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Trade in services related to climate changeg
Sébastien MiroudotOECD
A presentation of the work of the Trade Policy Linkages and Services Division on climate change mitigation services: Dale Andrew and Ronald Steenblik.
“Selected Outstanding Issues in Services, Trade and Development”3-5 May 2011 – Manila, Philippines
Outline of talk
• Services involved in climate change i i imitigation
• Demand drivers for these services
• Role of trade in supplying relevant services
I di t t t t d i CCMS• Impediments to greater trade in CCMS
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Services associated withrenewable-energy-based electricity
Wind-turbine Wind-turbine Remote (cross-border) erection maintenance monitoring of wind
turbines
Services associated with landfill gas or biogas production
Biogas unit construction
Remote (cross-border)
monitoring of
Laboratory analysis
monitoring of biogas plant
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Services associated withenergy performance of buildings
Architectural services
Home energy audit
“Green” renovation
Home energy audit
Bicycle- sharing services (Mode 3)
Services associated with eco-travelling and logistics
Logistical consulting consulting services (Mode 1)
Training in “eco-driving” (Mode 2)
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Engineering and operation of
facility
Services associated with carbon capture and storage (CCS)
Monitoring
Feasibility studies, geological surveys
gperformance
Management of registries
Carbon-finance services
Services associated with carbon markets
Preparation of documents for CDM and JI projects
Verification and certification services
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An indicative “cluster” of CCMS
Environmental services-e.g. Solid waste
management, emissions monitoring and control of
ll t t i
Business services-e.g. Legal services, architecture,
engineering, management consulting, technical testing and analysis, maintenance and repair
Research andDevelopment Services
-e.g. R&D services on natural sciences, social
sciences and humanities;
Energy services-e.g. Services incidental to
energy distribution
pollutants in the air
analysis, maintenance and repair of equipment, etc.
Services important for climate-change
mitigation and adaptation Financial services
-e.g. money broking
Telecommunications-e.g. Data transmission
services
Computerand Related Services
-e.g. Data-processing services
sciences and humanities; Interdisciplinary R&D
services
Services incidental to agriculture
———————————Services incidental to forestry and logging
Education services- e.g. higher technical and
vocational education servicesConstruction and related
engineering services-e.g. Work for building and civil
engineering, installation and assembly
Environmental standards in creating demand
• “In contrast to financial, telecommunications or transport services, there is no genuine demand for transport services, there is no genuine demand for environmental services. Relevant markets are essentially created through government regulation. Who would purchase, for example, sewage or air-cleaning services out of sheer altruism?”From : International Trade Regulation and the Mitigation of Climate Change
• Deployment & diffusion of low-carbon technologies are driven above all by government regulations, including taxes and subsidies
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International action also creates demande.g. Kyoto Effect
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Wind power
Fuel cells
Electric/hybrid cars
Lighting EE
Solar PV
Buildings EE
All tech. sectors
Note: Counts are measured in terms of ‘claimed priorities’ worldwide, shown as 3-year moving average, indexed to 1990=1.0. See ENV/EPOC/WPNEP(2009)1/FINAL for methodology. Based on data extracted from EPO/OECD Worldwide Patent Statistical Database (PATSTAT) using search algorithms developed by the OECD (www.oecd.org/environment/innovation).
0
1997 - Kyoto Protocol
Renewable Energy: R&D, feed-in tariffs, RE certificates
0.35
0.40
0.45
0.50
0 05
0.10
0.15
0.20
0.25
0.30Role of dedicated R&D spending
Role of feed-in tariff levels
Role of renewable energy certificates & targets
Importance of inventive capacity in general
Estimated elasticities evaluated at sample means. Variables without fill not significant at 5% level.
Source: Johnstone, Nick, Ivan Haščič, and David Popp (2010). “Renewable Energy Policies and Technological Innovation: Evidence Based on Patent Counts.” Environmental and Resource Economics 45(1):133-55.
0.00
0.05
Wind power Solar energy All renewables
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Trade usually follows demand creation
• A wide range of services are needed for CCM activities: business (including professional activities: business (including professional services), construction and energy services figure prominently, just to name a few
• They are dependent on availability of specialised quality services, including services imports
Services in GHG mitigation : role of services trade
Expertise & capacity varies across nations
• A typical CCM project will involve local services and imported know-how– Low-carbon power sources: when there is little
domestic capacity to design, finance & construct large facilities for hydropower, wind, geothermal or solar PV power, specialised expertise will be importedp
– Often supplied by commercial presence complemented by visits of engineers from abroad
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Trade and stringency of environmental regulations
Supplying services for CCMS
• Most important services used in climate change mitigation are supplied through modes 3 and 4 and also mode 1:modes 3 and 4 and also mode 1:Examples: – Mode 3: “EPC” engineering, procurement and
construction
– Mode 4: site visits needed to assess specificity of terrain and other conditions to undertake study. y
– Mode 1: remote monitoring, remote control, analytical services and laboratory testing supplied through internet
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Illustrative measures affecting trade in CC services
Restrictions on CCM services trade are generally the same as those for other services. For example:
Cross-border supply (mode 1) pp y ( )•Full commercial presence required in order to trade cross-border
•Cross-border transfer of capital, payments or use of credit cards for such transactions not permitted
•Must use monopoly or otherwise specified network access or connection provider
Example: Companies specializing in biogas production on farms Example: Companies specializing in biogas production on farms monitor the performance of equipment or networks and intervene , remotely, to fix the problem.
This service may be impeded due to the local requirement to incorporate or set up a branch in the country
Establishment of commercial presence (mode 3)
• Ownership restrictions (foreign equity limits; equity restrictions applying to not locally licensed professionals)R i i l l f ( i i hibi i
Illustrative measures affecting trade in CC services
• Restrictions on legal form (Joint Venture requirements or prohibitions on other legal forms)
• Investment screening (Economic Needs Tests or national interest test; notification)
• Numerical quotas for operating licenses• Requirements on board of directors (must be nationals, residents, or
locally licensed professionals)
Example: Stringent qualification system in a large Asian country for construction suppliers effectively prevented a Central American renewable energy company suppliers effectively prevented a Central American renewable-energy company specialising in hydroelectric power to move from the early consultancy and design phase to the construction and operation of the facility. In particular, overly burdensome minimum capital requirements, non-recognition of the qualifications of managerial and technical personnel has placed a disproportionate burden on the firm.
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Temporary entry or stay of service providers(mode 4)• Labour market tests (for intra-corporate transferees or other personnel categories)
Illustrative measures affecting trade in CC services
• Numerical quotas (applying to intra-corporate transferees or other personnel categories)
• Nationality requirements
• Residency requirements (Prior or permanent residency; domiciliation)
• Limitations on the duration of stay (for intra-corporate transferees or others)
• Non-recognition of foreign qualifications (foreign university degrees; foreign practice and exams)
Example: Maintenance by technicians from a large Asian manufacturers of solar PV panels supplied to a university in a North American country was impeded due to significant delays in issuing entry visas thereby leading to long ‘down time’ of the CCM technologies .
Measures affecting trade involving more than one mode of supply :
• Discrimination in public procurement– Discrimination in public procurement is rife. Local-content obligations for
wind-energy projects exist in North America, often at sub-national level, and
Illustrative measures affecting trade in CC services
wind energy projects exist in North America, often at sub national level, and in China, among others.
• Discriminatory taxes or subsidies– Dozens of countries subsidize consumer prices of transport fuels, heating fuels,
and electricity. These subsidies undermine the potential market for renewable energy-related services and energy-efficiency services.
• Lack of use of international standards – Requirements applying to buildings (building codes & technical standards)
i l i d h l i d d f i i i– Requirements applying to goods & technologies needed for service provision
• Lack of transparency and administrative impediments (red tape)– Lack of international standards and transparency in building codes make it
difficult for firms providing services to reduce the energy use of buildings to abide by all the applicable regulations in numerous countries.
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Thank you!
Visit: www.oecd.org/tradeClick on: environment and trade
Contacts: [email protected]