2.2.1 Actions for all governments
Macroeconomic conditions can favour the flourishing of private sector development
include such factors as low inflation, stable and realistic exchange rates,
deregulation, free movement of capital, promotion of competitive markets, open
trade policies and transparent foreign investment policies.
An especially important barrier for the transfer of ESTs, is the existence
of externalities in the economy. The lack of internalising environmental and
social costs and the resultant underpriced energy deter investments in clean
alternatives, for instance in the buildings, industrial, and energy sectors.
Different measures to "internalise" the environmental costs of fossil
fuel use and reduce the unfair commercial risk for ESTs are now being tried
to improve the competitiveness of the cleaner energy sources. Such measures
could include regulations, taxes, codes, standards and removal of subsidies
to internalise the full environmental and social costs.
EST market transformation
A market transformation approach promotes technology transfer by catalysing
sustainable markets for specific technologies, and thus harnessing the power
of market-based incentives to accomplish environmental goals. The three central
characteristics of a market are: (i) the number, nature, and capabilities of
participants, (ii) the characteristics of the products and services, and (iii)
the rules governing transactions. Properly functioning markets generally require
the availability of information, acceptable levels of risk, appropriate skills,
a system of property definitions, quality and contractual norms or standards,
oversight and intermediation bodies, decision-making autonomy for buyers and
sellers, and stable political and legal regimes. Government actions to encourage
market transformation of ESTs include:
- Foster competitive international markets by opening their domestic markets
in industry, energy and agriculture;
- Simplification and transparency of programme and project approval procedures
and public procurement requirements;
- Establishment of requirements for environmental impact assessment and environmental
- Establishment of incentives for corporations to pioneer new ways of working
with the community;
- Promote so-called "green-labelling" programmes to employ trademark
or related principles (e.g. a not-for-profit organisation allows a vendor
to use an environmental seal of approval if certain requirements are satisfied).
- Encouragement of social and technological learning between private firms
and public agencies at regional (sub-national) levels;
- Conducting of programmes that focus on the demand-side of technology transfer;
- Development of capacity for technology adaptation by small- and medium-scale
- Conducting of consumer education and outreach campaigns;
- Influencing of WTO standards to facilitate the trade products and goods
produced from the use of ESTs (PPM - products and process methods);
- Targeted purchasing and demonstrations by public sector.
Availability of and access to financing
Further efforts are needed to engage banks and other lending institutions into
financing environmentally sound technologies and projects. Such efforts may
consist of stimulating innovative financial mechanisms, public-private partnerships
and the involvement of intermediaries.
There is a wide variety of types of traditional private sector debt and equity
finance available depending on the scale and type of the project. The most flexible
finance debt is secured loan and leasing. The transfer of environmentally sound
technologies to developing countries will also involve increased use of innovation
to structure existing financial products to new markets and to develop new ones
as appropriate. Just as supporting scientific and technical innovation is seen
as an appropriate use of public funds, so can financial innovation. A number
of worthwhile initiatives have been undertaken to date (such as micro-credit,
project finance, green finance and also the use of strategic investors) and
there is scope to replicate and extend these as well as develop new concepts.
Different financing arrangements are often required at both the production and
Public private partnerships are increasingly seen as an effective way in which
the public sector can achieve public policy objectives by working with the private
sector. For the public sector they have the potential of harnessing the efficiency
of the private sector, as well as overcoming budget restrictions and leveraging
limited public funds. For the private sector, they aim to help overcome some
of the internal and external barriers which prevent appropriate technology transfer
from taking place, and to create interesting business opportunities.
Technology intermediaries, such as national-level technology transfer agencies,
electric utilities, and energy service companies (ESCOs) have gained widespread
acceptance to stimulate innovative financing schemes. They can effectively address
financial, capability as well as other institutional market barriers. An ESCO
is a firm that offers energy services to customers with performance guarantees.
Typical performance contracting arrangements provide customers with feasible
means of improving their competitiveness by reducing energy consumption costs.
Additionally, companies' cash flows are enhanced, which adds value to their
financial value. Governments and other public-sector entities can develop technology
intermediaries through direct support and other interventions.
Uncertain, slow and expensive enforcement of contracts by national courts or
international arbitration and insecure property rights can discourage investment.
Three broad types of legal risk are likely to influence decisions to invest
in advanced environmental technologies by foreign and domestic actors: Contract
risk, Property risk and regulatory risk.
Contract risk refers to the likelihood and costs of enforcing legal obligations
with suppliers, partners, distributors, managers, labour forces, construction
organisations or licensors. Property risk refers both to more familiar risks
associated with interference in asset ownership and to less visible, but also
to essential questions of corporate governance including shareholder rights
and competition laws that determine how decision making within the firm is divided
and whether firms will be able to operate in competitive markets. Regulatory
risk arises from the behaviour of public administrations, which influence economic
returns through licensing, tariff setting, taxation, and foreign exchange and
To reduce contract, property and regulatory risk, governments can strengthen
national legal institutions for intellectual property protection; strengthen
administrative and law processes to assure transparency, participation in regulatory
policy-making, and independent review; and strengthen legal institutions to
reduce risks and corruptionand to ensure that public regulation is accessible
to stakeholders and subject to review by independent authorities.
Intellectual property rights
For harnessing the bulk of international investment, intellectual property rights
(IPR) regimes are an important consideration. Overall the literature is diverse
concerning the relationship between IPRs and technology transfer. Strong IPR
regimes, generally lead to increased innovation and "vertical" technology
transfer and increased foreign investment, although it should be kept in mind
that it is not the only factor affecting investment decisions. Strong IPR regimes
could, however, depending on the holder of the patents, slow down the dissemination
of certain technologies, the so called horizontal technology transfer Where
this is the case, countries may address this concern by taking appropriate measures.
For example, the risk of unlicensed patents may be reduced by charging increasing
annual maintenance fees. If the fee becomes high enough by 5 to 10 years after
patent issuance, the owner might let an uncommercialised patent lapse. Another
option is so called compulsory licensing as specified under the international
Trade Related Aspects of Intellectual Property (TRIP) agreement and in decisions
contained in Agenda 21, provided that correct procedures are followed (generally,
they require the user first to seek a license through regular venues, to pay
reasonable compensation for the license and to practice the invention on a limited
non-exclusive basis). IPR regimes could be extended more widely to support innovation
and dissemination of ESTs. Industry standards, including management standards
developed through the International Standards Organisation (ISO) and sector
standards for some industries, could also play an important role in fostering
global dissemination of ESTs.
Multinational companies' leadership in using the same standards for environmental
performance wherever they operate.
Two key ways by which private sector firms can stimulate the more rapid adoption
of ESTs are leadership and participation. Leadership involves the senior executives
of the company making a clear commitment to addressing environmental issues,
with the consequence that all in the business are aware of these issues and
sees them as an important aspect of their work (e.g. relevant towards promotion
or bonuses). An example of leadership has been the recent clear announcement
of multinational companies to initiate ambitious GHG reduction programmes including
innovative mechanisms such as internal trading systems. Voluntary agreements
can be a useful ways of obtaining high level commitment. Participation involves
engaging employees (and others) in the environmental challenge, and encouraging
responses and initiatives from them. It should be seen as complementary (not
an alternative) to leadership. A number of companies have successfully used
participatory approaches to address environmental problems.
Consumer awareness, and product standards, industry codes and certification
Governments can work with the private sector and NGOs to establish codes, standards
and labels. This provides a framework which can work to the benefit of industry
and consumers. This route can help build markets for dispersed, small-scale
technologies where technologies are diverse, vendors are many, and consumers
face high risks in evaluating and selecting technologies and suppliers. Codes
and standards also provide a means for representing the interests of end-users
who are absent from purchase or construction decisions. Standards also reduce
risk for consumers with regard to the equipment they are purchasing.
With regard to energy use, information programmes have proven successful in
assisting energy consumers to understand and employ technologies and practices
to use energy more efficiently. These programmes aim to increase consumers'
awareness, acceptance, and use of particular technologies or utility energy
conservation programmes. Examples of information programmes include educational
brochures, hotlines, videos, design?assistance programmes, audits, energy use
feedback programmes and labelling programmes.
For industry, energy audit programmes are a more targeted type of information
transaction than simple advertising. Industrial customers that have undergone
audits have reduced their electricity use by an average of 2 to 8%, with the
higher savings rates achieved when utilities followed up their initial recommendations
with strong marketing, repeated follow-up visits, and financial incentives to
implement the recommended measures.
An example of the effective role codes and standards can play is the International
Performance Measurement and Verification Protocol (IPMVP) used for energy efficiency.
Energy efficiency investments in the buildings, industrial, energy sectors have
been constrained due to inconsistencies and uncertainties in their performance
(i.e., actual energy savings achieved), financing for efficiency investments
has been limited and inflexible. The existence of monitoring and verification
protocols can help to reduce these inconsistencies and uncertainties.
Nowadays, Multilateral Development Banks such as the World Bank are using the
IPMVP as the technical basis for large scale energy efficiency financing. Use
of the IPMVP results in higher and more persistent levels of energy efficiency
savings and in a standardised approach to contract development, implementation
and monitoring. This uniform approach cuts transactions costs, allows project
pooling and facilitates project financing. As a result of the rapidly increasing
application of the IPMVP, there is increased energy efficiency project financing,
with improved project performance, and increased availability of lower cost
financing for energy efficiency projects.
|BOX TS2 NATIONAL TECHNOLOGY INTERMEDIARIES IN
National-level government agencies acting as intermediaries can also
be important in creating incentives and facilitating a market for cleaner
technologies. The Energy Management Centre (EMC), an autonomous agency,
under the Ministry of Power of the Government of India is an example of
a technology intermediary for energy efficiency. EMC has been carrying
out a number of initiatives to promote energy conservation and efficiency
in India. To begin with, EMC set up and trained 25 agencies (public, private,
NGOs), to provide specialised energy auditing and management to consumers
in India. Each of these agencies are carrying out on an average 10-12
energy audits annually and the feedback from the industry is that there
is an urgent need for many more such professional agencies to be able
to serve the consumers in the country. EMC also carried out a number of
studies in the area of technologies for energy efficiency, issues relating
to standards and labelling, and implements a nation wide energy conservation
awareness project. EMC annually organises through industry associations
about 20-25 training programmes and workshops for wider dissemination
of information on energy conservation in the country. To date, it is reported
that over 5000 professionals have been provided training in different
aspects of energy efficiency. Regular feedback indicated that the participants
have actually implemented energy efficiency projects in their organisations.
EMC was the executing agency for international co-operation projects with
Germany, the European Union and the Department of Energy (USA) among others.
The initiatives of the Indian Government implemented through the EMC
have resulted in a significant rise in the exposure and awareness on energy
conservation technologies. It is reported that there are proposals to
introduce standards for appliance and energy consuming devices and these
would be mandatory. Penalties for non-compliance would be enforced once
the law is passed by the Indian parliament. Under a collaborative programme
with the EU, EMC has set up an information service on energy efficiency
(ISEE), jointly with a national industry association. The database established
is expected to contain information on technologies, guide books, manuals,
best practice programmes, lists of manufacturers etc. and is expected
to fill the gap in information with energy consumers.
The Technology Information, Forecasting and Assessment Council (TIFAC)
in India was established as an autonomous organisation of the Indian Department
of Science and Technology, and has been particularly successful in making
the public-private sector linkages, providing information on patent issues,
and supporting start-up ventures. Each of these activities provides important
examples for other similar, knowledge-based technology transfer policy
The Ministry of Non-conventional Energy Sources (MNES) is the nodal ministry
responsible for providing the overall thrust and direction for increased
adoption and installation of renewable energy devices in the country.
MNES implements the programmes through the state governments and through
state energy nodal agencies. MNES has separate programmes for biogas,
solar thermal, solar PV, biomass gasifier, and for new technologies.