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Policy brief 549.66 KB

The Paris Agreement on Climate Change and the 2030 Agenda for Sustainable Development have been game changers in the global landscape of policies regarding environment, climate and trade, acknowledging the strong interlinkages and potential synergies between the different areas.

Environmentally sound technologies (ESTs), often also referred to as “clean” technologies, are technologies that reduce environmental risk and minimize pollution as well as energy and resource use and are essential in the fight against climate change. They also contribute to a number of Sustainable Development Goals (SDGs) such as goal 7 on energy, goal 8 on economic growth, goal 12 on sustainable consumption and production, and goal 13 climate action.

Trade liberalization can further facilitate market creation and expansion for ESTs and generate opportunities for companies, particularly in developing countries, to participate in regional and global value chains. Increasing trade in ESTs can offers a triple win by promoting economic development, industrialization, job creation and innovation while simultaneously enabling countries to more efficiently access the technologies needed to improve their environmental performance.

Global trade in ESTs has increased by over 60% from USD 0.9 trillion in 2006 to USD 1.4 trillion in 2016, with renewable energy technologies accounting for more than one third of the total trade value, followed by wastewater management and water treatment and solid and hazardous waste management technologies. While emerging economies such as China have dramatically increased their share in world trade of ESTs, many low-income countries, especially least developed countries (LDCs), have not yet fully benefited from EST trade.

This report aims to enhance understanding of the implications, capacity needs and enabling conditions for trade liberalization of environmentally sound technologies (ESTs), with focus on developing countries. It focuses its analysis on five ESTs, namely solar photovoltaic cells (PVs), water filters, waste incinerators, gas filtering machinery, hemp and flax fibers.

To do that, the study takes a holistic approach and combines trade flow analysis with policy research. It draws upon findings from two regional assessments on EST trade in the Association of Southeast Asian Nations (ASEAN) and the East African Community (EAC), including country case studies in Malaysia and Kenya. Data was collected from multiple sources, including the United Nations Comtrade database, the World Trade Organization (WTO) database on trade in services, country- and company-level data, as well as scientific publications.

Key findings

  • Trade in ESTs is increasing, with growing participation of developing countries.
  • Negotiations aiming at liberalizing trade in ESTs have made progress at international and regional levels.
  • Developing countries have the potential to benefit significantly from EST trade and increased participation in global value chains.
  • Challenges remain. Non-tariff measures in particular pose a significant challenge to trade in ESTs.
  • A holistic approach could help developing countries further harness trade opportunities in ESTs.
  • Trade rules and negotiations can significantly contribute to fostering EST trade.
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