Green Economy & Trade Trends, Challenges and Opportunities Key facts and findings of the report

Green Economy & Trade report The report, Green Economy and Trade – Trends, Challenges and Opportunities, explores the nexus between international trade and the green economy. It analyzes: -how the transition to a greener economy can create sustainable trade opportunities, economic growth and progress in developing countries. -how the main trade-related challenges can be addressed in order to advance economic and social development in a sustainable way. -how national capacity to deal with the challenges of the transition to a green economy can be developed. The report is a key output of UNEP’s Green Economy and Trade Opportunities Project (GE-TOP). In the next phase of GE-TOP, UNEP and its partners will, at a national level, assist countries to capture the benefits of greening trade. 1

Background Rio+20 reaffirmed trade as an engine for development and sustained economic growth. Since then, the focus has shifted from the potential risks of trade protectionism to the benefits for developing countries when implementing green economy policies. The GE&T report reflects UNEP’s aim to help developing countries capture trade opportunities arising from the implementation of sustainability standards, the integration in sustainable supply chains, and the exchange of environmental goods and services, while ensuring that these measures are neither used as trade barriers nor as green protectionist measures with trade partners and multilateral bodies. In producing this report, UNEP has benefited from the inputs of many partner organizations, as well as more than 200 experts, government representatives and stakeholders. The European Commission financially supported this project. 2

Current Trends and Opportunities Trade is a vital element of the global economy -The sum of world exports of goods and services grew at a rate of 5% per year between 2000 and 2011, amounting to US$ 22.3 trillion in Merchandise and commercial services exports share of the world’s GDP doubled since 1970 up to 29.3% in In developing countries, this share reached peaks of 45%. -Trade between developing countries is the most dynamic segment of global trade in the last decade, increasing from 39.2% of total developing country exports in 2002 to 50% in Greening trade is an imperative of our times -This expansion of trade has implied an unprecedented surge in resource consumption as well as significant increases in GHG emissions. To reverse these trends, trade must become more sustainable and responsible. 3

Current Trends and Opportunities Developing countries, and especially LDCs, whose exports are still dominated by natural resource based products and raw materials, need to urgently diversify their economies. While still representing only a small percentage of the global market, trade in certified products and in environmental goods and services is on the rise. Developing countries are well-positioned to capitalize on the opportunities to integrate into international value chains for sustainable goods and services. The transfer of environmentally sound technologies, through trade and investment-related channels, also promotes economic and social development. 4

Economic Sector Analyses The report analyses emerging opportunities and challenges in six economic sectors – agriculture, fisheries, forestry, manufacturing, renewable energy and tourism – all of which are particularly promising in a transition to a green economy, especially for developing countries. Each of the sectoral chapters includes case studies and - reviews the environmental and economic context for greening the economy - presents green economy measures and assesses the opportunities and challenges they imply for developing countries, and - discusses enabling conditions, such as policy tools, market based instruments, the role of national and international frameworks, and relevant actions that can help countries benefit from these new markets. 5

Economic Sector Analyses Agriculture Large multinational companies made sustainability commitments, which will further drive demand for sustainable agricultural and fishery products. The organic agricultural market is projected to rise from US$ 62.9bn in 2011to US$ 105bn in Increasing demand for sustainable and/or organic products (e.g. organic tea production increased by 2000% between 2005 and 2009) Fisheries and Aquaculture Wild-capture fisheries – already certified or in full assessment – records annual catches of around 18 million metric tonnes. This represents about 17% of annual global catches, while demand far outstrips supply. Sales of certified aquaculture seafood is forecasted to increase from US$ 300mln in 2008 to US$ 1.25bn in

Economic Sector Analyses Forestry Illegal logging and processing is worth between US$ bn a year. Certification schemes like PEFC or FSC can significantly increase transparency in the forestry sector (2013: 10% of global forest resources, which is close to 400mln hectares, are already certified). Certified products sales are worth more than US$ 20bn per year; currently, demand outstrips supply Price premiums for certified woods range between 15-25% Non-timber forest products (NTFPs) fit high-value markets Manufacturing Manufactured products with environmentally friendly designs and sustainability standards have an advantage in international markets. Moreover, ISO certifications on environmental management awarded increased by 1500% between 1999 and Increasing energy- and resource efficiency in processes and production methods allows firms to maintain or increase competitiveness in international markets. 7

Economic Sector Analyses Renewable Energy The use of renewable energy could save an equivalent of gigatons of CO 2 emissions between 2010 and The global market in low-carbon and energy efficient technologies, which includes renewable energy supply products, is projected to nearly triple to US$ 2.2 trillion by Developing countries significantly increased their exports of renewable energy equipment (e.g. solar panels) and expanded their potential to export electricity from renewable sources. Tourism Tourism generates large export revenues for developing countries and is a key driver of growth for the world economy (tourists account for >9% of global GDP, more than one billion tourists in 2012). Ecotourism, which focuses on nature-based activities, is the fastest growing sub-sector of the sustainable tourism industry. Many developing countries have a comparative advantage in ecotourism, e.g. Costa Rica generates US$ 5mln a year with entrance fees to protected areas. Countries need to preserve their natural environments to be attractive as tourism destinations. 8

Enabling Conditions for Greening the Trade Investment and spending. Public investment in key economic infrastructure, technical assistance, targeted education and training programmes, and access to sustainable resources, such as electricity from renewable energy sources Market-based instruments. Phasing out environmentally harmful subsidies; introduction of pricing policies that include environmental and social costs of production and consumption National regulatory frameworks, that support green industries and incorporate sustainable development considerations in national development plans and export promotion strategies Enhancing dialogue and capacity building. International organization have an important role in building capacity, providing research and data, and increasing awareness International and regional frameworks. International frameworks, such as the WTO, can help liberalize trade in environmental goods and services, and provide opportunities for collective action to address global challenges. Regional trade agreements, if properly designed, also provide opportunities to promote sustainable practices and drive the policy reforms needed. 9

Challenges on the Way to Greener Trade Obstacles such as low levels of literacy, problems in accessing finance, poor transport services and economic infrastructure, and lack of support by public institutions, all hinder the ability of producers and service providers to comply with sustainability certification requirements. The complexity of the requirements that producers and service providers have to meet to access sustainable value chains. These can include sanitary and phyto- sanitary or technical requirements, coupled with the proliferation of private standards. Compliance with more requirements can be costly, notably for small and medium-sized enterprises, and can necessitate technologies and know-how that may not yet be available in developing countries. UNEP will continue to help developing countries overcome these challenges. Following this report, UNEP will focus on applying these findings in conjunction with partners through quantitative and policy assessments at the national and sectoral level. 10

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