National Measures, Trade and Competitiveness Post Bali: A Dialogue on Trade, Climate Change and Development Dialogue organized by UNEP February 11, 2008 Geneva Aaron Cosbey, IISD

National Measures Subsidies Tax measures Green government procurement Carbon taxes; cap & trade schemes Standards (e.g., efficiency standards) Product bans R&D spending, technology cooperation Energy policy measures

Available at: climate_trade_competitive.pdf

Defining the Problem Competitiveness is meaningless when it is used at the level of the nation state. At that level we should just talk about productivity. We will use it at the level of firms or sectors

Two types of concerns 1.The non-Party problem: competitiveness issues arise because non-Parties don’t impose standards on their firms, sectors 2.The implementation problem: competitiveness issues arise when Parties favour firms or sectors in implementing their commitments

The non-Party Problem Paucity of research in this area Look at the rich body of pollution haven literature: –Does stringent regulation reduce market share? –Does stringent regulation affect investment decisions? (greenfield investment or migration)

Early studies found little impact, and pollution related costs at 2 – 3% of total costs. Poor methodologies though, e.g.: –Cross-sectional rather than panel data analysis –Aggregated analysis rather than sectoral analysis

Final answer? There are competitiveness impacts, on market share and on investment decisions. In most cases these are quite moderate. In specific sectors, they can be considerable. Need a sectoral analysis.

Which Sectoral Characteristics Matter? Energy intensity The ability to pass along cost increases to consumers Opportunities for abatement (technology)

Policy implications At firm level: boost ability of firms to innovate – standard competitiveness policy Sectoral level: need for sectoral research to identify vulnerable sectors, design policy accordingly

Policy implications, national level Reduce burden to be shouldered, e.g. through energy efficiency, conservation, renewables policies Regulatory design to include flexibility (e.g., market mechanisms) Trade measures

Policy implications, international level International agreement on targets for all International agreement on common approaches (carbon tax, for example)

Aaron Cosbey International Institute for Sustainable Development