BUSINESS EUROPE WEBINAR ON TRADE AND CLIMATE CHANGE REMARKS OF:
Alan Wm. Wolff, Deputy Director-General, World Trade Organization – 17 SEPTEMBER 2020
Good afternoon. I am pleased to join you today.
Climate change is a global crisis.
Focusing on climate change can be particularly challenging at a time when another global crisis – COVID-19 – sweeps the world, threatening lives and livelihoods at an alarming pace.
And yet, there is reason to believe that climate change would cause even greater suffering and harm than the current pandemic.
As Bill Gates put it: “If you want to understand the kind of damage that climate change will inflict, look at COVID-19 and spread the pain out over a much longer period of time.”
So there is real urgency here.
I welcome the interest of Europe’s business community in discussing how trade must be made part of the solution to address climate change.
TRADE POLICIES AS A TOOL TO FIGHT CLIMATE CHANGE
Trade policies have a huge potential to support climate action. They are powerful tools to:
- Increase resource efficiency;
- Scale-up investment in clean and resilient infrastructure;
- And accelerate climate-friendly innovation.
Trade policies are important ingredients to help businesses unlock the US$ 26 trillion in market opportunities that would result from bold climate action by 2030.
But trade policies can only play a full role in the fight against climate change if we step up efforts to make sure that:
- Trade and climate change policies are adopted that reinforce each other, rather than work at cross purposes.
- Trade and environment officials work collaboratively, not in silos.
- And all adopt solutions that are good for trade and good for the climate.
The WTO has several opportunities to help make this happen. I would like to highlight three of these today.
OPPORTUNITY 1: REMOVE BARRIERS TO TRADE IN GREEN GOODS AND SERVICES
First, WTO members can cooperate to expand trade opportunities in green and climate-friendly sectors.
Take renewable energy for example:
- Solar photovoltaic and wind power have become the cheapest sources of electricity in many markets.
- New renewable power capacity has outpaced new fossil fuel power capacity for the past 7 years. Last year alone, renewables accounted for nearly three quarters of new power capacity globally.
- Employment in this sector, which reached 11 million jobs worldwide in 2018, is expected to quadruple by 2050, while jobs in energy efficiency and related areas could grow by another 40 million.
These are important developments. Trade allowed producers to reap economies of scale, stimulate investment and foster innovation.
Trade agreements are not going to determine national policy choices but they can assist in achieving national objectives.
Removing barriers to trade in green goods and services could add further momentum to the clean energy transformation unfolding right before us. Some important work has been done.
A group of 46 WTO members worked towards an Environmental Goods Agreement before negotiations were suspended in 2016.
The agreement aims to eliminate duties on key environmental goods, such as those needed in the fight against climate change. It includes, for example:
- Solar, wind and geothermal energy equipment;
- Insulation materials for energy efficient buildings and water-saving equipment to help farmers adapt to more frequent droughts;
- And the key components of smart grids and weather forecasting instruments.
Redoubling efforts to conclude these negotiations is even more important now, as we confront the worst economic crisis of our lifetimes.
We urgently need affordable green goods and services to build back better from the COVID-19 crisis.
So that’s the first opportunity I wanted to highlight.
OPPORTUNITY 2: DEEPEN POLICY DIALOGUE
The second opportunity for WTO members is to share best practices and concrete solutions to make trade and climate policies go hand in hand.
WTO members have different positions on how the WTO should be involved in this discussion, and what solutions it should collectively advance.
However, this does not mean that climate and other pressing environment issues are absent from our work. On the contrary.
The last few years have seen a positive change in how WTO members approach trade and environment discussions.
This is encouraging. It has helped to improve transparency, to build trust and cooperation and to raise awareness about the growing impact of climate risks on the way we do business and trade.
The deepening links between trade and climate change are borne out by the evidence:
- Climate and other disruptions increasingly affect global value chains. For example, McKinsey has found that, across industries, companies can now expect supply chain disruptions lasting a month or longer to occur every 3.7 years on average, with the most severe events taking a major financial toll. A number of sectors are deeply affected by climate change.
- Businesses are subject to more and increasingly complex climate regulation. There are currently close to 2,000 climate change laws and policies around the world. Just 20 years ago, there were less than 200. This upward trend is likely to intensify, as many countries consider additional measures to mitigate and adapt to climate change, from carbon prices and border carbon adjustments to carbon footprint standards and green procurement and support schemes.
- WTO data show that climate measures are often closely related to trade. Roughly one-third of environmental measures notified to the WTO are related to climate action. Most of these measures have not been subject to disputes at the WTO. Of the few environmental measures that have been brought to a dispute settlement panel, the rulings have shown that WTO rules do not prevent action to protect the environment, provided that environmental measures are not applied arbitrarily or used as disguised protectionism.
The WTO Committee on Trade and Environment is a forum dedicated to promoting a better understanding of what climate-related developments mean for trade, and how the WTO should respond.
Members have used this forum quite successfully to identify possible action areas.
For example, these include:
- Trade and circular economy, for example how to eliminate obstacles along the supply chains underpinning recycling and foster resource-saving activities that minimize emissions and waste;
- The removal of environmentally harmful distortions, including an initiative by a group of WTO members to reform fossil fuel subsidies.
- And an initiative by a group of Members, including the European Union, to create an Informal Working Group within the WTO to intensify work in these and other areas of common interest and to deepen engagement with stakeholders, not least the business community.
There is a lot to build on here to develop a pragmatic, forward-looking and action-oriented agenda with respect to trade and climate change.
OPPORTUNITY 3: FOSTER INCLUSIVENESS
This brings me to my third and final point: Our ability to make progress on trade and climate change calls for greater inclusiveness.
This means redoubling efforts to support the ability of the smallest and poorest countries to benefit from the rapidly expanding green economy.
It means working to maximize the contribution of trade to a carbon-neutral world economy in a way that is just and fair.
Let us not forget that the smallest and poorest countries are those who contribute the least to climate change while bearing a disproportionate share of the costs.
The WTO’s Aid for Trade initiative provides a good foundation to galvanize investment for more and better trade.
For example, Aid for Trade can help SMEs in developing countries to properly account for their emissions and meet new standards and requirements so that they can become part of climate-friendly value chains.
Since its creation 15 years ago, Aid for Trade has helped countless developing countries to strengthen skills, build capacity and trade-related institutional infrastructure to benefit from WTO agreements and expand their trade.
WTO members have shown growing interest in “greening” Aid for Trade:
- Of the US$ 340 billion disbursed under Aid for Trade between 2006 and 2016, around one-third – US$ 112 billion has been allocated to projects with an environmental goal.
- And earlier in the year, WTO members endorsed a new work programme for the next biennium which identifies the circular economy as a focus area.
So Aid for Trade is one way to bolster inclusiveness. Another way is to strengthen collaboration among not just governments, but also the private sector, consumers and other stakeholders.
Two years ago, the WTO and the UN Environment Programme announced that they would join forces to provide a platform for stakeholders to exchange ideas, showcase successful experiences and improve understanding of trade and environment.
The initiative has started to bear fruit, and it has benefitted significantly from the participation of businesses from Europe and around the world.
I encourage you to deepen your engagement. An excellent opportunity to do so is the upcoming “WTO Trade and Environment Week” scheduled for later in November this year.
So let’s keep this discussion going.
I believe that there are many untapped opportunities for WTO members to make trade work better for people and the planet.
Your voices, along with those of other stakeholders, can help WTO Members take advantage of opportunities.
We in the WTO Secretariat look forward to having your contributions to the work of advancing the world trading system.