DDG Ellard: Effective trade policies essential for clean energy transition

DDG Ellard noted that trade policies can help lower clean energy costs, decarbonize supply chains, harmonize standards, redirect subsidies toward sustainability, and create new economic opportunities in emerging low-carbon markets, ultimately fostering sustainable development.

Highlighting key challenges, DDG Ellard pointed to significant tariff disparities that currently favour high-carbon goods over renewable energy equipment. For instance, while crude oil and coal face minimal tariffs, renewable technologies can incur duties as high as 12%. Reassessing these tariffs could enhance the competitiveness of renewable energy and accelerate its adoption.

DDG Ellard also highlighted the challenges arising from the 73 different carbon pricing schemes globally, which inflate compliance costs and threaten climate objectives. Trade policies can facilitate greater interoperability and collaboration on carbon pricing frameworks, helping to alleviate trade tensions and expedite the transition to sustainability, she added.

Furthermore, DDG Ellard emphasized the importance of redirecting harmful subsidies toward more beneficial objectives, highlighting that government support for fossil fuels exceeded USD 1.4 trillion in 2022. "By reallocating these funds to nature-positive initiatives, we can stimulate innovation and significantly reduce emissions," she said. She noted that the Agreement on Fisheries Subsidies, adopted by WTO members in 2022, is a valuable blueprint for future efforts on environmental sustainability.  The Agreement demonstrates how economies can collaborate across geopolitical divides and eliminate environmentally harmful subsidies while redirecting resources toward more beneficial initiatives. DDG Ellard urged members that have yet to deposit their instruments of acceptance for this groundbreaking Agreement to do so promptly.

DDG Ellard noted that the clean energy transition presents immense opportunities for developing economies rich in renewable energy resources and critical minerals. However, to fully harness this potential, targeted and effective trade policy actions are essential. These actions include aligning standards and implementing green procurement practices to establish stable frameworks that can reduce capital costs for large-scale renewable projects. WTO members are actively engaged in discussions aimed at supporting this process, exploring concrete pathways for trade-related climate actions, including promoting renewable technologies and addressing market distortions caused by fossil fuel subsidies.

DDG Ellard also noted the importance of a solid investment climate in developing economies to build investor confidence and attract financing in ways to encourage environmental sustainability.  She highlighted that more than two-thirds of WTO members, including 89 developing members, of which 27 are least-developed countries (LDCs), concluded the Investment Facilitation for Development Agreement, designed to streamline investment procedures and encourage foreign direct investment in sustainable projects.

Looking ahead to the 29th United Nations Climate Change Conference (COP29), DDG Ellard emphasized the significant opportunity for global leaders to integrate climate finance, investment, and trade, adding that the WTO Secretariat plans to co-host a Trade Day for the second year to highlight this intersection. She explained that in preparation for the last conference, the WTO Secretariat issued a 10-point set of "Trade Policy Tools for Climate Action ", launched at COP28. This publication explores how integrating trade policy options, such as reviewing import tariffs on low-carbon solutions, can help mitigate climate change impacts. The WTO Secretariat also presented a joint report with the International Renewable Energy Agency (IRENA) on "International Trade in Green Hydrogen ," providing insights into global hydrogen trade and scaling up production.

Additionally, DDG Ellard said, the WTO Secretariat's support for collaboration in the steel sector has led to the establishment of Steel Standards Principles, endorsed by over 40 organizations, aimed at promoting common methodologies for measuring greenhouse gas emissions. The WTO is also examining the role of trade in addressing the high demand for energy-related critical minerals to alleviate supply chain pressures. These initiatives reflect the diverse perspectives of WTO members, all sharing the common goal of harnessing trade to combat climate change while promoting sustainable development.

DDG Ellard concluded by emphasizing that a sustainable clean energy transition is both an environmental necessity and an economic opportunity, achievable only through collaboration. "The WTO Secretariat remains committed to supporting WTO members in creating a global trade environment that leverages trade tools to achieve sustainable environmental goals and bolster the resilience of renewable energy supply chains, all while ensuring that such efforts do not create barriers to trade", she said.