Getting on a technology pathway to avoid dangerous climate change

An IFC investment helps provide clean, affordable water to underserved communities in developing countries.

Many of the measures proposed in the World Development Report (WDR) 2010 will require substantial engagement with the private sector. The UN Framework Convention on Climate Change has estimated that more than 80 percent of the investment required for climate change mitigation and adaptation will have to be privately financed. For this to happen, the key requirement will be meaningful targets and supportive public policies.

One area in which private initiative will be critical is in the development and dissemination of new climate friendly technology. As the advance edition of the WDR states, "Technological innovation and its associated institutional adjustments are key to managing climate change at reasonable cost. . . . Mobilizing technology and fostering innovation on an adequate scale will require that countries not only cooperate and pool their resources but also craft domestic policies that promote a supportive knowledge infrastructure and business environment."

For several reasons, an increased focus on accelerating new technology is urgently needed.

First, existing technologies, even if steadily improved, can substantially reduce greenhouse gas emissions expected in a business-as-usual scenario but cannot reduce global emissions by 50 to 80 percent as will be needed by mid-century to avoid a serious risk of dangerous climate change.

Second, there are currently few, if any, good alternatives for some greenhouse gas intensive activities, particularly coal thermal power plants in countries with abundant coal resources like China, India, and South Africa. Carbon capture and storage, solar thermal power plants with low cost storage, and other new technologies will be needed if these countries are to be part of a climate-constrained world without incurring disproportionate economic and social dislocation.

Finally, time is not on our side. Bringing about a new energy technology can take decades from laboratory success to widespread use. Meanwhile, economic growth in the largest and most rapidly growing developing countries like China, India, and Brazil will lock in billions of dollars of investment in buildings, factories, cars and power plants, making it much more costly and difficult to introduce alternatives.

As the WDR, the Stern Review and many other studies have concluded, the current level of effort in public and privately funded R&D is not nearly sufficient and tends to be highly cyclical, rising with good times and declining in downturns including the recent fiscal crisis.

However, there are signs that some developing countries—particularly China—now appreciate that an aggressive commitment to pushing new clean technologies will be key to their future economic growth. Developing country based companies like SunTech and Suzlon are becoming global leaders, as reflected in market growth and rates of new patents.

The IFC (International Finance Corporation) is initiating new programs to support this trend, dedicating resources to clean tech funds and early stage clean tech investments and also working with a major rating company to develop a carbon efficient index for emerging markets.

While modest relative to global investments in emerging markets, these initiatives may be indicative of the change in thinking necessary to engage private investors and technology developers in beginning the necessary transformation of the global economy.