From Hong Kong to CSD. Making the multilateral trading system supportive of the transition to a sustainable energy future

Mar 2005

International energy use and trade are currently in a state of flux, with issues related to both security and sustainability driving global adjustment in energy trade and policies. Trade in fossil fuels (oil) is characterised by surging prices as well as price volatility, and these trends are unlikely to change in the near to medium term. The International Energy Agency (IEA) projects that energy demand and prices will continue to soar, with the world set to use 60% more energy in 2030 than at present. Current changes in the global political economy – driven not least by the growth of China and India – are contributing to the dramatic expansion of energy consumption.
The OPEC members of the Middle East and Russia will be the major suppliers of traditional fossil fuels. Many of these countries are on the path of joining the WTO, with Saudi Arabia’s and Russia’s accessions considered as possible deliverables at the WTO Sixth Ministerial in Hong Kong in December 2005. The dynamic of the WTO is shifting as major energy exporters are seeking access to the organisation - in effect making the accession negotiations a bargain between energy importers and exporters. The accession requests these countries are facing include
dropping dual energy pricing schemes or joining the World Energy Charter. As energy effectively comes under multilateral trade rules, this will also raise the pressure on supply-side cartels such as OPEC. In addition, as these countries join they are set to change the (limited) discussions relating to energy in the WTO, such as the ongoing classification exercise of services relating to the exploration, distribution, marketing and supply of energy under the General Agreement on Trade in Services (GATS).
In the overall energy scenario, the use of renewable energy such as solar, wind, geothermal and modern biomass energy is also projected to rise, and action to address climate change – especially the Kyoto Protocol and future action to be implemented in the post-2012 period – is an increasingly crucial factor in international energy policy. With developing countries being particularly vulnerable to the effects of climate change, this issue has arrived to stay at the top of the sustainable development agenda. The 2006-2007 cycle of the UN Commission on Sustainable Development (CSD 14-15) focuses on energy for sustainable development, climate change, atmosphere and industrial development. Timing is critical, as the post-2012 discussions are becoming pressing, and the broader implications of future climate change mitigation commitments, including on trade, require careful scrutiny. At this stage, it is important that not only environment ministries get a clear and realistic understanding of their options, but that ministries of trade get involved and develop an understanding of the ways in which they can support these negotiations.
All these trends will all require fundamental socio-economic adjustment in production and trade across sectors and countries, as countries change their patterns of energy use. The transition to a sustainable energy future will have enormous implications for the international political economy as well as sustainable development.

By: International Centre for Trade and Sustainable Development (ICTSD)

 
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