As sustainability becomes a global priority, industries are shifting towards eco-friendly practices, including commodity production. Green commodities are raw materials and goods produced using sustainable methods that minimise environmental harm. From renewable energy sources to ethically sourced agricultural products, these commodities play a key role in reducing carbon footprints and promoting a greener economy.
What Are the Three Types Of Commodities?
Commodities are classified into metal, energy, and agricultural commodities. Metal commodities are obtained through mining. They have value and are usually in their raw and basic form before being created into a product. Examples of them are gold, silver, copper, and aluminium.
What Is the Green Commodities Programme?
The Green Commodities Programme (GCP), initiated by the United Nations Development Programme (UNDP), is a global initiative aimed at improving the environmental, social, and economic performance of agricultural commodity sectors by promoting sustainable production practices, primarily focusing on enhancing rural livelihoods, protecting forests and ecosystems, and mitigating climate change within these sectors; funded by the Swiss State Secretariat for Economic Affairs (SECO).
What Are Green Commodities?
Green commodities are raw materials and goods produced using environmentally sustainable methods. They aim to reduce environmental impact, lower carbon emissions, and promote a net-zero future.
What Are Some Examples Of Green Commodities?
Some examples of green commodities include steel which can be made with low emissions using hydrogen, carbon capture and storage, or scrap materials, recycled plastics that can have a premium over virgin plastics, low-CO2 steel that could have a significant premium, and renewable energy sources like solar and wind power.
Impact Of Commodity Trading On the Environment
Commodity trading can have a significant negative impact on the environment due to the extraction, production, and transportation of raw materials, which often involve high levels of greenhouse gas emissions, deforestation, water pollution, and biodiversity loss. Here are the key ways commodity trading is impacting the environment:
Greenhouse gas emissions
Many commodities are extracted and processed, particularly fossil fuels like gas and oil, which greatly increase greenhouse gas emissions worldwide and cause climate change.
Deforestation
The production of agricultural commodities, especially goods like soy and palm oil, can result in widespread deforestation in tropical areas, which can affect carbon sequestration and biodiversity.
Water Pollution
Water bodies may become contaminated and aquatic ecosystems may be impacted by pollutants released into them by mining operations and industrial processes associated with the production of commodities.
Land Degradation
Land fertility may be impacted by soil erosion and nutrient depletion caused by intensive agricultural operations used to produce commodities like grains.
Biodiversity Loss
The loss of plant and animal species can be caused by habitat degradation brought on by logging, mining, and agricultural expansion for the production of commodities.
How Can Commodity Trading Mitigate Environmental Impacts?
Companies can prioritise sourcing commodities from producers with environmentally responsible practices, such as certified sustainable forestry or responsible mining. They can also purchase carbon credits to offset emissions associated with their commodity trading activities and establish carbon pricing mechanisms which can incentivise companies to reduce emissions. Another way commodity trading can become more environmentally friendly is if governments can implement stricter regulations on commodity production and transportation to minimise environmental impacts.