Advancing Development Gains in the Trade, Climate Change and Development agenda

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Advancing Development Gains in theTrade, Climate
Change and Development agenda

• AMCEN UNECA AU
• Pre COP 15 Conference
• Addis Ababa, 23 October 2009

Lucas Assunção Coordinator Climate Change
Programme of UNCTAD Lucas.Assuncao_at_unctad.org
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Outline

• Context
• Why trade matters? But does it matter for
  Africa?
• Similarities and differences between trade and
  climate regimes
• How trade liberalization impacts climate change?
• How climate policies and measures interface with
  trade rules?
• In what ways could climate change and trade be
  mutually beneficial?
• The logic of the argument for advancing
  development goals as a climate change strategy
  (Kyoto Protocol and carbon price as a lever)
• Elements of a strategic approach
• Avoided deforestation (REDD)
• Enhanced supply capacity of domestically produced
  clean energy (Biofuels)
• Financial support for low carbon development and
  greater economic diversification

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Context

• COP-11 mandated Dialogue on LCA to look at
  advancing (sustainable) development goals in a
  sustainable way.
• This heavily influenced the Bali Action Plan,
  where the concept is a cross-cutting theme among
  the four pillars.
• Can be teased out of UNFCCC text, but not
  explicit.
• Needs to be solidly advanced as a guiding
  principle, operationalized.

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The Underlying Reasoning

• Action to address climate change is now
  imperative
• (Stern review IPCC 4th AR 2007)
• So is action to address poverty and inequity
• Economic (export-led) growth is an important
  means to development
• Potential conflict between growth and climate
• Potential synergies between climate and
  development
• For all countries, important to find synergy
  between development and climate action (future
  will be C-constrained)
• International community should focus, in
  particular, on helping developing countries do so

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Pressure on Developing Countries to Act
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Pressure on Developing Countries to Act
Notes CO2 emissions per capita data are for
2004, from World Banks World Development
Indicators on line. GDP per capita data is for
2007, from UNCTAD 2008a.
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Trade and Climate

• The Framework Convention on Climate Change (FCCC)
  and the Kyoto Protocol (KP) have no trade
  provisions BUT their implementation have clear
  trade and development implications
• FCCC Article 3 and KP Article 2.3 require that
  climate change policies and measures should not
  constitute means for arbitrary or unjustified
  discrimination or restriction of trade
• WTO Doha Development Agenda (DDA) Art 31 (iii)
  calls for liberalization of Environmental Goods
  and Services (EGS) and also the WTO Working
  Group on Technology Transfer supports the
  technology transfer pillar of the Bali roadmap

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Similarities and differences between trade and
climate regimes

• Similarities
• Shared purpose to maximize public welfare
  through enhancement of economic efficiency
• Mutual recognition
• Both disapprove free riding
• Both are work in progress, hence conflict can
  still be avoided
• Differences
• Trade aims to solve government failure (avoid
  protectionism and mercantilism)
• Climate change aims to solve market failure (by
  internalizing climate change externality)
• International trade is about bargaining and
  leveraging based on trade weight, while climate
  change is science-based.

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How trade liberalization impacts climate change

• Trade liberalization impacts climate change
  through
• scale effect
• composition effect
• technique effect
• direct transport effect
• Climate change policies interface with trade
  rules
• Subsidies
• Technical specifications (trade barriers)
• Government procurement

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Trade and Climate winwin scenarios

• DDA Art 31 (iii) biofuels
• Renegotiating fossil fuel subsidies
• Unactionable environmental subsidies
  (discontinued in WTO Seattle Ministerial)
• Sound IPR regimes in developing countries as a
  lever for technology transfer
• RISK spread use of Border Carbon Adjustments to
  prevent carbon leakage

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What is in there for Africa? Elements of a
Strategic Approach or turning climate change
concerns into pro-development opportunities

• Avoiding and reversing deforestation
• Clean energy production and use for developing
  countries
• Economic diversification as a (climate)
  adaptation strategy

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Avoiding and reversing deforestation

• IPCC CO2 emissions from land use change between
  1989 and 1995 were 20 of global anthropogenic
  emissions.
• Deforestation amounts to over 90 of net
  emissions from land use change.
• Deforestation negatively affects those poor that
  rely heavily on ecosystem services food, fuel, Y
  generation, job creation, flood prevention
• Use of biomass for cooking and heating 1.6
  million early deaths per annum from indoor air
  pollution

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Avoiding and reversing deforestation

• Issue is now part of the Bali mandate (para.
  1(b)(iii)).
• Currently not allowed under the CDM
• An economic proposition. Stern
• Effective action to protect existing forests and
  encourage afforestation and reforestation
  requires changes to the structure of economic
  incentives that lead to unsustainable logging and
  to the conversion of forestland to agriculture.
  (market failure)

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Options for Action

• PNG/Costa Rica proposal and UN-REDD Try to
  incorporate avoided deforestation in
  UNFCCC-administered carbon market.
• Brazilian proposal/SD-PAMs new and additional
  support, also additional to commitments no
  CDM-like mechanism. No-lose targets.
• Developing country targets Assign no-lose
  targets, set tough developed country targets,
  allow trading.

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Clean Energy in Developing Countries

• Energy supply is the biggest single contributor
  to GHG emissions at 25. End use efficiency is
  also critical for emissions reduction.
• Energy is also fundamentally linked to
  development two related challenges
• Energy for basic needs 1.6 billion still have
  no grid access 2.4 billion use traditional
  biomass
• Energy to feed economic growth IEA projects a
  need for 26.3 trillion in new energy investment
  between 2007 and 2030, more than 60 non-OECD.

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Options for Action

• CDM-like mechanism for bringing power and
  efficiency to energy-poor.
• International fund (ODA) with development and
  climate-related goals energy access, increased
  energy investment.
• Cooperation to alter baseline energy paths,
  especially in fast-growing economies
• Subsidize investments, technologies, IPRs
• Support policy reform to create enabling
  environments

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Thank you

• www.unctad.org/climatechange