Facilitating Trade in Services Complementary to Climate-friendly Technologies

Research
Date period
12 October 2011

A vast range of services across multiple sectors appears to be related to implementing climate change policies. Despite the widely touted potential benefi ts of liberalizing trade in environmental goods and services for the fi ght against climate change, any attempts to realize such benefi ts are bound to face many challenges. The fi rst of these challenges lies in identifying a reasonable set of climate change related services that could be subject to a negotiation on trade liberalization; given that these services are spread across multiple sectors, identifying such services is sure to be a daunting task.

Another challenge comes from the current disconnect between negotiations on environmental goods and negotiations on environmental services in the framework of the WTO, since certain climate friendly goods are indispensable for delivering these associated services, and vice versa. In addition, a lack of progress on environmental services negotiations with regards to the issue of classifi cation does not help Members schedule meaningful commitments in supporting action on climate change.

This study attempts to address these challenges by identifying services that are directly linked to the diffusion of climate change mitigation technologies1 (hereafter ‘services complementary to climate change mitigation technologies’) and analyzing specifi c commitments made by the major trading countries of these services. Given that some of the key services required for mitigation options, ranging from energy effi ciency projects to utility-scale wind power projects, are often unavailable in the countries hosting the projects, liberalizing trade in these services could not only facilitate the diffusion of associated climate change mitigation technologies, but also enable countries to easily get access to such services.

‘Complementary services of climate change mitigation technologies’ that cut across multiple key mitigation sectors identifi ed by the Intergovernmental Panel on Climate Change (IPCC) - i.e. energy supply, transport, buildings, industry, agriculture, forestry and waste - largely fall into the following Centralized Product Classifi cation (CPC) groups: other professional, technical and business services; construction services; and sewage and waste collection treatment and disposal and other environmental protection services. Among the 17 major trading countries of these services, the EU and the USA are the biggest exporters, followed by Japan and Canada. Meanwhile, a few emerging economies, as well as economies in transition such as India, China, the Russian Federation and Chinese Taipei, are quickly becoming major exporters in some of these services sectors.

A review of major trading countries’ specifi c commitments to liberalize trade in these services shows that only a handful of the countries have made a full commitment. The principal Modes of supply for the complementary services of climate change mitigation technologies are ‘commercial presence’ (Mode 3) and ‘movement of natural persons’ (Mode 4). Yet these Modes of supply appear to be largely limited, as the majority of countries concerned have put specifi c as well as horizontal limitations on them. Members’ commitments on ‘Cross-border supply’ (Mode 1) across all three CPC groups are becoming increasingly important for the facilitation of trade in these services, as the provision of services through Mode 1 is increasing together with new channels of electronic supply. Yet the majority of trading countries concerned left this Mode of supply unbound, as they considered it inapplicable, particularly in the case of construction services.

No discernable progress seems to have been made on Members’ new commitments across the three CPC groups of services in either their initial or revised offers during the Doha Round. In both offers the nature of horizontal limitations in the services sectors concerned and their limitations regarding Modes of supply also remain largely the same.

It should be kept in mind that facilitating trade in ‘services complementary to climate change mitigation technologies’ goes beyond the boundaries of the General Agreement on Trade in Services (GATS), as it is not limited to the issue of market access and national treatment. Domestic legislation, regulatory measures and administrative rules could also affect trade in these services. In particular, regulations concerning government procurement could have a significant impact on trade in these services, given that the public sector is the largest client in these sectors. It is crucial, therefore, to address the issue of trade liberalization in complementary services of climate change mitigation technologies alongside a discussion on the WTO’s plurilateral Government Procurement Agreement (GPA).