Advancing Development Gains in the Trade, Climate Change and Development agenda

1. Advancing Development Gains in theTrade, Climate Change and Development agenda AMCEN – UNECA – AU Pre COP 15 Conference Addis Ababa, 23 October 2009 Lucas Assunção Coordinator Climate Change Programme of UNCTAD Lucas.Assuncao@unctad.org

2. Outline • Context • Why trade matters? But does it matter for Africa? • Similarities and differences between trade and climate regimes • How trade liberalization impacts climate change? • How climate policies and measures interface with trade rules? • In what ways could climate change and trade be mutually beneficial? • The logic of the argument for advancing development goals as a climate change strategy (Kyoto Protocol and carbon price as a lever) • Elements of a strategic approach: • Avoided deforestation (REDD) • Enhanced supply capacity of domestically produced clean energy (Biofuels) • Financial support for low carbon development and greater economic diversification

3. Context • COP-11 mandated Dialogue on LCA to look at advancing (sustainable) development goals in a sustainable way. • This heavily influenced the Bali Action Plan, where the concept is a cross-cutting theme among the four pillars. • Can be teased out of UNFCCC text, but not explicit. • Needs to be solidly advanced as a guiding principle, operationalized.

4. The Underlying Reasoning • Action to address climate change is now imperative (Stern review + IPCC 4th AR 2007) • So is action to address poverty and inequity • Economic (export-led) growth is an important means to development • Potential conflict between growth and climate • Potential synergies between climate and development • For all countries, important to find synergy between development and climate action (future will be C-constrained) • International community should focus, in particular, on helping developing countries do so

5. Pressure on Developing Countries to Act

6. Pressure on Developing Countries to Act Notes: CO2 emissions per capita data are for 2004, from World Bank’s World Development Indicators on line. GDP per capita data is for 2007, from UNCTAD 2008a.

7. Trade and Climate • The Framework Convention on Climate Change (FCCC) and the Kyoto Protocol (KP) have no trade provisions BUT their implementation have clear trade and development implications • FCCC Article 3 and KP Article 2.3 require that climate change policies and measures should not constitute means for arbitrary or unjustified discrimination or restriction of trade • WTO Doha Development Agenda (DDA) Art 31 (iii) calls for liberalization of Environmental Goods and Services (EGS) [and also the WTO Working Group on Technology Transfer supports the technology transfer pillar of the Bali roadmap]

8. Similarities and differences between trade and climate regimes • Similarities • Shared purpose: to maximize public welfare through enhancement of economic efficiency • Mutual recognition • Both disapprove free riding • Both are “work in progress”, hence conflict can still be avoided • Differences • Trade aims to solve government failure (avoid protectionism and mercantilism) • Climate change aims to solve market failure (by internalizing climate change externality) • International trade is about bargaining and leveraging based on trade weight, while climate change is science-based.

9. How trade liberalization impacts climate change • Trade liberalization impacts climate change through: • scale effect • composition effect • technique effect • direct transport effect • Climate change policies interface with trade rules: • Subsidies • Technical specifications (trade barriers) • Government procurement

10. Trade and Climate: win–win scenarios • DDA Art 31 (iii) biofuels • Renegotiating fossil fuel subsidies • “Unactionable” environmental subsidies (discontinued in WTO Seattle Ministerial) • Sound IPR regimes in developing countries as a lever for technology transfer • RISK: spread use of Border Carbon Adjustments to prevent carbon leakage

11. What is in there for Africa?Elements of a Strategic Approach [or turning climate change concerns into pro-development opportunities] • Avoiding and reversing deforestation • Clean energy production and use for developing countries • Economic diversification as a (climate) adaptation strategy

12. Avoiding and reversing deforestation • IPCC: CO2 emissions from land use change between 1989 and 1995 were 20% of global anthropogenic emissions. • Deforestation amounts to over 90% of net emissions from land use change. • Deforestation negatively affects those poor that rely heavily on ecosystem services: food, fuel, Y generation, job creation, flood prevention • Use of biomass for cooking and heating: 1.6 million early deaths per annum from indoor air pollution

13. Avoiding and reversing deforestation • Issue is now part of the Bali mandate (para. 1(b)(iii)). • Currently not allowed under the CDM • An economic proposition. Stern: • “Effective action to protect existing forests and encourage afforestation and reforestation requires changes to the structure of economic incentives that lead to unsustainable logging and to the conversion of forestland to agriculture.” (market failure)

14. Options for Action • PNG/Costa Rica proposal and UN-REDD: Try to incorporate avoided deforestation in UNFCCC-administered carbon market. • Brazilian proposal/SD-PAMs: new and additional support, also additional to commitments – no CDM-like mechanism. No-lose targets. • Developing country targets: Assign “no-lose targets”, set tough developed country targets, allow trading.

15. Clean Energy in Developing Countries • Energy supply is the biggest single contributor to GHG emissions at 25%. End use efficiency is also critical for emissions reduction. • Energy is also fundamentally linked to development: two related challenges: • Energy for basic needs – 1.6 billion still have no grid access; 2.4 billion use traditional biomass • Energy to feed economic growth – IEA projects a need for $26.3 trillion in new energy investment between 2007 and 2030, more than 60% non-OECD.

16. Options for Action • CDM-like mechanism for bringing power and efficiency to energy-poor. • International fund (ODA) with development and climate-related goals – energy access, increased energy investment. • Cooperation to alter baseline energy paths, especially in fast-growing economies: • Subsidize investments, technologies, IPRs • Support policy reform to create enabling environments

18. Thank you www.unctad.org/climatechange