Liberalization of Trade in Environmental Goods for Climate Change Mitigation E-mail
Tuesday, July 21, 2009

The Stern Review has highlighted the potential contribution trade liberalization in clean technologies could make to climate change mitigation. Such trade liberalization could contribute positively towards moving economies onto “low-carbon” trajectories to the extent that it drives diffusion and access to lowcarbon and energy-efficient technologies as well as to renewable sources of energy.

Trade is an important channel for the diffusion of many climate mitigation technologies and goods. Few countries have the domestic capacities or know-how to produce all that they need. This is particularly true for developing countries, and although building domestic capacities may be their long-term goal, trade liberalization can provide rapid access to key technologies. Trade liberalization—whether locked in through negotiations at the WTO or elsewhere, or undertaken autonomously—can also lower the costs of environmental
goods by allowing consumers (industries or households) to purchase them at world market prices.

Liberalization of Trade in Environmental Goods for Climate Change Mitigation: The Sustainable Development Context,
Paper prepared for ICTSD-IISD-GMF Conference on Trade and Climate Change 19-20 June in Copenhagen by Mahesh Sugathan

A 2007 World Bank study, International Trade and Climate Change, points to the potential for liberalization in the area of low-carbon goods to lead to real increases in trade flows. According to Bank estimates, the removal of tariffs for four basic clean energy technologies (wind, solar, clean coal and efficient lighting) in 18 developing countries with high greenhouse gas emissions would result in trade gains of up to seven percent. The removal of both tariffs and non-tariff barriers could boost trade by as much as 13 per cent. The net effect would, however, vary across technologies and across countries, depending on existing barriers and the import elasticities of demand.

Coupled with appropriate supportive measures, trade liberalization of climate technologies can also contribute towards fulfilling the technology transfer mandates contained within the UNFCCC. Similarly, trade liberalization can complement negotiations within the WTO Working Group on Trade and Transfer of Technology, which is mandated to “examine the relationship between trade and transfer of technology, and of any possible recommendations on steps that might be taken within the mandate of the WTO to increase flows of technology to developing countries.”

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