UNEP’s Executive Director Achim Steiner recently launched the report South-South Trade in Renewable Energy – A Trade Flow Analysis of Environmental Goods. The report shows that trade between developing countries, “South-South Trade”, is growing rapidly, at a rate of 15.9% per annum on average.
One of the most dynamic areas of growth is in environmental goods and services, particularly renewable energy goods like solar PV cells and wind turbines. Growth of South-South Trade in this sector has outpaced global and North-South trade. In fact, the share of developing countries in global exports of renewable energy goods more than doubled from 32% in 2004 to 75% in 2011.
This report launched at a high-level press conference at the occasion of the first United Nations Environmental Assembly (UNEA) in Nairobi, responds to still widely held views that the Green Economy is only for those that can afford it, that green goods are luxury goods, or even that Green Economy measures are a threat to international trade, growth and welfare. It turns, as Achim Steiner candidly remarked during the launch event, this argument on its head.
Those countries that have decided to take the path towards a Green Economy – and there are many examples – know that there are tremendous opportunities for powering economic development and social welfare through protecting and rebuilding natural resources, reducing pollution and enhancing resource efficiency. The report shows the crucial role that trade and cooperation between southern countries can play in this process.
Many developing countries have rapidly expanded their trade in environmental goods and services as they vie to become part of a market that is estimated to grow to US$ 1.9 trillion by 2020. Just for low carbon and energy-efficient technologies the market is projected to nearly triple between 2010 and 2020. In 2007 developing countries, as a group, went from net importers to net exporters of renewable energy goods, with trade in solar PV particularly important. The share of China alone increased from only 6% in 2004 to 46% in 2011. The share of other developing countries also increased, but more moderately, from 26% in 2004 to 32% in 2012.
While the Chinese have developed their solar industry with US and EU markets in mind, the precipitous decline in the cost of solar cells has supported accessibility in developing countries and spurred adaptations to applications like off-grid lighting. As a result, in 2013, China’s exports of PV cells and modules to developing countries increased by 145 % to a record US$ 2.3 billion.
The report points to other related areas for further cooperation between Southern countries. For instance, as a result of the Chinese solar industry, value chains have been established across East and South-East Asia for raw materials and intermediate goods that feed into PV cells manufacturing. Also, the portion of developing countries as a destination for Chinese global PV exports increased from only 6% in 2011 to 23% in 2013. In the case of wind-powered generating sets, this portion grew from 32% to 66%.
Another example: from 2009 to 2013, African countries collectively imported US$342 million in wind-powered generating sets from other developing countries. With their high employment factors as compared to fossil-fuel generation, these imports represent substantial job creation opportunities in the importer countries.Other obvious Green Economy benefits include improved electricity supply, greater energy security, reductions in fossil fuel production and imports, cleaner air and water, advances in rural electrification and significant contributions to addressing the global problem of climate change.
Indeed, the employment creation potential of renewable energy is particularly high. Estimates suggest that by 2030 – either directly or indirectly – up to 20 million people could be employed in the renewable energy sector globally. This potential is most pronounced in the manufacturing and services activities related to solar PV and wind-powered energy. More generally, it is estimated that services, with their high labor intensities, actually make up two thirds of the overall environmental goods and services market.
While the growth in South-South trade in renewable energy has been remarkable, it does not come without its challenges. At the UNEA launch of the report, Bernice Heloo, Deputy Minister of the Environment of Ghana, highlighted the issue of low quality and untested renewable energy goods being sold into African markets. These issues, too, must be given serious attention, also by the international community. Increased cooperation on international quality and sustainability standards, labelling and harmonization initiatives, both multi- and plurilateral, needs to support and ensure that high quality products protecting the environment and advancing the Green Economy increasingly become the norm in environmental goods trade.
While the UNEP report focuses primarily on renewable energy markets, it also points out that there are other growing dynamic markets for environmental goods and services. For instance, water treatment equipment and water supply – valued at US$ 50 billion globally – present developing economies with a promising growth potential, as well as the opportunity to provide more than 700 million people with access to improved drinking water. Additionally, South-South trade in organic food and beverages – with a global market value of over US$ 63 billion – is also identified as another growing market, where greater regional cooperation could help generate additional commercially-viable products for export.
The information contained in UNEP’s new report shows South-South trade and cooperation is an increasingly significant facet of the Green Economy. In order to maintain this trend and pace of development, policymakers have an important role to play in making trade work for the Green Economy. This will need to include setting the right framework conditions and incentives for South-South cooperation in the development, dissemination, innovation and also installation and maintenance of high-quality environmental goods, services and technologies. Support will need to be targeted particularly at the poorest and most vulnerable countries that are not yet benefiting from sustainable trade and Green Economy opportunities.
This blog was originally published on Thomson Rueters.