From politics to business: Technology transfer to AsiaBy Rajesh Chhabara
Climate Change Corp Climate News for Business
December 9, 2008
Climate change technology transfer needs to move from being a political football to becoming a business opportunity, but how?
As countries gather in Poznan to begin another round of negotiations to develop a successor agreement to the Kyoto Protocol, which expires in 2012, technology transfer remains one of their most complex challenges.
Developing nations, led by China and India, complain that rich countries have not kept to their part of the deal to transfer clean technologies as envisaged in the United Nations Framework Convention on Climate Change (UNFCCC), Kyoto Protocol and again emphasised in the Bali Roadmap.
The Bali Roadmap, which resulted from the last round of negotiations in Bali, Indonesia in December 2007, pledged action to remove obstacles to deployment, diffusion and transfer of affordable environmental technologies to developing countries including providing financial assistance. In Bali, India and China aggressively opposed binding emission targets on developing nations and instead asked for financial assistance for clean energy technologies.
Developing economies, including China and India, say they need access to environmentally sound technologies and funds to reduce their greenhouse gas emissions while continuing to develop.
India has repeatedly said it needs access to clean technologies especially in energy, manufacturing, transportation and agriculture. Speaking at the Asia-Europe Summit in Beijing in October, the Indian Prime Minister Manmohan Singh said: "Unfortunately, the international community has not lived up to its commitments for technology transfer and additional financing since the Rio conference.”
UNFCCC chief Yvo de Boer, who was in Beijing to attend a high level conference on climate change and technology transfer in November, agreed saying: “The developed world has not paid sufficient attention to technology transfer. International technology transfer will allow countries like China to take action which is not affordable to them at the moment.”
[HOW IS IT POSSIBLE THAT CHINA, WHICH, AS OF NOVEMBER 2008, HOLDS 27% OF THE WORLD'S FOREIGN CURRENCY RESERVES (APPROX. 1/3, IF YOU ALSO INCLUDE MAJORITY CHINESE NATIONS SUCH AS MACAU, HONG KONG, TAIWAN and SINGAPORE) IS UNABLE TO AFFORD TO TAKE ACTION??]
[See: List of Countries by Foreign Exchange Reserves, Wikipedia, at: http://en.wikipedia.org/wiki/List_of_countries_by_foreign_exchange_reserves ].
New Delhi-based Energy and Resources Institute estimates that India would need $5bn a year between 2012 and 2017, over and above its current investment plans, to make the transition to low carbon energy generation.
A report by the UNFCCC published in January revealed some interesting dimensions of technology transfer through the Clean Development Mechanism (CDM). CDM projects allow developed nations to offset their own greenhouse gas emissions by investing in emissions reduction projects in developing countries.
The report said only 39% of CDM projects - accounting for 64% of the annual emission reduction claims - claimed technology transfer. Technology transfer took place predominantly in destruction projects for HFC and N2O - two potent greenhouse gases. HFC and N2O destruction projects generate very high numbers of Carbon Emission Reductions (CERs) or carbon credits. In most of these cases, the buyer of CERs was also the supplier of technology and finance.
What [Do] India and China want?
But India and China want clean technologies for wider applications mainly in power generation, steel, cement, chemical, paper, aluminium and agriculture sectors which are identified as the most energy intensive industries.
While India and China have mastered bio-mass energy and hydro power respectively, they need access to other technologies such as those enabling methane trapping from coal mines, energy efficiency, energy distribution, fossil fuel alternatives, energy from landfill gas and reforestation.
China and India suffer from a heavy lack of energy efficiency in their industrial sectors. The International Iron and Steel Institute estimates that China could reduce 180 million tonnes of CO2 from the steel industry alone if its efficiency was brought on par with Japan.
According to a study by the UN Department of Economic and Social Affairs in 2004, China’s coal-fired power plants consumed 30% more coal than German plants, indicating huge potential for emission reduction by switching to cleaner technology.
Similarly, Asia can save hundreds of millions of tonnes of carbon in the transport sector, which remains amongst the most energy-inefficient in the world. An Asian Development Bank backed study on “energy efficiency and climate change considerations for on-road transport in Asia” in 2006 said that the global transport sector in 2002 accounted for 21% of the world's total energy consumption and is projected to generate over 60% of the increase in total energy use through to 2025.
The report projected that emerging Asian nations would provide much of the future growth in oil consumption – and greenhouse gas emissions - due to their strong economic and population growth. It concluded that increasing energy efficiency in the road-transportation sector is crucial to mitigating climate risks.
Lu Xuedu, deputy director general of China’s National Development Reform Commission, backs up the report, saying, “transferring more efficient technology to developing countries would achieve large scale emission reductions at lower cost.”
Several European countries currently own the latest clean technologies. Technology experts point to the Netherlands (bio-mass), Germany (energy efficiency households and N2O), Sweden and Norway (Hydro power), Italy and Spain (wastewater treatment) and France (nuclear and environment-related technologies) as leaders in their respective technologies.
Cutting edge technologies in wind power and solar power also remain concentrated in Europe and the US, and are largely owned by private companies. Japanese companies dominate technologies in industrial scale energy efficiency, HFC and transport projects.
Some of the largest players in clean technologies include Hydroenergy (hydro-power, Norway), Q-Cells (solar, Germany), Vestas (wind power, Denmark), GE (wind power, U.S.), Kawasaki Heavy Industries (waste heat generator, Japan), Vichem (HFC destruction, France), Uhde (N2O abatement, Germany) and Mitsubishi (clean coal technology, Japan).
N. Yuvaraj Dinesh Babu, chief executive of The Carbon Rating Agency- a company belonging to the Idea Carbon group, says that intellectual property rights (IPR) form the main barrier to technology transfer. Western companies are wary of sharing their technology and know-how with developing countries, he says, as they fear losing control of the market to copy cats: “The high cost of clean technologies is also prohibiting technology transfer.”
According to the UNFCCC report, technology which has been transferred through CDM projects so far, originated mostly (over 70%) from Japan, Germany, the US, France, and Great Britain. The report analysis found that the rate of technology transfer was higher where foreign partner participated in the project. Whilst joint ventures may be better placed to facilitate technology transfer, the report says, they would still require investment incentives and IPR protection guarantees by the host government.
Policy intervention in the CDM can also stimulate technology tranfer. China’s CDM policy states that projects should encourage transfer of environment technology though it does not make it mandatory. India’s policy is very vague on the requirement of technology transfer in CDM projects. Malaysia, on the other hand, has made it mandatory that a CDM project must involve import of environmentally sound technology.
As a result of these policies, whilst only 7.3% CDM projects in India mentioned transfer of technology by 2006, the figure for China was 55.1% and a staggering 83.3% for Malaysia. The main technologies transferred to Malaysia included biomass, biogas, substitution of coal with biomass in a cement manufacturing plant, methane capture from landfill gas, hydropower, agriculture (composting) and energy efficiency.
The Carbon Rating Agency's Babu says developing nations should adopt a three pronged strategy if they want access to clean technologies: they should set up a national level high-power organisation tasked with creating enabling environment for technology transfer, put in place a stronger IPR regime and find ways to finance projects including using local investors and international assistance.
India and China both have reformed their intellectual property rights regulations as required by their commitment to WTO but they are often criticised for lax enforcement.
Private joint ventures in large coal projects may also incur problems as most energy production is still in the hands of the state in India and China. In India, renewable energy– a current boom sector – is entirely in the private sector, and some reforms in the last few years have opened the conventional power sector for private investment.
Adaptation of clean technologies to local conditions is another area of concern. Babu suggests that the technology transfer should be planned in four phases: the host country should carry out a need assessment to identify technology needs. Then, adaptation aspects of the chosen technology should be worked out followed by a pilot project. Only after a successful pilot, the full scale deployment should take place.
China advocates the establishment of a Multilateral Technology Access Fund to finance technology transfer to developing countries. Xie Zhenhua, vice chairman of China National Development and Reform Commission says, “such a fund can cut down the cost of technology transfer to developing countries.”
He says that lack of access to green technologies at this stage can have serious implications as developing nations are building massive infrastructure to keep pace with industrialisation. Use of old technologies can only aggravate global warming.
China wants this fund, established by developed nations by contributing 0.5% of their GDP, to be used to enhance mitigation, adaptation, research and development in technology, and technology transfer.
However, in view of the global financial crisis, demand for funding may face resistance from developed nations in Poznan talks. “The greater emphasis will be on technology transfer,” says Ajay Mathur, director general, Bureau of Energy Efficiency who is a member of the Indian team for Poznan negotiations.
In the last few weeks, China and India both have reiterated that technology transfer at cheaper rates is crucial to their commitment to reduce greenhouse gas emissions without compromising on their development needs. International negotiators at Poznan are under pressure to produce a framework for technology transfer to developing countries in order to keep up the hopes of a final deal in Copenhagen by end-2009. Facts: Trends in technology transfer within Clean
Development Mechanism (CDM) projects
· Technology transfer is more common for larger CDM projects
· 39% projects (representing 64% estimated emission reductions) claim tech transfer
· Unilateral and small-scale projects involve less technology transfer
· Technology transfer is more common for projects that have foreign participants: almost half of projects with foreign participants claims tech transfer
· Host country can influence the extent of technology transfer involved in its CDM projects: The DNA approval criteria of these countries include provision for technology transfer
· 56% of the projects that involve technology transfer claim both equipment and knowledge transfers
· 32% of the projects claim transfer of equipment only
· 11% claim transfer of knowledge only
Source: Technology Transfer in CDM Study by UNFCCC, Dec 2007
