Estimating the GHG mitigation potential of liberalization Peter Wooders, Senior Economist Climate Change, Energy and Trade 14 December 2009

Aim – Estimate Potential GHG Savings Much has been made of the efforts of the WTO Doha Round attempt to agree to a list of Environmental Goods & Services (EGS) –Tariffs and Non-tariff barriers (NTBs) would be eliminated from these EGS Implicit assumption that agreeing such a list would significantly reduce GHG emissions –This study estimates what the greenhouse gas (GHG) mitigation potential is for the Doha talks on environmental goods From Tariff Removal only

Environmental Goods Lists proposed to the WTO Over 400 goods originally discussed List of 153 by “Friends of the EGS Group” –Submitted April 2007 –Canada, the European Communities, Japan, Korea, New Zealand, Norway, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, Switzerland, and the USA World Bank defined 43 of these as ‘climate-friendly’ –List submitted by EC and US in November 2007

Contents of the list of 153 Renewable Electricity Generation goods (not techs) –But only including hydro-electricity up to 1 MW (“mini”) Rest of list would have nothing more than very minor impacts on GHG emissions –Primary focus is air quality, water, waste, etc.

Hydro, Wind and Biomass are the key technologies

Step 1: Potential uptake of technologies and impacts on GHG emissions IEA WEO 2008 projects new renewable uptake fpr the period –450 ppm ($180/tCO 2 ), 550 ppm ($90/tCO 2 ), Reference scenarios (“laissez faire” – no new policies) –We assume renewables would replace coal or natural gas Increased renewables in 2030 avoid GtCO 2 –Reduction of 6-28% of world emissions in 2030 –Similar figures in IEA (ETP), etc.

Step 2: Drivers of uptake of technologies Barriers to renewable uptake widely accepted –Relatively high cost, regulations, lack of investment in grids, etc. –Trade liberalisation, or tariff removal, generally not listed Key barrier clearly financial –Feed-in tariffs and renewable portfolio schemes typical premium US¢ 5/kWh (US$50/MWh) To Wind and more commercial technologies

Step 3: Contribution of Trade Liberalisation Levelised generation costs for hydro, onshore wind and biomass US¢ 4-10/kWh (US$40-100/MWh) Capital costs typically largest share –Wind 55-75%, Hydro dominated by civil works Trade liberalisation only affects tradable fraction –High for wind, low for Hydro Import tariffs typically 0-15% $80/MWh * 60% * 75% * 5% = US$1.8/MWh –<5% of typical premium to renewables

Extra 2% of Renewables competitive with Gas

Impact of Tariff Removal on GHG Emissions Tariff removal can make a contribution if –it were part of a package of measures, for instance it is combined with a feed-in tariff –the cost of renewable electricity declines relative to the cost of fossil-fuel generation. Without hydro, renewable savings GtCO 2 First order estimate is tariff removal responsible for 5% of this (pro rata basis) –45–325 MtCO 2 /year in 2030 –0.1% - 0.9% of world emissions

What could be done next The current list would need to be significantly extended to increase its impact –Industrial efficiency, transport, Buildings, CCS, etc. Goods generally less specific than renewables Extended lists would keep many problems –“dual use” (same goods can be used for a range of technologies, of varying performance) –Politics and commercial interests of WTO Members WTO could redirect its SD efforts? –Standards, non-tariff barriers, SD as focus of trade