klimawandels für Deutschland. Abschlussbericht: Analysen und Politikempfehlungen. Umweltbundesamt (Hg.). Climate Change 15/2020, Dessau-Roßlau, 111 pp. https://www.umweltbundesamt.de/sites/default/files/medien/376/publikationen/2020-05-06_cc_15-2020_impactchain.pdf}

^{188 - Die Bundesregierung (Hg.) 2020: Zweiter Fortschrittsbericht zur Deutschen Anpassungsstrategie an den Klimawandel. 61 pp. und Anhänge. https://www.bmuv.de/fileadmin/Daten_BMU/Download_PDF/Klimaschutz/klimawandel_das_2_fortschrittsbericht_bf.pdf}

^{189 - Peter et al. 2020, cf. endnote no. 188}

^{190 - Die Bundesregierung (Hg.) 2015: Fortschrittsbericht zur Deutschen Anpassungsstrategie an den Klimawandel. Bundesministerium für Umwelt, Naturschutz und nukleare Sicherheit. 275 pp. https://www.bmuv.de/fileadmin/Daten_BMU/Download_PDF/Klimaschutz/klimawandel_das_fortschrittsbericht_bf.pdf}

IG-R-2: Exposure of Germany’s foreign trade to global climate change | Umweltbundesamt