Environmental Goods Agreement Talks Focus on Clean Energy Products

This article first appeared in BioRes, Volume 9, Number 1 (ICTSD)

The latest round of talks towards securing a tariff-cutting deal on select environmental goods made progress last week, trade sources say, with several participating countries presenting indicative lists of product nominations related to cleaner and renewable energy, as well as energy efficiency.

Following another discussion round next month, the talks for an Environmental Goods Agreement (EGA) could move into full negotiation mode in the second quarter of this year, officials confirmed, as long as the process continues to head in the right direction.

The US and the EU are said to have tabled the largest lists of indicative product nominations in last week’s energy-focused round, with Australia, Canada, Japan, New Zealand, South Korea, and Switzerland also proposing products to include.

China has not yet come forward with indicative product nominations for either this round or the ones preceding it, although it reportedly promised to do so for the EGA’s next session in mid-March, citing the need for more time in order to coordinate internally.

Last week’s meeting reportedly saw some technical discussion on renewable energy products, including in relation to component parts. Some participants also backed including equipment used in hydropower applications in the eventual EGA.

Sources say that some participants also expressed preferences for including goods related to nuclear power, biodiesel, methanol, wood products, as well as hybrid vehicles, all of which are likely to prompt some further conversations within the group.

These talks are the result of a pledge made a year ago at the World Economic Forum (WEF) gathering in Davos, Switzerland, where a group of 14 WTO members announced plans to negotiate this Environmental Goods Agreement. Formal talks then began last July. (See BioRes, 10 July 2014)

In the past, EGA participants said that they would build on a list of environmental goods under 54 tariff lines agreed to by the Asia-Pacific Economic Cooperation (APEC) forum in 2012, with the possibility of including other products. The 21-country APEC group has committed to lowering applied tariffs on these 54 tariff lines to five percent or less by the end of this year.

From discussion to negotiation

March’s discussion round will focus on environmental monitoring, analysis, and assessment, environmentally-preferable products, and resource efficiency.

Sources confirmed that the discussion approach has served to help participants fine-tune their product proposals, particularly in terms of “ex-outs,” which are product descriptions where international customs codes are not detailed enough.

A total of five technical discussion rounds have been held so far in Geneva, Switzerland, each examining product nominations related to specific environmental goods categories or sectors. EGA participants have said that this “category approach” is geared towards ensuring the environmental credibility of the products nominated and selected for inclusion in the eventual list slated for tariff cuts.

EGA negotiators reportedly agreed last week that each participant’s initial product nominations – across each of the environmental goods categories discussed – should be put forward by the beginning of April. That date represents a soft deadline, however, with participants agreeing to be flexible if necessary.

Once EGA participants come forward with these compiled lists, the talks would then move into a second phase geared more towards concrete negotiations, beginning with a week of consultations in early May.

Two further rounds were reportedly agreed to last week, one planned for 15-19 June and another for 27-31 July.

Climate context

While last week’s discussions focused on the details of trade in energy-related products, delegates reportedly are keeping in mind parallel efforts to negotiate a global climate deal under the UN Framework Convention on Climate Change (UNFCCC) in time for this December’s Conference of the Parties (COP) in Paris, France.

A number of EGA participants have said that the deal offers an opportunity for trade policy to do something positive on climate action. With the energy supply sector being the largest contributor to global greenhouse gas (GHG) emissions, according to UN climate scientists, boosting trade in clean energy and energy efficiency products could play a role in curbing man-made climate change.

“Reducing tariffs on environmental goods can enable innovation and deployment to other countries, thus helping to scale up low carbon development,” said Danish Ambassador to the WTO Carsten Staur at an event hosted last Monday by ICTSD on the EGA’s climate potential. [Editor’s note: ICTSD is the publisher of Bridges]

A number of goods relevant for the supply of clean energy, in particular solar cells, panels, and modules, are already duty-free in all EGA markets due to the initiative’s current participants also being signatories to the WTO’s Information Technology Agreement (ITA) – a separate plurilateral tariff-cutting initiative covering select information and communication technology (ICT) products.

Various other goods in this area could, however, still usefully be added to the list according to some researchers.

EGA participants have set themselves the goal of reaching some form of agreement by the WTO’s tenth ministerial conference this December in Nairobi, Kenya.

Whether the EGA talks could have come far enough along to deliver a signal of success in time for the Paris climate talks, which are scheduled prior to the WTO’s Nairobi meet, remains an open question and will be difficult to evaluate until participants move into more formal negotiations.

ITA lessons?

In the corridors last week, some delegates reflected on the need to learn from the ITA experience, particularly around a review process for the eventual EGA list.

Efforts among a subset of the ITA’s signatories to expand the deal’s product coverage to reflect the realities of today’s trade – given the technological advances seen since the original agreement was finalised in 1996 – have repeatedly stalled in recent years. The negotiations are currently deadlocked over a disagreement between China and South Korea. (See Bridges Weekly, 18 December 2014)

Some experts have argued that it would be important for the EGA negotiations to create a review mechanism as part of the EGA in order to ensure a “living list.” This could be useful in the context of evolving climate mitigation and adaptation technologies and needs, for example, as well as keeping pace with other environmental challenges.

However, no detailed formal discussion has yet taken place on this topic, although some sources suggest that a forthcoming EU non-paper on draft elements for the eventual EGA text – which the 28-nation bloc has suggested it will circulate to other EGA participants following internal consultations – could possibly prompt further talks in this area.

New members

The latest round saw Israel formally join the talks, following domestic approval by existing members, bringing total EGA participants to 15.

Turkey and Iceland have also applied to join the initiative, and sources say that the various domestic procedures among other participants will likely have concluded in time to bring these two nations into the talks for the March round.