Synthesis Report - Question 7

Climate Change 2001: Synthesis Report

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Transfer of technologies between countries and regions would widen the choice of options at the regional level, and economies of scale and learning will lower the costs of their adoption.

Adequate human and organizational capacity at every stage can increase the flow, and improve the quality, of technologies transferred within and across countries. The transfer of environmentally sound technologies has come to be seen as a major element of global strategies to achieve sustainable development and climate change mitigation. The local availability of technical, business, management, and regulatory skills can enhance the flow of international capital, helping to promote technology transfer. Technical skills are enhanced by the creation of competence in associated services, organizational know-how, and capacity improvement to formulate and enforce regulations. Capacity building is a continuous process that needs to keep up with the evolution of mitigation options as they respond to technological and social changes.

WGIII TAR Sections 2.4.5 & 10.3.3, & SRTT SPM

Governments through sound economic policy and regulatory frameworks, transparency, and political stability can create an enabling environment for private- and public-sector technology transfers. At the macro-level, actions to consider include reform of the legal system, protection of intellectual property rights, open and competitive markets, reduced corruption, discouragement of restrictive business practices, reform of export credit, political risk insurance, reduction of tied aid, development of physical and communications infrastructure, and improvement of macro-economic stability. At the sectoral and project levels, actions include fuel and electricity price rationalization, energy industry institutional reform, improving land tenure, transparent project approval procedures, ensuring assessment of local technology needs and social impact of technologies, cross-country R&D on innovative technologies, and demonstration programs.

WGIII TAR Section 10.3.3 & SRTT SPM

Networking among private and public stakeholders, and focusing on products and techniques with multiple ancillary benefits that meet or adapt to local development needs and priorities foster effective technology transfer. National systems of innovation (NSI) can help achieve this through activities such as (a) strengthening educational institutions; (b) collection, assessment, and dissemination of technical, commercial, financial, and legal information; (c) technology assessment, demonstration projects, and extension services; (d) supporting market intermediary organizations; and (e) innovative financial mechanisms. Increasing flows of national and multilateral assistance can help to mobilize and multiply additional financial resources, including official development assistance, to support NSI activities.

WGIII TAR Section 10.3.3 & SRTT SPM

For participating countries, an increasing scale of international cooperation, such as emissions trading14 and technology transfer, will lower mitigation costs.

Box 7-1: Bottom-up and top-down approaches to cost estimates: critical factors and the importance of uncertainties.

For a variety of reasons, significant differences and uncertainties surround specific quantitative estimates of mitigation costs. Cost estimates differ because of the (a) methodology used in the analysis, and (b) underlying factors and assumptions built into the analysis. Bottom-up models incorporate detailed studies of engineering costs of a wide range of available and anticipated technologies, and describe energy consumption in great detail. However, they typically incorporate relatively little detail on non-energy consumer behavior and interactions with other sectors of the economy. The costs estimated by bottom-up models can range from negative values (due to the adoption of "no-regrets" options) to positive values. Negative costs indicate that the direct energy benefits of a mitigation option exceed its direct costs (net capital, operating, and maintenance costs). Market and institutional barriers, however, can prevent, delay, or make more costly the adoption of these options. Inclusion of implementation and policy costs would add to the costs estimated by bottom-up models.

Top-down models are aggregate models of the economy that often draw on analysis of historical trends and relationships to predict the large-scale interactions between sectors of the economy, especially the interactions between the energy sector and the rest of the economy. Top-down models typically incorporate relatively little detail on energy consumption and technological change. The costs estimated by top-down models usually range from zero to positive values. This is because negative cost options estimated in bottom-up models are assumed to be adopted in both the baseline and policy scenarios. This is an important factor in the differences in the estimates from these two types of models.

The inclusion of some factors will lead to lower cost estimates and others to higher estimates. Incorporating multiple greenhouse gases, sinks, induced technical change, and emissions trading can lower costs. Further, studies suggest that some sources of greenhouse gas emissions can be limited at no or negative net social cost to the extent that policies can exploit no-regret opportunities such as correcting market imperfections, inclusion of ancillary benefits, and efficient tax revenue recycling. International cooperation that facilitates cost-effective emissions reductions can lower mitigation costs. On the other hand, accounting for potential short-term macro shocks to the economy, constraints on the use of domestic and international market mechanisms, high transaction costs, inclusion of ancillary costs, and ineffective tax recycling measures can increase estimated costs. Since no analysis incorporates all relevant factors affecting mitigation costs, estimated costs may not reflect the actual costs of implementing mitigation actions.

WGIII TAR Sections 3.3-8, 7.6.3, 8.2-3, & 9.4, & WGIII TAR Box SPM-2

A large number of studies using both top-down and bottom-up approaches (see Box 7-1 for definitions) report on the costs of greenhouse gas mitigation. Estimates of the costs of limiting fossil-fuel greenhouse gas emissions vary widely and depend on choice of methodologies, underlying assumptions, emissions scenarios, policy instruments, reporting year, and other criteria.

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