box 3.1: a sustainable energy trade agreement (SETA)
In the region, one of the mechanisms by which trade and investment is facilitated is through the ASEAN Free Trade Area (AFTA) agreed by the 10 member countries. The two primary objectives of the AFTA are i) to increase ASEAN’s competitive edge as a production base in the world market through the elimination of tariffs and non-tariff barriers within the region, and ii) attract more foreign direct investment to ASEAN. Moreover, in November 2012, in its determination to beat the global economic slowdown, the heads of states or governments of the member countries and its main trade partners namely Australia, China, India, Korea, Japan and New Zealand officially kicked off negotiations for the Regional Comprehensive Economic Partnership or RCEP. The RCEP sets out the general principles for broadening and deepening the ASEAN’s engagement with its free trade agreement (FTA) partners and this milestone signalled the determination and commitment of ASEAN to play the lead and central role in the emerging regional economic architecture. In order for the ASEAN to fast-track the deployment of renewable energy goods and services in the region, it is imperative for AFTA to start addressing some of these traderelated barriers. Trade in these goods and services are affected
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To overcome these different factors, it may be worthwhile for ASEAN to consider another fresh methodology that accounts for an integrated view of the renewable energy sector while simultaneously addressing trade-related barriers. A key concept that is now being considered and debated on is the Sustainable Energy Trade Agreement or SETA which is a way of bringing together countries interested in addressing climate change and longer term energy security. There are various possible ways that could be conceived for such an agreement in terms of structure, scope of issues and market barriers to address. One of the advantages of SETA is that it could be a stand-alone pluri-lateral regional agreement outside of the AFTA, which would also be open to other non-ASEAN traderelated partners.
RENEWABLE ENERGY FINANCING BASICS
This is where trade policy comes in since it can contribute by lowering barriers to market access for sustainable energy goods and services, particularly renewables. Often, however, trade and domestic sustainable energy policies are designed to restrict access to competitively priced goods and services for sustainable energy producers because while policy makers aim to lower the costs of renewable energy production, they often also seek to promote the domestic manufacturing of renewable energy equipment and the provision of services. This is because the renewable energy sector is viewed as an engine for job creation and rightly so. Other trade and market barriers are also triggered by existing domestic laws and measures linked to investment, government procurement, competition policy and trade facilitation, or in some cases their absence. Diversity of product-related standards and even the absence of standards also hamper trade and diffusion of renewable energy equipment, as well as energy efficient products.
by rules and agreements developed in regional and bilateral forums. In some cases, trade in renewable energy goods and services is also affected by negotiating and rule-making forums set up to address climate change issues such as the United Nations Framework Convention on Climate Change or even on issues of energy transit under the International Energy Charter Treaty where ASEAN has an observer status.
implementing the energy [r]evolution |
A rapid scale-up and deployment of renewable energy and energy efficiency technology systems could significantly reduce the emissions responsible for global warming. Switching to cleaner and low-carbon transport fuels and technologies also contribute positively toward achieving this goal. However, efforts to increase renewable energy uptake require power producers to keep costs of energy generation as low as possible. Despite the fact that market incentives such as the feed-in tariffs and other tax breaks help, lowering the costs of equipment and services in the ASEAN region used to produce renewable power could also play an essential role in facilitating the scale-up process.
© GP/PETER CATON
image SOVARANI KOYAL LIVES IN SATJELLIA ISLAND AND IS ONE OF THE MANY PEOPLE AFFECTED BY SEA LEVEL RISE: “NOWADAYS, HEAVY FLOODS ARE GOING ON HERE. THE WATER LEVEL IS INCREASING AND THE TEMPERATURE TOO. WE CANNOT LIVE HERE, THE HEAT IS BECOMING UNBEARABLE. WE HAVE RECEIVED A PLASTIC SHEET AND HAVE COVERED OUR HOME WITH IT. DURING THE COMING MONSOON WE SHALL WRAP OUR BODIES IN THE PLASTIC TO STAY DRY. WE HAVE ONLY A FEW GOATS BUT WE DO NOT KNOW WHERE THEY ARE. WE ALSO HAVE TWO CHILDREN AND WE CANNOT MANAGE TO FEED THEM.”
In terms of scope of issues and market barriers to address, other possibilities also exist within a SETA. One phase can address clean energy supply goods and services of solar, wind, small hydro, biomass, geothermal and transport-related biofuels. Another phase could address the scope of energy efficiency products and standards, focusing on priority sectors for greenhouse gas mitigation as identified by the Intergovernmental Panel on Climate Change (IPCC) . These sectors are buildings and construction, transportation and manufacturing. Policy makers may discuss issues on a thematic basis or proceed incrementally on an issue by issue agenda. It is worthy to bear in mind however that these approaches has its own set of advantages and disadvantages. But regardless of the approach to be adopted, policy makers should ensure that the “development dimension” is reflected in the modalities, including meaningful provisions on facilitating access to climate-related technologies, technical assistance and capacity building. The SETA is not a cure-all remedy for all trade-related issues and challenges on renewable energy. But while that is true, a SETA in ASEAN might be able to facilitate innovative approaches to opening up and liberalizing renewable energy goods and services. It is a way to provide a trade climate that is conducive to assessing the linkages between sustainable energy goods and servies where rules and discipline pertaining to renewable energy could be clarified and take shape. In addition to its catalysing effect on regional trade in a sector of huge importance to global mitigation efforts, such a sustainable energy trade agreement could constructively inform and perhaps even shape the course and direction of future negotiations at the UNFCCC.
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