Climate Change, Trade Policy & Innovation Governance: The Caribbean Context

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1 Climate Change, Trade Policy & Innovation Governance: The Caribbean Context Dr. Keith Nurse Executive Director UWI Consulting Inc. University of the West Indies

2 Structure of Presentation 1. Climate Change Impact 2. Climate Change and the Global Trade Policy Governance a) Aviation b) Maritime Transport c) Solar Water Heaters 3. Climate Change & Innovation Governance 4. Conclusion 1

3 Geographic Distribution of Major Climate Change Impacts Affecting Tourism Destinations Source: UNWTO/ UNEP/WMO 2

4 Hurricanes: Economic Impact 3

5 Cost of Inaction in the Caribbean by 2100 Source: EDF (2008) The report compares two possibilities: an optimistic rapid stabilization case a pessimistic business-asusual/case Countries Caribbean LAC Est. Economic Impact (share GDP Loss) Focuses on three categories of effects: Hurricane damages Loss of tourism revenue, and Infrastructure damage due to sea-level rise. Puerto Rico 6 Dominica, Haiti, St. Kitts & Nevis, Grenada, Turks & Caicos 75 4

Since the main thrust of climate change policies is to increase the price of carbon, trade costs are impacted, with implications for the global pattern of production and consumption and thus for

6 Since the main thrust of climate change policies is to increase the price of carbon, trade costs are impacted, with implications for the global pattern of production and consumption and thus for trade patterns. The development of effective climate change policies and their harmonious accommodation in trade rules pose major, perhaps unprecedented, challenges to international governance. Pascal Lamy, WTO Secretary General, WTO News, June 26,

7 Climate Change Trade Policies CC mitigation policies: Border measures (e.g. carbon taxes, levies) Production subsidies (e.g. free allowances and exemptions) Performance standards (e.g. carbon labeling, efficiency standards) CC Trade liberalization Technology transfer & IPRs Shift in corporate policy Shift in consumer preferences 6

8 Climate Change Governance Binding commitments for all big GG emitters Common but differentiated responsibility OECD- Annex I countries BIG SOUTH AOSIS SVE SVEs G77 & CHINA OPEC LDCs 7

9 AVIATION 8

10 Global Tourism & Travel: Vector and Consequences VECTOR CO2 (MT) 2005 Air transport Other transport Accommodation- 274 Activities - 45 TOTAL = 1,307 TOTAL WORLD = 26,400 Global Tourism (%) = 4.95 CLIMATE CHANGE POLICIES Emissions trading schemes (EU ETS 2012) Voluntary offsetting Aviation taxes (e.g. UK Airline Passenger Duty) 9

11 Long-Haul Travel and Destinations: Barbados, Mauritius & Fiji (share of long-haul in total arrivals) 57% 42% 61% 10

12 Exposure to the UK Tourist Market (CTO 2011) 11

13 MARITIME TRANSPORT 12

World Shipping Pollution on Major Routes Source: American Chemical Society 2007 World Shipping is estimated to contribute1.12bn tonnes of CO₂, or nearly 4.

14 World Shipping Pollution on Major Routes Source: American Chemical Society 2007 World Shipping is estimated to contribute1.12bn tonnes of CO₂, or nearly 4.5% of all global emissions of the main greenhouse gas. A recent report from the International Council on Clean Transportation reports that in 2005, ships produced 27% of the world's total nitrogenoxide emissions, which contribute to smog and global warming. 13

Economic Impact of Maritime Transport 0.

15 Economic Impact of Maritime Transport (US$30 tonne CO 2) (ICTSD 2010) Annex I Non-Annex I G77 LDCs SIDS Est. Cost GDP% 14

16 Solar Water Heaters 15

17 SWHs and CO 2 Abatement in several countries Retail Cost per liter Number of Liters in AVG. system AVG cost of systems Tonnes of CO 2 Abated system/year Barbados Brazil China India Mexico South Africa Source: Milton and Kaufman (2005) 16

18 Explanation for High Rate of Adoption of SWHs in Barbados Extremely high electricity tariffs Relatively high consumer purchasing power Very active government pro-swh incentive programs Low pay back period High level of local content and entrepreneurship Low barriers to entry - IP in the public domain Local champion pushed by the PM 17

Economic Impact of Solar Water Heater There are approximately 50,000 units (SWHs) installed in Barbados (out of 78,000 households) over the period 1974-2010.

19 Economic Impact of Solar Water Heater There are approximately 50,000 units (SWHs) installed in Barbados (out of 78,000 households) over the period Each unit on average saves 428 tonnes of energy per year (21,400 tonnes). Total consumer savings: US$ 425m Tax Benefit (one time): US$62.5m Barbados saved 15,000 metric tonnes of emissions (4. 5% of all emissions) and 130,000 barrels of oil. 18

20 Given success of SWHs why has PVs not taken off? Accessibility of incentives. The Government has put in place an incentive for use of solar technology by the hotel sector but it was not taken up because of the structure of the loan portfolio through the enterprise growth fund. Legislative and Policy Shortcomings. E.g: Grid connection. There is no legisl ation in place right now allowing for B&LP to buy power from individuals. Ri ght now it is not legal. Secondly, there is the lack of a national marketing programme for solar power. Entrenched interests. B&LP has limited the number of installations to 200 units. Feed in tariff is very high with long payback time. Structural Problems. 60 cycle base of most power companies and 50 cycle base in B arbados is also a structural problem. 19

21 Strategic Areas for Investment 20

22 Climate Change & Innovation Governance Business as usual - not viable Many renewable energy technologies in the public domain There needs to be guidelines for licensing of renewables - they should be reasonable and fair Declaration on IPRs and access to CC technologies Collaborative R&D between Big South and Developing Countries - need for alternative innovation models Developing countries need to expand R&D investment in energy renewables 21

23 Strategic Opportunities for SIDS Climate Change a useful platform to promote alternative development and use of renewable energy. Particularly solar energy (increased usage in homes and Hotels) Production and export of renewable energy technologies (e.g. solar water heaters use and export from Barbados) Can encourage use of environmentally technologies can facilitate proliferation of trade in environmental goods and services 22

24 Strategic Opportunities for SIDS Encourages firms to invest in energy-efficient technologies that would be particularly useful in Developing Countries. Increased investment in R&D could make less dependent upon technology transfer developed nations. Some Caribbean countries can position themselves as Carbon Neutral tourism zones. Encourages development of non-traditional branches of tourism: Shift to low-volume, high-value tourism. Shift to pro-poor, eco-friendly tourism. 23

25 The Process of Technological Innovation Acquisition Improvement of product or process Technological leap in the generation of value Imitation Creative Imitation Adaptation Technological Innovation Foreign Direct Investment Licences Capital Goods Research and Development Knowledge Incorporation IP Creation Sales of Licences Research and Development Cooperation Between Companies Knowledge Incorporation Sale of Patents Licences Import Replacement Export Development Domestic Value Added Trade Policy Measures Liberalization of EGS Technology Transfer Technology Upgrading 24

26 THANK YOU FOR YOUR KIND ATTENTION 25

Climate Change and Trade Governance: Implications for the Travel and Tourism Sector in SIDs and the Caribbean

Climate Change and Trade Governance: Implications for the Travel and Tourism Sector in SIDs and the Caribbean Presented at WTO Chairs Panel, WTO Public Forum, Geneva, Switzerland September 26-28, 2017