Automatgenererad bild.

9 January 2014

How to make international trade greener

How can our global trade in goods contribute to an ambitious environmental policy and sustainable development? The Entwined programme, now completed, has provided new knowledge of how current international trade rules and regulations can be developed, and of the effects of various environmental labelling systems and environmental taxes.

Since 2007 ‘Environment and Trade in a World of Interdependence’, the Entwined programme, has been coordinating research on environmental economics and on how the international trade system can help to bring about a sustainable transformation of society. A closing seminar on 4 November included the presentation of results from a major study of how environmental labelling works. Scope for an active environmental policy focusing on renewable energy in current international trade agreements was also discussed.

In December Mark Sanctuary, the Programme Director for Entwined, also presented his thesis Essays on Trade and Environment at the Stockholm University Department of Economics.

Your life has been fairly hectic recently, with both the final Entwined conference and your thesis disputation, hasn’t it?
Yes. Managing the programme has taken up a lot of time, but it’s given me a great deal. It feels good to have finished the thesis, and just as good to see that it turned out extremely well. The thesis captures much of the research we have carried out in Entwined, on a wide range of subjects, from environmental labelling and trade rules to economic theories. Thanks to the final seminar, the survey pinpointing the real effects of the rapidly expanding systems of environmental labelling on the environment and social aspects had plenty of med coverage. That was pleasing, but also something we counted on when we chose it as one of the subjects for the seminar, since that research is, after all, close to the everyday decisions we all make.

You were the Programme Director while taking your PhD at the same time, which is unusual. Has this been a problem, given that you’ve been in charge of more senior researchers?
Yes, it was undeniably a challenge for me to direct senior and highly experienced researchers, but I felt I had their full support. Being able to head a project well is a different matter from having good academic qualifications. I also believe it was an advantage not being established in a particular research field. It meant I was able to push through an agenda that made use of the whole range of strong research expertise in the programme, and make sure we achieved the ambitious aims we’d adopted.

What is your thesis about?
Part of it is about environmental labelling, in line with the study we carried out in the programme. I’ve also studied the effects a carbon tax on cross-border trade (‘border carbon adjustment’ or BCA, as it’s called) might have. This tax is one of the options discussed by the EU, as a way of imposing a charge on goods imported from countries that lack stringent climate policies. Many major countries and regions are talking about BCA, but none have introduced it yet. So discussing it seriously makes the EU exceptional. There have been proposals to introduce this kind of system in aviation — a proposal that provoked massive protests from many countries. But the issue is still on the EU agenda and it’s also being discussed in the US.

Another part of the thesis covers the effect a tougher climate policy would have on domestic production. One theory says that it would make companies move to countries with more lenient requirements. Another is that production would become located primarily near major markets like the EU and US. By combining the two theories, we can show that it’s not self-evident that stricter environmental requirements cause companies to move. This is a claim often asserted as an argument against tightening up environmental legislation. I’ve also studied how higher electricity prices affect Swedish industry’s imports. Based on statistical analysis of data on all Swedish manufacturing companies, it’s possible to identify the sectors where companies are starting to import more. And also, which is just as interesting, the sectors where this isn’t happening despite electricity costing more.

Looking at what you’ve done in the programme, what do you think Entwined has achieved?
We’ve had quite a big impact, especially considering we haven’t had more than 12 researchers in the programme. Our key contribution is that we’ve translated cutting-edge research into practice: we’ve applied it to real issues on the table and this has enabled us to help provide decision support for the World Trade Organisation (WTO), for instance. There, we’ve earned confidence in our work and been able to disseminate research on how environmental requirements, in various forms, can be reconciled with the rules of international trade.

Another area where we’ve exerted influence is environmental labelling, and the results that may be expected from the many labelling systems that exist. Another example is BCA, where we’ve brought together research in the area and been able to provide results that serve to support decisions on how this kind of tax could be introduced in an effective way.

What’s happening to the work now that the programme has come to an end?
It’s been a joy to see how Entwined has generated new collaborations that would never have come into existence without the programme. Researchers in international economics have worked alongside environmental economists, lawyers and political scientists, who all think very differently despite being engaged in the same project. That has resulted in many exciting academic discussions. We’re going to draw up a synthesis report that collects the research results from the programme. And then I see ample prospects of carrying on with work on these issues in new projects.

Text: Andreas Nilsson, Vetenskapsjournalisterna

Mistra Webbredaktör