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With the U.N. Framework Convention's climate negotiations set to resume in Bali, Indonesia next week, the issue of international trade is a topic that will likely be discussed at the meeting. During today's OnPoint, Muthukumara Mani, senior environmental economist at the World Bank and author of the new report, "International Trade and Climate Change: Economic, Legal, and Institutional Perspectives," explains how the World Trade Organization and United Nations Framework Convention on Climate Change can address trade issues associated with climate change. Mani explains why he believes tariffs and taxes should be removed so developing nations can gain easier access to clean technologies. He also discusses how emissions created through the trade process should be handled.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Muthukumara Mani, a senior environmental economist at the World Bank. Mr. Mani is also the author of the new report, "International Trade and Climate Change; Economic, Legal, and Institutional Perspectives." Mr. Mani, thanks for coming on the show.
Muthukumara Mani: Thanks for having me here.
Monica Trauzzi: You published a new study on the relationship between international trade and climate change. Essentially it discusses what can be done through trade to address climate issues and you also address some of the negatives that come as result of trading. So, what role can trade play when it comes to a future international agreement that we're trying to make on climate change and how are trade and climate policy integrated?
Muthukumara Mani: First of all, I think one should realize that climate change is no longer an environmental issue where it's gone much beyond that. It's more of a developmental issue. It's more of a much bigger economic issue. For example, the last year the Stern report suggested if you don't take action the economic cost could be pretty high. So once it becomes an economic issue I think there's a role for the WTO, there's a role for the country, there's a role for international organizations to play. And in that context we are suggesting the WTO has quite an important role to play, especially in terms of providing access to clean energy technologies to developing countries which are rapidly growing and they need to grow at a much, in terms of low-carbon growth as opposed to high-carbon growth.
Monica Trauzzi: So currently these countries are not receiving the appropriate technologies to get them to a point where they're not emitting?
Muthukumara Mani: Yes. I mean if you look at the next 20, 30 years I think the kind of technology now, most of the technology that these countries need in terms of scale is huge compared to what's happening currently through some of the mechanisms that are already in place. In the report we identify that trade barriers could be one of the ways in which countries are not getting proper access to technologies. So by removing some of these trade barriers, both tariff and non-tariff barriers, countries could actually get greater access and that would considerably reduce the cost of getting and implementing these technologies. And that way they can achieve the kind of growth paths that are much more climate friendly, as opposed to the existing business as usual scenario.
Monica Trauzzi: The World Energy Congress' secretary general has said that a trade war between those who are concerned over emissions and those who are not could erupt unless the WTO takes up this issue soon. Would that be an accurate characterization of the current situation?
Muthukumara Mani: I wouldn't totally agree with that, but I think in terms of the role of trade versus environment, I think there are different schools of thought. There's one school of thought which basically believes that WTO should stay out of environmental issues and these are probably the trade purists, so as to speak, who feel that the environment will come in the form of protection, the protectionist agenda, somebody is trying to push. And then that's why it could be harming the trade flows across countries. The other extreme view, which basically says that more trade is bad for the environment, that's the other extreme view. But I think one has to be more realistic and look at what trade could possibly do for environment and that is the positive side of things. Basically free trade, yes, of course, free trade will lead to more production and more consumption, more pollution, but at the same time free trade can also facilitate technology transfer across countries, both clean energy technologies that are climate friendly and also for things like basic issues like water, sanitation issues, air pollution issues. I think the technology aspect should not be ignored. So I think, overall, I think one should take a more balanced approach to looking at trade and environment, not just looking at trade either from a purely trade point of view or from an environmentalist point of view.
Monica Trauzzi: But we can't ignore the fact that the more we trade the more we'll emit. So, how do we reconcile that? Is there a way to emit less if we trade more?
Muthukumara Mani: OK, now, trade is seen as an engine of growth for most developing countries, even if you look at some of the countries that have really rapidly progress in the last 20 years. If you looked at the East Asian tigers and Chinas and Indias of today, trade has been a major factor in terms of getting their economies to grow, getting rid of poverty as we see it in these countries. So trade is something that's going to happen and globalization cannot be stopped at this point of time. And that especially we have about 3 billion people who are still living below poverty line and they need to be better off, and that trade could be one of the major venues for pushing countries ahead. From an environmental point of view, so stopping trade is not an option, should not be an option from an environmental point of view. But on the other hand, countries could take steps to beef up their environmental regulations, environmental policies in place, so that when trade opens up their sectors are not adversely affected. For example, the general argument is that if you have a country that's rich in forests and, obviously, if you open up trade in that country, the forests are going to get cut because then the country will start exporting a whole lot of timber and so on and so forth. But on the other hand, the solution is then not open up trade, but at the same time make sure that the forestry is done in a sustainable manner. So I think the focus would be on sustainable management. You put in place policies, regulations governing the forestry sector where the country can benefit from exporting sustainable timber as opposed to a whole lot of timber in the absence of these measures.
Monica Trauzzi: Where do you see the discussion on trade going?
Muthukumara Mani: Now, in terms of the WTO, right now a window of opportunity has come as we suggest in this book. Basically right now the WTO in the Doha negotiations, they have opened up discussions on liberalizing trade in the environmental goods and services. I think that's a great idea and that's something that should have been done much before. But unfortunately what's been happening is that the discussions are so caught up in terms of trying to define what exactly are environmental goods or a service. The negotiations have been going on for seven years. The countries have not to reached an agreement exactly what is an environmental good? Are we talking about hybrid cars? Are we talking about end-of-pipe pollution control equipment? Are we talking about biofuels and so on and so forth? So there's still no agreement and the negotiations are still stalled. So what we are suggesting in this study is that, OK, given that there's still not much been happening and actually in the WTO a number of lists of environmental goods and services have been submitted over the years. So we looked at some of the lists that have been submitted, a list of 400, a list of 150, and then the most latest list we were able to identify about 40 technologies we can clearly say and everybody can agree that they are climate friendly. So what we are suggesting is that countries can actually, given the enormity of the climate situation, take these 40 technologies and then agree to liberalize trade on these 40 technologies that's going to be beneficial for trade and also beneficial for climate change. And that way we see that this is a way out. Current negotiations are pretty much stalled on the broader environmental goods and services. Those things that we agree later, but given that we are really at a crisis situation and there seems to be an agreement both within developed countries and between developed and developing countries that we are reaching a crisis point in terms of climate change, I think this should be the way to go in terms of pushing the trade agenda forward.
Monica Trauzzi: At the same time we also have U.N. Framework Convention talks happening. Next week they're meeting in Bali to discuss just that. So, as we move forward, what could the U.N. Framework Convention be doing to minimize some of the trade issues that you've been discussing?
Muthukumara Mani: Yeah, just an interesting footnote to what you mentioned is that for the first time in the UNFCC co-op they are going to have a trade ministers meeting in Bali. So that's, I think, a major, major recognition that trade is an important aspect of the broader climate change and that. In terms of the UNFCC, of course, we have to think of what exactly countries need to do in the post-Kyoto kind of framework, because obviously in terms of any kind of post-Kyoto framework you need to think of what's going to happen in the next 20, 30 years. So you have the Chinas and Indias, which are going to be rapidly growing and also accounting for a major share of emissions. So obviously they need to be brought on board in any kind of post-Kyoto framework. And to bring them on board, of course, those countries have their own ambition in terms of achieving growth, getting rid of poverty, and so on and so forth. So one way to kind of sweeten the deal for these countries to get into any kind of agreement or any kind of broad framework agreement is maybe through technology transfer, because these countries, they need to grow. So one way to kind of help them grow through a low-carbon growth path could be to provide them access to technology and that's where trade could be one part. I think right now the technology transfer agenda in UNFCC is not very clear. So that needs to be firmed up. And also, for example, the CDM mechanisms that are in place right now, they do well at the project level, but they are small in terms of magnitude compared to what countries need. So maybe one way to go forward would be to promote programmatic CDMs or technology-based CDMs, much broader scale, much bigger scale at the sectoral level, that way you can get the technology transfer on a much grander scale. And also I think within UNFCC I think the biggest agenda should be to get all the players on board so that there is a comprehensive negotiation package where countries agree, let's say, to cut down emissions by 2050. Developing countries maybe can be given some leeway in terms of increasing their emissions of bit, but then coming back maybe by 20 to kind of reduce their emissions and so on. Again, these are some broad ideas, but I think that's really key in terms of trying to get the climate agenda moving forward.
Monica Trauzzi: We're almost out of time so I want to get this last question in.
Muthukumara Mani: Sure.
Monica Trauzzi: It might strike some of our viewers as a bit odd that the clean energy issue hasn't really been addressed or improved upon up until this point. So why has it taken so long to even have a discussion about this?
Muthukumara Mani: I think the problem has been they're trying to convince people that climate change is a big issue. I think that has taken so long, but now people are convinced that climate change is mainly human induced and we need to do something about it. And then also people have come to realize that we don't have to reinvent the wheel. There is this existing technology, the renewable, the solar, the winds, and so on that could be put to effective use. We don't have to come up with some new technology. Yes, of course, in the future we need to maybe invest in some kind of path-breaking technologies that can really reduce our energy dependence. But at least for now we have this technology that can substitute for, let's say, the high-intensity coal use that's been the major impact on the greenhouse gas emissions. So I think right now the timing is all right, in terms of they're getting attention. So the only question that remains is how do we get this clean technology to countries that need them in the next 20, 30 years? And that's what we are suggesting that trade could be an important part of it.
Monica Trauzzi: All right, well, it's a very interesting report to read and I thank you for coming on the show.
Muthukumara Mani: Thank you very much for having me.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
[End of Audio]
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