EU Climate Policies and Developing Country Trade Vulnerability

August 2011 |

ICTSD Programme on Competitiveness and Sustainable Development

Transition to a Low Carbon Future Series

EU Climate Policies and Developing Country Trade Vulnerability An Overview of Carbon Leakage-Sensitive Trade Flows

ICTSD Global Platform on Climate Change, Trade and Sustainable Energy

Issue Paper No. 19

August 2011

l ICTSD Programme on Competitiveness and Sustainable Development

EU Climate Policies and Developing Country Trade Vulnerability An Overview of Carbon Leakage-Sensitive Trade Flows

ICTSD Global Platform on Climate Change, Trade and Sustainable Energy

Issue Paper No. 19

ii

EU Climate Policies and Developing Country Trade Vulnerability

Published by International Centre for Trade and Sustainable Development (ICTSD) International Environment House 2 7 Chemin de Balexert, 1219 Geneva, Switzerland Tel: +41 22 917 8492 Fax: +41 22 917 8093 E-mail: ictsd@ictsd.org Internet: www.ictsd.org Chief Executive: Programmes Director: Programme Manager:

Ricardo Meléndez-Ortiz Christophe Bellmann Ingrid Jegou

Acknowledgments This paper was prepared under the general direction of Ricardo Meléndez-Ortiz and supervised directly by Ingrid Jegou. Principal researcher and author was Samantha Derksen. ICTSD would like to thank Aaron Cosbey of the International Institute for Sustainable Development (IISD) for taking time during his mountain summer to review the final manuscript; Vicente Yu from the South Centre and Anirudh Shingal from the WTI for their valuable comments and contributions. Contributions were also made by Ingrid Jegou and Ricardo Meléndez-Ortiz. As with other our research and analysis work, the subject of study here was exposed in detail to developed and developing country negotiators and policy-makers, academic experts, staff of intergovernmental, nongovernmental organisations and advocacy groups, and other participants in ICTSD multi-stakeholder dialogues. Critical insights were received and are most appreciated on those occasions, in particular at the ICTSD Symposium in Cancun in December 2010 and a side-event in Bonn in June 2011, both alongside the UNFCCC-negotiations, as well as a workshop held in Pretoria in May/June 2011.

This paper was produced under the ICTSD Competitiveness and Development Programme and the ICTSD Global Platform on Climate Change, Trade and Sustainable Energy. ICTSD is grateful for the support of ICTSD’s core and thematic donors including the UK Department for International Development (DFID), the Swedish International Development Cooperation Agency (SIDA); the Netherlands Directorate-General of Development Cooperation (DGIS); the Ministry of Foreign Affairs of Denmark, Danida; the Ministry for Foreign Affairs of Finland; the Ministry of Foreign Affairs of Norway; Australia’s AusAID; and Oxfam Novib.

For more information about ICTSD’s Programme on Competitiveness and Sustainable Development, visit our website at www.ictsd.org ICTSD welcomes feedback and comments on this document. These can be forwarded to Ingrid Jegou, ijegou@ictsd.ch Citation: ICTSD; (2011); EU Climate Policies and Developing Country Trade Vulnerability: An Overview of Carbon Leakage-Sensitive Trade Flows; Transition to a Low Carbon Future Series; Issue Paper No. 19; International Centre for Trade and Sustainable Development, Geneva, Switzerland, www.ictsd.org.

Copyright ICTSD, 2011. Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged.

This work is licensed under the Creative Commons Attribution-Noncommercial-No-Derivative Works 3.0 License. To view a copy of this license, visit http://creativecommons.org/licenses/bync-nd/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA. The views expressed in this publication are those of the author and do not necessarily reflect the views of ICTSD or the funding institutions.

ISSN 1995-6940

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ICTSD Programme on Competitiveness and Sustainable Development

TABLE OF CONTENTS List of Tables AND BOXES List of Figures LIST OF Abbreviations and Acronyms FOREWORD

v vi vii viii

1.

IntroducTION

1

2.

The EU, Climate Change Policies and Carbon Leakage

3

2.2 Possible Border Measures

4

1.1 Aim and Outline of the Study 2.1 The EU Emissions Trading System and Free Allowances

1 3

3.

To Which Products Would the EU Most Likely Apply BCAs?

4.

Which Developing Countries Would Most Likely Face EU BCAs? 7

5.

Methodology

6.

Analysis of Carbon Leakage-Sensitive Trade Flows

10

6.2 Analysis of the Findings

18

7.

6.1 Summary of the Findings

Discussion, Conclusions and Policy Recommendations

5 9 10

20

ENDNOTES

22

REFERENCES

25

Annex I – Goods Identified as Likely to Face EU BCAs

27

Annex II – Complete Overview of Carbon Leakage-Sensitive Trade Flows

33

35

China India

Brazil

Mexico

Indonesia

Iran

South Korea South Africa

Saudi Arabia Thailand

Argentina

33 37 39 41 43 44 46 47 49 51

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EU Climate Policies and Developing Country Trade Vulnerability

Nigeria

52

Venezuela

56

Taiwan Pakistan

Malaysia

Egypt

Kazakhstan

54 58 59 61 64

ICTSD Programme on Competitiveness and Sustainable Development

LIST OF TABLES AND BOXES Table 1: Annual GHG emissions for developing countries responsible for >0.5 percent of global GHG emissions, 2005 Table 2: Carbon leakage-sensitive exports to the EU, 2007-09 Table 3: CHINA – Carbon leakage-sensitive exports to the EU, 2007-09 Table 4: INDIA – Carbon leakage-sensitive exports to the EU, 2007-09 Table 5: BRAZIL – Carbon leakage-sensitive exports to the EU, 2007-09 Table 6: MEXICO – Carbon leakage-sensitive exports to the EU, 2007-09 Table 7: INDONESIA – Carbon leakage-sensitive exports to the EU, 2007-09 Table 8: SOUTH KOREA – Carbon leakage-sensitive exports to the EU, 2007-09 Table 9: IRAN – Carbon leakage-sensitive exports to the EU, 2007-09 Table 10: SOUTH AFRICA – Carbon leakage-sensitive exports to the EU, 2007-09 Table 11: SAUDI ARABIA – Carbon leakage-sensitive exports to the EU, 2007-09 Table 12: THAILAND – Carbon leakage-sensitive exports to the EU, 2007-09 Table 13: ARGENTINA – Carbon leakage-sensitive exports to the EU, 2007-09 Table 14: NIGERIA – Carbon leakage-sensitive exports to the EU, 2007-09 Table 15: TAIWAN – Carbon leakage-sensitive exports to the EU, 2007-09 Table 16: VENEZUELA – Carbon leakage-sensitive exports to the EU, 2007-09 Table 17: PAKISTAN – Carbon leakage-sensitive exports to the EU, 2007-09 Table 18: MALAYSIA – Carbon leakage-sensitive exports to the EU, 2007-09 Table 19: EGYPT – Carbon leakage-sensitive exports to the EU, 2007-09 Table 20: KAZAKHSTAN – Carbon leakage-sensitive exports to the EU, 2007-09

Box 1:

Carbon leakage sensitivity and WTO law

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EU Climate Policies and Developing Country Trade Vulnerability

LIST OF FIGURES Figure 1: Chinese exports to the EU, 2007-09 Figure 2: Chinese exports of sensitive products to the EU, 2007-09 Figure 3: Indian exports to the EU, 2007-09 Figure 4: Indian exports of sensitive products to the EU, 2007-09 Figure 5: Brazilian exports to the EU, 2007-09 Figure 6: Brazilian exports of sensitive products to the EU, 2007-09 Figure 7: Mexican exports to the EU, 2007-09 Figure 8: Mexican exports of sensitive products to the EU, 2007-09 Figure 9: Indonesian exports to the EU, 2007-09 Figure 10: Indonesian exports of sensitive products to the EU, 2007-09 Figure 11: South Korean exports to the EU, 2007-09 Figure 12: South Korean exports of sensitive products to the EU, 2007-09 Figure 13: Iranian exports to the EU, 2007-09 Figure 14: Iranian exports of sensitive products to the EU, 2007-09 Figure 15: South African exports to the EU, 2007-09 Figure 16: South African exports of sensitive products to the EU, 2007-09 Figure 17: Saudi Arabian exports to the EU, 2007-09 Figure 18: Saudi Arabian exports of sensitive products to the EU, 2007-09 Figure 19: Thai exports to the EU, 2007-09 Figure 20: Thai exports of sensitive products to the EU, 2007-09 Figure 21: Argentinean exports to the EU, 2007-09 Figure 22: Argentinean exports of sensitive products to the EU, 2007-09 Figure 23: Nigerian exports to the EU, 2007-09 Figure 24: Nigerian exports of sensitive products to the EU, 2007-09 Figure 25: Taiwanese exports to the EU, 2007-09 Figure 26: Taiwanese exports of sensitive products to the EU, 2007-09 Figure 27: Venezuelan exports to the EU, 2007-09 Figure 28: Venezuelan exports of sensitive products to the EU, 2007-09 Figure 29: Pakistani exports to the EU, 2007-09 Figure 30: Pakistani exports of sensitive products to the EU, 2007-09 Figure 31: Malaysian exports to the EU, 2007-09 Figure 32: Malaysian exports of sensitive products to the EU, 2007-09 Figure 33: Egyptian exports to the EU, 2007-09 Figure 34: Egyptian exports of sensitive products to the EU, 2007-09 Figure 35: Kazakhstani exports to the EU, 2007-09 Figure 36: Kazakhstani exports of sensitive products to the EU, 2007-09

ICTSD Programme on Competitiveness and Sustainable Development

LIST OF Abbreviations and Acronyms BCA

Border Carbon Adjustment

CAIT

Climate Analysis Indicators Tool

CBDR

Common but differentiated responsibilities

CO2

Carbon dioxide

CO2e

Carbon dioxide equivalent

ETS

Emissions Trading System/Scheme

EU

European Union

FTA

Free Trade Agreement

GHG

Greenhouse gas

GSP

Generalized System of Preferences

HFC

Hydrofluorocarbon

HS

Harmonized System

LDC

Least Developed Country

MERCOSUR

Mercado ComĂşn del Sur (Southern Common Market)

Mt

Metric ton (1,000 kg)

PFC

Perfluorocarbon

SF6

Sulfur hexafluoride

UNFCCC

United Nations Framework Convention on Climate Change

US

United States

USD

United States Dollar

WTO

World Trade Organization

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EU Climate Policies and Developing Country Trade Vulnerability

FOREWORD As negotiations under the United Nations Framework Convention on Climate Change (UNFCCC) progress, it seems increasingly unlikely that parties will agree on a comprehensive binding deal, putting a global price on carbon. Rather, in the past years it has been possible to observe a shift towards a bottom-up approach, where countries make pledges of emission reductions, that will, at best, add up to abatement efforts sufficient to hinder temperature increases exceeding 2 degrees Celsius.

In light of this development, concerns remain over competitiveness distortions and carbon leakage resulting from unilateral climate change mitigation policies. Asymmetric levels of commitments and carbon pricing could lead to firms in restrained economies losing market share to firms in countries imposing no or a lower carbon cost, thereby resulting in emissions moving across borders.

A few options are available to policy makers to dampen such effects. One of them is to impose a carbon cost on imports, so as to level the playing field between domestic and foreign producers.

Concrete proposals have so far been put forward in the US, and discussed in many other countries.

Although EU policy has for a long time been to wait and see, the Union is now raising its stakes as for the first time it includes imports of aviation services in its emissions trading scheme, and is also considering including maritime transport.

Against this background, it is crucial to take the often-polarized debate about border measures one step further, and assess the actual vulnerabilities of developing countries in particular to such measures. Indeed, in the case of aviation, no exceptions are made for airlines or flights originating in developing countries, something that accentuates the need for solid facts focusing on developing countries’ exports.

In this paper, the author Samantha Derksen, Programme Officer at ICTSD specializing in competitiveness and development in relation to climate change policies, makes a pioneer effort to quantify the potential exposure of developing countries to possible EU border measures. By converting a list of sectors that the European Commission has identified as sensitive to carbon leakage into products as classified in the Harmonized System and then applying trade data to them, she has been able to identify the levels of trade that could face EU import restrictions. The results clearly show that a number of countries have good reason to closely monitor developments in the EU in this regard, as their export profiles and high dependence on the EU as an export market make them highly vulnerable.

I hope that the findings of this paper will add to the debate about climate change policies and trade, and in particular assist policy makers in striving for balance between the urgent need to address climate change and the responsibility to minimize the impact of climate change policies on social and economic development, in particular of developing countries.

Together with the author, I invite you to provide us with comments on this paper. We hope you will enjoy the reading.

Ricardo MelĂŠndez-Ortiz Chief Executive, ICTSD

ICTSD Programme on Competitiveness and Sustainable Development

1. Introduction As the international community struggles to agree on a comprehensive, global effort to curb greenhouse gas (GHG) emissions, countries are increasingly moving forward unilaterally and in smaller groups. This will result in an exacerbated asymmetry of climate change mitigation measures and larger differences in costs of carbon around the world.

Countries imposing a carbon cost, for example through an emissions trading scheme (ETS), are concerned that their energy-intensive industries will become less competitive and lose market share to firms from countries pricing carbon lower or not at all. This could result in a relocation of production and thus of related emissions, a concept referred to as carbon leakage.

To address these competitiveness and carbon leakage concerns, countries are discussing putting in place measures at the border, socalled border carbon adjustments (BCAs), to tax imports from countries where the carbon cost is lower. Such proposals raise concerns from trading partners that their exports will face BCAs and thereby that an important source of income will be affected. Developing countries1 are especially concerned, as they will not be prepared to take on comparable mitigation measures, and exportation can be an important tool in their developmental process.

The European Union (EU) aims to take a lead in combating climate change and, as such, experiences a higher intensity of carbon leakage and competitiveness concerns. The EU is, however, an important export market for many developing countries, and BCAs implemented by the EU could therefore have a large impact on these countries.

Even though there is currently no (draft) legislation in the EU that foresees the implementation of BCAs, it is not unlikely that these measures will be adopted in the future, especially considering the EU’s relatively high emission reduction targets compared to

other countries. This paper focuses on such possible future measures implemented by the EU and identifies related vulnerabilities in developing countries.

1.1 Aim and Outline of the Study The purpose of this paper is to assess the overall vulnerability of developing countries to possible EU BCAs, and identify where their specific vulnerabilities, in terms of products, lie. For this purpose, the trade flows originating from developing countries that would be likely to face possible future EU BCAs were identified.

Further, it is considered that developing country economies are specifically vulnerable to BCAs imposed on products of which high values are exported to the EU. This vulnerability is accentuated when the EU, as an export market, represents a large share of the country’s sectoral exports. Therefore, the sectors for which the largest values of goods are exported to the EU were singled out and, where possible, the importance of the EU as an export market in these sectors was also analyzed.

This study, by identifying where developing countries’ vulnerabilities lie, is considered a first step towards examining the economic and social consequences of (EU) BCAs for developing countries. It needs to be stressed however that in order to assess the actual costs that could be involved, a carbon cost would have to be assumed, and, most importantly, estimations of the GHG intensities of the exports would have to be made.

The paper starts by outlining current EU climate change regulation, and, more specifically, the legislation enacted to address the concerns of carbon leakage and distortions of competitiveness. In doing so, the possibility of future border measures is assessed.

1

2

EU Climate Policies and Developing Country Trade Vulnerability

This discussion is followed by an analysis of which products and developing countries would likely face possible future EU BCAs. This forms the basis of the assumptions made in this research in terms of the sectoral coverage of possible border measures and the developing countries whose products would face them.

A summary and analysis of the findings is given in the main text; more detailed findings are presented in Annex II. Finally, the conclusion discusses what these results mean for developing countries and provides recommendations as to the possible lines of action they could take to address the threat of BCAs.

ICTSD Programme on Competitiveness and Sustainable Development

2. The EU, Climate Change Policies and Carbon Leakage The EU has made a unilateral commitment to cut emissions by 20 percent by 2020 compared to 1990 levels, and to increase this reduction commitment to 30 percent within the framework of a genuine global effort to fight climate change.2 2.1 The EU Emissions Trading System and Free Allowances The main instrument with which the EU currently addresses its concerns over carbon leakage and competitiveness distortions is the allocation of allowances free of charge under its Emissions Trading System (ETS).3 The EU-ETS, in place since 2005, is a cap-andtrade system with a cap on overall emissions and free trade of emission allowances between the covered installations. The EU-ETS currently covers some 11,000 installations, accounting for about half of the EU’s carbon dioxide (CO2) emissions. The system covers activities such as the combustion of fuels and refining of oil; production of metal, cement, ceramics and glass, pulp and paper, and chemicals; and, from 2012 onwards, aviation. The first trading period of the EU-ETS ended in 2007, lasting three years.

The second trading period runs from 2008 to 2012, thereby ending at the same time as the commitment period under the Kyoto Protocol.

The EU is currently preparing its ETS for phase III and for making it capable of contributing to the more significant emission reductions that the EU has committed to over the coming years.

Among others, an important change involves the allocation mechanism, whereby auctioning will progressively become the general principle for distributing allowances.

During the first two phases of the EU-ETS, a large proportion of the emission allowances were allocated free of charge, as a way of slowly introducing the burden imposed by the system.

Although in the post-2012 strategy emission allowances within the EU-ETS will increasingly be distributed through auctioning, sectors and

subsectors deemed to be exposed to a significant risk of carbon leakage will continue to receive free allowances. The European Commission was assigned to establish a list of (sub)sectors eligible for free allowances no later than 31 December 2009, and will issue a new list every five years. Moreover, the Commission may add sectors every year if it can be demonstrated that they satisfy the criteria for inclusion on the list.4 From 2013 until 2020, these (sub)sectors will receive free allowances on a 100 percent basis,5 whereby the 10 percent most efficient EU performers in 2007 and 2008 are used as a benchmark.6 This means that only the most efficient installations, in terms of their carbon emissions, will have any chance of receiving all of their needed allowances for free. The free allowances will be allocated on a productbasis, as opposed to a sector-basis. Accordingly, an installation will receive allowances based on its production of products that fall within the carbon leakage-sensitive (sub)sectors, not based on its entire production because of its classification within such a (sub)sector.

A (sub)sector qualifies for inclusion on the list if it satisfies one of the following criteria:7 i. the sum of the direct and indirect additional costs induced by the implementation of the ETS would lead to at least a 5 percent increase in production costs, calculated as a proportion of gross value added, and the intensity of trade with third countries is above 10 percent, ‘intensity of trade’ defined as the ratio between the total value of EU exports and imports with third countries over the total market size of the European Union (in other words, annual turnover plus total imports from third countries), or; ii. the sum of direct and indirect additional costs induced by the implementation of the ETS would lead to a particularly high increase in production costs, of at least 30 percent, or;

3

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EU Climate Policies and Developing Country Trade Vulnerability

iii. the intensity of trade with third countries is above 30 percent.

In addition, sectors can also qualify for entry onto the list after a qualitative assessment, which takes into account the extent to which it is possible for individual installations in the sector or subsector concerned to reduce emission levels or electricity consumption. As appropriate, the increase in production costs that the related investment may entail is also taken into account.8 In December 2009, the Commission issued this list of (sub)sectors deemed exposed to a significant risk of carbon leakage.9 It includes 164 sectors and subsectors. The list is longer than the list of sectors covered by the ETS, as it includes sectors and subsectors not actually covered by the ETS. The rationale is that these sectors may face increased costs indirectly from the ETS, because they use products from ETS-covered sectors, notably electricity, as inputs.

2.2 Possible Border Measures Border carbon measures are another tool that has been discussed in the EU to deal with the concerns of carbon leakage and competitiveness distortions. In light of the disappointing outcome of the United Nations Framework Convention on Climate Change (UNFCCC) conference in Copenhagen, the European Commission issued a communication in May 2010, in which it reviewed, among other things, the need for tools to address carbon leakage and competitiveness concerns.10 The communication establishes that it is difficult

to assess the risk of carbon leakage as long as it is not clear how or whether countries will implement their commitments under the Copenhagen Accord. Considering these uncertainties, it states that it is justified to retain the measures already in place to handle the risks of carbon leakage.

The communication also discusses border measures, citing several potential stumbling blocks to the implementation of BCAs, including practical, legal and political complications. The communication thereafter concludes that such measures “could at best only be envisaged for a limited number of standardized commodities”.11 The possibility of border measures is not, however, excluded. The communication states that “as an alternative to current measures, the Commission continues to study the inclusion of imports to the EU-ETS”.12 In the communication of May 2010, the implementation of a community-wide carbon tax, as a supplement to the EU-ETS, was described as an important contributor to possible increased emission reduction targets (30%) and, at the same time, a generator of considerable revenues.13 These revenues could be used for low carbon investments. The fact that discussions have been taking place on an EU-wide carbon tax, although fruitless so far, could possibly reinvigorate interest among member states for discussing border adjustments.

The EU’s 30 percent reduction target is still on the table,14 and it is not unlikely that new mitigation measures implemented to reach this target, such as a carbon tax, will be accompanied by border adjustments.

ICTSD Programme on Competitiveness and Sustainable Development

3. To Which Products Would the EU Most Likely Apply BCAs? To assess the value of developing country exports that could be affected by possible future EU BCAs, one of the most important assumptions that needs to be made is the sectoral coverage of the border measures. In other words, the question that needs to be answered is: which products will likely face a carbon cost when being imported into the EU? A logical starting-point to identify these products is the EU’s list of carbon leakagesensitive (sub)sectors. Over the years 2007-09, EU imports of products in these (sub)sectors equalled 82 percent of total EU imports.15 It is unlikely that the EU would impose BCAs on such a large share of its imports.

The EU list of carbon leakage-sensitive (sub) sectors consists of several tables.16 Tables 1.1, 1.2 and 2 of the list contain sectors that have

been identified by the EU as carbon leakagesensitive on the basis of their trade intensity as well as their predicted increased costs due to the ETS. Table 1.3 contains sectors identified on the basis of their increased costs only and Table 1.4 sectors identified on the basis of their trade intensity only. Lastly, Table 3 contains sectors identified on the basis of qualitative criteria. For the purpose of this research, it is assumed that the EU would impose BCAs on the goods from the sectors listed in Tables 1.11.3 and 2. This way, sectors qualifying for the EU status of carbon leakage-sensitive on the basis of trade intensity only (Table 1.4) are excluded from the assumed sectoral coverage of possible future EU BCAs. Imposing BCAs on the products from these (sub)sectors would not only make little environmental sense, it would also be more difficult to justify under World Trade Organization (WTO) law (see Box 1).

Box 1: Carbon leakage sensitivity and WTO law It is generally agreed that emission-intensive, trade-exposed sectors are those that could be susceptible to carbon leakage. The EU has compiled its list of carbon leakage-sensitive sectors17 using these two criteria; however, it has also used them separately. Table 1.4 of the list contains sectors that only satisfy the criterion of trade intensity. From an environmental viewpoint, protecting these sectors from carbon leakage through BCAs makes little sense because, as they did not meet the emission intensity threshold, they will not be notably impacted by measures to charge for emissions, and high levels of leakage cannot therefore be expected.

Because of this, in the case that the hypothetical BCAs are found to be in violation of one of the provisions of the WTO’s General Agreement on Tariffs and Trade (GATT) 1994,18 it would be difficult for the EU to justify this assumed violation under GATT Article XX. Article XX, which provides for general exceptions, includes two environmental provisions: paragraph (b) provides a provisional exception for measures “necessary to protect human, animal or plant life or health”; and paragraph (g) for measures “relating to the conservation of exhaustible natural resources”. In addition to satisfying the criteria included in either of these paragraphs,19 as a second step, an environmental measure will have to be applied in accordance with the criteria set out in the chapeau in order to be justified under Article XX. The crucial point is that Article XX provides an opportunity to justify otherwise WTO-incompatible measures taken on environmental grounds, but not on economic or competitiveness grounds.

The EU would encounter problems justifying an imposition of BCAs on the goods of the sectors listed in Table 1.4 because it is highly questionable that sectors can be identified as carbon leakage-sensitive on the basis of their trade intensity only. This would especially pose a barrier for justification under the chapeau of Article XX, which scrutinizes whether the measure is indeed applied in accordance with the reasons outlined in the specific paragraph under which the measure is provisionally justified (which, as far as relevant here, focus on environmental goals).

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The sectors in Tables 1.1-1.3 and 2 are expressed in EU-specific NACE (European Classification of Economic Activities) and PRODCOM (Products of the European Community) codes, which were converted to Harmonized System (HS) 2007 codes by the author.20 This was necessary in order to express the sectoral coverage in international codes and enable comparisons and further research. During this conversion, the author removed the codes related to services.21 This was done for two reasons. First, BCAs are unlikely to be applied to services, as services do not cross customs borders. Second, including services would have been impractical due to the lack of data relating to trade in services.

After converting the NACE- and PRODCOMlisted sectors to HS 2007 ones, several codes were aggregated, despite the absence of some corresponding more-detailed codes, so as to include five entire sectors (2-digit level) usually deemed very carbon leakagesensitive.22 Annex I includes the resulting list of sensitive products, which are also the products analyzed in this paper.

Thus, what will be referred to below as either (most) sensitive products, products identified as (most) sensitive to carbon leakage, or the like, are the products resulting from this conversion process (including aggregation) of the sectors listed in Tables 1.1-1.3 and 2 (see Annex I).

ICTSD Programme on Competitiveness and Sustainable Development

4. Which Developing Countries Would Most Likely Face EU BCAs? The assumption made in this paper is that if the EU does implement BCAs, it will apply them to the identified carbon leakage-sensitive products from large-emitting countries that charge the emission of carbon at a lower price than the EU or not at all. In addition, it is assumed that Least Developed Countries (LDCs) will be exempt from the application of BCAs. These assumptions are reasonable, as the EU states on its website that “[a] ction by developing nations (except the least developed countries) is also needed to limit the rapid growth in their emissions. Overall, developing country pledges need to amount to a substantial deviation – in the order of 15-30 percent – below the currently predicted growth rate in their collective emissions by 2020”.23 As this paper studies the trade flows from developing countries to the EU that could be affected by possible future EU BCAs, only the developing large-emitting countries are investigated. However, it needs to be stressed that the most vulnerable targets are likely other Annex 1 countries, such as the US and Canada.

Developing countries are defined here as nonAnnex 1 countries, which are those that do not have binding emission reduction targets under

the UNFCCC and its Kyoto Protocol. In addition, Taiwan is included in our analysis, even though it is not a UNFCCC member. At this point, none of these countries have emission reduction policies in place as stringent as those of the EU. Large emitters are defined in this study as countries that contributed more than 0.5 percent to global GHG emissions in 2005, which is the most recent year for which individual country data on all GHG emissions (not only CO2) is available, using the Climate Analysis Indicators Tool (CAIT).24 The threshold of 0.5 percent is taken from the Waxman-Markey and Kerry-Lieberman bills discussed in the US. Both these comprehensive climate and energy bills proposed the implementation of an emissions trading scheme with free allowances, and additionally both included provisions enabling the future implementation of border adjustments. Currently, however, both bills are off the table.

Table 1 shows the developing countries that were responsible for more than 0.5 percent of global GHG emissions in 2005, which are therefore included in the trade flow analysis. As can be seen, this list does not include any LDCs.

Table 1. Annual GHG emissions for developing countries responsible for >0.5 percent of global GHG emissions, 2005 Country

Million Mt CO2e emissions (rank)

Percentage of global CO2e emissions

China

7,232.8 (1)

19.13%

5.5 (84)

India

1,859.0 (5)

4.92%

1.7 (149)

Brazil

1,011.6 (7)

2.68%

5.4 (87)

Mexico

645.0 (10)

1.71%

6.3 (75)

Indonesia

583.2 (12)

1.54%

2.7 (118)

South Korea

568.9 (13)

1.50%

11.8 (29)

Iran

559.2 (15)

1.48%

8.1 (61)

South Africa

422.2 (20)

1.12%

9.0 (54)

Saudi Arabia

376.6 (22)

1.00%

16.3 (16)

Thailand

351.1 (24)

0.93%

5.3 (88)

Argentina

326.6 (25)

0.86%

8.4 (59)

Nigeria

297.3 (26)

0.79%

2.1 (136)

Taiwan

283.8 (27)

0.75%

12.4 (26)

260.4 (28)

0.69%

9.8 (48)

12

Venezuela

Per capita Mt CO2e emissions (rank)

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EU Climate Policies and Developing Country Trade Vulnerability

Table 1. Continued Country

Million Mt CO2e emissions (rank)

Percentage of global CO2e emissions

Per capita Mt CO2e emissions (rank)

239.7 (29)

0.63%

1.5 (154)

235.9 (30)

0.62%

9.2 (52)

Egypt

227.2 (31)

0.60%

2.9 (113)

Kazakhstan

202.5 (33)

0.54%

13.4 (22)

Pakistan Malaysia

1

Note: excludes land use change 1 PFC, HFC & SF6 data not available 2 Non-UNFCCC Party Source: CAIT Version 8.0 (2011).

ICTSD Programme on Competitiveness and Sustainable Development

5. Methodology The trade flows presented in this study are based on EU-27 import data from UN Comtrade for the period 2007 to 2009.25 To identify the trade flows that could possibly face EU BCAs, the trade values of the EU imports of the sensitive products (see Annex I) were aggregated. For this purpose, each developing country was considered a separate country of origin. The analysis further identifies the largest (most valuable) trade flows of sensitive products, highlighting the sectors from which the exports of sensitive products to the EU

constituted more than 0.5 percent of the country’s total exports to the EU. In addition, the study gives an impression of the importance of the EU as an export market for the selected developing countries, overall as well as at a sectoral level. What is calculated is the share of a country’s total (sectoral) exports that were destined for the EU market during the years 2007 to 2009. These figures, unlike the trade flows of sensitive products, are calculated using export data.26

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6. Analysis of Carbon Leakage-Sensitive Trade Flows 6.1 Summary of the Findings Table 2 summarizes the results of the mapping of carbon leakage-sensitive exports from largeemitting developing countries to the EU during the years 2007-09. For each country analyzed, the table presents information on the average absolute (in USD; column 4) and relative (in % of total exports to the EU; column 3) values of carbon leakage-sensitive exports to the EU. In addition, the table identifies those sectors

in which the countries exported the largest values of sensitive products (column 2) and also presents average absolute (column 4) and relative (column 3) values for the sensitive products of these sectors specifically. Finally, the table includes information, wherever available, on the importance of the EU as an export market for the countries, overall as well as at a sectoral level (column 5).

A more detailed overview of these findings is presented in Annex II.

Table 2: Carbon leakage-sensitive exports to the EU, 2007-09 Country Sectors with largest trade flows of sensitive products to the EUa

China

India

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

All sensitive sectors

6.95%

$22,769

20.11% (of total exports)

Organic chemicals – HS 29

1.69%

$5,546

22.18%

Iron and steel – HS 72

2.07%

$6,778

15.91%

All sensitive sectors

23.75%

$9,119

21.19% (of total exports)

Petroleum oils & oils from bituminous minerals – HS 2710.19

6.64%

$2,549

22.52%

Organic chemicals – HS 29

5.88%

$2,256

25.47%

Leather articles of apparel – HS 4203.10

1.02%

$393

84.23%

Cotton yarn (>85% cotton, no retail sale) – HS 5205

0.87%

$335

17.82%

Iron and steel – HS 72

5.61%

$2,154

29.82%

Sensitive articles of iron or steel – HS 73

0.58%

$223

ICTSD Programme on Competitiveness and Sustainable Development

Table 2: Continued Country

Sectors with largest trade flows of sensitive products to the EUa

Brazil

All sensitive sectors

Mexico

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

13.80%

$6,117

23.66% (of total exports)

Solid cane or beet sugar and chemically pure sucrose – HS 1701

0.70%

$310

2.98%

Undenatured ethyl alcohol, >80% alcohol and denatured ethyl alcohol/sprits – HS 2207

0.86%

$382

28.89%

Petroleum oils & oils from bituminous minerals – HS 2710.19

0.82%

$365

16.80%

Inorganic chemicals – HS 28

0.86%

$380

18.05%

Organic chemicals – HS 29

1.86%

$826

24.61%

Sensitive paper, paperboard and articles thereof (also of paper pulp) – HS 48

0.70%

$309

Iron and steel – HS 72

4.05%

$1,794

16.89%

Refined copper or copper alloys, unwrought – HS 7403

0.81%

$358

61.13%

Unwrought aluminium – HS 7601

1.44%

$639

25.49%

All sensitive sectors

10.56%

$1,786

5.45% (of total exports)

Malt beer – HS 2203

0.99%

$167

7.08%

Petroleum oils & oils from bituminous minerals – HS 2710.19

0.54%

$92

3.00%

Organic chemicals – HS 29

2.27%

$384

21.84%

Iron and steel – HS 72

3.17%

$536

11.17%

Zinc and articles thereof – HS 79

0.99%

$167

36.31%

11

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EU Climate Policies and Developing Country Trade Vulnerability

Table 2: Continued Country

Sectors with largest trade flows of sensitive products to the EUa

Indonesia

All sensitive sectors

South Korea

Iran

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

17.51%

$3,133

11.58% (of total exports)

Bituminous coal, not agglomerated – HS 2701.12

4.32%

$773

8.04%

Coal other than anthracite & bituminous, not agglomerated – HS 2701.19

3.68%

$658

8.49%

Petroleum oils & oils from bituminous minerals – HS 2710.19

0.64%

$114

Organic chemicals – HS 29

1.33%

$237

10.82%

Industrial monocarboxylic fatty acids; acid oils from refining; industrial fatty alcohols – HS 3823

0.99%

$178

26.23%

Uncoated paper and paperboard – HS 4802

0.74%

$133

Yarn of synthetic staple fibres, no retail sale – HS 5509

0.51%

$91

14.40%

Iron and steel – HS 72

2.08%

$371

11.11%

Unwrought tin – HS 8001

1.65%

$295

All sensitive sectors

8.94%

$4,752

13.94% (of total exports)

Petroleum oils & oils from bituminous minerals – HS 2710.19

2.72%

$1,446

10.12%

Organic chemicals – HS 29

1.02%

$542

4.04%

Iron and steel – HS 72

3.95%

$2,102

10.85%

All sensitive sectors

6.34%

$1,095

Organic chemicals – HS 29

3.09%

$533

Iron and steel – HS 72

1.30%

$225

Refined copper or copper alloys, unwrought – HS 7403

0.94%

$162

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Table 2: Continued Country

Sectors with largest trade flows of sensitive products to the EUa

South Africa

All sensitive sectors

Saudi Arabia

Thailand

Argentina

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

28.10%

$7,672

30.75% (of total exports)

Bituminous coal, not agglomerated – HS 2701.12

9.51%

$2,596

54.18%

Coal other than anthracite & bituminous, not agglomerated – HS 2701.19

3.41%

$931

Inorganic chemicals – HS 28

0.79%

$216

24.05%

Organic chemicals – HS 29

1.12%

$305

28.21%

Sensitive paper, paperboard and articles thereof (also of paper pulp) – HS 48

0.72%

$196

Iron and steel – HS 72

9.00%

$2,456

Sensitive copper and articles thereof – HS 74

0.55%

$150

Unwrought aluminium – HS 7601

0.70%

$192

14.34%

16.24%

$3,889

7.05%c (of total exports)

Petroleum oils & oils from bituminous minerals – HS 2710.19

8.42%

$2,017

Propane, liquefied – HS 2711.12

0.85%

$205

All sensitive sectors

29.66%

8.83%

Organic chemicals – HS 29

6.24%

$1,494

19.14%

All sensitive sectors

5.03%

$1,139

13.04% (of total exports)

Petroleum oils & oils from bituminous minerals – HS 2710.19

0.81%

$183

3.55%

Organic chemicals – HS 29

1.17%

$265

9.73%

Iron and steel – HS 72

0.80%

$181

7.26%

All sensitive sectors

4.84%

$624

18.32% (of total exports)

Organic chemicals – HS 29

0.91%

$118

22.28%

Iron and steel – HS 72

0.92%

$119

17.22%

Iron or steel tubes, pipes and hollow profiles (seamless) – HS 7304

0.86%

$110

8.77%

Sensitive aluminium and articles thereof – HS 76

0.51%

$66

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EU Climate Policies and Developing Country Trade Vulnerability

Table 2: Continued Country

Sectors with largest trade flows of sensitive products to the EUa

Nigeria

Taiwand

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

All sensitive sectors

2.49%

$424

20.73% (of total exports)

Propane, liquefied – HS 2711.12

1.08%

$185

Butanes, liquefied – HS 2711.13

0.66%

$112

All sensitive sectors

6.98%

$2,222

Petroleum oils & oils from bituminous minerals - HS 2710.19

1.45%

$463

Organic chemicals – HS 29

1.03%

$328

Iron and steel – HS 72

2.97%

$946

41.83%

$3,098

Bituminous coal, not agglomerated – HS 2701.12

3.28%

$243

Coal other than anthracite & bituminous, not agglomerated – HS 2701.19

0.53%

$39

Petroleum oils & oils from bituminous minerals – HS 2710.19

19.67%

$1,456

Petroleum coke – HS 2713

3.25%

$240

Organic chemicals – HS 29

2.33%

$172

Iron and steel – HS 72

7.61%

$564

Unwrought aluminium – HS 7601

1.59%

$117

Aluminium wire – HS 7605

1.06%

$79

Venezuela All sensitive sectors

4.42%e (of total exports)

23.17%

82.89%

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Table 2: Continued Country

Sectors with largest trade flows of sensitive products to the EUa

Pakistan

All sensitive sectors

Malaysia

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

13.61%

$668

25.70% (of total exports)

Molasses from sugar – HS 1703

1.68%

$82

97.83%

Undenatured ethyl alcohol, >80% alcohol and denatured ethyl alcohol/sprits – HS 2207

1.17%

$57

37.64%

Leather articles of apparel – HS 4203.10

4.71%

$231

56.78%

Gloves etc. of leather, not for sports – HS 4203.29

1.88%

$92

58.34%

Cotton yarn (>85% cotton, not for retail sale) – HS 5205

2.82%

$138

10.84%

Yarn of synthetic staple fibres, no retail sale – HS 5509

0.55%

$27

41.93%

All sensitive sectors

5.15%

$1,222

11.69% (of total exports)

Petroleum oils & oils from bituminous minerals – HS 2710.19

1.12%

$266

4.56%

Organic chemicals – HS 29

0.62%

$147

4.73%

Industrial monocarboxylic fatty acids; acid oils from refining; industrial fatty alcohols – HS 3823

1.52%

$361

27.37%

Iron and steel – HS 72

0.52%

$125

4.94%

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EU Climate Policies and Developing Country Trade Vulnerability

Table 2: Continued Country

Sectors with largest trade flows of sensitive products to the EUa

Egypt

All sensitive sectors

Exports of Average annual sensitive trade value products to of exports of the EU as % of sensitive products total exports to the EU (in to the EU million USD)

Exports to the EU as % of total / sector exportsb

31.19%

$3,122

32.97%f (of total exports)

Portland, aluminous, slag, supersulphate and similar hydraulic cements – HS 2523

0.52%

$52

12.68%

Light petroleum oils and preparations – HS 2710.11

4.78%

$478

18.15%

Petroleum oils & oils from bituminous minerals – HS 2710.19

1.93%

$193

32.44%

Propane, liquefied – HS 2711.12

3.30%

$331

100%

Sensitive other mineral fuels, oils, waxes and bituminous substances – HS 27, excl. 2710.11, 2710.19 & 2711.12

0.61%

$61

Inorganic chemicals – HS 28

1.17%

$117

52.23%

Fertilisers – HS 31

6.20%

$621

55.44%

Cotton yarn (>85% cotton, no retail sale) – HS 5205

0.83%

$83

57.74%

Iron and steel – HS 72

5.30%

$530

46.26%

Copper wire – HS 7408

1.53%

$153

Unwrought aluminium – HS 7601

1.52%

$152

Aluminium plates etc., >0.2mm – HS 7606

1.33%

$133

94.43%

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Table 2: Continued Country

Sectors with largest trade flows of sensitive products to the EUa

Kazakhstan

All sensitive sectors

Exports of Average annual sensitive trade value products to of exports of the EU as % of sensitive products total exports to the EU (in to the EU million USD)

Exports to the EU as % of total / sector exportsb

14.05%

$2,727

43.83% (of total exports)

Petroleum oils & oils from bituminous minerals – HS 2710.19

2.04%

$395

43.86%

Propane, liquefied – HS 2711.12

1.31%

$255

65.27%

Sensitive other mineral fuels and oils – HS 27, excl.

2710.19 & 2711.12

1.20%

$232

Inorganic chemicals – HS 28

1.40%

$271

24.24%

Iron and steel – HS 72

4.04%

$784

21.60%

Refined copper or copper alloys, unwrought – HS 7403

1.71%

$331

Zinc and articles thereof – HS 79

1.14%

$221

45.86%

Other base metals; cermets; articles thereof – HS 81

0.52%

$101

33.40%

a A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). Sectors in italics are those from which not all goods are identified as sensitive. The data however only refers to those goods from the sector that have been identified as sensitive. b These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. Moreover, as mentioned before, the export data of these countries is often not classified according to HS 2007. However, for most codes mentioned in this table, the authors checked the concordances and decided that it poses no major problems that older HS classifications are used.

Missing data in this column is for one of the following reasons: • The sectors at issue are not completely comprised of identified sensitive products (the italicized sectors), and therefore information on the importance of the EU as an export market for these sectors as a whole would not serve the purpose of this study (India 73, Brazil 48, South Africa 48 & 74, Argentina 76, and Egypt 27, excl. 2710.11, 2710.19 & 2711.12).

• No trade data is available for the country (Taiwan).

• No 2007-09 trade data is available for the country (Iran).

• For certain HS codes, no 2007-09 export data is available for the country (Venezuela 2701.19, 2710.19 & 2713).

• The old classification system used in the country poses a problem, as there are no codes in this old system that appropriately correspond to the HS 2007 codes in which the sectors of certain sensitive products are expressed (Indonesia 2710.19 & 4802).

• The export data deviates so much from the EU-27 import data that it is highly unlikely that this difference is due to the general dynamics that cause import and export data to differ (for examples, see supra note 24). Figures based on export data where this is the case are not presented in this table (Indonesia 8001, South Africa 2701.19, Saudi Arabia 2710.19, Nigeria 2711.12 & 2711.13, Venezuela 2701.12, 29 & 7601, Egypt 7408 & 7606, and Kazakhstan 7403). c For Saudi Arabia, no export data specifying the country of origin is available for the years 2008 and 2009, and these figures thus represent the year 2007 only. d The imports of the EU-27 from Taiwan were assumed to be equal to the imports from the region classified as ‘Other Asia, nes’. e For Venezuela, no export data is available for the year 2007, and these figures thus represent the years 2008 and 2009 only. f For Egypt, no trade data is available for the year 2009. In addition, Egypt’s export data for 2007 is classified according to HS 1992, for which no correspondence tables are available on the UN Statistics Division website. Therefore, these figures represent the year 2008 only.

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EU Climate Policies and Developing Country Trade Vulnerability

6.2 Analysis of the Findings One conclusion that can be drawn from the analysis of those trade flows from developing countries to the EU that are likely to be affected by possible future EU BCAs is that sensitive exports differ widely between the countries of origin analyzed, not only in terms of trade value, which is to be expected if only because of the different sizes of the economies, but also in terms of their shares of total trade flows to the EU. For example, taking two extreme cases, only 2.49 percent of Nigeria’s total 2007-09 exports to the EU consisted of goods identified as likely to face EU BCAs, against no less than 41.83 percent for Venezuela. This makes it very difficult to draw general conclusions with respect to the relative magnitude of the trade flows originating from developing countries that would likely be affected by possible future EU BCAs. Countries that stand out in terms of the large shares of sensitive products in their 2007-09 exports to the EU are India (23.75%), South Africa (28.10%), Egypt (31.19%) and, as mentioned above, Venezuela (41.83%). Countries with relatively small shares are Argentina (4.84%), Thailand (5.03%), Malaysia (5.15%) and, as mentioned above, Nigeria (2.49%). In interpreting these shares it is important, however, to take into account the importance of the EU as an export market for these countries. For example, again taking two extreme cases, exports to the EU market made up only 5.45 per cent of Mexico’s total exports in 2007-09, against 43.83 percent for Kazakhstan.

Logically, these differences are explained by the sectoral focus of domestic production and exports (to the EU). One general trend that can be discerned, however, is that many of the analyzed developing countries with large shares of carbon leakage-sensitive exports to the EU in 2007-09 exported high values of iron and steel (HS 72), organic chemicals (HS 29), and petroleum oils and oils from bituminous minerals (HS 2710.19). With respect to how possible future EU BCAs could affect developing countries, whether these products/sectors

are covered by the border measures will thus be crucial.

In addition, these three particular sensitive products are among the usual suspects with respect to carbon leakage. That means that even if the EU decides on a narrower sectoral coverage in implementing BCAs, it is very likely to impose them on these particular products. For China, India, Brazil, Mexico, South Korea, Iran, South Africa, Saudi Arabia, Thailand, Taiwan, Venezuela, Malaysia, Egypt and Kazakhstan, these sensitive products represented large shares of their total exports to the EU and/or their sensitive exports to the EU, meaning that they are particularly vulnerable to EU BCAs imposed on these products/sectors. Venezuela stands out in the sense that no less than 19.67 percent of its 2007-09 exports to the EU consisted of petroleum oils and oils from bituminous minerals (HS 2710.19).

Egypt is additionally particularly vulnerable to EU BCAs imposed on light petroleum oils and preparations (HS 2710.11) and fertilisers (HS 31), and Malaysia to those imposed on industrial monocarboxylic fatty acids, acid oils form refining and industrial fatty alcohols (HS 3823). South Africa is additionally particularly vulnerable with respect to coal products, as (not agglomerated) bituminous coal (HS 2701.12) and coal other than anthracite and bituminous (HS 2701.19) together represented 12.92 percent of its total 2007-09 exports to the EU. Moreover, the EU is a very important export market for South Africa. Indonesia also exported coal products heavily to the EU during 2007-09; the same coal products (HS 2701.12 & 2701.19) represented exactly 8 percent of Indonesia’s exports to the EU in that period.

Nigeria is particularly vulnerable to EU BCAs imposed on liquefied propane and butanes (HS 2711.12 & 2711.13); 70 percent of the country’s 2007-09 sensitive exports to the EU consisted of these products. However, these sensitive exports comprised only 2.49 percent of its total exports to the EU. In terms of the composition of sensitive exports to the EU, Pakistan stands out; it is particularly vulnerable with respect

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to leather articles of apparel (HS 4203.10) and cotton yarn (>85% cotton, not for retail sale; HS 5205). India shares these vulnerabilities and exported even larger values of the products identified as the usual suspects.

Further, what is also crucial for the impact of possible future EU BCAs on developing countries is the importance of the EU as an export market for each of them in their affected sectors. Namely, if the EU is a very important export market for an affected sector, that sector could experience problems as a whole because an important part of its demand is likely to shrink due to higher costs. As an example, 94.43 percent of Egypt’s unwrought aluminium (HS 7601) exports and 100 percent of its liquefied propane (HS 2711.12) exports were destined for the EU in 2007-09. Further, 97.83 percent of Pakistan’s exports of molasses from sugar (HS 1703), 82.89 percent of Venezuela’s aluminium wire (HS 7605) exports, and 84.23 percent of India’s exports of leather articles of apparel (HS 4203.10) were destined for the EU market in 2007-09.

The results presented above and the conclusions drawn here need to be interpreted in light of the limitations of the methodologies used and the assumptions made to identify sensitive trade flows. As alluded to above, the assumption of sectoral coverage is crucial, as well as the assumption of the countries for which the products would be covered.

Regarding the sectoral coverage, the author assumed coverage based on HS 2007 codes, which were obtained through a complex conversion process. In addition, after the conversion, some HS codes were aggregated so as to include certain entire HS chapters (HS 28, 29, 72, 79 and 81) in the list of assumed covered products, even if not all lower level codes (with more digits) resulted from the conversion process. This possibly resulted in a slightly overstated sectoral coverage.

Further, it should be remembered that the trade flows presented above are averages over the years 2007 to 2009. Due to the extraordinary economic circumstance of these years and our general inability to predict future trade flows, these figures cannot be entirely relied upon as representative of future trade flows. They likely understate the value of future trade flows.

Lastly, with respect to the singling out of sensitive products in the tables because of the relatively large trade values of their exports to the EU, the threshold, a trade value of at least 0.5 percent of the total trade value of exports to the EU, is quite a random cut-off point (see the Methodology section above and the notes below Table 2). Products representing for example 0.49 percent of the country’s exports to the EU have not been singled out, even though the absolute value of their trade flows should not differ significantly from those of some of the products that have been.

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EU Climate Policies and Developing Country Trade Vulnerability

7. Discussion, Conclusions and Policy Recommendations The analysis in this paper strongly suggests that developing countries should closely monitor EU discussions of legislation on border carbon adjustments, and, more generally, legislation surrounding the EU list of carbon leakagesensitive (sub)sectors. Although not the focus of this paper, the magnitude of the trade flows presented here suggests that it is generally advisable to closely monitor climate change policy developments within any country where competitiveness and carbon leakage concerns have been raised.

If indeed the EU does implement BCAs on products from the list identified in this paper as most carbon leakage-sensitive, this could affect significant shares of certain developing countries’ exports to the EU. In particular, large shares of exports to the EU from India, South Africa, Egypt and Venezuela could be expected to be affected, as in 2007-09 the share of their exports to the EU consisting of these sensitive products were 23.75, 28.10, 31.19 and 41.83 percent respectively.

Countries that export high values of metals, minerals and chemicals to the EU seem to be most at risk of facing a carbon cost on large shares of their exports to the EU. This logically follows from the specific products that have been identified in this paper as most carbon leakage-sensitive and thus most likely to face EU BCAs (see Annex I). In addition, countries for which the EU is a very important export market, again such as South Africa and Egypt, but also Kazakhstan, should naturally be extra vigilant. This is not to say, however, that other developing countries should assume they would not to be affected by possible future EU BCAs. In monitoring these discussions, within the EU or other countries, the sectoral coverage discussed will be a particularly important element to pay attention to. For example, for many developing countries, specifically India, Saudi Arabia and Venezuela, it is crucial whether petroleum oils and oils from bituminous minerals (HS 2710.19) would face EU BCAs.

Considering that for many developing countries significant values of exports could be affected by possible EU BCAs, it is also worthwhile for these countries to take a proactive stance in finding solutions to the carbon leakage problem. This could avoid the need for the EU to implement such measures or make it possible for the country to be exempted from their application.

The optimum solution to curbing carbon leakage would be for all countries, including developing countries, to take domestic climate change mitigation action under a comprehensive multilateral climate agreement. However, due to the UNFCCC common but differentiated responsibilities (CBDR) principle,27 which would have to be taken into account in setting mitigation targets, even in the case of such an agreement it would still be possible for carbon leakage concerns to persist in developed countries, as asymmetric actions are prescribed by this principle. At the same time, if indeed a comprehensive climate change agreement is reached in which mitigation targets are set, it does not seem politically viable for developed countries to impose BCAs on developing countries’ products precisely because of the CBDR principle. Unless, of course, those countries are not complying with their mitigation targets, a situation that raises an entirely new set of questions.

Assuming no comprehensive climate change agreement is forthcoming, a way in which the need for the EU to impose BCAs on the imports from a particular country could be avoided is for that country to impose a carbon tax on exports to the EU. In this case, not only would the EU’s concern over carbon leakage be addressed, but the revenue raised by the carbon tax would also stay within the exporting country. The revenue could, for example, be used to support the needed transfer to a lowcarbon economy.

Another possibility could be to seek bilateral or plurilateral agreements, in which deve-

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loping countries would take on mitigation commitments and the EU would, in exchange, offer other concessions that are beneficial to developing countries and that could ease the enactment of unpopular climate change measures at the domestic level. One obvious example of concessions that the EU could offer is additional trade openings.

This study identified the shares of developing countries’ exports to the EU that could in the future be affected by BCAs if the EU would indeed implement such measures. Further, it shows where the specific vulnerabilities of developing countries lie by identifying heavilytraded carbon leakage-sensitive goods. This effort, although valuable in itself, can be used for further research into the economic and social consequences of possible EU BCAs. For this it will be necessary to assume a carbon cost and study in detail the affected sectors and their economic and social characteristics.

In particular, a necessary complement to this study is the calculation of the carbon cost that

would be levied on the trade flows outlined in this paper. This will require estimations of the GHG intensity of the exports.

Another important factor that should be accounted for in further research into the effects of border measures are the administrative costs involved. Even if the imposed carbon cost is low, these administrative costs can be immense, and thus affect exports.28 For an applied analysis of these costs, it will be necessary to know which and how many imports would be covered by BCAs, which is where this study lays a foundation.

In general, it is clear that for many developing countries, exports are an important source of income, and measures affecting them could thus adversely affect development. Therefore, it is important to analyze and discuss ways in which both the concern over carbon leakage can be addressed, and at the same time the negative consequences of climate change measures can be largely avoided.

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EU Climate Policies and Developing Country Trade Vulnerability

ENDNOTES 1

Developing countries are defined in this study as non-Annex 1 countries. Conscious of the fact that this definition does not reflect the current economic reality, it is decided to be most practical, as it reflects the institutional realities within the UNFCCC and WTO.

2

See amongst others the Council of the European Union (2009a), the Copenhagen Accord, and European Commission (2010a).

3

This is recognized in Council of the European Union (2009b), para. 18 and in Council of the European Union (2009c), paras. 21-22.

4

Directive 2009/29/EC (amending Directive 2003/87/EC), Art. 10a(13).

5

Ibid., Art. 10a(12).

6

European Commission (2010c), para. 8, p. 3.

7

Directive 2009/29/EC (amending Directive 2003/87/EC), Art. 10a(15-16).

8

Ibid., Art. 10a(17).

9

Annexed to the Commission Decision (2010).

10 European Commission (2010a).

11 Ibid., p. 12.

12 European Commission (2010b), p. 73.

13 European Commission (2010a), p.7.

14 EurActiv (2011).

15 ICTSD and IADB (forthcoming 2011).

16 See Article 10(a), paragraphs 15 to 17 of Directive 2009/29/EC (amending Directive 2003/87/ EC) for the different criteria used by the EU to determine carbon leakage sensitivity.

17 Annexed to the Commission Decision (2010).

18 BCAs are not necessarily in violation with one of the provisions of the GATT 1994. See ICTSD and IADB (forthcoming 2011) for a comprehensive legal analysis of the WTO-compatibility of BCAs. 19 Considering the different legal tests under these two paragraphs, provisional justification under paragraph (g) is generally more likely, as the so-called ‘relating to’ test is easier to pass than the ‘necessary’ test. See ICTSD and IADB (forthcoming 2011).

20 Use was made of the correspondence tables of the United Nations Statistics Division. To convert the NACE codes, the following tables were used: NACE Rev. 1.1 – ISIC Rev. 3.1; ISIC Rev. 3.1 – ISIC Rev. 4; ISIC Rev. 4 – CPC Ver. 2; and CPC Ver. 2 – HS 2007. To convert the PRODCOM codes, the following tables were used: PRODCOM 2002 – HS 2002; and HS 2002 – HS 2007. It proved particularly difficult to convert the NACE codes, in which the vast majority of (sub)sectors on the list of sectors sensitive to carbon leakage are expressed (including all the sectors listed in Tables 1.1, 1.2 and 1.3). This relates to the intrinsic difficulties involved in identifying the different commodities that can result from production processes, or, conversely, the different processes involved in the production of certain commodities. The correspondence tables were

ICTSD Programme on Competitiveness and Sustainable Development

not simply applied, as this would not result in the desired outcome, but in overstated sectoral coverage. In contrast, the tables were applied carefully using the detailed descriptions of the codes involved. Due to these difficulties and the long conversion process, the resulting list of HS 2007 codes should be interpreted with caution.

21 More specifically, at the stage of conversion of the NACE codes where the sectors were expressed in CPC codes (Ver. 2, 5-digit level), the codes starting with the digits 88 were deleted.

22 After studying the sensitive sectors in Tables 1.1-1.3 and 2 in detail, and taking into account the ‘usual suspects’ of carbon leakage-sensitive sectors, the author has taken the liberty to assume the presence of certain absent 6- and 4-digit level codes. Based on the descriptions of the (sub)sectors in these tables, it was judged most likely, and therefore assumed, that BCAs would be applied to all products classified under certain HS Chapter. In these cases, we aggregated codes to the 2-digit level despite the lack of certain HS codes at the 6- or 4-digit level. This was done for the following HS Chapters (and their corresponding lacking code-extensions): 28(18.10 & 44.50), 29(18.21, 18.22, 18.23, 31, 36, 37, 38, 39, 40 & 41), 72(04, 05 & 17), 79(02 & 07), and 81(01.97, 02.97, 03.30, 04.20, 05.30, 07.30, 08.30, 09.30, 10.20, 12.13, 12.22, 12.52 & 13). Initially, after the conversion to HS 2007 codes, the list of carbon leakage-sensitive sectors originally set out in Tables 1.1-1.3 and 2 contained 300 entries. The list resulting from aggregation contained 139 entries, and was used in the analysis of trade flows. No HS codes that were on the list with 300 entries were excluded from the list with 139 entries and thus from the analysis. It should be kept in mind that these aggregations may overstate, although probably only slightly, the trade flows that might be subject to BCAs. 23 European Commission (2011).

24 CAIT Version 8.0 (2011).

25 United Nations Commodity Trade Statistics Database (UN Comtrade) (2010). When, in this paper, a claim is made about certain trade data being available or not, this applies exclusively to the data of UN Comtrade.

Import data, as opposed to export data, has been used for two reasons. First, at exportation, the final destination of a commodity is often unknown. In contrast, at importation, the country of origin is important information, mainly for reasons related to tariffs. Second, many developing countries have not used the HS 2007 system from 2007 onwards, making it more difficult to present a coherent picture of the involved trade flows if export data is used for which these countries are the reporters. Unfortunately, due to the fact that the presented trade flows reflect import data, it would not be correct to express them as a percentage of total exports. This would not be correct for several reasons, among them the fact that imports are generally recorded in CIF (cost, insurance and freight) values whereas exports are recorded in FOB (free on board) values, and that due to time lags between exportation and importation, the exportation of a certain trade flow can potentially be recorded a year earlier than the importation.

26 It should be remembered that at exportation, the final destination of a commodity is not always known.

27 This principle, established under Article 3.1 of the UNFCCC, is one of the Convention’s guiding principles that recognizes historical differences in the contribution of developed and developing countries to climate change, and, at the same time, the differences in economic and technical capacities to address the problem of climate change.

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EU Climate Policies and Developing Country Trade Vulnerability

28 See Persson (2010).

29 According to CAIT Version 8.0 (2011).

30 Council Regulation (EC) No 732/2008, Annex I, p. 4.

31 As mentioned in the Methodology section, phrases such as ‘products/goods identified as (most) carbon leakage-sensitive’ or simply ‘(most) sensitive products/goods’ refer to those products that are listed and described in Annex 1 of this paper, which resulted from the conversion process (including aggregation) of the products originally included in Tables 1.1-1.3 and 2 of the EU list of (sub)sectors deemed to be exposed to a significant risk of carbon leakage.

32 From here on, unless otherwise specified, an ‘average’ number refers to an annual average over the years 2007 to 2009.

33 These figures exclude PFC, HFC and SF6 emissions, for which data is not available for Taiwan.

34 These figures exclude PFC, HFC and SF6 emissions, for which data is not available for Malaysia.

ICTSD Programme on Competitiveness and Sustainable Development

REFERENCES CAIT. (2011). Climate Analysis Indicators Tool. Version 8.0. World Resources Institute.

Washington, D.C. Commission Decision. (2010). “…of 24 December 2009, determining, pursuant to Directive 2003/87/ EC of the European Parliament and of the Council, a list of sectors and subsectors which are deemed to be exposed to a significant risk of carbon leakage”. Official Journal of the European Union. L 1/10. 5 January 2010. Brussels.

Council of the European Union. (2009a). Brussels European Council 11 and 12 December 2008 – Presidency Conclusions. 17271/1/08 REV 1 CONCL 5. 13 February 2009. Brussels.

Council of the European Union. (2009b). EU Position for the Copenhagen Climate Conference (7-18 December 2009) – Council conclusions. Information note. 21 October 2009. Brussels.

Council of the European Union. (2009c). Brussels European Council 29/30 October 2009 – Presidency conclusions. 15265/1/09 REV 1 CONCL 3. 1 December 2009. Brussels.

Council Regulation (EC) No 732/2008. (2008). “…of 22 July 2008, applying a scheme of generalised tariff preferences for the period from 1 January to 31 December 2011 and amending Regulations (EC) No 552/97, (EC) No 1933/2006 and Commission Regulations (EC) No 1100/2006 and (EC) No 964/2007”. Official Journal of the European Union. L 211/1. 6 August 2008. Brussels.

Directive 2003/87/EC of the European Parliament and of the Council. (2003). “…of 13 October 2003, establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC”. Official Journal of the European Union. L 275/32. 25 October 2003. Brussels.

Directive 2009/29/EC of the European Parliament and of the Council. (2009). “…of 23 April 2009, amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community”. Official Journal of the European Union. L 140/63. 5 June 2009. Brussels.

European Commission. (2010a). Analysis of options to move beyond 20% greenhouse gas emission reductions and assessing the risk of carbon leakage. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. COM(2010) 265 final. 26 May 2010. Brussels.

European Commission. (2010b). Analysis of options to move beyond 20% greenhouse gas emission reductions and assessing the risk of carbon leakage – Background information and analysis PART II. Commission Staff Working Document accompanying the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. SEC(2010) 650. 26 May 2010. Brussels.

European Commission. (2010c). Draft Commission Decision “of […] determining transitional Union-wide rules for the harmonized free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC”. Version of 15 December 2010. Brussels.

European Commission. (2011). “Building a post-2012 climate regime: the EU’s contribution”. EC Climate Action website. Available at: http://ec.europa.eu/clima/policies/international/ negotiations_future_en.htm.

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EurActiv. (2011). 30% greenhouse gas emissions cut ‘still on the table’. Climate & Environment Section.

14 February 2011. Available at: http://www.euractiv.com/en/climate-environment/percentgreenhouse-gas-emissions-cut-table-news-502133?utm_source=EurActiv+Newsletter&utm _campaign=332ce1ff41-my_google_analytics_key&utm_medium=email.

ICTSD and IADB. (forthcoming, 2011). Vulnerabilities in Latin America and the Caribbean to Trade-Related Climate Change Policies: The Case of Border Carbon Adjustment Measures.

International Centre for Trade and Sustainable Development. Geneva.

Persson, S. (2010). Practical Aspects of Border Carbon Adjustment Measures – Using a Trade Facilitation Perspective to Assess Trade Costs. ICTSD Programme on Competitiveness and Sustainable Development, Issue Paper No. 13. International Centre for Trade and Sustainable Development. Geneva.

United Nations Commodity Trade Statistics Database (UN Comtrade). (2010). United Nations Statistics Division. New York. Available at: http://comtrade.un.org.

ICTSD Programme on Competitiveness and Sustainable Development

Annex I – Goods Identified as Likely to Face EU BCAs HS 2007

Description

0402.10

Milk in powder/granules/other solid form, fat content by weight not >1.5%

0402.21

Milk in powder/granules/other solid form, unsweetened, fat content by weight >1.5%

0402.29

Milk in powder/granules/other solid form, sweetened, fat content by weight >1.5%

1107

Malt, whether or not roasted

1108

Starches; inulin

1109

Wheat gluten, whether or not dried

1701

Cane or beet sugar and chemically pure sucrose, in solid form

1702

Other sugars, including chemically pure lactose, maltose, glucose and fructose, in solid form; sugar syrups not containing added flavouring or colouring matter; artificial honey, whether or not mixed with natural honey; caramel

1703

Molasses resulting from the extraction or refining of sugar

1903

Tapioca and substitutes therefore prepared from starch, in the form of flakes, grains, pearls, siftings or in similar forms

2002.90

Tomatoes, prepared/preserved otherwise than by vinegar/acetic acid, other than whole/in pieces

2102.10

Active yeasts

2203

Beer made from malt

2205

Vermouth and other wine of fresh grapes flavoured with plants or aromatic substances

2207

Undenatured ethyl alcohol of an alcoholic strength by volume of 80% vol. or higher; ethyl alcohol and other spirits, denatured, of any strength

2502

Unroasted iron pyrites

2503

Sulphur of all kinds, other than sublimed sulphur, precipitated sulphur and colloidal sulphur

2510

Natural calcium phosphates, natural aluminium calcium phosphates and phosphatic chalk

2511

Natural barium sulphate (barytes); natural barium carbonate (witherite), whether or not calcined, other than barium oxide of heading 28.16

2522

Quicklime, slaked lime and hydraulic lime, other than calcium oxide and hydroxide of heading 28.25

2523

Portland cement, aluminous cement, slag cement, supersulphate cement and similar hydraulic cements, whether or not coloured or in the form of clinkers

2528

Natural borates and concentrates thereof (whether or not calcined), but not including borates separated from natural brine; natural boric acid containing not more than 85% of H3BO3 calculated on the dry weight

2529.21

Fluorspar, containing by weight 97%/less of calcium fluoride

2529.22

Fluorspar, containing by weight >97% of calcium fluoride

2530.20

Kieserite, epsomite (natural magnesium sulphates)

2530.90

Mineral substance, n.e.s. in Ch.25

2601.20

Roasted iron pyrites

2701.11

Anthracite coal, whether/not pulverised but not agglomerated

2701.12

Bituminous coal, whether/not pulverised but not agglomerated

2701.19

Coal other than anthracite & bituminous, whether/not pulverised but not agglomerated

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EU Climate Policies and Developing Country Trade Vulnerability

HS 2007

Description

2704

Coke and semi-coke of coal, of lignite or of peat, whether or not agglomerated; retort carbon

2706

Tar distilled from coal, from lignite or from peat, and other mineral tars, whether or not dehydrated or partially distilled, including reconstituted tars

2707

Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the non-aromatic constituents

2708

Pitch and pitch coke, obtained from coal tar or from other mineral tars

2710.11

Light petroleum oils & preparations

2710.19

Petroleum oils & oils obtained from bituminous minerals (other than crude) & preparations not elsewhere specified/incld., containing by weight 70%/more of petroleum oils/of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, other than waste oils and light oils & preparations

2711.12

Propane, liquefied

2711.13

Butanes, liquefied

2711.14

Ethylene, propylene, butylene & butadiene, liquefied

2711.19

Petroleum gases other than natural gas/propane/butanes/ethylene, propylene, butylene & butadiene, liquefied

2711.29

Petroleum gases & gaseous hydrocarbons, other than natural gas, in gaseous state

2712

Petroleum jelly; paraffin wax, micro-crystalline petroleum wax, slack wax, ozokerite, lignite wax, peat wax, other mineral waxes, and similar products obtained by synthesis or by other processes, whether or not coloured

2713

Petroleum coke, petroleum bitumen and other residues of petroleum oils or of oils obtained from bituminous minerals

28

Inorganic chemicals; organic or inorganic compounds of precious metals, of rareearth metals, of radioactive elements or of isotopes

29

Organic chemicals

31

Fertilisers

3207

Prepared pigments, prepared opacifiers and prepared colours, vitrifiable enamels and glazes, engobes (slips), liquid lustres and similar preparations, of a kind used in the ceramic, enamelling or glass industry; glass frit and other glass, in the form of powder, granules or flakes

3501.10

Casein

3503

Gelatin (including gelatin in rectangular (including square) sheets, whether or not surface-worked or coloured) and gelatin derivatives; isinglass; other glues of animal origin, excluding casein glues of heading 35.01

3505.10

Dextrins & other modified starches

3507

Enzymes; prepared enzymes not elsewhere specified or included

3801

Artificial graphite; colloidal or semi-colloidal graphite; preparations based on graphite or other carbon in the form of pastes, blocks, plates or other semimanufactures

3802.90

Activated natural mineral products other than of activated carbon; animal black, incl. spent animal black

3803

Tall oil, whether or not refined

ICTSD Programme on Competitiveness and Sustainable Development

HS 2007

Description

3805

Gum, wood or sulphate turpentine and other terpenic oils produced by the distillation or other treatment of coniferous woods; crude dipentene; sulphite turpentine and other crude para-cymene; pine oil containing alpha-terpineol as the main constituent

3806

Rosin and resin acids, and derivatives thereof; rosin spirit and rosin oils; run gums

3807

Wood tar; wood tar oils; wood creosote; wood naphtha; vegetable pitch; brewers' pitch and similar preparations based on rosin, resin acids or on vegetable pitch

3823

Industrial monocarboxylic fatty acids; acid oils from refining; industrial fatty alcohols

4002

Synthetic rubber and factice derived from oils, in primary forms or in plates, sheets or strip; mixtures of any product of heading 40.01 with any product of this heading, in primary forms or in plates, sheets or strip

4203.10

Articles of apparel, of leather/composition leather

4203.29

Gloves, mittens & mitts, of leather/composition leather other than those specially designed for use in sports

4203.30

Belts & bandoliers, of leather/composition leather

4203.40

Clothing accessories (excl. of 4203.21-4203.30), of leather/composition leather

4402

Wood charcoal (including shell or nut charcoal), whether or not agglomerated

4801

Newsprint, in rolls or sheets

4802

Uncoated paper and paperboard, of a kind used for writing, printing or other graphic purposes, and non perforated punch-cards and punch tape paper, in rolls or rectangular (including square) sheets, of any size, other than paper of heading 48.01 or 48.03; hand-made paper and paperboard

4803

Toilet or facial tissue stock, towel or napkin stock and similar paper of a kind used for household or sanitary purposes, cellulose wadding and webs of cellulose fibres, whether or not creped, crinkled, embossed, perforated, surface-coloured, surface-decorated or printed, in rolls or sheets

4804

Uncoated kraft paper and paperboard, in rolls or sheets, other than that of heading 48.02 or 48.03

4805

Other uncoated paper and paperboard, in rolls or sheets, not further worked or processed than as specified in Note 3 to this Chapter

4806

Vegetable parchment, greaseproof papers, tracing papers and glassine and other glazed transparent or translucent papers, in rolls or sheets

4807

Composite paper and paperboard (made by sticking flat layers of paper or paperboard together with an adhesive), not surface-coated or impregnated, whether or not internally reinforced, in rolls or sheets

4808.20

Sack kraft paper, creped/crinkled, whether/not embossed/perforated, in rolls/ sheets (excl. of 48.03)

4808.30

Kraft paper (excl. sack kraft paper), creped/crinkled, whether/not embossed/ perforated, in rolls/sheets (excl. of 48.03)

4808.90

Paper & paperboard, corrugated (with/without glued flat surface sheets), creped, crinkled, embossed/perforated, in rolls/sheets, other than paper of the kind described in heading 48.03 (excl. of 4808.10-4808.30)

4809

Carbon paper, self-copy paper and other copying or transfer papers (including coated or impregnated paper for duplicator stencils or offset plates), whether or not printed, in rolls or sheets

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EU Climate Policies and Developing Country Trade Vulnerability

HS 2007

Description

4810

Paper and paperboard, coated on one or both sides with kaolin (China clay) or other inorganic substances, with or without a binder, and with no other coating, whether or not surface-coloured, surface-decorated or printed, in rolls or rectangular (including square) sheets, of any size

4811

Paper, paperboard, cellulose wadding and webs of cellulose fibres, coated, impregnated, covered, surface-coloured, surface-decorated or printed, in rolls or rectangular (including square) sheets, of any size, other than goods of the kind described in heading 48.03, 48.09 or 48.10

4813.90

Cigarette paper (excl. of 4813.10 & 4813.20)

5203

Cotton, carded or combed

5205

Cotton yarn (other than sewing thread), containing 85% or more by weight of cotton, not put up for retail sale

5206

Cotton yarn (other than sewing thread), containing less than 85% by weight of cotton, not put up for retail sale

5207

Cotton yarn (other than sewing thread) put up for retail sale

5509

Yarn (other than sewing thread) of synthetic staple fibres, not put up for retail sale

5510

Yarn (other than sewing thread) of artificial staple fibres, not put up for retail sale

6806.20

Exfoliated vermiculite, expanded clays, foamed slag & similar expanded mineral materials (incl. intermixtures thereof)

6901

Bricks, blocks, tiles and other ceramic goods of siliceous fossil meals (for example, kieselguhr, tripolite or diatomite) or of similar siliceous earths

6907

Unglazed ceramic flags and paving, hearth or wall tiles; unglazed ceramic mosaic cubes and the like, whether or not on a backing

6908

Glazed ceramic flags and paving, hearth or wall tiles; glazed ceramic mosaic cubes and the like, whether or not on a backing

7005

Float glass and surface ground or polished glass, in sheets, whether or not having an absorbent, reflecting or non-reflecting layer, but not otherwise worked

7006

Glass of heading 70.03, 70.04 or 70.05, bent, edge-worked, engraved, drilled, enamelled or otherwise worked, but not framed or fitted with other materials

7007

Safety glass, consisting of toughened (tempered) or laminated glass

7008

Multiple-walled insulating units of glass

7009

Glass mirrors, whether or not framed, including rear-view mirrors

7010.90

Carboys, bottles, flasks, jars, pots, phials & other containers, of glass, of a kind used for the conveyance/packing of goods; preserving jars of glass

7013

Glassware of a kind used for table, kitchen, toilet, office, indoor decoration or similar purposes (other than that of heading 70.10 or 70.18)

7019.11

Chopped strands, of a length of not >50mm, of glass fibres

7019.12

Rovings of glass fibres

7019.19

Slivers of glass fibres; chopped strands, of a length of >50mm, of glass fibres

72

Iron and steel

7301

Sheet piling of iron or steel, whether or not drilled, punched or made from assembled elements; welded angles, shapes and sections, of iron or steel

ICTSD Programme on Competitiveness and Sustainable Development

HS 2007

Description

7302

Railway or tramway track construction material of iron or steel, the following: rails, check-rails and rack rails, switch blades, crossing frogs, point rods and other crossing pieces, sleepers (cross-ties), fish-plates, chairs, chair wedges, sole plates (base plates), rail clips, bedplates, ties and other material specialized for jointing or fixing rails

7303

Tubes, pipes and hollow profiles, of cast iron

7304

Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel

7305

Other tubes and pipes (for example, welded, riveted or similarly closed), having circular cross-sections, the external diameter of which exceeds 406.4 mm, of iron or steel

7306

Other tubes, pipes and hollow profiles (for example, open seam or welded, riveted or similarly closed), of iron or steel

7401

Copper mattes; cement copper (precipitated copper)

7402

Unrefined copper; copper anodes for electrolytic refining

7403

Refined copper and copper alloys, unwrought

7405

Master alloys of copper

7406

Copper powders and flakes

7407

Copper bars, rods and profiles

7408

Copper wire

7409

Copper plates, sheets and strip, of a thickness exceeding 0.15 mm

7410

Copper foil (whether or not printed or backed with paper, paperboard, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0.15 mm

7411

Copper tubes and pipes

7412

Copper wire

7501

Nickel mattes, nickel oxide sinters and other intermediate products of nickel metallurgy

7502

Unwrought nickel

7504

Nickel powders and flakes

7505

Nickel bars, rods, profiles and wire

7506

Nickel plates, sheets, strip and foil

7507

Nickel tubes, pipes and tube or pipe fittings (for example, couplings, elbows, sleeves)

7601

Unwrought aluminium

7603

Aluminium powders and flakes

7604

Aluminium bars, rods and profiles

7605

Aluminium wire

7606

Aluminium plates, sheets and strip, of a thickness exceeding 0.2 mm

7607

Aluminium foil (whether or not printed or backed with paper, paperboard, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0.2 mm

7608

Aluminium tubes and pipes

7609

Aluminium tube or pipe fittings (for example, couplings, elbows, sleeves)

7801

Unwrought lead

7804

Lead plates, sheets, strip and foil; lead powders and flakes

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EU Climate Policies and Developing Country Trade Vulnerability

HS 2007

Description

79

Zinc and articles thereof

8001

Unwrought tin

8003

Tin bars, rods, profiles and wire

81

Other base metals; cermets; articles thereof

8401.30

Fuel elements (cartridges), non-irradiated

8701.10

Pedestrian controlled tractors (excl. of 87.09)

8701.90

Tractors n.e.s. in 87.01 (excl. of 87.09)

ICTSD Programme on Competitiveness and Sustainable Development

Annex II – Complete Overview of Carbon Leakage-Sensitive Trade Flows China Since 2005, China has been, in absolute terms, the largest emitter of GHGs globally;29 in that year it was responsible for 19.13 percent of global emissions. In terms of the need for mitigation, action in China is thus very important, and in the absence of such action, the scope for leakage is significant.

Therefore, BCAs are very likely to be imposed on Chinese products if the country does not take sufficient mitigation action to address the carbon leakage concerns of the EU, or price the carbon of its exports.

China is a beneficiary of the EU Generalized System of Preferences (GSP), but many of its tariff preferences have been removed. Most

importantly with regard to the products identified as sensitive, tariff preferences have been removed for Chinese ‘products of chemical or allied industries’ (HS 28-38) and ‘base metals and articles of base metal’ (HS 72-83).30 These preferences have been removed because the EU was importing relatively high values of the corresponding Chinese products.

Thus, for certain sensitive and heavily-traded products, not only does China not enjoy GSP preferences, but the country’s exports of these products may also face EU BCAs in the future.

It should be stressed, however, that not all the Chinese products from those sectors from which tariff preferences have been removed enjoyed preferences under the GSP in the first place.

Figure 1: Chinese exports to the EU, 2007-09 7%

Non-sensitive products Sensitive products 93%

Of China’s total exports to the EU in 2007-09, 6.95 percent consisted of goods identified as most carbon leakage-sensitive (see Figure 1).31 On average, over the years 2007 to 2009,32 the value of Chinese exports to the EU of these sensitive goods was USD 22,769 million per year. This should be interpreted in light of the importance of the EU as an export market for China; in 2007-09, 20.11 percent of Chinese exports were destined for the EU. Figure 2 gives an overview of the composition

of China’s sensitive exports to the EU in terms of specific products.

Of the identified carbon leakage-sensitive goods, China exported particularly high values of ‘organic chemicals’ (HS 29) and ‘iron and steel’ (HS 72) to the EU. China is thus especially vulnerable to possible future EU BCAs imposed on these products. An overview of these sensitive exports and of the importance of the EU as an export market for them is shown in Table 3.

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EU Climate Policies and Developing Country Trade Vulnerability

Figure 2: Chinese exports of sensitive products to the EU, 2007-09

24%

27%

Organic chemicals (29) Iron and steel (72) Inorganic chemicals (28) Other base metals; sermets; articles thereof (81) Sensitive glass and glassware (70)

7%

Other sensitive products

6%

30% 6%

Note: Sectors in italics are those from which not all goods are identified as sensitive.

Table 3: China – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

Exports of sensitive Average annual trade Exports to the products to the EU as value of exports of EU as % of total % of total exports to sensitive products to / sector exportsb the EU the EU (in million USD)

All sensitive products

6.95%

$22,769

20.11% (of total exports)

Organic chemicals – HS 29

1.69%

$5,546

22.18%

Iron and steel – HS 72

2.07%

$6,778

15.91%

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. b

This analysis shows that even though the products identified as likely to face possible future EU BCAs (see Annex I) made up a small proportion of China’s total exports to the EU (6.95%), in terms of absolute value they were immense (on average USD 22,769 million annually). In addition, it should be kept in mind that about one fifth of total Chinese exports were destined for the EU. Further, the sectors of which China exported sensitive goods with particularly high values (inorganic chemicals,

and iron and steel) are among the sectors generally viewed as the most likely targets for BCAs. This means that even if the sectoral coverage of possible future EU BCAs is much narrower than assumed in this paper, it would still very likely include these sensitive sectors that comprise a lot of China’s exports to the EU. Moreover, with respect to these sectors specifically, the EU is quite an important export market, making China additionally vulnerable to EU BCAs imposed on its products.

ICTSD Programme on Competitiveness and Sustainable Development

India India was the fifth largest emitter of GHGs in 2005, responsible for 4.92 percent of global emissions. It is thereby the second non-Annex 1 country in the ranking and is unsurprisingly also often mentioned as a country which would likely face BCAs implemented by developed countries to curb carbon leakage.

India is also a beneficiary of the EU GSP, but some of its tariff preferences have been removed (HS 50-63). More specifically, the GSP tariff preferences regarding carbon leakage-

sensitive Indian cotton, cotton yarn and other sensitive yarn have been removed because these products were too heavily traded between India and the EU (see Annex I for the specific sensitive products within HS chapters 50-63, which in principle all enjoy tariff preferences under the EU GSP). Further, negotiations between the EU and India on a free trade agreement (FTA) were launched in 2007.

Table 4 gives an overview of India’s sensitive exports to the EU and the share of the EU as a destination for them.

Figure 3: Indian exports to the EU, 2007-09

24%

Non-sensitive products Sensitive products 76%

Over the years 2007 to 2009, no less than 23.75 percent of India’s exports to the EU consisted of the identified sensitive goods (see Figure 3). The annual average value of this trade flow was USD 9,119 million. Moreover, the EU is an important export market for India; of its total 2007-09 exports, 21.19 percent were destined there. Figure 4 shows the composition of India’s sensitive exports to the EU. Of the identified sensitive goods, India exported especially high values of ‘petroleum oils and oils from bituminous material’ (HS 2710.19), ‘organic chemicals’ (HS 29), ‘leather

articles of apparel’ (HS 4203.10), ‘cotton yarn’ (HS 5205) and ‘iron and steel’ (HS 72).

In addition, it exported high values of those ‘articles of iron and steel’ (HS 73) that have been identified here as sensitive products.

Even though not all products from this sector (HS 73) were identified as sensitive, the data presented in this paper only covers the goods of this sector that have been identified as sensitive. The exact description of these can be found in Annex I. India would thus be particularly vulnerable to EU BCAs imposed on these sensitive products that were heavily exported to the EU.

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EU Climate Policies and Developing Country Trade Vulnerability

Figure 4: Indian exports of sensitive products to the EU, 2007-09

2%

13% 28%

Petroleum oils & oils from bituminous minerals (2710.19) Organic chemicals (29) Leather articles of apparel (4203.10) Cotton yarn (>85% cotton, no retail sale) (5205)

24%

Iron and steel (72) 4%

25% 4%

Sensitive articles of iron or steel (73) Other sensitive products

Note: Sectors in italics are those from which not all goods are identified as sensitive.

Table 4: India – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

23.75%

$9,119

21.19% (of total exports)

Petroleum oils & oils from bituminous minerals - HS 2710.19

6.64%

$2,549

22.52%

Organic chemicals – HS 29

5.88%

$2,256

25.47%

Leather articles of apparel – HS 4203.10

1.02%

$393

84.23%

Cotton yarn (>85% cotton, no retail sale) – HS 5205

0.87%

$335

17.82%

Iron and steel – HS 72

5.61%

$2,154

29.82%

Sensitive articles of iron or steel – HS 73

0.58%

$223

All sensitive products

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). Sectors in italics are those from which not all goods are identified as sensitive. The data however only refers to those goods from the sector that have been identified as sensitive. a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. Only 2009 Indian export data is classified according to HS 2007. However, for the codes mentioned in this table, the authors checked the concordances and decided that it poses no major problems that an older HS classification (HS 2002) is used. Data is missing for the HS 73 sector because it is not completely comprised of identified sensitive products (hence the italics), and therefore information on the importance of the EU as an export market for this sector as a whole would not serve the purpose of this study. b

ICTSD Programme on Competitiveness and Sustainable Development

The share of Indian exports to the EU of products that could be affected by possible BCAs is quite high (23.75%). In combination with the fact that the EU is an important export market for India, and that the country is likely to face border carbon adjustments, this makes India very vulnerable to possible EU BCAs. Further, the sensitive Indian products singled out due to the fact that they were heavily exported to the EU are again mostly products that are identified as usual suspects with respect to carbon leakage.

This means that if the EU indeed implements BCAs but chooses a narrower sectoral coverage, it is still quite likely that these heavily-traded sensitive products from India will face BCAs. Finally, the fact that the EU is an extremely important export market for the Indian ‘leather articles of apparel’ (HS 4203.10) sector needs to be underlined. This means that this sector could face serious problems if the EU were indeed to impose BCAs on these products.

Brazil In 2005, Brazil, with a contribution of 2.68 percent to global emissions, was the largest GHG emitting country in Latin America and the seventh globally. Brazil is a beneficiary of the EU GSP, but some of its tariff preferences have been removed (HS 16-24 and 44-46). Certain sensitive products fall under the HS chapters from which tariff preferences were removed, but, importantly, not all of these products enjoyed GSP preferences in the first place. For example, the preferences for ‘undenatured ethyl alcohol etc.’ (HS 2207) have been removed, but ‘solid cane or beet sugar and chemically pure sucrose’ (HS 1701) never enjoyed preferences. Further, as a member of the Mercado Común del Sur (Southern Common Market, MERCOSUR), Brazil is part of ongoing negotiations between the EU and this economic region on an FTA.

Figure 5: Brazilian exports to the EU, 2007-09 14%

Non-sensitive products Sensitive products 86%

Over the years 2007 to 2009, 13.80 percent of Brazilian exports to the EU consisted of the identified sensitive goods (see Figure 5). On average, the value of these exports of sensitive goods to the EU was USD 6,117 million per year.

Figure 6 gives an overview of the composition of these sensitive products exported to the EU. The EU is an important export market for Brazil; 23.66 percent of its total 2007-09 exports were destined there.

Of the identified sensitive goods, Brazil exported particularly high values of the following: ‘solid cane or beet sugar and chemically pure sucrose’ (HS 1701); ‘undenatured ethyl alcohol

etc.’ (HS 2207); ‘petroleum oils and oils from bituminous minerals’ (HS 2710.19); ‘inorganic chemicals’ (HS 28); ‘organic chemicals’ (HS 29); ‘iron and steel’ (HS 72); ‘refined copper and copper alloys’ (HS 4703); and ‘unwrought aluminium’ (HS 7601). In addition, Brazil exported high values of the products identified as sensitive from the paper and paperboard sector (HS 48). Brazil is especially vulnerable to EU BCAs imposed on these heavily-traded sensitive products. The corresponding trade flows can be found in Table 5, which also shows the share of the EU as a destination for these Brazilian exports.

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EU Climate Policies and Developing Country Trade Vulnerability

Figure 6: Brazilian exports of sensitive products to the EU, 2007-09 12%

Solid cane or beet sugar and chemically pure sucrose (1701)

5% 6%

Undenatured ethyl alcohol, >80% alcohol and denatured ethyl alcohol/sprits (2207)

6% 11% 6%

Petroleum oils & oils from bituminous minerals (2710.19) Inorganic chemicals (28)

6% 14%

Organic chemicals (29) Sensitive paper, paperboard and articles thereof (also of paper pulp) (48)

29%

5%

Iron and steel (72) Refined copper and cooper alloys, unwrought (7403) Unwrought aluminium (7601) Other sensitive products

Note: Sectors in italics are those from which not all goods are identified as sensitive.

Table 5: BRAZIL – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

All sensitive products

Exports of Average annual sensitive products trade value of to the EU as % of exports of sensitive total exports to products to the EU the EU (in million USD)

Exports to the EU as % of total / sector exportsb

13.80%

$6,117

23.66% (of total exports)

Solid cane or beet sugar and chemically pure sucrose – HS 1701

0.70%

$310

2.98%

Undenatured ethyl alcohol, >80% alcohol and denatured ethyl alcohol/sprits – HS 2207

0.86%

$382

28.89%

Petroleum oils & oils from bituminous minerals - HS 2710.19

0.82%

$365

16.80%

Inorganic chemicals – HS 28

0.86%

$380

18.05%

Organic chemicals – HS 29

1.86%

$826

24.61%

Sensitive paper, paperboard and articles thereof (also of paper pulp) – HS 48

0.70%

$309

Iron and steel – HS 72

4.05%

$1,794

16.89%

Refined copper or copper alloys, unwrought – HS 7403

0.81%

$358

61.13%

Unwrought aluminium – HS 7601

1.44%

$639

25.49%

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). Sectors in italics are those from which not all goods are identified as sensitive. The data however only refers to those goods from the sector that have been identified as sensitive. a

ICTSD Programme on Competitiveness and Sustainable Development

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. Only 2008 and 2009 Brazilian export data is classified according to HS 2007. However, for the codes mentioned in this table, the authors checked the concordances and decided that it poses no major problems that an older HS classification (HS 2002) is used. Data is missing for the HS 48 sector because it is not completely comprised of identified sensitive products (hence the italics), and therefore information on the importance of the EU as an export market for this sector as a whole would not serve the purpose of this study. b

This analysis shows that Brazil is particularly vulnerable to EU BCAs imposed on ‘iron and steel’ (HS 72), as the products from this sector were heavily traded from Brazil to the EU. Indeed, 4.05 percent of Brazil’s exports to the EU consisted of products from the iron and steel sector, translating to an annual average of USD 1,794 million. Moreover, the EU is not an unimportant export market for this sector.

In addition, the EU is a very important export market for Brazilian ‘unwrought refined copper and copper alloys’ (HS 7403); 61.13 percent of Brazil’s exports of these products were destined for the EU. This means that this sector could experience large problem if EU BCAs are indeed imposed on its products.

Overall, the EU is an important export market for Brazil, which means that if indeed a share

of 13.80 percent of its exports to the EU faces BCAs, it would have serious consequences for Brazil’s economy.

Mexico Mexico was responsible for 1.71 percent of global GHG emissions in 2005, ranking 10th in the world. Mexico is a beneficiary of the EU GSP and has not had any preferences removed. In addition, Mexico and the EU have an FTA, meaning that Mexican products face comparatively low trade barriers when imported into the EU. This implies that for any given carbon cost imposed at the EU border, the relative strength of this cost and the related trade barrier will be higher for Mexican products than for products not enjoying similar FTA preferences.

Figure 7: Mexican exports to the EU, 2007-09 11%

Non-sensitive products Sensitive products 89%

During 2007-09, 10.56 percent of Mexican exports to the EU consisted of sensitive products, at an average annual value of USD 1,786 million. Figure 8 gives an impression of the composition of the exports of these sensitive products. The EU is in general not a very important export market for Mexico; 5.45 percent of its total 2007-09 exports were destined there.

Of the identified sensitive goods, Mexico exported to the EU large values of ‘malt beer’ (HS 2203), ‘petroleum oils and oils from bituminous minerals’ (HS 2710.19), ‘organic chemicals’ (HS 29), ‘iron and steel’ (HS 72) and ‘zinc and articles thereof’ (HS 79). Mexico is thus particularly vulnerable to EU BCAs imposed on these sensitive products.

Table 6 presents data on these heavily-traded sensitive exports, and on the share of the EU as a destination for them.

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EU Climate Policies and Developing Country Trade Vulnerability

Figure 8: Mexican exports of sensitive products to the EU, 2007-09 9%

Malt beer (2203)

5%

25%

Petroleum oils & oils from bituminous minerals (2710.19) 22%

9%

Organic chemicals (29) Iron and steel (72) Zinc and articles thereof (79) Other sensitive products

30%

Table 6: MEXICO – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

10.56%

$1,786

5.45% (of total exports)

Malt beer - HS 2203

0.99%

$167

7.08%

Petroleum oils & oils from bituminous minerals - HS 2710.19

0.54%

$92

3.00%

Organic chemicals – HS 29

2.27%

$384

21.84%

Iron and steel – HS 72

3.17%

$536

11.17%

Zinc and articles thereof – HS 79

0.99%

$167

36.31%

All sensitive products

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. Only 2008 and 2009 Mexican export data is classified according to HS 2007. However, for the codes mentioned in this table, the authors checked the concordances and decided that it poses no major problems that an older HS classification (HS 2002) is used. b

Even though the EU is not generally speaking an important export market for Mexico, it seems to be so for some specific sensitive products, particularly ‘organic chemicals’ (HS 29) and ‘zinc and articles thereof’ (HS 79), which were heavily traded between Mexico and the EU. This suggests that if EU BCAs would be imposed on these Mexican products, their

sectors could experience large problems. In addition, it should be mentioned that the trade flows of iron and steel (HS 72) from Mexico to the EU were of particularly high value; they represented 3.17 percent of Mexico’s total exports to the EU. This means that Mexico is especially vulnerable to EU BCAs imposed on these products.

ICTSD Programme on Competitiveness and Sustainable Development

Indonesia

overall. Indonesia is a beneficiary of the EU GSP, but has some tariff preferences removed (HS 15). No tariff preferences have been removed for Indonesian sensitive products.

With a contribution of 1.54 percent to global GHG emissions in 2005, Indonesia ranked 12th Figure 9: Indonesian exports to the EU, 2007-09 18%

Non-sensitive products Sensitive products 82%

Of Indonesia’s total exports to the EU in 200709, 17.51 percent consisted of sensitive products (see Figure 9). On average, these trade flows of sensitive goods amounted to USD 3,133 million per year. Of Indonesia’s total 2007-09 exports, 11.58 percent were destined for the EU market. Figure 10 presents an overview of the composition of the country’s sensitive exports in terms of specific products.

By far the largest value of sensitive goods exported from Indonesia to the EU was in the coal (HS 2701) sector. The value of ‘bituminous coal’ (HS 2701.12) exports was an average USD 773 million per year, and that of ‘coal other

than anthracite and bituminous’ (HS 2701.19) exports a further USD 658 million. Other sensitive goods exported heavily to the EU were: ‘petroleum oils and oils from bituminous minerals’ (HS 2710.19); ‘organic chemicals’ (HS 29); ‘industrial monocarboxylic fatty acids; acid oils from refining, and industrial fatty alcohols’ (HS 3823); ‘uncoated paper and paperboard’ (HS 4802); ‘yarn of synthetic staple fibres’ (HS 5509); ‘iron and steel’ (HS 72); and ‘unwrought tin’ (HS 8001). Indonesia is particularly vulnerable to EU BCAs imposed on these heavily-traded sensitive exports. Table 7 gives an overview of them and, in addition, presents figures on the share destined for the EU.

Figure 10: Indonesian Exports of Sensitive Products to the EU, 2007-09 9%

Bituminous coal, not agglomerated (2701.12) 25%

9%

Coal other than anthracite & bituminous, not agglomerated (2701.19) Petroleum oils & oils from bituminous minerals (2701.19) Organic chemicals (29)

12% Industrial monocarboxylic fatty acids; acid oils from refining; industrial fatty alcohols (3823) Uncoated paper and paperboard (4802)

3% 21%

4% 6%

Yarn of synthetic staple fibres, no retail sale (5509) Iron and steel (72)

7%

4% Unwrought tin (8001) Other sensitive products

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EU Climate Policies and Developing Country Trade Vulnerability

Table 7: INDONESIA – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

17.51%

$3,133

11.58% (of total exports)

Bituminous coal, not agglomerated – HS 2701.12

4.32%

$773

8.04%

Coal other than anthracite & bituminous, not agglomerated – HS 2701.19

3.68%

$658

8.49%

Petroleum oils & oils from bituminous minerals - HS 2710.19

0.64%

$114

Organic chemicals – HS 29

1.33%

$237

10.82%

Industrial monocarboxylic fatty acids; acid oils from refining; industrial fatty alcohols – HS 3823

0.99%

$178

26.23%

Uncoated paper and paperboard – HS 4802

0.74%

$133

Yarn of synthetic staple fibres, no retail sale – HS 5509

0.51%

$91

14.40%

Iron and steel – HS 72

2.08%

$371

11.11%

All sensitive products

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. Indonesian export data is classified according to HS 1996. For most of the codes mentioned in this table, the authors checked the concordances and decided that it poses no major problems that this older HS classification is used. However, the reason why data is missing for the HS 2710.19 and 4802 sectors is that there are no codes in HS 1996 that appropriately correspond to these HS 2007 codes. Further, the reason data is missing for the HS 81 sector is that the corresponding export data deviates so much from the EU-27 import data that it is highly unlikely that this difference is due to the general dynamics that cause import and export data to differ (for examples, see supra note 24). b

As mentioned above, it is clear that if the EU implements BCAs on coal products (HS 2701) from Indonesia, this would affect very high values of Indonesian exports. Indonesia’s exports to the EU of bituminous coal and coal other than anthracite and bituminous represented respectively 4.32 and 3.68 percent of the country’s total exports to the EU, corresponding to average annual values

of USD 773 and 658 million. This is despite that fact that the EU does not seem to be an extremely important export market for Indonesia regarding these specific products.

Overall, the EU is not an extremely important export market for Indonesia either, but quite a large share (17.5%) of its exports to the EU would likely face EU BCAs if they are implemented.

ICTSD Programme on Competitiveness and Sustainable Development

South Korea South Korea contributed 1.50 percent of global emissions in 2005, some 568.9 million Mt CO2e, ranking 13th overall. On a per capita

basis, it ranks quite highly compared to the other developing countries discussed here, namely 29th. South Korea’s new FTA with the EU entered into force on the 1st of July (2011).

It is not a beneficiary of the EU GSP.

Figure 11: South Korean exports to the EU, 2007-09 9%

Non-sensitive products Sensitive products 91%

Of South Korea’s total exports to the EU in 2007-09, 8.94 percent constituted products identified as most sensitive to carbon leakage (see Figure 11). These vulnerable trade flows were on average worth USD 4,752 million per year. Figure 12 provides information on the specific products comprising these sensitive exports. Of South Korea’s total exports in 2007-09, 13.94 percent were destined for the EU.

Particularly high values of sensitive ‘petroleum oils and oils from bituminous minerals’ (HS 2710.19), ‘organic chemicals’ (HS 29), and ‘iron and steel’ (HS 72) were exported to the EU by South Korea. The country is thus especially vulnerable to EU BCAs imposed of these products.

Information on the corresponding trade flows, and the share of the EU as a destination for these heavily-traded South Korean sensitive products, can be found in Table 8.

Figure 12: South Korean exports of sensitive products to the EU, 2007-09 14% 31% Petroleum oils & oils from bituminou minerals (2710.19) Organic chemicals (29) Iron and steel (72) 44%

11%

Other sensitive products

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EU Climate Policies and Developing Country Trade Vulnerability

Table 8: SOUTH KOREA – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

Exports of sensitive Average annual trade products to the EU value of exports of as % of total exports sensitive products to to the EU the EU (in million USD)

Exports to the EU as % of total / sector exportsb

All sensitive products

8.94%

$4,752

13.94% (of total exports)

Petroleum oils & oils from bituminous minerals - HS 2710.19

2.72%

$1,446

10.12%

Organic chemicals – HS 29

1.02%

$542

4.04%

Iron and steel – HS 72

3.95%

$2,102

10.85%

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. b

The South Korean sensitive products that have been singled out as particularly heavily traded with the EU – petroleum oils and oils from bituminous minerals, organic chemicals, and iron and steel – are again those most likely to face BCAs. In other words, if the EU does indeed implement BCAs, but used a narrower sectoral coverage than assumed in this paper, the sensitive products most heavily traded between South Korea and the EU are still very likely to face these measures. These three groups of products also make up a surprisingly large part (86%) of the total sensitive products exported from South Korea to the EU. However, it seems that overall South Korea would not be very much affected by EU BACs, as these total sensitive products only made up 8.94 percent of its total exports to the EU, and

the EU does not seem to be a very important export market for the country with respect to the sensitive products singled out.

Iran In 2005, Iran emitted 559.2 million Mt CO2e and thereby contributed 1.48 percent of global emissions, ranking 15th overall. Iran is not a Member of the WTO and has no bilateral trade agreement with the EU. Further, even though Iran is a beneficiary of the EU GSP and has not had any tariff preferences removed, its benefits from this scheme are minimal because it mostly exports oil products to the EU for which there are no import duties. Finally, due to sanctions against Iran, trade between the EU and Iran is generally restricted.

Figure 13: Iranian exports to the EU, 2007-09 6%

Non-sensitive products Sensitive products 94%

ICTSD Programme on Competitiveness and Sustainable Development

During 2007-09, Iran’s exports of sensitive goods to the EU amounted to 6.34 percent of its total exports to the EU (see Figure 13).

On average, the value of these exports was USD 1,095 million per year. An overview of the composition of these sensitive exports in terms of specific products can be found in Figure 12.

Iran exported particularly high values of sensitive ‘organic chemicals’ (HS 29), ‘iron and steel’ (HS 72) and ‘unwrought refined copper and copper alloys’ (HS 7403) to the EU. This means that Iran is especially vulnerable to EU BCAs imposed on these products. An overview of these heavily-traded sensitive exports is given in Table 9.

Figure 14: Iranian exports of sensitive products to the EU, 2007-09 15%

7% Sensitive mineral fuels, oils, waxes and bituminous substances (27) Organic chemicals (29)

14%

Iron and steel (72) 45% 19%

Refined cooper and cooper alloys, unwrought (7403) Other sensitive products

Note: Sectors in italics are those from which not all goods are identified as sensitive.

Table 9: IRAN – Carbon leakage-sensitive exports to the EU, 2007-09a Sectors with largest trade flows of sensitive products to the EUb

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

All sensitive products

6.34%

$1,095

Organic chemicals – HS 29

3.09%

$533

Iron and steel – HS 72

1.30%

$225

Refined copper or copper alloys, unwrought – HS 7403

0.94%

$162

For Iran, no 2007-09 trade data is available. Thus, no data is presented on the importance of the EU as an export market for Iran. a

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). b

For Iran it can be concluded that the country would be most vulnerable to EU BCAs imposed on products from its organic chemicals sector (HS 29). Exports of these products to the EU were 3.09 percent of Iran’s total 2007-09

exports to the EU, corresponding to an annual average of USD 553 million. Overall, however, sensitive products made up only a small proportion (6.34%) of Iran’s total exports to the EU.

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EU Climate Policies and Developing Country Trade Vulnerability

South Africa South Africa was responsible for 1.12 percent of the global emissions in 2005, which results in a country ranking of twentieth20th overall. It is a beneficiary of the EU GSP, and in addition has an FTA with the EU. Trade barriers into the

EU are thus comparatively low for South Africa.

This means that for any given carbon cost that BCAs impose, the trade barrier created by this cost will be relatively higher for South African products than for products from countries not enjoying similar FTA preferences.

Figure 15: South African exports to the EU, 2007-09

28% Non-sensitive products Sensitive products

72%

Over the years 2007-09, no less than 28.10 percent of South Africa’s exports to the EU were constituted by the identified carbon leakagesensitive products (see Figure 15). On average, the value of these trade flows was USD 7,672 million per year. Figure 16 provides an overview of the composition of these sensitive exports.

The EU is also a very important export market for South Africa, which makes the country even more vulnerable to potential EU BCAs. Specifically, 30.75 percent of South Africa’s 2007-09 exports were destined for the EU. The following sensitive products were most heavily exported from South Africa to the

EU: ‘bituminous coal’ (HS 2701.12); ‘coal other than anthracite and bituminous’ (HS 2701.19); ‘inorganic chemicals’ (HS 28); ‘organic chemicals’ (HS 29); ‘iron and steel’ (HS 72); and ‘unwrought aluminium’ (HS 7601). In addition, the goods from the ‘paper and paperboard’ (HS 48) and ‘copper’ (HS 74) sectors that have been identified as sensitive were also heavily traded between South Africa and the EU. South Africa is particularly vulnerable to EU BCAs imposed on these sensitive products. Table 10 gives an overview of the corresponding trade flows and, in addition, presents information on the importance of the EU as an export market for most of these heavilytraded sensitive products.

Figure 16: South African exports of sensitive products to the EU, 2007-09

2%

2%

Bituminous coal, not agglomerated (2701.12)

8%

Coal other than anthracite & bituminous, not agglomerated (2701.19) 34%

Inorganic chemicals (28) Organic chemicals (29) Sensitive paper, paperboard and articles thereof (also of paper pulp) (48)

32%

Iron and steel (72) Sensitive copper and articles thereof (74) 12% 3%

4%

3%

Unwrought aluminium (7601) Other sensitive products

Note: Sectors in italics are those from which not all goods are identified as sensitive.

ICTSD Programme on Competitiveness and Sustainable Development

Table 10: SOUTH AFRICA – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

All sensitive products

Exports of Average annual Exports to the sensitive trade value of EU as % of total products to the exports of sensitive / sector exportsb EU as % of total products to the EU exports to the EU (in million USD) 28.10%

$7,672

30.75% (of total exports)

Bituminous coal, not agglomerated – HS 2701.12

9.51%

$2,596

54.18%

Coal other than anthracite & bituminous, not agglomerated – HS 2701.19

3.41%

$931

Inorganic chemicals – HS 28

0.79%

$216

24.05%

Organic chemicals – HS 29

1.12%

$305

28.21%

Sensitive paper, paperboard and articles thereof (also of paper pulp) – HS 48

0.72%

$196

Iron and steel – HS 72

9.00%

$2,456

Sensitive copper and articles thereof – HS 74

0.55%

$150

Unwrought aluminium - HS 7601

0.70%

$192

29.66%

14.34%

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). Sectors in italics are those from which not all goods are identified as sensitive. The data however only refers to those goods from the sector that have been identified as sensitive. a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. Data is missing for the HS 48 and 74 sectors because they are not completely comprised of identified sensitive products (hence the italics), and therefore information on the importance of the EU as an export market for these sectors as a whole would not serve the purpose of this study.

Further, the reason data is missing for the HS 2701.19 sector is that the corresponding export data deviates so much from the EU-27 import data that it is highly unlikely that this difference is due to the general dynamics that cause import and export data to differ (for examples, see supra note 24). b

It can be concluded from this analysis that South Africa would be hard hit by possible EU BCAs, as a large share (28.10%) of its 200709 exports to the EU consisted of sensitive products, and the EU is an important export market for the country generally. Of South Africa’s total 2007-09 exports, 30.75 percent were destined for the EU. In particular, South Africa is most vulnerable to EU BCAs imposed on its coal products and iron and steel. Sensitive exports from these sectors constituted very large shares of total South African exports to the EU: ‘bituminous coal’ (HS 2701.12) made up 9.51 percent of exports; ‘coal other than anthracite and bituminous’ (HS 2701.19) 3.41 percent; and ‘iron and steel’ (HS 72) 9 percent.

Moreover, the EU seems to be an even more important export market when it comes to these specific sensitive products.

Saudi Arabia In 2005, Saudi Arabia emitted 376.6 million Mt CO2e, contributing exactly 1 percent of global emissions and ranking 22nd overall. Unlike most of the developing countries discussed here, Saudi Arabia ranks higher when considering its per capita emissions, ranking 16th with 16.3 Mt CO2e per person in 2005. This makes the country the largest emitter in per capita terms of the countries discussed in this paper. Saudi Arabia is a beneficiary of the EU GSP and has not had any tariff preferences removed.

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EU Climate Policies and Developing Country Trade Vulnerability

Figure 17: Saudi Arabian exports to the EU, 2007-09 16%

Non-sensitive products Sensitive products

84%

Of Saudi Arabia’s total exports to the EU in the period 2007-09, 16.24 percent consisted of goods identified as most carbon leakagesensitive (see Figure 17). On average, the value of these sensitive exports was USD 3,889 million per year. However, the EU does not seem to be a very important export market for Saudi Arabia; of its total 2007-09 exports, 7.05 percent were destined for the EU market. Figure 18 provides an overview of the composition of these sensitive exports in terms of specific products.

Saudi Arabia exported particularly high values of sensitive ‘petroleum oils and oils from bituminous minerals’ (HS 2710.19), ‘liquefied propane’ (HS 2711.12) and ‘organic chemicals’ (HS 29) to the EU. The country is thus especially vulnerable to EU BCAs imposed on these specific sensitive products. Data on the corresponding trade flows, and on the share of the EU as an export market, can be found in Table 11.

Figure 18: Saudi Arabian exports of sensitive products to the EU, 2007-09 5% Petroleum oils & oils from bituminous minerals (2710.19)

38%

52%

Propane, liquefied (2711.12) Organic chemicals (29) Other sensitive products

5%

ICTSD Programme on Competitiveness and Sustainable Development

Table 11: SAUDI ARABIA – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

16.24%

$3,889

7.05% (of total exports)

Petroleum oils & oils from bituminous minerals - HS 2710.19

8.42%

$2,017

Propane, liquefied – HS 2711.12

0.85%

$205

8.83%

Organic chemicals – HS 29

6.24%

$1,494

19.14%

All sensitive products

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. For Saudi Arabia, no export data specifying the country of origin is available for the years 2008 and 2009, and these figures thus represent the year 2007 only. The reason data is missing for the HS 2710.19 sector is that the corresponding export data deviates so much from the EU-27 import data that it is highly unlikely that this difference is due to the general dynamics that cause import and export data to differ (for examples, see supra note 24). b

Certain sensitive products represent very high percentages of the country’s exports to the EU. This means that how the sectoral coverage of possible EU BCAs is defined will be very important, and, specifically, whether ‘petroleum oils and oils from bituminous minerals’ (HS 2710.19) and ‘organic chemicals’ (HS 29) are covered. These products represented respectively 8.42 and 6.24 percent of Saudi Arabia’s total exports to the EU in 2007-09, and together 90 percent of its sensitive exports to the EU. On an overall

level, however, the EU does not seem to be a very important export market for Saudi Arabian products.

Thailand Thailand emitted 351.1 million Mt CO2e in the year 2005, contributing 0.93 percent of global emissions and ranking 24th overall. Thailand is a beneficiary of the EU GSP, but has had some tariff preferences removed (HS 71). However, no tariff preferences with respect to sensitive products have been removed.

Figure 19: Thai exports to the EU, 2007-09 5%

Non-sensitive products 95%

Sensitive products

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A share of 5.03 percent of Thailand’s total 2007-09 exports to the EU consisted of products identified as most sensitive to carbon leakage (see Figure 19). On average, the value of these Thai exports of sensitive goods to the EU was USD 1,139 million per year. Figure 20 gives an overview of the composition of these sensitive exports to the EU. As an export market, the EU represented 13.04 percent of Thailand’s total 2007-09 exports.

Particularly high values of sensitive ‘petroleum oils and oils from bituminous minerals’ (HS 2710.19), ‘organic chemicals’ (HS 29) and ‘iron and steel’ (HS 72) were exported to the EU. This means that Thailand is especially vulnerable to EU BCAs imposed on these specific sensitive products. Figures on the corresponding trade flows can be found in Table 12. In addition, the table provides information on the share of the EU as an export market for these heavilytraded sensitive products from Thailand.

Figure 20: Thai exports of sensitive products to the EU, 2007-09 8% 30%

Portland cement, aluminous cement, slag cement, supersulphate cement (2523) 16%

Petroleum oils & oils from bituminous minerals (2710.19) Organic chemicals (29) Dextrins & other modified starches (3505.10)

23%

16%

Iron and steel (72) Other sensitive products

7%

Table 12: THAILAND – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

Exports of sensitive Average annual trade value Exports to the products to the EU as of exports of sensitive EU as % of total % of total exports to products to the EU (in / sector exportsb the EU million USD)

All sensitive products

5.03%

$1,139

13.04% (of total exports)

Petroleum oils & oils from bituminous minerals - HS 2710.19

0.81%

$183

3.55%

Organic chemicals – HS 29

1.17%

$265

9.73%

Iron and steel – HS 72

0.80%

$181

7.26%

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. b

From this analysis it can be concluded that compared to other countries in this study, Thailand seems less vulnerable to possible EU BCAs. This statement is mainly based on the fact that only 5.03 percent of Thailand’s total 2007-09 exports to the EU consisted of

sensitive products. In addition, for the specific sensitive products that have been singled out on the basis of the relative value of their exports to the EU, the EU does not seem to be a very important export market.

ICTSD Programme on Competitiveness and Sustainable Development

Argentina In 2005, Argentina contributed 0.86 percent of global emissions, ranking 25th overall.

Argentina is a beneficiary of the EU GSP and

has not had any tariff preferences removed.

Like Brazil, Argentina is part of MERCOSUR, and thus part of ongoing regional negotiations with the EU on an FTA.

Figure 21: Argentinean exports to the EU, 2007-09 5%

Non-sensitive products Sensitive products

95%

Of Argentina’s total exports to the EU in the period 2007-09, only 4.84 percent consisted of sensitive products (see Figure 21). On average, the value of these trade flows of sensitive products was USD 624 million per year. Figure 22 provides an overview of the composition of these sensitive exports in terms of the products involved. Of Argentina’s total 200709 exports, 18.32 percent were destined for the EU market.

Argentina exported particularly high values of the following sensitive products to the EU: ‘organic chemicals’ (HS 29); ‘iron and steel’

(HS 72); and ‘iron and steel tubes, pipes and hollow profiles’ (HS 7304). In addition, those products from the aluminium sector (HS 76) that have been identified as sensitive were also heavily traded from Argentina to the EU. Because of the high values of exports of sensitive products to the EU from these sectors, it will be particularly important for Argentina whether they are indeed covered by potential EU BCAs. Table 13 provides an overview of these high-value sensitive exports, and additionally presents information on the importance of the EU as an export market for them.

Figure 22: Argentinean exports of sensitive products to the EU, 2007-09

17%

8%

Sensitive mineral fuels, oils, waxes and bituminous substances (27) 19%

Organic chemicals (29) Wood charcoal (4402)

10%

Iron and steel (72) 9%

18%

Iron or steeltubes, pipes and hollow profiles (seamless) (7304) Sensitive aluminium and articles thereof (76)

19%

Other sensitive products

Note: Sectors in italics are those from which not all goods are identified as sensitive.

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Table 13: ARGENTINA – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade Exports to the EU as value of exports of % of total / sector sensitive products to exportsb the EU (in million USD)

All sensitive products

4.84%

$624

18.32% (of total exports)

Organic chemicals – HS 29

0.91%

$118

22.28%

Iron and steel – HS 72

0.92%

$119

17.22%

Iron or steel tubes, pipes and hollow profiles (seamless) – HS 7304

0.86%

$110

8.77%

Sensitive aluminium and articles thereof – HS 76

0.51%

$66

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). Sectors in italics are those from which not all goods are identified as sensitive. The data however only refers to those goods from the sector that have been identified as sensitive. a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. Data is missing for the HS 76 sector because it is not completely comprised of identified sensitive products (hence the italics), and therefore information on the importance of the EU as an export market for this sector as a whole would not serve the purpose of this study. b

Only 4.84 percent of Argentina’s total exports to the EU in 2007-09 consisted of sensitive products. However, the EU is not an unimportant export market for Argentina; almost a fifth of its total 2007-09 exports were destined there. This suggests that the proportion of the exports to the EU that could be affected by EU BCAs does not have to be very large for it to have an impact on the overall economy. Moreover, for certain sensitive sectors that have been singled out because of the high value of their exports to the EU, the region also represents about one fifth of their exports market, suggesting that for these sectors any development in the EU

regarding imports is important and can have large consequences. This goes particularly for the ‘organic chemicals’ (HS 29) and the ‘iron and steel’ (HS 72) sectors, which are likely to face BCAs even if the EU decides on narrower sectoral coverage.

Nigeria In 2005, Nigeria was responsible for 0.79 percent of global GHG emissions, ranking 26th overall. Importantly, after South Africa, Nigeria is the highest-ranking African country in terms of national emissions. Nigeria is a beneficiary of the EU GSP and has not had any tariff preferences removed.

ICTSD Programme on Competitiveness and Sustainable Development

Figure 23: Nigerian exports to the EU, 2007-09 2%

Non-sensitive products Sensitive products

98%

Of Nigeria’s total exports to the EU in 2007-09, the identified sensitive products comprised only 2.49 percent (see Figure 23). On average, the value of these sensitive exports was USD 424 million per year. Figure 24 gives a schematic overview of the main sensitive products that constituted these sensitive exports. Of Nigeria’s total 2007-09 exports, 20.73 percent were destined for the EU.

Particularly high values of Nigerian liquefied propane and butanes (HS 2711.12 and 2711.13) were exported to the EU. As can be seen in Figure 24, these products make up 70 percent of the total sensitive trade flow from Nigeria to the EU. It would thus be crucial for Nigeria whether EU BCAs, if implemented, indeed cover these products. Information on the related trade flows can be found in Table 14.

Figure 24: Nigerian exports of sensitive products to the EU, 2007-09 8% 6%

16% Light petroleum oils & preparations (2710.11) Propane, liquefied (2711.12)

26%

Butanes, liquefied (2711.13) 44%

Wood charcoal (4402) Other sensitive products

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Table 14: NIGERIA – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade Exports to the value of exports of EU as % of total / sensitive products to sector exportsb the EU (in million USD)

All sensitive products

2.49%

$424

Propane, liquefied – HS 2711.12

1.08%

$185

Butanes, liquefied – HS 2711.13

0.66%

$112

20.73% (of total exports)

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. Only 2009 Nigerian export data is classified according to HS 2007. For the codes mentioned in this table, the authors checked the concordances and decided that it poses no major problems that an older HS classification (HS 2002) is used. However, the data is nonetheless missing, because for the HS 27110.12 and 2711.13 sectors, the corresponding export data deviates so much from the EU-27 import data that it is highly unlikely that this difference is due to the general dynamics that cause import and export data to differ (for examples, see supra note 24). b

It is very clear from this analysis that only a small proportion (2.49%) of Nigeria’s 200709 exports to the EU consisted of sensitive goods, and that of these sensitive goods a very large proportion (70%) consisted of liquefied propane and butanes (HS 2711.12 and 2711.13).

This means that the value of Nigerian exports facing EU BCAs could be limited but focused. As mentioned above, if EU BCAs are implemented, it will be crucial for Nigeria whether liquefied propane and butanes are indeed covered.

However, it should be stressed that more than a fifth of Nigeria’s exports in 2007-09 were destined for the EU market, which means that the share of Nigerian exports to the EU

facing BCAs does not have to be very large for these measures to have a large impact on the country’s economy.

Taiwan Taiwan contributed 0.75 percent of global GHG emissions in 2005, ranking 27th overall. On a per capita basis, it ranks slightly higher (26th) with emissions of 12.4 MtCO2 per person in 2005.33 Taiwan is neither a beneficiary of the EU GSP, nor has it signed an FTA with the EU. This means that compared to most of the other countries studied in this research, Taiwan faces higher trade barriers when exporting to the EU.

Figure 25: Taiwanese exports to the EU, 2007-09 7%

Non-sensitive products 93%

Sensitive products

ICTSD Programme on Competitiveness and Sustainable Development

Of Taiwan’s total exports to the EU in 2007-09, 6.98 percent consisted of the identified sensitive goods (see Figure 25). On average, the value of these vulnerable exports was USD 2,222 million annually. Figure 26 gives a schematic overview of the main specific sensitive products making up this vulnerable trade flow.

Taiwan exported particularly high values of the following sensitive products to the EU: ‘petroleum oils and oils from bituminous minerals’ (HS 2710.19); ‘organic chemicals’ (HS 29); and ‘iron and steel’ (HS 72). An overview of these trade flows can be found in Table 15.

Figure 26: Taiwanese exports of sensitive products to the EU, 2007-09 8% 6%

16% Light petroleum oils & preparations (2710.11) Propane, liquefied (2711.12) Butanes, liquefied (2711.13)

26%

Wood charcoal (4402) Other sensitive products

44%

Note: Sectors in italics are those from which not all goods are identified as sensitive.

Table 15: TAIWAN – Carbon leakage-sensitive exports to the EU, 2007-09a Sectors with largest trade flows of sensitive products to the EUb

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

All sensitive products

6.98%

$2,222

Petroleum oils & oils from bituminous minerals - HS 2710.19

1.45%

$463

Organic chemicals – HS 29

1.03%

$328

Iron and steel – HS 72

2.97%

$946

For Taiwan, no trade data is available. Thus, no data is presented on the importance of the EU as an export market for Taiwan. The other figures have been calculated using the assumption that the imports of the EU-27 from Taiwan are equal to the imports from the region classified as ‘Other Asia, nes’. a

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). b

Quite a small proportion of Taiwan’s 200709 exports to the EU consisted of sensitive products. Unfortunately this percentage cannot be interpreted in light of the importance of the EU as an export market for the country overall,

as no export data is available for Taiwan. It is relevant to observe, however, that for Taiwan, too, the specific sensitive products singled out because of the relative values of their exports to the EU would be very likely to face BCAs.

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EU Climate Policies and Developing Country Trade Vulnerability

Venezuela

EU GSP Plus. Compared to the countries that are only beneficiaries of the GSP, Venezuela thus Venezuela contributed 0.69 percent of global faces lower trade barriers when importing into GHG emissions in 2005, ranking 28th overall. the EU. This means that any new trade barrier, With respect to per capita emissions, Venezuela such as a carbon cost imposed by BCAs, will ranks 48th, having emitted 9.8 Mt CO2e per be relatively higher for Venezuelan products person in 2005. Venezuela is the only country than for products facing higher barriers in the studied in this paper that is a beneficiary of the first place.

Figure 27: Venezuelan exports to the EU, 2007-09

42% Non-sensitive products

58%

Sensitive products

No less than 41.83 percent of Venezuela’s total 2007-09 exports to the EU consisted of products identified as most sensitive to carbon leakage (see Figure 27). On average, the value of these sensitive exports was USD 3,098 million annually. Figure 28 specifies the main sensitive products that comprise this vulnerable trade flow. The EU does not, however, seem to be a very important export market for Venezuela, at least at a general (non-product specific) level; of Venezuela’s total exports in 2007-09, 4.42 percent were destined for the EU.

Venezuela exported particularly high values of the following sensitive products to the EU: ‘bituminous coal’ (HS 2701.12); ‘coal other than anthracite and bituminous’ (HS 2701.19); ‘petroleum oils and oils from bituminous minerals’ (HS 2710.19); ‘petroleum coke’ (HS 2713); ‘organic chemicals’ (HS 29); ‘iron and steel’ (HS 72); ‘unwrought aluminium’ (HS 7601); and ‘aluminium wire’ (HS 7605).

An overview of these specifically vulnerable trade flows is given in Table 16. In addition, information is provided on the importance of the EU as an export market for Venezuela with respect to some of these specific products.

Figure 28: Venezuelan exports of sensitive products to the EU, 2007-09

4%

2%

6%

8%

1%

Bituminous coal, not agglomerated (2701.12) Coal other than anthracite & bituminous, not agglomerated (2701.19) Petroleum oils & oils from bituminous minerals (2710.19)

18%

Petroleum coke (2713) Organic chemicals (29) 47%

6%

Iron and steel (72) Unwrought aluminium (7601)

8%

Aluminium wire (7605) Other sensitive products

ICTSD Programme on Competitiveness and Sustainable Development

Table 16: VENEZUELA – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

41.83%

$3,098

4.42% (of total exports)

Bituminous coal, not agglomerated – HS 2701.12

3.28%

$243

Coal other than anthracite & bituminous, not agglomerated – HS 2701.19

0.53%

$39

Petroleum oils & oils from bituminous minerals - HS 2710.19

19.67%

$1,456

Petroleum coke - HS 2713

3.25%

$240

Organic chemicals - HS 29

2.33%

$172

Iron and steel - HS 72

7.61%

$564

Unwrought aluminium - HS 7601

1.59%

$117

Aluminium wire - HS 7605

1.06%

$79

All sensitive products

23.17%

82.89%

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. For Venezuela, no export data is available for the year 2007, and these figures thus represent the years 2008 and 2009 only. The 2008 and 2009 export data is classified according to HS 2002. However, for the codes mentioned in this table, the authors checked the concordances and decided that it poses no major problems that this older HS classification is used. However, certain data is nonetheless missing, because, first, for the HS 2701.12, 29, and 7601 sectors, the corresponding export data deviates so much from the EU-27 import data that it is highly unlikely that this difference is due to the general dynamics that cause import and export data to differ (for examples, see supra note 24). Second, no 2008-09 export data is available for the HS 2701.19, 2710.19 and 2713 sectors. b

An extremely large proportion (41.83%) of Venezuela’s 2007-09 exports to the EU consisted of the identified sensitive products, which suggests that the country could be significantly affected by possible EU BCAs. Almost half of the sensitive exports are comprised of

‘petroleum oils and oils of bituminous minerals’ (HS 2710.19). Further, the ‘iron and steel’ (HS 72) sector could also face possible EU BCAs on relatively high values of exports, given that they represented 7.61 percent of Venezuela’s total 2007-09 exports to the EU.

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EU Climate Policies and Developing Country Trade Vulnerability

Pakistan In 2005, Pakistan contributed 0.63 percent of global GHG emissions, ranking 29th overall.

On a per capita basis, however, Pakistan ranks

154th, which is the lowest of all the developing countries studied in this paper. In 2005, Pakistan emitted only 1.5 Mt CO2e per person. Pakistan is a beneficiary of the EU GSP and has not had any tariff preferences removed.

Figure 29: Pakistani exports to the EU, 2007-09 14%

Non-sensitive products Sensitive products

86%

Of Pakistan’s total exports to the EU during the years 2007 to 2009, 13.61 percent consisted of the products identified as most sensitive to carbon leakage (see Figure 29). On average, the value of these sensitive Pakistani exports was USD 668 million per year. Figure 30 gives an overview of the composition of these exports in terms of sensitive products. The EU seems to be an important export market for Pakistan overall; of Pakistan’s total exports in 2007-09, 25.70 percent were destined there.

Particularly high values were exported from Pakistan to the EU of the following sensitive products: ‘molasses from sugar’ (HS 1703); ‘undenatured alcohol etc.’ (HS 2207); ‘leather articles of apparel’ (HS 4203.10); ‘leather gloves etc.’ (HS 4203.29); ‘cotton yarn’ (HS 5205); and ‘yarn of synthetic staple fibres’ (HS 5509). An overview of these particularly vulnerable trade flows can be found in Table 17, which also provides information on the importance of the EU as an export market for them.

Figure 30: Pakistani exports of sensitive products to the EU, 2007-09 12%

Molasses from sugar (1703)

20% 8%

Undenatured ethylalcohol, >80% alcohol and denatured ethyl alcohol/sprits (2207) Leather articles of apparel (4203.10)

4% Gloves etc. of leather, not for sports (4203.29) Cotton yarn (>85% cotton, no retail sale) (5205) 21%

Yarn of synthetic staple fibres, no retail sale (5509)

21% Other sensitive products

14%

ICTSD Programme on Competitiveness and Sustainable Development

Table 17: PAKISTAN – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade Exports of sensitive Average annual trade Exports to flows of sensitive products to products to the value of exports of the EU as % of the EUa EU as % of total sensitive products to total / sector exports to the EU the EU (in million USD) exportsb All sensitive products

13.61%

$668

25.70% (of total exports)

Molasses from sugar – HS 1703

1.68%

$82

97.83%

Undenatured ethyl alcohol, >80% alcohol and denatured ethyl alcohol/sprits – HS 2207

1.17%

$57

37.64%

Leather articles of apparel – HS 4203.10

4.71%

$231

56.78%

Gloves etc. of leather, not for sports – HS 4203.29

1.88%

$92

58.34%

Cotton yarn (>85% cotton, not for retail sale) – HS 5205

2.82%

$138

10.84%

Yarn of synthetic staple fibres, no retail sale – HS 5509

0.55%

$27

41.93%

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. Only 2008 and 2009 Pakistani export data is classified according to HS 2007. However, for the codes mentioned in this table, the authors checked the concordances and decided that it poses no major problems that an older HS classification (HS 2002) is used. b

The sensitive sectors that have been singled out for Pakistan, on the basis of the relatively high values of their exports to the EU in 200709, are clearly different from most of the other countries studied here (although some similarities exist, unsurprisingly, with India).

Further, the EU is a very important export market for these specific Pakistani sensitive products, above all for ‘molasses from sugar’ (HS 1703).

Malaysia Malaysia contributed 0.62 percent of global emissions in 2005, ranking 30th overall. On a per capita basis, it emitted 9.2 Mt CO2e, ranking 52nd in the world.34 Malaysia is a beneficiary of the EU GSP, but has had some tariff preferences removed (HS 15). However, these removed tariff preferences do not concern any sensitive products. Further, negotiations between the EU and Malaysia for an FTA were launched at the end of 2010.

Figure 31: Malaysian exports to the EU, 2007-09 5%

Non-sensitive products 95%

Sensitive products

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EU Climate Policies and Developing Country Trade Vulnerability

Of Malaysia’s total 2007-09 exports to the EU, only 5.15 percent constituted sensitive products (see Figure 31). On average, the value of these sensitive exports was USD 1,222 million annually.

Figure 32 gives an overview of the specific sensitive products these exports were made up of. As for the importance of the EU as an export market for Malaysia, 11.69 percent of its total exports were destined for the EU market.

Malaysia exported particularly high values of the following sensitive products to the EU:

‘petroleum oils and oils of bituminous minerals’ (HS 2710.19); ‘inorganic chemicals’ (HS 29); ‘industrial monocarboxylic fatty acids’ (HS 3823); and ‘iron and steel’ (HS 72). This means that the Malaysian economy is particularly vulnerable to EU BCAs imposed on these specific sensitive products. An overview of their trade flows can be found in Table 18, as well as figures on the importance of the EU as an export market for Malaysia with respect to these products.

Figure 32: Malaysian exports of sensitive products to the EU, 2007-09

20%

Petroleum oils & oils from bituminous minerals (2710.19)

22%

Sensitive other mineral fuels, oils, waxes and bituminous substances (27, excl. 2810.19) 6%

10%

12%

Organic chemicals (29) Industrial monocarboxylic fatty acids; acid oils from refining; industrial fatty alcohols (3823) Iron and steel (72) Other sensitive products

30%

Note: Sectors in italics are those from which not all goods are identified as sensitive.

Table 18: MALAYSIA – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa

Exports of sensitive products to the EU as % of total exports to the EU

Average annual trade value of exports of sensitive products to the EU (in million USD)

Exports to the EU as % of total / sector exportsb

All sensitive products

5.15%

$1,222

11.69% (of total exports)

Petroleum oils & oils from bituminous minerals - HS 2710.19

1.12%

$266

4.56%

Organic chemicals – HS 29

0.62%

$147

4.73%

Industrial monocarboxylic fatty acids; acid oils from refining1; industrial fatty alcohols – HS 3823

1.52%

$361

27.37%

Iron and steel – HS 72

0.52%

$125

4.94%

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. Only 2009 Malaysian export data is classified according to HS 2007. However, for the codes mentioned in this table, the authors checked the concordances and decided that it poses no major problems that an older HS classification (HS 2002) is used. b

ICTSD Programme on Competitiveness and Sustainable Development

Egypt

Only a small proportion (5.15%) of Malaysia’s 2007-09 exports to the EU were comprised of sensitive products. Although not unimportant, the EU is also not an extremely important export market for Malaysia. Industrial monocarboxylic fatty acids, acid oils from refining, and industrial fatty alcohols (HS 3823) constitute the greatest share (30%) of Malaysia’s sensitive exports to the EU, and the EU seems to be quite an important market for these products specifically. This means that for Malaysia it will be very important, if the EU implements BCAs, whether they are indeed covered under the system.

Egypt emitted 227.2 million Mt CO2e in 2005, contributing 0.60 percent of global GHG emissions and ranking 31st overall. Egypt is a beneficiary of the EU GSP, and, in addition, has an FTA with the EU. Thus, Egypt faces low trade barriers compared to most of the other developing countries studied in this paper.

A trade barrier resulting from carbon costs imposed by EU BCAs will therefore be relatively higher for Egyptian products than for products from countries not already enjoying similar FTA preferences.

Figure 33: Egyptian exports to the EU, 2007-09 31% Non-sensitive products 69%

In 2007-09, 31.19 percent of Egypt’s total exports to the EU consisted of the identified sensitive products (see Figure 33). On average, this trade flow had an annual value of USD 3,122 million.

Figure 34 shows the main sensitive products comprising it. As an export market, the EU was important for Egypt; 32.97 percent of its total 2007-09 exports were destined there.

Egypt exported particularly high values of the following sensitive products to the EU: ‘portland, aluminous, slag, supersulphate and similar hydraulic cements’ (HS 2523); ‘light oils and preparations’ (HS 2710.11); ‘petroleum oils and oils from bituminous minerals’ (HS 2710.19); ‘liquefied propane’ (HS 2711.12);

Sensitive products

‘inorganic chemicals’ (HS 28); ‘fertilisers’ (HS 31); ‘cotton yarn’ (HS 5205); ‘iron and steel’ (HS 72); ‘copper wire’ (HS 7408); ‘unwrought aluminium’ (HS 7601); and ‘aluminium plates etc.’ (HS 7606). In addition, those other products from the ‘mineral fuels, oils, waxes and bituminous substances’ (HS 27) sector that were identified as sensitive to carbon leakage were also heavily traded between Egypt and the EU. Egypt is thus particularly vulnerable to EU BCAs imposed on these specific sensitive products. Table 19 outlines the corresponding trade flows, and additionally provides information on the importance of the EU as an export market for some of these Egyptian products.

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EU Climate Policies and Developing Country Trade Vulnerability

Figure 34: Egyptian exports of sensitive products to the EU, 2007-09 2% Portland, aluminous, slag, supersulphate and similar hydraulic cements (2523) 7% Light petroleum oils and preparations 4% 15% (2710.11) 5% Petroleum oils & oils from bituminous minerals (2710.19) 5% 6% Propane, liquefied (2711.12)

10%

17%

Sensitive other mineral fuels, oils waxes and bituminous substances (27, excl.2710.11, 2710.19 & 2711.12) Inorganic chemicals (28)

4%

3% 20%

2%

Fertilisers (31) Cotton yarn (>85% cotton, no retail sale) (5205) Iron and steel (72) Copper wire (7408) Unwrought aluminium (7601) Aluminium plates etc., >0.2 mm (7606) Other sensitive products

Note: Sectors in italics are those from which not all goods are identified as sensitive.

ICTSD Programme on Competitiveness and Sustainable Development

Table 19: EGYPT – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa All sensitive products

Exports of sensiAverage annual trade tive products to value of exports of the EU as % of total sensitive products to exports to the EU the EU (in million USD)

Exports to the EU as % of total / sector exportsb

31.19%

$3,122

32.97% (of total exports)

Portland, aluminous, slag, supersulphate and similar hydraulic cements – HS 2523

0.52%

$52

12.68%

Light petroleum oils and preparations – HS 2710.11

4.78%

$478

18.15%

Petroleum oils & oils from bituminous minerals - HS 2710.19

1.93%

$193

32.44%

Propane, liquefied – HS 2711.12

3.30%

$331

100%

Sensitive other mineral fuels, oils, waxes and bituminous substances – HS 27, excl.

2710.11, 2710.19 & 2711.12

0.61%

$61

Inorganic chemicals – HS 28

1.17%

$117

52.23%

Fertilisers – HS 31

6.20%

$621

55.44%

Cotton yarn (>85% cotton, no retail sale) – HS 5205

0.83%

$83

57.74%

Iron and steel - HS 72

5.30%

$530

46.26%

Copper wire – HS 7408

1.53%

$153

Unwrought aluminium – HS 7601

1.52%

$152

Aluminium plates etc., >0.2mm – HS 7606

1.33%

$133

94.43%

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). Sectors in italics are those from which not all goods are identified as sensitive. The data however only refers to those goods from the sector that have been identified as sensitive. a

These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. For Egypt, no trade data is available for the year 2009. In addition, Egypt’s export data for 2007 is classified according to HS 1992, for which no correspondence tables are available on the UN Statistics Division website. Therefore, these figures represent the year 2008 only. Data is missing for the HS 27, excl. 2710.11, 2710.19 & 2711.12 sector because it is not completely comprised of identified sensitive products (hence the italics), and therefore information on the importance of the EU as an export market for this sector as a whole would not serve the purpose of this study. Further, data is also missing for the HS 7408 and 7606 sectors, because the corresponding export data deviates so much from the EU-27 import data that it is highly unlikely that this difference is due to the general dynamics that cause import and export data to differ (for examples, see supra note 24). b

A large proportion (31.19%) of Egypt’s 2007-09 exports to the EU consisted of sensitive products.

This, in combination with the fact that about one third (32.97%) of the country’s exports were destined for the EU, makes the country very vulnerable to possible EU BCAs. Further, certain sensitive products, specifically ‘light petroleum oils and preparations’ (HS 2710.11), ‘fertilisers’ (HS 31), and ‘iron and steel’ (HS 72), constituted relatively large shares of Egypt’s total exports

to the EU, making the country particularly vulnerable to EU BCAs imposed on them. Finally, for some of the sensitive products that have been singled out on the basis of the value of their exports to the EU, the EU is a shockingly important export market. This is especially the case for liquefied propane (HS 2711.12), of which all Egyptian exports were destined for the EU, but also for unwrought aluminium (HS 7601), of which 94.43 percent were.

63

64

EU Climate Policies and Developing Country Trade Vulnerability

Kazakhstan In 2005 Kazakhstan was responsible for 0.54 percent of global GHG emissions, ranking 33rd overall. On a per capita basis, it ranks 22nd, which is very high compared to the other

countries analyzed in this paper. Kazakhstan is a beneficiary of the EU GSP and has not had any tariff preferences removed. It is also in the process of working towards accession to the WTO.

Figure 35: Kazakhstani exports to the EU, 2007-09 14%

Non-sensitive products 86%

Of Kazakhstan’s total exports to the EU in 200709, 14.05 percent consisted of the identified sensitive products (See Figure 35). On average, the value of these sensitive exports was USD 2,727 million. Figure 36 provides an overview of the main specific sensitive products comprising them. In general, the value of these sensitive exports should be interpreted in light of the fact that the EU is an important export market for Kazakhstan; of its total 2007-09 exports, 43.83 percent were destined for the EU market.

Particularly high values were exported to the EU of the following Kazakhstani sensitive products: ‘petroleum oils and oils from bituminous minerals’ (HS 2710.19); ‘liquefied propane’ (HS 2711.12); ‘inorganic chemicals’

Sensitive products

(HS 28); ‘iron and steel’ (HS 72); ‘unwrought refined copper and copper alloys’ (HS 7403); ‘zinc and articles thereof’ (HS 79); and ‘other base metals, cermets and articles thereof’ (HS 81). In addition, those other products from the sector covering ‘mineral fuels, oils, waxes and bituminous substances’ (HS 27) that were identified as sensitive to carbon leakage were also heavily traded between Kazakhstan and the EU. For Kazakhstan, if the EU does implement BCAs, whether these products are indeed covered will be very important. Table 20 gives an overview of these trade flows, and additionally presents information on the importance of the EU as an export market for some of these sensitive Kazakhstani products.

ICTSD Programme on Competitiveness and Sustainable Development

Figure 36: Kazakhstani exports of sensitive products to the EU, 2007-09

4%

5%

Petroleum oils & oils from bituminous minerals (2710.19) 14%

Propane, liquefied (2711.12)

8% 9% 12%

Sensitive other mineral fuels, oils, waxes and bituminous substances (27, excl.

2710.19 & 2711.12) Inorganic chemicals (28)

9%

10% 29%

Iron and steel (72) Refined copper and copper alloys, unwrought (7403) Zinc and articles thereof (79) Other base metals; cermets; articles thereof (81) Other sensitive products

Note: Sectors in italics are those from which not all goods are identified as sensitive.

65

66

EU Climate Policies and Developing Country Trade Vulnerability

Table 20: KAZAKHSTAN – Carbon leakage-sensitive exports to the EU, 2007-09 Sectors with largest trade flows of sensitive products to the EUa All sensitive products

Exports of sensitive Average annual trade Exports to products to the EU value of exports of the EU as % of as % of total exports sensitive products to the total / sector to the EU EU (in million USD) exportsb 14.05%

$2,727

43.83% (of total exports)

Petroleum oils & oils from bituminous minerals - HS 2710.19

2.04%

$395

43.86%

Propane, liquefied – HS 2711.12

1.31%

$255

65.27%

Sensitive other mineral fuels and oils – HS 27, excl.

2710.19 & 2711.12

1.20%

$232

Inorganic chemicals – HS 28

1.40%

$271

24.24%

Iron and steel – HS 72

4.04%

$784

21.60%

Refined copper or copper alloys, unwrought – HS 7403

1.71%

$331

Zinc and articles thereof – HS 79

1.14%

$221

45.86%

Other base metals; cermets; articles thereof – HS 81

0.52%

$101

33.40%

A sector was included in this list if its trade value of exports of sensitive products to the EU was larger than 0.5 percent of the trade value of total exports to the EU (over the years 2007-09). Sectors in italics are those from which not all goods are identified as sensitive. The data however only refers to those goods from the sector that have been identified as sensitive. b These percentages have been calculated using export data from UN Comtrade. It should be remembered that at exportation, the final destination of a commodity is not always known. Only 2009 Kazakhstani export data is classified according to HS 2007. However, for the codes mentioned in this table, the authors checked the concordances and decided that it poses no major problems that an older HS classification (HS 2002) is used. Data is missing for the HS 27, excl.

2710.19 & 2711.12 sector because it is not completely comprised of identified sensitive products (hence the italics), and therefore information on the importance of the EU as an export market for this sector as a whole would not serve the purpose of this study. Further, data is also missing for the HS 7403 sector, because the corresponding export data deviates so much from the EU-27 import data that it is highly unlikely that this difference is due to the general dynamics that cause import and export data to differ (for examples, see supra note 24). a

Most interesting from the analysis of Kazakhstan’s vulnerability to EU BCAs seems to be the finding that the EU is a very important export market for the country overall and for specific sensitive products. Considering that 43.83 percent of Kazakhstan’s total exports were destined for the EU, the fact that sensitive products constitute 14.05 percent of them

suggests the country is highly vulnerable to possible EU BCAs. In addition, the fact that the EU is an important export market for many sensitive products that were heavily traded between Kazakhstan and the EU means that their sectors will be significantly affected if these products do indeed face EU BCAs.

SELECTES ICTSD ISSUE PAPERS Agriculture Trade and Sustainable Development The Impact of US Biofuel Policies on Agricultural Price Levels and Volatility. By Bruce Babcock. Issue Paper No. 35, 2011.

Risk Management in Agriculture and the Future of the EU’s Common Agricultural Policy. By Stefan Tangermann. Issue Paper No. 34, 2011.

Policy Solutions To Agricultural Market Volatility: A Synthesis. By Stefan Tangermann. Issue Paper No. 33, 2011.

Composite Index of Market Access for the Export of Rice from the United States. By Eric Wailes. Issue Paper No. 32, 2011.

Composite Index of Market Access for the Export of Rice from Thailand. By T. Dechachete. Issue Paper No. 31, 2011.

Composite Index of Market Access for the Export of Poultry from Brazil. By H. L. Burnquist, C. C. da Costa, M. J. P. de Souza, L. M. Fassarella. Issue Paper No. 30, 2011.

How Might the EU’s Common Agricultural Policy Affect Trade and Development After 2013? By A. Matthews. Issue Paper No. 29, 2010.

Food Security, Price Volatility and Trade: Some Reflections for Developing Countries. By Eugenio Díaz-Bonilla and Juan Francisco Ron. Issue Paper No. 28, 2010.

Composite Index of Market Access for the Export of Rice from Uruguay. By Carlos Perez Del Castillo and Daniela Alfaro. Issue Paper No. 27, 2010.

How Would A Trade Deal On Cotton Affect Exporting And Importing Countries? By Mario Jales. Issue Paper No. 26, 2010.

Simulations on the Special Safeguard Mechanism: A Look at the December Draft Agriculture Modalities. By Raul Montemayor. Issue Paper No. 25, 2010.

Competitiveness and Sustainable Development The Role of International Trade, Technology and Structural Change in Shifting Labour Demands in South Africa. By H. Bhorat, C. van der Westhuizen and S.Goga. Issue Paper No. 17, 2010.

Trade Integration and Labour Market Trends in India: an Unresolved Unemployment Problem. By C.P. Chandrasekhar. Issue Paper No. 16, 2010.

The Impact of Trade Liberalization and the Global Economic Crisis on the Productive Sectors, Employment and Incomes in Mexico. By A. Puyana. Issue Paper No. 15, 2010.

Globalization in Chile: A Positive Sum of Winners and Losers. By V. E. Tokman. Issue Paper No. 14, 2010.

Practical Aspects of Border Carbon Adjustment Measures – Using a Trade Facilitation Perspective to Assess Trade Costs. By Sofia Persson. Issue Paper No.13, 2010.

Trade, Economic Vulnerability, Resilience and the Implications of Climate Change in Small Island and Littoral Developing Economies. By Robert Read.

Issue Paper No.12, 2010.

The Potential Role of Non Traditional Donors ‘Aid in Africa. By Peter Kragelund. Issue Paper No.11, 2010.

Aid for Trade and Climate Change Financing Mechanisms: Best Practices and Lessons Learned for LDCs and SVEs in Africa. By Vinaye Dey Ancharaz.

Issue Paper No.10, 2010.

Resilience Amidst Rising Tides: An Issue Paper on Trade, Climate Change and Competitiveness in the Tourism Sector in the Caribbean. By Keron Niles.

Issue Paper No. 9, 2010.

Dispute Settlement and Legal Aspects of International Trade Conflicting Rules and Clashing Courts. The Case of Multilateral Environmental Agreements, Free Trade Agreements and the WTO. By Pieter Jan Kuijper. Issue Paper No.10, 2010.

Burden of Proof in WTO Dispute Settlement: Contemplating Preponderance of the Evidence. By James Headen Pfitzer and Sheila Sabune. Issue Paper No. 9, 2009.

Suspension of Concessions in the Services Sector: Legal, Technical and Economic Problems. By Arthur E. Appleton. Issue Paper No. 7, 2009.

Trading Profiles and Developing Country Participation in the WTO Dispute Settlement System. By Henrik Horn, Joseph Francois and Niklas Kaunitz. Issue Paper No. 6, 2009.

Fisheries, International Trade and Sustainable Development The Importance of Sanitary and Phytosanitary Measures to Fisheries Negotiations in Economic Partnership Agreements. By Martin Doherty. Issue Paper No. 7, 2008.

Fisheries, Aspects of ACP-EU Interim Economic Partnership Agreements: Trade and Sustainable Development Implications. By Liam Campling. Issue Paper No. 6, 2008.

Fisheries, International Trade and Sustainable Development. By ICTSD. Policy Discussion Paper, 2006.

Innovation, Technology and Intellectual Property Intellectual Property Rights and International Technology Transfer to Address Climate Change: Risks, Opportunities and Policy Options. By K. E. Maskus and R. L. Okediji. Issue Paper No. 32, 2010 Intellectual Property Training and Education: A Development Perspective. By Jeremy de Beer and Chidi Oguamanam. Issue Paper No. 31, 2010.

An International Legal Framework for the Sharing of Pathogens: Issues and Challenges. By Frederick M. Abbott. Issue Paper No. 30, 2010.

Sustainable Development In International Intellectual Property Law – New Approaches From EU Economic Partnership Agreements? By Henning Grosse Ruse – Khan. Issue Paper No. 29, 2010.

Trade in Services and Sustainable Development Facilitating Temporary Labour Mobility in African Least-Developed Countries: Addressing Mode 4 Supply-Side Constraints. By Sabrina Varma. Issue Paper No.10, 2009.

Advancing Services Export Interests of Least-Developed Countries: Towards GATS Commitments on the Temporary Movement of natural Persons for the Supply of Low-Skilled and Semi-Skilled Services. By Daniel Crosby, Issue Paper No. 9, 2009.

Maritime Transport and Related Logistics Services in Egypt. By Ahmed F. Ghoneim, and Omneia A. Helmy. Issue Paper No. 8, 2007.

Environmental Goods and Services Programme Harmonising Energy Efficiency Requirements – Building Foundations for Co-operative Action. By Rod Janssen. Issue Paper No. 14, 2010 Climate-related single-use environmental goods. By Rene Vossenaar. Issue Paper No.13, 2010.

Technology Mapping of the Renewable Energy, Buildings, and transport Sectors: Policy Drivers and International Trade Aspects: An ICTSD Synthesis Paper. By Renee Vossenaar and Veena Jha. Issue Paper No.12, 2010.

Trade and Sustainable Energy International Transport, Climate Change and Trade: What are the Options for Regulating Emissions from Aviation and Shipping and what will be their Impact on Trade? By Joachim Monkelbaan. Background Paper, 2010.

Climate Change and Trade on the Road to Copenhagen. Policy Discussion Paper, 2009.

Trade, Climate Change and Global Competitiveness: Opportunities and Challenge for Sustainable Development in China and Beyond. By ICTSD. Selected Issue Briefs No. 3, 2008.

Intellectual Property and Access to Clean Energy Technologies in Developing Countries: An Analysis of Solar Photovoltaic, Biofuel and Wind Technologies. By John H. Barton. Issue Paper No. 2, 2007.

Regionalism and EPAs Questions Juridiques et Systémiques Dans les Accords de Partenariat économique : Quelle Voie Suivre à Présent ? By Cosmas Milton Obote Ochieng.

Issue Paper No. 8, 2010.

Rules of Origin in EU-ACP Economic Partnership Agreements. By Eckart Naumann. Issue Paper No. 7, 2010 SPS and TBT in the EPAs between the EU and the ACP Countries. By Denise Prévost. Issue Paper No. 6, 2010.

Los acuerdos comerciales y su relación con las normas laborales: Estado actual del arte. By Pablo Lazo Grandi. Issue Paper No. 5, 2010.

Revisiting Regional Trade Agreements and their Impact on Services and Trade. By Mario Marconini. Issue Paper No. 4, 2010.

Trade Agreements and their Relation to Labour Standards: The Current Situation. By Pablo Lazo Grandi. Issue Paper No. 3, 2009.

Global Economic Policy and Institutions The Microcosm of Climate Change Negotiations: What Can the World Learn from the European Union? By Håkan Nordström, Issue Paper No. 1, 2009.

These and other ICTSD resources are available at http://www.ictsd.org

www.ictsd.org

Other Publications from ICTSD’s Programme on Competitiveness and Sustainable Development include: •

The Allocation of Emission Allowances Free of Charge: Legal and Economic Considerations.

Issue Paper No. 18 by I. Jegou and L. Rubini, 2011

•

The Role of International Trade, Technology and Structural Change in Shifting Labour Demands in South Africa. Issue Paper No. 17 by H. Bhorat, C. van der Westhuizen and S. Goga, 2010.

•

Trade Integration and Labour Market Trends in India: an Unresolved Unemployment Problem. Issue Paper No. 16 by C.P. Chandrasekhar, 2010.

•

The Impact of Trade Liberalization and the Global Economic Crisis on the Productive Sectors, Employment and Incomes in Mexico. Issue Paper No. 15 by A. Puyana, 2010.

•

Globalization in Chile: A Positive Sum of Winners and Losers. Issue Paper No. 14 by V. E. Tokman, 2010.

•

Practical Aspects of Border Carbon Adjustment Measures – Using a Trade Facilitation Perspective to Assess Trade Costs. Issue Paper No. 13 by S. Persson, 2010.

•

Trade, Economic Vulnerability, Resilience and the Implications of Climate Change on Small Island and Littoral Developing Economies. Issue Paper No. 12 by Robert Read, 2010.

•

The Potential Role of Non-Traditional Donor’s Aid in Africa. Issue Paper No. 11 by Peter Kragelund, 2010.

•

Resilience Amidst Rising Tides: An Issue Paper on Trade, Climate Change and Competitiveness in the Tourism Sector in the Caribbean. Issue Paper No. 9 by Keron Niles, 2010.

•

Aid for Trade and Climate Change Financing Mechanisms: Best Practices and Lessons Learned for LDCs and SVEs in Africa. Issue Paper No. 8 by Vinaye Dey Ancharaz, 2010.

•

El sector textil y confección y el desarrollo sostenible en Nicaragua. Documento de Fondo No. 7 por Ana Victoria Portocarrero Lacayo, 2010.

•

El sector textil y confección y el desarrollo sostenible en Guatemala. Documento de Fondo No. 6 por Pedro Prado et al, 2009.

•

Estrategias para la reconversión de la industria textil y confecciones en Guatemala y Nicaragua. Documento de Fondo No. 5 por Eduardo Burga Bartra, 2009.

•

Looking for a meaningful Duty Free Quota Free Market Access Initiative in the Doha Development Agenda. Issue Paper No. 4 by David Laborde, 2008.

About ICTSD Founded in 1996, the International Centre for Trade and Sustainable Development (ICTSD) is an independent non-profit and non-governmental organisation based in Geneva. By empowering stakeholders in trade policy through information, networking, dialogue, well-targeted research and capacity building, the Centre aims to influence the international trade system so that it advances the goal of sustainable development.