With global talks on climate change just inching along, governments can move forward on some climate goals through trade agreements to cut tariffs and facilitate commerce in “green” goods like wind turbines and solar panels, experts told a Brookings Institution session this week.
For years, the US and European Union have avoided negotiating bilateral trade deals because they might undercut the Doha Round, the tariff reduction talks the World Trade Organization begun in 2001.
But those talks have effectively stalled, in part over issues similar to those hindering international climate talks. In both cases, early decisions divided the world into developed and developing nations, and neither set of talks has a mechanism for moving fast-developing nations like China and India into an intermediate category where they would share some of the responsibilities of developed nations.
With the Doha Round making little progress, said Jennifer Hillman, Senior Transatlantic Fellow of the German Marshall Fund of the US, worries about undermining the talks have ebbed. “The window is open now” for a “broad comprehensive agreement” that will cut tariffs and ease trade in “green” imports and exports, she said.
“Green trade liberalization should be high on the agenda for all countries,” said Pia Olsen-Dyhr, Denmark’s Minister of Trade.
Almost all nations now “distort” green trade with protective tariffs, requirements for local content, and similar mechanisms, she said, and the renewable energy industry has become “fiercely competitive.”
But Olsen-Dyhr said dropping trade barriers for green goods, both equipment and technology, is vital as nations like her own seek to limit greenhouse gas emissions. Denmark has a goal of reducing its carbon emissions 40% by 2020.
Joshua Meltzer, a Fellow with Brookings, pointed to Canadian provincial requirements for local content in wind, solar and other renewable projects. Those requirements mean that renewable projects cost more because they can’t take advantage of global price competition, he said.
Hillman said any bilateral or multilateral trade deals should “green light” activities that clearly advance a nation’s clean energy goals.
Under WTO rules, she noted, direct subsidies on export goods are forbidden. She said international trade agreements should include a “peace clause” with national climate change strategies, recognizing when subsidies for carbon-free technologies are “clearly aimed at reducing” domestic greenhouse gases rather than gaining export advantage.
The speakers agreed that most countries are subsidizing green technology development since renewables can’t yet compete economically. Meltzer said that’s because the larger costs to society of fossil energy pollution and climate change aren’t included in energy’s bottom line, and subsidies are one way for governments to level the playing field.
Olsen-Dyhr pointed to the proposed Sustainable Energy Trade Agreement, a framework approach launched last fall in Denmark, which proponents say could open trade in green goods and services and foster adoption of low-carbon alternatives worldwide.
Hillman said the ideal is a global green trade agreement. But with Doha stalled, she and Olsen-Dyhr both said, agreement between the US and the EU appears relatively easy to take forward. They said the transatlantic trading partners should invite other countries to join them in any deal.
One substantial barrier, Olsen-Dyhr warned, is the EU’s decision to require carbon allowances for all airplanes landing in European airports. The decision is part of the EU’s plans to cut carbon emissions under the Kyoto Protocol.
Non-EU nations have protested their airlines’ being forced to buy the allowances, but “the EU will not take this off the table,” Olsen-Dyhr said, adding, “This is not so easy to solve.”