Speech by Cecile Toubeau on the Environmental Goods Agreement: opportunities and challenges

Speech at European Commission DG Trade hearing on the Environmental Goods Agreement on 9 June 2015 by T&E senior policy officer on sustainable trade, Cecile Toubeau

I thought I would start my intervention with a clever question, and in a bid to increase my twitter profile, I tweeted the Commission. Sadly, this has backfired as she actually answered my question! But now I have lost my introduction.

I wanted to open with a question: is the EGA about promoting and protecting the environment or about expanding the current model of free trade? And as you heard, Commission Malmström confirmed that was to address all three issues. Without a real understanding of the aim of the EGA, we risk losing our way and being disappointed by the outcome. 

I was asked to speak about opportunities and challenges, however I like to end things on a positive note so will first address challenges followed by opportunities. 

While this was confirmed earlier, my first point is that there is still no clear definition of what actually constitutes an ‘environmental good’ – some goods being considered are actually harmful to the environment. Without a specific definition we run the risk of including items that could be used in a manner that is either environmentally positive or negative. This includes, for instance, waste incinerators, centrifuges, gas turbines, sludge compactors and a variety of technical machinery. I would also like to highlight how important a definition can be – there is no agreed definition for what constitutes a fossil fuel subsidy. The lack of common internationally-agreed definitions can be illustrated by comparing OECD data with IMF data. The OECD estimates show that EU fossil fuel subsidies (FFS) are three times higher than those in the US. The IMF estimates are larger and arrive at the opposite result: US FFS are three times higher than EU ones. The lack of clear subsidy standards – and consequently workable data – have affected the capacity of the international community to effectively implement existing frameworks such as the WTO provisions on the Agreement on Subsidies and Countervailing Measures (SCM). 

My second point is on how do we know the potential impact of trade liberalisation on environmental goods? We need a full environmental impact assessed of everything on the list under consideration. These range from natural products (honey, palm oil, urea) to the technical (pipes and casings “of a kind used in drilling for oil and gas”) to the seemingly random (vacuum cleaners, cameras). There needs to be a focus on the whole lifecycle of a product’s impact being taken into account. According to Inside U.S. Trade, U.S. Trade Representative (USTR) Mike Froman sent a letter in April requesting that the International Trade Commission provide a report containing its advice as to the "probable economic effect of providing duty-free treatment for imports of environmental goods for all U.S. trading partners" on industries in the United States and on consumers. 

My third point is trying to balance the aim of the EGA and the WTO approach to trade. The OECD has identified that the main instruments to encourage uptake is to focus on incentivising their usage, and not so much about making them cheaper. However this would be in complete contradiction to the WTO approach – guaranteeing the free flow of capital, goods and services trumps environmental protection priorities. As a result, environmental protection measures are often challenged for being a “disguised restriction on international trade.”

And now for opportunities…

Setting a clear and comprehensive definition and criteria to determine what constitute environmental goods. Only with a comprehensive set of criteria to determine what constitutes an environmental good, can the EGA function correctly. Goods considered for tariff reduction must be evaluated on performance basis, using a set of criteria that assesses environmental impact – air, water, etc. Multiple end use goods should be assessed in all the ways it can be used. Any good that could negatively impact the environment should be eliminated from the list.

A life cycle impact assessment of goods should focus not just on the end us but also needs to take into account how goods are produced. Failing to do so may have huge environmental ramifications – burning gas is indeed less polluting that coal, however hydraulic fracturing has huge impacts on air and water quality. 

And now for the elephant in the room, I wonder if we are going to think about how we are going to get all of these wonderful green goods that are going to save CO2. I do not think you can email a wind turbine for a wind farm? So all the CO2 saved from the green goods is going to be wasted by the transportation method – shipping and aviation. The very means of increasing trade is not being considered by anyone (lets us not discuss the international bodies regulating shipping and aviation who have failed to date to come up with any credible measures to mitigate the sectors’ environmental impacts). Shipping and aviation each account for nearly 3% of annual global CO2 emissions. Recent estimates have stated that business-as-usual emissions will increase by up to 250% for shipping and 270% for aviation by 2050. This needs to be addressed, I realise that the AGE might not be the right place to address is, so instead I call on the Commission to support our efforts to have the UNFCCC include both sectors in the negotiations in Paris this year.