1. Introduction

Background
Article 4.5 of the United Nations Framework Convention on Climate Change (UNFCCC) states that developed country Parties and other developed Parties included in Annex II "shall take all practicable steps to promote, facilitate and finance, as appropriate, the transfer of, or access to, environmentally sound technologies and know-how to other Parties, particularly developing country Parties, to enable them to implement the provisions of the Convention." The Subsidiary Body for Scientific and Technological Advice (SBSTA) identified at its first session a list of areas in which it could draw upon the assistance of the IPCC. This Special Report was prepared in response to this request. It addresses the technology transfer problem in the context of all relevant UNFCCC provisions, including decisions of the Conference of Parties (COP), and Chapter 34 in Agenda 21. It attempts to respond to recent development in the UNFCCC debate on technology transfer, by providing available scientific and technical information to enable Parties to address issues and questions identified in Decision 4/CP.4 adopted by COP4.

The role of technology transfer in addressing climate change
Achieving the ultimate objective of the UNFCCC, as formulated in Article 2¹ , will require technological innovation and the rapid and widespread transfer and implementation of technologies, including know-how for mitigation of greenhouse gas emissions. Transfer of technology for adaptation to climate change is also an important element of reducing vulnerability to climate change.

This technological innovation must occur fast enough and continue over a period of time to allow greenhouse gas concentrations to stabilise and reduce vulnerability to climate change. Technology for mitigating and adapting to climate change should be environmentally sound technology (EST) and should support sustainable development.

Sustainable development on a global scale will require radical technological and related changes in both developed and developing countries. Economic development is most rapid in developing countries, but it will not be sustainable if these countries follow the historic greenhouse gas emission trends of developed countries. Development with modern knowledge offers many opportunities to avoid past unsustainable practices and move more rapidly towards better technologies, techniques and associated institutions. The literature indicates that to achieve this developing countries require assistance with developing human capacity (knowledge, techniques and management skills), developing appropriate institutions and networks, and with acquiring and adapting specific hardware. Technology transfer, in particular from developed countries to developing countries, must therefore operate on a broad front covering these software and hardware challenges, and ideally within a framework of helping to find new sustainable paths for economies as a whole. There is, however, no simple definition of a "sustainable development agenda" for developing countries. Sustainable development is a context driven concept and each society may define it differently, based on Agenda 21. Technologies that may be suitable in each of such contexts may differ considerably. This makes it important to ensure that transferred technologies meet local needs and priorities, thus increasing the likelihood that they will be successful, and that there is an appropriate enabling environment for promoting environmentally sound technologies (ESTs).

The Report analyses the special challenges of transferring ESTs to address climate change in the context of sustainable development. The literature provides ample evidence of the many problems in current processes of technology transfer which makes it very unlikely to meet this challenge without additional actions for the transfer of mitigation and adaptation technologies.

What do we mean by technology transfer?
The Report defines the term "technology transfer" as a broad set of processes covering the flows of know-how, experience and equipment for mitigating and adapting to climate change amongst different stakeholders such as governments, private sector entities, financial institutions, NGOs and research/education institutions. Therefore, the treatment of technology transfer in this Report is much broader than that in the UNFCCC or of any particular Article of that Convention. The broad and inclusive term "transfer" encompasses diffusion of technologies and technology co-operation across and within countries. It covers technology transfer processes between developed countries, developing countries and countries with economies in transition, amongst developed countries, amongst developing countries and amongst countries with economies in transition. It comprises the process of learning to understand, utilise and replicate² the technology, including the capacity to choose it and adapt it to local conditions and integrate it with indigenous technologies.

The Report generally makes a distinction between developed and developing countries. Although economies in transition are included as developed countries under the UNFCCC, they may have characteristics in common with both developed and developing countries.

Trends of technology transfer
It is difficult to quantify how much climate-relevant hardware is successfully transferred annually. When software elements such as education, training and other capacity building activities are included, the task of quantification is further complicated. Financial flows, often used as proxies, allow only a limited comparison of technology transfer trends over time. The 1990s have seen broad changes in the types and magnitudes of the international financial flows that drive technology transfer.

Official Development Assistance (ODA) experienced a downward trend in the period of 1993 to 1997, both in absolute terms and as a percentage of funding for projects with significant impact on technology flows to developing countries. However, in 1998 there was an increase in ODA funding. ODA is still important for those parts of the world and sectors where private sector flows are comparatively low, like agriculture, forestry, human health and coastal zone management. Moreover, it can support the creation of enabling conditions, which may leverage larger flows of private finance into ESTs in the context of overall sustainable development goals in the recipient countries.

Levels of foreign direct investment (FDI), commercial lending, and equity investment all increased greatly in recent years. These are the dominant means by which the private sector makes technology-based investments in developing countries and economies in transition, often in the industry, energy supply and transportation sectors. However, private sector investment in the form of FDI in developing countries has favoured East and South East Asia, and Latin America.

These trends are altering the relative capacities and roles of different stakeholders. The importance of the private sector has increased substantially. However, there is a definite role for governments both in providing an enabling environment for the technology transfer process as well as participating directly in it. Many NGOs support technology transfer activities.

Stakeholders, pathways, stages and barriers
Technology transfer results from actions taken by various stakeholders. Key stakeholders include developers; owners; suppliers, buyers, recipients and users of technology (such as private firms, state enterprises, and individual consumers); financiers and donors; governments; international institutions; NGOs and community groups. Some technology is transferred directly between government agencies or wholly within vertically integrated firms, but increasingly technology flows depend also on the co-ordination of multiple organisations such as networks of information service providers, business consultants and financial firms. Although stakeholders play different roles there is a need for partnerships among stakeholders to create successful transfers. Governments can facilitate such partnerships.

There is a large number of pathways through which stakeholders can interact to transfer technologies. They vary depending on sectors, country circumstances and type of technology. Pathways may be different for "close to market" technologies and for technology innovations still in the development phase. Common pathways include government assistance programmes, direct purchases, licensing, foreign direct investment, joint ventures, co-operative research arrangements and co-production agreements, education and training, and government direct investment.

While technology transfer processes can be complex and intertwined, certain stages can be identified. These may include the identification of needs, choice of technology, assessment of conditions of transfer, agreement and implementation. Evaluation and adjustment to local conditions, and replication² are other important stages.

Barriers to the transfer of ESTs may arise at each stage of the process. These vary according to the specific context, for example from sector to sector, and can manifest themselves differently in developed countries, developing countries and countries with economies in transition. These barriers range from lack of information; insufficient human capabilities; political and economic barriers such as lack of capital, high transaction costs, lack of full cost pricing, and trade and policy barriers; lack of understanding of local needs; business limitations, such as risk aversion in financial institutions; and institutional limitations such as insufficient legal protection, and inadequate environmental codes and standards³ .

There is no pre-set answer to enhancing technology transfer. The identification, analysis and prioritization of barriers should be country based. It is important to tailor action to the specific barriers, interests and influences of different stakeholders in order to develop effective policy tools.

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