Tough environmental rules do not hamper global exports

March 10, 2016 10:19 AM

Countries with tough environmental policies such as carbon levies and air pollution rules are not at a big disadvantage when trading globally compared with countries that have looser regulations, a study by the OECD said on Thursday.

The report comes at a time when lawmakers in Europe are thrashing out details of how to compensate energy-intensive industries for costs associated with the bloc’s Emissions Trading System (ETS) which charges polluters for each tonne of carbon dioxide they emit.

"Environmental policies are simply not the major driver of international trade patterns," Catherine L. Mann, chief economist for the Paris-based Organization for Economic Co-operation and Development (OECD) said in a statement with the report.

"Governments should stop working on the assumption that tighter regulations will hurt their export share and focus on the edge they can get from innovation."

The study found exports from Denmark, Germany and Switzerland—countries deemed to have the most stringent environmental policies—to major emerging economies with weaker regulations, Brazil, Russia, India, China and South Africa (BRICS) rose by $11.2 billion from 1995-2008.

That export figure would have been 3% higher from heavy polluting industries such as chemicals and metals without the tough regulation but this was offset by a 3% rise in exports of cleaner industries such as electronics, the report said.

Under Europe’s ETS the European Commission awards free carbon permits to guard against the relocation of EU firms to places with less-stringent emission limits, amid fierce lobbying from industries fearful of meeting the cost.

Around 180 sectors are currently on the so-called "carbon leakage" list but this will be scaled back to around 50 sectors with the final list to be decided in 2019.

"These companies that are protected from the environmental policy signal have much less incentive to innovate and become cleaner," the OECD’s Tomasz Kozluk and co-author of the report told journalists at a briefing on Thursday.

The Commission estimates the permits will be worth €160 billion ($174 billion) from 2021-2030.

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