Green Economy and Trade Opportunities

Background• A Green Economy (GE) is one that

results in increased human well-being and social equity, while significantly reducing environmental risks and ecological scarcities

• The Green Economy Report (2011)focused on key sectors considered to be driving the defining the transition to a green economy

• Investing in natural capital, resources and energy efficiency can lead to:

– higher rates of GDP growth over time and enhanced wealth

– reduced poverty– decent employment

–

GE and Trade – assessing risks and opportunities• The transition to a GE will not be

without its challenges

• A number of previous studies have analysed the potential risksassociated with the transition, including those related to trade protectionism

– as noted in these studies, it is essential that a GE transition is implemented in a fair, open and transparent manner to mitigate these risks

• However, there are also a number of trade opportunities that can create and strengthen developing countries’ capacity to benefit from a transition to a GE

GE and Trade – identifying opportunities

• It is crucial to identify and assess the existing and future international trade opportunities associated with the transition to a GE, and in particular how developing countries can increase exports to respond to international demand for environmentally friendly goods and services

• This joint study comprises a research and analysiscomponent and an outreach component (policy dialogues)

Agriculture Fisheries

WaterForests

Renewable EnergyManufacturing

WasteBuilding

TransportTourism

CitiesFinance

http://www.unep.org/greeneconomy/ResearchProducts/GreenEconomyandTradeOpport

unities/tabid/104305/language/en-US/Default.aspx

Preliminary findings

• A transition to a GE will maintain and create many economic benefits, particularly for developing countries to expand their presence in growing export markets for sustainable food, products and services

• Green trade opportunities also exist in terms of value-addition relationships, e.g. through certification

• Due to growing wealth and changing consumer preferences, as well as growth of cross-border trade, demand for sustainable goods and services is likely to further increase

• A shift to a GE can yield significant environmental and social benefits

Agriculture• Strong comparative advantage for many developing

countries, inter alia:– suitable climatic conditions and rich biodiversity

– less contaminated soils

• Organic:– 2010: $59 billion > 2015: $105 billion– most production is in developing countries (> 75%), most

consumption in developed countries (> 95%)

– development of regional organic trade (e.g. South America)

– increasing demand for value-added organic products (e.g. juices, spices)

• Higher price premiums

• Improved trade balances: use of local, instead of costly imported, inputs and increased exports of sustainable agrifood products

Agriculture (cond.)

US$ 42.0 mil (2009/10)US$ 22.8 mil (2007/08)US$ 6.2 mil (2004/05)US$ 3.7 mil (2003/04)

The case of Ugandalargest African exporter of organic agricultural products

Fisheries• Demand for certified fish products

(such as eco-label products) has been gaining momentum

• Sustainable procurement policies of large international food firms are likely to further drive demand

• Processing: developing countries yet to exploit additional gains with product certification

– Particular growth areas in the market for frozen organic fish and sustainable aquaculture

• Tourism: recreational fishing, whale watching, scuba diving, etc.

Forests• Trade and export opportunities in the

forest industry include:– certified timber– recycled timber

– non-timber forest products (NTFPs): food items, pharmaceutical ingredients and cosmetic products, etc.

– forest tourism

• Regulations (e.g. EU Timber Regulation, US Lacey Act) as well as a number of public and private sector procurement policies are key drivers in this sector

• Currently, demand outstrips supply

Manufacturing

• Switching to more efficient manufacturing will save energy and resources and thus enable developing countries to produce goods for export at a lower price (increased competitiveness)

• Potential to generate new business from remanufacturing: paves the way for technology and knowledge transfer, increased employment and exports

• Eco-labels can provide further opportunities to market sustainably manufactured products, particularly in light of the growing demand in developed countries

– Energy efficient products include light bulbs and electrical goods

Manufacturing (cond.)

Renewable Energy• Growing export opportunities for raw

materials and components for renewable energy supply (RES) products (e.g. solar panels, wind turbines) – thus, entry into supply chains through trade in intermediate goodsis a key opportunity for developing countries (encouraged by government policies, such as feed-in tariffs)

• Exports of renewable energy: many developing countries have abundant renewable energy resources (potential to export), including solar energy, wind power, geothermal energy, biomass and hydro

• Potential opportunities for sustainable second-generation biofuels

Tourism

• Tourism generates large export revenues for developing countries and is a key driver of growth for the world economy (tourists account for greater than 9% of global GDP, estimated 1 bn. tourists in 2012)

– small changes towards greening (e.g. more efficient water and energy use) can have large impacts

• Investment in sustainable tourismgenerates significant financial returns as tourist choices demonstrate a preference for companies that implement best practices in their environmental management

• Eco-tourism, which 83% of developing countries rely upon as a major export, is the fastest growing sub-sector of the tourism industry

Enabling conditions – domestic

• Providing support to exporters to enable them to meet standards in international markets: engaging with the domestic industry to explain international standards and regulations and to assist in identifying and obtaining the required equipment and training

• Creating/maintaining and enforcing a stringent domestic standardsregime compatible with international standards: new environmental rules and regulations are an important means of building up the domestic industry

• Changing fiscal policy (e.g. phasing out environmentally harmful subsidies) and employing new market-based instruments (e.g. green public procurement)

• Promoting innovation (inter alia investment in education and training, support for R&D)

Enabling conditions – domestic (cond.)

• Identifying and reducing non-tariff barriers to imports of environmental goods and services (EGS) (including through regional and bilateral trade agreements): easier access to EGS can enable domestic firms to produce more efficiently thereby increasing their competitiveness

• Investing in infrastructure development and reallocating public and private investments to build up or enhance natural capital, such as forests, water, soil, fish stocks, which is particularly important for the rural poor

• Agreeing upon nationally appropriate and ambitious targets for renewable energy production, together with incentives such as quotas or feed-in tariffs: this would provide the green private sector with certainty as to the future regulatory environment

Enabling conditions – international• Concluding the World Trade Organization Doha Round on:

(i) reduction of tariffs and non-tariff barriers to trade in EGS

(ii) discipline of fisheries and agriculture subsidies

• Creating an agreement on a joint effort to bring new technologies more quickly to the market (open innovation schemes, international R&D, publicly backed patent pools, etc.)

• Harmonising or granting of equivalency of standards – it is important to ensure that different standard schemes for sustainable producers do not effectively exclude developing country producers

• Promoting public awareness to increase consumer demand for sustainable food, products, and services

Enabling conditions – international (cond.)

• Facilitating market access for the green sectors (e.g. Aid-for-Trade and the Enhanced Integrated Framework)

• Increasing green investments from international finance institutions and national development banks and developing additional innovative mechanisms and tools, such as:

– Green Climate Fund

– Payments for Ecosystem Services

– environmental, social and governance reporting

• Strengthening integration of the sustainability agenda in trade between developing countries – this could include tapping into growing regional markets

Thank you!

Giles ChappellEconomics and Trade Branch

Division of Technology, Industry, and EconomicsUnited Nations Environment Programme (UNEP)

giles.chappell@unep.org