Report on
Asia Regional Dialogue on Trade and Climate Change
April 30 – May 1, 2009, Bangkok, Thailand.

In the wake of the global economic crisis and the urgent need for policymakers to rethink the nature and patterns of economic growth and investment in order to make the development paradigm more sustainable, economically as well as environmentally, more than seventy experts on Climate Change from twenty countries gathered in Bangkok on 30^th April in a two day conference on Asia Regional Dialogue on Trade and Climate Change. Kumar Gautam from Centad participated in the conference which began on a shared understanding that the adverse impacts of climate change will be felt most heavily in developing countries.

The conference was jointly organized by the International Centre for Trade and Sustainable (ICTSD), the International Institute for Sustainable Development (IISD), and the International Institute for Trade and Development, Bangkok (ITD). With the aim to bring out Asian developing country perspectives and input on the issues at the heart of the trade and climate change interface, the three key objectives of the Asia regional dialogue were as follows:(1) To explore issues at the interface of trade and climate change that are of concern and interest to the developing countries in Asia (2) to Identify a positive agenda able to contribute to engagement of Asian developing countries in the process of negotiations towards Copenhagen , and (3) to provide a platform for interaction and exchange amongst climate change and trade negotiators; policymakers, and other stakeholders in the private sector and civil society in Asia.

In this multi stakeholder consultation which brought together Asian NGOs, private sector actors and governments, fifteen presentations were made by leading experts and each presentation was followed by elaborated open house discussion. In her key note address to the gathering Thanpuying Dr. Suthawan Sathirathai, Chairperson of Good Governance for Social Development for Social Development and the Environment Institute (GSEI), Bangkok reiterated on the warnings issued by the IPCC reports. Refering to the various projections and estimations by Stern (2007) and IPCC about the global cost of stabilizing GHG concentrations, she pointed out that intensive emission of CO₂ is the direct consequence of world wide over-consumption particularly by the developed countries and principle of Common But Differentiated Responsibilities(CBDR) should be the guiding post on shouldering responsibities of emission reduction and burden sharing. While recognizing that tackling Climate Change requires collective action, she emphasized that fairness of approach, structure and mechanism in dealing with the Climate Change issue holds the key to success. “The major Challenge, therefore, in the design of international structures that are responsive to environmental considerations, is to create GHG mitigation systems that embody both efficiency and fairness and also a mechanism of effective enforcements for the same”, she said.

Speaking about trade and its relevance in dealing with Climate Change, Dr. Suthawan said that the most pertinent issue for discussion in this dialogue would be: How the international community applies trade for the benefit of Climate Change mitigation and adaption without creating unfairness and protectionism. Elaborating further on the issue relating to Trade and Climate Change she highlighted four issues v.i.z.(a) Carbon off shoring and leakages under the Kyoto protocol (b) Border carbon Adjustment( C) Production based versus Consumption based approach ( C) Liberalization of Environmental goods and services: Green Technology.

In Setting the Scene session chaired by Aaron Cosbey of IISD, Canada, the topic for discussion was “Climate Change Negotiations: What is Happening and What are the Implications for Adaptation and Mitigation in Asia?” The fist speaker in this session, Ms. Aree Wattana Tummakird representing Office of Climate Change Coordination, Ministry of Natural Resources and Environment, Thailand said that Asia regional as a whole is certainly an important actor in the Climate Change debate and especially in view of the fact that it is one of poetically worst victims of climate Change. Citing reasons for the Climate Change vulnerability of Asian countries and briefly giving the GHG emission scenario of a few selected countries in Asia, she gave a detailed account of the current status of Climate Change negotiations. She said that The Bali Action Plan (COP 13, Bali) provides for enhanced national/international action on mitigation of climate change by both developed and developing countries. Moreover, the two negotiation tracks currently underway are 1) The Kyoto Protocol track under the Ad Hoc Working Group on the commitments of the Annex I parties (AWG-KP) and 2) The Convention’s track under the negotiating Ad Hoc Working Group on long-term cooperative action (AWG-LCA). While the AWG-KP track will result in GHG emissions commitments for developed countries (except of the USA) for the second commitment period 2013-2020, the AWG-LCA track will try to define Nationally Appropriate Mitigation Actions (NAMAs). The aim is to conclude the negotiations at the fifteenth Conference of the Parties (COP 15) at Copenhagen (Dec. 2009) by adopting a new global climate regime .It is expected that at the next negotiating session in June 2009, two draft texts for the negotiation will be available: one for the Kyoto Protocol and one for the AWG-LCA .As the developing countries are expected to continue rigorously with their demand (and rightly so) that developed countries must announce ambitious emission reduction targets, the developed countries too are likely to insist that most advanced developing countries (e.g. China and India) should take substantial actions to control and limit their emissions. The other key issues under negotiations are financing issues and the transfer of technology as they will determine the extent to which developing countries will adopt NAMAs. Furthermore, citing some recent development made by the Asian countries on the Climate Change mitigation front, Ms. Aree Wattana Tummakird said many Asian countries are currently participating in the Clean Development Mechanism (CDM) and have the largest share of the CDM projects (China, India, Republic of Korea) .Also, many Asian countries have developed portfolios of actions that applied in activity sectors such as agriculture, transport and energy will address GHG emissions. These actions may be announced under the Convention as NAMAs and registered in the international registry that will be established at Copenhagen and maintained by the UNFCCC Secretariat.The mitigation effect of these actions will be subject to international measurement, reporting, and verification (MRV).Talking about the adaptaion, she outlined some key vulnerable areas in Asia region urgently needing adpataion measures.They include Ccoastal systems and low-lying areas, decreasing freshwater availability in Central, South, East and Southeast Asia particularly in large river basins. If urgent adaptation measures are not undertaken, it is projected that crop yields could decrease up to 30% in Central and South Asia by the mid-21st century. Taken together and considering the influence of rapid population growth and urbanization, the risk of hunger is projected to remain very high in several developing countries. Endemic morbidity and mortality due to diarrhoeal disease primarily associated with floods and droughts are expected to rise in East, South and Southeast Asia due to projected changes in hydrological cycle associated with global warming. Increases in coastal water temperature would exacerbate the abundance and/or toxicity of cholera in South Asia.

In his speech, the second speaker of the session H.E. Abdul Ghafoor Mohamed from the presidents Office, Maldives and former Ambassador of Maldives to the WTO and the United Nations Office in Geneva reiterated Maldive’s pledge to become fully carbon neutral country by 2020.He sought financial and technical cooperation from international fraternity for the same.

Mukul Sanwal, adviser to the Ministry of Science and Technology, Govt. of India drew the attention to the UNCCC Framework and to other key elements such as Needs Assessments, Information, Enabling environment , Capacity building, Mechanism for institutional and financial support, Measuring and verifying extent of transfer and resulting benefits. Under the global innovation system, he spoke about the public sector approach of limited funding and capacity building support and about the private sector approach of balancing market access with limited licensing including joint ventures. He said that the relatively new areas up for discussion are (a) National Commitments in the context of global inter-linkages between Growth, Trade and Climate Change (b) Scale of the challenge requiring a transformation and new technologies and (c) Public Health experience in the WTO.

Mr. Sanwal further pointed out that 75% of existing technology transfer currently happens between developed countries. Recognizing that Public sector R& D support has played an important initial role, he emphasized on the importance of tax incentives, grants, regulatory framework for technology diffusion. As developed countries themselves have identified high investment cost involved in technology transfer, out of fear of competition, they are also restricting licensing of advanced technologies and strategically withholding technology to maximize profits. Moreover, current innovation policies are designed around national competitiveness priorities and the market will not bring forward technologies at the required pace. Mr. Sanwal concluded by emphasizing on the need for collaboration around R & D activities , cooperative arrangements for sharing knowledge, and South-south cooperation.

Ancha Srinivasan representing Asian Development Bank (ADB) from Philippines highlighted the multiple Processes, Tracks, and Actors involved in the Climate Change negotiations causing tremendous confusions. The greatest changes have occurred in institutional architecture for climate and finance which have significant implications for trade .According to him, new issues are sectoral approaches for mitigation, REDD+, adaptation and technology deployment. Expressing concern over growing tendency for protectionism, he informed the gathering that 9 out of G20 countries have taken or considered restrictive trade measures in April 2009.US Bills such as “Save Our Climate Act (H.R. 2069)” and “Energy Security Trust Fund Act (H R 3416)” seek to impose taxes based on carbon equivalency on imported goods.

Out of 34 issues, he specifically pointed out eight most important issues pertaining to Climate Change having profound implications on Asian countries which are as follows: 1.Scale of emission reductions 2.NAMAs – Registry and “Matching” Mechanism 3.LULUCF: “REDD-plus” and Agriculture 4.Flexibility Mechanisms.5.Sectoral approaches 6.Adaptation 7.Financing (Global carbon tax, air travel tax and/or border tax regulations) 8.Technology (Tech. fund & IPRs). After elaborating on each eight points, he said that there was no time to lose as Copenhagen is only 6 weeks away in terms of negotiating time and a lot needs to be accomplished. Expressing hope that the ongoing economic crisis can be turned into opportunity to address concerns on climate change, trade, social justice and equity, he urged every stakeholder to work in order to ensure that genuine concerns and interests of Asian developing countries are positively & effectively represented in debates on the design of future climate regime and code for “climate and trade” (WTO).He concluded by saying “Do not wait for others to lead, and be proactive in confronting climate and economic crises.”

The second session moderated by Prabir Sengupta of The Energy and Resources Institute, India was titled “Development and Trade Impacts of Climate Change: How Can Trade Policy Support Asian Adaptation Needs in Agriculture and Fisheries?” This panel discussed the effects of climate change on the productive capacities and the composition/patterns of trade as well as the development implications of such changes in two sectors of interest to the regionfisheries and agriculture. Dr. Edward H. Allison, Director – Policy, Economics and Social Sciences of The World Fish Center from Penang in his presentation said that while there are 44 million fishers & fish farmers across the world, 520 million people i.e. 8 % of the world’s population depend on fisheries alone. Climate change is adversely impacting on the fishery production systems with severe implications for trade and contribution of fisheries to the regional economy, food system and poverty reduction. Presenting a vulnerability mapping of world fisheries, Dr. Edward pointed out that Asia stands out as the most vulnerable in view of the Climate Change impact as Asia has very high dependence on fisheries in terms of revenues, employment and nutrition. What is even worse is the fact that marine ecosystems e.g. coral reefs, shelf seas are already heavily exploited and major river for fisheries such as Mekong, Gangetic floodplain are facing threats from climate change. To remedy the situation, he said that there is an urgent need to Support adaptation of Asia’s artisanal fisheries and smaller-scale fish farmers using low-input technologies. Use of aquaculture in coastal zones should be encouraged to compensate for loss of income from land salinization and reduced supplies from overexploited or climate-impacted capture fisheries. Policy support is also needed to promote harmonization of standards and support producers and processors to comply with them such as – ecolabels, fair trade, food safety and quality. Biosafety protocols for shrimp diseases etc should be developed and increase in investment is needed for strengthening regional trade as well as harnessing opportunities in global market.

Marie Chamay of International Centre for Trade and Sustainable Development (ICTSD), Spoke about the interface between climate change, agriculture and international trade. Global Warming will decrease yields in seasonally dry and tropical regions. However, there will be positive effects in temperate regions. Climate Change will cause increase in the number of people at hunger risk particularly in sub-Saharan region. Most importantly, Climate Change will impact crop water-use demands. Quoting projection from reliable sources, she said that there will be 17% decline in rainfed maize yields and more than 25% decline in irrigated rice yields by 2050 due to adverse climate conditions. Marie said that if the rivers that rely on disappearing glaciers become more variable then the existing irrigated rice could well become rainfed in the years to come.About the impacts of climate change on rural livelihood and food security, Maries said that the number of undernourished people incorporating climate change effects in Asia is decreasing since 1990 and this trend is expected to continue by 2080. In other regions such as Sub-Saharan Africa, the number of undernourished will continue to increase.

On the role of trade measures, Marie was of the view that shift in comparative advantages is expected to result in higher trade flows, including from mid/high latitudes (cereals and livestock) to low-latitude countries (the increase ranging between 10-40%).She said that trade liberalisation is important and export restrictions should be removed to facilitate trade liberalisation. Tariff liberalisation should be carefully undertaken. There is a need to balance market openness with protecting livelihood and promoting rural development. There is also a need for a new type of safeguard against price volatility. Production related subsidies create the strongest incentives for increasing outputs, intensifying the use of chemical inputs, and thus negatively affecting the environment. In principle, moving to de-coupled or “green box” subsidies should be good for the environment (e.g. promoting organic agriculture as a way to reduce GHG emissions). However, major challenges remain with environmental payment. Programmes are only effective if they have clear objectives that are expressed in terms of measurable outcomes and targets. Even de-coupled payment might have trade distorting effects. Also, developing countries have limited financial capacities, she pointed out.

Session III on “Ensuring Access to Climaterelevant Technologies for Asia: What Role for Trade Policy?” was moderated by Debapriya Bhattacharya, Centre for Policy Dialogue, Bangladesh and former Ambassador of Bangladesh to the WTO. This panel explored technological needs for adaptation as well as mitigation based on the technology needs assessment reports submitted by select Asian countries to the UNFCCC. It also reviewed actual and potential barriers to innovation, development and transfer of such technologies. It also explored the significance of trade barriers and patterns of Asian trade flows in climatefriendly goods in two sectors important in the transition to a lower carbon economynamely the Energy Supply and Buildings sector. It subsequently examined the importance of domestic policy reforms in promoting investment in and transfer of clean technologies.

The first presentation in this session was made by Pichaya Ratchadavong of Chulalongkorn University, Thailand on “A Review of Priority Technologies Needed for Adaptation and Mitigation in Asia in the Context of the UNFCCC Technology Needs Assessment Process: Thai Experience.” The speaker highlighted the priority areas for Mitigation Technology Transfer Need. They are (a.) Renewable energy resources – Biogas, Biomass and (b.) Sector such as Cement and Iron & Steel. After giving the overview of the each outlined area, he concluded with a list of issues of concerns such as 1. Lack of data 2. High transaction costs for technology 3. Poor access to capital, especially for smaller firms (Commercial banks or Thai financiers not interest) 4.Adequate fund is needed for field-scale trial 4.Trade barriers such as tariffs and tax and 5.Insufficient human and institutional capabilities for sustaining action. Specifically for identified priority sectors, he said more important issues are lack of understanding of urgency, “Keeping-secret” mindset, and financial assistance in forms of tax or low interest loan incentives.

The next presentation on “Intellectual Property Rights and Access to Climaterelevant Technologies” was made by Krishna Ravi Srinivas of RIS, India. He submitted that patents in another technology may be relevant for future innovations but difficult to estimate as technology development is not a linear process. He gave trends of technology patents in the renewable energy such as solar, wind and biofuel. About Solar he said, basic technology is in public domain and nanotechnology patents may be relevant in solar applications. Firms in China and India are leading. However, at present there are no monopoly or patent thickets. Citing the study by Johanna Lewis on India- China –How firms acquire Technology; he observed that on the wind energy front too, basic technology is in public domain with relatively few players. There is limited scope for radical innovation and therefore incremental innovation is important. However, design and increasing efficiency in converting wind power are real issues. The developing nations are well placed in this technology. In the case of biofuel, according to him multiple fields are relevant- from biotechnology to chemical engineering; and numbers of patents are on rise. The basic technology is old but new products and processes are important as inputs vary. Also, developing nations have a stake in this technology. Innovations in biotechnology and process engineering, enzymes and catalysts hold the key. In terms of ownership of technology, there is no monopoly but all round interest from various players ranging from Monsanto to GE can complicate the patent landscape. On the important issue of Clean Coal Technology and Transfer having implications for India, patent rights act as barrier as Sellers impose condition. There is also fear of unauthorized transfer and use; and weak protection is an issue for domestic innovators. There is definitely a need for low-cost access to them.

On IPRs in relation to technology transfer he remarked that the relation is actually a controversial one. It is not quite clear whether more IPRS mean more technology-transfer or vice-versa. Sometimes IPRs may not be problem but market structure and capacity to assimilate may be problems. USTR identifies weak IPRS as barrier in transfer of CFTS to developing nations. Past experience with Ozone friendly technologies indicates that IPRS can be a barrier. Strong IPRS at initial stages weaken or hamper technology assimilation or learning by imitating and doing. Investors do consider IPR as a factor but not the only factor. The East Asian experience indicates that at earlier stages weak IPRs have positive development for technology development.

On the issue of technology transfer, Krishna Srinivas remarked that north –south divide remains despite advances by south in technology development. Still north accounts for a lions share in royalty and license fees, number of patents issues, global R& D expenditure. In conclusion, he said that preliminary study indicates that IPRS can be a barrier and there is a need to study innovative solutions for their relevance. The overall North-South dynamics in negotiations and priorities has enormous implications .Moreover, what role UN and UNFCCC can play is not clear as the issues are complicated. Hence, there is a need to find solutions that are compatible with Bali Action Plan and Mandate.

In her opening remarks, Veena Jha in her presentation on ‘Climate Change, trade and production of energy supply goods: The need for leveling the playing field” said that Economic crisis implies that expenditures on climate change mitigation and adaptation must also make economic sense. The mood on trade is increasingly protectionist. But the economic crisis is also an opportunity to create a green economy as is shown by the emphasis in fiscal stimulus packages. The question is: How is the Green Economy initiative linked to production and trade of environmental goods in the energy- supply sector?

Both IPCC and Stern Review have highlighted the potential gains from trade-liberalisation in clean technologies. Renewable energy products liberalization implies expansion of markets for climate friendly technologies and services which also implies an incentive for innovation. Also, diffusion of and access to renewable energy goods has the potential to put economy on low-carbon trajectory. But the important issue is: Will reduction of tariff and non-tariff barriers actually increase trade in renewable and the deployment of renewable energy technologies?

Veena Jha informed the audience that 18 of the top twenty firms in renewable energy are from developed countries, with a majority from Europe.Exports of renewable is largely dominated by the European players, in keeping with the dominance of European firms in the production of renewable energy .Also, China is a major exporter in almost all forms of renewable energy sources, especially in solar energy. Other significant players are India (wind energy), Mexico, Hong Kong, Republic of Korea, Malaysia, Colombia, South Africa or Brazil (biofuel). But, as a whole, the developing countries have little capacity to trade these goods. It is important to note that major exporters are also exporters of industrial products. Tariffs in the top trading nations are generally below 10%. However, the emerging economies apart from China have higher tariffs and there is some water between bound and applied tariffs. Major traders of components may not necessarily be those that are deploying renewable energy technologies. This exposes the limitations of the six-digit mapping exercise which inevitably results in several multiple use products.Trade in components plays a relatively minor role in the deployment of a number of technologies such as geothermal, ocean and hydroelectricity. Trade in components, especially turbines of wind and solar is important.From a trade point of view, feedin tariffs which is a form of subsidy would distort the level playing field and go against free and perhaps fair trade. However from an environmental point of view, feedin tariffs have played a crucial role in generating markets for renewable energy and hence on climate change. As the industry becomes competitive and costs come down, feed-in tariffs and tariffs can be phased out. Thus a level playing field in renewable would demand the simultaneous dismantling of subsidies by the developed countries.

Emerging economies are important players though their share of trade is less than half that of developed countries. Liberalizing tariffs however may not guarantee a diffusion of these technologies or the creation of markets for products used in these technologies in developing countries. Markets in developed countries have grown exponentially during the last few years in response to the subsidies provided for renewable energy consumption and the huge volume of venture capital investment. Given the grip of the economic and the financial crisis, it is unlikely that such venture capital will come to developing countries. It is also likely that subsidies or incentives to the green economy in the developed countries will increase through the stimulus packages. This would be a double whammy for developing countries that have the capacity to develop renewable on their own. On the one hand, they would have to reduce their tariffs (which are only high in a few emerging economies that have the capacity to produce these products), and on the other they may not be able to give subsidies to develop their own industry. In a way, the discussion in the context of the World Trade Organization should be similar to that of agriculture: i.e. parity should be established between the two pillars of the RET industry—the overall level of support for the RET industry and the tariffs in RET industry.

Smita Nakhooda of World Resources Institute, USA made a presentation on “Domestic Policy Reform as a Spur for Clean Technology Investment and Technology Transfer”. She strongly argued for aligning investment with Sustainable Development. While rising energy prices, energy shortages, social concerns, and environmental problems are the hard realities of developing economies, decisions are often driven by short term and financial concerns. In fact, the energy-institutions are grappling with new and entrenched challenges. Promoting sustainability requires trade-offs like promoting conventional options such as Megawatts vs. “Negawatts”, promoting clean technology vs. increasing quality access, and intermittency of many RE technologies. However, these initiatives are causing tensions between additional costs of clean energy and affordability. Smita advocated for investing in good policy which typically means “pricing” in terms of long term integrated energy planning and policies and regulations to incentivize energy efficiency. It also means Policies and regulations that incentivize renewable structures that incentivize efficiency and reduce consumption. This may also require reforming subsidies to reveal true costs of fossil fuels and enhance the viability of sustainable options. Transparency of policy, planning and regulatory processes for electricity is really important as consumer, civil society, and stakeholder engagement in policy, planning and regulatory processes will hugely contribute to the success of utilization of executive capacity, regulatory capacity and utility capacity and greenhouse gas accounting. In her concluding remarks she said that sustainability will require innovation and political compromises. Also, investment and climate rules need to keep policy space open. Better information and better processes can catalyze positive change. Local institutions, stakeholders, and processes need emphasis.

Day 2

Interactive Panel IV: Domestic Policy Tools to Address Climate Change and the international Trade Architecture.

This panel discussed the status of debate on measures related to competitiveness such as Cap and Trade Schemes and Border Tax Adjustment within the US and EU and discuss their possible implications on Asian exports. It also explored how subsidies relevant to climatechange should be treated under trade rules keeping in mind the sustainable development concerns and priorities of Asian countries. It subsequently examined the challenges and opportunities arising for Asian exporters from standards and labels in the biofuel as well as wind energy sectors. The session was moderated by Johannes Bernabe, ICTSD Switzerland.

Robert Heilmayr, World Resources Institute, US presented on the “Use of Traderelated Tools to Address Competitiveness: Concerns in the Context of Climate Change”. Robert said that US political posturing through Climate policy will increase worldwide carbon emissions because many of the millions of jobs shipped overseas will in fact be sent to countries that do not follow the environmental standards here in America. Cap and Trade will cede market share to overseas competitors that are not subject to the limits on greenhouse gas emissions. Industry and conservative legislators don’t believe to get China or India to cooperate. Speaking about the Cost containment mechanisms, he said that there is growing skepticism that border measures won’t be WTO legal. Also, neither it will address leakage concerns nor provide big enough stick to deal with free-riders. This has as led to a shift to other mechanisms of allowance rebate. According to him, this mechanism includes an 85 percent multiplier to prevent over-allocation and accommodates new market entrants. Also, it creates efficiency and production incentive while discourages demand destruction. His Analysis of Waxman-Markey discussion draft revealed that US Industries are protected under the Waxman-Markey GHG-Intensity & Energy-Intensity Criteria.

Jiahua Pan, Member of the China National Expert Committee on Climate Change and Executive Director of Research Centre for Sustainable Development, Chinese Academy of Social Sciences, Beijing spoke on the issue of “Border Measures: Implications for Carbon Intensive Asian Industries in International Trade.” Pan introduced the concept of ‘Border Measure’ and related concepts such as Border Tax Adjustment (BTA), Quotas on carbon intensive products, Technological standards, Associated trade requirements, proportional to total imports/exports, parts or the like. He further said the net impacts of Border Measures on consumers in the importing country will mean reduced amount of imports and higher prices for consumers which means loss of consumer surpluses.

Mr. Pan also analysed Border Measures and its impact on competitiveness, trade protectionism and trade dispute. In terms of its impact on competitiveness, he opined that carbon factor constitutes only a small or negligible part of the price for the traded goods. Other factors like labor and capital can be more important. On trade protectionism front, border measures may protect the less competitive domestic carbon intensive products and therefore a protectionist measure. With regard to trade dispute, the exporting partner may use similar or other protectionist measures as a response to the border measure initiated by the importing country.In his conclusions, Mr. Pan said that there are no winners in Border Measures. In environment there will be more emissions. Consumers will be paying higher price and consumption will be reduced. While the importing country who initiates the border measure will experience more emissions (already high) and reduced social welfare, the exporting country will experience reduced export, lower emissions and reduced employment.

Another presentation followed Pan’s presentation on the legal issues of Border measures. The presentation on ‘Border measures: Legal Issues in International Trade’ was prepared by Chang-fa Lo, NTU Chair Professor/Lifetime Distinguished professor and presented by Johannes Bearnabe of ICTSD on his behalf in his absence revealed that different kinds of border measures might have different status under WTO. The legitimacy of different border measures depends on its specific designs. Generally speaking; the border measures are inconsistent with MFN and NT provisions. Depending on the schemes, there may be breaches of the tariff binding obligation and prohibition of QRs. Whether the border measures can be justified under Article XX (b) and (g) depend on the specific designs but there are legal obstacles for countries to adopt border measures which include the following:(A)It might be difficult for the importing countries to claim that the border measure is the “least trade restrictive” alternative reasonably available (b)It is difficult to argue that theses countries have pursued international cooperative arrangements,(C)It is difficult to argue that sufficient flexibility to take into account the specific conditions prevailing in any exporting Member have been provided(d)It might be difficult to argue that all exporting countries have been provided with similar opportunities to negotiate an international agreement in good faith before restricting trade (e)It is difficult to argue that these importing countries do not require exporting countries to adopt essentially the same regulatory regime as the importing country. It was also observed that Control of greenhouse gas emission is commonly desirable. However, unilateral decision of the types of border measures could be subject to challenge under the WTO and might be counterproductive. It is also desirable to have border measures negotiated at multilateral legal in good faith so as to ensure the consistence with the WTO. Such multilaterally negotiated border measures can also reduce concerns about protectionism. This presentation was followed by a brief intervention by ‘Rob Howse of New York University, US using on “Using Subsidies: Competitiveness and Trade Rules’.

The second session of day 2 dealt with Standards and Labels for Climate relevant Products and discussed specifically the Case of Biofuels and Wind Turbines. Ms. Peesamai Jenvanitpanjakul of Thailand Institute of Scientific and Technological Research (TISTR) spoke about the benchmarking of Biodiesel Fuel Standardization in East Asia and Mr. Mr. Chintan Shah of Suzlon Energy Limited gave vital insights about Standards for Wind Turbines.

Ms. Peesamai Jenvanitpanjakul gave a detailed account of the project which was working on making a benchmark standard of biodiesel fuel in East-Asia. The objective of the project, of which she is a member, is to support the formulation of biodiesel fuel standards in line with the conditions in each country, and considering international standards, e.g. ASTM D6751 of the US and EN 14214 of the EU, among others to facilitate the distribution and use of good-quality biodiesel fuel. The project envisaged that this would in turn promote cross-border trade of bio-fuels. The expert members of the project have said that it is necessary to use “high-quality biodiesel fuel” to prevent corrosion of engine tanks. Harmonization of standards within the East Asia region will facilitate the use and trading of high-quality biodiesel fuel. The project will elaborately look into the feasibility issue and explore the potential sustainable feedstock including inedible materials such as Jatropha, micro algae; waste biomass .One of the important output of this project will be an “ERIA Biodiesel Fuel Trade Handbook”, which will contain all results of discussion and feasibility study.The handbook will be made to refer voluntarily for the purpose of trading “high-quality biodiesel fuel” in East-Asia and ASEAN region.

Mr. Mr. Chintan Shah of Suzlon Energy said in his presentation that Suzlon was third-largest wind Turbine Company in the world with global market share of more than 12% and presence in 21 countries. Suzlon is an end-to-end solution provider and has R&D centres in Germany, Netherlands – formulation of RETC, Hamburg. On the manufacturing front, it is present in India at multiple locations including 3 SEZs; China, US, Germany, Belgium and Portugal. It manufactures gear box, blades, towers, and Control Systems, generators, foundry, and forging and transformers and has the annual capacity to produce more than 6,000 MW. It supplies 5% of global renewable energy. He said that global warming, energy security & diversity of supply, emerging geo-politics, sustainable development, depleting fossil fuel sources and the externalities generated by renewable energies are some of the key reasons behind the surge for alternative energies. Further on, he highlighted the Pull factors and push factors behind the growing trend for renewables. More and more public policy frameworks in countries all over the world are targeting certain fixed procurement of RE. For example, USA targets 20% energy from renewable sources by 2030.President Obama has approved $70B for renewable energy industry. Also, EU has targeted 20% of energy from renewable sources by 2020. Moreover, Parliament and heads of nations are committing to renewable Energy directives of a 20% cut in carbon dioxide emissions by 2020. India aims to fulfill its 15% energy needs from renewable sources by 2020.China’s has a target of 10% renewables by 2020 (Renewable Energy Law).Kyoto Protocol & cap/trade emission treaties are major pull factors indeed. Among the key push- factors are price convergence of renewable vis-à-vis conventional power and Civic bodies pushing the cause of environment & proliferation of RE. Throwing light on the geographical spread of the renewable, he said Currently RE are mainly concentrated in developed countries and emerging economies (viz. India, China etc.) and major sources of RE are Wind, Biomass based, hydro, solar & Geothermal. Wind is the most the competitive and fastest growing source(CAGR of 27.5% in the past 5 years).The Current installation is 122000 MW* (Dec 2008) and will triple by 2013.Solar (both thermal & photovoltaic) would be following the growth curve in years beyond 2012 , Mr. Shah predicted. In an over view of the global wind market, he said, the total wind capacity installed in 2008 was 28,190 MW, across 46 countries. Cumulative installed capacity by the end of 2008 reached 122,158 MW. Europe lost its position as the largest wind power continent for yearly installations. Two years ago the European share was 51%, now reduced to 32%.US accounted for 33.8% of the world’s installations in 2008 and is occupying first position. Asia showed significant growth and increased its cumulative installation, from 17,193 MW in 2007 to 26,446 MW by the end of 2008. From the vintage position of corporate executives, he informed the gathering of the changing business behavior of the corporate in the business of renewable. Traditional corporations are not competing but rather complementing the cause of alternative energy, he quipped. Oil companies like BP, Shell, RIL etc. are getting into alternative energy. Traditional utility players v.i.z. GE, Siemens have taken exposures and traditional corporations having impetus on R&D like Dow, Sharp, Kyocera are joining the game .There would be further more changes in these equations in the coming period, he claimed. After providing, quick capsule case studies of Barzil and South Africa of their progress at renewable energies front, Mr. Shah pointed out different kind of trade barriers in RE goods. He said that not much technology transfer is occurring for intermediate component manufacturing. Although, SUZLON has bypassed these barriers it may not be possible to replicate for others.EGS should only include the latest technology under ‘finished goods’ category. WTO framework should not be treated as creation of dumping ground of old technology .Capital intensive intermediate products can be looked into for inclusion in the list of RE goods. Machineries for manufacturing labour intensive goods may be thought of to be included in the list of RE goods; these machineries at times have single use. There is a need to look at the technology-transfer for intermediate goods, rather than finished products. ‘Tariff barriers’ put up by developing country is understandable; however, should a developed country also put up a ‘tariff barrier’? - he questioned. He argued for acceptance of Indian Testing Standards by developed countries. India has two testing agencies C-WET for wind and SEC for solar but test results are not accepted by EU and US .Hence, Indian products have go through mandatory testing as GL/RISO etc. for wind and ISPRA for solar PV in EU, and UL for US. Enormous difficulties exist in giving services to developed countries. Immigration issues are also problematic. There it is important to create positive framework for availing financing for technologies emerging from developing countries.

Concluding Session

The concluding session of the two day dialogue was a roundtable on defining research gaps and policy priorities for the Region. Dr. Watcharas Leelawath, deputy director of ITD, Thailand moderated this session. This concluding roundtable session aimed to spark an open discussion on the main knowledge gaps on trade and climate change that have been identified as being of concern to the diverse countries in the region. Participants, particularly regional institutions identified key issues where they could undertake further research and analysis. The Roundtable also attempted to highlight, from a policyperspective, priority areas of concern for trade and environmental policy makers in the Asian region based on discussions in previous panel sessions. It also flagged options that emerged during these discussions to address these issues with a view to informing subsequent discussions at the UNFCCC summit in Copenhagen as well as the WTO and regional trade negotiations. Kumar Gautam from Centad, New Delhi said that the issue of adaptation financing and technology transfer are critical to developing countries and extremely limited amount of work has been done on the same. Issue of the needs assessment and availability of finance needs to be studied at country level. Also, there is a need to look into the volume and quality of technology transfer actually taking place mainly through CDM. It is pertinent to study the extent scale of investment required to shift from current technology to renewable energy technologies and scale of the lock-in cost required for the same. Who and from where would the finance come? Centad also raised the issue of equity and the related social engineering required at the country level to address the same. Centad reiterated the need to generate awareness among the masses, especially the poor and the vulnerable who are most adversely affected due to Climate Change. The national action plans being prepared by the Asian countries must be done with due consultations with the primary stakeholders otherwise the plans will not fructify. The session concluded with identification of certain broad research issues which are as follows: (1) IPR regime and Transfer of Technology (2) Trade liberalization (issue of tariff and HS Code) and Transfer of technology (3) Subsidies beyond agriculture (issue of good subsidies and bad subsidies) and Transfer of Technology( 4) WTO negotiations and Transfer of Technology( 5) The need to re-visit the global framework and sectoral approaches (6)Domestic reforms and Technology transfer (issue of complementarities, interface and synergies) (7) Multilateral financing and technology transfer (8) South-South cooperation and Technology transfer (9) Governance structure (Trade regime/Climate regime and mixed regime) and technology transfer (10) Border measures and Climate Change( 11). Consumption approach and Climate Change (12) The new context and Climate Change. The common consensus that emerged during the conference was that Development should given more importance than transfer of technology. The Climate Change discussion, therefore, should also take place in the framework of ‘Right to Development’.

Kumar Gautam
Associate Fellow
Centad