Ronald Steenblik OECD Trade and Agriculture Directorate

1. Challenges and opportunities to including energy-efficient products inenvironmental-goods negotiations Ronald Steenblik OECD Trade and Agriculture Directorate Geneva, 23 September 2009

2. OECD/IEA study looked atwhat is meant by energy-efficient goods • Efficiency is relative • For example, on the EU market an A++ rated refrigerator uses only about 45% of the energy of an average, but otherwise completely equivalent refrigerator, and just 22% of a G rated refrigerator. However, a top-rated refrigerator in another country might use more or less energy than the EU one. • There is a large spread in efficiency for most energy-using appliances such as clothes-washers, air conditioners, lighting, monitors, dishwashers, and TVs. • Where the “energy-efficient” cut-off lies is a point for discussion. • And it is a moving target with technological advances.

3. Some “energy efficient goods” can be distinguished by technology Light-emitting diodes (LEDs) Cellular concrete (Electric) bicycle?

4. Problem even for them is that most are not separately described or identified via the 6-digit Harmonised System • Numerous other products emerging: heat-pump clothes dryers, heat pump water heaters, LCD monitors, ultrasonic dishwashers, etc. • Some of these can be located through the 6-digit HS code but mostly products would need to be identified at the 8 or 10 digit (i.e., national) level. • Creating new tariff lines in the HS takes time. Agreement could be reached on common descriptors at the 8 or 10 digit level, but that also takes time.

5. However, … Most relatively energy-efficient goods can only be distinguished by performance in use

6. Scope for reducing tariffs on such goods? Tariffs being applied in 2007

7. Don’t think only about trade balance of device

8. Don’t think only about trade balance of device

9. OECD/IEA study on energy-efficientelectrical appliances: tariff treatment For relatively energy-efficient goods to be included in a tariff reduction or elimination initiative, agreement would be needed on either: • A) a standard set of product descriptions, reference testing standards, periodicity of reviews and efficiency thresholds OR • B) agreement to set lower or zero tariffs on goods that meet some % better performance than existing national energy-efficiency thresholds – the “MEPS+ approach”

10. Common, absolute energy-efficiency threshold unlikely in near or even medium-term • 57 countries have implemented EE labels and 28 more are developing them – almost as many have Minimum Energy Performance Standards (MEPS) • 80% of world’s population live in these countries • Large differences in energy-efficiency standards are justified by different product functionalities, different energy costs (affecting the life-cycle cost minimum), different levels of technical development and hence different market-average efficiencies

11. What about “relative efficiency”? • Yet “relative-efficiency” criterion as a basis for tariff reductions could be problematic: • Relative to what — like goods, or goods that perform the same service? • Perspective only national or international? • If international, how to deal with different design features? • And, no matter what, the goods must be tested according to an agreed test procedure to determine performance

12. Generally an energy-efficient electrical appliancecan only be identified through testing and comparison • To a set test procedure • Using pre-defined product categories to account for functionality and service • According to a prescribed efficiency metric • Often measured additionally against the peer products on the market, and for other criteria (such as noise level) • Sometimes test procedures are the same or equivalent across countries, but for many appliances procedures differ, often according to regional groupings

13. What about our case-study products? • Refrigerator-freezers are the most problematic (as are similar “white-goods” products) • To test room air conditioners, almost all countries test to ISO T1 condition and apply the same EER metric • However, energy-efficiency thresholds vary • CFLs and LFLs : commonality of approach could allow agreement on quality and energy-efficiency levels

14. The case of compact fluorescent lamps • Artificial lighting account for 8% of the worlds' CO2 emissions • Yet CFLs account for only 6% of the lighting market; a minor share of light production in residential sector • As seen, tariffs still high in many countries • But there are other barriers to take-up • Case studies show success conditional on policy addressing multiple barriers

15. Where do we go from here? • If there is the will, it should be possible for WTO members to agree quickly to a list of products that are intrinsically more energy-efficient (e.g., solar-powered lamps) or that are necessary for reducing energy use (e.g., insulation material) • In the meantime, WTO members could agree to work to identify areas where harmonization of energy-efficiency metrics and testing protocols is possible • Other policy actions, such as to reform subsidies to energy and to internalize emissions from combustion, would also increase uptake of energy-efficient products

16. OECD Trade and Agriculture OECD: Can energy-efficient electrical appliances be considered “Environmental Goods” ? IEA: Barriers to technology diffusion: the case of Compact Fluorescent Lamps www.oecd.org/trade Click on : “environment & trade” www.iea.org Contact Ronald.Steenblik@oecd.org