Ladies and gentlemen,

This is my first opportunity to address the World Trade Organization since taking up my appointment as Executive Director of the United Nations Environment Programme (UNEP) in mid-June.

Thank you for the opportunity.

Money may make the world go round. But we know what makes a significant amount of that money is natural capital—the goods and services provided by nature.

We also know from reports like the Millennium Ecosystem Assessment that a great deal of this capital is being run down—we are in the red.

This is not a recipe for long lasting prosperity in either the developing or developed countries.

It is clear that a better balance is needed that capitalizes on the benefits of trade liberalization with the absolute necessity of maintaining and re-investing in the global natural resource base.

In other words trade that is not extractive in nature but sustainable for current and future generations.

UNEP is as Trade Organization

Ladies and gentlemen, I would also like to outline how environmental policy—far from being a brake on trade—is emerging as a powerful new force generating new kinds of trading opportunities.

Now if I told you that I was now heading up a trade organization I am sure it would trigger a few wry smiles around the room.

But in many ways I do.

Most, if not all, of the Multilateral Environmental Agreements (MEAs) linked with UNEP and the global sustainable development agenda have significant trade dimensions.

It is not by chance that one of the main ones dealing with biodiversity is know as the Convention on the International TRADE in Endangered Species.

And take the chemicals conventions—the Montreal Protocol on substances that deplete the ozone layer, the Basel Convention on hazardous waste, the Stockholm and Rotterdam conventions on chemicals—we are dealing with environment but also very much with trade.

The Kyoto Protocol on Climate Change is taking the notion of trade as powerful force for sustainable development into new realms.

Kyoto’s provisions--a first step towards the significant, more than 60 per cent reduction in greenhouse gases needed-- include Joint Implementation, Emissions Trading and the Clean Development Mechanism (CDM).

It is an environmental treaty. But at its heart are trade based flexible, mechanisms.

Kyoto is also triggering new flows of funds from developed to developing countries—you may like to call them Aid for Trade in the broadest sense.

The United Nations Framework Convention on Climate Change (UNFCCC)-- whose annual conference will be held at UNEP’s headquarters in Nairobi in November-- estimates that the CDM alone could generate some $100 billion of funds for developing countries.

Kyoto is also helping to drive investment and trade in new and renewable technologies like wind, solar power and biomass fuels.

In 1995 global wind power stood at 4,800 MW. It has since increased twelve-fold to reach over 59,000 MW at the end of 2005.

The international market is expected to have an annual turnover in 2006 of more than € 13 billion, with an estimated 150,000 people employed around the world.

The latest out look of the Global Wind Energy Council estimates that over a third of the globe’s electricity could be generated by wind by 2050.

This is not just benefiting the exporting economies of the developed world. It is can and will benefit the lives and livelihoods of billions in the developing world currently without access to electricity.

Poverty is not only a challenge to the environment and sustainable development it is an obstacle to trade.

So environmental treaties like Kyoto can, by bringing development and wealth to the poor, create billions of new consumers on continents like Africa, Asia and Latin America who can genuinely participate in the global market place.

UNEP is Pro-Subsidies

Ladies and gentlemen, you may have smiled when I said I headed a trade organization, I can only imagine your reaction if I said I supported subsidies.

But well thought out and well targeted financial support can help the environment and economies.

The Multilateral Fund of the Montreal Protocol has, since its inception 15 years ago, paid close to $2 billion to developing countries to switch from ozone damaging chemicals and production to more environment-friendly ones.

The Global Environment Facility (GEF), just replenished to the tune of more than $3 billion by developed countries, is playing its part in catalyzing environmental but also cleaner technological and economic improvements.

GEF funded projects, for example, are helping to promote clean energy through wind and solar power mapping which in turn is stimulating renewables investments in the developing world.

Fisheries, one of the most contentious areas of environmentally-damaging trade, are also benefiting.

A new GEF project, where shrimp fishermen in developing countries are testing new nets and trawls, is reducing the damage of by-catch by up to 70 per cent in some cases.

This is good news for people living in coastal communities, this is good news for the environment and for the local and global economy—it is sustainable development in action.

So UNEP is pro-trade when it balances all the costs and benefits and we are pro-positive subsidies that make social, environmental and economic sense.

Sadly we are all aware that significant amounts of trade and far too many subsidies promote extraction rather than sustainable management--are skewed in favour of short term profits with the benefits confined to narrow sectors of our global society.

The true value of many of the nature-based goods and services we exploit—from forests to genetic resources- are also under priced and those who directly manage or conserve them are far from fully recompensed for what their communities provide.

Ladies and Gentlemen, we meet with the Doha Round of negotiations suspended and no firm date when they will resume and no firm conviction that a resumption will bring a happy ending.

But this cannot be an alibi for inaction on the broad question of ‘Making Trade Liberalization Work for Sustainable Development”.

Indeed, the world is still turning even if the talks are not.

Opportunities and Challenges

Let me outline some opportunities and challenges that can carry forward our mutual agendas and aims.

Certification—Last week the bulk carrier ‘Glory’ landed over 130 cubic metres of logs from Central Africa in Europe destined for traders and door manufacturers in Switzerland.

It was the first consignment of timber from that region covered by the Forest Stewardship Council’s certification scheme following the issuing of certificates in December last year.

The wood came from the Kabo concession—a 1.3 million hectare lowland tropical rainforest on the Congo-Cameroon-Central Africa Republic border.

Over the past decade some 70 million hectares of forest in over 70 countries have been certified.

Certification is now being extended to places where timber is used including housing schemes, events infrastructure like those for the London Olympics and maybe even airports.

We need to extend certification to ever more forests and develop the capacity of more developing countries to take part.

Fisheries management offers similar benefits and challenges. The Marine Stewardship Council certifies and eco-labels well-managed fisheries.

However, only a relatively small number of fisheries are involved.

With a few notable exceptions—one thinks of South Africa’s hake fishery—the vast majority are in developed countries.

How can we broaden such schemes not only in the area of fisheries but to other areas of the global, natural-resource base?

And do it in such a way that we do not exclude developing countries by establishing “eco-barriers or green tariffs”?

Non Financial Reports

Next week I will be in Amsterdam for the Conference on Sustainability and Reporting organized by the Global Reporting Initiative—a UNEP collaborating centre.

In recent years there has been tremendous growth, especially in developed countries, in the reporting of large corporations’ social, environmental and corporate responsibility performance.

Adopting green standards like the International Standards Organization’s ISO 14000 and new ones like the ISO 26000 on sustainability management, are also growth areas.

It is clear that many multinationals and transnationals are keen to factor sustainability into their operations.

Shareholders, investors and consumers are increasingly demanding such information which in turn has investment and trade implications.

Again, how can we assist in extending these reporting guidelines and sustainability standards to capture the true costs and benefits of trade--again especially in the developing countries?

We also need to urgently examine how such measures like certification, reporting and standards can be more easily and reasonably taken up by small and medium sized enterprises regionally and globally.

Other areas that can help deliver sustainable trade include Green Procurement--in which governments and companies source goods and services that meet some level of sustainability.

This has something to do with certification, labeling, non financial reporting and capacity building for developing countries—it also has a lot to do with awareness raising among consumers and those in purchasing departments.

Ladies and gentlemen,

Let me leave you with a few final ideas on how we might better capture the true costs of global trade.

It was once normal practice to externalize the costs of production. A chemical factory could get rid of its waste on the cheap by pumping it into a river.

The atmosphere was a dustbin where we could release greenhouse gases for free.

Under the polluter pays principle, this has and is changing.

Perhaps we need to refine the concept and extend it to its logical conclusion.

Payments for Ecosytem Services

Let’s take one example—climate change and tropical forests.

Some eminent economists argue that the carbon sequestration value alone of these forests may be worth tens if not hundreds of billions of dollars a year.

Currently the countries and communities whose forests provide this service are paid zero for the pollution they remove and the economically damaging climate change they avert.

In Costa Rica, hydro-electric companies pay communities upstream not to cut down trees. It makes economic sense because deforestation destabilizes the soil and can trigger the silting up of dams.

So why do we not pay communities in the tropics for maintaining forests and the ecosystem services they provide in terms of carbon removal?

Could we extend payment for ecosystem services further or develop flexible trade-related mechanisms—like those developed for Kyoto-- further to more sustainably manage other natural resources.

Could damage to nature or natural capital in Europe or the United States be offset by backing projects in the developing world that conserve water basins, coral and mangrove forests or genetic and biologically rich hotspots?

Can we trade ecosystem services like we now trade carbon and if so how might that work?

In some areas the questions have almost been answered. One bright light that shone from the recent WTO Ministerial Conference in Hong Kong was in the area of fisheries subsidies.

Here the mutually supportive nature of trade and environment policies really came through.

We should not—indeed cannot—let this momentum slow and would encourage all concerned to work on the next steps needed to deliver sustainable fisheries for all.

Amongst the points in the Hong-Kong declaration were those setting out a path that will allow definitions of “overcapacity and overfishing” –criteria that can be used for prohibiting subsidies.

Let us walk down that path in partnership. UNEP stands ready and able assist.

Ladies and gentlemen, the challenges of making international trade work sustainably for everyone is a key goal of the WTO and is a key goal for UNEP.

It is a challenging but also exciting subject that goes to the heart of the world we have inherited in the early 21st Century.

Together and in partnership with private business and civil society, I believe we can find the answers if we can find the political will, creative ideas, economic instruments, respect for nature and common humanity that unites us all.

Globalization and trade liberalization have polarized public opinion and generated emotive if not colourful language and entrenched positions.

Free trade has been characterized as a free for all--one in which short term profits slash and burn and bulldoze their way through other concerns, be they social or environmental.

To counter this some people have talked about giving globalization a ‘human face’.

But what we really need is ‘intelligent’ rather than benevolent globalization—one that produces sustainable markets through sustainable trade in the certain knowledge that this is where long lasting profits and genuine livelihoods will be made.

It can be done, indeed is being done but at a pace that for many remains glacial in speed.

But I am convinced that there is enough in creativity within and outside this room to achieve these mutual goals.

There is another cause for optimism.

Ladies gentlemen I mentioned earlier that I was responsible for a trade organization.

There are now increasing numbers of finance ministers who are convinced they now hold an environmental portfolio.

I think Gordon Brown, the UK Chancellor of the Exchequer, summed it up best just before the G8 in Gleneagles.

“More than sixty year ago in 1944, the economist John Maynard Keynes laid down what he believed were the foundations of economic policy—that it was for government to ensure the twin objectives of high and stable levels of growth and employment.”

“Today we know that there is a third objective on which our economies must be built—and that is environmental care”.

“If our economies are to flourish, if poverty is to be banished, and if the well-being of the world’s people enhanced—not just in this generation but in succeeding generations—we must make sure we take care of the natural environment and resources on which our economic activity depends”.

Thank you for your attention.