Methodological and Technological issues in Technology Transfer

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10.3 Current Transfer of Climate Change Mitigation Technology

10.3.1 Current energy supply technology transfer

Energy supply technology transfer in the past
Current pathways and actors of energy technology differ substantially from historical patterns. In the 1950s and 1960s large scale power projects and rural electrification schemes financed by multilateral banks and operated by national public monopolies dominated the electricity sector, while the international oil and gas companies ruled over the exploration, development and production of hydrocarbons. Technology transfer was in fact a euphemistic term for large-scale public investments based on foreign technology and soft loans with minimal knowledge transfer and domestic capacity building. The oil crises of the seventies caused a revolution by stimulating the domestic search for oil substitution and shifting interests from supply side issues to demand side issues. The international oil and gas companies now had to negotiate with demanding governments of exporting nations and their emerging national oil companies. Requirements for training of local talent and purchasing of domestic equipment were increasingly included in new contracts. At the same time new ventures in small-scale renewable technology and energy conservation began to influence views on technology transfer. The incentives for large-scale hydro and nuclear were weakened due to environmental and social concerns. Technical assistance, including training and R&D activities, became a standard component of project financing by multilateral agencies. The emphasis gradually shifted from isolated hardware package deals to more integrated, process-oriented approaches including proper incentive structures for relevant actors. Moreover, at the same time it became clear that the diversity among developing countries was growing fast in terms of economic development potential and technological absorption capacity, which implied a growing divergence in the needs for technology transfer in the developing world.

Energy supply technology transfer in transition
In the early 1990s a second revolution followed when processes of market globalisation accelerated and energy demand growth in the industrialised countries remained low. The availability of private capital on a global scale increased greatly and competition between global vendors of technology became intense. In addition, market restructuring through liberalisation and privatisation spread from the industrialised to the developing world. This restructuring process will ultimately affect the role of government in guiding technology transfer in a major way. At the same time, the strong growth of energy demand in some parts of the world increased the range of potentially profitable technologies of interest to developing countries. At low levels of demand it does not pay to build complex refineries and long-distance pipelines. These changes are also affecting the traditional actors on the global energy scene, in particular multilateral banks and oil and gas multinationals, who are no longer concentrating on their traditional roles. Multilateral banks are keen on diversifying their portfolios of energy supply projects and have included environmental objectives besides traditional economic goals (see also Section 5.2). Special funds such as the Global Environmental Facility (GEF; see Box 5.2 in Chapter 5) have been created. Oil and gas multinationals are venturing outside their traditional domain of hydrocarbon development and production, and are involved in power projects and renewable energy technologies. They now share the global stage with major equipment vendors, emerging domestic firms, private financing institutions, independent project developers and major energy clients.

From a policy perspective these changes have important consequences. In today's dynamic market environment government policy on the level of specific technologies and isolated actors is no longer very effective and could even be detrimental. It is becoming more and more difficult to pick specific winners and losers. While formerly governments played an active role as recipients in the technology transfer process, they now concentrate more and more on regulating the rules of the game and promoting enabling policies of a general nature. This involves more attention for the proper economic incentives, the technological consequences of trade regulations and the legal aspects of innovation policies. They are now keen on facilitating technology transfer in general through creation of an adequate institutional infrastructure with high quality engineering education, promotion of R&D activities, adequate industrial standards and flexible market intermediation services.

Climate change and energy supply technology transfer
Current energy supply technology transfer is primarily driven by objectives of economic development and international competitiveness. Climate change objectives and in particular the reduction of CO2 emissions do not play a significant role. This does not imply that energy supply technology transfer has no effect on climate change, but that such effects are coincidental rather than intended. This situation could change in the next few years because of the binding commitments for industrialised countries and CEITs under the Kyoto Protocol, and also because of the opportunity to use, in addition to the measures implemented domestically, the provision for the flexible mechanisms under the protocol. At the Buenos Aires Fourth Conference of Parties (CoP4) further steps were agreed upon towards implementation of these instruments. Article 6 of the Kyoto Protocol allows for Joint Implementation (JI) projects among Annex I Parties (developed countries), which implies that emission reduction units from specific projects can be transferred between countries. Article 17 allows opportunities for international emission trading among Annex I Parties. These mechanisms could be of major interest to CEITs in Eastern Europe. Finally, Article 12 defines the new Clean Development Mechanism (CDM) as a multilateral mechanism to assist Non-Annex I Parties (developing countries) in achieving sustainable development while allowing Annex I Parties to comply with their reduction commitments3 . The intentions of the CDM instrument are particularly relevant for initiatives in the energy supply sector of developing countries, and raise the question how energy supply technology transfer can be guided in a direction which will both enhance economic development and reduce potential CO2 emissions. For this purpose it is useful to concentrate on the technologies which are inherently beneficial from both the economic and climate change perspective Section 10.2. has already discussed the categories of technology options as presented in the IPCC TP1 and listed in Table 10.2. The six categories distinguished include: efficiency improvement, switching to low-carbon fuels, removing and storing CO2, nuclear power, biomass resources and small-scale renewables.

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