The South African Government has committed to combating climate change and promoting investment in energy efficiency and renewable energy and various iterations of the Industrial Policy Action Plans (IPAPs) and the National Development Plan place significant focus on the ‘green economy’ as a driver of growth and job creation. However, there has been relatively little focus on Environmental Goods and Services (EGS), either in South Africa’s domestic policy or within the country’s negotiating platforms with regional countries and blocs.

The removal of trade barriers linked to EGS formed part of the 2001 Doha Ministerial Declaration (which marked the start of the Doha Development Agenda and is still informing multilateral trade negotiations), emphasising the potential for a “triple win” that benefits trade, the environment and development. Negotiations have however been deadlocked for over a decade, with the exact definition and identification of EGS proving a particular sticking point.

Nevertheless, interest in EGS has been re-ignited by the agreement among 20 APEC members to significantly reduce tariffs on a list of 54 EGS products by 2015. This initiative gained further momentum in 2014 when the EU and 13 APEC members (including the United States) committed to “global free trade” in environmental goods, based on the APEC list. This group of countries, together accounting for 86% of international trade in EGS, formally launched negotiations on the Environmental Goods Agreement (EGA) in Geneva on the 8th of July 2014. Since then 3 more WTO members (Israel, Turkey and Iceland) have joined the negotiations.

Unsurprisingly, given that there remains no universal agreement on the definition of the EGS sector, estimates of the size of the EGS market vary substantially. Estimates of the global EGS market range from US$ 1 trillion to more than US$ 5 trillion in 2011/12. While the size of the market may be unclear, there is almost universal agreement that the EGS sector will continue to grow strongly over the next decade.[1]

Studies suggest that South Africa is among the top 25 EGS markets globally, with a market size of close to US$ 45 billion in 2011/12. The country boasts a strong domestic EGS industry that initially developed to service the mining industry. South Africa is in its own right an attractive destination for global exports. The country would also seem to be well-positioned to establish itself as a regional hub for the provision of EGS to the Southern African Development Community (SADC) market.

Export opportunities in the region are expected to increase as climate change adaptation and mitigation efforts ramp up as a larger proportion of climate finance is diverted to fund adaptation in developing (and particularly least developed) countries. Given the expected size of adaptation funding flows to SADC countries, preferential access to EGS markets throughout SADC (and potentially other African regional groupings) could be very attractive to South African-based firms looking to expand northwards.

SADC member states are currently negotiating liberalisation commitments on trade in services in six priority sectors, including energy-related services. A preliminary scan of activities that could potentially be included in “energy-related services” shows a strong overlap with environmental services. The opportunity thus exists to include environmental services in the first round of SADC Trade in Services negotiations, set to conclude in 2015/2016. Even if a narrow definition of “energy-related services” is agreed that excludes environmental services, environmental services will be included in subsequent rounds of negotiations set to start in little over a year.

The EGS sector presents strong growth prospects – and binding regional commitments to eliminate barriers to EGS trade will further strengthen these prospects. However, to inform these negotiations and unlock the growth of this sector, more information is needed on its size and competitiveness, and the nature of existing barriers to EGS trade and investment within SADC.