Bridges Trade BioRes • Volume 6 • Number 21 • 1st December 2006

CLIMATE, ENERGY FEATURE IN TRADE DISCUSSIONS

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CLIMATE, ENERGY FEATURE IN TRADE DISCUSSIONS

Climate change made headlines at a trade meeting between Pacific rim nations in Vietnam, although participants remained divided in their approach to the issue.

The annual Asia-Pacific Economic Cooperation (APEC) forum — held in Hanoi from 18-19 November to discuss trade issues, including the Doha Round — brought together countries that represent close to 60 percent of the world’s economy and 50 percent of its trade, including both countries that embrace and that reject the Kyoto Protocol.

Meanwhile, EU Trade Commissioner Peter Mandelson — speaking in advance of a key summit between the EU and its principal foreign energy supplier, Russia — said that trade policy has an important role to play in alleviating tensions in the energy sector. He called for supra-national solutions, as "the twin challenges of security of supply and climate change cannot be overcome at the national level".

Climate change makes its way into APEC declaration

Speaking in advance of the APEC leaders’ summit, New Zealand’s Prime Minister Helen Clark suggested adding climate change to the agenda. "The dire economic effects of unchecked climate change should be addressed by APEC," said Clark, stressing that "without the commitment to sustainability you’ll get neither growth nor development if climate change continues unchecked." She said the recent Stern Review detailing the costs of unchecked climate change (see Bridges Weekly, 1 November 2006, http://www.ictsd.org/weekly/06-11-01/inbrief.htm#3) provided the impetus for her proposal for APEC to take on climate change.

Australian Prime Minister John Howard, for his part, promoted the Asia-Pacific Partnership on Clean Development and Climate at the summit. The partnership focuses on new technology to deal with climate change rather than setting mandatory emissions cuts like the Kyoto Protocol. Environmentalists have widely dismissed the approach as not going far enough.

According to Howard, "No country, developed or developing, will agree to climate change measures which imperil its energy security". He added that "much of the Kyoto framework reflects a European mindset. Europe’s contribution is important, but it is crucial that our own region’s perspective be reflected in any climate change discussions and decisions."

Australia and the US are the sole two developed countries to have rejected the Kyoto Protocol. They are looking mainly to technology for a fix to the climate change problem, and are strongly advocating the participation of major developing countries in any efforts made.

The draft APEC ministerial statement included language encouraging member countries "to transition to low-carbon energy systems" and called for "rapid transfer of low-carbon technologies to lower-income economies".

The final APEC statement mentions climate change under the heading of energy security, and leaves out any reference to either the Kyoto Protocol or the Asia-Pacific Partnership on Clean Development and Climate. According to the statement, ministers "also noted the need to address the environmental side effects of rapidly growing energy demand". In particular, they urged APEC to consider ways in which it might further contribute to promoting cleaner energy, thereby addressing energy security, improving air quality, and advancing climate change objectives. Next year’s APEC meeting in Sydney is expected to follow up on this.

The 21 APEC members include Australia, Canada, China, Japan, Mexico and the US; the EU and India, along with Brazil, are among the world’s few major economies that do not belong to APEC.

Getting the troubled Doha Round negotiations back on track was the main focus of the APEC meeting (see Bridges Weekly, http://www.ictsd.org/weekly/06-11-22/story3.htm).The complexities of energy trade

Mandelson, speaking at a conference on strategic energy policy in Brussels on 21 November, emphasised the role that trade policy can play in providing stability to energy markets. According to Mandelson, "more international rules can provide stability and fill the legal vacuum that is currently the source of international tension and insecurity". He stressed that "we cannot afford to have energy become a geopolitical bargaining chip". Both buyers and sellers have an interest in predictable energy markets, as the sector requires long-term investment. Yet some producers have been weary of international rules, which they feel may interfere with their sovereign right to exploit their natural resources and maximise profits.

The EU has included energy as a strategic area of its new trade strategy (see Bridges Trade BioRes, 3 November 2006, http://www.ictsd.org/biores/06-11-03/story2.htm). At the conference, Mandelson emphasised the importance of bilateral agreements to cover issues such as market access, resources and infrastructures, transit, investment, competition and disputes related to energy. Multilateral rules under the WTO need to be better applied to the energy sector, according to Mandelson. However, he cautioned that these rules have been tailored to deal with market access, not access to resources. One should also bear in mind that many energy producers — notably, OPEC members — were not yet part of the WTO when the rules were negotiated. Several large producers have either recently entered the organisation or are still in the process of accession.

Mandelson also directly addressed the link between energy policy and climate change, which he said was "an issue affecting our very survival and which will be the single greatest public policy challenge of this century".

EU-Russia summit yields scant results on energy

The summit between the EU and Russia on 24 November provided little in the way of progress on energy cooperation. Internal schisms in the EU hindered the bloc from taking a strong and united stance, and Russia continued to hold off on signing the Energy Charter Treaty.

Poland vetoed the launch of talks for renewing the EU-Russia partnership and co-operation agreement (PCA) because of a Russian ban on meat imports from the country. Russia further threatened to extend the ban to all EU meat as Bulgaria and Romania enter the EU at the beginning of next year. The entry of the former Soviet satellite states is a sensitive issue for Russia, which claims the sanitary conditions of their meat sectors are inadequate. The existing PCA will remain valid until a new agreement comes into force.

EU energy imports are currently at 50 percent and set to increase to 70 percent, Russia being the major source. Russia has separate agreements with several major EU countries in this area. As Russia has singed but not ratified the Energy Charter Treaty, the PCA represents the best tool for governing energy trade between the two trade parties.

The Energy Charter Treaty sets out binding protections for trade and investment in the energy sector, as well as rules for energy transit. Russian ratification would open the sector for investment by EU companies, and allow them to export oil and gas produced there through Russian pipelines. The treaty would also ensure that Russia did not discriminate against EU companies.

Additional resources

The Joint Statement of the Eighteenth APEC Ministerial Meeting is available at http://www.apec.org/apec/ministerial_statements/annual_ministerial/2006_18th_apec_ministerial.html.

Mandelson’s speech on energy trade can be viewed at http://ec.europa.eu/commission_barroso/mandelson/speeches_articles/sppm133_en.htm.

ICTSD reporting; "Trade, climate change top APEC agenda," THE AGE, 13 November 2006; "Climate change grabs attention at Asia-Pacific summit," INTERNATIONAL HERALD TRIBUNE, 17 November 2006; "Clark wins Apec backing for climate change move," NEW ZEALAND HERALD, 19 November 2006; "Few results at EU-Russia summit," THE PARLIAMENT, 27 November 2006; "EU-Russia summit marred by tensions," EURACTIV, 27 November 2006; "Calls for Climate Change Action at Asia-Pacific Summit," REUTERS, 20 November 2006.