Methodological and Technological Issues in Technology Transfer

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9.5.2 Programmes and Policies for Technology Transfer between Countries

Energy efficiency and GHG emission abatement could be viewed as an integral component of national and international development policies. Energy efficiency is commonly much less expensive to incorporate in the design process in new projects than as an afterthought or a retrofit. In the environmental domain, we have learned that "end of pipe" technologies for pollutant cleanup are often significantly more expensive than project redesign for pollution prevention, leading to widespread use of pre-project environmental impact statements to address these issues in the planning phase. Energy efficiency should also be incorporated into the planning and design processes wherever there are direct or indirect impacts on energy use such as in the design of industrial facilities, reducing the costs for energy supply and reducing the risks of local air pollution. This has not always been the case, as shown by Callin et al. (1991) for the investment in a new paper mill in Tanzania. Local circumstances often limit even the small investments needed for cleaner production and GHG abatement, due to lack of capital, poorly developed banking systems, lack of appropriate financing mechanisms, lack of knowledge (both within the industrial and financial sectors), technology risks, and management's unwillingness to borrow funds (Van Berkel and Bouma, 1999). These barriers reduce the availability of capital, stimulating investors to keep investment costs low, which may result in selection and purchase of inappropriate technologies.

Most policies and programmes for the transfer of environmentally sound and greenhouse gas abatement technologies are national, and only a few are internationally oriented. Examples of the latter are the Greenhouse Gas Technology Information Exchange (GREENTIE) of the OECD/IEA, the PHARE programme of the European Union with Central and Eastern-Europe, and various bilateral programmes, e.g. US-AEP (U.S. and various Asian countries), Green Initiative (Japan), and the Technology Partnership Initiative of the UK. Most industrialised (donor) countries have policies in place, but strongly connected to (technology) interests of the donor country. Joint Implementation or Activities Implemented Jointly (JI/AIJ) may also be a useful energy efficiency promotion instrument. JI (see also Chapter 3) involves a bi- or multi-lateral agreement, in which (donor) countries with high greenhouse gas abatement costs in implementing mitigation measures in a (host) country with lower costs receive credit for (part of) the resulting reduction in emissions. Under CoP3 the Clean Development Mechanism (CDM) (see also Chapter 3) has been introduced as a means to accelerate emissions reduction and credit emission reductions from project activities in non-Annex I countries to Annex I countries. The criteria for JI/CDM are still in the process of development (Goldemberg, 1998). Most likely the projects should fit in the scope of sustainable development of the host country (without reducing national autonomy and with cooperation of the national government), have multiple (environmental) benefits, be selected using strict criteria and be limited to a part of the abatement obligations of a donor country (Jepma, 1995; Pearce, 1995; Jackson, 1995). Determination (and crediting) of the net emission reductions is a problem that stresses the need of well-developed baseline emissions (La Rovere, 1998), i.e. emissions that would occur in the absence of the project (Jackson, 1995). JI/CDM can prove to be a viable financing instrument to accelerate developments in CEITs and in developing countries, if implemented according to specific criteria (Goldemberg, 1998). Comprehensive evaluation of pilot projects is necessary to formulate and adapt these criteria, including the issue of crediting.

Technology assessment and selection is very important. However, often the capacity is missing, or the selected technology is determined by a donor country or by available financing (e.g. bilateral export loans or tight aid). This may lead to sub-optimal technology choices (Schumacher and Sathaye, 1998, Yhdego, 1995). An important arena for cooperation between the industrialised and developing countries therefore involves the development and strengthening of local technical and policy?making capacity, for example, for an assessment of (technical) needs. Large companies may be able to access information or resources or hire engineering companies more easily, like in the chemical industry (Hassan, 1997). SMEs and local companies have generally less easy access to external resources. Project?oriented agencies eager to show results commonly pay inadequate attention to the development of institutional capacity and technical and managerial skills needed to make and implement energy efficiency policy.

The Japanese Green Assistance Plan aims at supporting Japanese exports of energy efficient technologies to other Asian countries, including China and Thailand (Sasaki and Asuka-Zhang, 1997). It is not always clear how the technologies supported under this programme are selected. Hu et al. (1998) made a report on the transfer of dry coke quenching technology from Japan to China, as part of the Japanese Green Assistance programme and JI/AIJ. The payback period under current Chinese conditions is 7 years (Hu et al., 1998). The recipient, Capital Steel, had no choice in the technology selection, as the transfer was the product of cooperation between both governments. Projects in India (Menke, 1998; Van Berkel, 1998b), as well as Leadership Programmes under the Montreal Treaty in Thailand and Vietnam aimed at the development of the needed capacity (Andersen, 1998b; see also Box 2.1 in Chapter 2 and Section 3.4 in Chapter 3 on the Montreal Protocol). The Indian projects proved to be successful, in the sense that they built active capacity assessing needs and opportunities for energy efficiency improvement and clean technologies for industries in various regions (see also Box 9.2). Formal recognition of the acquired skills in knowledge transfer seems to be important to improve the status of a program (Van Berkel, 1998a). International partnerships of firms can be a successful tool to transfer technologies, as shown in the Vietnam Leadership Programme between various TNCs active in Vietnam and government agencies to phase out the use of CFCs in the Vietnamese electronics industry (Andersen, 1998b). The example of bilateral cooperation between U.S. electronics manufacturers and Mexican suppliers helped to overcome some of the barriers in information supply and access to technology and financing (Andersen, 1998c).


The basis of successful technology transfer is the capacity to adapt, operate and integrate a new technology. The National Cleaner Production Centre (NCPC) Programme is a global project managed by UNIDO, together with UNEP. The Programme aims to facilitate the application of cleaner production in industry and the incorporation of the concept in policies of developing countries and economies in transition. In collaboration with a host institution, the programme establishes a unit (called NCPC) that provides continuous support to cleaner production initiatives in companies, business organisations, and local and national governments. An NCPC undertakes four sets of activities: in-plant demonstrations, training, information dissemination and policy advice. These activities can differ in intensity and form, depending on the situation in a country. The programme has established NCPCs in Brazil, China, Costa Rica, India, Czech and Slovak Republics, El Salvador, Guatemala, Honduras, Hungary, Mexico, Nicaragua, Tanzania, Tunisia, and Zimbabwe. New centres are being established in Slovenia, Croatia, Vietnam, and Morocco. Experiences with the NCPCs have showed that disseminating knowledge on cleaner production and showing the gains were not sufficient to spur the demand in industry. The programme will need to improve the identification of the needs of companies and responding to these needs. There is a need to formalise the process, e.g. by linking cleaner production concepts to certification systems like ISO 14000. Replication needs several prerequisites to be successful including: effective environmental policy, regulation and enforcement, environmentally sound behaviour (embedded in society); the use of operational, accounting and management systems for data collection in industries; and a relation between cost of inputs, waste and emissions and the proceeds of the output. Access to adequate financing is also necessary to enable industry to invest (Van Berkel, 1998b).

As industrial development increases, capabilities for technology assessment and selection improve, as evidenced by the case study of pulverised coal injection for blast furnaces in the steel industry in Korea (Joo, 1998c), as well as by investment projects in new cement plants in Mexico (Turley, 1995) and Chinese Taipei (Chang, 1994). It is stressed that development of technical capabilities is a continuous process, because it takes large resources to build up a knowledge infrastructure, and the key to success is so-called "tacit knowledge" (unwritten knowledge obtained by experience) (Dosi, 1988), which is easily lost. The greater the existing capability, the greater the opportunities are for gaining knowledge from industrial collaboration and technology transfer (Chantramonklasri, 1990). Finally, language can be a barrier in successful transfer of a technology, especially when working with local contractors or suppliers (Hassan, 1997).

Agreement and Implementation
As in adoption of technology and practices within countries, adoption across countries depends on the motivation of management and personnel, external driving forces, e.g. legislation and standard setting, economics (i.e. profitability), availability of financial and human resources, and other external driving forces (e.g. voluntary agreements). Financing in particular may be more difficult, hindered by high inflation rates, and needing hard currencies to acquire technologies. Budgets of multilateral financing institutes are relatively small, while bilateral financial assistance schemes may influence the technology selection (see above). The example of the Montreal Protocol Multilateral Fund shows that efficient and effective financing mechanisms can be deployed, although specific barriers may delay the financing schemes, as happened in Mexico (Andersen, 1998c). The case studies have shown that financing schemes for small companies, e.g. soft-loans, subsidies and tax credits, may help to improve the adoption rate (TERI, 1997). Large companies in NICs seem to have easier access to capital, as shown by the case studies for the steel industry in Korea (Joo, 1998a,b and c). Trade barriers, such as import taxes, can influence the economic assessment, and hence technology selection and implementation.

Evaluation and Adaptation
Adaptation of technologies to local conditions is crucial. There is a great need for technological innovation for energy efficiency in the developing countries and CEITs. The technical operating environment in these countries is often different from that of industrialised countries. For example, different raw material qualities, lower labour costs, poorer power quality, higher environmental dust loads, and higher temperatures and humidities require different energy efficiency solutions than successful solutions in industrialised country conditions. Technologies that have matured and been perfected for the scale of production, market, and conditions in the industrialised countries may not be the best choice for the smaller scale of production, raw materials used or different operating environments often encountered in a developing country. Transferred technologies seldom reach the designed operational efficiencies, and often deteriorate over their productive life (TERI, 1997) due to several reasons. Improper maintenance, inadequate availability of spare parts and incomplete transfer of "software" are some of the problems. This stresses the need for effective adaptation strategies, including transfer of technical and managerial skills (see also Box 9.3). Technical training is a very important aspect of a technology transfer (Hassan, 1997), and should preferably be done in the local language.

Much of China's coal consumption is in inefficient polluting equipment. Coal burning is a major contributor to air pollution in many Chinese cities. The average boiler efficiency of small and medium capacity industrial boilers, which consume approximately 1/3 of China's annual coal production, is only 60 to 65% (LHV, Lower Heating Value). In China there are already about 2000 fluidised bed boilers burning low grade coal. However, almost all of them are bubbling fluidised bed combustion (BFBC) boilers that have performance disadvantages and development limitations. In OECD countries, a new generation of circulating fluidised bed combustion (CFBC) concept has been developed. CFBC addresses the problems of combustion efficiency and air pollutant emissions. It was decided to demonstrate imported CFBC technology to China's coal users. Ahlstrom Pyropower was selected as the technology supplier. The project aimed to demonstrate CFBC technology at an existing industrial site, and enhance the capacity of China to design, manufacture, install and operate CFBC systems in various sizes with the flexibility to burn numerous coal types. The planned project costs of US$8.5 million (M$) were exceeded by 2 M$. UN funds provided 2 M$ and the Chinese Government provided 8.5 M$. Government input in kind was estimated at RMB 292 million (35.3 M$*) to meet other costs in China. The cost overrun was due to additional auxiliary equipment that needed to be imported. Eight training groups consisting of 16 researchers and engineers were trained in OECD countries, while over 174 Chinese engineers participated in a training workshop held in China. The R&D facilities provide a necessary tool for CFBC technology development in China. At least seven domestic boilermakers are now involved in CFBC design and construction, with a total of over 200 units either in operation, construction or under contract (Williams, 1998).

* This figure is based on a currency exchange rate from November 1999.

In practice, adaptation practices vary widely in various countries. For example, Chinese enterprises have spent, on average, only 9 (US) cents on assimilation for every (US) dollar on foreign technology. In contrast to countries as Korea and Japan where the amounts spent on assimilation were greater than those spent on technology itself (Suttmeier, 1997). Countries in a later stage of industrialisation may be better equipped for adapting technologies to the local industrial environment, while countries or companies in an earlier stage may (have to) rely more on the foreign suppliers of technology. Equipment suppliers may license part of the construction or parts supply to local firms. This is illustrated by the construction of an advanced steel plant in Korea, which was partly done by Samsung Heavy Industries (Worrell, 1998), as well as examples in the construction of cement plants in India (Somani and Kothari, 1997), Mexico (Turley, 1995) and Chinese Taipei (Chang, 1994). The examples in Korea, Mexico and Chinese Taipei show a heavy involvement in technology procurement, design and management. The Korean and Mexican firms belong to the largest producers in the world of respectively steel and cement.

Replication and further development of practices and technologies in developing countries and CEITs is needed. It is also a heavily debated issue involving intellectual property rights (see Chapter 3), and dependence on (foreign) technology suppliers. Many industrial technologies are privately owned, although (part of) the (pre-competitive) research may have been publicly funded. When transferring dry coke quenching technology to China the proprietary rights stayed with the Japanese technology providers for a period of 10 years, avoiding replication in China for a long period (Hu et al., 1998). A clear (legal) framework is needed to improve adaptation and replication of technology (ESETT, 1991). Technology transfer projects need continued support from the technology supplier. This is beneficial to both the technology user and supplier. The user can benefit from experience from other licensees, and the licensor gets an opportunity to gain further market entrance. Experience has shown that reasonable plant performance will improve future business opportunities (Hassan, 1997). However, technology owners may be hesitant to share all parts of a technology, including "software", without sufficient legal protection in the country of the user (see Chapter 3).

Various concepts of replication and development are demonstrated by other case studies. Waste Minimisation Circles were started in a few regions in India, and are now replicated in other sectors and regions (Van Berkel, 1998a). UNIDO/UNEP replicated National Cleaner Production Centres in various developing countries and CEITs (Van Berkel, 1998b). Replication of programmes and experiences as a form of South-South cooperation is demonstrated by the transfer of the Indian auditing programme to Jordan (Menke, 1998). The examples of furnace technology development for SMEs in India through joint organisations (e.g. research institutes, NGOs) demonstrate the benefits of combining the experiences and strengths of various partners in innovative development and implementation schemes (TERI, 1997). Countries possessing a higher technical capability are faster to replicate and develop a technology. The first implementation of pulverised coal injection in a blast furnace in Korea made it possible to replicate the technology in another plant (Joo, 1998c) of the same company. The examples of the FINEX (fine-ore-based smelt reduction) process development, as well as the development of the HYL direct reduction process in Mexico (Zervas et al., 1996), illustrate the capability of companies in NICs to develop a new process. The advanced FINEX project is an example of technology cooperation between the Austrian supplier and the Korean industry (Joo, 1998b). The steel sector is an industry with relatively frequent and open communication. In other sectors, e.g. the chemicals industry, process and technology knowledge is proprietary, limiting replication and development for developing countries and CEITs. Licensors and contractors are interested in the successful transfer of proprietary technology to secure future sales (Hassan, 1997).

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