Bridges Weekly Trade News DigestVolume 15Number 34 • 12th October 2011

Proposed Sustainable Energy Trade Agreement Gets Traction at Copenhagen Meet


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The first gathering of the Global Green Growth Forum (3GF) announced the launch on Wednesday 12 October of a number of public-private collaborative initiatives, including the pursuit of an international agreement aimed at ensuring policy frameworks that enable trade in sustainable energy goods and services.

Initiated and hosted by the Danish government, the gathering brought together government representatives, over 50 global corporate leaders, and leading civil society organisations.

The event was opened by the Prime Minister of Denmark and attended by the Prime Ministers of Ethiopia and Kenya, the Environment Ministers of Korea and Mexico, the Minister of Finance of Turkey, the UN Secretary General and heads of the Organisation for Economic Co-operation and Development (OECD), the United Nations Industrial Development Organization (UNIDO), the UN Environment Programme (UNEP), the United Nations Framework Convention on Climate Change (UNFCCC), as well as ministers for trade, development co-operation, climate, and business from the host country, among other personalities.

A Sustainable Energy Trade Agreement (SETA) aimed at enabling the rapid scale up in innovation, diffusion, and use of goods, services, and technologies in the non-fossil fuel energy sector, was proposed by three leading think tanks: the Global Green Growth Institute (3GI), the International Centre for Trade and Sustainable Development (ICTSD - the publisher of Bridges Weekly) and the Washington-based Peterson Institute for International Economics.

The initiative was launched as part of a package of other proposals on sustainable biofuels and civil aviation, global green public procurement, and energy efficiency, which are to be “progressed in international policy processes going forward, including those leading to the next Clean Energy Ministerial (CEM) in April 2012.”

“Denmark, Mexico and Korea will feed these initiatives into high-level intergovernmental processes, negotiations and forums. As upcoming EU president, Denmark will take recommendations from 3GF to Rio+20 and the EU’s green growth agenda. Korea and Mexico will help link outcomes to the G20. The Forum will present and promote key recommendations at the Climate Summit in Durban in late 2011,” a 3GF press release announced after the event.

Initiative draws support

At a panel chaired by Ricardo Meléndez-Ortiz, Chief Executive of ICTSD, support for the initiative was announced by Pia Olsen-Dyhr, Danish Minister of Trade and Investment. The initiative was also explicitly endorsed by South Africa’s Deputy Minister for Trade and Industry, Ms. Thandi Tobias-Pokolo, as a way forward “out of the mud” and “in response to the need to act on the imperatives of climate change and in face of stalemate in other processes.”

Ditlev Engel, President and CEO of Danish wind turbine producer Vestas, “fully endorsed” the undertaking. Meanwhile, Gary Hufbauer of the Peterson Institute made the case for a plurilateral approach “that may be started by a few and follow the path of WTO’s successful Information Technologies Agreement (ITA) or stand alone.” Several event participants also highlighted the pressing need to ensure that policy frameworks on trade support the enormous scale up in renewable energies.

SETA evolved out of an initiative led by Michael Liebreich, Chief Executive of Bloomberg New Energy Finance, and the Renewable Energy Global Agenda Council of the World Economic Forum’s (WEF) Global Redesign Initiative in October 2009. It was then taken as a recommendation by the Forum to the Korea G-20 Summit in 2010.

Since then, ICTSD - in co-operation with several partners - has developed the analytical case for it, with consultations being held with governments and other stakeholders in settings including the WTO, UNFCCC, and WEF.

Greenhouse gas emissions context

Globally, as the Intergovernmental Panel on Climate Change (IPCC) has noted, energy supply is the largest single source of greenhouse gas emissions. The challenge to de-carbonise production and economic activity comes at a time of rapid expansion in energy demand, and in a context in which half of the world’s population currently has no access to modern forms of energy.

Energy supply and use is responsible for 75 percent of global greenhouse gas emissions (GHG); estimates from the International Energy Agency (IEA) placed such emissions at a record high of 30.6 Gigatonnes (Gt.) in 2010 alone, making the targets set by the international community to limit climate temperature rise to a maximum of 2 percent extremely difficult to meet.

Indeed, for the “pathway to be achieved, global energy-related emissions in 2020 must not be greater than 32 Gt. This means that over the next ten years, emissions must rise less in total than they did between 2009 and 2010,” the IEA notes.

Non-clean energy sources - i.e. fossil fuels - currently account for about 80 percent of emissions worldwide, and existing infrastructure and projects in construction are estimated to already lock-in to 2020 approximately 20 percent of those emissions.

The geographical distribution of GHG emissions is highly heterogeneous, as is energy consumption. While they only host a fifth of the world’s population, 40 percent of emissions continue to be generated in OECD countries, and 40 percent of energy demand is located there.

Meanwhile, 75 percent of the growth in emissions in 2010 came from an energy-deficient developing world that is experiencing long-term economic growth trends. In this context, as stated by UN Secretary General Ban Ki-moon at the World Energy Summit in January 2011, “Our challenge is transformation. We need a global clean energy revolution - a revolution that makes energy available and affordable for all.”

UN push for energy efficiency, sustainable energy access

The UN has declared 2012 as the International Year of Sustainable Energy for All, and its Advisory Group on Energy and Climate Change - composed of major energy companies and UN agencies - has recommended universal access and a 40 percent increase in energy efficiency in the next 20 years. If these recommendations are implemented, this could reduce global energy intensity by 2.5 per cent per year, approximately double the historical rate.

Cutting energy-related emissions in half by 2050 would require deep de-carbonisation of the power sector. This reduction in fossil fuel use would need to be offset by sustainable energy; the largest increase, according to the World Bank’s 2010 World Development Report, would have to come from renewables.

To increase the share of low-carbon energy from 13 percent as of present to 30-40 percent by 2050 would imply an effort of enormous magnitude, the World Bank report shows. Over the next 40 years, it would imply deploying annually an additional 17,000 wind-turbines (producing 4 megawatts [MW]each), 215 million square meters of solar photovoltaic panels, 80 concentrated solar power plants (producing 250 MW each), and 32 nuclear plants (producing 1000 MW each).

ICTSD studies estimate that even though most countries in the world, developed and developing, are significantly engaged one way or another in innovation and the manufacturing and/or assembly of components needed for renewable energy, these markets are heavily distorted by tariff and non-tariff trade barriers.

A number of other trade-related policies, including subsidies, can be supportive or perverse in constructing the robust and efficient markets needed for such a rapid scale up in renewable energies. Green technologies generate significant local jobs both in the installation phase and during the long-term lifetime (20 years for some technologies such as wind power) service and maintenance phase.  Local manufacturing also benefits, as the backward linkages in these production chains use components from local sources, including the services and transportation sectors.

Experts see investments in renewables as a primary way for non-fossil fuel producing countries to increase foreign direct investment and savings in foreign exchange. Renewable technologies by definition make use of free sources such as solar, wind or geothermal.

A determined effort, specific to the clean energy sector, is necessary to address barriers to scale, and to equip the world with the governance and policy mechanisms it urgently requires in the transition to a low-carbon economy, proponents of the initiative argue.

ICTSD reporting.

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