Aaron Cosbey
4. CONCLUDING THOUGHTS
This analysis has found major impediments for certain types of green industrial policies in trade and investment law. It bears asking the question:
is this a problem? The answer depends, among other things, on an assessment of whether the green industrial policies in question are actu-ally effective at achieving their stated objectives:
enhancing environmental quality while contrib-uting to domestic economic wellbeing by building up producers of green goods and services. Bahar et al. (2013) argue strongly that domestic content requirements are ineffective, wasting scarce dollars that could be more effectively spent on renewable energy technology dissemination and reducing global public welfare. If they are correct, and this is a general truth, then it is not a prob-lem for domestic content requirements to be constrained by trade and investment law. If, on the other hand, domestic content requirements can be effective, then the limits imposed by trade and investment law are problematic. Johnson (2013), for example, puts forward clear recom-mendations to policymakers for successful use of domestic content requirements, based on an anal-ysis of India’s National Solar Mission.
Assessing the potential effectiveness of the vari-ous measures surveyed here is beyond the scope of this paper, but the question needs to be asked if we are to judge the propriety of trade and invest-ment law impediinvest-ments to green industrial policy, and to consider possible reforms.
A useful heuristic proposed earlier in this paper is the environmental Bastable test. For any given green industrial policy intervention, does the present value of the environmental impacts of the measure, in terms of long-term increased compe-tition and innovation in a global green sector, exceed the present value of the environmen-tal costs–usually in terms of short-term higher prices for environmental goods and services, and their consequent curtailed dissemination?
It is noted above that this framework is useful for thinking about the problem, but less useful in calculating the value of any specific measure.
It is also useful to bear in mind one of the key differences between traditional industrial policy and green industrial policy. In the former context, the benefits vest almost exclusively in the imple-menting country, and the costs are born by foreign producers–a traditional mercantilist outcome. In the latter context, the costs are much the same, but the benefits may be much different. If the green industrial policy is successful in fostering
new globally competitive entrants in green sectors with global impacts, such as the renew-able energy sector, then the benefits will be felt globally. That is, not only will the implement-ing country improve environmental outcomes directly via its own structural transformation, but it will also foster indirect global environmental improvement by lowering the costs, or improv-ing the effectiveness, of green goods and services.
If the goods and services in question address a significant global environmental problem, such as climate change, those global benefits will also be significant.
This is an important consideration because the laws on trade and investment are founded in public welfare economics. If the restricted poli-cies can indeed be effectively used in ways that would increase global public welfare, then there is a strong case for the reform of those restrictions.
In the context of the multilateral rules, however, a strong case may not be enough, at least in the short term. The room for new negotiations in the WTO is highly restricted by the inability to conclude the Doha Round of trade negotiations.
Given the imperative importance of the two chal-lenges that green industrial policy addresses, environment and development, it is urgent to find authoritative answers to the question of effec-tiveness. Of course it is impossible to say in the abstract whether certain policies will be effective.
The specific context is decisive, as are the details of implementation. It is likely that for many of the policies surveyed here the answer is that they are sometimes effective. The question then for trade and investment policymakers is whether it is appropriate to prohibit policies that can be effectively utilised, even if it is clear that success will be elusive. The alternatives to such a prohibi-tion are reform of the law to guide policies toward effectiveness as mandatory sunset provisions, for example, or opening wide the doors to green industrial policy with the clear understanding that states can and will get it wrong, to the detri-ment of their trading partners. The crucial global public interest element to green industrial policy, as opposed to traditional industrial policy, should have an influence in the final balance point among the many deciding factors in the mix.
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PART 4:
COUNTRY
EXPERIENCES
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Renewable Energy as a Trigger for Industrial Development in Morocco