Methodological and Technological issues in Technology Transfer

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2.2.2 Official Development Assistance and Official Aid

ODA/OA remains the main conduit for government supported technology transfer efforts, particularly those aimed at the poorest developing countries. By definition, support to a developing country counted as Official Development Assistance must be both developmental and concessional. ODA statistics are collected from members of the OECD's Development Assistance Committee (DAC), which consists of 21 OECD member governments (of 29 total) and the Commission of the European Communities (see also Section 5.2.2 on ODA).

DAC statistics describe aid flows (grants and loans) to recipients by major category of expenditure. In addition to ODA/OA, data are collected on other official flows, private market transactions, and assistance from non-governmental organisations to each recipient country and recipient countries combined. The OECD also reports on development assistance provided by other groups (OECD, 1998a).

ODA involves much more than technology transfer and looking at overall ODA trends tells little about actual financial flows for this purpose, except to set an upper limit on official government transfers. The OECD's Creditor Reporting System (CRS) is an information system comprising more detailed data on the components of ODA and other lending by the official sector. Data relate to individual grant and loan commitments and specify their purpose, tying status, and, for loans, terms of repayment. The DAC Secretariat converts the amounts of the projects into US dollars using annual average exchange rates. Approximately 15,000 transactions are recorded annually. The CRS does not report details on aid flows from NGOs, non-DAC donors, FDI, unguaranteed bank lending, or portfolio investment (Felcke, 1997).

DAC/CRS statistics on the purpose of aid cover three dimensions: the sector of destination, the nature or form of the aid, and the policy objectives of the aid. Three of 26 principal sectors (broken down into some 200 sub-sectors) have a plausibly stronger relationship to climate change: energy generation and supply, transport, and industry. In principle, the CRS can be used to identify how much ODA (and to a lesser degree OA) is directed to these sectors. Non-sector specific aid to the environment is contained within the "multi-sector/cross-cutting" category.

The policy objectives of aid efforts are tracked across most sectors and forms of aid using a "marker system" introduced several years ago to support changing DAC policy objectives. The marker system facilitates monitoring aid in relation to cross-cutting themes (that is, issues that can be addressed through aid activities across all economic sectors), such as environment. Donor governments are supposed to report an environment-oriented policy objective for aid if the activity 1) is intended to produce an improvement in the physical or biological environment of the recipient country, area, or target group concerned or 2) "includes specific action to integrate environmental concerns with a range of development objectives through institution building and/or capacity development" (OECD, 1997b). The marker system is not used by all donor governments. In the sectors of transport, energy and industry, however, the data are reasonably complete since 1996.

The DAC has recently begun a pilot study with the secretariats of the conventions on biological diversity, desertification, and climate change to see whether the marker system can be strengthened to allow tracking of developed country financial assistance required under those conventions. The goal is to avoid creating new and possibly overlapping reporting requirements for donor governments. If implemented fully the expanded marker system would track ODA directed to sectors relevant to the objectives of the UNFCCC (see section 3.4), including buildings, transport, industry, energy, agriculture, forestry, waste management and coastal adaptation. Results of the pilot study will be available in March 2000 from the DAC Working Party on Statistics, and will be presented to SBSTA 12 in June 2000 (UNFCCC, 1999).

Apart from operating various reporting systems, the DAC helps donor governments share information about each other's aid programmes to promote coordination and avoid overlap. In November 1996, the OECD Working Party on Development Assistance and Environment gathered basic information about donor strategies, policies and programmes involving what it called "cleaner technology" (OECD, 1997a). In their responses to a questionnaire, about half the donors identified cleaner technology as a major focus of their technology cooperation activities. The other half of the donors responding reported minor or negligible emphasis on cleaner technology approaches.

Support for overall capacity development to use cleaner technology was the most important goal of activities directed towards cleaner technology. Demonstration projects, training, and education were the main instruments used. This highlights the importance of ODA/OA in leveraging funds for technology transfer, particularly in developing capacity to make good technology choices and use improved technologies.

Virtually all donors saw the private sector in developing countries as a major target for cleaner technology activities, with the establishment of joint ventures between enterprises in their countries and developing countries a primary goal. This blurring of the formerly distinct role of government in ODA is one characteristic change in recent years; many governments now view their primary role in technology transfer as facilitating the role of the private sector in transferring hardware and skills, particularly those from the donating country. The creation of networks between business associations in industrialised and developing countries and the development of new types of public-private partnerships were identified as areas of growing interest for donors.

In the majority of donor countries aid organisations are not the only agencies supporting the transfer of environmental technology. Environment and trade departments, export promotion agencies, and research and development agencies are also involved in ODA efforts related to cleaner technologies, pointing to the need for coordination within both donor and recipient governments.

Ten donors responding to the OECD survey reported using export promotion programmes to support the transfer of environmental technologies, although the promotion of environmental technology is not always an explicit goal of such schemes. Risk funds and seed funds, as well as financing for small-scale investment, were identified as special financing instruments to support cleaner technology. Financing for patent right acquisition is generally not provided.

ODA Trends
The OECD (1999c) reported that in 1998 ODA reversed a five year downward trend, rising to US$51.5 billion from US$47.6 billion in 1997, an almost nine per cent increase in real terms (Figure 2.1). Official aid to economies in transition amounted to some US$5.4 billion in 1998, a slight decrease from 1997. The technical cooperation component of ODA in 1997 was US$13 billion, with some US$1.3 billion spent on students and trainees.

The OECD's summary of 1998 ODA (OECD, 1999c) notes that the recovery in aid in 1998 was in part due to the timing of contributions to multilateral agencies and short-term measures to deal with the Asian crisis, but also reflected some members' commitments to maintain or increase aid flows. Fourteen of the 21 DAC Members reported a rise in ODA in real terms, but the percentage of GNP spent on ODA averaged 0.23 percent for DAC member countries; only Norway and Sweden maintained ODA above the United Nations target of 0.7 percent of GNP (OECD, 1999c).

Looking at trends, DAC countries' ODA to transport, energy, and industry sectors in 1993 to 1997 amounted to US$47 billion. In comparison to their total bilateral ODA, aid to transport (US$24 billion) was nine per cent, aid to energy generation and supply (US$20 billion) eight per cent, and aid to industry (US$3.5 billion) one per cent.

Aid to transport can be further broken down to road, rail, water and air transport. Half of all activities were to support road transport and one-fourth to support rail transport. Water and air transport received 15 per cent of aid to transport each. On the basis of the "aid to environment" marker data (which are reasonably complete since 1996), over 60 per cent of aid activities in the transport sector addressed environmental concerns as a significant objective.

Regarding aid to energy projects, CRS data allow a distinction between that directed to renewable and non-renewable sources. Roughly one-third of aid to energy in 1993 to 1998 was allocated to "renewable sources", one-third to "non-renewable sources" and one-third to electrical transmission and distribution. Hydro-power is by far the largest component (75 per cent) in the renewable category, but aid activities in the field of geothermal, solar and wind power have been increasing during the last few years. Projects involving coal-fired power plants make up the largest component in the non-renewable energy generation category. Over 70 per cent of all aid activities in the energy sector, and 95 per cent involving coal-fired power plants, were marked against aid to environment as a significant objective.

Aid to industry has decreased during the 1990s. In particular, there has been a substantial drop in aid to fertiliser, chemicals and cement manufacturing, and to the basic metal and transport equipment industries. Industrial development and SME development are at present the largest sub-sectors. Approximately 40 per cent of aid to industry are reported as having environment as a significant objective.

Finally, there has been an increase in aid flows to general environmental protection. This may be partly due to the revision of the DAC sector classification in 1996, which clarified the reporting of environment-related aid activities. The total for 1993 to 1997 was close to US$5 billion. Slightly over 20 per cent of this amount was reported to be for flood prevention/control, nine per cent for biosphere protection (air pollution control, ozone layer preservation and marine pollution control) and eight per cent for biodiversity conservation. The remainder was reported as aid to environmental policy/administrative management and unspecified environmental protection activities.

The sectoral data can be broken down by recipient, giving some idea about aid targeting by donor countries. Bilateral aid to energy, for example, has been highly concentrated on Asia, the region with the largest growth in CO2 emissions. The ten largest Asian recipients - India, China, Indonesia, Pakistan, Philippines, Thailand, Viet Nam, Malaysia, Sri Lanka and Bangladesh - have received 63 per cent of DAC Members' bilateral aid to energy since 1980. The extent to which aid has influenced the path of energy development depends on the relative importance of ODA in overall energy sector finance. But as noted above, aid can contribute in ways that are not quantifiable, transfer of technology through aid projects also means transfer of knowledge, which in turn can influence developing countries' internal investments in energy infrastructure. The DAC's pilot study with the FCCC Secretariat referred to above is examining this relationship, as well as the targeting of aid in other climate change related sectors.

The OECD notes that the general decrease in ODA has occurred during a period in which there have been widespread improvements in the economic and budgetary situations of DAC Member countries. The G8 Summit leaders meeting in May 1998 reconfirmed the commitment to mobilising resources for development, including a goal (among others) of promoting environmental sustainability in developing countries. The organisation notes that "... without a renewed commitment to invest adequate and well targeted resources, progress cannot be expected and achievement of the internationally agreed goals will be jeopardised" (OECD, 1998a).

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