Expansion of the OECD Trade Facilitation Indicators in the area of environment

Annex A. A product’s environmental lifecycle

This section introduces the product environmental lifecycle as a conceptual framework for analysing traceability through a trade facilitation lens. Traceability-related information requirements do not arise at a single point, but rather across different stages of the product lifecycle, including raw materials extraction, processing of inputs, transport, consumption, and end-of-life management. Each of these stages may generate distinct data needs and verification requirements, some of which materialise at the border and intersect with customs and other border agency procedures. This conceptual framework is innovative and distinct from other initiatives in this area1 in that it systematically applies a product environmental lifecycle perspective – covering production, use and end-of-life stages – to trade procedures. By doing so, it offers a more comprehensive and operational lens to capture the priorities and initiatives of OECD and non-OECD economies, while also recognising the critical role of private sector actors in generating, transmitting and using traceability information to advance environmentally performing supply chains. In addition, this work is also embedded in the recognised metrics of the OECD TFIs, reinforcing their relevance as an analytical tool for assessing how traceability-related requirements intersect with border procedures and trade facilitation performance.

The production segment

The environmental impacts related to the production segment of a product’s environmental lifecycle heavily depend on the processes and production methods (PPMs) of its supply chains. PPMs refer to the techniques, technologies, and practices used in manufacturing a product or growing an agricultural commodity, including how energy, water, and raw materials are used and whether these processes generate pollution or save resources. Different PPMs may not always result in physically different products, in which case they are referred to as non-product related PPMs (NPR-PPMs).2

Trade-related measures based on NPR-PPMs are not new and they raise a number of issues for international trade (Moïsé and Steenblik, 2011[15]). For instance, compliance generally requires importers to provide detailed information on how goods were produced, including supply chain traceability, emissions intensity, or land-use records. This has significant implications for processes both at the border (OECD, 2025[2]) and beyond the border (Pauwelyn, 2024[16]).

The use segment

In turn, the environmental impacts of the use and end-of-life segments of a product’s environmental lifecycle occur during its end-use, disposal and recovery. They depend on policies promoting environmental goods and sound waste management, as well as on product-related PPMs (PR-PPMs) that directly affect the observable characteristics or performance of the product, and on non-product-related PPMs (NPR-PPMs) that concern production methods not necessarily discernible in the final product or not readily verifiable through testing. This latter category may include measures relating to inputs such as recycled content where, despite potentially affecting physical composition, compliance is typically demonstrated through process-based certification or labelling rather than product testing, and which influence downstream environmental impacts through their effects on consumer choice, product use, and end-of-life management (e.g. eco-labelling schemes related to carbon footprint, sustainable sourcing, or recycled content).

Of particular relevance in this context are environmental goods – such as solar panels, wind turbines, water purification systems, and energy-efficient appliances – that are designed to deliver environmental benefits through their end-use. While there is no internationally agreed definition of environmental goods (and services), the OECD has adopted the following working definition (OECD/Eurostat, 1999[17]):

The environmental goods and services industry consists of activities which produce goods and services to measure, prevent, limit, minimise or correct environmental damage to water, air and soil, as well as problems related to waste, noise and eco-systems.

This includes cleaner technologies, products and services that reduce environmental risk and minimise pollution and resource use.

Through their ability to generate renewable energy, reduce energy or water consumption, or filter pollutants, their use thus reduces environmental impacts, for instance through lowering carbon emissions, improving air quality, or reducing water contamination.

Based on this definition, environmental goods are distinguished by their physical characteristics, and they can be identified in the Harmonized System (HS) of tariff classification (Moisé and Tresa, 2025[4]). Therefore, to promote trade in environmental goods and take advantage of their environmental benefits, numerous efforts have aimed at reducing tariffs for a list of HS codes that trade negotiators have agreed to classify as environmental goods. One such recent effort includes the Agreement on Climate Change and Trade and Sustainability (ACCTS). The OECD working definition of environmental goods also includes environmentally preferable products (EPPs) (Box 6).

Box 6. Environmentally preferable products

The Combined List of Environmental Goods (CLEG) in the OECD report (Moisé and Tresa, 2025[4]) includes a category labelled as environmentally preferable products (EPPs).3 These goods deliver environmental benefits because they have a lower environmental impact over their lifecycle compared to conventional alternatives. EPPs also include goods that are defined by their relative environmental performance in use such as high-efficiency water boilers that reduce heat losses. EPPs display recognisable physical attributes, and efforts to promote them are therefore closely connected to policies based on PR-PPMs.

In principle, EPPs can be identified against measurable and enforceable criteria such as performance thresholds (Tothova, 2005[18]). At the border, this would require that the attributes that make goods environmentally preferable be reflected in the descriptions of HS codes. For example, the international community could create differentiated tariff lines for room air-conditioning units, distinguishing those with energy efficiency ratios exceeding ten from those falling below this threshold (OECD, 2005[19]).

In practice however, tariff lines do not (yet) differentiate goods by their relative environmental performance in use -- and even if they did, the identification of those goods at the border raises challenges. In the absence of supplementary materials such as proof of compliance with eco-labels or technical standards, customs agents may need to proceed with manual inspections or performance tests.

The use of trade facilitation tools can avoid such cumbersome procedures. These tools include measures to automate the processing of documents that demonstrate a specific environmental performance – e.g. air-conditioning units with a certain energy efficiency ratio – but also the recognition of the certifying bodies awarding labels (OECD, 2005[19]).

Environmental goods are frequently subject to technical regulations, conformity assessments, or certifications aimed at ensuring compliance with environmental, health, and safety standards. As a result, exporters and importers must often provide product test reports, eco-labels, or proof of compliance with these (Moisé and Tresa, 2025[4]).

The end-of-life segment

The end-of-life segment of a product’s lifecycle encompasses the way it is disposed and recovered. Its environmental impacts depend on the availability of environmentally sound waste4 management for sorting, recycling, and safely disposing of waste materials, which can significantly reduce environmental harm and feed valuable materials back into supply chains. Policies aiming at making supply chains more circular consider the end-of-life of goods and how products and materials can be recovered, repurposed, or reintegrated after use. They are also linked to PR-PPMs-based regulations such as eco-design rules on durability, reparability, recyclability (e.g. relevant for electronics, appliances).

While circular economy initiatives largely take place within national boundaries, they have important interlinkages with international trade (Yamaguchi, 2021[20]). For instance, promoting trade in second-hand goods and goods intended for refurbishment or remanufacturing can help extend the lifespan of products, reduce demand for raw materials, and prevent premature waste. Remanufactured goods, which are typically high value, offer the same utility as new products while consuming fewer materials and generating less emissions. Under certain conditions, refurbished electronics or reconditioned machinery can provide similar results. Circular approaches are also increasingly important for securing access to critical raw materials, as recycling and recovery from end-of-life products can reduce dependence on primary extraction and strengthen supply chain resilience (IEA, 2025[21]). For a number of products, circularity requires economies of scale that are only achievable through international trade (OECD, 2024[22]).

Notes

← 1.  Such as the efforts by the United Nations Regional Economic Commissions and UNCTAD in the context of the UN Survey on Digital and Sustainable Trade Facilitation, which includes four measures on trade facilitation in the area of environment: facilitation of sustainability reporting for traded goods; trade facilitation of green and climate-smart goods; eCITES application/issuance/exchange; and facilitation of legitimate trade in waste.

← 2.  Product-related PPMs (PR-PPMs) directly affect the characteristics or performance of the product. These will have a more direct links to the use and end-of-life segments of a product’s environmental lifecycle.

← 3.  The latest version of the CLEG can be found here: https://www.oecd.org/en/publications/non-tariff-measures-affecting-environmental-goods-trade_ca790510-en/support-materials.html.

← 4.  Waste ranges from electronic waste (e-waste), batteries, vehicles, metal waste, plastic wastes, textile waste, paper waste and chemical waste to mixed wastes.