Triple Pundit | November 7th, 2011
Sustainable Energy Trade Agreements: A fresh, “green” twist on free trade
By Andrew Burger
Governments around the world have been busy enacting controversial, so-called “Free Trade Agreements,” since Canada, Mexico and the US passed the still-controversial North American Free Trade Agreement (NAFTA) back in 1994.
Putting a “green” twist on the concept, the International Centre for Trade and Sustainable Development (ICTSD) is advocating the enactment of Sustainable Energy Trade Agreements to speed up the development and adoption of renewable energy and clean technology globally.
Supplementing government policies such as feed-in tariffs and tax credits, Sustainable Energy Trade Agreements (SETAs) could function as integral facets of such pro-sustainable energy policy frameworks, according to the ICTSD’s “Fostering Low Carbon Growth: The Case for a Sustainable Energy Trade Agreement.”
A global agreement enacted by the World Trade Organization (WTO), or perhaps the United Nations Framework Convention on Climate Change (UNFCCC) that lowers trade barriers to market access for sustainable energy goods and services across all members would raise the potential for SETAs to a maximum, speeding up a transition to low-carbon transport fuels and technologies. “Lowering the costs of equipment and services used to produce sustainable power could also play a critical role in facilitating the scale up process,” the report’s authors write.
Barriers to Sustainable Energy Trade Agreements
On the other hand, governments can, and in some cases have, raised trade barriers that limit access to sustainable energy goods and services in the interest of domestic job creation and economic stimulus. Trade in sustainable energy goods and services can also be held back by “diverse or conflicting technical standards,” the report’s authors note.
A case in point is the recent filing of a petition by Solarworld AG and six other US solar panel manufacturers with the US Dept. of Commerce and International Trade Commission (ITC). The petition asserts that Chinese solar module manufacturers are the beneficiaries of illegal government subsidies that tilt the terms of trade in their favor and are in effect, dumping solar panels in the US market at below cost. Imposing a 100 percent duty on the price of imported solar panels from China was proposed as a penalty.
Significantly, a global institutional framework that brings together trade, energy and climate-related regulatory policymakers necessary to hashing out sustainable energy and policies is lacking, they add.
Breakdowns in WTO negotiations addressing trade in environmental goods and services, as well as efforts by the UNFCCC to enact a successor to the Kyoto Protocol, illustrate the point.
Nonetheless, “effectively addressing these market barriers will require a holistic and integrated approach that may not be feasible within the present framework of trade, energy, and climate-related regulatory barriers and institutions,” according to the ICTSD report’s authors.
“This is because of various institutional and context-specific reasons, such as the fragmented and ambiguous nature of many existing World Trade Organization (WTO) agreements and rules, lack of effective and operational provisions both within and outside the WTO in several cases, and even the non-inclusion of key countries that matter within existing regulatory frameworks on trade as well as energy.”
De-Carbonizing World Energy Production & Use
The report’s authors suggest that such hurdles could be surmounted by considering a Sustainable Energy Trade Agreement on a standalone basis by the WTO, or one that “could be initially pursued as a plurilateral option, either within or outside the WTO framework.”
“De-carbonizing” energy production and use across economies globally calls for “the deployment of energy efficiency measures in both conventional power generation and end-use sectors, such as buildings, industry and transport,” according to the ICTSD report, as well as proactive deployment of cleaner, low-carbon fuels and technologies.
The challenge is particularly daunting in light of growing worldwide energy demand and population, particularly as countries with developing economies are the major drivers of growth in both. Fully half the world’s population has no access to modern forms of energy, while 75 percent of the increase in global GHG emissions came from the developing world, the report’s authors point out.
On the other hand, developed OECD countries that continue to produce 40 percent of global GHG emissions though their populations make up just one-fifth of the global population.
Limiting a global rise in mean temperature to the 2 degrees Centigrade (3.5 degrees Fahrenheit) maximum agreed to by international climate agreement negotiators is going to be extremely difficult, they write.
The use of fossil fuel energy sources in buildings, industry and transport accounted for 70 percent of global greenhouse gas emissions, according to a 2004 report, while the International Energy Agency (IEA) reported that such emissions reached a record high of 30.6 giga-tonnes (Gts) in 2010.
In order for the “pathway to be achieved, global energy-related emissions in 2020 must not be greater than 32 Gt,” according to the ICTSD. “This means that over the next ten years, emissions must rise less in total than they did between 2009 and 2010.”
Moreover, they added, fossil fuels, which currently account for about 80 percent of emissions worldwide, and existing infrastructure and projects in construction already locked in to 2020 add approximately 20 percent of those emissions.
SETAs: A New, Fresh Approach
Establishing the means to negotiate and successfully enact SETAs offers a “fresh approach” to forging a global consensus and common platform for action that could provide a much-needed catalyst to sustainable adoption, the ICTSD asserts.
“A Sustainable Energy Trade Agreement (SETA) could be a way to bring together countries interested in addressing climate change and longer term energy security while maintaining open markets,” the report authors write. “Numerous possible pathways could be conceived for such an agreement in terms of structure, as well as the scope of issues and market barriers to be addressed.
“A SETA could be a stand-alone plurilateral agreement similar to the Government Procurement
Agreement (GPA) at the WTO. Alternatively, it could extend concessions on a most favoured nation
(MFN) basis to all WTO members, similar to the Information Technology Agreement (ITA), with such
an extension made conditional on the accession of a ‘critical mass’ of members based on various
trade, climate, or energy-related criteria.
“A SETA could also be conceived as a stand-alone plurilateral agreement outside of the WTO, the
advantage in this case being that membership would also be open to other, non-WTO members.
There could also be a possibility of eventually incorporating such an agreement into the WTO
framework at some point in the future. If concluded outside the WTO, members would need
to clarify the agreement’s relationship with existing WTO rules and agreements, including with
regard to any dispute settlement mechanisms.”