Accelerating Decarbonization through Trade in Climate Goods and Services (original) (raw)

2022, Accelerating Decarbonization through Trade in Climate Goods and Services

Boosting trade in specific climate action-related technologies and services could help encourage emissions reductions in industries and homes worldwide. Trade can support climate action: Trade can help spread climate-friendly technologies around the world. Wind turbines contain around 9,000 components traded in global and regional value chains, electric cars are made from components sourced in many countries, and global heat pump markets are growing. Services trade supports climate technology roll out, like monitoring wind turbine performance to repair faulty parts, or engineering advisory, design, consulting and project management functions that deliver clean energy projects. As well as increasing availability, trade in climate goods and services can reduce costs and increase choice, making industries dependent on emissions savings more competitive. Government collaboration has been mixed, but action is needed now: Governments have long recognized the importance of a broader push for more environmental goods and services trade. Yet efforts to work together to reduce barriers – from tariffs to regulatory complexity or limitations on foreign suppliers – have been mixed. The urgency of climate action means the time is ripe for a renewed, focused collaboration on boosting trade in climate goods and services. Trade in 25 climate goods could help emissions reductions: This report presents a list of 25 key climate technologies that trade policy-makers could prioritize in discussions. These were identified based on three sectors that will play an essential role in reaching net-zero emissions, according to the Intergovernmental Panel on Climate Change (IPCC), including energy supply, transport and buildings. Goods for carbon capture and storage (CCS) and refrigerant management are also included as these are promising for decarbonization too. Technologies proposed include wind and solar power, heat pumps, alternative refrigerants, insulation, efficient motors, LED lighting, smart thermostats, electric cars and biogas stoves. A longer list is also available that indicates inputs to key technologies and relevant tariff codes. That information is specifically designed to help policymakers explore value chains and areas of most interest to their national context. Non-tariff barriers matter more than tariffs: A tariff-cutting deal on climate goods would send an important message. It would demonstrate that participating governments are serious about aligning their commercial and economic policies with climate action. Most research to date also notes the importance of addressing non-tariff barriers (NTBs) – like different testing and certification requirements for safely placing a product on a market. The report lists seven types of NTBs and suggests priorities for further work. Services trade restrictions slow down climate goods distribution: Interviews for this report confirmed that trade barriers to providing climate-related services have resulted in missed business opportunities for the sale of climate goods. The report presents a list of climate services, associated with the five sectors targeted for increased climate goods trade, to encourage trade policy efforts. The list includes “core” environmental services and services that “enable” or are “indispensable” to climate goods trade. Developing countries must be included, and value chain competitiveness can help Globally, 759 million people do not have access to electricity, even though it is vital for development and clean energy solutions. Developing countries equally need to secure clean energy supplies to power companies engaged in global value chains as attention grows around supplier emissions. While south-south trade in clean energy technologies is growing, developed country markets could be opened up through regulatory cooperation in areas such as standards and technical requirements for key products. A climate trade deal can start targeted and grow over time: A trade deal among a broad number of interested countries focused on a tight list of items with significant potential for cutting emissions would be a positive move. The agreement could be broadened in time, especially as policy-makers build up confidence in trade collaboration and undertake effective capacity building. The Climate Trade Zero community stands ready to support these and other efforts aimed at maximizing the positive contribution that trade can make to addressing climate change.