Transcript Environmental Priorities and EGS Trade Policy: A Reality Check

EGS and Climate Change:
China a case study
Veena Jha
Structure of the presentation
• What framework policy is China following to
control implications of climate change?
• How does this link with trade?
• Linking trade flows in the list of 80 EGs with
Environmental problems related to Climate
Change and its associated technologies
• Trends in trade of EGS related to Climate
Change
• Policy implications
Policy of co-control and co-benefit
•
Earlier local pollution control policy and climate change
policy were considered independently without links
•
Ancillary benefits or secondary benefits of GHGs reduction
were found to be also beneficial for controlling local air
pollution.
•
The joint benefits of controlling GHGS were measured.
•
Thus it was decided to design policies/programs/projects in
order to maximize joint benefits of GHG reduction and local
pollution.
•
These joint control policy and projects were designed and
implemented for the five year period 2006-2010
Joint benefit program
Success of the Co-Control Policy
Foreign trade policy challenges
• Environmental accounting of the trade balance
between China and the rest of world, using
DRC-CGE model simulation 1.2 billion ton of
carbon deficit, taking up about 23% of total direct
emissions
• 5.3 million ton SO2 deficit, taking up about 39%
of total industrial emissions
• 61.5 billion ton of water resources, taking up
about 12% of industry and agriculture
consumption
What is green trade for China
• Green trade is one of the measures to
achieve the goal of 11th five year plan:
• Suggestions include:
• Put tariff on export goods with high energy and
pollution intensity
• Encourage eco-labels on exported products
• Encourage imports of environmental goods and
services as well as technologies
Liberalization of Environmental
Goods and Services (EGS) trading
• Low carbon EGS products are the core of low carbon
economy, which have co-benefits associated with high/low
sulphur/PM etc
• High carbon product trading sanction Vs Low carbon product
trading liberalization
• CDM investments: mode 3 of trade in service 49%
shares limitation
• Visa: a barrier of mode 4 of trade in service for co-benefit
consulting service
• Carbon-friendly equipments importing limitation for co-control
projects
– Liberalization of EGS trading is the key barrier of actions
with co-benefits for low carbon, low sulphur, low PM
society
Liberalization of EGS trading
• Who should and how to deal with the
barrier of EGS trading?
• WTO Doha Round negotiation on EGS
» The problems of EGS negotiation
» Trade interest driven but environment demand
driven
» Environment is used by trade officials as an
excuse to promote exports
» National interest driven but should be global
interest driven. It’s very necessary to have global
environmental goods to improve global
environment
What to Liberalise? : Issues of
Product Coverage
• Difficult to
(i) Isolate ‘climate-friendly’ products from
others for easier trade liberalisation.
‘Dual-use’ categories includes
environmental and non-environmental
products.
(ii) Deal with intrinsically ‘dual-use’ products
What to Liberalise? : Issues of Product
Coverage
(iii) Present HS classification also difficult to
operationalise faster liberalisation for
‘relatively’ friendlier products especially if
product remains the same but embedded
technology changes. Eg: Energy efficient
products.
Where are the Environmental
Hotspots
• The developed countries have higher per
capita carbon emissions than developing
countries. If carbon emissions from
agriculture are included then their
emissions would increase substantially.
• However, reducing carbon emissions is
not merely a matter of technology or
products but patterns of consumption too,
especially food.
Technology
• Substantial convergence in technological achievement between
China and the developed countries according to a World Bank study.
• This is attributed to the openness of China to foreign trade, foreign
direct investment.
• Returning Chinese migrants have also dramatically increased both
exposure to new technologies and the opportunities to use foreign
markets to exploit increasing returns to scale.
•
Hence both exports and imports of EGs important for China.
Trade in EGS products in general
• Top ten importers of EGs identified by job
54 of the WTO prominently includes
China. China accounts for roughly 10% of
total imports and exports at the global
level.
• China along with Hong Kong accounts for
over half of the developing countries
exports and imports.
Exports of Climate mitigation products and
technologies in the area of energy
• China a major exporter, i.e among the top twenty
countries in almost all categories of climate
friendly energy products.
• However, its volume of exports much lower than
those of developed countries in a range of
products.
• Its exports are highest in small hydro plants and
turbines and products associated with solar
energy.
• In addition a number of Climate friendly energy
technologies use electronic components in
which China has a comparative advantage.
Exports of Climate mitigation products and
technologies in the area of energy
• China also is the number one exporter in a
number of geothermal energy exports.
• It has a comparative advantage in a
number of solar energy exports as
demonstrated by the fact that it is among
the top 5 exporters of nearly twenty
products in this category.
• It is a relatively small exporter of wind
energy products and technologies.
Imports of climate mitigation
products
• In almost 66 of the 84 categories of energy products,
China is among the top twenty importers.
• However, China’s rank as an importer among the top
twenty is much lower than that of its exports.
• This indicates that China has a net comparative
advantage in value terms in the production of most
products which are climate friendly energy products.
• Nevertheless, the gap between China and the developed
countries remains wide in terms of both exports and
imports.
Tariffs of top ten Developing
country importers of EGs
50
40
30
20
10
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Bound Tariff
An analysis of tariff profiles
• Applied tariffs of most high level importers
fluctuates between 0 and 12%. While these are
not very high, on specific tariff lines they can be
as high as 40%.
• China’s tariffs on an average for these products
is between 5 and 8%.
• Liberalisation through cutting tariffs would yield
real market access benefits to China as far as
intra-developing country trade is concerned.
• However, these benefits would only accrue if
imports of developing countries sensitive to tariff
cuts.
Linking trade flows with Climate
Change
•
•
•
•
Essentially climate associated technologies
scattered around 84 product categories for
energy efficient products.
If we use the World Bank identification of
climate friendly technologies and products as
the starting point, around 43 products identified
as being associated with climate change.
About 30% of these products do not show any
sensitivity to tariff changes.
A number of these products are also dual use,
so difficult to identify how many would be put to
environmental end use.
Linking trade flows with Climate
Change
•
•
•
An important shortcoming of the world bank as
well as the WTO list is that both do not identify
technologies or products associated with
agriculture which could reduce carbon
emissions.
According to some studies if the EU reduces its
meat consumption by just 5%, the reduction in
carbon emissions would be equivalent to
removing 21 million cars off the road.
Thus Carbon emissions associated with
intensive agriculture, particularly intensive meat
production needs to be calculated.
Policy Implications and proposals
• While the Doha Mandate puts environment at the centre
of the EGS negotiations, it is difficult to see how products
classified in the HS code can be directly related to
Climate Change.
• Thus the next logical step is to examine the trade
implications for developing countries of the lists
proposed as EGs to the extent that they are relevant to
climate change.
• While additional tariff lines identified by other studies
may be more relevant to climate change, the process of
isolation and agreement on what would be considered as
climate friendly may be somewhat cumbersome.
Policy Implications and proposals
• Examining the list of 84 EGs, China has a clear
comparative advantage in a number of products.
• The list can be further examined in light of
dynamic comparative advantage of China.
• In this case, the comparative advantage of
climate friendly technologies and products would
not shift in favour of China in the near future.
(2015).
• In addition, if NAMA negotiations are successful,
they would achieve the liberalisation of a
number of climate friendly goods too.
Policy Implications and proposals
• However, other factors such as FDI, GDP,
Environmental performance and technical
assistance projects are much more important
determinants of trade flows than tariffs.
• The elasticity with respect to TA of trade in
Energy products is particularly high.
• This shows that international and bilateral
donors would have a large role to play in
directing the trade of EGs, rather than tariff
negotiations.
Thank you very much
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