Post on 30-Mar-2015
transcript
THE STRINGENCY OF
ENVIRONMENTAL REGULATIONS
AND TRADE IN ENVIRONMENTAL
GOODS AND SERVICES
Measuring Progress on “Greening” the Economy: Policies and Practices — UNEP-Eurostat-EEA-ILO workshop
Geneva, 14-15 May 2014
Jehan SAUVAGETrade Policy AnalystOECD, Trade and Agriculture Directorate
2OECD Trade and Agriculture Directorate
Trade in EGS is increasing at a rapid pace…
70
80
90
100
110
120
130
140
150
2007 2008 2009 2010 2011
World imports of CLEG products World merchandise imports
World imports of Core CLEG products
(2007 = 100)
Source: OECD based on data obtained from the UN Comtrade database and WTO (2013).
3OECD Trade and Agriculture Directorate
…driven mostly by the power sector and waste and water activities
Environmental medium or themeShare in world imports of
environmental goods (2011)
Air pollution control (APC) 7%
Cleaner or more resource efficient technologies and products (CRE)
6%
Environmentally preferable products based on end use or disposal characteristics (EPP)
<1%
Heat and energy management (HEM) 6%
Environmental monitoring, analysis and assessment equipment (MON)
10%
Natural resources protection (NRP) <1%
Noise and vibration abatement (NVA) 6%
Renewable energy plant (REP) 37%
Clean up or remediation of soil and water (SWR) 1%
Waste water management and potable water treatment (WAT) 19%
Management of solid and hazardous waste and recycling sytems (SWM)
9%
82%
4
1. Trade liberalisation– Import-tariff reductions, removal of NTBs, services
commitments, etc.
– Ongoing trade negotiations in various fora (APEC, WTO, etc.).
2. Stringent environmental regulations– Stringent environmental regulations, together with
economic growth, spur demand for EGS.
• Lots of attention given to the first engine, but what about the second?
OECD Trade and Agriculture Directorate
The twin engines of EGS trade
5
• Different regulatory instruments can be used by governments to correct environmental market failures: market-based instruments (e.g., taxes or permits), emission standards, information disclosure, etc.
• This generates a market for equipment and services in relation to pollution control and abatement as firms seek new solutions.
“In contrast to financial, telecommunications or transport services, there is no genuine demand for environmental services. Relevant markets are essentially created through government regulation. Who would purchase, for example, sewage or air-cleaning services out of sheer altruism?” (Adlung, 2009)
OECD Trade and Agriculture Directorate
Environmental regulations and EGS market size
• Answering this basic question requires indicators for measuring:
– The degree of stringency of environmental regulations
– Countries’ performance in EGS trade
OECD Trade and Agriculture Directorate 6
Hence the basic question:
Stringent environmental
regulations
EGS trade
?
7OECD Trade and Agriculture Directorate
Measuring the stringency of environmental regulations (i)
Implementation
Enforcement
Environmental laws are designed andimplemented….
… to alter firms' (and consumers') behaviour
… and achieve "cleaner"outcomes
E.g. Event based approach, composite indicators
E.g. Survey ofexecutives
E.g. Shadow prices, survey of firms abatement costs
E.g. Environmental performance data
Environmentalpolicy
instruments
1
Perceptions of Environmental
policies
2
Changes in agents' behaviour
3
Changes in environmental
outcomes
4
Source: OECD (2014, forthcoming).
8
1. Actual regulatory instruments
2. Perceptions of policies
• Aggregation and multi-dimensionality
• Market-based vs. non-market-based instruments
• Enforcement and implementation
• Usually surveys• Cognitive problems• Lack of time variation• Identification issues
OECD Trade and Agriculture Directorate
Measuring the stringency of environmental regulations (ii)
3. Changes in agents’ behaviour
4. Environmental outcomes
• How firms and households react to changes in the regulations
• Surveys of PACE or shadow costs
• Accounts for enforcement• Identification issues
• Generally good availability• Accounts for incidental
abatement of emissions• Accounts for enforcement• Acute identification issues
9
Code Environmental theme or medium Share of HS lines
APC Air pollution control 5%
CRE Cleaner or more resource efficient technologies and products 19%
EPP Environmentally preferable products based on end use or disposal characteristics 2%
HEM Heat and energy management 10%
MON Environmental monitoring, analysis and assessment equipment 15%
NRP Natural resources protection < 2%NVA Noise and vibration abatement < 2%REP Renewable energy plant 22%
SWM Management of solid and hazardous waste and recycling systems 10%
SWR Clean up or remediation of soil and water < 2%WAT Waste water management and potable water treatment 13%
OECD Trade and Agriculture Directorate
Measuring trade in environmental products: the CLEG
10
• Results are obtained using a standard index of revealed comparative advantage (RCA) in environmental goods:
• This index accounts for country size.
• It can be used as a guide to what causes actual trade patterns, including policies that may not be intended to influence trade, but that might do so unintentionally.
OECD Trade and Agriculture Directorate
Measuring trade in environmental products: the RCA index
OECD Trade and Agriculture Directorate 11
Broad-based analysis
12OECD Trade and Agriculture Directorate
The EPS index
Composite indicator of environmental policy stringency
Market-based policies Non-market based policies
• CO2• NOx• SOx• Diesel
Taxes
• CO2• Renewable Energy Certificates• Energy Efficiency Certificates
Trading Schemes
• Solar• Wind
FITs
• Deposit & Refund Scheme
DRS
• Emission Limit Values:• NOx• SOx• PMx• Diesel content limit (Sulphur)
• Govt. R&D expenditure on Renewable Energy
StandardsR&D
Subsidies
0.5 0.5
0.25 0.5 0.50.25 0.25 0.25
Source: OECD (2014, forthcoming).
13OECD Trade and Agriculture Directorate
The EPS index and RCA in CLEG products
14OECD Trade and Agriculture Directorate
The sources of comparative advantage in CLEG products
(1) RCA (2) RCA (3) RCA (4) RCA (5) RCA
All CLEG All CLEG All CLEG All CLEG All CLEG
EPS index 0.569*** 0.592*** 0.547*** (3.89) (4.11) (3.62) EPS index (3-year lag) 0.488***
(3.09)EPS index (5-year lag) 0.489*** (2.84)Export concentration index -0.770*** -0.768*** -0.800*** -0.837*** -0.925***
(-5.40) (-5.65) (-5.64) (-5.45) (-6.90)Average import tariff applied on CLEG products
-0.0176** -0.0216** -0.0214**-
0.0248***-
0.0297*** (-2.52) (-2.73) (-2.77) (-3.01) (-3.87)Capital-labour ratio -0.175 -0.239 -0.312* -0.430***
(-0.91) (-1.42) (-1.93) (-3.74)Secondary education or more (% labour force)
0.391** 0.547*** 0.643***
(2.64) (3.85) (5.49)Constant 2.529*** 4.579** 3.600* 3.655* 4.599***
(7.21) (2.07) (1.91) (1.95) (3.16)Year dummies Yes Yes Yes Yes YesObservations 256 256 224 161 116Adjusted R-squared 0.584 0.599 0.673 0.698 0.752F Statistic 10.14 12.60 51.79 25.56 35.52
OECD Trade and Agriculture Directorate 15
The municipal-solid-waste (MSW) sector
16
• Regulations on MSW-management are complex and often sub-national (e.g., local landfill taxes, bans, EPR).
• Landfilling is often the worst option from an environmental standpoint.
• Heterogeneity among OECD countries. OECD Trade and Agriculture Directorate
The share of MSW landfilled as an indicator of stringency for waste
Source: US EPA.
OECD Trade and Agriculture Directorate 17
MSW landfilled and RCA in waste-related products
OECD Trade and Agriculture Directorate 18
Urban wastewater treatment
OECD Trade and Agriculture Directorate 19
• There are different levels of wastewater treatment:– Primary (e.g., mechanical)
– Secondary (e.g., biological)
– Tertiary or advanced (e.g., phosphate removal)
• Instruments for regulating the treatment of wastewater are both supra-national and sub-national (e.g., the UWWTD, local tariffs and levies, basin-level standards).
• More heterogeneity among OECD countries than in the case of drinking-water regulations (e.g., WHO guidelines and health considerations).
The level of wastewater treatment as an indicator of stringency for water
OECD Trade and Agriculture Directorate 20
The TRT indicator
OECD Trade and Agriculture Directorate 21
The TRT indicator and RCA in water-related products
22
• Markets for and trade in EGS are regulation-led.
• Countries having stringent environmental regulations tend to export environmental products relatively more.
• Environmental regulations and trade barriers have opposite effects on EGS trade.
• Ambitious environmental policies imply losers but also winners from a trade angle.
• Trade liberalisation alone does not suffice.
• More work needed on indicators for services related to the environment.
OECD Trade and Agriculture Directorate
Key messages
23
• Visit our website: www.oecd.org/trade/envtrade/
• Contact us: – Jehan.SAUVAGE@oecd.org – Ronald.STEENBLIK@oecd.org
Thank you for your attention!
Trade and Agriculture Directorate
OECD Trade and Agriculture Directorate 24
Back-up slides
25
• New trade theory highlights the importance of domestic (home) market size for exports in the context of product differentiation, economies of scale, and transportation costs.
• Bottom line: net exports can increase with the size of the home market, and stringent regulations determine domestic market size in the case of EGS.
• Adding dynamics reinforces this idea: learning-by-doing, knowledge spillovers, etc.
OECD Trade and Agriculture Directorate
The home-market effect (i)
26OECD Trade and Agriculture Directorate
The home-market effect (ii)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Intra-industry trade in environmental goods (2007-11)(1 = full intra-industry trade; 0 = full inter-industry trade)
27OECD Trade and Agriculture Directorate
The EPS index and RCA in Core CLEG products
OECD Trade and Agriculture Directorate 28
The sources of comparative advantage in waste-related products
(1) RCA (2) RCA (3) RCA (4) RCA (5) RCA
SWM SWM SWM SWM SWM
MSW landfilled (% MSW generation)-
0.0635***-
0.0510***-
0.0414***
(-4.08) (-3.68) (-3.89)
MSW landfilled (3-year lag)-
0.0379***(-3.48)
MSW landfilled (5-year lag)
-0.0415***
(-3.64)Export concentration index -0.830*** -0.832*** -0.760** -0.724** -0.790***
(-2.97) (-2.88) (-2.62) (-2.69) (-2.94)Capital-labour ratio 0.163 0.190 0.205 0.232 (1.21) (1.40) (1.42) (1.58)Secondary education or more (% labour force)
0.888** 0.982** 0.906**
(2.28) (2.60) (2.71)Constant 2.616*** 0.709 -3.313 -3.640 -3.793 (4.11) (0.54) (-1.21) (-1.25) (-1.37)Year dummies Yes Yes Yes Yes YesObservations 356 336 303 203 140Adjusted R-squared 0.360 0.378 0.430 0.404 0.428F Statistic . . 11.31 9.395 7.370
OECD Trade and Agriculture Directorate 29
The sources of comparative advantage in water-related products
(1) RCA (2) RCA (3) RCA (4) RCA (5) RCA
WAT WAT WAT WAT WAT
TRT indicator 0.279** 0.457*** 0.452*** (2.19) (5.78) (5.16) TRT indicator (3-year lag) 0.585***
(7.20)TRT indicator (5-year lag) 0.604*** (7.72)
Export concentration index-
0.685***-
0.503***-
0.477***-
0.445***-
0.415***(-4.53) (-4.31) (-4.68) (-3.86) (-2.92)
Capital-labour ratio -0.115 -0.117 -0.153 -0.121 (-1.26) (-1.22) (-1.52) (-1.12)Secondary education or more (% labour force)
0.0306 0.0476 0.197
(0.14) (0.17) (0.48)Constant 1.976*** 2.976*** 2.916** 2.857 1.776 (3.83) (2.78) (2.05) (1.61) (0.74)Year dummies Yes Yes Yes Yes YesObservations 271 248 223 175 127Adjusted R-squared 0.481 0.551 0.559 0.701 0.753F Statistic 9.612 32.74 23.71 40.91 40.62