International and National Policies to Promote Trade of CSG
Keep focusing on increasing growth rates of GDP of all Lower inter country dispersion of income Lower trade costs between countries by having open regionalism policies, reduce transportation costs within and between countries, lower border disputes to have open trade between neighboring countries.
Increase prices for exporters and lower prices of CSG goods in importers country by focusing on having sound competition policies, effective legislations for sound environmental policy( say increasing paper less trade and single window clearance as a starting point, carbon tax and regional emission trading system), appropriate regulatory framework, financial infrastructure and investment climate for production of CSGs, having appropriate standards and labels, mechanism of technology transfer, mechanisms to promote CSG trade among countries by coordination and cooperation and promoting R&D activities for CSG products among countries
Environmental Sustainability in Ecuador
As regards the international scene in the fields of the environment and sustainable development, Ecuador has ratified the main conventions (Biodiversity, Desertification, and Climate Change) and, in particular, the Kyoto Protocol in 1999. Ecuador has a good background in terms of environmental legislation, strategies and plans, dating back to the beginning of the 1980s. Possibly, this can be the reason of having some positive trade balance for Climate Smart Goods with the Latin American trading partners in 2010( see Table I above). The Environmental issues and policies need to be very high on the agendas of governments. The country faces many other serious threats including intensive deforestation (mainly caused by encroaching agriculture, logging, and exploitation of hydrocarbons); a significant loss of biodiversity, soil and water pollution (mainly due to mining and hydrocarbon extraction); erosion caused by poor agricultural practices in vulnerable areas (leading to erosion and desertification); institutional weakness in ensuring compliance with the legal framework; and a lack of local and national capacity to develop and sustain effective environmental management, both generally and in sensitive areas such as the Amazon and the Galápagos Islands. The challenge is to tackle all these problems on the basis of a land-use planning model that promotes environmental awareness and sustainable development, ensures that disaster risk reduction is incorporated within all activities, secures the rational use of natural resources and, where relevant, protects the rights of indigenous and Afro-Ecuadorean peoples living in the affected areas (European Commission, Ecuador Strategy Paper, 2007). Promoting the CSG goods will be the good strategy for sustainable growth, having safe and secure energy source, directing social spending towards low carbon emanating technologies and promotion of small and medium enterprises for production of CSG goods.
Various national and international policies can be followed by Ecuador and its trading partners to promote trade of CSG goods. Gravity analysis (third objective) reinforces the below points
• Keep focusing on increasing growth rates of GDP of all. Larger sizes promote trade of Climate Smart Goods.
• Lower inter country dispersion of income for promoting trade of CSG among countries
• Lower trade costs between countries by having open regionalism policies, reduce transportation costs within and between countries, lower border disputes to have open trade between neighboring countries.
• Increase prices for exporters and lower prices of CSG goods in importers country by focusing on having sound competition policies, effective legislations for sound environmental policy( say increasing paper less trade and single window clearance as a starting point, carbon tax and regional emission trading system),
appropriate regulatory framework, financial infrastructure and investment climate for production of CSGs, having appropriate standards and labels, mechanism of technology transfer, mechanisms to promote CSG trade among countries by coordination and cooperation and promoting R&D activities for CSG products among countries
• Lower tariffs by small countries in the American Peninsula for imports of CSG from Ecuador. In particular there is potential to reduce tariffs(Applied duties) by Dijbouti(26%), Belize(15%), Costa Rica(10%), Guaetmala(1L97%), Honduras(9.87%), Nicaragua(12.49%), Cuba(8.99%) and El Salvador(12%).
Following are the potential barriers to production, trade and investment of CSG. Ecuadorian governments need to attend to the following points
• Low level of competition
• Limited foreign ownership
• Inefficient transmission and grid interconnection
• Limited access to local financing
• Inadequate training and skills to produce CSGs
• Weak Intellectual property rights enforcement
Climate change specific policies may include the following for Ecuador. This is adapted from the studies undertaken by UNESCAP (2011, a, b). It will help Ecuador to adapt and acclimatize itself to the CSG environment
1) Nationally Appropriate Mitigation Actions (NAMA)
Nationally Appropriate Mitigation Actions (NAMAs) are voluntary emission reduction measures undertaken by countries that are reported by national governments to UNFCCC, and can cover any policy that works towards reducing Green House Gas(GHG) emissions. In principle, this means that NAMAs also cover carbon-friendly trade and investment policies. Apart from the policies discussed in this study, NAMAs cover a wide range of policy areas, including sectoral policies. NAMAs involve improvements of land, soil and water management The idea is that some policies that are effective in some countries may not be effective in others, so the countries themselves should be able to design their own mitigation strategies. Whatever strategy a country chooses, it must conform to international trade rules if they affect trade. NAMAs ensure that mitigation actions undertaken at the national level are recognized internationally and that they will bolster the demand for CSGTs, particularly in renewables. However, it is important to have a proper monitoring, evaluation and verification process in place with clear objective indicators and measurements to ensure that NAMAs are actually implemented
2) National Adaptation Programmes of Action (NAPA)
NAPAs can take many forms, including awareness creating campaigns, the construction of flood shelters and flood protection systems (dams, dykes etc.), research and development of drought and saline tolerant crops, evacuation of coastal areas and retraining facilities. Many such actions require substantive amounts of investment and thus offer investment opportunities.
3) Environmental policy (environmental standards, carbon taxes should be designed carefully so that national and international companies get affected in the same manner, cap-and-trade schemes for greenhouse gas reductions, also know as Emission Trading Schemes)
Emission Trading Schemes or Systems (ETS) at the national, regional or multilateral level, i.e. CDM under the Kyoto Protocol, set an aggregate limit on the amount of GHGs that may be emitted annually by certain capped sources. Subject to the overall limit, capped sources may buy and sell permits for the right to emit GHGs.
4) Industrial policy (including energy efficiency standards)
Energy efficiency labels are informative labels attached to manufactured products to describe the product's energy performance (usually in the form of energy use, efficiency or energy cost). These labels give consumers the data necessary to make informed purchases, and to promote the trade and purchase of CSGs and other green products. Carbon standards are an important tool for informing consumers of the carbon footprint of a particular product as well as for indirectly encouraging domestic demand for, and production of products on the basis of RE
5) Public procurement of energy efficient products
Sustainable public procurement is a tool that allows governments to leverage public spending in order to promote the country's social, environmental and economic policies. It provides governments with a powerful tool to influence the way in which businesses operate through purchasing decisions. Government procurement often involves large sums, with regard to investment projects and in the procurement of goods and services for consumption. More importantly, it includes the procurement of key infrastructure, such as power- and transport-related infrastructure as well as public buildings, i.e. the type of investments that will have an impact on GHG emission levels for many years to come.
By applying clear sustainability criteria in purchasing and investment decisions, governments can provide a major driving force for lowering emissions. First, this will help to ensure that public investments are low-emitting and use low GHG-emitting input materials. Second, in so doing, this will stimulate the market for environmental goods and services, thus stimulating innovation and increasing the competitiveness of such goods and services, both locally and globally. By actually encouraging green procurement practices in government activities, new markets for indigenous green products and services can be developed
6) Energy policy (e.g. requirements of renewable/low-carbon energy shares in energy mix of utilities, feed-in tariffs, subsidies and incentives for low-carbon investments). Policies to be in consonance with the WTO provisions
7) Technology policy (related to generation, dissemination and diffusion of chronology policy (related generation, low-carbon know-how)
8) Trade policy adjustments for low-carbon activities (e.g. tariff reductions for capital goods/inputs for low-carbon activities, tariff policy of the home country with respect to potential host countries - for export activities of Multinational Companies)
9) Incentives for manufacturers of low carbon goods and/or providers of energy efficiency or process improvement services (e.g. tax benefits, subsidies concessionary loans, export guarantee insurance). Policies to be in consonance with the WTO provisions
10) Reducing Emissions from Deforestation and Forest Degradation
Closely related to cap-and-trade systems is the reducing emissions from deforestation and forest degradation (REDD) mechanism, which uses market/financial incentives to reduce GHG emissions from deforestation and forest degradation. Such actions offset carbon emissions and contribute to carbon credits. Actions involve reforestation and a forestation. REDD"+" adds to these actions in order to include the possibility of offsetting emissions through sustainable forest management, conservation and increasing forest carbon stocks. REDD and REDD+ are important for business as such actions contribute to sustainable business practices, ensuring sustained long-term supplies of forest-based raw materials for a variety of industries (e.g. furniture, and pulp and paper), and the preservation of forests with added benefits such as conservation of bio-diversity. Actions involving REDD are important NAMAs and are potentially an important carbon offset credit under cap-and-trading schemes. Forest-rich countries stand to potentially benefit from REDD projects. Apart from REDD, specific sectoral policies can be designed to mitigate GHG emissions. In various energy-intensive sectors, binding emission reduction targets need to be imposed in combination with emission crediting schemes. In the agricultural sector, land, livestock and waste management needs to be improved while increased attention should be paid to the development of drought or flood-resistant crops. In summary, this policy will include
• Creating a financial value for the carbon stored in standing forests;
• Industrialized countries to make financial transfers to developing countries like Ecuador to compensate them for avoiding deforestation.
11) Legal framework and compliance mechanisms for climate change mitigation and adaptation
This is required for the effective implementation of all NAMAs and NAPAs and any other policy outlined above. A comprehensive "green growth" legislative framework would also ensure the coordination, consistency and coherence among all policies and ensure environmentally sustainable and climate-smart economic growth.
12) Strengthening supply-side capacities of small and medium-sized enterprises to produce and use CSGs.
13) Strengthen public-private partnerships and promote adoption and implementation of the principles of corporate social responsibility
14) When negotiating trade agreements, ensure broad coverage of CSGs and climate-smart services as well as deep commitments (ideally zero tariffs with generous rules of origin and verifiable NTBs such as standards)
15) Avoid Non tariff Barriers (NTBs) such as local content requirements, which also discourage investment and may violate the WTO Trade-Related Investment Measures (TRIMS) Agreement, and ensure that others (such as standards, taxes and subsidies) are applied in a non-discriminatory manner (national treatment).
16) Keep Regional Trade Agreements (RTAs) open to new members in order to avoid trade diversion. Liberalization of CSGs has more impact with wider membership. Regional cooperation can be in the form of establishment of regional emission trading schemes, regional investment collaboration, regional harmonization of climate smart standards and labels, regional financing schemes, regional cooperation in development of climate smart technologies and technical assistance.
17) Promote exports of CSGs through environmental regulations and incentives while avoiding restrictive trade practices, including Border Carbon Adjustments (BCAs), which may violate WTO rules or otherwise constitute distortions of international trade
18) Apart from subsidies there are other financial instruments for supporting the production and development of CSGs. Many of those instruments have close links to subsidies or are themselves subsidies in disguise. In particular, development banks can provide soft loans for such purposes, refinanced by governments. Such loans offer flexible or lenient terms for repayment, usually at lower than market interest rates. In particular, such loans could be channeled to SMEs to raise their capacity to adopt green practices (e.g. acquire or develop CSTs). For example, the India Renewable Energy Development Agency provides loans for clean energy projects while government low interest loans have assisted in the development of the PV industry in the Republic of Korea. Green bonds are tax-exempt bonds that are issued by qualified central or local government agencies
for the development of environmentally-friendly projects. A related concept is climate bonds, which are bonds issued by a government or corporate entity in order to raise finance for climate change mitigation or adaptation-related programmes or projects. All funds raised from such bonds will only go to climate-related programmes or assets, such as Renewable Energy plants or climate mitigation focused funding programmes. Various provisions in the tax code could be made to allow suitable tax breaks for enterprises or adopt relaxed tax calculation methods based on the equipment and technologies (and their depreciation) used by enterprises. Tax breaks could be given to enterprises that undertake R&D in CSGs or development of CSGs, and/or enterprises that are actually already producing such goods and climate-smart services. Such measures are normally associated with the promotion of investment .In the absence of an internationally agreed-defined list of CSGs and climate-smart services, countries could adopt their own lists for tax purposes. Another end-user type of innovative financing mechanism is dealer-credit financing where the Renewable Energy provider obtains a loan from a financial institution, either national or international, which is then converted into a loan to consumers so that they can purchase the appropriate Renewable Energy Technology. Additional financial instruments include risk-sharing instruments such as catastrophe bonds, weather derivatives, mutual funds and micro-insurance index-based schemes through partnerships involving the private sector.
19) SThe Government can help improve the CSG production, trade and investment by adopting the following policies
a) Start Incubation programmes for small and medium enterprises interested in developing CSGs.
b) Link Multinationals with domestic enterprises to transfer technology for producing CSGs
c) Apprise and inform all on standards for motor vehicles; buildings, etc, labels and rules and regulations for producing and importing CSGs
d) Improve access to finance, strengthen IPR climate, strengthen domestic R&D and national innovation system, hone human resource and skills and promote public and private partnerships for the production of CSGs
e) Low cost loans for developing new CSG products
f) Leverage the power of institutional investors such as pension funds, insurance companies and sovereign wealth funds towards CSG production and R&D
g) Provide infrastructure support such as special economic zones for facilitating production of CSGs
h) Provide corruption free bureaucracy and enabling regulatory framework where in disputes can be settled
i) Liberalize and deregulate energy markets
