Trade powers energy transition and green job creation in developing countries
The world urgently needs to reduce greenhouse gas emissions and this requires a rapid shift toward renewable energy. A new report shows how trade can help that happen.
Energy generation produces more greenhouse gases than any other human activity – around 75%. Last year, under the United Nations Framework Convention on Climate Change, governments agreed to triple renewable energy capacity by 2030. Scientific evidence indicates that this is the most effective way to limit global temperature rise to no more than 1.5°C above pre-industrial levels.
A new report by the International Trade Centre (ITC), Renewable Energy: How trade policy supports deployment and value addition in developing countries, analyses the role of trade policies in supporting this crucial goal. Making components for renewable energy more available in developing countries means those power sources are easier to deploy. There are also new opportunities for local businesses in both manufacturing components and services such as installation and advisory.
The publication is based on a study of global trade in solar photovoltaic and wind energy components. The study explores trade flows, tariffs and non-tariff measures, with a focus on seven developing countries: the Dominican Republic, Ecuador, Kenya, Mauritius, the Philippines, Senegal and Viet Nam.
‘Decarbonization of the economy is a non-negotiable policy objective for the planet,’ said ITC Executive Director Pamela Coke-Hamilton. ‘This study shows that trade speeds up the flow of trade in goods and services needed for deployment of renewable energy whilst creating new employment opportunities for developing countries.’
Over the last decade, all seven countries tended to export renewable energy components to countries in their region. For example, more than 95% of exports of solar panel components from Dominican Republic went to North America and the Caribbean. Nearly all of Ecuador’s exports went to countries in the Americas.
The data show that smaller countries could export even more components by targeting regional markets. For inverters and static converters, Dominican Republic and Ecuador have room to grow exports. Dominican Republic could also export more structures for racking and mounting.
Three key findings and how to respond
The main findings from the analysis pulled from case studies in the seven countries are:
- Low tariffs increased access to renewable energy technologies by making imports more affordable. A case in point is Viet Nam, where duty-free imports of solar cells from China helped establish a large solar module industrial base.
- Non-tariff regulatory measures hindered exports. Some regulations are also applied at home (on both exports and imports).
- Regional trade holds promise for growing exports of goods and services. Trade agreements make it easier to export in regional groups. Adding provisions for renewable energy in trade accords could bring even more benefits. The Philippines and Kenya show the growth potential in services, such as advising on renewable energy.
The study outlines policy options for developing countries to speed deployment of renewable energy. These include strengthening national regulatory frameworks to ensure safety, quality and performance of domestically produced and imported goods; working towards harmonization and mutual recognition of standards and conformity assessment procedures with a solid regional quality infrastructure network; and leveraging trade agreements to promote foreign investments in renewable energy and simplify travel for professionals and experts.
