Trade and green growth

Achieving greener growth will require innovative goods and services to enable factories and buildings to use energy more efficiently, to reduce air and water pollution, to make the transition to more sustainable uses of energy, and to provide sanitation and clean drinking water. Many of these goods and services will be procured locally, but some will only be available, or become available more cheaply, from foreign suppliers. Trade can help the environment both through achieving a more efficient use of resources and by serving as a conduit for the transfer of environmental technologies. Trade can also help scale up sustainable business models and help economies shelter negative environmental shocks.

Circular economy policies, which largely take place domestically, have important interlinkages with international trade. OECD work explores how to make circular economy policies and trade policies mutually supportive by mapping out potential misalignments and identifying opportunities to align and strengthen both policy areas.

The report Securing reverse supply chains for a resource efficient and circular economy focuses on the opportunities and challenges for governments to facilitate cross-border reverse supply chains and reverse logistics to close material loops, such as recycling waste and scrap into secondary raw materials, and extending product life by promoting direct reuse, repair, refurbishment and remanufacturing.

The report Incorporating environmental provisions in regional trade agreements in chapters and articles dealing with trade in services explores ways in which RTAs can incorporate environmental objectives in chapters and articles related to: (i) non-tariff measures, technical-barriers to trade and regulatory cooperation, and (ii) trade in services, respectively.

The report Climate Policy Leadership in an Interconnected World: What Role for Border Carbon Adjustments? provides a broad and evidence-based analytical perspective of the debate around the possible role of a Border Carbon Adjustment (BCA) to deal with climate change. The paper provides an overview of different policy instruments that can limit carbon leakage, with a particular focus on the BCA option, and offers a technical review of the literature and of the legal specificities around BCA as well as of alternative instruments.

The OECD has also been at the forefront of international efforts to identify and analyse trade in environmental goods and services (EGS). Recent work provides evidence that trade in wind turbines provides access to technologies with a level of efficiency that cannot be replicated domestically in importing countries.

the volume of trade in environmentally- related goods; tariffs on environmentally-related goods; support measures for fossil fuels; enabling policy and regulatory environment for renewable energy; the volume of trade in waste and scrap; and nutrient balances of exported grains.

In an effort to better understand the relationship between domestic environmental regulations and international trade policies, the OECD has recently engaged in the construction of a set of policy indicators on trade and environment. This set of indicators aims to shed light on topical debates regarding the interactions between trade and environmental policies. Issues covered include: carbon emissions embodied in trade; embodied raw materials in trade;

A retrospective of OECD work on trade and environment was published in 2020. This report highlights the breadth and depth of the OECD analysis in this field and provides suggestions for future analysis.

Trade in environmental goods

Between 2003 and 2016 international trade in environmentally-related goods (EGs) more than doubled – from USD 531.10 billion to USD 1 261.24 billion – increasing its share in global trade from 7.2% to 8.1%. This robust growth was mostly driven by three categories of EGs: (i) components of renewable energy plants; (ii) equipment for wastewater management and treatment; and (iii) management of solid and hazardous waste and recycling systems.

A growing body of literature suggests this growth is partly the result of environmental policies which create markets for environmental goods and services, and which in turn improve the competitiveness of local firms operating in these industries. For instance, the more stringent the regulation of the municipal solid waste management sector, the stronger the trade comparative advantage in related environmental goods, lending support to the argument that a demand for these goods is created as a result of stricter environmental standards.

Trends in indicators on trade and environment developed at the OECD confirm these results, and suggests that a strong policy and regulatory environment for the deployment of renewable energy is associated with an increase in the net exports of equipment for renewable energy plants. Conversely, countries that spend a larger share of their GDP to support fossil fuels seem to harm the competitiveness of their domestic renewable industry. This effect is particularly strong in countries outside the OECD area.

Key Publications and websites

• Securing reverse supply chains for a resource efficient and circular economy, OECD Trade and Environment Working Papers (2022)

• Incorporating environmental provisions in regional trade agreements in chapters and articles dealing with trade in services, OECD Trade and Environment Working Papers (2022)

• International trade and circular economy - Policy alignment, OECD Trade and Environment Working Papers (2021)

• Trade as a channel for environmental technologies diffusion, OECD Trade and Environment Working Papers (2021)

• Climate Policy Leadership in an Interconnected World - What Role for Border Carbon Adjustments? (2020)

• Greening regional trade agreements on non-tariff measures through technical barriers to trade and regulatory co-operation, OECD Trade and Environment Working Papers (2020)

• Greening regional trade agreements on investment, OECD Trade and Environment Working Papers (2020)

• New digital technologies to tackle trade in illegal pesticides, OECD Trade and Environment Working Papers (2020)

• Greening regional trade agreements”, OECD Trade and Environment Working Papers (2020)

• The consequences of a more resource efficient and circular economy for international trade patterns: A modelling assessment, OECD Environment Working Papers (2020)

• Trends in policy indicators on trade and environment, OECD Trade and Environment Working Papers (2019)

• www.oecd.org/environment/envtrade

• www.oecd.org/trade/topics/trade-and-the-environment/

Contact for more information

Rob Dellink

Environment Directorate

E-mail: Rob.Dellink@oecd.org

Evdokia Moïsé

Trade and Agriculture Directorate

E-mail: Evdokia.Moise@oecd.org

Shunta Yamaguchi

Environment Directorate

E-mail: Shunta.Yamaguchi@oecd.org

Grégoire Garsous

Trade and Agriculture Directorate

E-mail: Gregoire.Garsous@oecd.org