The Liberalization of Climate-friendly Environmental Goods: Issues for Small Developing Countries

Liberalization of environmental goods that are climate-friendly could aid climate mitigation efforts by lowering costs of these goods by reducing or eliminating higher tariffs and non-tariff barriers (NTBs). But, as WTO negotiations to selectively accelerate liberalization of these goods, the exercise is fraught with a number of challenges, a major one being that there is no universally accepted definition of environmental goods that exist. A number of environmental goods both intrinsically as well as the way they are classified for customs purposes have ‘dual’ i.e. both environmental and non-environmental uses. Further, most of the major producers and exporters of these technologies and products are developed and the larger, middle-income developing countries. Therefore, unless products such as bio-fuels or lower-technology components are deemed to be ‘environmental goods’ many smaller income developing countries may see little export benefits from liberalization. On the other hand potential does exist for a number of smaller developing countries to specialize in parts and components lower down the value-chain of certain climate-friendly technologies and such opportunities need to be explored further. Another major conclusion of the research has been that supportive Government policies and public and private financing are a key market driver particularly in the area of renewable energy. Thus, for many smaller developing countries, bilateral and multilateral technical and financial assistance both as part of a trade-liberalization package (within or outside the WTO) as well as in other relevant forums such as the UNFCCC will be critical in enabling them to emerge as attractive markets for climate-friendly technologies as well as enable them to build and develop capacity at higher levels of the value chain.