Download E Economic and Social Commission for Asia and the Pacific /ESCAP/CDR(2)/INF/7

E/ESCAP/CDR(2)/INF/7
Distr.: For participants only
19 May 2011
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Economic and Social Commission for Asia and the Pacific
Committee on Disaster Risk Reduction
Second session
Bangkok, 29 June-1 July 2011
Item 4 of the provisional agenda
Recent trends in disasters and their socio-economic and
environmental aspects
Climate change and disaster risk reduction: the role of
trade and investment *
Note by the secretariat
Summary
While it has been widely recognized that climate change will lead to an
increased incidence of natural disasters in the course of this century, an
international consensus on the reduction of emissions of greenhouse gases
responsible for climate change has proved elusive so far. This is a key concern as
such disasters severely disrupt trade and investment, which are wide acknowledged
to be the engines of growth and development. This paper, while recognizing the
costs associated with climate change mitigation and adaptation efforts, argues that
trade and investment in climate-smart goods, technologies and services are also part
of the solution and can contribute to a triple win solution where trade and
development, climate and disaster risk reduction all benefit. The paper identifies
opportunities to promote trade and investment in those goods and services in the
region and briefly presents a policy framework to capture those opportunities. The
paper makes a strong case for regional cooperation and suggests a regional
partnership or agreement on the mitigation of and adaptation to climate change
including a regional trade and investment agreement in this area. The paper
proposes that ESCAP could take the lead in such initiative.
*
The present document has been issued without formal editing.
DMR A2011-000207 TP020611
CDR2_INF7
E/ESCAP/CDR(2)/INF/7
Contents
Page
I.
Introduction................................................................................................. 2
II.
Trade, investment, and climate change: Linkage, impacts and concerns
of developing countries ............................................................................... 2
III.
Opportunities for trade and investment in climate smart goods and
services........................................................................................................ 5
IV.
Policies to promote trade and investment in climate-smart goods and
services...................................................................................................... 10
V.
Regional cooperation and the role of ESCAP........................................... 13
I.
Introduction
1.
There is universal consensus that the world’s climate is changing
beyond the normal fluctuations in weather patterns. The changes in climate
foreseen towards the end of the century involve a gradual warming of the
planet, with a temperature increase ranging from 1.1 to 6.4°C over preindustrial levels during the twenty-first century. If these temperature
increases are not slowed or stopped, sea levels will rise, and coastal
communities and other low lying areas may be flooded while others will
experience severe drought. In other words, global warming will lead to
natural disasters which will affect the livelihood of millions of people, most
of whom are living in poor countries. There is compelling evidence that
global greenhouse gas (GHG) emissions cause climate change and that most
1
GHG emissions are due to anthropogenic factors. Consensus is therefore
growing among scientists and policy makers that in order to reduce the risk
of natural disasters, actions need to be taken to curb global GHG emissions
and drastically reduce the unsustainable use of so-called carbon sinks, such
as the world’s forests and oceans, to prevent global temperatures from
rising by more than 2°C, which is the rate at which climate change can still
be managed. This requires reductions in GHG emissions to a concentration
level of 450 ppm CO2e. This information note reviews the role of trade and
investment in mitigating climate change and makes the case for regional
cooperation in promoting trade and investment in climate-smart goods,
services and technologies. The note is based on a larger ESCAP study on
Trade, Investment and Climate Change: Working Together towards a Triple
Win Outcome, forthcoming (2011).
II.
Trade, investment and climate change: Linkages,
impacts and concerns of developing countries
2.
The linkages between trade, investment and environmental issues
with a particular focus on the impact of trade and trade liberalization on
1
2
According to the International Panel on Climate Change (IPPC), there is less than 5
per cent chance that climate change is the result of only natural climatic processes.
IPCC (2007). Climate change (2007). Synthesis Report. Contribution of Working
Groups I, II, III to the Fourth Assessment Report of the Intergovernmental Panel on
Climate Change. Geneva.
E/ESCAP/CDR(2)/INF/7
2
climate change have been comprehensive explored in the literature. It is
generally acknowledged that trade and investment contribute to GHG
emissions as the associated production and transportation processes depend
excessively on fossil-fuels, which are the principal contributors to GHG
emissions. However, the carbon intensity of trade is not always higher than
that of local production (see below). In addition, trade and investment are
essential for economic development and growth and achieving the
Millennium Development Goals, in particular poverty reduction. A
reduction or elimination of trade and investment is therefore not a practical
solution. When production and transportation can take place on the basis of
renewable energy sources and technologies, trade and investment become
major solutions to climate change. In particular, investment is needed to
develop and commercialize viable and cost-efficient low-carbon or climatesmart goods and technologies, while trade and aid for trade are needed to
make these products and technologies widely available to all countries,
including least developed countries. Under such a scenario, trade,
environment and development all benefit while the risks of natural disasters
from climate change are reduced (figure 1).
Figure 1
An integrated climate-smart trade and investment policy model
Climate-smart (low carbon) trade
and investment policy
Renewable energy and
climate smart technologies
Sustainable construction, production and
transportation
Mitigation of and adaptation
to climate change/reduced or
zero GHG emissions
Disaster risk
reduction
Afforestation and
reforestation
3.
Some of the world’s fastest growing economies are from the AsiaPacific region. Their growth has been triggered and sustained by high levels
3
of trade and investment. They are also among the largest carbon emitters
in the world. According to the most recent available date from the World
Resources Institute Climate Analysis Indicators Tool (CAIT), GHG
4
emissions from the region have grown faster than the world average.
2
For a comprehensive overview, see for instance: World Trade Organization
(WTO)-United Nations Environmental Programme (UNEP) (2009). Trade and
climate change. Geneva. WTO Publications.
3
Economic Commission for Asia and the Pacific (2009), Asia-Pacific Trade and
Investment Report 2009: Trade-led recovery and beyond. New York. Sales No.
E.09.II.F.19; ST/ESCAP/2549. United Nations.
4
http://cait.wri.org.
3
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China surpassed the United States to become the world’s largest emitter of
GHGs in 2005, the latest year for which data are available for all
5
greenhouse gases for 185 countries and economies. India was ranked fifth
and Indonesia twelfth. However, measured in terms of CO2e per capita,
China ranked at no. 71 and India at no. 123. In 2007, these ranks were 66
6
and 122 respectively. Also worth noting is that the CO2 emission
intensities (the level of CO2 emissions per economic output or CO2/GDP)
dropped for most Asian economies in the period 1992-2006 as their
economies grew faster than their CO2 emissions. Energy, agriculture, and
land use change and forestry were the largest sectors contributing to GHG
emissions accounting for 64 per cent, 14 per cent and 11 per cent of all
GHG emissions from the ESCAP region in 2005.
4.
The Asia-Pacific region is prone to a relatively high incidence of
natural disasters. While not all these disasters can be linked to climate
change, it is recognized that in the course of this century and most certainly
beyond, climate change will lead to increasingly fluctuating weather
patterns and rising sea levels, which, in turn, will increasingly affect
production and transportation and hence, indirectly, trade and investment
(see table 1).
Table 1
Some likely impacts of climate change on trade and investment
4
Direct effect of climate change
Derived impact on trade and investment
Severe weather patterns: floods, droughts,
desertification
Loss of productivity, in particular
agriculture in (sub)tropical areas; potential
increase in agricultural productivity in
temperate areas; decrease/increase in food
production depending on locations; increase
in forest fires affects wood-based industries
Rising sea levels: inundation of coastal
communities
Loss of coastal production and loss or
damage of infrastructure necessary for trade
(i.e. ports); loss of recreational beach
tourism; possible disappearance of whole
island developing countries
Other damages to eco-systems: loss of
biodiversity and glaciers; coral bleaching
Loss of products and local livelihoods (i.e.
medicines based on traditional knowledge);
coral bleaching leading to loss of fisheries
products; disappearance of glaciers leads to
shortages of fresh water for both agriculture
and industry
Increase in diseases and injuries due to
storms and increased air pollution
Lower labour productivity
5
GHG emissions include land use change and international bunkers and covers the 6
most common GHGs: carbondioxide (CO2), methane (CH4), nitrous oxide (N2O),
hydrofluorocarbon gases (HFC), perfluorocarbons (PFC) and sulphurhexafluoride
(SF6). The 185 countries and economies in the CAIT 8.0 database include the
European Union as one and Taiwan Province of China.
6
While GHG emission data are available only for 2005, CAIT 8.0 provides data on
CO2 emissions for 2007.
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5.
For this reason collective action to mitigate climate change through
drastic reductions in GHG emissions is called for. However, to date no
consensus has been possible to conclude an international climate change
treaty which would strengthening the 1997 Kyoto Protocol to the United
Nations Framework Convention on Climate Change and commit all
countries to emission reduction targets when the first commitment period of
Annex I (developed) countries’ GHG emission reductions will end at the
end of 2012. In particular, various developing countries have expressed
concerns on such a treaty though there is no unifying position among them.
Clearly, those that have no or negligible emissions but are severely affected
by them (i.e. island developing countries like the Maldives, Tuvalu,
Vanuatu) are strongly in favour of binding emissions cuts while emerging
but large carbon emitting economies like China and India or major oil and
gas exporting countries (e.g. Islamic Republic of Iran, Kazakhstan)
obviously are concerned that binding commitments may undermine their
economic growth. However, developing countries in general are reluctant to
compromise their fragile development gains through emission cuts to
address a problem which was not primarily caused by them. They are also
concerned that the measures put in place in the name of environment by
developed countries may be protectionist measures in disguise affecting
their exports. 7
6.
Generally, while developed countries’ main concern in climate
change negotiations is cost-effectiveness of mitigation measures, for
developing countries the main concerns are equity, the costs of climate
change adaptation and technology transfer. For that reason, any
international treaty on climate change should have clear provisions on
equitable cost sharing, technology transfer and aid. In the meantime,
negotiations continue but the outlook for a successful outcome any time
soon seems bleak. However, nothing prevents countries to take measures at
least voluntarily at the national and regional level. While such measures
may not be sufficient in the long run they would constitute a meaningful
beginning to seriously address the problem of climate change. There is at
least consensus that the “business-as-usual” scenario is not acceptable.
III.
Opportunities for trade and investment in climate goods
and services
A.
Opportunities for trade
There is a misperception that a good imported would always have a
7.
larger carbon footprint than when that good would be produced at home in
because of the transportation factor. However, the carbon intensity of a
good produced at home may be higher than that of an imported good. Thus,
8
an ESCAP study revealed that using so-called emission intensity indices of
7
See, for instance: Evenett, Simon .J.; Whalley, John. (2009). Resist green
protectionism –or pay the price at Copenhagen. In: Baldwin, Richard and Evenett
Simon J. (eds.). The collapse of global trade, murky protectionism, and the crisis:
Recommendations for the G20. VoxEU.org Publication.
8
Truong, P. Truong; Mikic, Mia (2010). Trade and Climate Change: Development
of Emission Intensity indices. ARTNeT Alerts on Emerging Policy Challenges
No.6. August.
5
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9
exports and imports, it appears that China, Indonesia, and Viet Nam
import commodities which are produced (overseas) with lower emissions
than if they were produced locally, while the reverse holds true for
Bangladesh, India and Thailand. Similarly, countries like Bangladesh,
China, India, Indonesia, Thailand and Viet Nam export commodities which
are locally produced with more emissions than the emissions which would
have resulted from production locally in the destination countries. It is
therefore important to make a detailed carbon intensity analysis of the trade
structure of each country and make adaptations based on the results of such
analysis. In other words, the concept of traditional comparative advantage
needs to be refined to include a measurement of carbon footprint to ensure
that such comparative advantage is also sustainable.
Table 2
Top 10 traders of CSGT in 2008 (ranked by the percentage share in
total exports and imports of CSGT of ESCAP)
Rank
Economy
1
2
3
4
5
6
7
8
9
10
China
Japan
Republic of Korea
Hong Kong, China
Singapore
Malaysia
India
Thailand
Turkey
Indonesia
Exports
(%)
36.1
30.9
7.4
7.2
4.2
3.1
2.6
2.5
1.4
1.2
Economy
China
Republic of Korea
Japan
Hong Kong, China
Russian Federation
Singapore
Thailand
India
Australia
Turkey
Imports
(%)
30
13.2
10.2
7.5
5.7
5.1
4.3
4.1
3.8
3.5
Source: From Comtrade data downloaded from WITS
8.
It follows therefore that not all trade is damaging to climate change.
However, among the most important voluntary measures countries could
implement are policies to promote trade and investment in low-carbon or
climate-smart goods and technologies (CSGT), in particular renewable
energy technologies, and climate-smart services. Such goods and
technologies are climate-smart in that they not only contribute to GHG
emission reductions but have otherwise no harmful environmental effect.
Based on an analysis of a list of 64 of such goods and technologies, ESCAP
research has revealed that global and regional trade in climate smart goods
is rising but is still only around three per cent of total global and regional
10
trade respectively. The Asia-Pacific region is emerging as the most
dynamic region with regard to trade in climate smart goods with China and
Japan the top two exporting countries (table 2). In 2008, the ESCAP region
6
9
The values of these indices range from 0 to infinite, but the important benchmark is
a value of equal to 1. For example, if the emission intensity index of import is
larger than one, emissions embodied in goods produced overseas and transported to
a destination are larger than the emissions that would have been caused by local
production in that destination of the same amount of goods. The index value of 1
indicates that emissions associated with imports of goods are the same as those
associated with local production replacing trade.
10
ESCAP (forthcoming). Trade, investment and climate change in Asia and the
Pacific: Working together towards a triple win outcome.
E/ESCAP/CDR(2)/INF/7
accounted for about 31.9% of world trade in CSGT. The value of CSGT
exports and imports tripled during the period 2002-2008. ESCAP’s
intraregional trade in climate smart goods is about 50 per cent of their total
trade in these goods. The ESCAP region’s intraregional trade in climate
smart goods is about 50 per cent of their total trade in these goods.
9.
ESCAP analysis using trade indices such as the Competitiveness
Index (CI), Revealed Comparative Advantage (RCA) index, and Regional
11
Orientation index (ROI) and analysis of prevailing applied tariffs in
selected countries of the region on climate-smart technologies based on the
12
ESCAP list revealed that there are considerable opportunities to expand
international and regional trade and investment in CSGT. Based on RCA
analysis alone, it appears that China; Hong Kong, China; and Japan have
emerged as the region’s most competitive countries in CSGT. Thanks to
their strong positions, the RCA index of the ESCAP region as a whole
remains just above one, indicating that the region has a comparative
advantage in CSGT. An analysis of the ROI indicates also potential for
intraregional trade in CSGT. Tariffs on the import of renewable energy
technologies have come down in many cases though some countries with
high emissions and comparative advantages in these goods still maintain
relatively high tariffs. For instance, average effectively applied tariffs on
solar PV in the Islamic Republic of Iran (33.19%), Pakistan (19.39%), Viet
Nam (14.91%), and Cambodia (18.59%) were especially high in both
absolute terms and relative to their corresponding industrial goods average
13
(table 3).
However, a simple gravity model analysis has revealed that tariffs
10.
play a minor role in explaining trade in CSGT. A higher level of income in
any given country seems to be more associated with a higher level of import
of CSGT than the tariff level. In addition, non-tariff barriers such as
standards appear to be a major impediment to trade in CSGT. Gravity
analysis has further found that based on 2008 data, the estimated export
potential of climate smart goods in Asia-Pacific was around $30 to $35
billion in that year. If Asian and Pacific economies were able to utilize this
potential, their exports of CSGT would have been higher by nearly $7.34
billion. With increasing awareness of climate change and rising trade in
CSGT, an increase in trade in climate-smart services would also follow
though data on such trade are not readily available and, hence, an analysis
of such trade is more difficult.
B.
Opportunities for investment
11.
It is difficult to measure the extent of investment in CSGT. Figures
for FDI in CSGT are particularly hard to assess. However, with focus on
renewable energy technologies, it appears that the Asia-Pacific region is
emerging as a global leader in overall investment. In sharp contrast to the
decline in investment in the Americas and Europe, and in spite of the
economic downturn, sustainable energy investment in Asia and the Pacific
11
For a definition of these indices, see http://www.unescap.org/tid/artnet/
artnet_app/iti_aptiad.aspx.
12
The following categories of CSTs were used: solar photovoltaic (PV) systems,
wind power, clean coal, efficient lighting, and other CSTs.
13
These rates were calculated by the ESCAP secretariat based on on Comtrade data
extracted from the World Integrated Trade Solutions (WITS) Database.
7
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increased by 37 per cent in 2009. This compares to drops of 33 per cent in
the Americas 16 per cent in Europe.
Table 3
Average effectively applied tariffs on climate smart energy technologies
in the top 20 GHG emitting countries of ESCAP
GHG
emissions
regional
rank
(2005)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Year
Country
China
Indonesia
Russian Federation
India
Japan
Republic of Korea
Australia
Islamic Republic
of Iran
Turkey
Thailand
Malaysia
Myanmar
Pakistan
Philippines
Kazakhstan
Viet Nam
Bangladesh
Singapore
Cambodia*
Turkmenistan*
AVERAGE
(most
recent year
available)
All
industrial
goods
average
(%)
Solar PV
(%)
Wind
power
Clean
coal
(%)
(%)
2008
2007
2008
2008
2008
2007
2008
8.57
5.84
8.19
9.74
2.61
8.29
3.93
4.16
5.93
4.33
5.41
0.00
4.64
1.91
7.65
4.81
4.14
7.28
0.00
5.50
6.88
8.03
0.00
8.85
7.25
0.00
5.35
0.69
8.03
7.63
0.00
9.39
0.00
6.98
3.97
2008
2008
2006
2007
2007
2008
2007
2008
2007
2007
2008
2007
2002
24.78
2.41
10.97
5.91
4.12
14.04
5.00
3.91
11.68
14.52
0.00
12.45
5.43
33.19
0.47
6.82
7.51
2.69
19.39
4.97
1.27
14.91
11.13
0.00
18.59
3.62
5.78
0.47
6.59
4.39
1.00
31.80
0.84
4.60
11.80
5.00
0.00
12.65
0.00
6.38
0.46
0.89
0.00
1.00
4.63
2.07
0.00
0.00
5.00
0.00
7.00
0.00
29.80
0.52
17.00
25.11
1.00
19.97
9.88
0.00
32.22
18.24
0.00
6.27
0.00
8.12
7.55
6.06
2.88
9.80
Source: calculated based on Comtrade data extracted from the WITS Database
Note: Ranking of countries by GHG emissions is based on 2005 data from Climate Analysis
Indicators Tool (CAIT) Version 7.0. (Washington, DC: World Resources Institute, 2010)
* Cambodia and Turkmenistan are actually ranked 20th and 21st, respectively, with
Democratic Republic of Korea ranked 19th. However due the lack of tariff data for the
Democratic Republic of Korea, Cambodia and Turkmenistan were both moved up a rank.
12.
Most sustainable energy investments in Asia and the Pacific, and all
of investment growth, was China – where sustainable energy investments
grew by 53 per cent, from $22 billion in 2008 to $33.7 billion in 2009. This
rapid growth has now made China the clear leader in sustainable energy
investments both globally and in the region, with 28 per cent of all
sustainable energy investments globally or 83 per cent of investments in the
Asia and the Pacific region. Other countries in Asia and the Pacific lag far
behind, with India as distant second at $2.7 billion in investments in 2009,
representing 2.3 per cent of global investments or 6.6 per cent of
investments in the Asian and Pacific region. In addition to taking the overall
8
Energy
efficient
lighting
(%)
E/ESCAP/CDR(2)/INF/7
lead in global sustainable investments, China became the clear leader in
wind energy investments, accounting for a total of 40 per cent of global
wind energy investments in 2009.
13.
While these figures look impressive, they fall far short of what is
required to prevent global temperatures from rising by 2°C by the end of the
century, the level at which climate change can still be managed. It has been
estimated that reducing emissions to the required level will require
additional global investments of over $1 trillion annually over the period
2010-2050. Around half of this is expected to be required for the ESCAP
region, i.e. approximately US$ 600 billion per year over and above current
investment levels. China is expected to make up more than half of these
mitigation related investment needs in the region, followed by India and the
rest of the developing countries at around 17 per cent each.
According to IEA estimates, close to 50 per cent of the required
14.
investments during 2010-2050 will be in the transport sector; followed by
buildings at 27 per cent, and power generation, transmission and
14
distribution at a combined 21 per cent. Efficiency investments – primarily
related to end-use efficiency – will form the majority of all energy related
investments, followed by renewables. Finally, in the services sector, the
market for energy efficiency services should be experiencing drastic
increases, e.g. in relation to energy efficiency consulting services for all the
above sectors, including process improvements in industry.
Investment needs will rise significantly when adaptation costs are
15.
included. Adaptation to climate change is important in reducing the risks
from climate-change related natural disasters and as it is expected that
mitigation efforts will fall short, adaptation will become increasingly
important in the years and decades ahead. Understanding the costs and
benefits of adaptation is important for planning and mobilizing investment.
Adaptation measures can be divided into “hard” adaptation measures, i.e.
structural measures aimed at building physical structures which would
reduce the risk of climate-change related disasters (such as dams and levies,
ocean wave barriers, water supply and irrigation systems, technologies for
the development of drought and flood-resistant crops, etc.) and “soft”
adaptation measures, i.e. non-structural measures not involving physical
construction that uses knowledge, practice or agreement to reduce risks and
impacts, in particular through policies and laws, public awareness raising,
training and education, and early warning systems. Estimates of the costs
associated with structural measures in all sectors in developing countries
range from $9 billion to over $100 billion per year for the period 201015
2015 and much higher in the decades after that with an estimated twothirds in Asia and the Pacific. According to an ADB study, for four
countries in ASEAN (Indonesia, Malaysia, Philippines and Thailand), the
cost of “hard” adaptation in the agricultural sector and in coastal zones,
would be about $5 billion per year by 2020 on average, and that this
14
IEA (2010). Energy technology perspectives 2010: scenarios and strategies to 2050.
OECD/IEA. Paris.
15
See S. Agrawala and S. Frankhauser (eds.) (2008). Economic aspects of adaptation
to climate change: costs, benefits and policy instruments. Organization for
Economic Cooperation and Development (OECD), Paris. Table 2.
9
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16
investment is likely to pay off in the future. UNFCCC has estimated
adaptation costs in the following sectors: agriculture, forestry and fisheries;
water supply; human health; coastal zones; and infrastructure under various
scenarios but acknowledges that there are serious caveats regarding the
findings. UNFCCC came up with investment and financial flows needed in
2030 for developing Asia ranging from $230 billion to just over $300
17
billion depending on the scenario These costs are expected to be much
higher when “soft” adaptation costs are included but estimates involving all
adaptation measures are not readily available..
16.
While these investment needs will imply a large cost and thus
financing challenge for governments, the private sector and consumers, they
simultaneously present a huge business opportunity. The exact extent of
these business opportunities will naturally depend on the level of ambition
of policy makers, the policy mix chosen, and the degree of enforcement.
IV.
Policies to promote trade and investment in climatesmart goods and services
Given the opportunities for expanded trade and investment in CSGT
17.
governments have a role to formulate and implement policies which are
conducive to such trade and investment. Most climate-change related
policies are not trade or investment policies but most have nevertheless an
impact on trade and investment. Such policies may therefore be subject to
international trade rules, in particular those contained in the multilateral
trade agreements under the World Trade Organization. In particular, some
countries have imposed or are considering imposing border carbon taxes or
border tax adjustments to ensure a level playing field between imports and
national products and prevent national companies with a relatively high
carbon footprint to leave the country and seek “carbon havens” in other
countries with less strict regulations, a process known as “carbon leakage”.
However, apart from the difficulties associated with such taxes, research
18
has shown that “carbon leakage” is either non-existent or very small.
18.
The design of national policies that actually create incentives for
mitigation and adaptation is a difficult task. Such policies can be structured
into regulatory measures (including regulations, standards and labelling),
and economic incentives (including taxes, tradable permits and subsidies).
Many of these policies are trade or investment policies or have implications
for trade and investment. In practice it is therefore very difficult to make
clear distinctions. The point to make is that the mitigation of climate change
requires a comprehensive approach combining various policies which need
to be consistent and carefully coordinated at national and regional level and
which conform to international trade rules and do not result in hidden
protectionism or in unduly distorting trade.
10
16
ADB (2009). The economics of climate change in Southeast Asia: a regional
review. Manila. April.
17
United Nations Framework Convention on Climate Change (UNFCCC) (2007).
Investments and financial flows to address climate change. Bonn.
18
See, for instance, Organization for Economic Cooperation and Development
(2009). The economics of climate change mitigation: policies and options for
global action beyond 2012. Paris. Wooders, Peter; Cosbey, Aaron. (2010). Climatelinked tariffs and subsidies: Economic aspects (competitiveness & leakage). TAIT
and the Graduate Institute.
E/ESCAP/CDR(2)/INF/7
19.
Policies which can be distinguished for the purpose of mitigating
and adapting to climate change consist of general policies consisting of
nationally appropriate mitigation actions (NAMA) and national adaptation
programmes of action (for least developed countries only) as committed
under the United Nations Framework Convention on Climate Change
(UNFCCC), a comprehensive national level legal framework for low carbon
growth, and the possible adoption of national level emission trading
systems (also known as cap-and-trade). Policies targeting particular sectors,
including policies aimed at reducing emissions from deforestation and
forest degradation (REDD) would also fall in this category. Other general
policies include public procurement systems favouring low-carbon
suppliers. Such policies should be coupled with financial policies, i.e.
policies which tax the use of high carbon products and subsidize the use of
low carbon products. For that reason, fossil fuel subsidies should be
reduced or eliminated in many countries in a phased manner to limit
negative impact on the poor while active financial support should be given
to investment in and production and use of CSGT. Specific policies to
promote the use of renewable energy also need to be implemented, e.g.
feed-in-tariffs and renewable portfolio standards which have already been
adopted in various Asian developing countries. Trade and investment
policies should be mainstreamed into general climate change mitigation and
adaptation strategies.
While the imposition of trade barriers to products perceived to have
20.
a large carbon footprint may run afoul of international trade rules, trade
policies can and should be adopted which promote trade in CSGT and
climate-smart services. For that reason, both at and behind the border
obstacles to such trade need to be removed. As the negotiations on the
liberalization of environmental goods and services are stalled at the
multilateral level, unilateral liberalization or liberalization under regional
and bilateral trade agreements seems to be the next best solution.
Negotiations on the liberalization of trade in CSGT and climate-smart
services are generally hampered by a lack of consensus on the definition of
an environmental or climate-smart good or service and on the modalities for
reducing barriers to such trade. However, at the bilateral or subregional
level, chances are higher that such a consensus could be forged. In the
meantime, countries could adopt various trade and transport facilitation
measures such as paperless trade in all goods and adoption of single
windows which would help in reducing carbon emissions associated with
trade.
Investment policies play an important role in both promoting
21.
domestic and foreign direct investment (FDI) in the production of CSGT
and provision of climate-smart services. Transnational Corporations are at
the forefront of developing CST and therefore a conducive and enabling
19
environment for such investment is essential. Such an environment
includes an enabling regulatory framework, appropriate infrastructure and
availability of local expertise, availability of incentives or privileges for
climate-smart investment, and an appropriate level of intellectual property
right (IPR) protection. Investment promotion agencies could engage in
specific targeting of climate-smart investment. At the same time, the
capacity of domestic small and medium enterprises (SMEs) in the area of
19
For a comprehensive overview of issues related to FDI in low-carbon goods, see
UNCTAD, World Investment Report 2010, New York and Geneva.
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E/ESCAP/CDR(2)/INF/7
CSGT should be enhanced so that they can evolve into suppliers of lowcarbon TNCs and effectively integrate in low-carbon value chains.
Countries should also ensure that any regional or bilateral trade agreements
or international investment agreements they are a party to, do not unduly
undermine their policy space to pursue low-carbon growth but, instead, are
conducive to such growth.
22.
Climate-smart standards and labels play an important role in
promoting trade and investment in CSGT. While it is recognized that
standards may be a formidable non-tariff barrier to trade in CSGT, they also
force enterprises to produce products which conform to market expectations
and contribute to reduction of GHG emissions. Important standards include
energy and fuel efficiency standards, minimum energy performance
standards, carbon emission standards and labels informing consumers on
the carbon footprint of a certain product, and “green” building codes.
Various countries already have national level label schemes 3(e.g. Japan’s
Eco Mark, Republic of Korea’s Eco-labelling Programme, and Singapore’s
Green Label). Notwithstanding the importance of such standards and labels,
they should conform to international trade rules and not be used as a tool for
protectionism while countries should strive towards harmonization and
mutual recognition of such standards, at least at the subregional or regional
level.
An issue of utmost importance to the mitigation of and adaptation to
23.
climate change and closely related to trade and investment is that of
technology transfer. It has been pointed out that in many cases, climatesmart technologies already exist but require further development and
commercialization. Developing countries need to enhance their capacity to
develop such technologies and obtain and absorb technologies appropriate
to their level of development. Technology transfer is a complicated process
often associated with the attraction of FDI but transfer is not automatic and
various barriers have to be overcome. Barriers can be distinguished into
eight categories: institutional and legal (including IPR), political,
technological, economic, information-related, financial, and cultural. IPR
protection does not seem to matter much in least developed countries.
However, it is understood that an excessive level of IPR protection is not
conducive to the effective transfer of technology of any kind in most cases
and, hence, a proper balance needs to be sought between needs of the
recipient country and those of the technology supplier. One solution is to
agree on additional flexibilities in the international IPR-related trading
rules, i.e. the WTO Agreement on Trade-Related Intellectual Property
Rights (TRIPS) though there is no consensus on this issue.
The need for technology transfer and financial assistance has
24.
dominated global climate change talks. In light of the capacity constraints
faced by developing countries, financial assistance in particular is essential,
either as part of wider aid-for-trade initiatives or in addition to such
initiatives. Various global and regional funds already exist but may not be
sufficient to satisfy the needs. This document proposes that regional
cooperation initiatives could incorporate modalities for technology transfer
and financial assistance from the more advanced developing economies of
the region to the less developed economies as part of a wider regional
partnership, which is further discussed below.
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E/ESCAP/CDR(2)/INF/7
V.
Regional cooperation and the role of UNESCAP
25.
While national level actions and policies to mitigate climate change
are important, climate change is most effectively tackled through
international cooperation. In the absence of international consensus, such
consensus may have a better chance of success at the regional or
subregional level. Though various voluntary schemes related to the
mitigation of climate change already exist in the context of subregional
organizations (e.g. Asia-Pacific Economic Cooperation, Association for
South-East Asian Nations, Pacific Forum Secretariat, and South Asian
Association for Regional Cooperation), a region-wide approach is as yet
lacking. Given the cross-border nature of GHG emissions, regional
cooperation is indispensable. This paper calls for a Regional Trade and
Investment Cooperation Partnership/Agreement for Mitigation of and
Adaptation to Climate Change. At the core of this Partnership would be a
Regional Trade and Investment Agreement on Mitigation of Climate
Change The Regional Partnership/Agreement would include, inter alia,
measures for the liberalization and joint promotion of climate-smart trade
and investment, adopt regional climate-smart sectoral and industry
standards and labels, explore the feasibility of a regional carbon tax and a
regional emission trading system, provide modalities for the effective joint
development and transfer of climate-smart technology, joint promotion and
targeting of climate-smart FDI and development of the required supportive
legal, institutional and physical infrastructure, expertise, and establishment
of a regional financial support mechanism for climate-smart SMEs and
climate-smart growth in general, tapping at least part of the huge
international reserves of selected countries.
26.
Among all regional institutions, ESCAP is well-placed to pursue the
conclusion of such a partnership/agreement. Already, the Secretariat has
undertaken various initiatives to support trade and investment in CSGT and
climate-smart services. As part of a wider low-carbon ESCAP project
funded by the Republic of Korea, the Secretariat undertook research and
organized a Regional Symposium on Low Carbon Economy: Trade,
Investment and Climate Change in Bali, 13-14 October 2010. The
Symposium agreed that trade and investment in CSGT could play an
important role in mitigating climate change and that barriers to such trade
and investment needed to be removed. The Symposium also emphasized
that measures to mitigate climate change should not undermine national
development and economic growth targets and be in accordance with each
country’s capacity.
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