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Transcript

Climate change and technology transfer
R.K. Pachauri
Tata Energy Research Institute, New Delhi, India
Abstract
In recent centuries, increased economic productivity has come about predominantly
as a result of technological change, enabling greater outputs from given levels of
labor and capital. However, human progress has often come at the expense of natural resources and the environment, as is evidenced by the excessive concentration
of greenhouse gases (ghgs) in the Earth’s atmosphere, resulting in the growing
threat of climate change.
While technology is at the root of climate change, technology can also be an integral part of its mitigation. The United Nations Framework Convention on Climate
Change (fccc) emphasizes technology transfer as an important element in the mitigation of climate change. Yet, in order for technology to be an effective tool, it will
be essential to formulate a worldwide strategy that ensures proper development,
transfer, and adaptation of technologies.
This paper is an exploration of the potential role of technology transfer in the climate change regime.The discussion begins by examining the fundamental elements
of technology transfer, specifically as a component of a larger economic cycle. The
steps that will facilitate technology transfer are then considered, followed by a discussion of how the concept of technology transfer is evolving within the climate
change regime.The author then details several topics deserving of close attention in
future negotiations, including capacity building, developing information resources,
setting up knowledge networks, and establishing new mechanisms for innovative
financing. The chapter concludes with a discussion of specific elements of the Clean
Development Mechanism and the fccc as they pertain to the abilities of developing
countries to take part in climate change mitigation activities, and a summary of the
potential for developing country participation.
Introduction: What is the role of technology transfer in climate change mitigation?
The role of technology in economic decisionmaking is generally not fully understood. This is perhaps because most technological developments throughout
human history have come about as a result of individual initiatives rather than as
the direct result of specific actions by governments. There have been some cases
where government policies or investments have directly resulted in development
of specific technologies, such as with space and military technologies. However, in
177
178
1 Economics, Sixteenth Edition.
1998. Paul A. Samuelson,
William D. Nordhaus. Tata
McGraw-Hill Publishing Co Ltd,
New Delhi, 323.
2 Decision 13/CP.1.1(a) of
UNFCCC, Document
FCCC/CP/1995/7/Addendum 1.
Report of the Conference of the
Parties on its first session,
Berlin, 28 Mar - 7 Apr, 1995. Part
two: Action taken by the Conference of the Parties at its first
session, Addendum 1.
   
general, the time lag between the initial actions that spur the development of a
technology and its actual dissemination is so extended that the public loses sight
of the interrelationship. Governments also frequently embark on these programs
with a notable lack of transparency, which distances the public from what actually
happens. Yet, technological change is an important and ongoing part of human
progress, in both its positive and negative manifestations.
Technology has provided the human population a means of avoiding the
Malthusian prediction of total disaster. Thomas Malthus stated that
“...as population doubles and redoubles, it is exactly as if the globe were halving and halving again in size until finally it has shrunk so much that food and subsistence fall below the level necessary for life. Because of the law of diminishing
returns applied to nature’s fixed supply of land, food production tends not to keep
up with the population’s geometric-progression rate of growth.” 1
However, Malthus believed capital and labor were locked into a rigid, linear
relationship. He clearly did not realize the role that technology could play in altering the productivity scenario over time. In recent centuries, increased economic
productivity has resulted predominantly from technological change enabling
greater outputs from given levels of labor and capital.
While Malthusian predictions effectively have been evaded, unfortunately, the
role of natural resources and the environment in the production process has generally been ignored. Consequently, human progress has been accompanied by
growing misuse and abuse of natural resources, one repercussion of which is the
excessive concentration of greenhouse gases () in the Earth’s atmosphere,
resulting in the growing threat of climate change.
While technology is at the root of climate change, it should also be an integral
part of its mitigation. However, the effectiveness of such an application will be
reliant not only on new directions for technological development, but also on an
improved dissemination process—enabling swift and efficient global distribution.
The importance of technology transfer, therefore, arises from the fact that the current system has inherent weaknesses that frequently hinder expeditious distribution, particularly from developed to developing countries. If the global problem
of climate change is to be addressed, then a worldwide strategy that ensures proper
transfer, adaptation, and development of technologies will be necessary.
The United Nations Framework Convention on Climate Change (),
which was accepted during the Rio Summit on Climate Change in 1992, emphasizes transfer of technology as an important element in the mitigation of climate
change. Yet, since then, progress in this area has been slow. In fact, a precise definition of what needs to be done has not yet been established. At the First Conference of the Parties ( ) in Berlin, it was determined that the Convention Secretariat would have to
“… prepare an itemized progress report (according to the types of activities
specified in paragraphs 34.15 to 34.28, inclusive of Chapter 34 of Agenda 21) taken
by the Parties listed in Annex II to the Convention with respect to their commitments related to the transfer of environmentally sound technologies and the knowhow necessary to mitigate and facilitate adequate adaptation to climate change.”2
In subsequent sessions of the  and its various subcommittees, emphasis has
been placed on the software and policy aspects of technology transfer. As far back
as the meeting of the Subsidiary Body for Implementation () in February and
March of 1996, the term technology transfer was clarified to include practices and

179
processes for enhancing removals by sinks as well as facilitating adaptation to climate change. These may include soft technologies such as capacity building, information networks, training, and research; and hard technologies such as equipment for controlling, reducing, or preventing anthropogenic emissions of 
in the energy, transportation, forestry, agriculture, and industry sectors.
What is involved in technology transfer?
To fully understand the process of technology transfer, it is important to examine
technology within the larger economic context. In the ultimate analysis, government support for the development or dissemination of technology will only take
it so far. The final phase of adaptation and use of any technological process or
innovation will happen only if there is economic rationale for its use. Typically,
therefore, whether or not government programs focus on the development of a
particular technology, the crucial final steps required for commercialization may
not be taken, simply because an economic agent may not find the technology to
be economically beneficial.
The same considerations must also apply to the transfer of technology from
developed to developing countries, mainly because the actual movement of hardware or equipment from one country to another is only one component in the
economic process. The technology being transferred must effectively fit into the
overall cycle. A transferred technology may fail if the skills and capacity to maintain it at a level that is economically advantageous are expensive or not available.
If a technology is economically viable in and of itself, then it is essential to provide
the necessary resources for maintenance of the equipment and processes inherent
to the technology, at a cost that makes its adaptation economically beneficial.
Along these lines, a technology that is inherently labor-saving cannot be justified in a labor surplus economy, and equipment that is energy efficient will not be
accepted or disseminated unless the existing price of energy reflects scarcity to an
extent that would economically justify energy saving measures. It is therefore
important to understand that the proper development and transfer of technologies for mitigation of climate change must be preceded by the establishment of
conditions that make the technology economically attractive. There are two major
prerequisites in this context:
• The development of local capacity, skills, and know-how must match requisite
levels of technological change, innovation, and up-grades.
• Prices of both the inputs and outputs for the production process of a given
technology must be rationalized to remove any distortion that would skew the
choice of technology.
Development of local capacity should not be limited to technical and scientific
training. Rather, it should aim at development of infrastructure that will enable
the rational introduction and use of appropriate technology. Developed countries
have, for the most part, increased their incomes using technology with high pollution levels. Only when income has reached a certain peak has environmental
improvement been given attention and allocated appropriate resources. However,
experience has shown that properly defining property rights, creating awareness
of the costs and benefits of environmental quality, and strengthening institutional
frameworks for regulation and monitoring of environmental laws can significantly lower the peak of the Environmental Kuznets Curve.3
3 The Environmental Kuznets
Curve is basically a representation of the relationship
between environmental quality
and income.
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   
Historically, in developed countries, environmental quality deteriorated until
incomes reached fairly high levels before environmental protection became a
focus. Developing countries should be able to bring about improvements in environmental quality at much lower income levels. Developing countries are now in
a unique position to benefit from the developed country experiences with institutional innovations for preserving and improving the environment. At the same
time, developed countries have an opportunity to help create this capacity for
environmental improvement in developing countries, which is an essential prerequisite for the adoption of appropriate technologies.
What are the steps that will facilitate technology transfer?
The Intergovernmental Panel on Climate Change () has stressed the importance of technology transfer as an element of global warming mitigation strategy.
Responding to the needs of the governments that are party to the , the Panel
completed an in-depth special report that covers all aspects of technology transfer in the context of climate change.
Theoretically, in a perfect world, markets would operate without constraints or
restrictions, including political barriers. Under such circumstances, technology
transfer would take place in a manner that led to efficiency in all areas of production. In an ideal world, it would be expected that technology, capital, and other factors of production would flow to those places where the costs of production,
goods, and services would be minimized. Unfortunately, this is not the case. Even
in the most progressive market-based economic systems, technology transfer is
restricted—both explicitly and implicitly—in the form of existing legislation or
specific government policies.
The existing global market is rife with imperfections that render it non-conducive to the unrestrained flow of technologies between states. Additionally,
another detractive element has existed since before the industrial era—the excessive use and mistreatment of natural resources and the environment. In essence,
these resources have not been valued as assets to be maintained and preserved. As
mentioned earlier, it is always important to examine technological advancement
If technology transfer is to be successful, then development of local capacity
before the actual flow of any hardware is essential. This applies not only to the
adoption of the incoming technologies, but also possibly to the adaptation of
technologies for local conditions.
within the context of the larger development and economic picture. The excessive
concentration of  in the Earth’s atmosphere, for example, is the direct result
of externalities: the cost of remedying the damage done is not being included in
the price of the use or production process of fossil fuels. Due to the nature of the
emissions, the cost of addressing their effects has now been imposed on the global
population.
The future of technology transfer will depend greatly on suitable capacity being
created in developing countries, and on institutional arrangements being made
for successful implementation of environmental policies. However, another initiative that could result in significant benefits would involve research and development partnerships between industrialized and developing countries. This

arrangement would not only have the cost advantages of the generally less expensive technical and scientific staffs in developing countries, but it would also create
conditions for technology absorption in the developing countries. Now that intellectual property rights are more precisely defined at the global level, there is much
greater incentive for contractual agreements between entities in developed and
developing countries.
In order to facilitate technology transfer between developed and developing
countries, bilateral and multilateral organizations should focus on creating capacity
that also requires partnership with institutions in recipient countries. These efforts
should essentially involve the development of knowledge networks that combine
the knowledge and understanding of select organizations with the responsibility for
implementation of sustainable technology choices in other organizations.
How is the concept of technology transfer evolving in the climate change regime?
If climate change is to be mitigated, then methods must be developed with which
appropriate technologies can be harnessed as rapidly and efficiently as possible.
This is particularly important for those countries that do not have the means to
develop or purchase environmentally efficient technologies. The text of the 
emphasizes that future mitigation of  emissions, particularly in the developing world, will take place only if technology transfer to developing countries is
facilitated. This will be true even for countries that are experiencing major industrial expansion or systemic economic modernization.
As mentioned earlier, technology transfer is not merely a movement of hardware or equipment. Hardware, or physical capital, is only one component of the
overall economic process. If technology transfer is to be successful, then development of local capacity before the actual flow of any hardware is essential. This
applies not only to the adoption of the incoming technologies, but also possibly to
the adaptation of technologies for local conditions.
Local capacity can be built essentially through two sets of activities. The first
group of activities is directed at human resource development; the second is
related to the software aspects of technology, which are frequently ignored in both
developed and developing countries. In this context, software can be defined as the
overall chain of policy measures, and the institutional frameworks whereby the
adoption and use of the right technology is facilitated and ensured. In a world
where economic rationale must underlie the use of specific technologies or production processes, ignoring these software aspects would effectively result in the
dumping of capital equipment or hardware. Without the underlying economic
rationale to maintain and use such hardware efficiently, this would only lead to its
disuse or rejection over time.
A crucial stage has been reached in the negotiations for implementation of the
, wherein developing countries, the non-Annex I parties, must clearly articulate exactly what is required to push the concept of technology transfer in a
manner that was intended in the . Unfortunately, while considerable attention has been paid to the political necessity of facilitating technology transfer since
the  was drafted and adopted, concrete measures and recommendations have
generally been absent. It is expected that   deliberations will provide some
attention to this subject, particularly in the wake of the  technology transfer
report.
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   
What are the technology transfer issues that
should be focused on in future negotiations?
To some extent, the ambiguity of the  has given the Annex I countries a very
convenient means by which to plead that technology transfer cannot be insured
by Annex I governments. Their argument is that the technologies are commercially available and can be purchased by the developing countries that intend to
use them. However, while this simple posture has been voiced in many forums,
reality is far more complex. The transfer of technology can, in fact, be accelerated
through government actions. Government policy would not supercede or surpass
the commercial processes by which technology transfer actually occurs. Rather, it
would assist the commercialization process—retaining the incentives and benefits
that the developer of a technology normally looks for when investments are made
in research and development and in the evolution of technological solutions. It
would be useful for non-Annex I Parties to formulate a set of concrete proposals
for future consideration. These solutions could cover the following sets of activities:
Building local capacity in developing countries
As mentioned earlier, development of local capacity requires training programs
and human resource development. These can be initiated within government
departments that are responsible for formulating incentive mechanisms and policies that facilitate technology transfer. At the grassroots level, capacity can be built
into the corporate sector by training people on specific technological innovations
that may not be easily available in some developing countries. In the past, training
programs have been favored by a number of bilateral assistance organizations.
However, there has been a general reduction in these activities. This may be happening in conjunction with the progression of industrialization in a number of
developing countries.
While traditional forms of technical training are not required to the extent that
they once were, there is now a growing need at the grassroots level for trained
managers and specialists with expertise in environmental benefits and cost-benefit assessments related to specific technological options. Ideally, training for positions such as these would not be carried out by parachuting specialists from developed countries into developing countries, but through collaborative ventures
whereby the training process takes advantage of skills and talents that are already
available in the developing countries. This would be the most durable and sustainable approach to training and human resource development.
With regard to local software capacity building, merely training government
policymakers may not be adequate. In some cases, there may be a need to create
institutions outside of the government, or to strengthen existing organizations
appropriately. One example of this is the regulatory commissions charged with the
responsibility of pricing services provided by natural monopolies such as electric
utilities. The training of regulators and officials in such organizations becomes
increasingly important if internalization of environmental costs is incorporated
into the pricing of services such as electricity or other forms of energy that are
being used in increasing quantities in the developing world. Rational pricing,
including the internalization of resource use and pollution abatement costs, is an
essential prerequisite for the use of the correct technology.

Developing information resources
Although commercial information on technology is generally available and efficiently transferred throughout the world, certain aspects of such information are
not easily available. For instance, the specific environmental benefits of technologies are not easily known and require careful evaluation, specifically under local
conditions. The practical feasibility of using a certain technology varies from one
place to another because the conditions under which the technology may be used
may vary substantially. For example, refrigerators operating in a country where
Peddling of technologies that may only have global benefits, i.e. reduction of ghg
emissions, is not likely to be successful in developing countries. Developed country policymakers must also understand, however, that technology that addresses
local environmental problems will generally be globally positive as well. Projects
that focus on local pollution levels and energy efficiency will also reduce global
ghg emissions levels.
the electricity supply has large fluctuations of frequency and voltage will need a
different compressor than those that will be used in a country where stability of
voltage and quality of power supply can be taken for granted. Different compressors will use different amounts of energy, which means that the environmental
implications of the technology will vary from one location to another.
It should also be emphasized that in a number of developing countries, while
information on specific technologies may be available, there may be a huge cost,
in terms of time and money, associated with actually attaining the information.
The establishment of networks to provide such information at zero or low cost
would make a substantial difference in the understanding, assessment, and
launching of technological initiatives for environmental protection. The International Energy Agency () has several programs for providing information
to its members, but most of these require fees. It would be useful if multilateral
and bilateral assistance organizations would help developing countries gain
access to  information that might be relevant to the country’s needs and initiatives.
Setting up knowledge networks
The importance of knowledge flows and the networks that support such flows
cannot be overemphasized. Given the vintage of the plants and equipment in
developing countries, there is much room for energy efficiency improvement. If
existing technologies are upgraded,  emissions will be reduced substantially.
However, capital is scarce in most developing countries, and there is no institutional framework for financing innovation and replacement of energy inefficient
equipment. As such, these innovations are not likely to happen without information networks and integrated initiatives, as well as capacity building measures.
Given the potentially huge economic benefits from such innovation, motivating an industrial owner to become involved with such innovative programs should
not be difficult. However, this motivation will only exist if the benefits are essentially local in nature. Peddling of technologies that may only have global benefits,
i.e. reduction of  emissions, is not likely to be successful in developing countries. Developed country policymakers must also understand, however, that tech-
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   
nology that addresses local environmental problems will generally be globally
positive as well. Projects that focus on local pollution levels and energy efficiency
will also reduce global  emissions levels.
Successful cases of local technology development and transfer of knowledge to
address environmental problems, particularly in the industry sector, have benefited
demonstrably from networks that facilitate the creation and flow of knowledge.
The Tata Energy Research Institute () is part of a coordinated effort
between small-scale industries in India, the premise of which is a knowledge
network among small-scale, local industries that require similar technical
innovations. The participating industrial partners are characterized by a large
number of small-scale units, particularly foundries, glass factories, and brick
manufacturers.
Working with the bilateral assistance organization Swiss Agency for
Development and Cooperation (), and an expert on cupolas from the
United Kingdom,  was able to facilitate a major improvement in the
design of a small foundry unit near Calcutta. This development for the
foundry industry, in partnership with the industrial manager and owner, has
had dramatic results in terms of energy efficiency improvements and emissions reductions. Since the pilot industrial unit is located within a cluster of
similar units, the chances of quick dissemination are good. It is expected that
the improved technology established in this single unit will now be emulated
by other units in the same cluster.
This innovation would not have been possible without the cooperative
efforts of the research institution and the progressive bilateral assistance
organization, and the expertise of the U.K. consultant. The final, essential,
ingredient was the foundry owner’s entrepreneurial spirit and willingness to
be involved in an innovative exercise.
Innovative financing of new technologies
The transfer of new technologies from the developed to the developing world can
be facilitated through innovative financing methods that will not necessarily subvert flows from the market. For example, the U.S. Department of Energy ()
in its various programs develops superior technologies that can be emulated at the
international level. If there is a new technology that is significantly advanced over
what is currently available, the  solicits bids for a large-scale purchase for
the production and supply of the technology. Once a bid is accepted, the 
places an order for the units, and then makes them saleable under existing market
conditions.
The market price might be much lower than the purchase price paid by the
. Were this the case, the government would subsidize the new units so that
they would not distort the market, and would therefore support similar innovations in subsequent purchases and sales. Bilateral and multilateral organizations
should specifically target programs of this nature whereby technologies can
receive a jump-start through purchases using such innovative financial methods.

What is the importance of the Clean Development
Mechanism when considering technology transfer?
The Clean Development Mechanism () is often touted as a financial opportunity whereby developing countries can promote the use of environmentally
sound technologies. This, however, is not the central objective of the . As
clearly articulated in paragraph 2 of Article 12 of the Kyoto Protocol, the purpose
of the  is basically to promote sustainable development in non-Annex I countries. Hence, technology transfer that is done merely for the reduction of 
emissions is really secondary to the objectives of sustainable development, as they
are defined by the society to which such technology transfer takes place.
It is important to remember that if the  is to be used as a vehicle for technology transfer, it must meets the objectives of both sustainable development and
 emissions reductions in the host country. In order to ensure this, proper training is required for the decisionmakers that will be involved with each project. This
is important in the developed countries as well as the developing countries. However, in the developing countries the focus would have to be not on simply training
decisionmakers and project developers to evaluate  emissions reductions for
every project, but also enabling them to weigh its value in meeting the overall goal
of sustainable development, as complex as this task would undoubtedly be.
Why is technology transfer so integral to the fccc?
Two other aspects must be discussed in the context of technology under the .
First, there would be lasting and tangible benefits from the establishment of
research partnerships between developed and developing countries. The World
Trade Organization () and the current patenting regime now cover most
countries, which means that intellectual property rights are fairly secure internationally. It should therefore be possible to ensure that contractual arrangements
between developed and developing country organizations minimize the possibility of disputes or misuse of intellectual property rights. This will create a number
of opportunities for joint technology development, which might even be achieved
at substantially lower cost than if the technology were developed solely in a industrialized country. The computer software industry is already realizing the advantages of such a scenario. A number of software companies that are based in developed countries are establishing facilities in countries like India, where the city of
Bangalore is already acquiring the characteristics of a new silicon valley.
Second, while all of the micro-level initiatives and programs can be taken in
hand as discussed above, it is vitally important for developing countries to start
shaping and developing a technology vision for the future, including initiatives to
ensure environmental protection and natural resource conservation at the local
level. This is an area where efforts must be made to involve think tanks and
research organizations in both developing and developed countries. The Batelle
Memorial Institute and the Electric Power Research Institute recently undertook
an important initiative that effectively shut out institutions and organizations
from developing economies. Given that the impact of technological innovations
in the next century will be the greatest in developing countries, this is fairly egregious. The developing world is likely to experience major energy-related expansion, specifically in the industry and transportation sectors, as well as with the
increased purchase of the household use of consumer durables (i.e. large electrical appliances).
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Conclusion
Developing country governments and organizations must take the initiative by
articulating long-term technology policies and developing technology visions for
the future. Multilateral and bilateral organizations can play an important role by
supporting these efforts. It may even be necessary to think in terms of this being
the first step for key developing countries where governments, domestic corporate
entities, and local research organizations can collaborate with multilateral and
bilateral organizations to examine the prospects for future economic growth. In
order for this to be successful, technology policies will have to be in place to ensure
that projects with local benefits will also result in positive global environmental
outcomes.
It is time that the developing countries come to understand the benefit of such
an exercise and articulate the need for cooperative action involving all of the key
players. It is also time that, in the context of technology transfer, the Group of 77
and China develop a detailed proposal for  , and for subsequent exercises
that will be undertaken for implementation of the Kyoto Protocol and the .
This is an area in which institutions like  have substantial experience. It would
be ideal if  could join with other organizations to develop a road map for a
future that would serve the interests of both developing countries and the global
community at large.
R K Pachauri is the Director of the Tata Energy Research Institute (teri) in New Delhi.
Dr. Pachauri is an engineer turned economist and environmental scientist. He is a
Visiting Research Fellow at the World Bank Group, and a part time adviser to the
Administrator for Energy and Sustainable Management of Natural Resources of the
United Nations Development Programme. Dr Pachauri has served in numerous
capacities for various international committees and boards, including the Board of
the International Solar Energy Society; the World Resources Institute Council; the
Work Group A – World Energy Council Committee on Developing Countries (President, 1988, Chairman, 1989–90); the International Association for Energy Economics
(President, Asian Energy Institute); and the Intergovernmental Panel on Climate
Change (vice chairman, 1997–2001). He is also author of 20 books and numerous
papers and articles. In the fall of 2000, he held the McClusky Fellowship in Conservation at the Yale School of Forestry and Environmental Studies.
Tata Energy Research Institute
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