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Technology issues have always been at the forefront of the global climate change debate. It is even suggested that just like the food crises of 1960 triggered the need for a “green” revolution, we need nothing short of a technology revolution to deal with climate change. However, if we look over the horizon, I think there isn’t enough of a sense of urgency being exhibited when it comes to technology, either internationally or at the country level.
Under the rubric of UN Framework Convention on Climate Change (UNFCCC), the Clean Development Mechanism (CDM) was conceived as a vehicle for transferring cleaner technology to developing countries. However, projects implemented through the CDM are too small-scale and the processes too convoluted to deliver technology to the extent required for rapid climate change mitigation. In the absence of bold measures to reform the CDM market, neither the CDM nor the UNFCCC’s Expert Group on Technology Transfer can achieve technology transfer along the scale required to combat greenhouse gas (GHG) emissions. I think it is time to re-examine the more traditional mechanisms of trade and investment which have been the conduits for global technology transfer for centuries.
The Stern Review suggests that the reduction of tariff and non-tariff barriers for low-carbon goods and services could provide further opportunities to accelerate the diffusion of key technologies. A recent World Bank study finds that such reductions can significantly increase the diffusion of clean technologies in developing countries. Within the current global trade regime, the study finds that removing tariff and non-tariff barriers for four basic clean energy technologies (wind, solar, clean coal, and efficient lighting) in 18 high-emitting developing countries will result in trade gains of up to 13 percent. Translated into emissions reductions, these gains suggest that (albeit within a small subset of clean energy technologies and for a select group of countries), the impact of trade liberalization could be substantial.
However, countries have generally been reluctant to engage the trade and climate regimes for fear of one overwhelming the other. Developing countries have been concerned that the trade regime might be used to promote rich countries’ environment/climate agendas, which could compromise their domestic interests. Yet global climate change awareness and discussions about clean energy technologies also offer an incredible economic opportunity for developing countries to produce and export these technologies.
Streamlining intellectual property rights (IPR), investment rules, and other domestic policies will further help the assimilation of clean technologies in developing countries. The latest UNEP Report [Global Trends in Sustainable Energy Investment 2009] suggests that some $155 billion was invested in 2008 in clean energy companies and projects worldwide, of which $117 billion went to renewable energy projects.
While foreign direct investment (FDI) can be an important means of transferring technology, weak IPR regimes (or perceived weak IPRs) and other barriers often inhibit diffusion of specific technologies beyond the project level. These barriers range from weak environmental regulations, fiscal feasibility, financial and credit policies, economic and regulatory reforms, and the viability of technology to local conditions (including availability of local skills and know-how). So governments need to complement IPRs with appropriate policy infrastructure, governance and competition systems in order to be effective conduits for technology transfer and diffusion.
Several measures to overcome IPR barriers have been on the table for a long time including patent buy-outs, reduction of tariffs on sale of technologies, a global clean-energy venture capital fund, transfer of technologies to public domain, licensing schemes with reduced duration of intellectual property rights, and flexible technology transfer mechanisms. However, these have not come up for serious discussion yet in any international forum.
On the international side, there is no clear global regime governing clean technology investments. In the absence of a multilateral agreement on FDI in manufacturing, over 2000 bilateral investment treaties (BITs) indirectly assume importance and they say very little on the clean technology front.
Official Development Assistance has been a major source of energy sector investments in developing countries and could significantly influence future GHG emissions. Following the G8 Gleneagles communiqué of 2005, bilateral and multilateral donors have responded to the increasing challenge of climate change with an agenda for action to integrate climate concerns into the mainstream of developmental policymaking and poverty-reduction agendas.
The World Bank Group has committed about US$1.4 billion in loans, credits, equity investments and guarantees for low-carbon projects in 2007-2008. Moving forward, the key issues for the Bank Group relate to promoting development while minimizing GHG emissions, the need for financing, and accelerating commercialization of new technologies. The Climate Investment Funds demonstrably provide the framework for future such engagement.
While increased spending will certainly be required for the rapid adoption of clean technologies; creative approaches beyond traditional research, development and deployment (RD&D) vehicles are urgently needed to accelerate energy technology innovation on the scale and in the time frame required.
Finally, pricing of carbon is critical for development and dissemination of clean energy technologies as it will create the economic incentives needed for private actors to take action.
Technology is the lynchpin of rapid and sustained global climate mitigation. The technology transfer agenda under the UNFCCC must be expanded to come up with concrete solutions on technology transfer within the broader resource allocation framework that may emerge at Copenhagen. At the same time, the importance of the domestic investment climate regime cannot be overstated.