Can the WTO Environmental Goods Agreement help advance climate and clean energy goals?

The Environmental Goods Agreement (EGA) has the potential to boost environmental goods, including clean energy and energy efficiency technologies, by lowering their costs and enhancing their supply and use in many countries. This article discusses the EGA in the post-Paris Agreement context as countries seek to achieve their sustainable development goals. Through the study of clean energy in Costa Rica – one of the few developing countries to have joined the EGA negotiations – it argues that the narrow focus of the EGA limits its impact. Engaging a larger group of countries, especially developing ones, will become more feasible if the EGA were to have broader coverage.

The negotiations on the Environmental Goods Agreement under the auspices of the World Trade Organization (WTO) may be finalised over the coming year. Thus far 17 WTO members – including the 28-nation European Union – have taken part in negotiating this plurilateral agreement.[1] Launched in July 2014, the EGA negotiations build on the pioneering efforts by the members of the Asia-Pacific Economic Cooperation (APEC), which had agreed as early as 2010 to give a boost to environmental goods and services by reducing trade and investment barriers.

Going into 2017 and beyond, the question is whether the EGA can help countries meet their climate objectives under the Paris Agreement and their Sustainable Development Goals (SDGs). This agreement and the 2030 Agenda for Sustainable Development marked a watershed in 2015, and the role of clean technologies in meeting climate and development objectives will continue to receive attention, especially in developing countries where the benefits of cleaner technologies become more tangible. For example, such technologies can help tackle levels of air pollution and meet energy access goals benefitting billions of people.

Accessing clean energy technologies at lower cost

The question framing an ICTSD paper exploring this issue is whether joining the EGA could help developing countries access clean technologies at a lower cost. The EGA will apply the principle of “most favoured nation,” meaning that the tariff concessions implemented by the signatories will be extended to all WTO members. The agreement will enter into force when “critical mass” is reached. This requires that a significant majority of global trade for the products under discussion be covered.

The paper looks at the EGA–Paris Agreement–SDG linkages by focusing on clean energy technologies (CETs). It acknowledges upfront that removing tariff barriers to clean technologies – the sole focus of the EGA – will be insufficient to meet national clean energy objectives. After all, non-tariff barriers also negatively affect clean energy technologies and must be tackled too. To complement the role the EGA can play, the paper looks at opportunities to integrate developing countries into global value chains, highlighting the need for policies to develop domestic capacities and to attract private investment supporting clean technologies and services.

If and when successfully concluded, the EGA will be signed in a context of growing interest in, and commitment to, renewable energy around the world. Clean energy investments have been growing in both developed and developing markets. 2015 set a record for global investment in clean energy: US$285.9 billion, exceeding the previous record of US$278.5 billion achieved in 2011 (which excludes large hydro-electric projects), according to a study by the Frankfurt School, UNEP Centre and Bloomberg New Energy Finance in 2016. A second record was also set in 2015: for the first time, investments in clean energy from the developing world were greater than those of developed countries. The developing world (including China, India and Brazil) committed a total of US$156 billion, up 19 percent on 2014, while developed countries invested US$130 billion, down 8 percent. Going into the Paris climate summit in December of 2015, 108 countries included clean energy objectives as part of their national contributions to the climate agreement.

Exploring synergies with the Sustainable Development Goals

Exploring synergies between the pursuit of SDG objectives, on the one hand, and trade liberalisation, on the other, is also addressed in the ICTSD research: it looks at potential linkages between lower barriers for CETs and meeting some of the SDGs such as access to energy (SDG 7), healthy societies (SDG 3) and resilient energy systems (SDG 13). Growing concerns about the prevailing exposure to air pollution (around the world, 9 out of 10 people do not breathe clean air) might increase the demand for CETs this decade, especially as societal demand for sustainable urbanisation grows around the world. The interest in a new urban agenda, as highlighted by the record attendance of the UN conference on the future of cities, Habitat III, in Ecuador, suggests that the attention accorded to poor air quality and unsustainable transportation will only grow over the coming years.

Countries that want to be part of “green” global value chains could develop new public-private partnerships to create synergies for upgrading skills, investment, innovation and diversified domestic production structures. By developing stronger links with international markets and with leading firms in global value chains, they can enhance their access to commercial opportunities globally through trade and investment. It will be critical to align qualification and certification processes to international standards. Developing countries could also put in place operational systems to enable easier conformity with, and certification of, standards, as well as incrementally build their green infrastructure.

Examining the clean energy and SDG experience of Costa Rica

To ground the global discussion in a concrete local context, the paper looks at one specific country by way of illustration. Costa Rica is used as a case study of how climate goals and SDGs are addressed in practice. The country has an ambitious Paris climate target (as suggested by some third-party analysis such as the Climate Action Tracker), and is one of the few developing countries to have joined the EGA negotiations.

Recent developments concerning renewable energy and climate policy are reviewed, including Costa Rica’s recent effort to promote a bill to incentivise electric mobility. This is a key action to decarbonise its economy, considering that the main source of emissions is the transport sector and that nearly 100 percent of the country’s electricity comes from renewable sources. If there is a country where electric cars and buses make sense, it is Costa Rica. In September, the government put on the table a “national pact” to increase ownership of the SDGs, and a variety of stakeholders have already joined it. Efforts are being made to examine the feasibility of “green clusters” from an export and foreign direct investment (FDI) perspective. The development of such clusters could help the country integrate green growth into economic institutions, thus moving beyond traditional approaches that concentrate environmental and climate efforts within the Ministry of Environment and Energy. Going forward, the Ministry’s Climate Change Directorate aims to consolidate past and new experiences into a learning process that reaches beyond Costa Rica, treating it as a “decarbonisation laboratory that can show other countries how to advance climate, development and economic growth objectives over time – involving a wide range of stakeholders and sources of finance.

Broadening the coverage of the EGA

One of the conclusions of the study is that the EGA has the potential to boost environmental goods, including clean energy and energy efficiency technologies, by lowering their costs and enhancing their supply and use in many countries. But the narrow focus of the EGA, to date, limits its impact. Its sole focus on tariffs and the exclusion of environmental services has attracted a limited group of nations. Engaging a larger group of countries, especially developing ones, will become more feasible if the EGA were to have broader coverage. Including environmental services and non-tariff barriers in it could also amplify the benefits the EGA can bring to help meet the aims of the Paris Agreement and the 17 Sustainable Development Goals agreed in 2015.

[1] In addition to the European Union (negotiating as a block), the participating members are Australia, Canada, China, Costa Rica, Hong Kong, Iceland, Israel, Japan, Korea, New Zealand, Norway, Singapore, Switzerland, Chinese Taipei, Turkey and the United States.

This article is derived from The Relevance of the Environmental Goods Agreement in Advancing the Paris Agreement Goals and SDGs: A Focus on Clean Energy and Costa Rica’s Experience authored by Monica Araya and published by ICTSD. This article was also published by CDKN.

Dr. Monica Araya is the Executive Director of Nivela and a former climate negotiator for Costa Rica. She also worked at the country’s Ministry of Trade. Follow her at @MonicaArayaTica

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