Government subsidies play a role in addressing market failures, such as underinvestment in technologies to mitigate climate change. Yet, if not well-designed, subsidies could not only fail to achieve environmental or other legitimate policy objectives, but may also undermine competitive markets, both domestically and internationally. The OECD hosts one of the most comprehensive sets of data on government support for agriculture, fisheries, manufacturing sectors and fossil fuels. A comprehensive research agenda combined with stakeholder consultations aims at analyzing both the environmental impacts of existing subsidies as well as the use of subsidies for environmental goals, with a view to enhance policy makers’ understanding about how to address the speed and scale of the green transition, meeting distributional objectives and minimizing the distortive effects on trade.
Trade and sustainability
OECD work on trade and sustainability contributes to enhancing the understanding of how trade and the environment interact and to documenting and examining the effect of trade policies and trade-related environmental policies on trade, climate change, biodiversity loss and pollution. In particular, we look at how trade facilitation can ensure environmental goods and services cross borders smoothly and that trade-related environmental policies do not hamper trade more than necessary.
Key messages
With reserves of raw materials critical for the green transition (such as cobalt or lithium) geographically concentrated, international trade is key to meeting the increasing demand for renewable energy and digital technologies. The role of trade will be significant in the short- to medium-term as CRMs markets become tighter and before new sources can be developed.
Many forms of export restrictions on raw materials undermine the economic viability of extractive industries, leading to decreased mining output. Some export restrictions have environmental and social objectives, but they can also unnecessarily restrict trade.
With environmental considerations for supply chains of growing importance, there are new requirements to measure, report, and verify the environmental footprint of products at the border. Differences in regulations (and approaches to assessing compliance) across jurisdictions can increase trade costs for businesses; it can also increase the need for robust systems of verification at the border as product-related environmental information cannot be seen in the goods being traded. OECD work examines how existing trade facilitation tools – such as transparency of trade-related information, harmonization with international standards, or electronic exchange of data – can help reduce trade costs and administrative burdens and increase consumer trust in the information provided. This work also looks at how to facilitate trade in environmental goods and services and enable the economies of scale needed for a viable circular economy, from recycling li-ion batteries to plastics.
Context
Export restrictions on raw materials have increased
Export restrictions on raw materials have surged five-fold since 2009, with approximately 10% of the global export value for critical raw materials encountering at least one restriction.
