Summary Post-Bali: A Dialogue on Trade, Climate Change and Development 11 February 2008, Geneva
Overview
The United Nations Environment Programme (UNEP) symposium entitled, “Post-Bali: A Dialogue on Trade, Climate Change and Development” took place on 11 February 2008 in Geneva, Switzerland. Organized by the Economics and Trade Branch of the UNEP Division of Technology, Industry and Economics, the dialogue was attended by approximately 130 participants from national governments, international organizations, research institutes, academia, and civil society organizations. The objectives of the dialogue were: (i) (ii) (iii) To explore underlying issues at the interface of trade and climate change, and their likely impact on development; To provide a platform for governments and experts to examine the relationship between trade, environment and development, and to identify emerging issues and policy implications; and To promote trade policies and practices that support climate change mitigation and adaptation.
The dialogue was divided into six main sessions covering a range of issues, including an update on the outcomes of the United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties meeting in Bali and the Informal Trade Ministers Dialogue on Climate Change; linkages between trade, climate change and development; environmental goods and services and access to climate-friendly technologies; transport and climate change mitigation; national measures, trade and competitiveness; and leveraging World Trade Organization (WTO) rules to address climate change. All documents related to the dialogue, including the agenda, presentations, related background papers and the participants’ list, are available on the internet at: http://www.unep.ch/etb/events/2008TradeClimateChangeMtg11Feb.php.
Summary of the Dialogue
The following summary provides an overview of the main issues raised by participants. It does not represent a consensus document by governments and other participants attending the dialogue. Rather, it attempts to highlight key contributions in order to provide insight into future discussions and analysis into the linkages between trade, climate change and development. Opening Session The dialogue was opened by Hussein Abaza, Chief of UNEP Economics and Trade Branch, and Mark Radka, Chief of the UNEP Energy Branch. In his opening remarks, Mr. Abaza welcomed participants and highlighted the importance of examining the linkages and synergies between trade, climate change and development in light of the outcomes from the Informal Trade Ministers Dialogue on Climate Change, which was convened during the UNFCCC negotiations in Bali. He challenged participants to use the dialogue to explore the role of international trade in addressing climate change challenges. He also highlighted the importance of designing and implementing mutually supportive trade and climate change policies that reduce emissions, address competitiveness concerns and promote sustainable development.
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Mr. Radka also welcomed the participants and emphasized UNEP’s long-standing commitment and efforts to address climate change. He provided a summary of the climate change events that took place over the previous year and noted that these events had culminated in driving climate change to the top of national government agendas. He also briefed participants on UNEP’s future climate change strategy and the critical role that issues at the interface of trade and climate change will play within this strategy. Session One: Review of the Bali Negotiations and Informal Trade Ministers Dialogue H.E. Gusmardi Bustami, Ambassador, Permanent Mission of Indonesia to the WTO, opened the first session of the dialogue by briefing participants on the outcome of the Informal Trade Ministers Dialogue in Bali. The dialogue represented the first time that Trade Ministers have met informally to discuss climate change issues. The aim of the dialogue was to discuss how international trade can support climate change objectives. H.E. Mr. Gusmardi Bustami stated that inaction on climate issues was unacceptable and highlighted the importance of consensus-based multilateral frameworks to address climate change targets, approaches, and instruments. He also noted that Trade Ministers called for more comprehensive studies to be undertaken to clarify the linkages and interface between international trade, development and climate change and to intensify high-level engagement on these issues in order to enhance public understanding and enable governments to take appropriate action. Claudio Forner, Programme Officer, UNFCCC Secretariat, summarized the main outcomes from the UNFCCC Bali climate change negotiations, including agreement on a “Bali Roadmap.” The Bali Roadmap consists of several decisions focused on a future international strategy for addressing climate change, including a Bali Action Plan, which provides for a new two-year negotiating process for determining future climate change actions on adaptation and mitigation supported by finance and technology. Key aspects of the plan include the recognition that economic growth and poverty eradication are global priorities, deep cuts in global emissions are urgently needed, and incentives must be provided to engage all Parties in climate mitigation and adaptation. Mr. Forner closed his remarks by asking participants to consider their own role and contribution to the Bali Roadmap, noting that stabilizing climate change will require full mobilization of the international community. Aaron Cosbey, Associate and Senior Project Advisor, International Institute for Sustainable Development (IISD), provided an overview of the Informal Trade Ministers Dialogue from the perspective of a nongovernmental organization that worked closely with the Indonesian Government in preparing and convening the meeting. He emphasized that climate change action is imperative and that trade must be part of the solution and not a hindrance to action on climate change. He noted that sustainable development represents a core objective of the WTO, and that it cannot be achieved unless there is successful action – both inside the climate negotiations and outside, in areas such as trade and finance – to address climate change challenges. During the open discussion, several participants noted the importance of aligning environmental objectives with global trade objectives. Suggestions for implementing this goal included joint meetings between Ministers of Environment and Trade, clarification of the legal relationship between the climate change and trade regimes, and an increase in aid to developing nations for climate change mitigation and adaptation. Participants were emphatic about quickly implementing the Bali Action Plan’s goal of long-term cooperation on climate change mitigation and adaptation. Session Two: Trade, Climate Change and Development Linkages The second session, which was chaired by H.E. Debapriya Bhattacharya, Ambassador, Permanent Mission of Bangladesh to the United Nations, explored the linkages between trade, climate change and development. Presentations were provided by Vesile Kulaçoglu, Director, Trade and Environment Division, WTO, and Ricardo Meléndez-Ortiz, Chief Executive, International Centre for Trade and Sustainable Development (ICTSD), with Vicente Yu, Programme Coordinator, South Centre, serving as the discussant. H.E. Mr. Bhattacharya opened the session by pointing out that parties often approach these linkages from different perspectives – some primarily seeking climate change solutions, others seeking trade liberalization, and still others focused on development. Given this, it is important to understand these perspectives when discussing the relationship between trade, climate change and development.
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Mrs. Kulaçoglu stated that for a number of years countries have taken a host of national measures to combat climate change. These may have an impact on international trade as they may be perceived as potentially modifying the conditions of competition. She mentioned some of the challenges the intersection between climate change measures and trade present for the trading system in the absence of international rules on climate change. She also referred to some ideas advanced on how the multilateral trading system should be positioned in the fight against climate change. She reminded participants that the current Doha Round of negotiations may provide a unique opportunity for addressing climate change through the liberalization of climate-friendly goods and services. She emphasized, however, that it is preferable that the international community reach a consensual climate change agreement that would send the appropriate signal to WTO Members thereby allowing the trade community to respond using the tools available in the WTO. In his presentation, Mr. Meléndez-Ortiz stated that measures used to address climate change will have significant trade and development implications, noting that while action related to trade instruments is warranted, the climate policy track must remain the focus for addressing climate change, with primary attention on the UNFCCC. Trade policy regulatory frameworks, WTO and otherwise, should be considered as complementary to, and enabling of, international cooperation on climate change within the overall objective of sustainable development. He noted that most trade-related climate policies fall within three broad categories: regulatory measures (e.g. standards), fiscal measures (e.g. taxes and subsidies) and market-based incentive measures (e.g. market access for low carbon goods and services). He then provided participants with a matrix that mapped these measures against relevant GATT and WTO provisions, as well as a conceptual approach for linking mitigation and adaptation strategies, as identified through the climate process, with potentially relevant trade policy tools and instruments. He noted several fairness and equity concerns that need to be taken account, including the issue of carbon labeling and carbon embodied in internationally traded goods, and their implications for the global carbon accounting system. Mr. Yu emphasized that any climate action in developing countries must be viewed in light of the overall objective of sustainable development in these countries. He noted that sustainable development is also the underlying objective within the trade and climate change regimes. He pointed out that trade liberalization has the potential to lead to development, but this should not be seen as a given. The Doha negotiations must provide developing countries with the flexibility to adopt policy choices that allow them to respond to climate change concerns and develop their own technology industry. He concluded by noting that the climate regime has sent important signals to the trade regime for action through the widespread adoption of the UNFCCC, which currently has 192 Parties. A number of participants noted that climate change is a problem broader than both trade and development. One participant argued that the objective of trade in addressing climate change should be to avoid obstructing urgent global mitigation and adaptation actions, to reduce trade’s carbon footprint and to assist in promoting development that is truly sustainable. Further comments identified many linkages and potential opportunities, including promoting liberalization and transfer of climate-friendly technologies, altering existing trade rules to mitigate and adapt to climate change, and reducing the transportation impacts of trade. Finally, a participant cited the Intergovernmental Panel on Climate Change’s Fourth Assessment Report in arguing that development will be constrained without climate action. Session Three: Environmental Goods and Services and Access to Climate-Friendly Technologies The third session examined the likely role and contribution of trade liberalization in environmental goods and services (EGS) and related climate-friendly technology development and transfer. The session was chaired by Eduardo Tempone, Minister, Permanent Mission of Argentina to the WTO. Veena Jha, Executive Director, Maguru Consultants Limited, provided a presentation and Rick Sellers, an international consultant on renewable energy and carbon abatement, served as the discussant. Mr. Tempone introduced the subject by highlighting the EGS mandate in the Doha Ministerial Declaration (para. 31(iii)) and its overarching objective of enhancing the mutual supportiveness of trade and the environment. He noted that an important first step would be to agree on a way to identify EGS for liberalization. He then discussed the importance of determining the modalities for EGS liberalization as well as the need to look beyond the Doha negotiations to improve access to climate-friendly technologies globally.
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Ms. Jha offered what she termed a “reality check” on the potential of EGS liberalization to address climate change concerns. Ms. Jha stated that making environmental technologies and services more readily available worldwide would not be sufficient to tackle the root causes of climate change. With the exception of Small Island States in the Pacific, she noted that there is a correlation between developing countries most vulnerable to climate change impacts and developing countries with the highest level of trading in relevant environmental goods. Analysing the tariff profiles of these main traders in EGS should lead to important decisions as to how to move forward on the liberalisation of EGS. She concluded by noting that tariff liberalization of environmental goods is not as important as other factors, such as foreign direct investment and technical assistance projects, in encouraging trade of environmental goods. With respect to technology transfer, Ms. Jha felt that UNEP could play a significant role on the ground by providing technical assistance. Mr. Sellers spoke about the transfer of climate-friendly technologies and how this is essential in tackling climate change. He emphasized the importance of renewable energy projects in developing countries and acknowledged that the private sector has a critical role to play in financing these technologies. However, he noted that the private sector’s involvement depends on the willingness of policymakers to create the right conditions for investment, including adequate intellectual property protection. In contrast, overly burdensome requirements, such as mandating that technologies contain a certain percentage of local content, or a resistance to using first generation renewable technologies, raise “red flags” to potential private investors. He also highlighted the importance of creating national and regional markets for environmental technologies in order to increase competitiveness within the industry. In the discussion, many participants noted that a priority in the EGS debate was to ensure that developing nations stand to profit both from an economic and environmental perspective. Participants also noted that the patterns of consumption of such goods required inclusion in current EGS liberalization debates, as these may lead to important emissions reductions. With respect to technology transfer, participants called on intergovernmental and non-governmental organizations to enhance their efforts in providing assistance to developing countries. Session Four: Transport and Climate Change Mitigation Session four addressed the future of the transport sector, currently a significant contributor to global GHG emissions, and how it relates to climate change policy. The session was chaired by Chuck Ashley, First Secretary, Permanent Mission of the United States of America. Phillippe Crist, Administrator, The International Transport Forum, Organisation for Economic Co-operation and Development, presented on the marine transport sector, and both Andreas Hardeman, Assistant Director, International Air Transport Association (IATA), and Regina Asariotis, Senior Legal Affairs Officer, United Nations Conference on Trade and Development, served as discussants. In opening the session, Mr. Ashley noted the need for increased focus on carbon intensive sectors in climate change mitigation and adaptation, such as the transport sector. He recognized that transport plays a critical role in poverty alleviation but that it was imperative for the sector to enhance its efforts for reducing GHG emissions. He stressed the important role of government and public-private sector collaboration for achieving substantial emission reductions in the transport sector. Mr. Crist began his presentation by outlining the current GHG emission levels for the transport sector as well as future projections under current policy frameworks. The future projections showed two and three-fold increases in emissions for the transport sector if complementary measures are not adopted. He noted that costeffectiveness was one of the fundamental determinants when considering what abatement policies to adopt in the transport sector. He noted that several high-cost measures, such as the use of hydrogen, biofuels or hybrids, have attracted political support despite occasionally low effectiveness. In contrast, cost-effective measures, such as ensuring tires are inflated and using cruise control, often have weak political support but high potential. In terms of maritime transport, he noted that there is a unique trade-off between air quality and global warming that might have to be made given the radiative forcing nature of some of the pollutants from maritime shipping. Mr. Hardeman described aviation as a financially fragile industry with thin profit margins that can only adopt the most cost-effective abatement measures if it is to stay afloat. He noted that 82% of GHG emissions in the aviation industry come from flights over 1500 kilometers in distance where many other modes of transportation may not be feasible. Despite these challenges, IATA has a medium-term strategy to decrease aviation’s
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contribution to climate change through four elements: improving climate-friendly technology, exploring cleaner fuel options, adopting greener economic measures and using more direct sky routes. Moreover, he stated that the long-term vision of IATA members is for carrier airplanes to become carbon neutral by 2050. Ms. Asariotis commented on the position of shipping within the climate change debate, including the exclusion of international shipping and aviation from the UNFCCC and Kyoto Protocol. On a general note, she noted the lack of transparency in the assumptions used when modelling fuel consumption and CO2 emissions and the need to ensure clarity and consistency when measuring the contribution of different sectors to GHG emissions. She highlighted the international dimension of shipping and how this has created additional complexities when considering potential regulatory measures. She also emphasized the need for a better understanding of the effects of climate change on transportation infrastructure and services, as these could, in the longer run, be significant. Both mitigation and adaptation measures to address the climate change challenge should take into account, inter alia, differing degrees of vulnerability and adaptive capacities among countries and regions, as well as differences between various modes of transport and be consistent with other strategic policy objectives such as energy security and sustainable development. Many participants agreed that business as usual will not suffice if current emission reduction targets are to be reached. A number of recommendations were made for tackling emission challenges in the transport sector, including increasing the role of the private sector in climate change discussions and decision-making, reviewing current transport policies, improving data collection, and increasing research and development on fuel efficiency and alternative fuel options. Session Five: National Measures for Mitigation and Adaptation and Implications for Trade and Competitiveness Session five addressed national measures, trade and competitiveness, and was chaired by Jean-Christophe Füeg, Special Respresentative for International Energy Affairs, Swiss Federal Office of Energy. Aaron Cosbey spoke about the role of national regulatory, fiscal and economic measures in mitigating and adapting to climate change, and their potential impact on competitiveness, and R. Andreas Kraemer, Director, Ecologic, served as the discussant. Mr. Füeg began the session by noting that national measures will be increasingly employed as a means of mitigating and adapting to climate change. He then highlighted a few of the measures that will likely be used in tackling climate change, such as subsidies and taxes. He noted that similar measures might also be used by countries concerned that their climate policies have made them less competitive internationally, and that this creates the risk of industrial relocation to avoid the measures (often referred to as “carbon leakage”). He noted that nations with less internal trade may be more exposed to such competitiveness concerns. He ended his intervention by calling for more research on carbon leakage effects. Mr. Cosbey focused his presentation on competitiveness issues. In terms of climate change, he noted two basic competitiveness concerns: (1) the so-called non-Party problem – competitiveness issues arise because some countries (whether Parties or not) fail to impose stringent climate standards on their firms and sectors; and (2) the implementation problem – competitiveness concerns arise when Parties favour firms or sectors in implementing their commitments. In most scenarios, competitiveness impacts were described as quite moderate but in specific sectors, particularly those that are energy intensive, where firms have difficulty passing the costs on to consumers, or where opportunities for abatement might be limited, the impacts may be considerable. Given this, he highlighted a number of policy implications, including boosting the ability of firms to innovate and the need for sectoral research to identify vulnerable sectors and design policies that respond to these sectors accordingly. In his discussion of the presentation, Mr. Kraemer argued that the climate change imperative was so strong that the international trading system was left with only two choices; either adapt its current rules to promote climate change solutions or “get out of the way.” He also called for flexible supervision of national measures to ensure that they are promoting less carbon-intensive products and processes and sharing innovative technologies. He further suggested limiting market access for certain products from nations that do not take adequate or commensurate climate change action.
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Several participants echoed Mr. Kraemer’s call for trade rules to align with climate change and sustainable development goals. It was also noted that research was needed to see how best to address the “dirty dozen” sectors that generate substantial GHG emissions and the possibly resulting competitive distortions from continued non-internalization of climate costs, or trade restrictions that may result from national action to correct such distortion. One participant called for establishing a transition plan for these carbon intensive sectors and noted that an international approach may be viable because the production processes in the sectors are similar worldwide. Session Six: Leveraging WTO Rules to Address Climate Change The final session addressed leveraging WTO rules to stimulate sustainable development as well as to contribute to climate change mitigation and adaptation. H.E. Ujal Singh Bhatia, Ambassador, Permanent Mission of India to the WTO, chaired the session. A presentation was made by Thomas Cottier, Managing Director, World Trade Institute. Joost Pauwelyn, Professor, the Graduate Institute of International Studies, and Nathalie Bernasconi, Managing Attorney, Center for International Environmental Law, served as discussants. In opening the session, H.E. Mr. Bhatia emphasized that transparency in trade measures was needed in order to distinguish between legitimate measures adopted to address climate change and protectionist measures. He then proposed two questions to guide the session: (1) how can existing trade rules combat climate change; and (2) how should trade rules be changed, adapted or augmented to address climate change? In his presentation, Mr. Cottier addressed a range of areas where WTO law could support climate change mitigation. In discussing the relationship between the WTO law and climate change, he noted two approaches were possible: negative integration in WTO rules (stating what cannot be done) and positive integration (what might be done). On the issue of subsidies, he addressed the possibility of reviving the non-actionable category (“green light”) in the WTO subsidies agreement. He also highlighted the political sensitivities associated with fossil fuel subsidies, including the interest by some countries in energy security and others in promoting consumption subsidies for development objectives. In terms of EGS liberalization, he suggested adoption of an Environmental Area Approach that would link various WTO rules associated with technology, such as IPRs, services and goods, with a specific environmental area. He suggested a number of potential environmental areas, including reduction of carbon emissions and promotion of renewable energies. He concluded by noting the need for additional transparency and predictability in WTO jurisprudence to allow trade rules to be leveraged to address climate change challenges. Mr. Pauwelyn noted that trade, although important, will ultimately not make or break international efforts to address climate change. He also stated that the WTO is becoming more flexible, allowing more environmental measures and exceptions than in the past, but that the measures must still pass the requirements of the GATT Article XX chapeau. He pointed out that the United States is currently exploring several border measures to mitigate potential competitiveness concerns, and that most of these national measures are permissible under current WTO trade rules and jurisprudence. Ms. Bernasconi discussed fossil fuel subsidies and noted that disciplining them could offer the potential for considerable gains for addressing climate change challenges. However, she emphasized the procedural and political challenges to eliminating or reducing fossil fuel subsidies. She noted that disciplines on subsidies already exist within the current WTO rules and that some fossil fuel subsidies could likely be challenged under the current system. She also noted that the WTO’s notification system with respect to fossil fuel subsidies should be improved in order to enhance transparency. On the issue of WTO legal consistency, she argued that the WTO should not be a stumbling block because the rules offer enough flexibility to accommodate a wide array of national climate change measures, though future panels would have to use that flexibility. She referred to the recent Brazil - Retreaded Tyres case, in which the Appellate Body clearly ruled with climate change measures in mind. However, she warned that uncertainty in the legal relationship between the climate and trade regimes could hinder strong climate solutions. Some participants felt that the institutional challenges of the WTO are best avoided and that climate change solutions must be negotiated within the context of the UNFCCC. It was noted that if WTO Members agree to liberalize trade in environmentally preferable goods, a neutral, credible body will be needed to determine best or preferable technologies and methods.
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Closing Remarks Mr. Abaza closed the dialogue by thanking the speakers and participants for their active engagement. Given the overwhelming interest in the dialogue, he noted that UNEP plans to convene other dialogues on specific issues at the interface of trade, climate change and development during the upcoming year. He also stated his hope that the dialogue was useful in further clarifying the relationship between trade, climate change and development and in stimulating further research and activities. He concluded by noting that substantive points and recommendations raised during the symposium will be used as input and guidance for further UNEP activities in this area.
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