GOODS AND SERVICES ENVIRONMENTAL REGULATIONS AND TRADE IN ENVIRONMENTAL. Meeting of the Inter-American Network of International Trade Single Windows

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1 ENVIRONMENTAL REGULATIONS AND TRADE IN ENVIRONMENTAL GOODS AND SERVICES Meeting of the Inter-American Network of International Trade Single Windows Cartagena, May 2014 Jehan SAUVAGE Trade Policy Analyst OECD, Trade and Agriculture Directorate

2 Environmental pressures are calling for more government intervention (i) OECD Trade and Agriculture Directorate 2 Source: OECD ENV-Linkages model.

3 Deaths per million inhabitants Environmental pressures are calling for more government intervention (ii) Premature death rate linked to exposure to PM worldwide: Number of deaths per million inhabitants OECD Sub-Saharan Africa India China South +SE Asia Indonesia Other countries OECD Trade and Agriculture Directorate 3 Source: OECD (2012).

4 Environmental pressures are calling for more government intervention (iii) Nitrogen effluents from wastewater: baseline, 2000 and OECD India China Africa Rest of the world Millions of tonnes of N / year OECD Trade and Agriculture Directorate 4 Source: OECD (2012).

5 North America Europe Japan/Korea Australia/NZ Brazil Russia South Asia China Indonesia Southern Africa RoW World Mean species abundance Environmental pressures are calling for more government intervention (iv) Terrestrial mean species abundance by region: baseline projection 80% 70% 60% 50% 40% 30% 20% 10% 0% OECD Trade and Agriculture Directorate 5 Source: OECD (2012).

6 What consequences for trade? OECD Trade and Agriculture Directorate 6

7 The EPS index and relative exports of environmental products OECD Trade and Agriculture Directorate 7

8 Wastewater treatment and exports of water-related products OECD Trade and Agriculture Directorate 8

9 What role for trade facilitation and singlewindow systems? OECD Trade and Agriculture Directorate 9

10 Exports and imports are two sides of the same coin (2007 = 100) World imports of CLEG products World imports of Core CLEG products World merchandise imports Source: OECD based on data obtained from the UN Comtrade database and WTO (2013). OECD Trade and Agriculture Directorate 10

11 Barriers firms face in entering value chains Private sector views OECD Trade and Agriculture Directorate 11

12 Trade-facilitation indicators for Colombia and the LAC region OECD Trade and Agriculture Directorate 12

13 Key messages There is a need for more stringent regulations in view of the environmental challenges ahead. Countries having stringent environmental regulations tend to export environmental products relatively more. Trade facilitation can help diffuse environmental products more widely. Environmental regulations should, however, be designed in a way that does not add to trade costs. OECD Trade and Agriculture Directorate 13

14 Thank you for your attention! Visit our website: Contact us: Trade and Agriculture Directorate 14

15 Back-up slides OECD Trade and Agriculture Directorate 15

16 Measuring the stringency of environmental regulations (i) Environmental policy instruments 1 Implementation Enforcement Perceptions of Environmental policies 2 Changes in agents' behaviour 3 Changes in environmental outcomes 4 E.g. Event based approach, composite indicators E.g. Survey of executives E.g. Shadow prices, survey of firms abatement costs E.g. Environmental performance data Environmental laws are designed and implemented. to alter firms' (and consumers') behaviour and achieve "cleaner"outcomes Source: OECD (2014, forthcoming). OECD Trade and Agriculture Directorate 16

17 Measuring the stringency of environmental regulations (ii) 1. Actual regulatory instruments 2. Perceptions of policies Aggregation and multidimensionality Market-based vs. non-marketbased instruments Enforcement and implementation Usually surveys Cognitive problems Lack of time variation Identification issues 3. Changes in agents behaviour 4. Environmental outcomes How firms and households react to changes in the regulations Surveys of PACE or shadow costs Accounts for enforcement Identification issues Generally good availability Accounts for incidental abatement of emissions Accounts for enforcement Acute identification issues OECD Trade and Agriculture Directorate 17

18 Measuring trade in environmental products: the CLEG Code Environmental theme or medium Share of HS lines APC Air pollution control 5% CRE Cleaner or more resource efficient technologies and products 19% EPP Environmentally preferable products based on end use or disposal characteristics 2% HEM Heat and energy management 10% MON Environmental monitoring, analysis and assessment equipment 15% NRP Natural resources protection < 2% NVA Noise and vibration abatement < 2% REP Renewable energy plant 22% SWM Management of solid and hazardous waste and recycling systems 10% SWR Clean up or remediation of soil and water < 2% WAT Waste water management and potable water treatment 13% OECD Trade and Agriculture Directorate 18

19 The EPS index Composite indicator of environmental policy stringency Market-based policies Non-market based policies Taxes Trading Schemes FITs DRS Standards R&D Subsidies CO 2 NO x SO x Diesel CO 2 Renewable Energy Certificates Energy Efficiency Certificates Solar Wind Deposit & Refund Scheme Emission Limit Values: NO x SO x PM x Diesel content limit (Sulphur) Govt. R&D expenditure on Renewable Energy Source: OECD (2014, forthcoming). OECD Trade and Agriculture Directorate 19