House of Commons - International Development Committee

Sustainable Development in a Changing Climate - International Development Committee Contents

Written evidence submitted by Sussex Energy Group, SPRU (Science and Technology Policy Research) at the University of Sussex

1. EVIDENCE CONTRIBUTED BY

Sussex Energy Group, SPRU (Science and Technology Policy Research) at the University of Sussex. The University of Sussex is a core partner of the Tyndall Centre for Climate Change Research.

2. SUMMARY OF MAIN POINTS

1. There is no one policy fits all solution to sustainable, low carbon development in developing countries. Appropriate policy depends crucially on country and technology-specific criteria.

2. There is limited empirical evidence available upon which to develop policy geared towards low carbon development.

3. Empirical evidence that is available highlights a need for policy makers in developed and developing countries to better understand the nature and role of low carbon technological capacity which is critical to securing sustained low carbon development in the long term.

4. A better understanding of the nature and role of technological capacity in facilitating economic development based on low carbon technologies is also integral to facilitating agreement between north and south within international climate and development negotiations.

5. The interactions between climate and trade policies need to be assessed with care. Measures to reduce carbon emissions in developed countries should not be used as an excuse for a more protectionist trade policy.

3. ABOUT US AND THE EVIDENCE BASE FOR THIS RESPONSE

This response was prepared by experts in low carbon development and technology transfer from the Sussex Energy Group, University of Sussex (http://www.sussex.ac.uk/sussexenergygroup/). The evidence we have provided builds on a strong history of empirical research in the area of low carbon development and low carbon technology transfer to developing countries. Of particular significance to this inquiry is the fact that the evidence we enclose draws on our recent policy oriented empirical work in India and China, a unifying theme of which is to attempt to move away from the political rhetoric that dominates discussions in these areas towards evidence based policy recommendations. Our recent research includes:

— Our research through the Tyndall Centre (funded by NERC, ESRC and EPSRC) to develop scenarios for China's carbon emissions to 2050 and 2100. The aim is to explore how China could live within its share of a global "carbon budget". This research is providing crucial in depth analysis on when and what changes are needed in China's economy and energy system, and the policy incentives required to promote these changes. See http://www.sussex.ac.uk/sussexenergygroup/1-2-11.html

— Our work through the Tyndall Centre on carbon emissions embodied in trade with China. This analysed the embodied emissions in exports from, and imports to, China. It revealed that nearly a quarter of China's total carbon emissions in 2004 were a result of net exports to the rest of the world. This emphasises the significant impact of global trade on the effectiveness of current carbon emission policies. It reinforces the need for OECD countries to take a lead in emissions reductions, and for low technology collaboration with developing countries like China to be properly addressed in a post-2012 global climate agreement. See http://tyndall.webapp1.uea.ac.uk/publications/briefing_notes/bn23.pdf

4. INSIGHTS FOR THIS INQUIRY

This response focuses on two of the questions in the inquiry's terms of reference:

2. Potential adverse impacts for developing countries of steps by developed countries to mitigate climate change, including in the context of the "post-2012" negotiations, and potential benefits for developing countries of related technology transfers.

Our response focuses on three related issues:

— Achieving sustainable low carbon technology transfer to developing countries.

— Understanding the north/south divide on the role of technology in international climate policy.

— Interactions between international climate policy and international trade policy.

4.1 Achieving sustainable low carbon technology transfer

Low carbon technology transfer from developed to developing nations will play a key part in delivering future carbon emissions reductions. It has the potential to allow developing nations to continue to develop economically whilst mitigating future emissions that would otherwise be associated with the rapid economic development currently observed in countries such as India and China. The need for developed countries to facilitate the transfer of low carbon technologies to developing nations is therefore recognised in Article 4.5 of the UN Framework Convention on Climate Change (UNFCCC). It is this aspect of the UNFCCC that provided the carrot that attracted most developing nations to become party to the Convention. It is also the aspect that has caused most controversy and made the least progress in the negotiations since the Convention was agreed.

Despite the high profile controversies surrounding technology transfer within international negotiations, inadequate empirical evidence currently exists upon which to base policy. The different stages of development of low carbon technologies, from R&D through to commercial diffusion, introduce new and unique barriers, opportunities and policy challenges which are not yet properly understood. These are made more urgent by the need to achieve rapid diffusion of low carbon technologies to avoid dangerous climate change.

Our empirical work in India and China at the University of Sussex has highlighted a number of key considerations that should guide policy if technology transfer is to contribute to sustainable, low carbon development in the long term.[56] Three of these are particularly relevant to this inquiry:

No on policy fits all solution

There is no "one policy fits all" solution to facilitating low carbon technology transfer. Relevant policy interventions vary according to the nature of the technology, its stage of commercial development and the political and economic characteristics of both supplier and recipient countries.

Horizontal AND vertical technology transfer

Due to the early stage of development of many low carbon technologies, vertical technology transfer (transfer of technologies from the research and development stage through to commercialisation) is as much an issue as horizontal technology transfer (transfer from one geographical location to another, including transfer from developed to developing countries). A key policy goal must therefore be to establish internationally collaborative initiatives that involve both developed and developing country firms in the development of new low carbon technologies. It is only via such early involvement in technology development that developing countries will develop the necessary technological capacity to make low carbon growth sustainable (see item 3 below).

Developing low carbon technological capacity

In order to be sustainable, technology transfer must take place as part of a wider process of technological capacity building in developing countries. Technological capacity refers to a country's capacity to develop, market and operate technologies, in this case low carbon technologies, in its own right rather than relying on importing them from other countries. Empirical evidence from decades of studying processes of technological innovation suggest that technological capacity development is vital to creating the conditions necessary for new technologies to be able to be adjusted to local conditions and then diffuse through an economy ie it is not enough for low carbon technologies to simply be imported into developing countries, companies in recipient countries also need to understand the tacit and intellectual knowledge that underpins a new technology, and then adapt that technology to local needs and conditions.

When thinking about low carbon technology transfer and sustainable development we are therefore not only interested in individual technologies, but the impact those technologies have on the broader technological capacity in that country. A useful image is a drop of water (the transferred technology) hitting the surface of a pond. The pond represents the technological capacity of the country receiving the transferred technology. In the long term, it is the ripples that spread across the pond as a result of the transferred technology that are the most important consideration if our goal is sustainable, low carbon development. These ripples represent the impact of the transfer of low carbon technologies on the overall technological capacity of recipient countries. It is this capacity that enables future innovation to take place and that is most likely to ensure long term adoption and development of low carbon technology in recipient countries. Building technological capacity is especially important in developing countries where long term economic development and poverty reduction are central concerns.

4.2 Understanding the north/south divide on the role of technology

It is also important to understand that there are fundamental differences in the motivations for developed and developing nations coming on board as a Party to the UNFCCC. Most importantly, these different motivations are underpinned by alternative ideas on the role of technology under the Convention. These different ideas translate into different lenses through which to interpret the limited empirical evidence, and the different lenses lead to conflicting policy recommendations. This is why there is such a marked difference between the position of countries such as the US on technology transfer, and the position of some developing countries such as China and India[57]. This is particularly exaggerated in relation to intellectual property rights (IPRs) with developed nations arguing that the tightening of IPR legislation would encourage technology transfer, whilst developing nations argue that an international fund should be created to buy up and make publically available IPRs for low carbon technologies.

Our research has demonstrated that both the lenses referred to above (those used by developed and developing countries) are based on a flawed understanding of how the process of technological capacity building happens in reality. It is possible that a better understanding of the process of low carbon technological capacity building and the role it plays in facilitating low carbon growth could facilitate agreement on this issue between developed and developing nations. Such agreement is critical to a post-2012 climate agreement but is jeopardised by the continued priority that all nations tend to give to maintaining or improving their competitive advantage relative to other nations. This tends to overshadow any political rhetoric on sustainable development and poverty alleviation, and must be addressed if a fair post-2012 agreement that contributes to sustainable development in developing countries is to be achieved.

4.3 International climate policy and international trade policy

International trade has experienced unprecedented growth over the last few decades as part of the on-going process of globalisation. However, as demonstrated by the controversy surrounding each round of international trade negotiations, there are many questions about the impact of international trade on the environment and equity. The environmental consequences of international trade have been highlighted further by the emergence of climate change as the most important international environmental issue.

Since only some countries are required to reduce their carbon emissions under the Kyoto Protocol, "carbon leakage" from the export of emissions to developing countries without emissions caps has become a focus of concern. There is considerable disagreement about the extent of this problem—with many studies emphasising that only a small number of economic sectors would be adversely affected by strong caps on emissions in the EU or the USA[58].

Carbon leakage is defined in various ways. One of the broader definitions expresses is at the emissions embodied in exports from non-Annex I countries (those without emissions caps) to Annex I countries (those that have emissions caps). Of course, there are many reasons why such "leakage" may occur—including relative labour costs, the geographical location of resources as well as differences in environmental regulations. However, it is useful to note that emissions embodied in traded goods can be very significant.

Our research on China has shown that international trade accounted for 23% of China's total carbon emissions in 2004[59]. This was due to China's large trade surplus, but is also due to the relatively high level of carbon intensity within the Chinese economy. This figure was more than double the UK's emissions in the same year. The equivalent emissions figures for 2005 and 2006 are likely to be larger as China's trade surplus has grown sharply since 2004.

This result suggests that there is some value in calculating the emissions of countries in two different ways—the conventional method that includes emissions from within that country (though often excluding its share of international aviation and shipping); and a "consumption-based" method that includes emissions from goods and services consumed by the country, irrespective of where those goods and services originate. It is unlikely that consumption based method will replace the established method, it could be used as a "shadow" indicator in a post 2012 climate deal[60].

The use of such a shadow indicator could inform policies that include greater assistance and resources for the developing countries that produce goods for consumption in the developed world. For example, there is extensive discussion of sectoral climate change agreements. These could extend the coverage of future international agreements beyond the 27% of global emissions covered by Kyoto. Furthermore, they could help target efforts at sectors such as iron and steel that are thought to be difficult to decarbonise. For developing countries, well designed sectoral agreements could include technology assistance measures. These could help to close the significant "efficiency gap" between developed and developing countries in many energy intensive industies.

A further policy option that is gathering increasing attention is the imposition of a levy on goods imported into countries or regions that have carbon emissions caps. In a recent speech, the President of the European Commission Jose Manuel Barroso proposed that importers of goods to the EU could be required to purchase emissions permits to reflect their embodied carbon[61]. Similar policies have also been put forward by politicians in the United States. These proposals have provoked the inevitable charge of "protectionism", and may be subject to challenge within the World Trade Organisation. Any move in this direction would therefore need to be evaluated with care. If implemented, these would need to treat developing countries and Annex I countries differently to ensure consistency with the principle of "common but differentiated responsibilities". This could be partly achieved by coupling such a policy with compensatory financial and technological assistance for industries in non-Annex I exporting countries.

5. RECOMMENDATIONS TO INFORM THE COMMITTEE'S DELIBERATIONS

1. The UK negotiating position on low carbon technology should be subjected to an appraisal with the aim of integrating a more thorough understanding of the role of low carbon technological capacity development in developing countries into the policy approaches currently under consideration.

2. The UK should seek to influence its negotiating partners in the EU and other developed nations to prioritise the development of new low carbon technological capacity in developing countries. This should include a combination of:

b. Encouraging foreign direct investment on the basis of less integrated transfer arrangements where local experts, suppliers and manufacturers are used and trained to understand the nature of new technologies.

c. Establishment of financing mechanisms to facilitate a) and b) above.

3. Additional empirical research must be commissioned to inform policy on low carbon technology transfer to developing countries. It is particularly important to draw on applied case studies of real technologies in real world situations.

4. The interactions between climate and trade policies need to be assessed with care. There is scope to assist developing countries through policies such as international sectoral agreements. However, measures to reduce carbon emissions in developed countries should not be used as an excuse for a more protectionist trade policy.

56 Further important considerations are set out in the executive summary to the UK-India collaborative project mentioned above, available at http://www.sussex.ac.uk/sussexenergygroup/documents/uk_india_tt_executive_summary_final.pdf Back

57 UNFCCC Ad Hoc Working Group on Long-term co-operative Action Under the Convention (2008) Ideas and proposals on paragraph 1 of the Bali Action Plan: Note by the Chair. UNFCCC, 20 November. Back

58 eg Carbon Trust (2008) EU ETS impacts on profitability and trade: a sector by sector analysis. London: Carbon Trust. Back

59 http://tyndall.webapp1.uea.ac.uk/publications/briefing_notes/bn23.pdf Back

60 Peters, G. P. (2008). From production-based to consumption-based national emission inventories. Ecological Economics 65(1): 13-23. Back

61 Barroso, J. M. (2008). Europes Climate Change Opportunity, Speech to the Lehman Brothers, London. Back

62 See http://www.sussex.ac.uk/sussexenergygroup/1-2-9.html Back



© Parliamentary copyright 2009	Prepared 3 June 2009