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Trade in Environmentally Sound Technologies in the East African Region

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Trade in Environmentally Sound Technologies in the East African Region TRADE IN ENVIRONMENTALLY SOUND TECHNOLOGIES IN THE EAST AFRICAN REGION Trade in Environmentally Sound Technologies in the East African Region 1 TRADE IN ENVIRONMENTALLY SOUND TECHNOLOGIES IN THE EAST AFRICAN REGION Copyrights This publication may be reproduced in whole or in part and in any form for educational or non-profit purposes without special permission from the copyright holder, provided acknowledgement of the source is made. The United Nations Environment Programme would appreciate receiving a copy of any publication that uses this publication as a source. No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from the United Nations Environment Programme. Citation United Nations Environment Programme (2018). Trade in environmentally sound technologies in the East African region. A report of the Environment and Trade Hub of UN Environment and UNEP DTU Partnership. Disclaimer The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the United Nations Environment Programme concerning the legal status of any country, territory, city or area or of its authorities, or concerning delimitation of its frontiers or boundaries. Moreover, the views expressed do not necessarily represent the decision or the stated policy of the United Nations Environment Programme, nor does citing of trade names or commercial processes constitute endorsement. Cover photos: Sebastian Noethlichs/Shutterstock.com Ungureanu Catalina Oana/Shutterstock.com HIndersby/Shutterstock.com Environment and Trade Hub, United Nations Environment Programme UNEP DTU Partnership This project is funded by the European Union 2 TRADETRADE ININ ENVIRONMENTALLYENVIRONMENTALLY SOUNDSOUND TECHNOLOGIESTECHNOLOGIES ININ THETHE EASTEAST AFRICANAFRICAN REGIONREGION Acknowledgements The report was commissioned by the Environment and Trade Hub of the United Nations Environment Programme (UN Environment) and implemented by the UNEP DTU Partnership. It is a key output of the Environment and Trade Hub’s project on ‘Trade in Environmentally Sound Technologies’, funded by the European Union. The report has been produced in collaboration with the African Centre for Technology Studies (ACTS) and the University of Copenhagen. The project was managed by Ying Zhang, Programme Management Officer of the Environment and Trade Hub (UN Environment), under the overall guidance of Anja von Moltke, Head of the Environment and Trade Hub (UN Environment) and Steven Stone, Chief of the Resources and Markets Branch (UN Environment). Substantive contributions were provided by Patrick Mwesigye, Regional Coordinator for Resource Efficiency Sub-programme (UN Environment Regional Office in Africa), Ronal Gainza (UN Environment), Lourdes Alvarez, Kerstin Wonka and Catherine Kamau. Ulrich Elmer Hansen and Ivan Nygaard from the UNEP DTU Partnership were responsible for coordinating the preparation of the report. Joanes Atela, Tonui Charles and Robert Ochieng from ACTS contributed to field work, analysis and writing of the report, which also received important contributions from Elder Davy, Lucy Gregersen and Daniel Puig from the UNEP DTU Partnership. Christian Elleby and Ioannis Fotiadis from the University of Copenhagen were responsible for the economic modelling study in the report. UN Environment would like to thank the following experts and colleagues for their review and contribution: Ronald Steenblik (Organisation for Economic Cooperation and Development, OECD), Jodie Roussell (Acacia Partners), Mahesh Sugathan (Trade and Sustainability Expert), Anirudh Shingal (World Trade Institute), Tom Ogada (National Council for Science Technology and Innovation), Maryanne Maina (German Agency for International Cooperation, GiZ). Administrative and communication support was provided by the following UNEP personnel: Ardeshir Zamani, Selome Tadesse Worku, Fatma Pandey and Suzan Lazaro Nshoka. Layout was designed by Diana De León. UN Environment would like to thank the European Commission for the financial support provided for this publication and project. 3I TRADE IN ENVIRONMENTALLY SOUND TECHNOLOGIES IN THE EAST AFRICAN REGION Table of contents Acknowledgements I Table of contents II List of Figures III List of Tables III List of Abbreviations IV Executive summary V 1. Introduction 1 2. Regional assessment of the drivers and barriers to trade in ESTs in the East African region 4 2.1. Trade in the EAC region 6 2.1.1. Intra-regional trade flows in the EAC 6 2.1.2. Barriers to trade within the EAC 7 2.1.3. Measures to address general trade barriers in the EAC 9 2.2 Policies related to EST services trade in the EAC 9 2.2.1. EAC member states commitments under the General Agreement on Trade in Services 11 2.2.2. Services liberalization under the EAC Common Market 11 2.2.3. Services liberalization under other intra-African regional trade agreements 13 2.2.4. External free trade agreements and cooperation arrangements involving EAC members 17 2.3. EST trade in the EAC 17 2.3.1. Status of diffusion of ESTs in the EAC 17 2.3.2. Regional trade in the selected ESTs 20 2.3.3. Regional initiatives that enable trade in ESTs 27 2.3.4. National policies supporting the adoption of ESTs 29 2.3.5. Tariff and non-tariff barriers to trade in ESTs in the EAC 32 2.3.6. Welfare impacts of removing trade barriers 34 2.3.7. Domestic market constraints 35 2.4. Summary of EST trade in the EAC region 36 3. Trade and value chain development in solar PV products in Kenya 37 3.1. Conceptual approach 37 3.1.1. Conceptualizing the green economy and ESTs 37 3.1.2. Conceptualizing tariffs and non-tariff barriers to trade 38 3.2. Data collection and analytical framework 39 3.3. Solar PV market and value chain in Kenya 40 3.3.1. Structure of the solar PV market in Kenya 40 3.3.2. Overview of solar PV value chain in Kenya 41 3.3.3. Types of imported solar products 43 3.3.4. Sourcing locations and supply chain 46 3.4. Barriers to trade in solar PV in Kenya 47 3.4.1. Description of the import and taxation process 47 3.4.2. Barriers to trade in solar PV products imported into Kenya 48 3.4.3. General challenges to the diffusion of solar PV technology in Kenya 49 3.4.4. Impact of trade barriers on solar importers 51 4. Conclusion and recommendations 53 4.1. Drivers, barriers and measures to unlocking trade in EST in the EAC region 53 4.2. Drivers, barriers and measures to unlocking trade in PV in Kenya 55 4.3 Implications to global and regional trade governance 56 II4 TRADE IN ENVIRONMENTALLY SOUND TECHNOLOGIES IN THE EAST AFRICAN REGION Annexes 59 Annex 1 – WTO GATS commitments of EAC states 59 Annex 2 – The East African Community Common Market: ANNEX V Schedule of Commitments on the Progressive Liberalisation of Services 60 Annex 3 – List of respondents 63 Annex 4 – Interview guide – Solar companies 64 Annex 5 – Interview guide – Government, research and academic institutions 69 Annex 6 - Economic modelling on impacts of trade liberalization of selected ESTs 70 References 89 List of figures Figure 1. Aggregated export data of all selected ESTs globally across EAC countries, 2006-2016 22 Figure 2. Aggregated import data of all selected ESTs across EAC countries, 2006-2016 22 Figure 3. Imports of five selected ESTs to the EAC from the rest of the world, 2006-2016 24 Figure 4. Conceptual framework for analysing tariff and NTBs to trade 39 Figure 5. Number of respondents by category 40 Figure 6. Solar PV value chain in Kenya. 42 Figure 7. Solar PV traders by type of license 42 Figure 8. Classification of solar PV and related products based on end-use 43 Figure 9. Solar PV companies by geographical market 43 Figure 10. Overview of value chain/distribution channels of the solar PV companies interviewed 45 Figure 11. Number of companies by distribution channel 46 Figure 12. Solar PV import process in Kenya 47 List of Tables Table 1. Intra-EAC trade flows from 2011-2015 (USD million) 6 Table 2. GDP per capita in EAC and per country (current USD) 7 Table 3. NTBs recognized by the East African Business Council 8 Table 4. Electrification rates at national level and in urban and rural areas of East African countries. 18 Table 5. HS six-digit sub-headings of the five ESTs analysed. 21 Table 6: Average applied most favoured nation (MFN) tariff ad-valorem duties, 2013-2016, in %, for tower and lattice masts (HS 730820). 21 Table 7. ESTs share of intra-regional trade in ESTs. 23 Table 8. Top five net-exporting countries to the EAC in the selected ESTs, 2006-2016 26 Table 9. Non-tariff barriers to trade 38 Table 10. The number of solar PV traders by license category 42 Table 11. Overview of the companies interviewed. 45 Table 12. Summary of NTBs identified in the solar PV industry in Kenya 50 5III TRADE IN ENVIRONMENTALLY SOUND TECHNOLOGIES IN THE EAST AFRICAN REGION List of Abbreviations ACTS African Centre for Technology Studies AfCFTA African Continental Free Trade Area APE Applied Partial Equilibrium CO2 Carbon Dioxide COMESA Common Market for Eastern and Southern Africa EAC East African Community EACREEE East African Centre for Renewable Energy and Energy Efficiency EGA Environmental Goods Agreement EPA Economic Partnership Agreement ERC Energy Regulatory Commission of Kenya EST Environmentally Sound Technology EUR Euro FDI Foreign Direct Investment GATT General Agreement on Tariffs and Trade GATS General Agreement on Trade in Services GDP Gross Domestic Product GHG Greenhouse Gas GII Gender
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