20 July, 2016 - Down the corridor from the sunlit atrium of the World Trade Organization (WTO), policymakers from Least Developed Countries gathered alongside the Geneva trade and environment community to attend a dialogue entitled “The Paris Agreement: Implications for Trade Policy and Least Developed Countries (LDCs)”.
Hosted by the LDC Group and the International Trade Centre (ITC), the room was filled beyond capacity in anticipation of high-level and thematic panels on the implications for trade in the Paris Agreement. While the Agreement, adopted by 196 parties to the United Nations Framework Convention on Climate Change at the end of last year, makes no direct reference to trade, indirect implications, relating to structural transformation and mechanisms for addressing climate change concerns, are clear. It is essential for LDCs to leverage trade to strengthen climate resilience, to take advantage of market opportunities stemming from the transition to a low-carbon economy, and to deliver upon both climate and development goals.
At the core of the Paris Agreement lies the mandate to decarbonize our economy. Panellists on the first high-level panel, including ambassadors from several Permanent Missions to the WTO, emphasized the importance of carefully considering and implementing associated policies, particularly surrounding the transition of the energy sector, including the elimination of fossil fuel subsidies, underscoring the effects on both environment and trade. A move towards renewables will require the manufacturing of related equipment, initially necessitating more carbon, meanwhile prices for fossil fuels capturing true social and environmental costs will have considerable repercussions on energy markets.
Post-Paris, the WTO and trade can play a central role in catalysing climate goals into action. Trade can make a key contribution in strengthening climate change resilience in LDCs by facilitating the diffusion of technology, allowing LDCs to “leapfrog” inefficient technologies and to build capacity against shocks and vulnerabilities. The WTO can serve as a backstop to climate protectionism, providing guidance in defining the scope of trade measures adapted for environmental purposes. In addition, trade can address development-related challenges alongside climate change, a vital factor to consider in order to ensure receptivity within LDCs.
The second panel showcased thematic expertise from an array of perspectives, including UNEP’s own Mr. Steven Stone, Chief of the Economy and Trade Branch. Externalities entered the discussion once again, this time in the context of carbon pricing, referring to unaccounted social costs in the market price. As institutions currently do not capture this discrepancy, the rules of the game must be changed. In a similar vein, trade continues to function by the status quo – on small margins and big volumes. For developing economies, particularly LDCs, moving beyond price is critical, and therefore entails competing on quality. However, locating and capitalizing on this new paradigm and resulting new market opportunities – referred to as the “markets of the future” – remains a challenge, though one that UNEP continues to tackle. Through the Environment and Trade Hub, UNEP aims to facilitate market access for sustainably produced and certified products in order to green global production and consumption.
Photograph: AFP/AFP/Getty Images
In light of a changing environmental policy landscape, the Environmental Goods Agreement (EGA) can provide a clear trade opportunity for LDCs. The EGA, intending to remove tariffs on key environmental goods, constitutes a small step in improving access to less costly goods, including those that generate renewable energy. Given that 1.2 billion people around the world lack access to modern electricity, many of whom reside in LDCs, the EGA will particularly serve to the of benefit developing countries. Moreover, growth in the market for environmental goods and services is expected to reach USD 2 trillion by 2020, further highlighting a viable market opportunity.
While low-hanging fruit, such as tariff removal on environmental goods and services, can be addressed through the EGA, the elimination of fossil fuel subsidies poses a greater obstacle. Trade indeed has the capacity to contribute to the Paris Agreement, but first and foremost, it must be seen to contribute, particularly in terms of climate adaptation and resilience and sustainable consumption and production. Despite the multitude of challenges and opportunities raised over the course of the two panels and in lively discussion following, an overarching theme emerged – policy coherence is critical.
