TWN Info Service on WTO and Trade Issues (Sept09/18)
28 September 2009
Third World Network

Climate chapter in UNCTAD TDR report criticized
Published in SUNS #6776 dated 22 September 2009

Geneva, 18 Sep (Chee Yoke Ling*) -- The treatment of climate change in the 2009 Trade and Development Report (TDR) by the United Nations Conference on Trade and Development (UNCTAD) has drawn different criticisms from both developing and developed countries.

In its opening plenary statement at the fifty-sixth session of the Trade and Development Board (14 to 25 September), India expressed its deep disappointment with Chapter V titled "Climate Change Mitigation and Development", stating that this chapter seeks to enter in the area of climate change negotiations, which is not in the remit of UNCTAD, as these are exclusively the preserve of the process under the UN Framework Convention on Climate Change (UNFCCC).

India expressed concern that there are factual inaccuracies and erroneous assumptions which betray a lack of understanding of the provisions of the UNFCCC, which enjoys near universal ratification with 193 ratifications to date, and the negotiation process under it.

It also criticised the chapter for focusing extensively on the adaptation and mitigation aspects of climate change, already under discussion in the appropriate fora, without adequately dealing with issues such as environmental barriers to trade and development.

Accordingly, at the plenary discussion of this agenda item on 15 September, India said this chapter of the TDR should only be noted but not endorsed in any manner. This was during the session on the agenda item titled "Development Strategies in a Globalized World: Meeting the development challenge of climate change" that was addressed by UNCTAD Secretary-General, Dr Supachai Panitchpakdi, and other experts.

The development challenge of climate change proved to be contentious with developing and developed countries raising concerns about the upcoming climate negotiations in Copenhagen (the 15th meeting of the Conference of the Parties to the UNFCCC in December) and on some aspects of Chapter V of the TDR.

India reiterated its concerns and drew attention to the framework in which the issue of climate change must be addressed at UNCTAD.

It referred to paragraph 58 of the 2008 Accra Accord (adopted by the 12th session of UNCTAD) that reaffirms that the UNFCCC in accordance with the common but differentiated responsibility principle is the appropriate forum for negotiating issues for reduction of global warming, and paragraph 17 of the Accra Declaration that states that climate change has to be discussed in accordance with the UNFCCC principles.

India also recalled paragraph 100 of the Accra Accord that sets out the manner in which UNCTAD is to deal with the issue of climate change ["UNCTAD, within its mandate and without duplicating the ongoing work of other organizations, should consider climate change in its ongoing work of assisting developing countries with trade- and investment-related issues in development strategies.]

According to India, this has not been the case in terms of approaching the issue.

On references to UNFCCC and Kyoto Protocol processes, it cited page 159 in the TDR report where there is reference that the Kyoto Protocol is expiring in 2012, which is clearly not the case. It is the first commitment period of Annex 1 countries (developed countries with greenhouse gas emissions reduction commitments) that is coming to an end, India said.

Similarly, there are references to a new global agreement. As far as the UNFCCC Bali Agreement and the Bali Action Plan were concerned (that mandates ongoing negotiations towards Copenhagen), it talks about an agreed outcome. These are references that puzzle us as to how they find place in the document, said India.

In references to adaptation, the TDR states that funding is required for poorer countries to adapt to climate change. The terminology used in the UNFCCC and the Kyoto Protocol is that of "developing countries". [This concern reflects moves by developed countries in the UNFCCC to dilute their financial commitments to developing countries by introducing new categories of "poor" or "vulnerable" countries.]

India also pointed out that in the reference to mitigation, for example, at page 134, the assertion has been made that developing countries where greenhouse gas emissions have been growing rapidly cannot afford to remain as passive bystanders. India inquired as to the basis for this assumption. It said that India has been an active participant in the international negotiations: we have been taking measures at the national level, and that is something recognised by the international community.

It did not understand the TDR references to developing countries, and in particular emerging economies, undertaking mitigation commitments. This goes away from the basic premise set out in the Accra conference where we have to respect the procedures and the negotiations which are currently underway in the UNFCCC and its processes, looking to the 15th Conference of the Parties to the UNFCCC in December this year.

References to mitigation by emerging economies and by developing countries takes away from the fact that they have been negotiating on the basis of principles agreed to in the UNFCCC (where legally binding mitigation commitments lie with developed countries, and the extent to which developing countries can fulfil their commitments depends on the degree of fulfilment of developed countries in the provision of finance and technology).

India added that the question of development is also far more broad-based. We have had the Rio Principles, Agenda 21 and we find no reference to the World Summit on Sustainable Development. We wish these references had been incorporated (into the TDR report) so that a more balanced picture had emerged.

There is also reference to climate change being an ethical imperative, which we agree with, India said. In that imperative, what is important is the trust factor. Now, the trust factor unfortunately has been missing because of the implementation deficit. The implementation deficit arises from non-implementation of certain commitments by our partners under the UNFCCC with regard to mitigation, adaptation and in terms of transfer of technology and resources.

It is important that we take a more balanced perspective and remain within the framework that has been prescribed for us, India said.

On the other hand, the European Union and the United States strongly opposed the 2009 TDR recommendation regarding the WTO Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) and access to climate-friendly technologies.

Sweden, speaking for the EU, strongly disagreed with the final conclusion of the climate change chapter that recommends that developing countries explore the flexibilities and policy space that the TRIPS agreement provides for medicines and public health. It said that the parallel made in the report between access to medicines and climate technologies is not correct.

Intellectual property rights (IPRs) are key to encourage innovation and ensure the development of new climate technologies, do not in themselves constitute a barrier to transfer of climate related technologies and the IPR price component of climate technologies, tends to be low, Sweden said.

Sweden also disagreed with the statement that the TRIPS agreement will severely restrict reverse engineering and other forms of imitative innovation. It said that TRIPS prevents the mere copying of inventions but reverse engineering, per se, is not prevented by the TRIPS agreement.

[Note: The trend in national patent systems of several developed countries that grant patents with very wide scope and that apply low standards for what is considered to be "novel" in the granting of patents is increasingly debated in several international fora.]

The US supported the EU view and disagreed with the premise that IPR protection would make environmentally sound technologies too expensive. It reiterated its position in other fora that intellectual property protections foster creativity and innovation, and contribute to economic development and improved quality of life around the world.

It described the TDR recommendation to use TRIPS flexibilities as undermining the intellectual property system.

The US also cautioned UNCTAD to remain within its mandate, stating that under paragraph 100 of the Accra Accord, it is to "consider" climate change and that it does not have a mandate to do independent work focused on climate change.

The US, in acknowledging the importance of helping countries to adapt to climate change, singled out "the most vulnerable and poorest countries" for financial and technological assistance. This is consistent with the trend in the UNFCCC that India referred to, where developed countries' commitments to provide finance and transfer of technology to developing countries is in the process of being reduced to a smaller group of countries.

Thailand, for G77 and China, said as developing new technologies will require pro-active industrial policies, it is essential that multilateral trade agreements do not impose limitations on policies supporting climate-friendly technological development, in the same manner that limitations are imposed on other types of industrial policies. At the same time, the international community needs to move towards the active promotion of such industrial policies by developing countries.

It noted with appreciation the TDR's suggestion that the international community should assist developing countries to access patents that are necessary for the development of climate-friendly technologies.

South Africa said that TRIPS flexibilities will be crucial for developing countries to have access to low-carbon technology. For developing countries to benefit, it is not something we can deny.

In his opening address for this discussion, Supachai posed the question, how do we carry on with our development strategy in a way that we can also deal with global warming and at the same time maintain the rate of economic growth and not stray away from poverty reduction as its objective and principle. Supachai made five points.

First, and explicitly mentioned in the TDR, developed countries need to take the leading action to mitigate climate change by adopting strong policy measures. This is done not only for their self-interest but for ethical and economic reasons. This is a responsibility that rests primarily with the developed countries.

Secondly, in the way UNCTAD considered who was going to do what, it has not tried or imagined that it would be influencing any negotiation anywhere. We have looked at the facts and looked at the principle. The principle that we followed is common but differentiated responsibilities. We do see this as something that has to be on a differentiated level, differentiation in the level of economic development, technological advances and also in the way countries can make amends in the level of their past actions, he said.

Thirdly, he said, climate change is mentioned as an outcome of a gigantic market failure. The market cannot help regulate this. Therefore, in order to mitigate all these global warming effects, we need to have strong government action at the national and international level. While some markets can be strengthened, the pricing mechanism cannot be able to take into account all the impacts of emissions of carbon dioxide. There must be direct government intervention in order to determine the kind of emissions standards, what kind of regulation would be needed to switch from one mode of production to less carbon emitting modes, also in terms of consumption, and also to lead the way to technological research.

Fourthly, on the need for technologies to be adopted by developing countries to reduce emissions, the policy would have to facilitate the adoption of this technology. It does not mean it will have to be at the expense of growth and development. This may open new kind of opportunities for developing countries to take part in, resorting to renewable energies production and production of environmental goods. There should be explicit industrial policies that would guide the economy, particularly the business private sector, to directions of new forms of investment, that can produce some advantageous areas for participation by developing countries.

Fifthly, to be able to facilitate this structural change, there must be an international commitment to assistance to developing countries to facilitate mitigation and adaption and policies. Although we did not go on to measure the costs, we do realise there are costs involved and to defray some of the costs we see international action to be mobilised, Supachai said.

In the area of proprietorship, some technologies will need to be transferred to the poor economies so they can resort to some of these technologies to render their new structure of production feasible. He said that UNCTAD sees some possible parallel treatment as done before on the multilateral channel with the way we tried to enhance the access to essential medicines for developing countries to make the intellectual property rights agreement more flexible.

Other speakers who preceded the responses from government delegations were UNCTAD's Mr D. Kotte, Head of the Macroeconomic and Development Policies branch, Mr Frank Ackerman, Senior Economist at the Stockholm Environmental Institute, Prof. Francis Yamba, Director, Centre for Energy, Environment and Engineering Zambia Limited.

Kotte said the TDR addresses climate change mitigation implications for development strategies. He stressed that we tried to look ahead twenty years from now. While not prophets, what is clear is that there will be a huge and lengthy process of structural change that takes place in the global effort to achieve climate mitigation between now and 2050, whatever the targets that are set at the global level or the national level.

There is the possibility to make climate change mitigation compatible with rapid growth in developing countries, but this requires appropriate and forward looking development strategies, Kotte said. The report looks at mitigation, the costs of adjusting to a low-carbon economy, which over a long period of time, requires investments, the creation of new equipment, new technology, new consumer goods, and shift to new modes of production and consumption.

He highlighted the importance of granting of policy space in the context of the existing agreements for developing countries to carry out policies in favour of developing their economies. One of these is facilitation of climate change relevant technology.

Frank Ackerman said most of the short term opportunities to reduce emissions are located in developing countries. While, looking at the magnitude of the funds required, most of the funds needed to pay for emission reduction will have to come from high-income countries. And the problem is what institutions and agreements will make this flow of funds possible. It is not in place now, and something new is needed. Funds to pay for the low-carbon agenda need not, and cannot, come from the developing countries alone.

He said that cost estimates for mitigation vary widely with most estimates based on $20 per ton of CO2 reduction. Seven to twenty billion tonnes emissions reduction per year by 2020 roughly equates to a cost of $140 to $400 billion per year.

He said that it is now clear that we can no longer avoid the serious damages of climate change, and adaptation to the inescapable damages is needed. Adaptation is difficult to estimate as it is extremely site-specific and varied. The best estimates suggest tens of billions or in the high case perhaps over $100 billion per year for developing countries. UNDP estimates it at $86 billion per year. Almost no adaptation funding is provided at present, he said.

The Clean Development Mechanism (CDM) under the UNFCCC is by far the largest flow of multilateral funding to developing countries. But the CDM did not used to be in the billions, it started out small. It has lots of limitations in its current form and has yet to dig very far into the greater problem of reducing the use of fossil fuels or creating clean energy.

The other UNFCCC/Kyoto Protocol institutions for funding, like Joint Implementation, Global Environmental Facility (note: this is implemented by the World Bank/UNDP/UNEP) and the Adaptation Fund, have a total of less than $1 billion flowing through them per year.

Ackerman said that the World Bank set up with fanfare climate investment funds, which has less than $1.5 billion per year, which may have appealed to some donors who want to fund outside international agreements. The question is whether these will have conditionality that has plagued the funding of the bank.

He noted that these funds are single digit billions, not the hundreds of billions that are needed. Spending as little as we do so far is deciding to fail to solve the problem in time, he said.

During the discussions, Thailand, for the G77 and China, also said that in addressing climate change concerns the Group believed it important to ensure that the development prospects for developing countries are not hampered or obstructed. While climate change is a vital challenge which must be dealt with on an urgent basis, it must also be recognized that developing countries also have other immediate and pressing concerns which require a greater level of attention. Therefore, a sense of perspective and understanding is essential in harnessing international cooperation.

Sri Lanka, for the Asia Group, endorsed the view of the G77 and China reminding the meeting that the Accra Accord mandate and Accra Declaration mandate to UNCTAD on climate change, is that it should consider work on assisting developing countries with trade and investment issues in development strategies.

It said that UNCTAD should examine the trade and development dimension of transfer of technology and know-how, not only on climate change mitigation, adaption but also in terms of fundamental adjustment of economies and to take advantage of opportunities. It is of utmost importance that there is adherence to and implementation of the Rio principles and Agenda 21 in their entirety.

In addition to its opposition to the recommendation to use TRIPS flexibilities, Sweden for the EU drew attention to the statement in the TDR that cost estimates of mitigation are usually over-estimated as they do not take into account the macro-economic dynamics of growth and employment opportunities.

South Africa said with regard to the panel presentations that it was interesting that the CDM's current financing levels are far short of what will be required for developing countries. We may want to look at reforming the system drastically or look at alternatives because it seems there was a common thread regarding the CDM. The other issue, in addition to financing, is the sustainability of projects funded by the CDM.

Luxembourg, as Chair of the session, will prepare a summary of the main ideas of the plenary session and send it to the UN Secretary-General for his climate summit in New York later in September.

(* With inputs from Riaz K Tayob.) +