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Fiscal and Trade Policy Drivers

Steven Stone

Chief, Economics and Trade Branch

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ModelingEnabling Conditions

AgricultureBuilding

CitiesEnergyFinanceForest

ManufacturingTourism

TransportWasteWater

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UNEP – GREEN ECONOMY INITIATIVE

• Selecting and driving transformation in key sectors - critical or highly material for greening the global economy

Green Economy: Approach and Focus

UNEP – GREEN ECONOMY INITIATIVE

• On enabling conditions (finance, subsidies, taxes, regulations, and related reforms that achieve GE objective)

FOCUSAPPROACH

taxes, regulations

subsidies

finance

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Fisheries

UNEP – GREEN ECONOMY INITIATIVE UNEP – GREEN ECONOMY INITIATIVE

Source: Froese and Pauly (2004)

Business as usual is not an option: State of fish stocks

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Reversing harmful subsidies

Investments

Strengthening political consensus

Fiscal policies

Type of subsidies

Impact Example Amount(US dollars in 2003)

Good Enhance the conservation of fish stocks over time

Funding fisheries management/ Using government spending to operate marine protected areas

$ 7.9 bn

Bad Lead to overcapacity and excessive catches

Fuel subsidies $ 16.2 bn

Ugly Can either conserve a fish-stock or deplete it further

Buyback (or decommissioning) to fishing vessel to reduce a fleet size

$ 3 bn

Types of subsidies – leave $ 8 bio ‘good’ subsidies: MPA’s, fleet buyback, skills training

Source: Sumeila et al (2006)

Example: Fisheries sector

UNEP – Green Economy Initiative

Fisheries

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Fisheries

UNEP – GREEN ECONOMY INITIATIVE UNEP – GREEN ECONOMY INITIATIVE

Source: Fogarty & Botsford, (2007) , Oceanography 20 (3); pp 112-123

73% of the US haddock catch are taken within 5 km of a fishery closed area, off the New England Coast.

Distribution of fishing effort around Georges Bank closed areas

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Green economy: What leaders are saying

“What is critical for Barbados and other small island developing states is that the green economy debate recognizes our structural vulnerabilities, offers a model to assist us in further realizing our sustainable development aspirations and creates the institutional platform that enables us to participate in innovative partnerships to help save the planet.”

H.E. Freundel Stuart , Prime Minister of Barbados, 28 March 2012“China will honor its commitment to growing a green economy and promoting the conservation culture. … The key is to combine economic growth, equality and of course the protection, preservation or even the rehabilitation of natural resources or natural capital.”

H.E. Hu Jintao, President of China, 12 November 2011

“It seems to me that structural economic transformation and green development in Africa not only go together but are virtually inseparable.” 

H.E. Meles Zenawi, Late Prime Minister of Ethiopia, 25 November 2011

“Our green economic mantra is pro-growth, pro-job, pro-poor, pro-environment – and of course pro-business….The success of this program (REDD+ Initiative) is critical to our success in pursuing a green economy. Therefore, let me once again invite all captains of industries here to contribute to the creation of a green economy and low-carbon future.”

H.E. Susilo Bambang Yuhoyono President of Indonesia, 28 April 2011

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Green economy: What leaders are saying

“If we want to solve financial and environmental crises, we need to find a solution for both – and that solution involves green growth - sustainable growth.”

H.E. Felipe Calderón, Former President of Mexico, January 2011

“We have spoken a great deal about using cleaner sources of energy. Today we reaffirm that commitment and determination to move towards a low-carbon economy.”

H.E. Jacob Zuma, President of South Africa, 5 December 2011

“The challenge of attaining a green economy and sustainable society is huge, but there is no alternative. …We need a better common understanding of green economy, and Rio+20 could get us closer to such an understanding.”

H.E. Fredrik Reinfeldt, Prime Minister of Sweden, 11 May 2011

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Rio+20 Outcomes on Green Economy

• Support for those countries wishing to transform their economies through sharing knowledge, best practices, and capacity development

• Going “beyond GDP”

• Sustainability reporting

• Sustainable Development Goals

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Demonstrating that Greening is a new engine for growth,

addressing hurdles & enabling conditions

ecosystems & biodiversity, capturing these values, and

Green Economy Report

TEEB

Green Growth

Knowledge Platform

Networking with Civil

Society and Private Sector

Inter-agency

Partnerships

Advisory Services

Green Jobs Initiative

UNEP, WB, OECD, GGGI

ILO, ITUC, IOE, UNEP

UNEP, UNDP, ILO, Governments,

National Institutions

UNEP working with 40 Agencies in the UN

system

GEC, GGGF, UN Global Compact

GEC Green Economy Coalition ITUC International Trade Union ConfederationGGGF Global Green Growth Forum OECD Organization of Economic Cooperation & DevelopmentGGGI Global Green Growth Institute UNDP United Nations Development ProgrammeILO International Labour Organization WB World BankIOE International Organization of Employers

PAGE – Partnership for Action on Green Economy

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Advisory Services Countries

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Green Economy and Trade – assessing risks and opportunities

• GE Transition not without challenges, particularly for poor

• Previous studies focused on potential risks, including related to trade protectionism

GE needs to be implemented in a fair, open and transparent manner to mitigate risks

• BUT, number of trade opportunities that can create and strengthen developing countries’ capacity to benefit from a transition to a GE and contribute to poverty reduction

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Preliminary findings – Selected Sectors

• GE transitions can create economic benefits, particularly for developing countries, to expand their presence in export markets for sustainable food, products and services

• Green trade opportunities also exist in terms of value-addition relationships, e.g. through certification

• Due to growing wealth and changing consumer preferences, and growth of cross-border trade, demand for sustainable goods and services is likely to further increase

• GE shift can also yield significant environmental and social benefits

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Agriculture

• Strong comparative advantage for many developing countries, inter alia:

– suitable climatic conditions and rich biodiversity

– less contaminated soils

• Organic:

– 2010: $59 billion > 2015: $105 billion

– most production is in developing countries (> 75%), most consumption in developed countries (> 95%)

– development of regional organic trade (e.g. South America)

– increasing demand for value-added organic products (e.g. juices, spices)

• Higher price premiums

• Improved trade balances: use of local, instead of costly imported, inputs and increased exports of sustainable agrifood products

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Fisheries• Demand for certified fish products

(such as eco-label products) has gained momentum

• Sustainable procurement policies of large international food firms are likely to further drive demand

• Processing: developing countries yet to exploit additional gains with product certification:

– Growth areas include frozen organic fish and sustainable aquaculture

• Tourism: recreational fishing, whale watching, scuba diving, etc.

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Forests• Developing Countries Trade and Export

opportunities in the forest industry include:

– certified timber

– recycled timber

– non-timber forest products (NTFPs): food items, pharmaceutical ingredients and cosmetic products, etc.

– forest tourism

• Currently, demand outstrips supply

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Manufacturing• Switching to more efficient

manufacturing will save energy and resources and enable developing countries to produce goods for export at a lower price -> increased competitiveness

• Potential to generate new business from remanufacturing: -> technology and knowledge transfer, increased employment and exports

• Eco-labels to market sustainably manufactured products -> growing demand in developed countries

• New greener products, e.g. energy efficient products like light bulbs -> new market opportunities

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Renewable Energy

• Growing export opportunities for raw materials and components for renewable energy supply products (e.g. solar panels, wind turbines)

• Entry into supply chains through trade in intermediate goods key opportunity for developing countries (encouraged by government policies, such as feed-in tariffs)

• Exports of renewable energy: many developing countries have abundant renewable energy resources (potential to export), including solar energy, wind power, geothermal energy, biomass and hydro

• Potential opportunities for sustainable second-generation biofuels

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Wrap- Up: What are the key policy drivers? On the domestic level…

• Providing support to exporters to meet standards in international markets

• Creating, maintaining and enforcing a stringent domestic standards

• Changing fiscal policy (e.g. phasing out environmentally harmful subsidies) and employing new market-based instruments (e.g. green public procurement)

• Promoting innovation (i.a. investment in education and training, support for R&D)

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On the international level?

• Concluding the WTO Doha Round on:

(i) reduction of tariffs and non-tariff barriers to trade in EGS

(ii) discipline of fisheries and agriculture subsidies

• Creating an agreement on a joint effort to bring new technologies more quickly to the market (open innovation schemes, international R&D, publicly backed patent pools, etc.)

• Harmonising or granting equivalency of standards – ensure that different standard schemes for sustainable producers do not exclude developing country producers

• Promoting public awareness to increase consumer demand for sustainable food, products, and services

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Questions for Discussion

• How to ramp up and effectively support those countries showing leadership in low income countries?

• How to best leverage financing for green investments in today’s economies?

• How to begin creating trust at the international level in facing collective challenges?

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Thank you!

steven.stone@unep.org