[Smart Grid Market Research] APEC Tariffs & Renewables - Zpryme Smart Grid Insights


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The Asia-Pacific Economic Cooperation recently reached a historic tariff reduction agreement on renewable energy items. Tariffs between APEC member states will be reduced to 5% or lower by the end of 2015 on listed renewable energy items. 54 items were listed for inclusion, all of which will benefit APEC members and have a positive effect on both their sustainable energy goals and their economies. Tariff reductions will first affect the renewable energy market and will include manufacturers, vendors and customers. All three groups will benefit from lowered prices, increased supply and enhanced innovation. In addition, the nation states, and the APEC region as a whole, will benefit from increased economies by way of additional jobs, increased investment, and increased growth. By evaluating the effects of other tariff reduction agreements, such as those achieved through NAFTA and other APEC agreements, predictions regarding the outcome of the tariff reduction can be made.

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[Smart Grid Market Research] APEC Tariffs & Renewables - Zpryme Smart Grid Insights

  2. 2. Table of ContentsExecutive Summary ................................................................... 2APEC Tariff Reductions .............................................................. 2Technological Effect .................................................................. 3Renewable Energy Market Effect............................................ 4Economic Effect ......................................................................... 5Results........................................................................................... 6Recommendations .................................................................... 61 [STANDARD] ZPRYME SMART GRID INSIGHTS APEC Tariffs & Renewables | October 2012Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved. www.zpryme.com | www.smartgridresearch.org
  3. 3. Executive Summary output. 1 The region also consumes 60% of the world’s energy, making the area a focus of global energy growth,The Asia-Pacific Economic Cooperation recently reached especially as the region becomes more industrialized. 2 Asa historic tariff reduction agreement on renewable energy such, Asia-Pacific “is considered to be the growth engineitems. Tariffs between APEC member states will be of the world”. 3 APEC summits frequently concentrate onreduced to 5% or lower by the end of 2015 on listed tariffs, as well as the terms of tariffs, which promote therenewable energy items. 54 items were listed for inclusion, ability of APEC members to reach collective goals such asall of which will benefit APEC members and have a green growth and liberalizing trade. In fact, tariffs onpositive effect on both their sustainable energy goals and renewable energy were recently discussed at an APECtheir economies. Tariff reductions will first affect the summit on Russky Island in Russia with a theme “Integraterenewable energy market and will include manufacturers, to Grow, Innovate to Prosper”. 4vendors and customers. All three groups will benefit fromlowered prices, increased supply and enhanced Tariffs are a tax imposed on imported goods. Protectiveinnovation. In addition, the nation states, and the APEC tariffs are intended to protect an industry from foreignregion as a whole, will benefit from increased economies competition by artificially raising prices on imported items.by way of additional jobs, increased investment, and This allows domestic items to be sold at a higher priceincreased growth. By evaluating the effects of other tariff which enables domestic firms to maximize profits. For thatreduction agreements, such as those achieved through reason, APEC has renewed its commitment to end barriersNAFTA and other APEC agreements, predictions regarding to trade investments, such as tariffs, export restrictions, andthe outcome of the tariff reduction can be made. other protectionist measures to encourage a free market zone between its members. 5 Currently, tariffs betweenThe complete renewable energy item list of 54 products APEC nations on renewable energy products are verycan be found at the following url: high, as much as 35% on some products. 6 APEC nations attended the Ministerial Meeting on September 5th andwww.apec.org/Meeting-Papers/Leaders-Declarations/2012/2012_aelm/2012_aelm_annexC.aspx 6th, 2012 and completed a decade long project which involved the compilation of a list of 54 items to beAPEC Tariff Reductions included in a renewable energy tariff reduction agreement which will result in the reduction of the tariff toThe Asia-Pacific Economic Cooperation, or APEC, is a 5% by 2015.collection of twenty-one member nations with advancedand rising economies whose aim is to collaborate oneconomic issues, such as growth and job creation. APEC 1 www.themoscowtimes.com/news/article/apec-agreement-reduces-tariffs-on-54-green-currently represents over 40% of the world’s population, technologies/467814.html 2 ecoseed.org/business/asia/15571-apec-leaders-emphasize-green-technology-in-summit44% of its international trade and 54% of total economic 3 www.tariffcommission.gov.ph/asia.html 4 www.themoscowtimes.com/special/apec/2012/apec-ministers-work-on-green-list.html 5 www.apec.org/Meeting-Papers/Ministerial-Statements/Annual/2012/2012_amm.aspx 6 www.asianewsnet.net/home/news.php?id=36131&sec=12 [STANDARD] ZPRYME SMART GRID INSIGHTS APEC Tariffs & Renewables | October 2012Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved. www.zpryme.com | www.smartgridresearch.org
  4. 4. The reasons renewable energy tariffs were discussed at the tariff up to 21%, while technology for air pollutionAPEC summit are two-fold. First, renewable energy tariffs treatment experiences a 20% tariff. Finally, technologypromote the economic growth of its member nations used to treat hazardous and solid waste is also facing upthrough improved trade. Secondly, APEC has committed to 20% tariffs in the region. The first effect of the tariffitself to promote “green economy policies as part of the reductions will be products with decreased prices beingplan to increase environmental protection and sustainable available on a much larger scale, as well as an increase indevelopment”. 7 Lowering the tariffs from 35% to 5% will competition among business entities. More products willresult in numerous economic benefits for all of the APEC be sold to more customers and increased sales willnations. Additionally, the targeting of renewable energy promote the development of new and improved productproducts will help the sustainable energy market flourish, innovations, which will result in further market growth.create growth, and spur innovation in the field. “This is Overall, decreasing tariffs between APEC members willreally a significant achievement in that it shows how APEC enable increased trade in renewable technologies, andcan lead...It allows us to accomplish the twin goals of allow the further development and improvement of theliberalizing trade and green growth” said Demetrios current products and services available to the market andMarantis, deputy US trade representative. 8 APECs for the future renewable energy markets as a whole.agreements are important not only for APEC nations, butfor the entire world because of the effects the lowered APECs tariff reduction will also spur further adoption oftariffs will have on renewable energy products and renewable energy products by virtue of the increase in thetechnology. number of products that can be introduced into the marketplace. In addition, the removal of the tariff willTechnological Effect drastically reduce the price of renewable energy technology. Projects being conducted in any part of theOver the course of several years, APEC nations drafted a APEC region will have the option of choosing from anlist of technologies that would benefit from reduced tariffs. increased variety of products at a lower cost. TheEvery APEC member contributed to, as well as ratified, the advantages of lowered tariffs will also include increasedlist. The APEC list of environmental goods includes an profits for the utilities due to the reduction in the price ofassortment of renewable energy products. Currently, renewable energy items and a decrease in the cost ofrenewable energy technologies in the region, such as solar goods sold. Subsequently, an expansion in the marketpanels and wind turbines, are subject to tariffs as high as should encourage the addition of substantial investment35%. Tariffs on environmental testing and monitoring streams to implement pilot projects, partnerships, and jointequipment between APEC countries currently face up to ventures in the region. As the Smart Grid is deployed in the20%. Technology for waste water treatment is subject to a APEC region, it is anticipated that manufacturers will work with governments and national utility firms to address their unique special needs and challenges.7 www.asianewsnet.net/home/news.php?id=36131&sec=18 www.themoscowtimes.com/news/article/apec-agreement-reduces-tariffs-on-54-green-technologies/467814.html3 [STANDARD] ZPRYME SMART GRID INSIGHTS APEC Tariffs & Renewables | October 2012Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved. www.zpryme.com | www.smartgridresearch.org
  5. 5. In addition, the collaboration of manufacturers with scale and establish competitive advantages. An increasedifferent countries will encourage standards to insure the in the number of manufacturers diving into theinteroperability of devices across the regions. Once marketplace will initiate a competition for innovation,interoperability standards have been established, improved efficiency and better products at a lower price.manufacturers will have the ability to streamline theiroperations and focus on value-added services, such as Another industry group in a position to benefit from APECincreasing the functionality of the devices. Both will tariff reductions is retail vendors. Since they have access toimprove the efficiency of the Smart Grid as a whole, and the entire APEC supply chain, they are able to purchasewill encourage the widespread adoption of renewable renewable energy products at a lower price. This, in turn,energy technologies throughout the APEC nations. enables them to offer a larger variety of products to their end-users, with a corresponding lower price to them. TheRenewable Energy Market Effect win-win results translate into higher profit margins for the vendors. In addition, retail vendors have an addedAs mentioned earlier, lowering the tariff on renewable opportunity to utilize foreign components from the APECenergy products will help the market flourish and create supply chain to create new products or services to meetgrowth and innovation in the field. One of the chief the needs of the marketplace. The vendors also enjoy thebeneficiaries of this phenomenon will come from the ability to sell their goods to a larger APEC market. Thismanufacturing industry. “Trade and investment allows them to benefit from both an increase in supplyliberalization in environmental goods will help APEC (supply of products or components from the entire APECbusinesses and citizens access important environmental region), and an increase in demand (from the entire APECtechnologies at lower cost, which in turn facilitate their marketplace). In fact, APEC stated in their Ministerialuse, and benefit the environment”. 9 Manufacturers benefit Meeting notes that businesses involved in the renewablefrom the lowered tariffs because decreased costs result in energy field will directly benefit from the tariff reduction. 11increased sales. In addition, since the manufacturers havethe ability to sell to all APEC nations, they have the ability One final group that will benefit from reduced tariffs isto drastically increase their market penetration. The consumers. When increased tariffs are imposed,manufacturers will also benefit from a reduction in consumers are forced to pay a higher price for renewabletechnical barriers to trade, thus being able to share and energy goods to cover the cost of the government feeslearn from increased trade. This practice allows for further produced by the tariff structure. This increases the priceinnovation, which will enable increased energy efficiency, not only at the point-of-sale but throughout the entirea wider energy mix, and a “transition to a lower climate value chain. When the APEC tariff is reduced, consumerseconomy with sustainable growth objectives”. 10 Finally, benefit from a reduction in price, as well as in increase inthe tariff reductions enable nations to attain economies of the supply of products. An even tastier benefit will accrue9 www.apec.org/Meeting-Papers/Ministerial-Statements/Annual/2012/2012_amm.aspx10 www.apec.org/Meeting-Papers/Ministerial-Statements/Annual/2012/2012_amm.aspx 11 www.apec.org/Meeting-Papers/Ministerial-Statements/Annual/2012/2012_amm.aspx4 [STANDARD] ZPRYME SMART GRID INSIGHTS APEC Tariffs & Renewables | October 2012Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved. www.zpryme.com | www.smartgridresearch.org
  6. 6. with an eventual reduction in energy prices and a broader and creates jobs wherever they are manufactured,energy mix. Consumers will also be able to purchase including in the United States”. 12equipment not only at a lower cost but with addedfeatures. As this cheaper and more efficient equipment is Economies will also benefit from the favorable investmentutilized, greater efficiencies are afforded for utilities that terms that the tariff reduction establishes. Investment isultimately return even more savings to the consumers. encouraged through enacting favorable terms of freeFinally, consumers and their future heirs will benefit from an trade. Increasing investment in the APEC nations spursimprovement in their environment. As more renewable further development and growth of the renewable energyenergy products are utilized, the APEC nations are better industry, increases production, decreases prices, andable to meet sustainable energy goals, such as reducing increases innovation. APEC has created an Investmentpollution, greenhouse gas emissions and the overall Facilitation Action Plan to underline the importance ofcarbon footprint. focusing on investment in numerous ways, such as transparency, international standards, IT sharing andEconomic Effect investment dispute resolution policies. APEC nations understand that improving the terms of trade willLowering tariff reductions from 35% to 5% will result in encourage investment and promote a free marketnumerous benefits for all the APEC nations, the first of economy in accordance with its mission.which will be job growth and an increase in GDP. The USTrade Representative states: “This historic outcome will APEC nations will also benefit from increased growth andmake a significant contribution to the Obama increased innovation. The September 2012 meetingAdministrations goals to increase exports and jobs, as well convened under the theme “Integrate to Grow, Innovateas its strong commitment to promoting green growth and to Prosper”. Leaders at the meeting agreed thatsustainable development.” Countries benefit from free international trade is a key component of sustainabletrade primarily through economic growth. As growth. Russian President Vladimir Putin stated “APECmanufacturers expand their operations to meet the rising states should work together to address the crucialAPEC market demand, jobs are created. In fact, after challenge of supporting growth by promoting innovationNAFTA approved the reduced tariffs, the jobs that were and the exchange of ideas”. 13 Other nations also affirmcreated are at a higher paying rate than they were. their own dedication to improving demand in theirLikewise, as the larger market encourages innovation, countries and cutting debt, thus stimulating globalworkers receive opportunities to become more skilled and economic growth. The meeting reaffirmed the 21-nationspecialized, thus offering growth and advancement in the memberships belief that through working together andjob market. United States Secretary of State, Hillary Clinton focusing on international free trade, both the economiesstates, “the APEC reduction of tariffs is positive for theUnited States. It makes green products more affordable 12 www.thefuturebuild.com/apec-cuts-tariffs-on-green-products-38740/news.html 13 www.themoscowtimes.com/news/article/apec-agreement-reduces-tariffs-on-54-green- technologies/467814.html5 [STANDARD] ZPRYME SMART GRID INSIGHTS APEC Tariffs & Renewables | October 2012Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved. www.zpryme.com | www.smartgridresearch.org
  7. 7. of individual nations, and the global economy as a whole, ratification, with US exports rising and 900,000 jobs beingcan be strengthened and experience economic growth. 14 added in the US, reaching 2.9 million from 1993-2003. 16In short, “We reiterate our strong commitment toimplement 2010 and 2011 leaders instructions to achieve The history of APEC tariff reductions in other areas alsobalance, inclusive, sustainable, innovative, and secure demonstrate the potential in APEC renewable energygrowth, and build a seamless regional economy by reductions. APEC was formed in 1989 and members havestrengthening a regional economic integration, experienced average tariff reductions of 5-16% on $2.3expanding trade, promoting green growth and trillion in goods and services. Total trade has grown 395%advancing regulatory coherence”. 15 during this time, with an average GDP of APEC nations tripling. Employment opportunities and economic growthResults also greatly improved. Due to APECs focus on trade expansion, trade increased $1.7 trillion in 1989 to $8.44When considering the implications of reducing tariffs on trillion in 2007. 17 As tariff reductions are applied torenewable energy products, it is useful to examine the renewable energy products, member nations are likely toeffects of other situations where tariffs were reduced. One experience similar benefits, such as increased trade ofexample of reducing tariffs is in the NAFTA agreements. included products, increased GDP, and increased jobs. InThe North American Free Trade Agreement established a fact, these benefits are likely to be experienced by nationsten year time frame for gradual tariff reductions between other than APEC members. Secretary of State Hillarythe United States, Canada and Mexico. Fully implemented Clinton states, “We hope this decision will inspire otherin 2008, NAFTA resulted in an immediate increase in both trading groups to emulate APECs record of trade andtrade and investment. Mexico experienced a 100+% in innovation”. 18exports, 93% of which was directly due to the NAFTAagreements. Canada experienced a 58% increase, and Recommendationsthe United States experienced a 55% increase in exportsdirectly due to NAFTA. Increased trade also created an APEC has made tremendous progress in lowering tariffs onincrease in available products and a decrease in product renewable energy products. As these tariff reductions ofprice. In addition, NAFTA resulted in an increase in jobs, up to 30% are enacted, several results are likely. First,many paying at a higher rate. Shipping costs also reducing tariffs will cause the price of imported items todecreased, and over time, the industry has become more decrease. When the amount of the tariff fee is removedcompetitive, better able to invest in improvements and from the price of the item, the overall cost of the item willmore efficient. In fact, the United States has enjoyed the decrease. This will make importing renewable energylongest period of economic growth since NAFTAs 16 www.ustr.gov/about-us/press-office/press-releases/archives/2002/january/nafta-partners-speed- elimination-tariffs- 17 www.ustr.gov/about-us/press-office/fact-sheets/2012/september/apec-environmental-goods14 www.saudigazette.com.sa/index.cfm?method=home.regcon&contentid=20120910135599 18 www.radioaustralia.net.au/international/radio/program/connect-asia/apec-nations-to-reduce-15 www.apec.org/Meeting-Papers/Ministerial-Statements/Annual/2012/2012_amm.aspx tariffs-on-goods/10133326 [STANDARD] ZPRYME SMART GRID INSIGHTS APEC Tariffs & Renewables | October 2012Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved. www.zpryme.com | www.smartgridresearch.org
  8. 8. products more attractive to foreign firms and supply willincrease. Overall trade will increase and more renewableenergy products will be available in the renewable energymarketplace. As more products are available, the marketwill innovate and a larger variety of products will beavailable. Firms that are able to develop a competitiveadvantage through specializing and creating innovativeproducts will be best poised for growth in themarketplace. Lower prices and a variety of availablerenewable energy products will also allow more customersto participate in the market and will increase demand. Inaddition, utilization of affected renewable energyproducts will produce lower energy prices overall.This trend represents numerous opportunities for thoseinterested in trading in the APEC region. First, the reductionof tariffs present increased opportunities for manufacturingand investment. The market will expand from numerous,single and independent nations to one large integratedmarket. The firms that have established themselves in theAPEC region by 2015 when the tariffs are reduced will bebest positioned to take advantage of the opportunities forgrowth. This is an excellent time for vendors to formpartnerships, participate in pilot projects, expandoperations and invest in APEC countries renewableenergy markets. By performing strategic partnerships now,the firms will be able to offer products particularly wellsuited and specialized to the individual nations needs. Inaddition, many of the member states prefer to trade withfirms that are well established in their region and haveworked with them on past projects. Firms that establishmanufacturing facilities, thus creating jobs in that areaand helping the regional economy, will also experiencegrowth as the tariffs are reduced.7 [STANDARD] ZPRYME SMART GRID INSIGHTS APEC Tariffs & Renewables | October 2012Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved. www.zpryme.com | www.smartgridresearch.org
  9. 9. About Zpryme Smart Grid Insights:Zpryme-powered Smart Grid Insights Publication, Practice andAdvisory Board help organizations understand their businessenvironment, engage consumers, inspire innovation, and take action.Zpryme Smart Grid Insights represents an evolution beyond traditionalmarket research and consulting: combining sound fundamentals,innovative tools and methodologies, industry experience, andcreative marketing savvy to supercharge clients’ success. At Zpryme,we don’t produce tables and charts; we deliver opportunity-focused,actionable insight that is both engaging and easy-to-digest. For moreinformation regarding our custom research, visit: www.zpryme.com.Zpryme Smart Grid Insights Contact:smart.grid@zpryme.com | +1 888.ZPRYME.1 (+1 888.977.9631)www.smartgridresearch.org (Zpryme Smart Grid Insights)Zpryme Credits:Managing Editor Sr. Research Analysts Research LeadMegan Dean Paula Smith Stefan Trifonov Robert LangstonDisclaimer:These materials and the information contained herein are provided by Zpryme Research & Consulting, LLC and areintended to provide general information on a particular subject or subjects and is not an exhaustive treatment ofsuch subject(s). Accordingly, the information in these materials is not intended to constitute accounting, tax, legal,investment, consulting or other professional advice or services. The information is not intended to be relied upon asthe sole basis for any decision which may affect you or your business. Before making any decision or taking anyaction that might affect your personal finances or business, you should consult a qualified professional adviser. Thesematerials and the information contained herein is provided as is, and Zpryme Research & Consulting, LLC makes noexpress or implied representations or warranties regarding these materials and the information herein. Without limitingthe foregoing, Zpryme Research & Consulting, LLC does not warrant that the materials or information containedherein will be error-free or will meet any particular criteria of performance or quality. Zpryme Research & Consulting,LLC expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitnessfor a particular purpose, noninfringement, compatibility, security, and accuracy. Prediction of future events isinherently subject to both known and unknown risks, uncertainties and other factors that may cause actual results tovary materially. Your use of these and the information contained herein is at your own risk and you assume fullresponsibility and risk of loss resulting from the use thereof. Zpryme Research & Consulting, LLC will not be liable for anyspecial, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in anaction of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of thesematerials and the information contained herein.8 [STANDARD] ZPRYME SMART GRID INSIGHTS APEC Tariffs & Renewables | October 2012Copyright © 2012 Zpryme Research & Consulting, LLC All rights reserved. www.zpryme.com | www.smartgridresearch.org