Liberalisation of Trade in Renewable Energy and Associated Technologies

This paper, the second in a series, examines the implications of liberalising trade in three forms of renewable energy: biodiesel, solar-thermal water heaters, and geothermal energy systems. Eliminating tariffs on renewable energy and associated goods — which are 15% or higher on an ad valorem basis in many developing countries — would reduce a burden on consumers of energy, particularly people living in rural areas of developing countries, as it is in such areas that many renewable fuels and renewable-energy technologies are making, and are likely to make, their greatest contribution. Manufacturers located in OECD countries would benefit from increased trade in equipment, but so would a growing number of companies based in developing countries. In the case of biodiesel, developing countries have the potential to become major suppliers to OECD countries. For the maximum benefits of trade liberalisation in biodiesel, and solar-thermal and geothermal technologies, to be realised, however, additional reforms may be required in importing countries’ domestic policies, especially those affecting the pricing of liquid fuels, competition in the electricity sector, and protection of the environment.