APEC warms to the green economy

Author: Giridharan Ramasubramanian, ANU

During the February 2023 Asia–Pacific Economic Cooperation (APEC) Senior Officials’ Meeting, delegates held discussions on this year’s theme of Creating a Sustainable Future for All, including building resilience and strengthening environmental sustainability.

To ensure that APEC plays a significant role in transitioning the region to a sustainable economy, US host officials should build upon APEC’s past achievements and leverage its dynamic organisational structure to realise their priorities.

APEC has a strong track record in facilitating efforts at the intersection of trade and sustainability. In 2009, APEC leaders first supported discussions on fossil fuel subsidy reform. Its energy working group developed a voluntary reporting mechanism framework before crafting peer review methodology guidelines. These provided scalable lessons to shape similar efforts within the World Trade Organization (WTO) and other international institutions.

In 2012, APEC economies also made progress on the liberalisation of tariffs on environmental goods. Through a process led by Australia under the Committee on Trade and Investment, APEC members agreed to the APEC List of 54 Environmental Goods. This list set the floor for discussions in other international forums, including the WTO.

The ongoing COVID-19 pandemic and climate crisis exposed how interconnected economic and environmental issues are. This was recognised in APEC’s Putrajaya Vision 2040 and its implementation through the Aotearoa Plan of Action.

APEC is well placed to continue the conversation when WTO negotiations fail to progress. In 2021, officials received a ministerial mandate to continue discussions on expanding APEC’s environmental goods list. Leaders also endorsed a Reference List of Environment and Environmentally Related Services, which has the potential to shape negotiations on environmental services in other forums. APEC remains a critical hub in the global–regional policy feedback loop.

In November 2022, APEC participants articulated their goals on a Bio-Circular-Green (BCG) Economy. They advocated for long-term and inclusive economic growth that meets environmental and climate objectives. APEC can incorporate related discussions into the agenda of relevant working groups and committees and put out a joint statement on the BCG Economy to chart new pathways forward.

But APEC has the potential to do much more than that. Promoting resilience and sustainability will require the full range of APEC’s institutional resources. APEC lies at the nexus of multiple institutions. It is shaped by the work of the Pacific Trade and Development Conferences. It holds formal linkages with regional institutions, such as the ASEAN Secretariat and the Pacific Economic Cooperation Council. It maintains informal connections with organisations such as the Asian Development Bank, the OECD and the WTO. The various APEC Study Centres foster research on regional integration and build networks of academics in the region.

Internally, APEC comprises a nested structure of working groups, committees and senior official and ministerial meetings. The ability of members to weave back and forth through the different political and technical levels allows them to make incremental progress even when issues become politicised. APEC’s architecture resembles a complex adaptive system instead of a centralised organisation. Characterised by modularity, feedback loops and a fractal structure, APEC’s strength of influence derives from leveraging the whole system to tackle trade and sustainability.

APEC could also utilise the APEC Policy Support Unit’s analytical capabilities on issues such as the circular economy and sustainable tourism to understand the potential of the BCG Economy. It could solicit input from private sector stakeholders through the APEC Business Advisory Council. APEC members can also tap Pacific Economic Cooperation Council seminars on innovative institutional mechanisms through which green economic cooperation can be developed. Members can also consider participating in the annual Pacific Trade and Development Conference where they relate to trade and environment.

To avoid protracted discussions on definitions, APEC members should harness work in the G20, the OECD and the WTO, as well as bilateral and regional free trade agreements to identify overlaps and opportunities. Depending on the level of consensus, members can decide whether to seek progress at the technical or political levels.

New international agreements combining climate and trade are currently emerging in the Asia Pacific. Singapore recently signed a green economy agreement with Australia and climate change partnerships with Indonesia and the United States. Its enhanced bilateral partnership with New Zealand has a new pillar on climate change and the green economy. Other countries in the region are also developing such climate-oriented economic cooperation. Through work undertaken in the different working groups and committees, APEC can provide templates and model measures to shape the form and substance of these agreements.

The competitive proliferation of green agreements has the potential to escalate geoeconomic frictions in the region, challenging APEC’s consensus-driven culture. As the United States, China and other member economies each engage in their respective green industrial and trade strategies, APEC would be a natural platform for them to learn about, and engage with, the overlaps and complementarities between the varying approaches.

As the 2023 APEC host, the United States has a unique institutional opportunity to inform members about its current industrial strategy and its ongoing discussions with Japan and the EU on limited trade agreements. It could facilitate multi-directional conversations with other economies to ensure that different green policies lead to greater regional convergence on rules and standards.

Keeping APEC’s institutional history in mind, US officials can leverage APEC’s entire ecosystem while remaining open to new ideas from other institutions. This will ensure that APEC remains an effective incubator when advancing priorities such as green recovery, green growth, climate finance and clean energy. As long as APEC remains at the nexus of multiple institutional channels, it will play an influential role in stewarding the region to a sustainable future.

Giridharan Ramasubramanian is a PhD candidate at the Coral Bell School of Asia-Pacific Affairs, The Australian National University.

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