Effect of Trade Liberalization on Low-Carbon Energy Technology Dissemination in Asia

Abstract

The production and use of low-carbon energy technology and services, such as renewable energy, are imperative for Asia’s emerging economies (which are heavily dependent on imported energy and resources) to tackle global environmental issues like climate change. Acknowledging this fact, recently, governments in the Asian region individually have been taking effective actions in the form of voluntary targets and policy commitments to improve the production and use of low-carbon technology, such as solar, wind, geo-thermal, and so forth. Nevertheless, the diffusion of these technologies has been through liberalized trade, which has been low compared with trade and investment in other energy intensive sectors. Though effective tariffs are low, non-tariff barriers or behind-the-border constraints are very high. In this exploratory study, the potential for increased exports in low-carbon technology and services under a grand regional coalition, partial regional coalition, and stand alone scenarios is studied. We find that production, trade, and investment in renewable energy technologies are very low regionally. There is a large gap between the demand for and the supply of low-carbon energy technology and associated pollution abatement services. Behind-the-border constraints that exist within the exporting country, such as poor infrastructure and inefficient institutions, create this gap between actually realized and potentially possible exports. This supply gap provides an opportunity for those emerging Asian economies, which have the potential to contribute to the manufacturing of such technologies individually and collectively pooling their physical and human capital.