Description
Trade in environmental services sectors can assist countries in the transition to a green economy by promoting more widespread use of efficient and cost-effective environmental technologies. Furthermore, the green economy itself will provide opportunities for exporters of environmental services whose expertise will increase in demand.
POLI CY BRI EF 7. J UNE 2012
Trade and Environment Briefings:
Environmental Services
Introduction
The market for environmental services is substantial and growing, driven
in part by increasing environmental regulation and changing consumer
preferences. If well managed, liberalisation of trade in environmental
services can provide substantial benefts to the private sector as well as the
general public through enhanced market opportunities, improved health
and environmental sustainability, particularly in developing countries.
Trade in environmental services sectors can assist countries in the transition
to a green economy by promoting more widespread use of effcient and cost-
effective environmental technologies. Furthermore, the green economy
itself will provide opportunities for exporters of environmental services
whose expertise will increase in demand.
Background
The Organisation for Economic Co-operation and Development (OECD)
has defined the environmental goods and services industry as: “activities
which produce goods and services to measure, prevent, limit, minimise
or correct environmental damage to water, air, soil, as well as problems
related to waste, noise and eco-systems.”
Environmental Services, as discus-
sed in this paper, are different
from the discussion on Payments
for Environmental Services (PES),
a market-based conservation
approach, which focuses on
establishing voluntary payment
mechanisms for environmental
services. One example of PES
is the Reducing Emissions from
Deforestation and Forest Degra-
dation (REDD) scheme under
the United Nations Framework
Convention on Climate Change, which works to create financial
value for the carbon stored in forests, offering incentives for
developing countries to reduce emissions from forested lands and
invest in low-carbon paths to sustainable development.
2
In general, environmental services can be divided into
two categories:
1) Infrastructure services (e.g. wastewater treatment,
refuse collection and disposal), which are often
associated with public services and can be provided
fully or partially by the public sector, and
2) Non-infrastructure (e.g. engineering design and
environmental consultancy services), which are
mostly business-to-business transactions and are
usually provided by the private sector.
At the international level, trade in environmental
services is governed by the World Trade Organization
(WTO)’s General Agreement on Trade in Services
(GATS). The agreement categorises trade in all services
according to the way it is supplied, as explained in the
following table:
GATS modes of supplying services
Source: B. Sinclair-Desgagne (2008), citing Environmental Business International (EIB)
As a part of the WTO Doha Round, members are working
to reduce or eliminate, as appropriate, tariff and non-
tariff barriers to environmental goods and services.
However, the lack of a detailed and internationally
accepted classifcation for environmental services has
proven to be a challenge to progress in the negotiations.
In making liberalisation commitments, countries must
instead rely on general service classifcations, such as
sewerage services, refuse disposal services, sanitation
and similar services, or other (e.g. environmental
services not classifed elsewhere, such as cleaning
services for exhaust gases, noise abatement services,
and nature and landscape protection services). Because
these categories include both environmental and non-
environmental services, statistics on environmental
services are scarce and often not comparable, making it
diffcult to analyse the market.
Opportunities
The market for environmental goods and services is already
very large (comparable in size to the pharmaceutical
and aerospace sectors) and demand is expected to
grow signifcantly in the near future. In 2006, the global
market for environmental goods and services was valued
at US$690 billion, with some analysts expecting it to rise
to US$1.9 trillion by 2020. Within the environmental
industry, environmental services represent the most
important component, accounting for 65 percent of total
market value. The sizes of the different segments of the
environment services market are shown below.
Trade and Environment Briefngs: Environmental Services June 2012
Mode of Supply Examples of Environmental Services
Mode 1 Cross-Border Supply Company in Country A monitors wastewater treatment in Country B
online
Mode 2 Consumption Abroad Scrap metal produced in Country A is sent for recycling in Country B
Mode 3 Commercial Presence Waste management company in Country A establishes a subsidiary
offce in Country B
Mode 4 Movement of Natural Persons Environmental consultant from Country A temporarily moves to Country
B to provide advisory services to a wastewater treatment company
Segment $billion (2004)
Solid Waste Management 120.7
Water treatment 78.6
Consulting and engineering 31.5
Site remediation 29.4
Hazardous waste management 17.8
Analyses 3.8
The environmental services industry is dominated by
the European Union and the United States (accounting
for over 60 percent of exports), while currently only
14 percent of overall environmental revenues are
generated by developing countries and economies in
transition.
The sector is expected to increase in importance in
the coming years, with the biggest growth potential to
be found in developing countries. The environmental
goods and services market is already well established
in developed countries. Many developing countries,
on account of their developmental stage, are now
3
Challenges
There are, however, a number of challenges to enhanced
trade in environmental services. A major one is access to
markets. Although it is generally accepted that gradual
liberalisation of the sector can provide substantial
benefts for sustainable economic development, the
services sector remains relatively closed off. Since
commercial presence (e.g. establishing a subsidiary
offce in a foreign country) is the most common form
of trade in environmental services, restrictions, such
as those on foreign investment or limitations on foreign
equity participation, are particularly detrimental to
trade. Likewise, the movement of natural persons is
often hindered by immigration policy or particular labour
market requirements (e.g. country specifc standards and
certifcation for engineering services).
Moreover, because many infrastructure environmental
services are provided by the public sector, liberalisation
is not always straight forward. The full or partial
privatisation of these sectors has enabled some trade
in environmental services. However, the success of
such initiatives depends to a large degree on the
quality of the regulatory environment in place, which
in most developing countries needs to be strengthened.
Likewise, in a liberalised market, a key concern for many
developing country frms is the challenge of competing
with more established environmental services frms from
developed countries.
beginning to invest more in environmental infrastructure
and to put in place stronger regulatory frameworks. In
China, for example, during the period of 2006-10, the
Ministry of Environmental Protection indicated that
the investment demand for environmental pollution
controls reached RMB1.4 trillion, accounting for 1.23
percent of GDP during the same period. Combined with
internationally increasing environmental awareness,
these trends are creating new and constantly evolving
markets for environmental services.
Trade in environmental services can offer several
opportunities. Domestic enterprises can beneft from
joint ventures with foreign frms. The investment
and expertise brought in by larger foreign frms can
enable job creation as well as skills and technology
transfers. Domestic frms in other related sectors, such
as engineering, construction and tourism, can also
beneft from growing environmental services trade. For
example, a precondition with regard to developing a
sustainable tourism sector is adequate water, energy
and waste management, which is often insuffcient in
developing countries.
In terms of exports, the greatest opportunities for
developing country firms lie in non-infrastructure
services (for example, certain types of environmental
consulting services). These are more commonly
supplied by small- and medium-sized enterprises
(SMEs) and provide more possibilities for developing
an export niche.
Given that trade in services is often facilitated by a
common language, culture and history, developing
country frms may also fnd a particular potential
for exports at the regional level. There are already
many examples of developing country frms providing
environmental services in neighbouring countries, such
as EnviroServ, a South African company providing waste
collection services in Angola, Mozambique and Namibia;
and Manantial, a Chilean frm providing wastewater
treatment services in Argentina and Peru.
New Opportunities for Trade in Services related to Climate Change
A recent OECD paper Trade in Services Related to Climate Change: An Exploratory Analysis, found that with
the growing need for climate change adaptation and mitigation, demand for environmental services related
to climate change can be expected to increase substantially in the near future. Climate change-related
services include business services, energy services, financial services, and research and development
services, among others.
An example of the market potential of this sector can be seen in the Clean Development Mechanism (CDM)
originating from the Kyoto Protocol. The CDM market was estimated to be worth US$19.8 billion in 2010.
Some examples of services that have sprung up in relation to this market include: management of registries
to record and track the creation and movement of “reduction units” or “carbon credits” generated by
greenhouse gas mitigating projects, carbon trading services, services to provide the necessary verification
and certification of GHG emission reductions and carbon finance expertise.
4
Trade and Environment Briefngs: Environmental Services June 2012
What’s next?
The market for environmental services looks set to grow
substantially over the coming years. The successful
conclusion of the on-going WTO Doha Round could offer a
number of potential opportunities to support growth in the
environmental services market, including through enhanced
market access. In addition, a number of other factors at
the national, regional and international levels can also
help create the right conditions for developing countries to
expand their presence in this market, such as:
• Build up expertise in niche segments of the market.
This can be particularly benefcial for SMEs involved
in non-infrastructure related services;
• Tap into growing regional markets;
• Seek joint venture opportunities with foreign frms;
• Liberalise environmental services through regional
and bilateral trade agreements;
• Build appropriate regulatory frameworks to
support the development of infrastructure related
environmental services; and
• Promote transparency and recognition of
qualifcations and certifcations to reduce obstacles
to trade in services linked to the movement of
natural persons.
5
Resources
Aeree Kim, Joy (2011) Facilitating Trade in Services Complementary to Climate-friendly Technologies. Issue Paper
16, ICTSD.
APEC (2010) “Survey on APEC Trade Liberalization in Environmental Services”.
Grosso, Massimo Geloso (2007) Regulatory Principles for Environmental Services and the General Agreement on
Trade in Services. Issue Paper 6, ICTSD.
Steenblik, Ron and Grosso, Massimo Geloso (2011) Trade in Services Related to Climate Change: An Exploratory
Analysis. OECD Trade and Environment Working Papers 2011/03, OECD.
World Bank (2011) “Exporting Services: A Developing Country Perspective”, Eds. Arti Grover Goswami, Aaditya
Mattoo, and Sebastian Saez, World Bank.
WTO Council for Trade in Services (2010) Background Note on Environmental Services. S/C/W/320.
This paper was produced jointly by the United Nations Environment Programme (UNEP), the International Trade
Centre (ITC) and the International Centre for Trade and Sustainable Development (ICTSD).
Citation: UNEP, ITC and ICTSD; (2012); Trade and Environment Briefings: Environmental Services; ICTSD Programme
on Global Economic Policy and Institutions; Policy Brief No. 7; International Centre for Trade and Sustainable
Development, Geneva, Switzerland, www.ictsd.org
About the International Centre for Trade and Sustainable Development, www.ictsd.org
Founded in 1996, the International Centre for Trade and Sustainable Development (ICTSD) is an independent
think-and-do-tank based in Geneva, Switzerland and with operations throughout the world, including out-posted
staff in Brazil, Mexico, Costa Rica, Senegal, Canada, Russia, and China. By enabling stakeholders in trade policy
through information, networking, dialogue, well-targeted research and capacity-building, ICTSD aims to influence
the international trade system so that it advances the goal of sustainable development. ICTSD co-implements all
of its programme through partners and a global network of hundreds of scholars, researchers, NGOs, policymakers
and think-tanks around the world. ICTSD acknowledges the contribution of its donors in supporting this project.
About the International Trade Centre, www.intracen.org
Formed in 1964, the International Trade Centre (ITC) has been the focal point within the United Nations system for
trade related technical assistance (TRTA). ITC’s mission is to enable small business export success in developing
and transition-economy countries, by providing, with partners, sustainable and inclusive development solutions to
the private sector, trade support institutions and policymakers. Working with partner organisations, both within
and outside the United Nations, ITC works to promote projects and programmes with global efforts to achieve the
Millennium Development Goals and the Aid for Trade agenda.
About the United Nations Environment Programme (UNEP), www.unep.org/
Headquartered in Nairobi, Kenya and established in 1972, the United Nations Environment Programme (UNEP) is
the leading environmental authority within the UN system. UNEP’s mission is to provide leadership and encourage
partnership in caring for the environment by inspiring, informing, and enabling nations and peoples to improve
their quality of life without compromising that of future generations.
Copyright © ICTSD, 2012. Prepared in cooperation with the International Trade Centre (ITC) and the United
Nations Environment Programme (UNEP). Readers are encouraged to quote this material for educational and
nonprofit purposes, provided the source is acknowledged.
This work is licensed under the Creative Commons Attribution-Non-commercial-No-Derivative Works 3.0 License. To
view a copy of this license, visithttp://creativecommons.org/licenses/bync-nd/3.0/ or send a letter to Creative
Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
The views expressed in this publication are those of the authors and do not necessarily reflect the views of ICTSD,
ITC and UNEP or the funding institutions.
ISSN 1816 6970
doc_660211110.pdf
Trade in environmental services sectors can assist countries in the transition to a green economy by promoting more widespread use of efficient and cost-effective environmental technologies. Furthermore, the green economy itself will provide opportunities for exporters of environmental services whose expertise will increase in demand.
POLI CY BRI EF 7. J UNE 2012
Trade and Environment Briefings:
Environmental Services
Introduction
The market for environmental services is substantial and growing, driven
in part by increasing environmental regulation and changing consumer
preferences. If well managed, liberalisation of trade in environmental
services can provide substantial benefts to the private sector as well as the
general public through enhanced market opportunities, improved health
and environmental sustainability, particularly in developing countries.
Trade in environmental services sectors can assist countries in the transition
to a green economy by promoting more widespread use of effcient and cost-
effective environmental technologies. Furthermore, the green economy
itself will provide opportunities for exporters of environmental services
whose expertise will increase in demand.
Background
The Organisation for Economic Co-operation and Development (OECD)
has defined the environmental goods and services industry as: “activities
which produce goods and services to measure, prevent, limit, minimise
or correct environmental damage to water, air, soil, as well as problems
related to waste, noise and eco-systems.”
Environmental Services, as discus-
sed in this paper, are different
from the discussion on Payments
for Environmental Services (PES),
a market-based conservation
approach, which focuses on
establishing voluntary payment
mechanisms for environmental
services. One example of PES
is the Reducing Emissions from
Deforestation and Forest Degra-
dation (REDD) scheme under
the United Nations Framework
Convention on Climate Change, which works to create financial
value for the carbon stored in forests, offering incentives for
developing countries to reduce emissions from forested lands and
invest in low-carbon paths to sustainable development.
2
In general, environmental services can be divided into
two categories:
1) Infrastructure services (e.g. wastewater treatment,
refuse collection and disposal), which are often
associated with public services and can be provided
fully or partially by the public sector, and
2) Non-infrastructure (e.g. engineering design and
environmental consultancy services), which are
mostly business-to-business transactions and are
usually provided by the private sector.
At the international level, trade in environmental
services is governed by the World Trade Organization
(WTO)’s General Agreement on Trade in Services
(GATS). The agreement categorises trade in all services
according to the way it is supplied, as explained in the
following table:
GATS modes of supplying services
Source: B. Sinclair-Desgagne (2008), citing Environmental Business International (EIB)
As a part of the WTO Doha Round, members are working
to reduce or eliminate, as appropriate, tariff and non-
tariff barriers to environmental goods and services.
However, the lack of a detailed and internationally
accepted classifcation for environmental services has
proven to be a challenge to progress in the negotiations.
In making liberalisation commitments, countries must
instead rely on general service classifcations, such as
sewerage services, refuse disposal services, sanitation
and similar services, or other (e.g. environmental
services not classifed elsewhere, such as cleaning
services for exhaust gases, noise abatement services,
and nature and landscape protection services). Because
these categories include both environmental and non-
environmental services, statistics on environmental
services are scarce and often not comparable, making it
diffcult to analyse the market.
Opportunities
The market for environmental goods and services is already
very large (comparable in size to the pharmaceutical
and aerospace sectors) and demand is expected to
grow signifcantly in the near future. In 2006, the global
market for environmental goods and services was valued
at US$690 billion, with some analysts expecting it to rise
to US$1.9 trillion by 2020. Within the environmental
industry, environmental services represent the most
important component, accounting for 65 percent of total
market value. The sizes of the different segments of the
environment services market are shown below.
Trade and Environment Briefngs: Environmental Services June 2012
Mode of Supply Examples of Environmental Services
Mode 1 Cross-Border Supply Company in Country A monitors wastewater treatment in Country B
online
Mode 2 Consumption Abroad Scrap metal produced in Country A is sent for recycling in Country B
Mode 3 Commercial Presence Waste management company in Country A establishes a subsidiary
offce in Country B
Mode 4 Movement of Natural Persons Environmental consultant from Country A temporarily moves to Country
B to provide advisory services to a wastewater treatment company
Segment $billion (2004)
Solid Waste Management 120.7
Water treatment 78.6
Consulting and engineering 31.5
Site remediation 29.4
Hazardous waste management 17.8
Analyses 3.8
The environmental services industry is dominated by
the European Union and the United States (accounting
for over 60 percent of exports), while currently only
14 percent of overall environmental revenues are
generated by developing countries and economies in
transition.
The sector is expected to increase in importance in
the coming years, with the biggest growth potential to
be found in developing countries. The environmental
goods and services market is already well established
in developed countries. Many developing countries,
on account of their developmental stage, are now
3
Challenges
There are, however, a number of challenges to enhanced
trade in environmental services. A major one is access to
markets. Although it is generally accepted that gradual
liberalisation of the sector can provide substantial
benefts for sustainable economic development, the
services sector remains relatively closed off. Since
commercial presence (e.g. establishing a subsidiary
offce in a foreign country) is the most common form
of trade in environmental services, restrictions, such
as those on foreign investment or limitations on foreign
equity participation, are particularly detrimental to
trade. Likewise, the movement of natural persons is
often hindered by immigration policy or particular labour
market requirements (e.g. country specifc standards and
certifcation for engineering services).
Moreover, because many infrastructure environmental
services are provided by the public sector, liberalisation
is not always straight forward. The full or partial
privatisation of these sectors has enabled some trade
in environmental services. However, the success of
such initiatives depends to a large degree on the
quality of the regulatory environment in place, which
in most developing countries needs to be strengthened.
Likewise, in a liberalised market, a key concern for many
developing country frms is the challenge of competing
with more established environmental services frms from
developed countries.
beginning to invest more in environmental infrastructure
and to put in place stronger regulatory frameworks. In
China, for example, during the period of 2006-10, the
Ministry of Environmental Protection indicated that
the investment demand for environmental pollution
controls reached RMB1.4 trillion, accounting for 1.23
percent of GDP during the same period. Combined with
internationally increasing environmental awareness,
these trends are creating new and constantly evolving
markets for environmental services.
Trade in environmental services can offer several
opportunities. Domestic enterprises can beneft from
joint ventures with foreign frms. The investment
and expertise brought in by larger foreign frms can
enable job creation as well as skills and technology
transfers. Domestic frms in other related sectors, such
as engineering, construction and tourism, can also
beneft from growing environmental services trade. For
example, a precondition with regard to developing a
sustainable tourism sector is adequate water, energy
and waste management, which is often insuffcient in
developing countries.
In terms of exports, the greatest opportunities for
developing country firms lie in non-infrastructure
services (for example, certain types of environmental
consulting services). These are more commonly
supplied by small- and medium-sized enterprises
(SMEs) and provide more possibilities for developing
an export niche.
Given that trade in services is often facilitated by a
common language, culture and history, developing
country frms may also fnd a particular potential
for exports at the regional level. There are already
many examples of developing country frms providing
environmental services in neighbouring countries, such
as EnviroServ, a South African company providing waste
collection services in Angola, Mozambique and Namibia;
and Manantial, a Chilean frm providing wastewater
treatment services in Argentina and Peru.
New Opportunities for Trade in Services related to Climate Change
A recent OECD paper Trade in Services Related to Climate Change: An Exploratory Analysis, found that with
the growing need for climate change adaptation and mitigation, demand for environmental services related
to climate change can be expected to increase substantially in the near future. Climate change-related
services include business services, energy services, financial services, and research and development
services, among others.
An example of the market potential of this sector can be seen in the Clean Development Mechanism (CDM)
originating from the Kyoto Protocol. The CDM market was estimated to be worth US$19.8 billion in 2010.
Some examples of services that have sprung up in relation to this market include: management of registries
to record and track the creation and movement of “reduction units” or “carbon credits” generated by
greenhouse gas mitigating projects, carbon trading services, services to provide the necessary verification
and certification of GHG emission reductions and carbon finance expertise.
4
Trade and Environment Briefngs: Environmental Services June 2012
What’s next?
The market for environmental services looks set to grow
substantially over the coming years. The successful
conclusion of the on-going WTO Doha Round could offer a
number of potential opportunities to support growth in the
environmental services market, including through enhanced
market access. In addition, a number of other factors at
the national, regional and international levels can also
help create the right conditions for developing countries to
expand their presence in this market, such as:
• Build up expertise in niche segments of the market.
This can be particularly benefcial for SMEs involved
in non-infrastructure related services;
• Tap into growing regional markets;
• Seek joint venture opportunities with foreign frms;
• Liberalise environmental services through regional
and bilateral trade agreements;
• Build appropriate regulatory frameworks to
support the development of infrastructure related
environmental services; and
• Promote transparency and recognition of
qualifcations and certifcations to reduce obstacles
to trade in services linked to the movement of
natural persons.
5
Resources
Aeree Kim, Joy (2011) Facilitating Trade in Services Complementary to Climate-friendly Technologies. Issue Paper
16, ICTSD.
APEC (2010) “Survey on APEC Trade Liberalization in Environmental Services”.
Grosso, Massimo Geloso (2007) Regulatory Principles for Environmental Services and the General Agreement on
Trade in Services. Issue Paper 6, ICTSD.
Steenblik, Ron and Grosso, Massimo Geloso (2011) Trade in Services Related to Climate Change: An Exploratory
Analysis. OECD Trade and Environment Working Papers 2011/03, OECD.
World Bank (2011) “Exporting Services: A Developing Country Perspective”, Eds. Arti Grover Goswami, Aaditya
Mattoo, and Sebastian Saez, World Bank.
WTO Council for Trade in Services (2010) Background Note on Environmental Services. S/C/W/320.
This paper was produced jointly by the United Nations Environment Programme (UNEP), the International Trade
Centre (ITC) and the International Centre for Trade and Sustainable Development (ICTSD).
Citation: UNEP, ITC and ICTSD; (2012); Trade and Environment Briefings: Environmental Services; ICTSD Programme
on Global Economic Policy and Institutions; Policy Brief No. 7; International Centre for Trade and Sustainable
Development, Geneva, Switzerland, www.ictsd.org
About the International Centre for Trade and Sustainable Development, www.ictsd.org
Founded in 1996, the International Centre for Trade and Sustainable Development (ICTSD) is an independent
think-and-do-tank based in Geneva, Switzerland and with operations throughout the world, including out-posted
staff in Brazil, Mexico, Costa Rica, Senegal, Canada, Russia, and China. By enabling stakeholders in trade policy
through information, networking, dialogue, well-targeted research and capacity-building, ICTSD aims to influence
the international trade system so that it advances the goal of sustainable development. ICTSD co-implements all
of its programme through partners and a global network of hundreds of scholars, researchers, NGOs, policymakers
and think-tanks around the world. ICTSD acknowledges the contribution of its donors in supporting this project.
About the International Trade Centre, www.intracen.org
Formed in 1964, the International Trade Centre (ITC) has been the focal point within the United Nations system for
trade related technical assistance (TRTA). ITC’s mission is to enable small business export success in developing
and transition-economy countries, by providing, with partners, sustainable and inclusive development solutions to
the private sector, trade support institutions and policymakers. Working with partner organisations, both within
and outside the United Nations, ITC works to promote projects and programmes with global efforts to achieve the
Millennium Development Goals and the Aid for Trade agenda.
About the United Nations Environment Programme (UNEP), www.unep.org/
Headquartered in Nairobi, Kenya and established in 1972, the United Nations Environment Programme (UNEP) is
the leading environmental authority within the UN system. UNEP’s mission is to provide leadership and encourage
partnership in caring for the environment by inspiring, informing, and enabling nations and peoples to improve
their quality of life without compromising that of future generations.
Copyright © ICTSD, 2012. Prepared in cooperation with the International Trade Centre (ITC) and the United
Nations Environment Programme (UNEP). Readers are encouraged to quote this material for educational and
nonprofit purposes, provided the source is acknowledged.
This work is licensed under the Creative Commons Attribution-Non-commercial-No-Derivative Works 3.0 License. To
view a copy of this license, visithttp://creativecommons.org/licenses/bync-nd/3.0/ or send a letter to Creative
Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
The views expressed in this publication are those of the authors and do not necessarily reflect the views of ICTSD,
ITC and UNEP or the funding institutions.
ISSN 1816 6970
doc_660211110.pdf