Trade in Environmentally Sound Technologies: Implications for Developing Countries

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March 2019
United Nations Environment Programme (UN Environment), University of Oxford, Norwegian University of Science and Technology

This report aims to build an understanding of capacity needs and enabling conditions for trade liberalization of environmentally sound technologies (ESTs) in developing countries. The analysis focuses on five ESTs: solar photovoltaic cells (PVs), water filters, waste incinerators, gas filtering machinery, hemp and flax fibers. The study combines trade flow analysis with policy research, drawing on findings from two regional assessments on EST trade in the Association of Southeast Asian Nations (ASEAN) and the East African Community (EAC), including country case studies in Malaysia and Kenya. Data was collected from multiple sources, including the UN Comtrade database, the World Trade in ESTs and the Sustainable Development Goals Organization (WTO) database on trade in services, country- and company-level data, as well as scientific publications.

While acknowledging that trade relations between countries, particularly in the context of technologies, are increasingly complex and include intangibles such as licensing, foreign direct investment, and other forms of knowledge and technology exchange, the study focuses its analysis on goods and services due to data availability. Given the high complementarity between goods and services in ESTs and the importance of services trade for developing countries, the study tries to shed new light on trade in environmental services by analysing interlinkages in the sector and trade patterns. A special focus is also placed on the discussion of challenges and limitations to facilitate the discussion and progress in this matter. A comprehensive sustainability assessment framework is presented to illustrate the benefits from selected ESTs, including solar PVs cells, water filters, waste incinerators, and filters for gases. This framework can be applied by countries aiming to assess their potential options in terms of engaging in EST trade. Finally, by taking stock of trade negotiations related to ESTs and linking it with market trends and policy landscapes, the study offers insights into global trade governance and potential ways forward for developing countries to participate in related negotiations.

This report is complimented by a series of Policy Briefs: