Liberalisation of Trade in Environmental Goods: The Devil in the
Details
-Mahesh Sugathan
IISD Mini-symposium on Trade and Investment
Crowne Plaza, Copenhagen, 14 December 2009.
Overview
• The Context: The Doha Negotiations on Environmental Goods
and Services.
• Identifying and isolating climate-friendly goods to calculate trade
flows. (The ‘dual-use’ problem) and other challenges.
• ICTSD’s Mapping Exercise and Trade Analysis in the Renewable
Energy and Buildings Sectors.
• What do the trade flows in key RE technologies and select
number of Buildings Technologies look like?
• To what extent are trade barriers-particularly tariffs an obstacle to
wider dissemination of RE technologies? How do they compare
with other policy-related barriers?
• How can incentives to RE be designed so as not to create an
unlevel playing field for equipment and service providers?
• How can the UNFCCC help create an enabling environment for
the uptake of RE and EE products in developing countries?
The WTO Window: the DDA Negotiations on EGS
• Doha Ministerial Declaration: Para 31(iii) calls for “ the reduction or
as appropriate elimination of tariff and non-tariff barriers to
environmental goods and services.”
• No definition exists of what is an environmental good. This has
made an agreement difficult to reach.
• A number of goods from a set of 153 products proposed by a few
WTO Members for further liberalisation include products relevant to
addressing climate change.
• These fall in two categories: (1) RENEWABLE ENERGY PLANT
and (2 ) HEAT AND ENERGY MANAGEMENT
• Out of this set of 153,US-EU informal 2007 proposal to liberalise 43
climate friendly goods identified by the World Bank and climate
friendly services on an accelerated basis. Zero tariffs on these
goods by 2013.
The Problem of ‘Dual –Use’
Case 1:
Pipes
6-digit HS code entry
(841360) :
Case 2:
Environmental Good
Ex-Out:
Pumps for Sewage
and Wastewater treatment
Pumps for liquids,
whether or not
fitted with a
measuring device; other
rotary positive
displacement pumps
Non-environmental
good
Other pumps
As an
Environmental
Good:
Used in Solar Hot
Water Systems
As a NonEnvironmental Good:
Used in Oil and Gas
Transportation
Non-environmental
good
Other pumps
Climate-relevant Environmental Goods-What has
been going on in the WTO?
• Qatar : includes natural gas fired generation systems and
advanced gas-generation systems.
• Saudi Arabia: includes natural gas as well as a range of
petroleum-based derivatives and other materials relevant to
carbon-capture and storage.
• Canada initially included hydrogen and bio-diesel; New
Zealand :methanol and bio-diesel-later dropped.
• Brazil has informally proposed bio-fuels and bio-fuel
technologies.
• Glass Insulation (Japan and New Zealand). Fluorescent
Lamps (Japan, Canada, New Zealand and the United States).
• Some Members have proposed a ‘review mechanism’ to
identify and extend liberalisation benefits to new technologies
that would evolve.
• Members still deadlocked with regard to modalities of
negotiations; most developing countries yet to identify
products of interest.
Other Key Challenges
• Scope of the basket-what to include?
Agricultural products, those based on
PPMs?
• How to capture evolving technologies and
new products?
• Identifying a ‘critical mass’ of exportables
for developing countries.
• Technology transfer and special and
differential treatment.
ICTSD’s Work on Climate-Friendly Environmental Goods
Technology mapping studies in 4 key mitigation sectors identified by
the IPCC
Energy
Buildings
Transport
Industry
Specification of technologies for mitigation and identification of
corresponding goods
Definition of HS codes at 6 digit and beyond; options for new
classification
Analysis of trade flows, tariff and non-tariff barriers, DCA, GHG
mitigation potential
Research and analytical insight into UNFCCC negotiations on
(potential for trade to enhance) transfer of technology
• Findings from ICTSD Mapping
Studies and Trade Analysis in
the Renewable Energy Supply
and Buildings Sectors.
• ICTSD Analytical Exercise
conducted with support of
UNEP
Methodology
• RE Technologies Mapped by ECN / Buildings by TERI and peerreviewed by IPCC experts.
• RE classified into 78 product categories ( covering solar, wind,
hydro, geothermal, ocean and biomass). Buildings classified into 35
product catgeories covering building envelope (insulation materials);
heating, ventilation, air conditioning and refrigeration (HVACR);lighting; renewable-energy use in buildings and stoves
• Some were removed as it was extremely difficult to identify end-use.
• Caveat: Not all trade figures are representative of RE supply
products. Because the 6 digit codes often include a number of unrelated products these get ‘captured’ in statistics. Further some
products like ball bearings are used for instance in wind turbines as
well as other purposes. Also plastic foam important for insulation but
have other uses. Yet both included as they are important for RE
and Builidngs.
Exports of RES products and components that may be
used in the RES sector, 2007 ( USD millions)
Exporter
(all)
All countries
Germany
China
Japan
United States
France
Italy
United Kingdom
Netherlands
Belgium
Korea, Rep.
Taiwan, China
Sweden
Denmark
Mexico
Spain
Singapore
Austria
Switzerland
Thailand
Canada
EU-27
Intra-EU-27
EU-27 (excl intra-EU)
Exports (US
million)
240238
34587
28378
23511
22072
12265
12197
7264
7040
6283
6245
5825
5240
5220
4606
4567
4282
4192
3693
3411
3325
Exporter
(developing countries*)
Developing countries*
China
Korea, Rep.
Taiwan, China
Mexico
Singapore
Thailand
Brazil
Malaysia
India
Turkey
Philippines
South Africa
Viet Nam
Argentina
Saudi Arabia
Tunisia
Colombia
Pakistan
El Salvador
Kazakhstan
116054
70211
45843
Source: COMTRADE using WITS
Exports (US
million)
67535
28378
6245
5825
4606
4282
3411
3252
2949
2321
1416
971
718
590
443
264
195
173
160
145
136
Imports of RES products and components that may be used in the
RES sector, 2007 ( USD millions)
Importer
(all)
All countries
United States
Germany
China
Spain
France
Hong Kong, China
Korea, Rep.
Japan
Italy
United Kingdom
Mexico
Netherlands
Canada
Taiwan, China
Belgium
Singapore
Russian Federation
Saudi Arabia
Sweden
Thailand
EU-27
Intra-EU-27
EU-27 (excl intra-EU)
Imports (US
million)
248080
30430
22203
21179
8923
8879
8843
8667
8513
8225
7754
7016
6805
6638
5575
5207
4541
4384
3553
3542
3438
92249
61560
30689
Source: COMTRADE using WITS
Importer
(developing countries*)
Developing countries*
China
Hong Kong, China
Korea, Rep.
Mexico
Taiwan, China
Singapore
Saudi Arabia
Thailand
India
Malaysia
Brazil
United Arab Emirates
Viet Nam
Turkey
South Africa
Qatar
Kuwait
Argentina
Nigeria
Kazakhstan
Imports (US
million)
95720
21179
8843
8667
7016
5575
4541
3553
3438
3434
2689
2519
2482
2280
2155
1365
1220
1206
1102
1056
965
Tariffs on Renewable Energy Technologies,
Equipment and Components
Russian Federation
Turkey
Thailand
Taiwan, China
South Africa
Singapore
Philippines
Peru
Pakistan
Mexico
Malaysia
Korea, Rep.
India
Hong Kong, China
BND
China
MFN
Chile
Brazil
Argentina
United States
Switzerland
Norway
Japan
European Union
Canada
Australia
0.00
10.00
Source: WTO Databases using WITS
20.00
30.00
40.00
Some interesting findings on Trade Flows in
RE equipment
•Emerging economies important players, though their share of trade is less
than half that of developed countries.
•Components for solar and wind appear more tradeable than for geothermal,
hydro and ocean
•Top exporters of RE equipment may not always be top deployers of RE.
China’s exports of solar panels to Germany and Spain were driven by favourable
policy environment for solar energy generation.
•In other cases correlation is clearer as in wind-turbines for Denmark and wind
energy generation.
•Thus deployment of RE usually depends on favorable ‘enabling’ market
environment.
•Regional and preferential trading agreements may affect trade profile for
example- Central American and Caribbean countries are top importers of bioethanol from Brazil which they export to US as dehydrated ethanol.
Tariffs have been found to be less significant as an explanatory variable for
increased exports or imports as compared to the share of renewables in a
country’s grid and subsidies.
Summary of Trade analysis and Trends in
Major Buildings Product Categories
• Thermal Envelope (Insulation)
 Major producers European companies. Many
use subsidaries and joint ventures rather than
direct exports to supply foreign markets.
 Most exports and imports between developed
countries. China the exception (4th largest
exporter and importer).
 Developed countries mostly apply single-digit
tariffs. Higher for some developing countries and
Russian Fed.
Summary of Trade analysis and Trends
in Major Buildings Product Categories
• HVAC
 Developing countries account for significant portion of
HVAC exports -esp air-conditioners but developed
countries predominate in central heating boilers and heat
pumps. Top importers predominantly developed
countries.
 Major exporters tend to comply with standards in export
markets and also develop their own MEPs.
 Tariffs also mainly in single digits except for a few
primarily developing countries.
Summary of Trade analysis and Trends
in Major Buildings Product Categories
• Lighting
 Share of EE lighting has been increasing while that of
incandescent and tungsten lamps falling. Same is true of
developing country imports.
 China is the world largest exporter of CFL, with a share
of 56 per cent of world exports in 2007 (or 75% if intraEU trade is excluded).China’s share in world exports of
incandescent lamps and tungsten halogen filament
lamps is only around 15 per cent.
Summary of Trade analysis and Trends
in Major Buildings Product Categories
• Lighting (Contd)
 With regard to tariffs, the European Communities have bound its import
duties at 2.7 per cent ad valorem and the United States at 2.4 per cent.
 The simple average of the applied tariff is 8.7 per cent and the tradeweighted (using 2007 import values) average rate is 4.9 per cent.
 Among the 30 largest importers, Argentina, Brazil, Colombia, India,
Malaysia, Mexico, the Philippines, the Russian Federation, Thailand and
South Africa have tariffs (applied rates) of 10 per cent or more.
 Some of these countries, however, have their own production of CFL and
other highly-efficient lamps and apply other measures than tariffs to
discourage the use of inefficient lamps.
 For example, applied rates in Argentina and Brazil are 18 per cent ad
valorem (the common external tariff for MERCOSUR), but Brazil is
subsidizing CFL and Argentina is banning the use of inefficient
incandescent lamps.
Summary of Trade Analysis and Trends in
Major Buildings Product Categories
• Solar energy products
• Intra EU trade is highest, Germany, Japan and China are
significant exporters.
• In specific products such as solar water heaters which is
most tradeable.China is emerging as the largest
exporter.
• Regional markets also important, e.g. Mexico exports to
the US, Turkey to Europe, China to Japan.
• Tariffs low. Most countries have zero applied tariffs or
PV cells and modules all (except Mexico and South
Africa) have bound rates.
• Solar water heaters-many large importing developing
countries have higher rates of 20 percent or more.
Summary of Trade analysis and Trends
in Major Buildings Product Categories
• Household stoves
•
•
•
•
•
•
•
2 types identified-solar stoves and wood pellet stoves
World trade was around $ 5 billion in 2007 (only part of this corresponds to
the types of stoves being analysed in this paper).
Developing countries accounted for more than half the value of world
exports excluding intra-EU trade.
Almost half of 2007 world imports of stoves (in value terms, excluding intraEU trade) were imported into the United States.
Imports into developing countries and countries in transition in Asia were
worth around $700 million, accounting for only around 18 per cent of world
trade.
The top importers were Venezuela, Saudi Arabia and Kazakhstan, but
imports were spread over a large range of developing countries with over 60
developing countries registering imports of over $ 1 million each. This
suggests that stoves are largely produced locally, with some imports taking
place (perhaps to acquire special stoves or filling local shortages).
Tariffs are high in many developing countries reaching 50 percent in the
case of Morocco.
Summary of Main Market Drivers in Renewable Energy
Generation and RE Product Categories
Renewable Energy Generation and RE
Products
•Laws requiring utilities to purchase all electricity
generated from renewable sources.
•Laws requiring renewables to be a certain percentage of
all power generation.
•Subsidies for investments in component manufacturing.
•Exemptions or reductions in taxes for component
manufacturers and preferential tariffs (feed-in tariffs) for
electricity from renewables.
Summary of Main Market Drivers in Buildings Product
Categories
Building
Envelope
(Insulation)
HVAC
Lighting
RE Use in
Buildings
• High energy
•EE
requirements in
building codes.
•Incentives esp
for building
renovations.
•High energy
prices
•Energy Neutral
Houses target
prices
•Regulatory
requirements
(MEPs) and
labelling.
•EE
requirements in
building codes
and financial and
fiscal incentives
for new products.
Eg: Heat-pumps
and boilers.
•Govt
regulations and
Incentives. Eg:
Voluntary
market
transformation
programmes
•International
initiatives such
as efficient
lighting
initiative (ELI)
launched by
IFC and GEF
•Regulation
•Fiscal incentives and
subsidies
Solar
Stoves
•Financial Incentives
and subsidies
•Tax-credits
Environment, Market Creation and Fair-trade. Complementary or
Contradictory?
Enables
Regulations
and Incentives
for Renewable
Energy
Generation.
If de-facto or
de-jure link
Regulations and
Incentives Favouring
Domestic RE Equipment
Manufacturers or Service
Providers
Enables
Markets for
Building Efficiency
Goods and
Services.
Markets for RE
Goods and Services.
Supply
Possibly
Distorting
Trade in
Possibly
Distorting
Trade in
Adverse
effects
Adverse
effects
Competitive
Equipment and
Service
Providers
Regulations
and Incentives
for Buildings
Energy
Efficiency.
If de-facto
or de-jure
link
Regulations and
Incentives Favouring
Domestic EE Buildings
Equipment
Manufacturers or Service
Providers
Non-tariff measures: Much work to
be done
• Diverse range of non-tariff measures ranging from standards and
labelling, customs procedures and immigration formalities may affect
delivery of climate-friendly goods and services. So far tariffs have
gotten most attention in the WTO.
• At present draft UNFCCC negotiating text includes proposals for
countries to “…participate, to the extent possible, in international
programmes that support the development and use of common
performance standards, testing, verification and certification
programmes.”
• The language in the UNFCCC text has echoes of Article 2.4 in the
TBT Agreement, which calls on members to base their national
standards on international ones, with some limited exceptions.
Conclusions, Way Forward and Fuel for
Thought
• Trade liberalisation done in isolation may not lead to a significant
uptake in climate-friendly technologies. Needs to be part of a
package.
• RE Market creation and energy efficiency may need supportive
measures outside WTO. The latter in turn may enhance trade
further.
• Some incentives may have a trade-distorting impact if they benefit
domestic equipment manufacturers. There may be ‘good’ and ‘bad’
green subsidies.
• Implications for climate change negotiations esp discussions on
technology and financing?
• What role can UNFCCC particularly play? What policies should it
support? Proposal for international fund to support ‘feed-in’ tariffs
for renewable energy. Funds to leverage private-investment.
• Sunset clause for financial support? When? Grid-parity?
ICTSD’s work on Trade in Climatefriendly Goods and Services
• Part of broader work under ICTSD’s
Global Platform on Trade and Climate
Change
• For papers please visit
http://ictsd.net/climatechange/accelerating-trade-and-diffusionof-climate-friendly-goods-and-services/ or
• Email me at: [email protected]
Thank You
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