Realization of Maximum Benefits from Liberalization of EGS: Kenyan Case

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Realization of Maximum Benefits from
Liberalization of EGS Kenyan Case

• By
• Moses Ikiara
• Kenya Institute for Public Policy Research
  Analysis (KIPPRA)

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Outline

• Introduction
• Demand for EGS in Kenya
• How is demand met? Imports vs Domestic
  Production
  
• Kenyas exports of EGS, Barriers?
• How benefits to Kenya from liberalization of EGS
  can be maximized.

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Introduction

• Presentation looks at evolving demand for and
  supply of EGS in Kenya how benefits from
  liberalization of their trade could be maximized
  
• Focus is on environmental goods
• Persuaded by the broad definition of EGS goods
  services whose production or consumption
  benefits the environment or which are inherently
  beneficial to the environment
• Environmental protection receives considerable
  attention in Kenya but environmental problems
  persist.
  

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Demand for EGS in Kenya

• Demand for EGS is high judging from
• 60 of urban and 34 rural populations have
  access to safe drinking water.
  
• 29 of urban population served by a water-borne
  sewage system. No sanitary landfill.
  
• Less than a quarter of solid wastes collected in
  Nairobi.
  
• Excessive deforestation, now only 2.5 of land
  under forest.
  
• This status is attributable to
• Rapid population growth Population growth rate
  3.4 in 1989 about 2.4 currently. Rural-urban
  migration, influx of refugees.
  
• Weak economic performance Growth slowed from
  6.6 (1960s) and 5.2 (1970s) to 0.8 in
  2000-2002. Incidence of poverty 48 in 1982 to
  56 in 2002. Per capita ODA 50 in 1990 to 16
  by 1998. High expenditure on debt servicing
  crowding out essential public services.

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Demand for EGS in Kenya

• 3. Heavy dependence on wood fuel and ecosystem
  services in general. Wood fuel supplies 70 of
  energy, 21 from petroleum and 9 from
  electricity (hydro largely). High rate of
  biodiversity loss. Air pollution becoming
  serious, with transport consuming 56 of fossil
  fuel in the country.
• 4. Pressure from stakeholders, donors, civil
  society and consumers. Green Belt Movement,
  Residential associations in Nairobi. Tourist
  hotels increasingly using energy and water saving
  technologies, eco-friendly detergents and
  shampoos, improved waste management systems.
• 5. Multilateral environmental agreements (MEAs)
  and related mechanisms. Kenya hosts UNEP, has
  signed many MEAs such as UNFCCC, CITES, Ramsar
  Convention. Has used CITES to fight ivory trade.

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Demand for EGS in Kenya

• 6. Domestic policy and institutional responses
  Environmental policy has been improving.
  Environmental Management Coordination Act
  (EMCA, 1999) has given power to the government to
  apply economic instruments to manage environment
  and natural resources customs excise duty
  waiver for imported environmental capital goods,
  tax rebates for environmental protection
  industries, fees or user charges proportional to
  environmental damage. Requires envntal audits,
  EIAs.
• 7. Trade policy reforms serious liberalization
  in early 1990s, including abolition of trade
  licensing and foreign exchange controls. By 1998,
  simple average tariff had been reduced to 12.8.
  Stronger regional integration has increased
  Kenyas exports COMESA took 15 of Kenyas
  exports in 1990-92 34 by 1996-98.

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Demand for EGS in Kenya

• Fairly vibrant trade in EGS in the country
  charcoal (including eco-charcoal), solid waste
  mgt services, solar energy materials, water
  tanks, water treatment chemicals, improved
  cooking stoves, etc.
• Recent strengthening of environmental legislation
  to increase demand for EGS.
  
• Incentives exist to encourage environmental
  friendly technologies. Examples
  
• 5 duty on polyethylene for waste disposal
• 15 duty on water tanks, chlorine
• 15 duty on hard rubber waste compared with 2.5
  on less polluting rubber waste
  
• 10 extra duty on imported motor vehicles that
  are 8 and above years old
  
• High export taxes (25-40) on live wildlife to
  protect fauna

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How is Demand Met?

• Capital goods (trucks, tippers, pumps, meters,
  machinery for water supply solid waste mgt)
  largely imported. Same with chlorine,
  fertilizers, solar photovoltaic (PV) modules,
  solar water heaters, wind turbines, etc. Low
  tariffs hardly any NTBs. Some of the imports
  e.g. waste compactors not suited to local
  conditions.
• Some environmental goods are also produced
  domestically
  
• 84 of firewood sustainably produced from
  individual farmlands
  
• Tea plantations have developed own eucalyptus
  plantations for tea leaf curing, switching from
  expensive carbon intensive petroleum fuel
  

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How is Demand Met?

• Charcoal briquettes from alien species (e.g.
  Australian black wattle, water hyacinth), and
  from wastes like charcoal dust, organic waste,
  sawdust, rice coffee husks, sugarcane waste.
• Small amounts of useful products (boxes, pots,
  furniture) from scrap metal and from alien weeds
  like water hyacinth
  
• Some solar water heaters
• Energy-efficient stoves used in about 50 of
  urban households and many schools, hospitals,
  etc.
  
• Small amounts of organically produced products
  like food and fibre (cotton)
  
• Small amounts of products harvested from the
  ecosystem such as honey, extremophiles (have been
  used to develop industrial enzymes in developed
  world e.g. Tide Alternative Bleach Detergent).
  Commercial value could stimulate conservation
  just like tourism creates stimulus for conserving
  wildlife

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How is Demand Met?

• Game meat sustainably produced from culled
  wildlife
  
• Eco-tourism One of Kenyas main exports
• What do these products suggest?
• Defining environmental goods on the basis of how
  they are produced could be important for
  developing countries. Could this flexibility be
  considered only for developing and LDCs as SD
  treatment?

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Exports?, Barriers?

• Little outside eco-tourism exports, and to the
  region
  
• Some re-exports of solar photovoltaic modules
• Base-metal waste scrap, chlorine, mineral
  water
  
• Goods exported via consumption by tourists
• Trade agreements regional blocs create great
  potential
  
• Barriers?
• High tariffs in the regional market, e.g. 40 on
  min. water
  
• Infrastructure problems high cost of
  transportation
  
• Lack of market information on EGS
• Capacity to produce envntal goods for export
  weak
  
• Foreign travel advisories
• Insufficient foreign appreciation of indigenous
  knowledge in the country
  

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Maximizing Liberal. Benefits

• Improve domestic supply capacity by involving the
  private sector and local communities in decision
  making and other operations, installing the
  necessary public capital investments, improvement
  of investment climate, faster impleme. of policy
  legislative reforms in tandem with liberal.,
  international support.
• Improve understanding of the domestic EGS
  industry international market comparative
  competitive adva. of the domestic sector. Need
  studies capacity building
• Ensure facilitative supportive multilateral
  trade regime
  
• - SD treatment including gradual liberal. as
  understanding improves, greater flexibility in
  attaching market access conditions, allowing
  goods defined on the basis of production method
  for developing and LDCs (e.g. organically
  produced products), allowing goods harvested from
  the envnt (such as honey and extremophiles as
  commercial value stimulates conservation!).

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Maximizing Liberal. Benefits

• Flexibility to protect (and gradually liberalize)
  infant industries of some of the environmental
  goods in which developing or LDC countries have
  or could develop comparative and competitive
  advantage.
• Rather than focusing on the development of an
  exhaustive list yet technological advances are
  changing rapidly, greater attention should be
  given to development of eligibility criteria and
  evaluation mechanisms. The list could then be
  gradually improved.
• Decisions should be made in a way that stimulates
  developing countries to develop potential
  environmental goods industries, i.e. could market
  access be improved even for not-yet-existing
  environmental friendly goods?
• Simultaneous negotiations on environmental goods
  and services so that developing and LDC countries
  have opportunity to use concessions on the goods
  for gains in the services (e.g. eco-tourism).