Climate Change, Trade Competitiveness, and Opportunity for Climate Friendly Goods in SAARC and Asia Pacific Regions

Climate Change, Trade Competitiveness, and Opportunity for Climate Friendly Goods in SAARC and Asia Pacific Regions

Soumyananda Dinda (Sidho Kanho Birsha University, India)
DOI: 10.4018/978-1-4666-8814-8.ch026


This paper examines trade performance of climate friendly goods using some trade indices for South Asia and Asia Pacific countries during 2002 - 2008. Climate friendly goods (CFG) are those goods which are less harmful to environment. Paper identifies performance of Asia Pacific region in CFG trade with other nations. Most of the countries in Asia are importers of climate friendly goods and technologies. The Comparative advantage analyses indicate that Hong Kong, China, and Japan have comparative advantage in the production of CFG goods. Pakistan, Sri-Lanka, and India prefer to trade in CFG regionally and have shown interest in production and trade of clean coal technologies (CCT). East and South East Asia regions have comparative advantage in Solar Photovoltaic Systems (SPVS) and Energy Efficient Lighting (EEL). Japan, China, Malaysia and Macao show good in 2008 for SPVS.
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Literature Review

Climate friendly goods (CFG) are defined as components, products and technologies which tend to have relatively less adverse impact on the environment. The climate friendly goods (CFG) forms part of the broader group of environmental goods and services (EGS), which prevent, minimise or recover environmental damage, as well as problems related to waste, noise and ecological systems. It includes clean technologies, products that reduce environmental risk and minimise negative externalities and resource use. EGS can be classified as environmental goods comprising of pollution controlling equipments, environmentally preferable and resource management products. EGS has also environmental services that comprises of sewage services, reuse services, sanitation and similar services. CFG constitutes low carbon technologies such as solar photovoltaic systems, wind power generation, clean coal technologies and energy-efficient lighting. Some of the climate friendly goods/technologies are assisting in mitigation efforts by reducing GHG emissions and also improving adaptive capacity such as water conservation or improving access to energy.

Trade and Investment in CFGs and climate services have received attention as a triple win scenario where trade, climate and environment, and development all benefit (APTIR 2011). Countries prefer to concentrate on low energy consumption. Countries need to design sustainable and smart growth that entails sharply reduced GHG emissions which limits the global temperature. Various efforts (Rio meet in 1992, Kyoto protocol of 1997, Bali Action Plan of 2007, Copenhagen accord in 2009, Durban meeting in 2011, etc) have been made by international community to tackle the climate change.

Key Terms in this Chapter

Climate Friendly Goods: Climate Friendly Goods are defined broadly as products, components, and technologies which tend to have a relatively less adverse impact on the environment. CFG constitute low carbon growth technologies. For example, one subcategory of CFG is clean coal technology, which improves energy efficiency and reduces environmental impacts. Clean coal technology includes technologies of coal extraction, coal preparation, and coal utilization. Wind technology (another sub category of CFG) focuses on wind energy generation and is composed of three integral components: gear box, coupling, and wind turbine. The study also observes that trade of such CFG has a regional bias for most of the countries in the region, although, almost all are net importers from Japan, Hong Kong, and more recently China. CFG is a part of a wider group of named environmental goods and services (EGS). Environmental goods can be understood as equipment, material or technology used to address a particular environmental problem or as a product that is itself environmentally preferable to other similar products because of its relatively benign impact on environment. Environmental services are provided by ecosystems or human activities to address environmental problems and to help minimize environmental damages and protect the bio-sphere of the earth. EGS can be classified as environmental goods comprising of pollution management products, cleaner technologies and products, resource management products and environmentally preferable products. EGS also has environmental services comprising of sewage services, reuse services, sanitation, and similar services, and others.

Revealed Comparative Advantage: The Revealed Comparative Advantage is defined as the ratio of two shares. The numerator is the share of a country’s total exports of the commodity of interest in its total exports, and the denominator is share of world exports of the same commodity in total world exports. The RCA takes a value between 0 and (infinity). A Country is said to have a revealed comparative advantage if the value is more than one.

Trade Opportunity: Trade opportunity is the scope of nation to increase its trade. Basically it is a trade gap of a country with its trade partners. Researchers can estimate trade value and measure how well a bilateral trade flow performs relative to the mean as predicted by the gravity model. So, the potential trade gap means how far below the actual trade value is from the predicted trade value. This potential trade gap suggests that there is a scope to increase the export of climate friendly goods (CFG) with trading partners. The total estimated export potential trade gap in CFG in Asia was around $30 billion US dollar in 2008.

Climate Change: Climate change refers to any significant change in the measurement of climate lasting for an extended period of time. Over the past century, human activities have released large amounts of carbon dioxide (CO 2 ) and other greenhouse gases into the atmosphere. Major greenhouse gases are generated from burning fossil fuels. Deforestation, industrial processes, and some agricultural practices also emit gases into the atmosphere. As a result, average global temperatures increased by 0.74ºC during 1906 – 2005, and a further increase of 0.2ºC to 0.4ºC in the next 20 years is expected (IPCC). Small changes in the average temperature of the planet can translate to large and potentially dangerous shifts in climate and weather. Many places have seen variations in rainfall - resulting in more droughts or intense rain and more floods, as well as more frequent and severe heat waves (IPCC Reports). Climate change refers to a change in the state of the climate that can be identified (using statistical tests) by changes in the mean and/or the variability of its properties, which persist for an extended period, typically decades or longer. Any change in climate may be due to natural variability or as a result of human activity. Anthropogenic warming is influencing many physical and biological systems.

Michelaye Index: The Michelaye index is defined as the difference of two shares. It is the share of one country’s exports of the commodity of interest in its total exports and the share of the same country’s imports of the same commodity in its total imports. The index takes a value between -1 and +1. A country is said to have a revealed comparative advantage if the value is greater than zero.

Competitiveness Index: Competitiveness index is estimated as ratio of each country export of CFG to the world exports of CFG. Competitiveness in trade is broadly defined as the capacity of an industry to increase its share in international markets at the expenses of its rivals. The competitiveness index is an indirect measure of international market power, evaluated through a country’s share of world markets in CFG. The index takes a value between 0 and 100 percent, with higher values indicating greater market power of the country in question.

Trade: Trade plays a major role in innovations and disseminating technologies. It is presumed that liberalized trade is a potent driver for technological innovation. It is expected that advanced know-how and environment friendly technologies will be readily available through liberalised trade.

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