Estimating the GHG mitigation potential of liberalization

1. Estimating the GHG mitigation potential of liberalization Peter Wooders, Senior Economist Climate Change, Energy and Trade 14 December 2009

2. Aim – Estimate Potential GHG Savings • Much has been made of the efforts of the WTO Doha Round attempt to agree to a list of Environmental Goods & Services (EGS) • Tariffs and Non-tariff barriers (NTBs) would be eliminated from these EGS • Implicit assumption that agreeing such a list would significantly reduce GHG emissions • This study estimates what the greenhouse gas (GHG) mitigation potential is for the Doha talks on environmental goods • From Tariff Removal only

3. Environmental Goods Lists proposed to the WTO • Over 400 goods originally discussed • List of 153 by “Friends of the EGS Group” • Submitted April 2007 • Canada, the European Communities, Japan, Korea, New Zealand, Norway, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Switzerland, and the USA • World Bank defined 43 of these as ‘climate-friendly’ • List submitted by EC and US in November 2007

4. Contents of the list of 153 • Renewable Electricity Generation goods (not techs) • But only including hydro-electricity up to 1 MW (“mini”) • Rest of list would have nothing more than very minor impacts on GHG emissions • Primary focus is air quality, water, waste, etc.

5. Hydro, Wind and Biomass are the key technologies

6. Step 1: Potential uptake of technologies and impacts on GHG emissions • IEA WEO 2008 projects new renewable uptake fpr the period 2006-2030 • 450 ppm ($180/tCO2), 550 ppm ($90/tCO2), Reference scenarios (“laissez faire” – no new policies) • We assume renewables would replace coal or natural gas • Increased renewables in 2030 avoid 1.0-7.7 GtCO2 • Reduction of 6-28% of world emissions in 2030 • Similar figures in IEA (ETP), etc.

7. Step 2: Drivers of uptake of technologies • Barriers to renewable uptake widely accepted • Relatively high cost, regulations, lack of investment in grids, etc. • Trade liberalisation, or tariff removal, generally not listed • Key barrier clearly financial • Feed-in tariffs and renewable portfolio schemes typical premium US¢ 5/kWh (US$50/MWh) • To Wind and more commercial technologies

8. Step 3: Contribution of Trade Liberalisation • Levelised generation costs for hydro, onshore wind and biomass US¢ 4-10/kWh (US$40-100/MWh) • Capital costs typically largest share • Wind 55-75%, Hydro dominated by civil works • Trade liberalisation only affects tradable fraction • High for wind, low for Hydro • Import tariffs typically 0-15% • $80/MWh * 60% * 75% * 5% = US$1.8/MWh • <5% of typical premium to renewables

9. Extra 2% of Renewables competitive with Gas

10. Impact of Tariff Removal on GHG Emissions • Tariff removal can make a contribution if • it were part of a package of measures, for instance it is combined with a feed-in tariff • the cost of renewable electricity declines relative to the cost of fossil-fuel generation. • Without hydro, renewable savings 0.9-6.5 GtCO2 • First order estimate is tariff removal responsible for 5% of this (pro rata basis) • 45–325 MtCO2/year in 2030 • 0.1% - 0.9% of world emissions

11. What could be done next • The current list would need to be significantly extended to increase its impact • Industrial efficiency, transport, Buildings, CCS, etc. • Goods generally less specific than renewables • Extended lists would keep many problems • “dual use” (same goods can be used for a range of technologies, of varying performance) • Politics and commercial interests of WTO Members • WTO could redirect its SD efforts? • Standards, non-tariff barriers, SD as focus of trade