Financing is an important dimension of environmentally sound technology transfer.
This chapter looks at the practical issues involved in conducting technology
transfers, and explores a wide range of mechanisms and approaches. Initiatives
need to be carefully tailored to the relevant circumstances and objectives.
Many environmentally sound technologies (ESTs) are essentially new - often requiring
change and innovation in the relevant institutions to support their transfer,
such as new partnerships, new financing mechanisms, new information distribution,
and new models for participation.
Public finance has a crucial role in supporting transfer of ESTs, especially in the absence of pricing that incorporates environmental costs. Public finance has different roles than private finance, which can vary by investment type and sector. For example, it is more important for long-term and infrastructure investments. Public finance remains central in the coastal zone adaptation and transport sectors, and still plays a large role in the energy sector despite growing private finance in some countries. There has been increasing interest in opening public infrastructure development to the private sector, for example, by privatising state owned companies, opening markets to competition, and opening projects to private finance.
Official Development Assistance (ODA) is still significant for the economies of the poorest developing countries. There is increasing recognition that ODA can best be focused on mobilising and multiplying additional financial resources. ODA can also assist the improvement of policy frameworks and take on long-term commitments to capacity building. Donor coordination by the host country is key to avoiding distortions such as those induced by tied aid, which can be detrimental to the technology transfer process, preventing the establishment of the institutions to support technology choice, financing, operation and management, etc. More generally, trade support (e.g., export credits) rarely takes account of environmental factors and may in many respects be biased against environmentally sound technologies.
Because of the ongoing shift in many countries from the public to the private sector as a principal source of finance, maximising the support for technology transfer may require a new degree of financial innovation and an increased emphasis on new or different forms of finance such as microcredit, leasing and venture capital. While the private sector has started a number of environmental initiatives, there is scope for governments to enhance these mechanisms through partnerships.
There is a need for adequate resources to enable adequate project preparation in the agreement stage of all pathways, yet this is precisely the area where funding can be most difficult to obtain, particularly for private-sector-driven and community-driven pathways. Project preparation needs to consider issues of financing and participation. There is wide scope for governments, both industrialised and developing, as well as multilateral organisations, to provide support directly for the project preparation process in private-sector-driven and community-driven pathways.
Public-private partnerships are becoming increasingly important, because the relationship between government and private finance has changed considerably in recent years in many countries. These partnerships can involve a mixture of governments at national and local levels, private firms (companies), private financial institutions, and non-governmental organisations. Examples include voluntary agreements, technology partnerships, information dissemination to the financial sector and support for the development of innovative financial instruments. There have been a number of examples in these areas, many of them funded by the multilateral development banks and the Global Environment Facility (GEF).
Technology intermediaries are an important form of financing and/or partnership that can overcome barriers associated with information, management, technology, and financing. Information clearinghouses are simple forms of technology intermediaries, but policies can create an environment that encourages more sophisticated forms of technology intermediaries, such as technology-specific national-level institutions, energy-service companies, and electric power utilities.
There is scope for governments to more formally organise, develop and report on the practical initiatives they undertake in support of environmentally sound technology transfer. A formal programme could monitor activities, disseminate best practices, and develop new ideas and initiatives. These initiatives could encompass a variety of action-oriented interventions that support technology transfer, typically based on addressing specific problems, and incorporating both private- and public-sector involvement.
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