Climate Change and Trade

1. Climate Change and Trade 24th CACCI CONFERENCE July 5-7, 2010 Colombo, Sri Lanka Mehdi Fakheri Vice President, International Affairs Iran Chamber of Commerce, Industries and Mines (ICCIM)

2. Outline • Basic concepts involved: energy use, industrial production, environment protection • Q1: What are the influential factors? int’l trade, int’l finance, FDI, development policies • Q2:Role and responsibility of national governments and international organizations • Q3: Level playing field for business community? • Q4: Business opportunities of climate change? • Conclusions

3. International Financial Crisis • Credit rating of credit raters • Lack of financial resources • Declining trend of Foreign Direct Investment • Breton Woods Institutions and need to New International Financial Architecture • South-South financial cooperation mechanisms

4. International Trade and Environment • Trade opening, increased outputs, higher transportation, more consumption, and hence more energy use • Trade may help mitigate climate change, e.g. trade emission rights, liberalization of environmental goods • Climate change mitigation measures may modify conditions of competition and therefore have an impact on international trade • Greater specialization towards products/services where country has comparative advantage • Higher income leads to demand for better environment • Improvements in technique of production leading to less energy use

5. Int’l negotiations on Climate Change • From Kyoto to Copenhagen, rights and responsibilities • Sustainable development, green house gases and int’l commitments • MDGs, poverty alleviation and social development • Climate change and food security • Technical and financial shortfalls to face climate change challenges

6. WTO and Climate Change • Climate change, per se, is not part of the WTO's work program and no WTO rules are climate change specific • WTO negotiations on environment (DDA Para. 31) • Committees on “Trade and Environment” and “Technical Barriers to Trade” • Reduction/elimination of tariff and non-tariff barriers to environmental goods and services( hydro power turbines, solar water heaters, tanks for the production of biogas, landfill liners for methane collection, eco-labling on energy efficiency and carbon emission) • Average MFN applied duty on renewable energy products are 2% for DDs, 7% for DCs and 10% LDCs

7. WTO rules on Climate change • Disciplines on tariffs (border measures) • General prohibition against border quotas • MFN and NT principles • Rules on subsidies • Rules on technical regulations and standards • Disciplines relevant to trade in services • Rules for trade-related intellectual property rights • The WTO dispute settlement mechanism can be triggered by any Member alleging that its rights or obligations under the WTO rules have been impaired by another Member.

8. Development Policies and Objectives • The concept of “Policy Space” • Climate change policy Vs development programs • Industrial development strategy and energy consumption • DCs need for technical and financial assistance • Rights and responsibilities of “Polluters” and “pollution receiving countries“ • At the national level stimulus recovery packages in the Asia-Pacific region include strategies and policies for greening the economy: China is a case in point with a 221 billion Us dollars green stimulus package. • In Asia, one of the most cost-effective mitigation measures is to boost energy efficiency. By using current technologies more efficiency in existing industrial and power facilities, energy saving of 20 percent could be achieved

9. Business Community Commitments • Public-private partnership to face challenges of global warming • Private investment in environmental goods and services • Capacity building for SMEs on climate change and implications of global warming • Training courses by CACCI, ITC and UNCTAD on carbon trade • Private initiatives in the context of South-South trade relations

10. Business Community Commitments • Undertaking the investment and technological innovation that will underpin low carbon growth • Providing finance for mitigation and adaptation, adopting lower carbon production processes • Encouraging and facilitating more climate conscious purchasing decisions by consumers. 

11. The Asia-Pacific Region: Facts and Figures • One trillion US dollars per year needed globally to avoid dangerous climate change (IEA) • The Asia-Pacific region the center of global economic growth in the last two decades, and currently responsible for about one-third of the global dioxide(CO2) emissions, to 55 per cent in 2030..

12. Climate Change and Business Opportunities • Climate change itself creates a market for goods and services needed for climate change mitigation and adaptation. • Fundamental change in the way energy production and consumption • A market of over 9 trillion US dollars by 2030 in the Asia – Pacific region alone. • PPP to create markets and grasp the huge business opportunities of low-carbon goods and services • Investment on clean technologies, renewable energies, energy efficiency and energy saving increased to 117 billion US dollars in 2007, up 41 percent from 2005.

13. Climate Change and Business Opportunities • At present developing countries have already established a carbon finance system supported by direct investment and financing, bank loans, carbon credits trading, carbon futures trading and other instruments. Businesses from Asia-Pacific, especially those from developing countries, should accelerate their paces to cultivate and diversify carbon finance system, and innovate in carbon swaps, carbon stock and other financial instruments, so that they could share the cake of green growth with the developed countries.

14. Conclusions • Green policies at home like carbon finance system, innovations in carbon swaps, carbon stock and other financial instruments crucial, • Trade liberalization with carbon tax • The need for changes in WTO rules on trade and environment • Successful conclusion of Doha Round • Need to technological improvements in energy consumption, transport and logistics • Wider use of information and communication technologies • A more enabling international environment • Higher level involvement of regional organizations like CACCI in policy recommendations to chambers

15. Thank you for your attention