Trade Policy Note Final-rev08 - Development

Annex 5B: Energy services
Attainment of the MDGs will require that modern energy be made available to a large
proportion of the nearly two billion people who currently are reliant on traditional
energy sources. Lack of access to energy not only undermines the productivity of an
estimated one third of the world’s people but causes insecurity and hardship and
threatens their health and future well being 144 . It constitutes a particular burden for
women, and provokes reduced life expectancy and higher rates of child mortality.
Again, developing countries are faced with the need to obtain capital and technology
while ensuring universal access and control over this strategic sector.
Enormous investment required to meet world demand
The World Energy Council estimates that enormous investments – about $100 billion
annually – will be required to maintain adequate supplies of energy, and this alone
will not ensure delivery to the poor. 145 Energy services constitute the value added in
the chain from the location of the potential energy source to its distribution to the final
consumer. The dynamism of trade in the energy services sector is accelerating due to
the increasing demand for energy, the liberalization of energy markets, increased
investment in the energy sector, and the introduction of new technologies.
Many developing countries are engaged in structural reforms of the energy sector
meant to cut costs and improve the economic performance and efficiency of the
energy sector by imposing free-market disciplines and commercial criteria. 146 These
can include deregulation (covering both the removal of regulations and the
reassessment of regulatory methods), corporatization, (placing public energy utilities
under commercial discipline), unbundling (i.e. breaking up vertically integrated state
monopolies), increased private sector participation and outright privatization. Efforts
to ensure competition require provisions to ensure access (third party access-TPA) to
networks (grids, pipelines).
The dismantling of state monopolies has provided lucrative possibilities for the
private sector and led to considerable interest in obtaining bound commitments on
trade in energy services, which are the subject of requests in GATS and covered in
FTAs. Such requests are aimed at gaining a share of dynamic “downstream” energy,
particularly electricity trading markets, while seeking to gain control of “upstream”
services to improve security of supply. The energy services market is estimated at
$100 billion, but it implies control over the $3 billion global trade in energy. 147
144 See Sieh Mei Ling (ed.), Investment, Energy and Environmental Services: Promoting Human
Development in WTO Negotiations, University of Malaya, UNDP and Malaysian Institute of
Economic Research (Kuala Lumpur, March 2004) (www.um.edu.my).
145 1.6 billion people did not have access to electricity in 2002. According to the International Energy
Agency's estimates, 1.4 billion people will still lack access to electricity in 2030.
146 UNCTAD, “Managing "Request-Offer" Negotiations under the GATS: The Case of Energy
Services”, UNCTAD/DITC/TNCD/2003/5 (Geneva: 2003).
147 See UNDP, International Trade in Environmental and Energy Services and Human Development,
op. cit.
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