Environmental Goods and Services: Conceptual IssuesUNECA Workshop on Trade and Environment

7 June, 2006 –Addis Ababa

Environmental Goods-Definition and Types

Current significance

Negotiating Framework; Approaches and State of Play

Other challenges

Hong Kong Ministerial Declaration and Recent developments

Environmental Goods: Overview of presentation

What are Environmental Goods?

• No Universally Accepted definition• Definition of environment industry

by the OECD as “activities which produce goods and services to measure, prevent, limit, minimise or correct environmental damage to water, air and soil, as well as problems related to waste, noise and ecosystems.”

Types of Environmental Goods

Class A (‘Traditional’ Goods)

Industrial goods used to provide environmental services to address pollution and waste affecting water, soil and air.

Examples include: basic manufactures such as valves, filters, pumps, compressors, tanks and containers, chemicals used in water purification; trash compactors, brooms, plastic lining material for landfill sites, ceramic wares and furnaces used in incineration, sorting equipment for recycling, measuring equipment to monitor the environment, noise reducing mufflers, etc. Class A EGs also include advanced turn-key technological systems comprising such goods.

Class B (Environmentally Preferable Products)

Industrial and consumer goods that have environmentally preferable characteristics relative to substitute goods,

Examples include: organic agricultural products, CFC-free refrigerants, chlorine-free paper, biodegradable natural fibers such as jute, sisal and coire, natural dyes, organic soaps free of phosphates, water-based paints, natural rubber, polymers, gums and adhesives, equipment used to generate renewable/clean energy, ethanol and other clean/renewable fuels, energy-efficient lighting, etc.

Environmental Goods

Source: UNCTAD-UNEP CBTF

EPPs as defined by UNCTAD

Products which cause significantly less ‘environmental harm’ at some stage of their life cycle than alternative products that serve the same purpose, or products the production and sale of which contribute significantly to the preservation of the environment.”

Traditional Goods vs EPPs

Traditional Goods

To address an environmenta

l problem

EPPs

Main purpose

Other uses

Main purpose

But environmenta

l benefits arise during

Production

E.g. Organic agriculture

Consumption/Use

E.g. Solar cars

Disposal

E.g. Jute Bags

Please note:

For every EPP there exists a substitute or ‘like product’ with a similar use that is not as environmentally friendly

Why have Environmental Goods assumed significance now?

• Environmental Goods always part of trade agenda but ‘hidden’ within normal negotiations

• Singled out for first time by Para 31 (iii) of Doha Ministerial Declaration

• Para 31(iii) calls for “ the reduction or as appropriate elimination of tariff and non-tariff barriers to environmental goods and services.”

• What does this mean? Accelerated liberalisation? Not clear

Different WTO Bodies handle different aspects of EGS negotiations

• Committee on Trade and Environment (CTE)- identify scope; screening of goods

• Non-Agricultural Market Access Group (NAMA)-will then negotiate actual tariff /NTB reduction on ‘non-agricultural’ environmental goods

• Council for Trade in Services: Responsible for negotiating environmental services

Different Approaches to Negotiations-1:List Approach

• Lack of universally accepted definition of environmental goods a challenge-some members instead advocated the list approach

• Members submit ‘lists’ of goods they consider environmental

• Lists developed by OECD/APEC used as starting point

• US proposed ‘core’ and ‘complementary’ lists

What do OECD/APEC lists contain?

• APEC List• End-of-pipe pollution

treatment and monitoring equipment

• Examples: Waste-incinerators; pollution measuring equipment; hydraulic and wind-turbines; electromagnets;

• OECD List• Includes goods and services

under 3 headings-pollution management, cleaner technologies and products and resource management.

• Resource management category includes sustainable agriculture, forestry and fisheries-but these are inputs into; not outputs from these activities

• Examples: Chlorine (water-disinfectant); recycled paper; waste material for further recycling; Hybrid-vehicles

Both lists are contained in WTO docs-TN/MA/S/6 and Both lists are contained in WTO docs-TN/MA/S/6 and TN/TE/W/18TN/TE/W/18

Examples of submissions

• EUWater filtering

equipmentOrganic pesticidesShea butter Fluorescent lampsEquipment for

Tramways

• USGas or Smoke

analysis equipmentPhotovoltaic cellsFishing hooks/rodsRopes made of jute

• New Zealand Vacuum pumps Micro-organisms

for water treatment Bio-diesel from

vegetable/animal fats

Hydrogen fuel cells Electric vehicles

• SwitzerlandPadlocks (as EPP)Signalling

equipment for railways

Sisal and jute ropes

Rubber tyres used in bicycles

Drawback of OECD/APEC lists and other developed country list submissions

• Mainly products of export interest to developed countries

• Included many ‘dual-use’ products. Eg: Parts for electric-locomotives; bicycles (Switzerland)

• Qatar (TN/TE/W/14): includes natural gas fired generation systems and advances gas-generation systems-but opposed to energy-efficient products

• Japan (TN/TE/W/17) includes PDP LCD TVs/ energy-efficient washing machines and dryers

Different Approaches to Negotiations: 2. The Project Approach

• Recognising drawbacks of ‘list’ approach; India supported by many Members advocated Project Approach

• Main features: Temporary liberalisation of all goods and

services used for specific environmental project approved by Designated National Authority

Project should meet criteria laid down by WTO-CTE

Criticised as there is no offer of ‘bound’ liberalisation; administrative costs; scope for favouritism

Merits of Project Approach according to India

• Ensuring goods and services are used for environmental purposes

• Enable transfer of Environmentally Sound Technologies (ESTs)-in acc with Agenda 21

• Compliance with MEAs and technical/SPS requirements

Other Key Challenges

• PPM Issue: HS-codes; Treatment by customs; labelling/certification inevitable

• HS-classification: 6-digit or beyond? Eg: Furnaces and ovens (six-digit:851420) sub-category with environmental use: Waste-incinerators (8-digit). No harmonised system beyond 6 digit

• Relativity: Hydrogen>Ethanol>Natural Gas

• Keeping up with Technological change

What does the Hong Kong Declaration say?

• Instructs Members to complete the work expeditiously under Para 31 (iii)

• 30 April 2006 deadline for the establishment of modalities and no later than 31 July 2006 for the submission of comprehensive draft schedules based on these modalities

• Closer coordination between the CTE Special session and the NAMA Negotiating group needed

Recent developments

• Members deadlocked over approach• Technical discussions underway to ‘screen’ goods

based on single environmental end-use.• Developing countries want to avoid ‘dual-use’

goods• Sectors covered so far include air-pollution

control; renewable energy; waste-water treatment and solid-waste management

• Progress in other issues such as agriculture may influence negotiations

• Many submissions have referred to MEAs like Kyoto. Others have stressed importance of access to EGS for WSSD; MDGs

Environmental Services: Overview of Presentation

Introduction to negotiation on environmental services

Key characteristics of services negotiations

Modes of supply in servicesTypes of environmental servicesClassification debate in the WTOState of Play

Negotiations on Environmental Services

• Doha mandate:para.31(iii) (negotiate on the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.

• Part of the overall services negotiations in WTO Council for Trade in Services.

Key characteristics of Services Negotiations

• Bilateral request-offer process• Commitments voluntary in nature• National Schedules listing sectoral

commitments Eg: Financial Services, Telecommunication Services; Environmental Services

• Members commit in only those sectors specifically listed (‘positive list’ approach)

• Exceptions can be listed in each Mode of Supply

• Commitments may be made in one or all of 4 modes of supply

Modes of Supply in Services

• Cross-border supply (Mode 1), for example,business services outsourcing

• Consumption abroad (Mode 2), for example, tourism services

• Commercial presence (Mode 3), for example, services supplied by a subsidiary or branch of foreign bank

• Movement of natural persons (Mode 4), for example, services supplied by professionals temporarily working abroad.

Types of Environmental Services

• Some experts have categorised environmental services into:

Environmental infrastructure services –Eg: Water treatment and management of waste

Commercial or professional environmental services-Eg: noise abatement, nature and landscape protection and

Other services with an ‘environmental’ end-use: Environmental engineering; environmental consultancy

Classification Debate in the WTO

• W/120 Services sectoral classification list

Environmental services

A. Sewage services (9401)

B. Refuse disposal services(9402)

C. Sanitation and similar services(9403)

D. Other (no reference to CPC codes)

• Alternative Proposed Classification (by EU referring to ‘pure’ enviromental services

1. Water for human use/Waste water management;

2. solid/hazardous waste management;

3. protection of ambient air and climate;

4. remediation and clean-up of soil and water;

5. noise and vibration abatement;

6. protection of biodiversity and landscape,

7. other environmental and ancillary services.

• In addition EU has proposed ‘cluster’ approach in environmental services so Members could commit in other services with an ‘environmental’ end-use

• Eg: Members could commit in ‘environmental engineering’ under Engineering services and ‘Environmental R&D’ under R&D services

• Classification issue not yet resolved; each Member can follow own classification

State of Play in Negotiations

• Key demandeurs are developed countries-especially EU

• Not much engagement on part of developing countries

• Hong Kong Declaration does not lay down concrete dates-but notes that mechanisms for priority to sectors and modes of supply interest for LDCs to be undertaken

• To date 70 Members have submitted initial offers (counting EC 25 as one), of which 21 Members are offering to make new or improved commitments in environmental services, including 13 developing Members

Thank You