Calls for increased investment from rich countries in low-carbon technologies for the world’s poorest regions have intensified in Bali, as new reports point to the climate risks related to the rapidly accelerating energy demand in developing countries.
The idea of a “technology transfer fund” that industrialised nations would have to pay into and developing countries could draw from in order to finance clean energy technology projects or buy patents, is being mooted by China, as delegations from 187 countries gathered in Bali for the 3-14 December UN climate conference.
While the Asian giant – now the world’s largest emitter of greenhouse gases – continued to fend off calls for binding CO2 reduction targets for developing countries, it insisted that rich countries should be doing more to encourage the spread of clean technologies.
According to the Chinese delegation, efforts so far have been “puny”.
Last year, the Clean Development Mechanism succeeded in directing $5 billion investment into cutting greenhouse gas emissions in developing countries. However, the UN estimates that climate mitigation efforts will require an annual investment of $200 billion by 2030, with nearly half of that in developing nations.
A report published on 3 December by the World Business Council for Sustainable Development (WBSCD) also notes that, although the CDM has succeeded in bringing clean energy technology to some countries in the developing world, hundreds of projects have been “stopped at the starting gates” due to lengthy approval processes, uncertainty regarding commercial returns and worries about intellectual property theft.
The result is that projects have focused on a select group of countries like China, Brazil and India, where existing market potential is high, whereas the African continent has only succeeded in attracting 3% of all CDM projects – primarily within South Africa.
"Raising finance is not necessarily the main problem, but stimulating large-scale investment and directing those financial flows toward commercially viable low- and zero-carbon energy technologies will be key," said WBCSD President Björn Stigson, adding that giving clear and strong expectations on future carbon prices and GHG reduction targets, as well as improving poor countries' risk profiles through capacity building for stable and transparent regulatory regimes, will be crucial to attracting more investments in clean technologies.
The global business association points out: "Unless policies change and ways are found to facilitate investments in lower carbon technologies at all stages of their development and deployment, developing countries are expected to follow the same carbon-intensive development pathways of today's industrialised nations. This would constitute a lost opportunity of immense proportions, as the consequences of carbon- and energy-intensive investment decisions made today lock in those emissions for decades."
Indeed, the risk of a technology lock-in is particularly worrying considering that the demand for energy in developing countries is expected to increase by a factor of 2.3-5.5 between now and 2050. India, for example, is already the world's fifth largest emitter, despite the fact that nearly half of its population has no access to electricity and 85% of its population lives on less than $2 per day.
According to a parallel study published on 3 December by US think tank the Centre for Global Development (CGD), cumulative emissions from developing countries alone would be sufficient, by 2060, to push carbon dioxide levels over the 450 parts per million threshold that the Intergovernmental Panel on Climate Change associates with large, irreversible climate impacts.
CGD president Nancy Birdsall stressed that the discovery that "the South is on its way to creating its own global warming crisis" goes to show that "the task is even larger and more daunting than we previously believed" and that "to avoid a shared global disaster, we in the rich countries need to cut our own emissions quickly and do much more to help developing countries shift to a low-carbon future while at the same time meeting the just aspirations of their people for a better life."
In a speech ahead of the Bali meeting, EU Environment Commissioner Stavros Dimas said he would support "new incentives and flexible types of contributions, as well as greater transfers and deployment of low-carbon technologies" in developing countries, as one of the key elements of the Bali roadmap.
However, Eileen Claussen of the Pew Center on Global Climate Change in Washington DC was more sceptical about the need for massive technological and financial transfers from the developed world to finance clean projects in poorer countries. "I am not sure if it is needed and, I think as a practical matter, it is highly unlikely when China is as competitive as it is, as with a lot of the other countries in the world. I just do not see that happening."
According to Martin Khor, director of NGO Third World Network (TWN), a key question resides in intellectual property rights (IPRs) over climate-friendly technologies, which are pushing up the cost of climate-friendly technologies and preventing developing countries from making the switch to low-carbon development pathways: "IPRs confer monopoly rights and can serve as a barrier for introducing or upgrading technologies by private industry or public-sector agencies in developing countries, or simply curb affordable access on account of high prices".
"We should be reminded of how Indian companies were hindered from introducing a new chemical that is not harmful to the ozone layer as a substitute to chlorofluorocarbons (CFCs) because of patents on that chemical," he cautioned.
Climate specialist Zou Ji of the Chinese delegation to Bali agreed: "It's a trade-off between intellectual-property rights and climate protection."
However, US officials said that while they backed the idea of an "international clean energy fund", they would reject any fund structure that might slash incentives for US companies to develop new technologies. "We do not support a technology-transfer fund that would buy down intellectual-property rights," said head of the US delegation Harlan Watson.
Whatever new initiatives are agreed in Bali, the World Wide Fund for Nature (WWF) urged governments to, at the very least, agree to certain improvements to the CDM in order to strengthen its credibility. "The CDM is a new and very important tool and needs to be fine-tuned to reach its purpose," said the head of WWF's European Climate and Energy Policy Unit, Dr Stephan Singer.
The WWF is especially calling for increased transparency and controls, after a study it carried out found that 20% of emission reduction credits sold under the CDM "lack environmental integrity" and could have happened even without CDM financing.
It underlined the EU's central role – as the world's largest carbon market – in making the CDM deliver "real climate and sustainable development benefits", and reminded EU nations that "CDM credits need to be additional to and not be used instead of domestic action".
The NGO concludes that "the use of CDM energy project credits within the EU ETS should be limited to those certified by the Gold Standard" – a quality benchmark established by the international NGO community.
Under the United Nations Framework Convention on Climate Change, developed countries are to take "all practicable steps to promote, facilitate and finance, as appropriate, the transfer of, or access to, environmentally sound technologies and know-how to developing countries".
One mechanism, created under the Kyoto Protocol to help foster technology transfers to developing countries, is the Clean Development Mechanism (CDM), which has been linked to the EU's carbon-trading market.
Under this "flexible mechanism", EU countries are entitled to partly meet their own greenhouse gas reduction targets by financing emission reducing projects in developing countries – which also allows them to achieve cheaper emission cuts than they would do at home.
However, the take-off of the scheme has been relatively slow.
- 8-9 Dec. 2007: Meeting of trade ministers on the contribution of trade to the climate change challenge
- 10-11 Dec. 2007: Meeting of EU finance ministers focusing on funding for low-carbon technologies
EU official documents
- Commission:UN Climate Change Conference 2007
- Commission:Speech by Stavros Dimas: The Road to Bali, Lisbon Council(26 November 2007)
- United Nations Framework Convention on Climate Change (UNFCCC):United Nations Climate Change Conference - Bali, 3 - 14 December 2007
- United Nations Framework Convention on Climate Change (UNFCCC):Fact sheet: Why technology is so important
Business & Industry
- World Business Council for Sustainable Development (WBSCD):Investing in a Low-Carbon Energy Future in the Developing World(3 December 2007)
NGOs and Think-Tanks
- Center for Global Development (CGD):Carbon-Intensive South Faces Climate Crisis, Even Without Greenhouse Gas from the North(3 December 2007)
- Institute of Science in Society (ISIS):Martin Khor: Global Action on Climate Change - A Third World Perspective(24 September 2007)
- World Wildlife Fund (WWF):Clean energy investment in developing countries must do better(29 November 2007)