What effect does trade policy have on sustainable energy in developing countries? Madhavan Nampoothiri and Hari Manoharan argue that trade policy has a substantial impact on developing countries’ ability to access “sustainable energy goods”, such as solar panels, solar lanterns and other useful equipment for off-grid villages in their recent report, International Trade and Access to Sustainable Energy: Issues and Lessons from Country Experiences.
Nampoothiri and Manoharan call for “a clear and coherent governance regime for sustainable energy and related goods and services supported by trade rules and robust markets,” yet they point out the fundamental issue of the incomplete WTO Doha negotiations and the lack of clarity regarding sustainable energy trade even if the round is completed.
They point instead to the possibility of sustainable energy trade initiatives (SETIs) that could include sustainable energy trade agreements (SETAs), one-off initiatives that could address specific barriers to trade and provide a workable framework for sustainable energy. Whether within the framework of the WTO or outside of it, the authors see this as a way to “help clarify existing ambiguities in various trade rules and agreements as they pertain to sustainable energy and provide focalised governance through effective operational provisions.”
The necessity of efficient trade rules for sustainable energy equipment are clear: 800 million people in Asia and 400 million people in Africa have little or no access to electricity. This has both direct and indirect impacts on health – 1.6 million people die each year from indoor smoke inhalation – women, who spend 2-9 times more than men gathering wood and other biomass for fuel – and productivity. Moreover, girls may lose out on education due to time spent gathering fuel.
Regarding policy actions in Africa and Asia to support sustainable energy, the authors highlight that far too often governments rely on financial incentives and direct subsidies, including giving away solar lanterns and other sustainable energy products. While financing is a core issue, this approach can create a host of problems, as detailed in the report, and they call instead for “innovative business practices”. These practices can include everything from pay-as-you-go electricity to solar lantern rental to UNEP’s suggestion of monthly payroll deductions.
The authors also wisely highlight the impact that other subsidies can have on sustainable energy affordability – such as kerosene subsidies. They suggest instead using this kerosene subsidy not simply to subsidise sustainable energy but to create awareness building campaigns.
Chapters 4, 5 and 6 are the most useful offering – the authors analyse various barriers to trade and offer insights to Africa and India in particular. They offer a series of recommendations regarding improving trade – including eliminating competing subsidies, lowering taxes and duties, particularly in Africa, quality assurance, standardisation and public awareness and information. They also go into depth regarding sustainable energy trade agreements (SETAs) and why they think they can address the challenges that currently exist for an efficient trade of sustainable energy goods.