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CLIMATE CHANGE AND
CARBON BARRIERS TO
TRADE
PRESENTED AT
THE ENERGY AND RESOURCES INSTITUTE
By Raktim Ray (Intern)
Resourc...
Linking climate change to trade.
The North-South divide
Trade instruments used for the purpose of
distorting free trade...
R&D investments to reduce GHG emissions involves
• Higher compliance Costs
• Higher product prices
Stiff competition from ...
Implementation of greener technology is
difficult due to high costs and strict IPR whereas
other issues domestically needs...
The Cancun Climate Conference held between 29th
November-11th December 2010 had some useful
highlights:*
Establishment of ...
17%
10%
73%
INDIA:EXPORT VOLUME BREAKUP
USA UK,France & Germany Others
21%
8%
71%
CHINA:EXPORT VOLUME BREAKUP
USA UK,Franc...
In all the cases the US is the leading market for
Exports followed by the EU with the US being the only
country to have im...
Understanding the existing regulations /policies on trade barriers.
•Mainly developed countries as they are footing the ma...
US
Waxman-Markey Bill
European Union
French prime minister of 2006
suggested that countries who do not
sign up for a post ...
Newly included Part F to Title VII entitled Ensuring Real Reductions in Industrial
Emissions has two subparts:
Emission Al...
• Establishing an Emission allowance rebate program
commencing no later than 30th June 2011 for eligible
industrial sector...
Imports of the countries which would be exempted
are based on conditions laid down in the bill.
Any country determined to ...
0.00
1000000.00
2000000.00
3000000.00
4000000.00
5000000.00
6000000.00
7000000.00
China Russia India Korea Iran Saudi
Arab...
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
China Mexico Korea Venezuela Malaysia Saudi Niger...
The previous
graphs
contained data
pertaining to
the year 2006
or averaged
around 2006
INDIA belongs
to both the lists
and...
0.00
500.00
1000.00
1500.00
2000.00
2500.00
3000.00
3500.00
4000.00
4500.00
NTRL OR
CLTRD
PRLS,PRCS
OR
SEMIPRECS
STNS,PRE....
• Data representation
carried out at the two
digit HS code level
and averaged around
2006.
• Shows the sectors
most vulner...
To arrive at an estimate of the GHG emission levels of the of
the sectors, data was collected from the CMIE database
regar...
Identifying the key industrial sectors
based on the level of energy consumption
and export share.
Arranging data on the am...
DATA SOURCES
ALL DATA ARE SECONDARY IN NATURE
DGFT website: Export data to the US from India
were collected according to ...
CMIE database: Sector wise fuel and electricity
consumption data of all companies registered to
the database for the purp...
Even if any other measures of a similar kind does come into being, the time of
implementation(2020) is a long way away and...
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CLIMATE CHANGE AND TRADE

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CLIMATE CHANGE AND TRADE

  1. 1. CLIMATE CHANGE AND CARBON BARRIERS TO TRADE PRESENTED AT THE ENERGY AND RESOURCES INSTITUTE By Raktim Ray (Intern) Resources and Global Security Division
  2. 2. Linking climate change to trade. The North-South divide Trade instruments used for the purpose of distorting free trade. •tariffs • Border Tax measures •non-tariff barriers •Quotas •Product standardization
  3. 3. R&D investments to reduce GHG emissions involves • Higher compliance Costs • Higher product prices Stiff competition from products of developing nations who are not cutting back on emissions as a result of trade Given the present scenario it is not possible for only the developed nation to take the burden alone
  4. 4. Implementation of greener technology is difficult due to high costs and strict IPR whereas other issues domestically needs to be taken care of for the sake of growth. Burden should be borne by the developed nations because their contribution to environmental degradation is much more than developing nations.
  5. 5. The Cancun Climate Conference held between 29th November-11th December 2010 had some useful highlights:* Establishment of Green Climate Fund(GCF) to support projects, programmes and other activities in developing countries, using thematic funding windows. Commitment by developed countries transfer $100 billion a year by 2020 to developing countries for adaptation and mitigation. Invitation to developed country parties to submit information on resources for fast-start financing and long-term finance. Scaled-up, new and additional, predictable and adequate funding for developing countries for GHG reduction. *Data source: International Institute for Sustainable development (IISD)
  6. 6. 17% 10% 73% INDIA:EXPORT VOLUME BREAKUP USA UK,France & Germany Others 21% 8% 71% CHINA:EXPORT VOLUME BREAKUP USA UK,France & Germany Others
  7. 7. In all the cases the US is the leading market for Exports followed by the EU with the US being the only country to have import shares in double figures. 18% 8% 74% BRAZIL:EXPORT VOLUME BREAKUP USA UK, France and Germany Others 11% 19% 70% S.AFRICA:EXPORT VOLUME BREAKUP USA UK, France and Germany Others
  8. 8. Understanding the existing regulations /policies on trade barriers. •Mainly developed countries as they are footing the major costs for climate change. The countries framing the policies: •Mainly developing countries due to their large share of exports to developed countries and also due to incomplete implementation of greener technology. The countries being affected: •Identifying the sectors that are most vulnerable •Overall impact on the volume of trade between countries Estimating the impact on export volumes as a result of the trade barriers:
  9. 9. US Waxman-Markey Bill European Union French prime minister of 2006 suggested that countries who do not sign up for a post 2012 international treaty on climate change could potentially face extra tariffs on their industrial exports. In early 2008 the EC discussed the idea of implementing a de-facto carbon tax on products of countries which do not similarly restrict their GHG emissions. These policies pose an initiative for conflict between the two parties because the clauses are not in tandem with the WTO agreements and the agreements in Article XX under GATT
  10. 10. Newly included Part F to Title VII entitled Ensuring Real Reductions in Industrial Emissions has two subparts: Emission Allowance Rebate Program International Reserve Allowance Program Introduction and passing of the bill by the house of representatives on 26th June 2009. The “American Clean Energy and Security Act of 2009” authored by US representatives Henry Waxman and Edward Markey.
  11. 11. • Establishing an Emission allowance rebate program commencing no later than 30th June 2011 for eligible industrial sectors, to distribute emission allowances to GHG emitting entities in the US domestic eligible industrial sectors Emission Allowance Rebate Program • To establish an International Reserve Allowance Program no later than 30th June 2018, which would require US importers to purchase and submit international reserve allowances as a condition for being able to import into and sell in the US, goods produced outside the US. International Reserve Allowance Program Our main focus will be on the second part
  12. 12. Imports of the countries which would be exempted are based on conditions laid down in the bill. Any country determined to meet any of the standards provided in section 767(c). Any foreign country that the United Nations has identified as the least developed of the developing countries Any foreign country that the president has determined to be responsible for less than 0.5% of the total world emission of GHGs and less than 5% import of covered goods to the US with respect to that industrial sector.
  13. 13. 0.00 1000000.00 2000000.00 3000000.00 4000000.00 5000000.00 6000000.00 7000000.00 China Russia India Korea Iran Saudi Arabia South Africa Mexico Indonesia Brazil ThousandtonsofCO2 GHG Emission Level After exclusion of the countries based on the above criteria, the top 10 GHG emitting countries are listed here
  14. 14. 0 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 China Mexico Korea Venezuela Malaysia Saudi Nigeria Brazil Thailand India in1000dollars Export Volume After exclusion of the countries based on the above criteria, the top 10 countries with the highest volume of exports to the US are listed here.
  15. 15. The previous graphs contained data pertaining to the year 2006 or averaged around 2006 INDIA belongs to both the lists and will most certainly fall under the purview of the bill should it come into effect. Another major and obvious choice from the graphs is China
  16. 16. 0.00 500.00 1000.00 1500.00 2000.00 2500.00 3000.00 3500.00 4000.00 4500.00 NTRL OR CLTRD PRLS,PRCS OR SEMIPRECS STNS,PRE. METALS,CL AD WITH PRE.METAL AND ARTCLS THEREOF;I MIT.JEWLR Y;COIN. ARTICLES OF APPAREL AND CLOTHING ACCESSORI ES, NOT KNITTED OR CROCHETE D. OTHER MADE UP TEXTILE ARTICLES; SETS; WORN CLOTHING AND WORN TEXTILE ARTICLES; RAGS ARTICLES OF APPAREL AND CLOTHING ACCESSORI ES, KNITTED OR CORCHETE D. NUCLEAR REACTORS, BOILERS, MACHINER Y AND MECHANIC AL APPLIANCE S; PARTS THEREOF. ARTICLES OF IRON OR STEEL IRON AND STEEL ELCTRCL MCHINRY & EQPMNT & PRTS THEREOF; SOUND RECRDRS & REPRDCRS, TELEVSN IMAG & SND RECRDRS & REPRDCRS & PRTS. ORGANIC CHEMICALS CARPETS AND OTHER TEXTILE FLOOR COVERINGS . Series1 4414.45 1701.54 933.06 879.36 783.01 664.27 625.32 607.27 535.80 453.86 inmilliondollars Sectoral trade with the US: Top 10 sectors
  17. 17. • Data representation carried out at the two digit HS code level and averaged around 2006. • Shows the sectors most vulnerable to the implementation of border tax measures on export revenues. • Sectors were afterwards looked into at the 4 digit level for further detailed study regarding the GHG emission levels.
  18. 18. To arrive at an estimate of the GHG emission levels of the of the sectors, data was collected from the CMIE database regarding inputs quantities. Key inputs considered are Mineral fuels Coal Petroleum oil and gases Fuel oils Fuel wood Electricity energy
  19. 19. Identifying the key industrial sectors based on the level of energy consumption and export share. Arranging data on the amount of output in physical quantity of the sectors collected from the ASI where the classification is on the basis of NIC codes. Tabulating and correlating the NIC codes for each of the sectoral classification based on the CMIE database.
  20. 20. DATA SOURCES ALL DATA ARE SECONDARY IN NATURE DGFT website: Export data to the US from India were collected according to HS classification both at the 2 and 4 digit levels. United States International Trade Commission (USITC) website: US import data to all countries not excluded from the reserve program list based on NAICS classification. UNEP Geostat database: GHG emissions level for the calculation of energy intensity for all countries included in the reserve program list.
  21. 21. CMIE database: Sector wise fuel and electricity consumption data of all companies registered to the database for the purpose of calculating overall carbon content of the products and industries. Annual Survey of Industries(ASI): Quantity of output produced in the various sectors according to NIC 3 digit classification containing products classified under ASICC UN comtrade database for export volumes of developing countries to the US and EU
  22. 22. Even if any other measures of a similar kind does come into being, the time of implementation(2020) is a long way away and the whole trade scenario might change and along with it the global effects. India’s export patterns might change sector wise as well as overall with the US China might emerge as the major exporter of manufactured products to the effect of monopolizing trade with developed nations Though the bill has minute possibilities of being put into effect, nevertheless the study would help us to identifying the sectors most potent to fall pray to trade distortions

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