South-South Trade Reaping Lion's Share of Renewable Market Growth

Developing Nations Solar Power


July 3, 2014

If you're looking for growth in the global market for renewable energy hardware, don't look to the usual suspects. 

That was one of the conclusions in a new United Nations study on the trade flow patterns of certain environmental goods. According to the report by the UN Environment Programme, South-South trade (characterized as trade between developing countries) is the "most dynamic segment" of international trade in environmental goods and services.

The report measured trading patterns for solar photo voltaic cells, wind energy components, hydroelectric turbines, biomass feedstock and solar water heaters, as well as non-energy generating goods like water purification equipment and organic agricultural goods. The UN considers these products the backbone of the "green economy," which is expected to grow to $1.9 trillion in value by 2020.   

Overall, trade between developing countries in those products grew 29.4 per cent faster than the global market. One big driver of this growth was wind power: developing countries added 20.7 gigawatts of new capacity in 2013, an increase of roughly 14 per cent over the previous year.

But beyond specific markets like wind, the overall decline in the cost of producing renewable energy added buoyancy to South-South trade. As the cost of producing renewable power approaches that of fossil fuels, investments are increasing.

Government incentives and subsidies have also spurred growth, along with liberalization policies that have deepened international trade.

Canada was among a group of World Trade Organization members that approved a trade deal early this year "aimed at eliminating tariffs on environmental goods trade."   

Canada is a key destination for renewable energy products goods like wind turbines, importing 15 per cent of its wind generation hardware in 2012. In contrast, during the same year, the European Union accounted for 66 per cent of the global wind export market.

But the EU’s market position is slipping, as growth in exports have stagnated while developing countries, chief among them China, capture more and more of the global market.

Indeed, developing countries have the potential to capture parts of the traditional green energy market, including countries like Canada. But hardware producers in developing countries are mostly focused on growing their South-South business, avoiding markets like Canada where EU and American companies are already competing.

Nonetheless, as China, India, and others aggressively pursue renewable energy and drive down its price, Canada stands to benefit from reduced costs and increased competition.