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A meeting room in Geneva may seem a world away from the rural reaches of Africa and Asia, but the process that began at World Trade Organisation (WTO) headquarters earlier this week could affect millions around the globe.
The international negotiations to discuss tarriffs on environmental goods, such as photovoltaic panels, wind turbines, wastewater filters and air pollutions scrubbers, could see increased access to affordable and sustainable energy.
Nearly one-fifth of the global population – 1.3 billion people – still live without electricity. More than 95% of those people live in the global south. In sub-Saharan Africa, which has the lowest electrification rates in the world (pdf), only 8% of the population in rural areas has access to electricity from the grid.
Unsurprisingly, research has shown (pdf) a strong correlation between a country's per capita energy consumption and its ranking on the human development index (HDI). The same research also gives us a glimmer of hope: at the lowest levels of development, a modest increase in energy consumption can generate substantial increases in a country's HDI.
To tackle the current gap in energy access, the UN's Sustainable Energy for All campaign has set itself the ambitious goal of achieving universal access to modern energy services by 2030. This will be no small feat. According to the World Bank (pdf), in order to increase global use of renewable energy from 13% of consumption to 30% to 40% by 2050, the world will need an additional 17,000 wind turbines, 215m square meters of solar panels, and 80 solar power plants every year for the next 40 years.
Reducing barriers to the trade in environmental goods can significantly cut the costs of renewable technologies, which will be a crucial step in the scaling up of wind and solar. Trade in sustainable energy goods and services is currently distorted by tariffs, subsidies, and complicated and conflicting standards – all of which make the products more expensive for consumers.
The WTO negotiations will aim to eliminate tariffs on environmental goods. Which goods will – and won't – be on the list will be one of the primary challenges that the talks will have to tackle. Fourteen governments are involved in the talks, nearly all of which are developed or emerging economies, including the EU, the US, and China.
Most of the countries involved already have fairly low tariffs on environmental goods, but there are exceptions. China, for example, imposes a 35% tariff on solar water heaters and an 8% tariff on wind power generators, as does Korea. Such tariffs represent an extra expense tacked on to the cost of renewable energy.
Developing countries may not be sitting at the negotiating table, but that doesn't mean they won't be affected by a trade deal on environmental goods. In fact, once an agreement is reached, its terms may be extended to all 160 countries that are members of the WTO. That means that countries from Angola to Zimbabwe would be able to gain much easier and more affordable access to the technologies they need to develop modern, sustainable energy systems.
The impacts of such an outcome could be significant. At the moment, Cameroon, Congo, Cote d'Ivoire, and Nigeria all apply tariffs of 20% (pdf) on solar lamps; in Tanzania, Zambia, and Zimbabwe, the rate is 25%. Meanwhile, solar panels imported into Cameroon, Congo, DRC and Gabon are given a 10% import tariff. An environmental goods agreement would encourage countries to get rid of those tariffs, making renewable energy solutions that much more affordable for their domestic consumers.
Certainly, tariffs aren't the only barriers. High capital costs, a lack of access to finance, and low purchasing power of those who live off the grid are all significant obstacles, which other processes will need to tackle. But the trade component is key. At the global level, an agreement to eliminate tariffs on environmental goods would expand trade in renewable energy products by around £110m each year (pdf), roughly 12% of the current total.
But an agreement wouldn't just bring down costs and increase trade volumes. An ambitious deal would send a clear signal that free trade in environmental goods is critical to a future of accessible, sustainable energy. It would also be good news for the WTO and for the long-running climate change negotiations, both of which are in dire need of achievements to celebrate.
Peter C Brun is managing director of the Seti Alliance. Follow @SETI_Alliance on Twitter.
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