News and Analysis • Volume 1 • Number 1 • October 2007

BioRes interview: energy, trade rules and sustainability

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BioRes Review talked to Olga Nartova, Research Fellow at the World Trade Institute in Bern, Switzerland.

BioRes: What are the key problems related to international energy trade, and how could they be addressed?

ON: When it comes to energy, the key problems relate to security of supply, efficiency, climate change, and transit issues. I think creating a multilateral agreement on energy within the framework of the WTO would be the best way to address international energy trade. Energy is now covered under a range of WTO agreements. This is not good enough, as the General Agreement on Trade in Services (GATS), the Agreement on Technical Barriers to Trade (TBT) and other agreements work at a general level and cannot be satisfactorily applied to energy.

BioRes: Should the WTO play a more active role in regulating energy trade? If so, what would this role look like?

ON: Historically, energy was presumed to fall outside the remit of WTO negotiations. The WTO does regulate energy trade – we would, however, be better off with a sectorial agreement to tackle issues specific to energy. For example, the GATS seems at first glance to cover energy services, but actually looking into the agreement one realises that we do not even have a definition of energy services. Third party access is considered one of the key issues, but it is not covered in the GATS. So there is a lot to be done in the area of energy services, starting from classification. Major gaps were recognised with regard to telecoms, and a reference paper and an annex on telecoms were created.

BioRes: Should energy derived from renewable sources be treated differently from conventional energy?

ON: This is a good question! From a climate change perspective, it is definitely better to treat energy differently based on the source, but I don’t see how this could be practically done at present. This is mainly because what seems environmentally friendly now will not necessarily be perceived as such next year or in five years. If we create a separate list for cleaner technology and energy sources, it has to be constantly reviewed and updated. We would need a group of experts to assess energy and technology. If we remove tariffs for natural gas because it now seems a cleaner option, and at later date, other, even cleaner energy sources are developed and become economically feasible –how can we promote these? We cannot put back tariffs that already have been removed, so what can be done to promote the newer sources? If we start differentiating between energy derived from different sources, issues of likeness and the “clean” vs. “cleaner” debate have to be addressed.

BioRes: Are current rules and disciplines applying to the energy sector adequate in supporting policies and measures aimed at climate change mitigation?

ON: No, they are not. Right now I don’t see any mechanism at the WTO system targeting climate change specifically. Yes, there is the Doha mandate for liberalising environmental goods and services (EGS), but negotiations have not achieved much progress. The mandate covers EGS generally, not just climate change, and most developing countries are more concerned with issues related to sanitation, wastewater treatment and water access, which does not have much to do with climate. I think that for the negotiations on EGS, as they are stacked now, it would be better to rethink the mandate and target specific problem areas; air pollution and climate change particularly. Also, I think that goods and services should be negotiated as a package. At the very least, more substantial coordination between the negotiations on goods and on services is needed.

BioRes: If countries choose stringent policies to deal with climate change, and these policies effect the competitiveness of their internationally traded products due to higher energy prices, should the countries be allowed to offset competitiveness losses through the use of measures such as border tax adjustments?

ON: I think it is time to introduce environmental cost as part of the final product price. This is not a purely political approach, it makes sense from an economic point of view. For a long time we took the environment for granted, and this attitude has to change in order for us to deal with climate change. My main point is that there is an economic basis for full cost pricing, it is not a payment you levy because you want to differentiate between suppliers, but merely the inclusion of the environmental impact in the final price.