Fiscal and Financial Policies for Low-Carbon Economic Development Should be Double Green HU Tao...
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Fiscal and Financial Policies for Low-Carbon Economic Development Should be Double Green HU Tao Policy Research Center of Ministry of Environmental Protection, China 26 November 2010, SNAI,
Transcript of Fiscal and Financial Policies for Low-Carbon Economic Development Should be Double Green HU Tao...
Fiscal and Financial Policies for Low-Carbon Economic Development
Should be Double Green
HU TaoPolicy Research Center of
Ministry of Environmental Protection, China
26 November 2010, SNAI, Shanghai
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Outline• Case of US Section 301 probe on
China’s clean energy subsidies
• Current challenge by WTO rules of fiscal and financial policies for low carbon economic development
• Why Fiscal and financial policy should be double green?
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US Section 301 probe
• Storyline – Union of Steel Workers (USW) accusing
China’s subsidy on clean energy, mainly wind and solar products
– USTR is investigating according to US trade Act Section 301
– If proved true, US discusses with China or brings it to Dispute Settlement Body (DSB) of WTO
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US Section 301 probe
• From UNFCCC perspective – All parties should make efforts to reduce
GHGs to mitigate • What US should do as Annex I country
– 8% GHGs reduction required in KY Protocol
• What China should do as non-Annex I country– Voluntary based reductions
• What Annex I should do for non-Annex I:– Financial support 0.7% of GDP committed in Rio – Technology transfer committed in Rio
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US Section 301 probe• From UNFCCC perspective
– What China is doing for implementing its voluntary based action plan
• Target– 40-45% carbon intensity by 2020, 20% by 2010– Cap for N2O by 2010– 15% renewable in energy mix by 2020; and 10% by 2010
• Instruments – MBIs
» Financial supports» Self-innovation» Taxation or trading
– Moral education– C&C
• Results (can be MRV)– Reducing GHGs domestically 726 million ton CO2 per year with 261 G
W capacity – Helping others reducing GHGs internationally 11.1 million ton CO2 pe
r year by exporting equipment for hydro 3GW, solar 2.59GW, wind 36.6MW.
– It’s very clear that the more renewable subsidized, the more GHGs reduced
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US Section 301 probe
• From WTO perspective – Subsidy
• Defining subsidy – Government or public body – Financial sources – Enterprises – Specificity
• Types of subsidy – Prohibited (red box)– Actionable subsidy (yellow box)– Non-actionable subsidy (green box)
» Article 8 expired already in 2000
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US Section 301 probe
• From WTO perspective – Exceptions
• GATT XX– For environmental protection – For resources conservation
• Case by case– Tuna-dolphin – Shrimp and turtle
• Transaction costs?• Agriculture as an exceptional sector
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US Section 301 probe• From WTO perspective
– What China has done• Subsidies
– Compensations – Financial supports– Privilege credit and loans– VAT waived – Quotas, regulations etc for renewable requirements
creating high shadow price of demanded equipment
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US Section 301 probe• From WTO perspective
– What US has done• Subsidies for renewable too as key part of
stimulus plan during the financial crisis • Subsidies for agriculture that increases fertilizer
applying amount and results in more emissions of N2O, CH4 and ammonia-nitrogen– US$ 19 billion annually– 513.8 million ton carbon annually, taking 7% of total
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US Section 301 probe• From WTO perspective
– Other cases• Japan as complainant accusing Canada for it’s
renewable in Ontario• US Senate’s proposal of BTA to punish China
and India high carbon goods• US, EC’s complain in DSB on China’s raw
materials exporting, rare earth element mineral ores exporting
• EC’s complain on China’s exported coke• US’s proposal in APEC on non-tariff measures
(but barriers) for renewable
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US Section 301 probe• From other bodies’ perspective
– OECD’s Green subsidies for• Agriculture• Regional development• Environment protection
– World Bank’s climate-friendly products• List of products for WTO EGS negotiation
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US Section 301 probe
• Conclusions from the case– Between WTO and MEAs
• Global environmental interests required by UNFCCC are NOT coherent with free trade articles of WTO.
• Which rules should be followed when two sets of international rules conflict each other?
– Within WTO• Between the principle of free trade and the
principle of sustainable development are unbalanced
• There are no operational details of SD principle• Environmental issue maybe an exception which
is case by case by GATT XX
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Current challenge by WTO rules of financial polices for low carbon economic development
• The question is not why new coherent rules needed but HOW
• The cases above mentioned are challenges for WTO rule itself
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Current challenge by WTO rules of financial polices for low carbon economic development
• WTO has realized the potential conflicts– Committee for Trade and Environment (CTE)
being established before Doha ministerial meeting 2001
– Topics dealing with environmental issues started after Doha• DDA 31.1 dealing with the relationships between W
TO and MEAs• DDA 31.2 MEAs observership • DDA31.3 EGS negotiation• DDA 32.1 Market access of environmental require
ment • DDA32.3 Eco-label discussion
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Current challenge by WTO rules of financial polices for low carbon economic development
• Directions – To normalize (at least global) environmental
exception in GATT XX, following agriculture sector exception
– To meet our common environmental demand as another goal of WTO besides free trade, to let SD principle operational
– To rejuvenate Article 8 of SCM to have green box policies
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Why fiscal policy should be double green
• Fiscal and financial policies should be green for low carbon economic development
• Why low carbon is more important than low sulfur, low nitrogen, low VOC from the global perspective?
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Spectrum of the environment
The conventional Environment
Indoor environment
Outdoor environment
Micro
Macro
Scale of environment
Regional environment
Local environment
National environment
Global environment
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Spectrum of the environment from micro to macro level
Indoor environment Outdoor/local/national/regional environment Global environment
– Climate change– Ozone depletion – Biodiversity loss– POPs– Hazardous wastes Trans-boundary transfer reg
ulated by Basal convention– And other MEAs regulated global environmenta
l problems
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Why fiscal policy should be double green
• Fiscal and financial policies should be green generally for promoting green economy
– To support MEAs implementation for improving global environment
– To reduce air pollution, water, solid wastes for conventional environmental improvement
– To support indoor environmental improvement for human being’s health
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Why fiscal policy should be double green
• Fiscal and financial policies should also be green for green box policies
– definitely not use red box policies which are prohibited clearly by WTO
– Not use amber box policies which are not allowed as actionable by WTO
– Better to use green box policies, which are much safer than other two sets of policies, although Article 8 is to be saved, such as • R&D• Smart location• Global than local environmental goods and
services
