Fostering Low Carbon Growth: The Case for a Sustainable Energy Trade Agreement (original) (raw)

Climate change is an unprecedented challenge facing humanity today. Given that fossil fuel-based energy use is the biggest contributor to anthropogenic greenhouse gas emissions, a rapid scale up and deployment of renewable or sustainable energy sources could significantly reduce the emissions responsible for global warming. A switch to cleaner and low-carbon transport fuels and technologies could also make a positive contribution toward achieving this goal. Energy efficiency measures represent a 'low hanging fruit' , as far as climate mitigation potential is concerned, and will entail the rapid deployment and use of energy efficient equipment and energy management practises. These measures will also contribute to energy security for countries that rely on fossil fuel imports, the supply of which may diminish or become unreliable in the future. Efforts to scale up sustainable energy require power producers to keep sustainable energy generation costs as low as possible. While incentives such as feed-in tariffs and tax breaks help, lowering the costs of equipment and services used to produce sustainable power could also play a critical role in facilitating the scale up process. Trade policy can contribute in this regard by lowering barriers to market access for sustainable energy goods and services. Often, however, trade and domestic sustainable energy policies could also be designed to restrict access to competitively priced goods and services for sustainable energy producers. This is because policymakers, while striving to lower the costs of sustainable energy production, also often seek to promote the domestic manufacturing of renewable energy equipment and the provision of services. In addition, the sustainable energy sector is also seen by many policymakers as a potential engine for job creation. Balancing these objectives may be difficult, however, especially when policymakers still need to win local support for sustainable energy policies from their constituents. Local manufacturing and employment-driven motivations may also trigger protectionist policies for goods and services connected to energy efficiency or sustainable transport. Trade and diffusion of energy efficient products and technologies may be hampered by diverse or conflicting technical standards and lack of harmonisation or mutual recognition efforts. Trade in cleaner transport fuels and technologies could be affected by a range of domestic policy measures, such as subsidies and product standards. While addressing trade barriers and ensuring a more open and fair trade regime for sustainable energy, policymakers will also need to be mindful of developing country concerns with regard to development priorities and access to technologies. This paper addresses some of the most critical and challenging issues in the trade and sustainable energy interface. It highlights the diversity of trade-related barriers in sustainable energy goods and services that arise as a consequence of both trade as well as domestic sustainable energy policies. Effectively addressing these market barriers will require a holistic and integrated approach that may not be feasible within the present framework of trade, energy, and climate-related regulatory barriers and institutions. This is because of various institutional and context-specific reasons, such as the fragmented and ambiguous nature of many existing World Trade Organization (WTO) agreements and rules, lack of effective and operational provisions both within and outside the WTO in several cases, and even the non-inclusion of key countries that matter within existing regulatory frameworks on trade as well as energy.