Green growth policies confront firms and workers with adjustments that may create welfare costs for different segments of the population and cause reductions in near-term actual versus potential gross domestic product. There is little evidence on the cost of adjustment to climate change measures, and only limited evidence for more general environmental policies, especially in developing countries. Therefore, this paper canvasses the research on adjustment costs to trade policies to draw analogies and highlight differences compared with the potential impacts of green growth policies. Trade policies affect prices and work directly on technology choice. In the presence of adjustment costs, firms may experience impacts on wages, employment, and incentives to adopt alternative technologies. Both types of trade policy impacts may be amplified by technology availability and credit constraints. Many green growth policies are likely to work via the same mechanisms, that is, taxes on emissions or changes in technology requirements. However, trade liberalization is typically seen as offering higher total incomes, albeit with winners and losers.
This paper studies the reality and the potential for green industrial policy. It provides a summary of the green industrial policies, broadly understood, for five countries. It then considers the relation between green industrial policies and trade disputes, emphasizing the Brazil-United States dispute involving ethanol and the broader United States-China dispute. The theory of public policy provides many lessons for green industrial policy. The authors highlight four of these lessons, involving the Green Paradox, the choice of quantities versus prices with endogenous investment, the coordination issues arising from emissions control, and the ability of green industrial policies to promote cooperation in reducing a global public bad like carbon emissions.
What kind of clean-energy support measures can be maintained under international trade rules and what cannot? Policy certainty reflected within a clear and coherent trade and energy governance regime is critical for boosting investor confidence and fostering clean energy investments. Ambiguity on clean energy support measures within WTO rules could cast a chilling effect on domestic efforts to scale up sustainable energy. One way of dispelling such ambiguity is through a possible sustainable energy trade agreement (SETA). This paper emphasises the importance of understanding what are the types of clean energy subsidies countries usually provide, why countries provide them, and how they fit into existing legal mechanisms. A SETA, by simultaneously addressing these questions and clarifying existing WTO subsidy rules, would add to the certainty and predictability of a country’s trade and investment climate.
Climate change is an unprecedented challenge facing humanity today, one that requires a quick and concerted response. With this context in mind, a rapid scale up in the deployment of renewable or sustainable energy sources is essential in order to reduce the emissions responsible for global warming. In this paper, Gary Hufbauer and Jisun Kim examine the conditions necessary for achieving a credible, low cost alternative to fossil fuel-based energy, placing an emphasis on how trade policy can be used to spur development in the sector, and the key issues that need to be addressed in order to accomplish a sustainable energy trade agreement (SETA). This publication is a joint effort by ICTSD, the Global Green Growth Institute (GGI) and the Peterson Institute for International Economics (PIIE).
This paper analyses the existing legal frameworks within which a possible Sustainable Energy Trade Agreement (SETA) could be negotiated to address energy-related trade governance and the resulting legal challenges and opportunities. It looks at a number of options under which a SETA could be given legal shape within and outside the World Trade Organisation (WTO) and assesses the pros and cons of the various approaches. It touches on a number of important considerations, such as the negotiating procedures, issues of accession, relationship to existing WTO rules and obligations, and dispute settlement. The paper also puts forward arguments as to why the WTO would provide the best forum to house such an agreement. The paper, produced by the International Centre for Trade and Sustainable Development (ICTSD), is part of a joint initiative on the promotion of sustainable energy, undertaken by the Global Green Growth Institute, the Peterson Institute for International Economics and ICTSD.
This summary was prepared by Eldis.