Methodological and Technological Issues in Technology Transfer

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2.3.5 Kyoto Protocol mechanisms and the UNFCCC

The analysis of the literature on the Kyoto Protocol Mechanisms, based on the preliminary stage of development of the rules for these, suggests that if they are implemented, the Mechanisms may have potential to affect the transfer of ESTs. The extent to which Article 4.5 of the UNFCCC has been implemented is being reviewed by the UNFCCC. Given this evolving process, the IPCC has not been able to assess this matter.
The Clean Development Mechanism (CDM) and Joint Implementation (JI) can provide financial incentives for ESTs and influence technology choice. As voluntary mechanisms they require co-operation among developed and between developed and developing country Parties as well as between governments, private sector entities and community organisations.

Although much about the design and governance of the CDM remains to be resolved, some notions on the CDM are starting to emerge from a variety of new literature that has been published since Kyoto:

  • The CDM can be a means to build trust and strengthen capacity. It could strengthen working relations and understanding among partners, private sector, non-governmental organisations, and governments at various levels to enhance technology co-operation. Project based crediting could lead to tangible investments and development of local capacity to maintain the performance of these investments. These projects could incrementally assist developing countries to achieve multiple sustainable development objectives (economic development, improvement of local environmental quality, minimise risk to human health of local pollutants, and reduce greenhouse gases). Careful project screening and selection, including host community decision-makers, will assist multiple benefits for all participants.
  • There is a need to design simple, unambiguous rules that ensure environmental performance in the context of sustainable development while also favouring investment. The multilateral oversight and governance provisions of the mechanism, and the project basis of transactions, will raise the transaction costs of investment in CDM projects as compared to mitigation reduction through other more conventional means (e.g. local options or even within other Annex I countries). This increases the complexity of the transaction and shaves a portion of the economic benefit that might otherwise be attained. Critical questions under this heading have to do with how to determine the additionality of proposed projects as well as the baseline against which to assess performance and establish transferable "credits."

One important distinction is between "bilateral" or "portfolio" approaches. The bilateral approach is closest to joint implementation programmes where the host country negotiates directly with the investor about the terms of the contract. The portfolio approach would allow host (developing) countries to advance bundles of possible projects that fit with their own sustainable development objectives. Some authors argue that both models will be needed, depending on the type of project involved.

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