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Part IV Conclusion

14 Constructing a global greenhouse regime

Conditionality and additionality
Technology transfer
Multi-pronged approach
Implementation procedures
Regional building blocks
North-'South' conflicts
Notes and references

Peter Hayes

The construction of a resilient, global greenhouse gas regime requires that state elites share a consensus as to common values and norms of behaviour; submit their respective states to observe the rules and procedures of the regime; and participate in the institutional arrangements established under the regime.

The signing of the Climate Change Convention is prima facie evidence that most national leaders agree that the global climate system must be conserved and restored, and that it must be used rationally in ways that are compatible with ecological imperatives. The rest of the interlocking elements of the regime have been left largely unspecified. Some analysts believe that states so hedged their commitments under the Convention that it merely maintains 'polluter sovereignty' and is so vague as to be almost meaningless.

I am less pessimistic, however. I am convinced that a fully fledged regime can be constructed that will achieve the goals of the Climate Change Convention. Achieving this goal will first and foremost mean activating the norms implicit in the Convention as to mutual reciprocity between, and differential responsibilities of, the rich and poor nations. Specifically, the articles on financial assistance and technology transfer (see Chapter 1) must be elaborated in protocols and implemented.

Donors may place conditions on financial transfers to the South to abate greenhouse gases. In this chapter, I outline the contrary positions held by potential parties to a Climate Change Convention on conditionality and additionality of resources for greenhouse projects in developing countries. The biggest likely demand on resources provided by the North to the South will be to fund technology transfer.

The desirability and even the meaning of technology transfer are contentious, however. I outline two important positions that have emerged in debates on this topic before turning to three aspects of multi-pronged technology transfer strategy for greenhouse gas reduction. These are: cost reduction; technical assistance and training; and information dissemination and transnational research collaboration.

For these commitments to be implemented, parties will require confidence that other beneficiaries under the Convention are not cheating. Procedures must be established to monitor and to verify compliance with convention commitments along with mechanisms to resolve disputes and to enforce compliance.

Transferral of financial resources and technologies on a scale envisaged in this study would transform North-South political-economic relations. I conclude by asking whether 'geoecological' issues such as climate change may strengthen the South's bargaining position in its geopolitical and geoeconomic relationships with the North. My answer to this question is only a qualified 'possibly'. Nonetheless a global greenhouse regime may succeed for three reasons:

1 the likelihood of continued technological innovation and associated reduction in the cost of emissions abatement;
2 the contribution of science on comprehension of the greenhouse effect;
3 the influence of social movements on governmental policy.


Conditionality and additionality

The language of the Convention implies - although it is nowhere specifically stated - that the commitment of parties to the Convention should encompass the costs of actually reducing greenhouse gas emissions in developing countries. (As developing countries carefully avoided committing themselves to abatement at this stage, they did not obtain a precise matching commitment from the developed world to fund their abatement costs but only vague statements of intention; see Chapter 1.)

A variety of conditions on providing or accepting financial assistance to abate greenhouse emissions or to ameliorate the impacts of climate change have been advanced. These include the possibility that donors will tie the aid to greenhouse abatement activities and/or require that recipients reform their energy prices and institutional structures; and on the part of possible recipients, that acceptance of such aid in no way infringes on the exercise of national sovereignty in determining the best use of development assistance and that its provision in no way reduces existing flows of official development assistance.

Some analysts have argued that transfers to the South ought not to be for any purpose. Michael Grubb, for example, suggests that the transfer should only be convertible into provision of technical assistance and equipment needed to abate greenhouse gas emissions, and not cash. Conversely, the Group of 77 have argued that funds provided for incremental abatement costs 'will be to a great extent of a compensatory nature.'

There are strong arguments that compensatory payments should be linked closely with greenhouse gas reduction activities. Most important, the resource transfer calculated in Chapters 5 and 6 was based on an obligation-topay index applied to marginal carbon abatement cost curves. This estimate did not define marginal benefits of avoiding greenhouse gas induced climate change. Thus, it does not represent an estimate of compensation that the North might owe the South for having pre-empted atmospheric space or for climate change induced damages.

In practical terms, it is also impossible to calculating monetary values for compensation. There are other advantages to providing compensation in the same dimension as the damages imposed by climate change. An in-kind approach makes explicit the nature of the international transaction. It thereby avoids any connotations of a buy-off of recipient elites.

From a pragmatic perspective, technology transfers financed by funds placed at the disposal of developing countries would increase economies of scale in supplier countries, thereby reducing the cost of supplying the aid in the first place. Linking compensation to specific uses may also help to circumvent elite corruption in recipient countries. It could also increase political support in donor countries.

However, linking resource usage reaches its limits when dealing with the most vulnerable states where urgent local development priorities require that resources be applied across a variety of economic and welfare projects, not limited to greenhouse projects. The most advanced expression of this nonlinkage is the proposal for an insurance fund for the most-affected island and coastal states as outlined in Chapter 7. Some mix of compensatory and linkedcompensatory resource transfer therefore seems inevitable.

Other conditions that might be placed on the transfers studied above include sectoral policies aimed at reforming energy prices or institutional arrangements in a recipient country. In China, for example, coal prices bear little relationship to supply and demand. In the Soviet Union, subsidized natural gas prices foster a high rate of leakage of methane out of transmission pipes. Conditions related to project self-financing by the recipient state, to environmental performance, and to expanding the role of the private sector (including permitting foreign investment in abatement activities) might also be included by donors. If financial and resource efficiencies are to improve in developing country energy utilities, many deep-seated causes of poor institutional performance must be rectified, including: overstaffing; inappropriate skill mixes; shortages of middle level and technical staff; low wages; rigid and politicized hiring and firing practices; political interference, graft and corruption in procurement and billing activities; and inadequate training facilities.

As international energy expert Russell deLucia puts it, 'The primary problems are associated with institutional matters and market structure,' not technology or know-how. In short, the energy sector in developing countries is often so irrational and inefficient that donors will be very reluctant to provide substantial technical or financial assistance unless prices are revised upward to reflect cost, and energy utilities are privatized.

Developing countries assert strongly that they will not accept greenhouse-abatement financial assistance unless such transfers add to rather than substitute for current official development assistance (ODA) flows. The ODA recipients are concerned that existing ODA will be diverted from local development priorities to global environmental concerns, to redress problems created by the donor countries in the first place. They also hold that it is impossible to distinguish between development projects that benefit only their own country, and those that damage or restore only the global environmental protection.

'Additionality', however, is a deceptively simple word. ODA flows fluctuate from year to year in most donor budgets; some donor countries have announced a gradual increase in ODA up to about 1 per cent of annual GNP; others are allowing their ODA to slide to even lower levels. There is no simple (or even complicated) way to ascertain what would have happened to ODA if donors do not fund greenhouse projects in recipient countries. Furthermore, many of these projects are justified in traditional developmental terms with or without consideration of global environmental concerns of the donors. The issue is largely symbolic, therefore, with the United States declaring in 1991 that its contribution to one important mechanism for greenhouse funding, the Global Environment Facility, comes from existing ODA flows on the one hand; and Norway creating a new budget line separate from existing ODA to fund the Facility on the other.

Defusing this issue requires two things to happen. First, overall ODA levels (minus identifiable greenhouse-related aid) should not fall but rather should remain constant or increase. Second, greenhouse-related projects in China, India and elsewhere (especially those funded by the GEF) should deliver enough developmental benefits to allay fears that greenhouse-related projects are an environmental diversion that benefit only the donor states.

Countries like China have also insisted that they will only participate in a Climate Change Convention that does not impinge on their national sovereignty. This stipulation presumably includes retaining control over setting of priorities for the use of external assistance in domestic development projects.

Finally, donor countries may insist on using bilateral rather than multilateral aid mechanisms to transfer greenhouse abatement assistance. In part, this preference would arise from the sheer scale of the transfers discussed above that would exceed the total current United Nations budget and fears that a bloated, inefficient international bureaucracy could not hope to meet the challenge in a timely fashion. Again in part, it would follow from the pursuit of narrower national interests in tying the aid to their own suppliers of greenhouse abatement goods and services as in traditional bilateral aid relationships. In so far as greenhouse projects are funded multilaterally, donor countries prefer the World Bank's Global Environment Facility rather than setting up a new mechanism for climate change (as suggested by China). Developing countries have objected strongly to the nonrepresentative and World Bank dominated decision-making system at the Facility. Given the strong statement in the Convention on reforming the GEF (see Chapter 1), it seems inevitable that either the South must be allowed to participate in the decision-making at GEF on an equal basis, or bilateral funding will dominate the global climate change arena.


Technology transfer

There is little dispute that technology transfer from the technologically powerful to the technologically deficient countries will require major expenditure by the North. Unless this transfer is achieved, there is little chance that the South can abate to ecologically acceptable levels as defined in Chapter 5. Technology transfer refers to human- and paper-embodied knowledge (such as operating procedures and manuals), known as technique, as well as knowledge embodied in physical equipment and plant.

Although the chorus of consensus is deafening on this score, the terms of the transfer have been a major sticking point in negotiations over climate change. Issues such as intellectual property, the role of transnational corporations, and the investment climate in recipient countries have all been hotly disputed. Before treating these issues, however, this section outlines two qualifications as to the desirability of large-scale technology transfer to reduce greenhouse gas emissions.

Do nothing

Some influential environmentalists have argued that current patterns of political and economic power between and within states virtually preclude any significant progress toward greenhouse gas reductions via resource and technology transfer. Patrick McCully, for example, argues that a massive influx of new aid would exacerbate the plight of the impoverished majority rather than achieve greenhouse gas reductions. The history of aid, he contends, is one of corruption, failed projects, waste, neocolonial control, and increased debt and dependency. He expects that a climate fund, whether a new entity - as called for by China - or administered by the World Bank's Global Environment Facility - as called for by the OECD countries and so designated in the Convention as an interim measure - will behave no differently to existing aid agencies. He cites Ian Smillie of Intermediate Technology in London to the effect that energy aid in the 1970s left a legacy of 'windmills that didn't turn, solar water heaters that wouldn't heat, and biogas experiments that were full of hot air before they started.

Greenhouse gas abatement projects, in McCully's view, are just one more of a long list of development fads that employ mostly first world, hit-and-run consultants who increase the South's technological dependency on the North. Sinking billions of dollars into greenhouse aid would create a perpetual technological dependency machine.

I will not take issue here with McCully's critique of aid nor whether social relations which block technology adoption in many developing societies must be realigned before much can be achieved by way of aid-supported development. Rather, I will analyse what could happen if nothing is done, as McCully seems to suggest.

In Figure 14.1, I show two IPCC emission curves, and the permitted (postreduction) emission trajectories developed from the efficiency scenario for the world and the South (see Chapter 5) The South's projected emissions would exceed the IPCC case E global permitted total in about 2100 (at 1.6 gigatonnes of carbon) if the status quo in 2030 is simply extrapolated. It already exceeds the global permitted emissions in IPCC case F (at 1.9 gigatonnes of carbon).

Left to itself, therefore, the South eventually exceeds the global permitted total that is defined in relation to putative acceptable rates of ecological damage associated with climate change induced by emission of greenhouse gases (see Chapter 5). In short, the rest of the world can't afford to leave the South to its own devices. 'Do nothing' is not a viable option, however great the obstacles to change in the South or in North-South relations.

Do more but differently

Martin Bell of the Science Policy Research Unit at Sussex University has levelled a more penetrating criticism against the notion of massive technology transfer to reduce greenhouse gases in the South. He notes that energy efficiency (and related carbon abatement) is obtained from pervasive, non-energy-saving technical change throughout an economy. 'lt is therefore impossible,' he avers, 'to identify any distinct category of "CO2 emission reducing technology" which might be the focus for new initiatives concerned with international technology transfer.'

Figure 14.1 Projected South emissions vs IPCC and study world totals

Obviously a technology transfer fund could focus on major 'energy saving' technologies, but that approach neglects many technologies and techniques with as much or more carbon-abatement potential. That is, the transfer of 'greenhouse' technologies is not likely to be blocked only by political and economic barriers. Transferring 'greenhouse' technology alone would achieve far less abatement than is desirable and achievable on economic and ecological grounds.

Bell argues that a more broad-ranging approach is needed that accounts for a whole spectrum of technology used by developing countries. Transfer should encompass not merely know-how (the construction and operation of transferred plant and equipment) and know-why (the research, development, design, demonstration and deployment of technology). It should also include the techniques of incremental learning involved in fine-tuning existing plant and equipment, and in managing the organizational changes that foster such learning. The very notion of technology transfer therefore needs to be recast and the content of the phrase expanded and deepened.

This emphasis on the organizational aspects of technology transfer places the onus for realizing the potential benefits primarily on the recipient countries. Nit Chantramonklasri, for example, found that Thai firms differed greatly in their internal technological capabilities, and that technologically innovative firms were both market competitive and more energy efficient.

The incremental learning and managerial capabilities that occur after technology transfer are as or more important to increasing organizational capability than transferral of skills during a discrete project. This on-going learning process, however, requires managerial effort and allocation of scarce skilled staff and time. As Sanjaya Lall states, every new application of a given technology requires adaptive engineering work. In contexts where policies motivate such organizational learning, Bell argues that donors should fund transnational corporations to transfer to developing countries the managerial and engineering techniques required to learn incrementally and continuously. The resultant human assets are expensive, invisible, mobile, enduring, scarce and therefore extremely valuable in most developing countries.

Organizational innovation, however, also requires a favourable macroeconomic structure. Thus, Frances Stewart argues that there is nothing inevitable about the undesirable dependency fostered by current modes of technology transfer. On the contrary - faulty macroeconomic policies and resultant malign decision-making incentives that face organizations in many developing countries explain the South's inability to become technologically self-reliant rather than the problems associated with transfer per se. Pervasive factors that are determined at a macroeconomic level often thwart micro-level technological changes. Such obstacles include distorted energy prices; regulated fuel supplies; capital scarcities; uncompetitive markets; government procurement policies; stagnant scientific and technological infrastructure; protectionism; low investment in education; and lack of information programmes to overcome market failures.

These considerations imply that transferring only the latest energy efficiency technologies in core energy transformation systems used in industry or the energy sector will result in much less abatement than is possible. It is also pointless to transfer state-of-the-art plant if it is operated as poorly as are many productive enterprises in the developing world. Rather, human and organizational resources must be developed first to improve capacity factors and product quality of existing plant in all sectors of the economy. These same human capabilities can ensure that transferred technology is adapted to operate at high efficiency rather than reverting to past practices. Importantly, much of the technology for controlling greenhouse gas emissions is already in the public domain and often already accessible to developing countries. Investing in human resources that enhance technological and managerial capacity is particularly attractive because the required training is often relatively cheap, entails little or no capital expenditure, and often yields economic and resource-saving benefits almost immediately.

This emphasis on building endogenous, self-reliant technological capabilities does not condemn the South always to lag behind the technological frontier of the latest hardware. Instead, it responds to two imperatives that will otherwise overwhelm the ability of any plausible transfer of narrowly defined technology to contribute meaningfully to greenhouse gas reductions in the South.

First, the vast demographic transition of the South's population growth combined with immense urbanization implies a primary reliance on informal, self-help development. Only an enormous proliferation of local technological research and development institutions can generate and deliver sufficient adapted, appropriate technology to end users. Without this local capability, environmentally benign technological alternatives will often not fulfil local needs and will not attract local users. Foreign technology can only supplement and never substitute for local technological capabilities that support the modernization process.

Second, developing countries confront the likelihood of a 'green' technological revolution in North in bioengineering, waste control, recycling, and product and process engineering early in the twenty-first century. This reformation will be as epochal as were steam motive power, electrical and then electro-mechanical technology, and electronics in their time. The green 'techno-economic' paradigm is driven by the need to preserve, conserve and restore ecosystems at local, national, regional and global levels. Consequent technological innovation in the North may devalue many of the traditional commodity exports and current manufacturing strengths of the developing countries (most notably, of the fossil fuel exporters).

Leaders in developing countries must be alert therefore to the opportunities that arise in a greenhouse world to obtain the best terms for technology transfer. To this end, they must nurture a highly receptive local environment to gain the most benefit from this transfer. Vendors of carbon abatement services, for example, could link their services to offsetting transfers of techniques and technology by buyers of abatement.


Multi-pronged approach

A judicious and careful blend of technology transfer from abroad combined with policies aimed at stimulating the virtuous circle of local technological development and competitiveness are essential to avoid the vicious circle of technological dependency and stagnation. A multi-faceted greenhouse technology transfer strategy will address at least three priorities, namely, reducing the cost of transferred technology; technical assistance and training; and information dissemination and technological collaboration.

Cost reduction

Two major determinants of the cost of transferred technology to developing countries are the rate of local and foreign innovation on the one hand, and whether the importing state is informed so as to enter bargaining on an equal footing with technology suppliers.

Many of the technological needs of developing countries - especially in the rural and urban-informal sectors - are poorly served by foreign technology suppliers. Indigenous centres of scientific and technological research are critical to expand the supply and reduce the cost of generating new technology and adapting imported technology that fulfils local needs. Demonstration programmes are badly needed that address the technical as well as market and non-market barriers to successful technological development in developing countries. Donor support for indigenous research centres and demonstration programmes should be expanded greatly to redress the imbalance in current research foci on technological needs that emanate from the industrial North rather than the modernizing South.

Transnational corporations are very important agents of technology transfer to developing countries. Aid/technology recipients will need to reexamine their traditional technology import policies to stimulate the corporate conduit of technology flows, including reforms of pricing controls, taxes, income repatriation policies, more liberal licensing arrangements, and less stringent ownership limits in joint ventures. Developing countries badly need to increase their flexibility to deal with transnational corporations if they are to 'stay in the loop' of the international technology alliances. Such strategic corporate alliances to develop new technology will likely predominate in the first wave of the greenhouse-driven technological revolution.

The system of creating and protecting intellectual property rights is closely related to the cost of technology generation and imports in developing countries. It is also a vexed issue in the GATT and UNCTAD fore that is unresolved in relation to possible technology transfer protocols in the Climate Change Convention. The jury is still out as to the net costs and benefits of strengthening intellectual property rights in developing countries. In all probability, there will be big winners (some of the technologically developed and technology exporting developing countries might gain substantially) and big losers (countries with absent or weak domestic scientific and technological infrastructure could pay more for technology imports and reap little in return).

A consensus on this issue may prove to be a precondition for implementing the Climate Change Convention. Developing countries have demanded that environmentally sound technology be transferred to them on a concessional and preferential basis and that patents be transferred on a non-commercial basis. But developing countries need not wait until this global standoff ends before obtaining more technology from transnational corporations involved in greenhouse projects. South Korea, for example, had extensive licensing arrangements at the same time concurrently with a loose intellectual property regime. Its electric utility also used 'turn-key' plant contracts to unpackage skills and to train its own engineers initially in know-how skills and later in know-why skills.

Technical assistance and training

Along the lines of the latter 'trick of the trade', Martin Bell has proposed that donors direct new resources to offset the costs of developing human and organizational capabilities to generate and manage technological change. Transnational companies already participate in such transfers provided they recover their costs. Driven by international competition, there appear to be few proprietary barriers to companies transferring such skills, even in 'state ofthe-art 'technologies. To support this skills transfer, donors would need to accept longer time horizons and invest in long running training programmes rather than with traditional, discrete aid projects.

Information dissemination and transnational collaboration

Donors should also support information dissemination programmes that serve energy efficiency programmes of governments and non-governmental agencies. Relatedly, increased scientific work on climate change monitoring and analysis should be supported in the South. Independent scientific and research communities should be strengthened in developing countries if their leaders are to negotiate in an informed fashion on an equal footing with their counterparts from wealthier societies. Such information can rectify the bargaining deficiencies of importing governments as well as facilitate collaboration between autonomous loci of research and development activity within the South. South-South networks of energy utilities and non-governmental networks of scientists and technologists concerned with energy efficiency should be fostered to hasten the pace of technological development and diffusion.

The transport sector exemplifies the need for an expanded role for government as well as South-South collaboration. Travel, car ownership, and freight are growing faster than income in all developing countries. Greenhouse emissions from transport systems are determined by population growth, travel and freight per person, and greenhouse emissions per passenger- and tonne-kilometre. These latter items are largely determined by economic choices which are constrained in the short run by existing settlement patterns, activities, and transportation infrastructure. The ability to design efficient cities and transport infrastructure plus the youthful vintage of vehicular stocks make it possible to combine big increases in transport services with advanced technologies for greenhouse friendly transport systems.

In poor countries, walking and animal powered carts are the main modes of transport for most people. As incomes rise, bicycles, motorcycles, light three-wheeled and various forms of utility and van-based public transport systems emerge. Due to the small number of privately owned light vehicles in developing countries, the combined total of the carbon emissions from fossil fuel used in transport in South and East Asia (excluding Japan), China, Africa, Latin America and the Middle East amounts to about 18 per cent of the world's transport sector carbon emissions.) By 2025, however, one projection shows that their transport emissions will have increased from their current 0.3 gigatonne per year (about 20 per cent of the world total) to about 0.5-0.8 gigatonne of carbon as CO2, or between 30 and 40 per cent of the world's transport emissions. Reducing this emission by 25 per cent by 2025 would save between 10 and 20 per cent of the South's projected permitted emission in that year in this study (see Figure 14.1).

Even in the wealthy countries, mere improvements in new vehicle efficiency will not by themselves significantly reduce overall carbon dioxide emissions from the transport sector if growth in overall use continues on current trends. Changes in modal balance, urban density, and regulation and market policy instruments will all have to be used to curb the transport sector's greenhouse contribution.

In developing countries, the bulk of the passenger and freight transport is on off-road and rural tracks on traditional transport systems. Policy instruments and technologies transferred from the wealthy to the poorest countries may be of some use in cities (as in Singapore and Hong Kong) but have little bearing on the central transport problems. There is an urgent need for these countries to collaborate in research and development of these traditional transport systems. Wealthy societies have little recent experience and existing technological capability relevant to these issues. A bullock cart, for example, has evolved over thousands of years to operate in rough terrain. Local technicians used immediately available materials to make and maintain the carts. Adding pneumatic tyres or creating hard roads without redesigning the whole cart can greatly reduce its resilience and lifetime. Improving a bullock cart and upgrading rural roads is far more complicated than designing a high technology motor vehicle from advanced materials to run in a predictable highway system.

Three priorities for collaboration and information dissemination in the transport sector are:

1 increased technical and financial assistance for producing intermediate means of transport, especially for human and animal-powered freight;)

2 establishing local organizational capabilities to construct, maintain, and rehabilitate roads;

3 creating low-cost, rural-urban transport links.

So far, I have reviewed the critical issues arising from the Convention that pertain to the realization of mutual reciprocity which is at the heart of the implicit North-South contract in the treaty. In the next section, we move from norms of behaviour to procedures relating to implementation and regulation of behaviour of parties to the Convention.

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