environmental goods

Setting Standards for Environmental Goods

Setting Standards for Environmental Goods

Trade in environmental goods plays a central role in addressing global environmental challenges. It facilitates the advancement, adoption, and dissemination of environmental technologies to mitigate environmental risks, reduce pollution, and optimize resource utilization. In ATC’s previous Policy Brief (23-02), we discussed two main categories of environmental goods: 1) products that are supportive of environmental protection or yield positive environmental outcomes and 2) products that are comparatively more “environmentally friendly” than similar products serving the same purpose.

The latter category presents particular challenges for the trading system, as identifying environmentally friendly goods necessitates clear criteria and standards, which can be complex to define. Moreover, establishing interoperable standards and labelling criteria for environmental goods requires a delicate balance between setting ambitious environmental objectives and ensuring feasibility and cost-effectiveness for manufacturers. The absence of universally accepted standards and labels for environmental goods leads to variability across countries and regions, which can hinder trade and create disparities in the assessment of product environmental performance. Despite the challenges, institutional and country-level initiatives have gained momentum in developing internationally recognized standards, particularly in areas such as carbon footprint measurement, energy efficiency, water efficiency, and greenhouse gas emissions. Quantification of such production emissions and performance outputs provide increased knowledge base and data to promote international cooperation in the exchange of environmental and trade policy-relevant technical and scientific information, and support work to harmonize product standards and labels relevant to achieving environmental objectives. Our newest Policy Brief, released today, discusses two types of environmental standards and labels – mandatory or voluntary. Mandatory standards and labels are imposed by government regulations and can be considered non-tariff measures (NTMs). Voluntary standards, on the other hand, are typically developed by non-governmental entities or corporations and are not regulated by laws. Both approaches have their advantages and disadvantages, and their selection depends on industry-specific objectives and regulatory environments.

The Devilishly Hard Job of Defining an Environmental Good

The Devilishly Hard Job of Defining an Environmental Good

What explains this apparent paradox of accelerating focus on taking steps to tackle climate change with limited forward progress in crafting trade policies that are responsive to climate-friendly objectives?  The Asian Trade Centre’s newest Policy Brief looks in detail at the difficulties of defining environmental goods.  [This Talking Trade post merely highlights some of the issues explored in the Brief—be sure to read the whole thing!] Policymakers in search of answers zeroed in on challenges in moving environmentally-friendly products across borders.  They were able to identify one specific issue: potentially high levels of tariffs applied to certain goods at the borders.  These tariffs were acting as a brake, impeding the flow of goods and driving up costs. Hence, one early and sensible idea was to consider how to reduce tariffs on environmentally friendly goods.  If tariffs are leading to lower utilization of climate-friendly products, the reduction or elimination of tariffs on these products should lead to their greater use. APEC members intended to have signatories agree to reduce tariffs on listed products to less than five percent within three years.  There would be “real world” consequences to inclusion/exclusion from APEC’s list of environmental goods (EGs).  Items on the list would have tariffs reduced or eliminated while those not included would not. Getting to the final set of 54 EG products, released in 2012, was not an easy process.  Understanding why it was so hard highlights the difficulties that are likely to affect a range of policy responses ahead.

Navigating the Climate-Trade Nexus in Asia: A Path to Sustainability

Navigating the Climate-Trade Nexus in Asia: A Path to Sustainability

Asia is home to over half of the world's population and boasts diverse landscapes, from bustling urban centers to extensive agricultural regions. However, this diversity also makes Asia particularly vulnerable to the impacts of climate change, such as rising sea levels, extreme weather events, and devastating floods. These climate challenges intersect with trade policies, especially as the world shifts towards carbon reduction and green technologies. Yet, discussions among trade policymakers about the impact of environmental policies on trade practices have been limited. This limited dialogue is partly due to the global focus on building consensus to combat climate change, as seen in the United Nations Framework Convention on Climate Change (UNFCCC). With the 28th Conference of the Parties (COP 28) scheduled for late 2023 in Dubai, the importance of considering the trade-related implications of climate measures is growing. Environmental provisions have been included in various trade commitments for some time, but the urgency of the climate crisis is pushing trade policy into the forefront. The interconnectedness of environmental issues across borders has long been recognized, from concerns about acid rain to ozone depletion. However, global climate change challenges are on a different scale, leading to international treaties like the Kyoto Protocol and the Paris Agreement. These treaties obligate governments to take action to reduce greenhouse gas emissions. As these commitments are put into practice, it becomes increasingly important to consider how climate-related policies will impact trade flows and practices. While there are some multilateral efforts within the World Trade Organization (WTO) to address trade and environmental concerns, there are currently no specific global trade agreements focused on sustainability. The complexity of trade, sustainability, and climate issues has led to alternative approaches, including regional forums like APEC and ASEAN, as well as bilateral initiatives, to address these emerging challenges.

Meanwhile In Global Trade…

This disconnect will need to be addressed.  The global rule book is getting badly out of date.  Current provisions do not match up well at all with the reality of how business is being done on the ground.  While FTAs help, a patchwork of trade agreements is not the best way to address the needs of a dynamic sector of the economy.  The WTO just announced that Argentina will host the next Ministerial round in late 2017.  Member governments cannot show up a year from now and begin to put into place a few more small initiatives.  It really is time for the global trade regime to get out of neutral and get back into gear.