Green goods are products that contribute to a cleaner planet and can provide significant energy-cost savings. With the global market reaching $1.9 trillion in 2022, it is essential for the United States to address trade barriers and capitalize on this growth. The World Trade Organization (WTO) estimates that trade in environmental goods has grown by 243 percent since 2000, with a list of select products including pollution control, wastewater management, and energy management. The United States is well-positioned to benefit from this growth, but it needs to focus on three areas: identifying the goods that best contribute to global climate goals, investing in the development of technology where the United States can have a competitive advantage, and creating fair rules for trade in those products. To achieve this, the United States should:

1. Develop clear criteria for identifying which environmental goods should be prioritized for enhanced market access, taking into account factors such as environmental impact, functional dual-use, and U.S. competitive advantage.
2. Assess how green goods should be categorized based on their functions, considering their mitigation or adaptation purposes, and the implications for setting trade policy priorities.
3. Relaunch talks at the WTO, which should also include disciplines to address overcapacity in this sector, including limits on market access.

The Environmental Technology Industry: A Rapidly Growing Sector

The environmental technology industry is rapidly evolving, driven by increasing global commitments to environmental protection and the need to address extreme-weather events. This industry supports 1.6 million jobs in the United States, with exports reaching over $38 billion in 2023. The water and wastewater management sector is a significant contributor to this growth. Canada and Mexico are the United States’ largest export markets for environmental technology, accounting for 35 percent of the value of environmental technology exports on average from 2004 to 2023. Other top markets include China, Germany, France, the United Kingdom, Japan, Brazil, the Netherlands, and South Korea.

Challenges in Defining Environmental Goods

Defining environmental goods is challenging due to the dual-use nature of many products. A comprehensive framework liberalizing trade in environmental goods would need to have a way to identify the end use of the product, set a threshold for permitted embedded emissions, and outline specific environmental benefits that would qualify the good for inclusion on the products list.

Addressing the Challenges

To address these challenges, countries could consider different approaches, such as:

1. Establishing a list of environmental goods based on a classification system, such as the Harmonized Tariff Schedule (HTS).
2. Developing a labeling standard, such as the “Energy Star” label, to facilitate the identification of environmental goods.
3. Creating a living list that would evolve over time to keep pace with technological innovation.

Opportunities for Action

Despite the challenges, governments around the world are working towards defining green goods and increasing market opportunities. The APEC List of Environmental Goods, for example, includes 54 products and has seen intra-APEC trade grow by 7 percent and global trade increase by 6.4 percent. The United States can capitalize on this growth by launching talks at the WTO, which should also include disciplines to address overcapacity in this sector. By prioritizing the development of green technologies and creating fair rules for trade, the United States can become a leader in the development and diffusion of green technologies and an important trade tool to advance climate action.