'The WTO report reveals that "Aid for Trade" is crucial for seizing energy transition opportunities.

On June 28th, the World Trade Organisation (WTO) Secretariat released a report during the Global Review of Aid for Trade, focusing on the trade opportunities available to developing economies and least-developed countries (LDCs) as the world shifts towards cleaner energy sources. The report, titled “Aid for Trade in Action: Supporting the transition to clean energy”, underlines the important role of development finance in helping these economies take advantage of emerging opportunities in global value chains for products and services related to clean energy.

According to the report, clean energy adoption is rapidly increasing, with wind, solar, hydropower, hydrogen, and nuclear power now accounting for almost 40 percent of global electricity generation. This share is expected to rise even further as the costs of these technologies decrease and economies intensify efforts to meet their net-zero greenhouse gas emission targets. The report emphasizes that this transition to clean energy provides an opportunity for developing economies and LDCs to expand trade volumes and achieve export diversification goals.

Furthermore, the report highlights that Aid for Trade has already been supporting the clean energy transition. Around US$60 billion, or 30 percent of all Aid for Trade commitments with climate objectives between 2011 and 2021, was directed to the energy sector. However, this amount is considered insufficient given the overall climate finance flows. Currently, developing economies and LDCs receive less than one-fifth of global clean energy investments, which hinders their ability to fully capitalize on trade opportunities and accomplish their own nationally determined contributions (NDCs).

The report identifies three key segments of the clean energy value chain in which developing economies could integrate more fully into global trade: minerals and metals, machinery and equipment manufacturing, and services. It also explores development opportunities related to carbon credits and the potential benefits of employing carbon capture and storage systems to decrease the carbon intensity of existing export baskets.

In the minerals and metals context, more support could facilitate developing economies and LDCs with significant resources to attract investments in safe and sustainable extraction facilities, particularly in critical minerals. Additionally, the manufacture of clean energy equipment is projected to surpass $1 trillion by 2050, offering opportunities for these economies to become manufacturing hubs in value chains. Developing services sector operations related to clean energy generation could also enhance cross-border trade prospects, create growth opportunities, and contribute to job creation.

The report delves into specific opportunities in five clean energy value chains: wind, solar photovoltaic (PV), green hydrogen, hydropower, and nuclear power. It presents examples and case studies of how Aid for Trade is helping developing economies capitalize on opportunities in each area, and how it can address some of the challenges that hinder greater value chain participation.

Finally, the report concludes with a recommendation to further align Aid for Trade with clean energy opportunities. By mobilising the necessary financial resources, enhancing trade capacity, and fostering international cooperation, the global community can contribute to ensuring a just and inclusive transition to a cleaner, more sustainable future for all.
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The report's authors, Michael Roberts and Vishvanathan Subramaniam from the WTO's Aid for Trade Unit, highlighted the importance of greening the energy sector. They emphasized that greening the energy sector is crucial for addressing climate change and for creating trading opportunities for developing economies.

Roberts stated, "The energy sector is absolutely critical for a net-zero transition as it accounts for 75 percent of greenhouse gas emissions." Subramaniam added, "The clean energy transition presents trade and development opportunities across various value chains. Realizing these opportunities requires financing, and Aid for Trade can play an integral role in helping developing economies obtain this financing."

Dr. Roberta Boscolo, the World Meteorological Organisation's climate and energy lead, pointed out that global warming is causing fluctuations in energy supplied by renewable sources. She suggested that cross-border energy trade could address these variabilities, providing a new trading system for renewable energy that represents a significant opportunity for economic growth, particularly for developing and least-developed countries.

Pramila Crivelli, an economist at the Asian Development Bank (ADB), referred to recommendations from the ADB's report on sustainable trade competitiveness. She highlighted trade and climate strategy alignment, technology transfer, and supply chain transparency as key areas where Aid for Trade can play a crucial role. She also emphasized that Aid for Trade could be vital for establishing common standards for environmental goods and services to ensure interoperability in regional and global value chains.

Furthermore, countries are scheduled to submit their revised Nationally Determined Contributions (NDCs) next year to reduce national emissions in line with the climate targets of the Paris Agreement, according to Beatriz Fernandez, a programme management officer at the United Nations Environment Programme (UNEP). She mentioned, "There's a lot of interest in the review of NDCs next year, and the finance community will become a more active stakeholder. There are different pathways that are developing, and Aid for Trade is becoming a central part to ensure that developing countries and least-developed countries benefit from an energy transition."