Trade and sustainable development sessions highlight need for action

25 June 2012

RIO DE JANIERO, BRAZIL - The Trade and Sustainable Development symposium organised by ICTSD in collaboration with CEBRI soared up to provide participants a bird's eye view of the forest of trade and sustainable development issues, particularly the scaling up sustainable energy on a global scale. The symposium then zoomed in on the individual trees in that forest, highlighting an array of specific case examples from numerous sectors and countries. The sessions on sustainable energy governance, technology and innovation, and energy subsidies, provided cause for optimism - highlighting actual on-the-ground examples - but at the same time revealed how challenging reform would be on a larger global scale.

A case in point of a success story was the example of Suzlon, an Indian wind turbine manufacturing firm that started out with four people in India and grew to become a successful trans-national company with operations in several countries including Brazil. One of the main reasons that was highlighted for Suzlon's successful development was its strategy of purchasing the technology it needed including acquiring firms outside India and adapting the technology to the specific conditions of the countries it operated in. It was also engaged in R&D and had established a centre for the same in Denmark and was in the process of completing an acquisition of and merger with RE Power, a prominent German wind energy firm specialising in the manufacture of megawatt-scale turbines.

Suzlon's case was a reminder as well of the changing nature of the world economy, where differences between developed and developing countries have become blurred in a number of sectors. One session on technology transfer and initiatives on clean energy collaboration highlighted the reality of increased global cooperation through the example of a virtual platform in India that sought to link research and development centres and laboratories and firms in India and the US. It also provided a contrast to the traditional stand-off between the two countries on technology-transfer and intellectual property rights when it came to international negotiations in forums such as the UNFCCC.

With regard to the virtual platform example, it was pointed out that it would be possible to develop a benefit sharing agreement amongst participating firms and research institutes relative to their contribution to the technology development efforts. The increasing role and relevance of developing countries in the production and trade of clean energy technologies also came to the fore. Examples included the massive production and export of solar panels from China, the development of wind power in India led by companies such as Suzlon, and Brazil's emergence as an ethanol super-power.

Production and trade however cannot be equated to domestic deployment. Indeed, China's massive production and export expansion was largely a response to domestic feed-in tariff policies in countries such as Germany and Spain and led to little, if any, solar capacity being installed in China, although this is now changing.

Distant light at the end of the tunnel

Presenters at the symposium left attendees with the impression that the tools and concepts needed bring humanity onto a lower carbon path existed but have not been implemented in a meaningful manner. A case in point was Desertec, an initiative to bring solar power from the deserts of the world to population centres via high voltage direct current cables and trans-national grids. The technologies to do so actually exist and once costs of deployment are brought down it would be a win-win situation for climate change as well as low-carbon energy access, development, and trade (through exports of renewable electricity).

All of these positive examples did not diminish in any way the scale of the challenges faced by humanity, such as climate change mitigation and access to modern forms of energy for more than a billion people in the developing world. The massive scale-up of renewable energy for meeting both objectives simultaneously entailed co-operation on a global scale including on financing efforts as well as national and international policy action. The technology session for instance also brought home the message that while individual developing countries had done very well on production and exports of equipment, the majority of clean energy technology patents were still held by a handful of OECD countries. There is certainly a greater need for widespread dispersal of patenting activity and the creation of enabling conditions for technology development in the developing world including through more initiatives like the virtual platform.

The issue of subsidies in general elicited strong views. Some participants wanted speedy removal of subsidies in general and were critical of any attempt to shift subsidies into "safe" categories such as "green" or "blue" boxes for agriculture and into "green" technologies. On the other hand, others supported the idea of a need for "policy space" for countries that would enable the development of clean energy through clean energy subsidies, particularly given the difficulties in implementing alternative policy instruments, such as a carbon-tax. Conditional-subsidies and trade-protection to develop strong domestic green manufacturing sectors such as those for Compact Fluorescent Lamps (CFLs) was also emphasised although others voiced concerns about their impacts on trade opportunities.

Finding the right balance between creating jobs in domestic manufacturing sector (that often entail a certain degree of protection) or in enabling the deployment of clean energy at the lowest cost (that would require countries to keep their markets open to low-priced imported equipment) is often a difficult choice for governments to make. Even fossil-fuel subsidies, where consensus on their harmful environmental impact exists, it was acknowledged that reform had to proceed gradually, taking into account considerations on their impacts on poor sections of the population.  Although the challenge of climate change was global in nature, policies often had to be designed according to prevailing conditions and circumstances in specific countries as well as regions within a country. It was not a "subsidy" measure in itself that was good or bad but the way in which they were designed and applied. While trade rules and the WTO had to be taken into consideration when designing domestic policies for scale-up of sustainable energy, it was felt that the WTO rules themselves needed to take cognisance of policies that were required to enable this scale-up and had to evolve accordingly.

Participants felt that the Rio+20 conference could have done much more. For instance, the text on the phase out of fossil-fuel subsidies only re-affirms commitments made by countries to phase-out harmful and inefficient fossil-fuel subsidies and invites others to consider "rationalising" inefficient fossil-fuel subsidies by removing market distortions. It was also pointed out however that it would be better to see Rio +20 as a starting point or reference that could pave the way for country-led reform.

Finally, going beyond the role of private sector and government, individual action and the role of education to create awareness also came up as part of the discussion on subsidies.  In that regard, educating 10-12 year olds was critical as it was found they were catalysts for change influencing not only their parents but also their younger siblings. Overall, attendees walked away the rich day of trade and sustainable development presentations and discussions with the message that it is small "drops of water" that is indeed the basis for a trickle, a torrent, a river, and ultimately the ocean.

Mahesh Sugathan
Programme Coordinator, Economics & Trade Policy Analysis

Read more blog posts from ICTSD on the Go...