Climate change threatens the Panama Canal and global maritime trade
The Panama Canal is the conduit for 6% of world maritime traffic. But climate change is disrupting this trade. While high temperatures and little rain are the main causes, four hurricanes in seven years have been equally devastating.
The Panama Canal is in the middle of Panama’s rainforests, which cover 68% of its land or nearly 12.7 million acres. Both depend on rainfall for their survival. If the rainforests don’t get enough rain, they run off to the canal. The bad news is that canal authorities say 2019 was the fifth driest year in 70 years, with rainfall 20% below average, all compounded by depleted reservoirs.
Indeed, the water levels have dropped in 2015 and 2016and shippers had to reduce the amount of cargo on their ships – money down the drain.
“The Panama Canal is the only interoceanic trade route whose operation depends on the availability of fresh water, making it the most vulnerable to the adverse effects of global climate change,” said Emilio Sempris, former Minister of the Environment of Panama from 2015 to 2017, during an interview with this writer. “There is no better natural solution to securing water in the Panama Canal watershed than protecting forests and planting more trees.”
The United States built the Panama Canal between 1904 and 1914 – a freshwater shortcut that allows ships to avoid rounding the tip of South America. The Panamanians widened the waterway during this century. As a result, shippers reduced their time at sea from two months to 10 hours. Over 10 million ships have accessed the canal since it opened.
The expansion of the Panama Canal has reduced the time spent at sea, resulting in 16 million tonnes less CO2 in 2021 and 650 million tons since 1914. Meanwhile, rainforests absorbed 18.3 million tons of CO2 between 2016 and 2020. Additionally, Panama’s rainforests absorb more CO2 than its national energy sector emits annually. That’s why Panama has meticulously protected its trees: between 1947 and 2014, the country lost 6.7 million acres of forest – a fraction of its total – mostly to ranching and agriculture.
Despite these contributions, Sempris says Panama has received no direct payments or carbon credits for protecting its rainforests and reducing carbon emissions. “Since the adoption of the Paris Agreement in 2015, Panama has put in place legal and institutional arrangements to progressively eliminate deforestation and restore its forest cover. We know that trees are home to our rich biodiversity, prevent soil erosion and regulate the water cycle.
Show us the money
Panama has complied with the United Nations verification process, which requires countries to report on their trees and determine how much carbon they will absorb if left standing. These are the rules of the Paris climate agreement if rainforest nations want to sell carbon credits to countries and companies. Panama claims it is eligible to sell 18 million tonnes of CO2 credits under the REDD+ financing mechanism – credits based on past achievements from 2016 to 2022.
Funds from carbon credit sales will protect and enhance the country’s tropical rainforests. Sempris says the credits will be ready for sale in 2023 and $250 million would initially be raised. After the first year, he says the credits would bring in between $50 million and $70 million a year.
Panama will also use the money to restore deforested land and create green jobs in everything from ecotourism to biodiversity protection to scientific research. The funds will go into a transparent and professionally managed trust. “We expect thousands of new jobs,” says Sempris. “We need to get the money to the countryside – to feed these provinces, so that they engage in reforestation.”
Panama’s primary industries are agribusiness, manufacturing, petroleum products, chemicals, and transportation related to the Panama Canal and Panama City Airport, which serves 170 destinations worldwide. Tourism also generates $4 billion in revenue. Meanwhile, international banks are important with mining, as the country is rich in minerals such as copper. The inefficient agricultural sector is the main cause of the country’s greenhouse gas emissions.
Among the multinationals with regional headquarters in Panama: the shipping company Maersk, the Procter & Gamble Co., Chevron
Panama’s efforts will have little global impact unless the larger rainforest nations make the same commitments and sacrifices – those focused on keeping their trees alive and absorbing CO2. This means that Africa, Australia, Brazil, China, India, Indonesia and Russia must stop deforestation.
“Forests must be a bigger part of the global climate solution,” says Sempris. “That’s why Panama protects its forests. If there is illegal logging elsewhere, we cannot close our eyes. The Panama Canal will suffer and 6% of global maritime traffic will be negatively impacted.
Rainforests are vital to Panama’s economic health – the engine that keeps the Panama Canal alive and well. Climate change is a threat to Panama and beyond. The battle is multifaceted. But protecting rainforests and ensuring access to climate finance are cornerstones of success.