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APEC Needs New Environmental Agenda

October 16, 1997

Washington, DC—While sustained and substantial economic growth across the Asia Pacific has brought sweeping advances in prosperity to the people and nations of the region, these future gains are at risk because of inattention to environmental issues according to a new study released today by the Institute for International Economics. Authors André Dua and Dan Esty, researchers at Yale University, show that the environmental consequences of economic success—blackened skies, fouled water, sterile land, ravaged forests, depleted fisheries, and destroyed ecosystems—impose social welfare losses that seriously diminish the gains from growth.

The authors note, moreover, that so many of the region's environmental harms arise from market failures and government policies which distort market pricing that the international economic system cannot be counted upon to deliver efficient results. More importantly, they argue that ongoing public support for trade and investment liberalization, which has delivered the tremendous material gains of the post World War II era, may be threatened if countries in the region do not concurrently address noneconomic issues including environmental regulation.

Dua and Esty demonstrate that the Asia Pacific Economic Cooperation (APEC) forum is the institution that is best equipped to address these concerns. They conclude, however, that APEC's existing environmental efforts are inadequate and indeed are not grounded in any clear understanding of the environmental needs of the Asia Pacific region. The authors therefore offer a new environmental agenda that is carefully tailored to respond to the public health and ecological problems that must be addressed at the supranational level, and the issues on which APEC as a regional institution can add value to national or multilateral environmental efforts. With an eye toward the upcoming APEC summits in Vancouver in 1997 and in Malaysia in 1998, Dua and Esty identify four priority issues:

• Climate change and the need for an APEC commitment to help lay a foundation for comprehensive future efforts by agreeing to "joint implementation," through which rich countries can partially discharge their obligations to reduce carbon emissions by paying for emission reduction in developing countries, in advance of the Kyoto negotiations in December;
• Depleted fisheries and the benefits of a regional tradeable permit regime;
• Elimination of energy and agricultural subsidies, which promises large trade benefits as well as environmental gains; and
• An environmental standard setting initiative, designed to promote trade and investment liberalization (and ensure market access) across APEC and to mitigate fears of a "race toward the bottom" in environmental regulation.