Written evidence submitted by the United
Nations Industrial Development Organisation (UNIDO)
EXECUTIVE SUMMARY
Potential impact for developing countries of steps
by developed countries to mitigate climate change and potential
benefits for developing countries of related technology transfers
Important to differentiate between net energy
importers and exporters. The overall impact of developed countries
mitigation measures are likely to be positive for the developing
countries. UNIDO has some concerns about the impact on trade with
developing countries from climate conscious western consumers
reluctant to buy goods with larger carbon footprints from developing
countries. UNIDO is actively engaged in the transfer of climate
change technologies to the developing world. These transfers represent
opportunities for SMEs in developing countries provided financial
and training needs can be addressed. UNIDO and DESA have been
appointed by the Secretary-General as co-convenors of the UN's
efforts to promote the transfer of climate friendly technologies.
UNIDO is working with ISO in drawing up an International Energy
Management Standard which will be applicable to both the developed
and the developing world.
The impact of choices about power generation and
energy sources in both developed and developing countries and
the linkages between these energy sources
The Director-General of UNIDO is chair of UN Energy,
bringing together all the UN organizations engaged in the field
of energy. An International Conference "Towards an Integrated
Energy Agenda beyond 2020" will take place in Vienna in June
2009. Developing countries have an overriding need to develop
even in the face of climate change. They have some concerns about
Western pressure to take up untested renewable energy technologies,
particularly where subsidies are required to promote uptake. Appropriate
renewable energy technologies represent a real opportunity for
developing countries to develop their manufacturing sectors particularly
in areas not linked to national grids and where power supplies
are unreliable.
Opportunities for developing countries presented
by sustainable approaches, such as carbon trading, direct fiscal
transfers and addressing the needs of increasingly environmentally-sensitive
consumers
Sustainable industrial development poses challenges
and opportunities for enterprises in developing countries. UNIDO
is working with SMEs providing training, guidance and access to
relevant technologies to enable them to take full advantage of
the opportunities. Environmental services in the developed world
has created a €300+ billion industry. Indications are that
this will soon be replicated in the developing world. UNIDO has
an important role to play in promoting the necessary industrial
support institutions—environmental laboratories, cleaner
production and energy efficiency centres, waste management, air
pollution, industrial design, environmental consulting and training.
UNIDO is working with UNEP (UN Environment Programme) on a Green
Industry initiative.
Pro-poor exploitation of natural resources, including
minerals and forests, and the regulatory framework for exploitation:
Matter of policy choice
UNIDO's experience has shown that abundant natural
resources in developing countries often results in unfulfilled
economic potential, the crowding out of manufacturing, (the so-called
"Dutch disease") widening income inequalities, increasing
poverty and violent conflicts. This need not be the case. UNIDO
has found that the output of manufactured or tradable goods can
increase, if developing countries use the revenues from resource
extraction to increase domestic investment. Pro-poor exploitation
of natural resources entails the promotion of locally based suppliers
of inputs needed by extractive industries. The greatest impact
of economic growth on poverty reduction occurs in those countries
where small and medium enterprises (SMEs) actively participate
in local and global value chains converting resource-based comparative
advantages into competitiveness. UNIDO has been active in this
area for many years. UNIDO is supporting the development of the
Action Plan for the Accelerated Industrial Development of Africa
which was drawn up by the Heads of State and Government of the
African Union meeting in Addis Ababa, Ethiopia, in January 2008.
UNIDO's Industrial Development Report 2009
subtitled "Breaking in and moving up: New industrial development
challenges for the bottom billion and the middle-income countries"
spells out a concrete, practical framework for transforming resources
into sustainable industrial development. The Report has been written
by Paul Collier, author of "The Bottom Billion" and
will be launched at Lancaster House in London on 23 February.
Potential 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
1. The experience of the United Nations Industrial
Development Organisation (UNIDO) has been that in the short to
medium term, it is important to differentiate between developing
countries that are net energy importers and those that are net
energy exporters. The increased use of renewable sources of energy
and energy efficient technologies by the developed countries in
their mitigation efforts is likely to reduce supply constraints
for fossil fuels, and therefore reduce their cost. In general,
this would have positive impacts for developing countries that
are energy importers but negative impacts on developing countries
that are energy exporters. As the majority of developing countries
are net importers, the overall impact on developing countries
is likely to be positive. There will probably also benefit developing
countries with abundant sources of renewable energy located near
developed countries, which could become important sources of renewable-energy
based electricity for these countries.
2. UNIDO has some concerns about the possible
impact on trade resulting from more climate-conscious consumers
in developed countries becoming more reluctant to buy goods with
larger carbon footprints from the developing world. We do not
yet have any figures to back this up. But in the longer term this
may well impact on the effectiveness of our trade capacity related
work aimed at increasing access to developed markets—eg,
the EU—for products (particularly food and agricultural
products) from the developing world.
3. That apart, our overall assessment is
that in the longer term, all developing countries are likely to
benefit from the mitigation efforts of developed countries. Without
these measures, the negative impacts of climate change would have
disastrous consequences on global development.
4. UNIDO is actively engaged in transferring
climate friendly technologies to the developing world. We do this
through a variety of mechanisms using our extensive global network
of Cleaner Production Centres and more broadly through our environment
and energy, trade capacity building, and productive activities
programmes. It is clear to us that the transfer of climate friendly
technologies to developing countries can have real economic and
environmental benefits for developing countries. The greater use
of energy efficient technologies by industry in these countries
will not only reduce their greenhouse gases (GHG) emissions but
also increase their competitiveness locally and globally. The
scanty data available suggest that industry in the developing
countries is significantly more energy inefficient than industry
in developed countries, so large gains appear to be possible.
In any transfer programmes, it is important to stress the business
benefits of such technology transfer since enterprises in developing
countries are far more likely to take up these technologies where
there are clear economic benefits. In UNIDO's view, it is unrealistic
to expect an enterprise in a developing country to take up cleaner
technologies where there is no obvious economic benefit to it.
A particular problem for SMEs (Small and Medium Sized Enterprises)
in developing countries is their inability to secure financing
and receive adequate training to enable their companies to operate
in a more energy efficient manner. This is where UNIDO has a significant
role to play.
5. It is also important to consider "technology
transfer" in its broadest sense, ensuring that the transfer
of hardware is always combined with the capacity development necessary
to ensure that these technologies are operated at maximum efficiencies,
individually and within the larger systems of which they are a
part. Once again, training is an essential component of this process.
6. In this context, it is important to note
that the UN Secretary-General has appointed UNIDO and the UN Department
of Economic and Social Affairs (UN DESA) as the co-convenors of
the UN's efforts to promote the transfer of climate friendly technologies.
7. As manufacturing hubs, developing countries
can also benefit from manufacturing and transferring to developed
countries more energy efficient technologies/products, or technologies/products
that otherwise minimize greenhouse gas emissions. UNIDO is working
closely with the International Standards Organisation (ISO) in
drawing up an International Energy Management Standard for Industry.
In doing this, we will need to ensure that energy efficiency standards
are sufficiently flexible to enable their adoption by developing
countries. There will be the need for capacity development at
the productive level, but also in standards and certification
systems, to ensure barriers to trade from the developing countries
are minimized. Handled properly, UNIDO foresees that climate friendly
technologies should present developing countries, particularly
middle-income countries, with export opportunities. Concrete examples
are evident in China which now has a substantial and growing industrial
sector devoted to the manufacture of renewable energy technologies,
most notably solar panels. UNIDO is active in encouraging South-South
cooperation to facilitate the spread of Renewable Energy and Energy
Efficiency technologies to other parts of the developing world.
The impact of choices about power generation and
energy sources in both developed and developing countries and
the linkages between these energy sources
8. UNIDO is currently chairing UN Energy
a body which brings together all the UN organizations engaged
in the field of energy. In this context, we will be organising
an International Conference focusing on the need to develop a
sustainable long-term solution to meeting the world's energy needs
beyond 2020. The conference will take place in Vienna from 22-24
June 2009.
9. Our experience has shown that the choices
made by developed countries about power generation and energy
sources will have some impact on the choices made by developing
countries, the resource endowments of individual countries are
likely to play a greater role in decisions over power generation.
For example, those developing countries with domestic coal or
other fossil fuel supplies will find it very difficult not to
use these supplies for power generation unless the costs of alternatives
are brought down considerably. As the availability of Renewable
Energy technologies becomes more widespread, costs will come down.
UNIDO's activities have shown that appropriate Renewable Energy
technologies represents a very real opportunity for developing
countries to develop their manufacturing sectors, particularly
in areas which are not linked to national grids and where power
supplies are currently unreliable or non-existent.
10. UNIDO has found that infrastructural
differences between developed and developing countries limit the
linkages between choices. Developed countries have extensive national
grids, whereas the developing countries do not. There are therefore
many choices of technologies linked to electricity generation
and transmission being considered and adopted in the developed
countries that are not very relevant to developing countries.
At the same time, there are technology needs in the developing
countries (the use of small-scale renewable sources linked to
stand-alone mini-grids, for instance) for which the developed
countries might not have solutions. In general, the difference
in scale of energy demand between many developed and developing
countries could mean weak linkages between the choices about power
generation and energy sources made by the two groups.
11. The overriding need of developing countries
to continue their development even in the face of climate change
compared to the overriding need of the developed countries to
move strongly towards low-carbon economies might well also limit
linkages between choices. For instance, there is concern in many
developing countries that to mitigate climate change they are
being encouraged to take up technology for energy generation that
have not yet been proven to be economically viable in the developed
countries unless significantly subsidised (which developing countries
cannot afford to do). While some of the emerging economies already
have the ability to lead in the development of technologies, the
majority of developing countries do not. They are therefore, for
legitimate reasons, unwilling to spend scarce resources on power
generation and energy sources that are not fully proven. This
makes it all the more important that the developed countries,
perhaps in cooperation with the more technologically advanced
developing countries, lead by example and thereby bring down the
cost of these technologies.
12. There is a specific case where linkages
between choices could be strong, and that is the case where developing
countries with good renewable energy endowments are located near
developed countries. In such cases, some developing countries
could develop renewable energy-based sources where they otherwise
might not. This is not only because of their proximity to developed
countries, but also because of the subsidy regimes adopted by
the latter for electricity based on renewable energies. These
subsidies make it economically viable to generate such electricity
and transmit it to them.
Opportunities for developing countries presented
by sustainable approaches, such as carbon trading, direct fiscal
transfers and addressing the needs of increasingly environmentally-sensitive
consumers
13. It is clear to UNIDO that sustainable
industrial development will pose challenges for enterprises in
developing countries, especially for the SMEs that make up the
bulk of the industrial sector in these countries. However, these
challenges should also create business opportunities for alert
entrepreneurs in these countries with sufficient foresight and
willingness to take risks. This is where UNIDO can help working
with SMEs and entrepreneurs, providing training, guidance and
access to relevant technologies to enable them to take full advantage
of opportunities where they exist.
14. At the domestic level: As occurred in the
developed countries from the 1960s onwards, as the populations
in developing countries grow—especially their growing middle
classes—they will demand safer and healthier products, more
modern and more efficient appliances, and functioning environmental
services (safe drinking water, waste water treatment, waste management,
air pollution controls, and so on). With respect to environmental
services alone, similar pressures in the developed countries have
created a €300+ billion industry, along with all the new
jobs this has entailed. The latest environmental challenges the
world faces—climate change and growing water scarcity, to
name only two—are spawning new industries. The rapidly growing
renewable energy industry is the most obvious manifestation of
this trend. This is also one in which developing countries already
have a significant presence.
15. The rapidity with which these new industrial
trends manifest themselves in the developing countries will depend
on the willingness of governments to create the necessary enabling
environments: developing—and even more importantly implementing—the
necessary environmental laws and regulations; articulating other
required sectoral policies (for instance, in the energy sector).
It will also require promoting the necessary industrial support
institutions—environmental laboratories, cleaner production
and energy efficiency centres, waste management companies, engineering
companies offering wastewater treatment and air pollution services,
industrial design companies, environmental consulting companies
to name a few, as well as creating or expanding the necessary
university degree programmes and, even more importantly, the necessary
supportive vocational training programmes. UNIDO has an important
role to play in all these areas and with more resources we could
do even more.
16. At the international level: Globalization
is creating opportunities for developing country entrepreneurs
to offer green goods and services to consumers in the developed
countries, or to join global value chains offering such goods
and services. Here, the menu of such goods and services is very
wide. Developing country enterprises are already serious players
in the global renewable energy industry. The bulk of the more
efficient appliances sold in the developed countries are manufactured
wholly or partly in the developing countries. Waste management
is also going global, with used products in the developed countries
(scrapped metal products, waste electrical and electronic equipment,
even waste paper) moving to the developing countries for recycling
and reuse. While much of this trade is still North-South, there
is growing potential for it to be South-South. UNIDO is actively
involved in pushing this forward working together with UNEP (UN
Environmental Programme) on its Green Industry initiative.
17. UNIDO has found that, as with all globalized
goods and services, enterprises in the developing countries must
be able to manufacture green goods and services at the levels
of quality required by the global market and certify that this
is so. Once again, the ease with which they can do this depends
on the willingness of governments to create the necessary enabling
environment. In this regard, industrial support institutions are
particularly important that can assist enterprises to meet quality
standards, and the metrology and conformity assessment institutions
that can allow them to make the necessary certifications. Through
the relevant global mechanisms, governments can also work to ensure
that private standards are developed that do not penalize the
developing countries, that national environmental requirements
are not used as technical barriers to trade, and that in the particular
case of global waste management this is not used as a way of dumping
hazardous and non-hazardous waste in developing countries unable
to manage them correctly.
Pro-poor exploitation of natural resources, including
minerals and forests, and the regulatory framework for exploitation:
Matter of policy choices
Resource curse and bad governance
18. Natural resources are randomly distributed
across the earth's surface. Unfortunately, this distribution has
led to unequal outcomes. Some countries have abundant natural
resources. Some people in countries have claim to abundant natural
resources. Other countries have few or no natural resources. Or,
within countries, many poorer people have little no ownership
or claim to natural resources. Yet, the abundance of natural resources
can give rise to many opportunities to increase incomes, reduce
income inequality and poverty, and accelerate overall economic
and social development. On the other hand, this favourable scenario
has not been the experience of a number of developing countries
in recent years. UNIDO's experience has been that invariably,
abundant natural resources have led to largely unfulfilled economic
potential, leading to performance being far below potential, the
crowding out of manufacturing, widening income inequalities and
increasing poverty levels with many large-scale violent conflicts.
Development experience is littered with examples on all continents.
The abundance of natural resources has often been viewed as a
"curse" rather than a "blessing". This "resource
curse" is often termed the "Dutch disease". This
is the case when the discovery of an abundant natural resource
or a significant increase in commodity prices raises the real
value of country's currency, making manufacturing and exports
("tradeables") less competitive with other nations,
increasing imports and decreasing exports.
19. The richness of a country's natural resource
endowment should not, however, further underdevelopment and push
many more into poverty. Such a state of affairs often stems from
inept policies and lack of good governance. The development experience
of a number of resource-rich countries shows that "resource
curse" is not inevitable and that sound economic policies
can mitigate its ill effects and work positively for pro-poor
growth. The recent development experience of Botswana, Brazil,
Oman, Indonesia, Malaysia, and Thailand speaks powerfully on this
issue. The problem is not the resources themselves but how the
revenues from these resources are used. This is the fundamental
policy challenge for pro-poor growth. This is not an easy matter.
Governments have not always handled the abundance of natural resources
well. Resources have often been wasted or illegally expropriated
to the detriment of the poor in rural areas and overall sustainable
economic growth and poverty reduction.
20. UNIDO has found that the output of manufactured
or tradable goods can increase, if developing countries use the
revenues from resource extraction to increase domestic investment.
They must consider using a large part of the revenues for investment
instead of consumption and spending money on the right projects
which generate the best social returns. Sadly, they do not always
have the capacity to do so. They must also be able to moderate
the increase in demand for non-tradable consumer goods and services
which occurs when countries are flush with natural resource revenues
to avoid fuelling the "Dutch disease". Hence, prudent
investment and good governance dampen the tendency towards the
Dutch disease by both augmenting supply and moderating demand.
Understanding the critical level of governance to avoid the so-called
"resource curse" is crucial.
Pro-poor exploitation of natural resources: the promotion
of local suppliers and SMEs
21. UNIDO's experience has shown that pro-poor
exploitation of natural resources entails the promotion of locally
based suppliers of inputs needed by extractive industries. While
the production of these inputs requires locally-specific knowledge,
it will also require activity-specific knowledge that is not available
locally. Policy instruments, incentives and support systems should
thus promote small and medium enterprises and the required skills
to meet the demands of extractive industries.
22. While economic growth generally reduces poverty,
it does so at different rates in different contexts. The greatest
impact of economic growth on poverty reduction occurs in those
countries where small and medium enterprises (SMEs) actively participate
in local and global value chains which convert resource-based
comparative advantages into competitiveness.
Spreading the pro-poor spill-over effects of construction
booms
23. Construction booms are generally closely
related to resource extraction. As commodity booms generate revenue
booms which in turn if properly used sharply increase savings
and public investment. Such investment takes two forms: equipment
and structures. Most public investment is in infrastructure so
that the boom in public revenues leads to a boom in the demand
for the construction sector. UNIDO research suggests that the
empowerment of the poor in the local resource-based production
of building materials can lead to income generation and employment
creation for the poor.
24. Not only does the construction sector provide
a critical link between resource revenues and effective investment,
it also potentially provides the key link from resource revenues
to the labour market. Construction can employ precisely the young
males who, if left unemployed, are most susceptible to crime and
violence. Again, this transmission depends upon the capacity of
the construction sector to expand output. Spreading pro-poor spill-over
hinges largely on the institutional and business support services
that encourage small and medium enterprises in the vertical integration
of the production of construction materials.
25. UNIDO has been active in this area for
many years. As an example of a more recent development UNIDO has
been active in supporting the development of the Action Plan for
the Accelerated Industrial Development of Africa which was drawn
up by the Heads of State and Government of the African Union meeting
in Addis Ababa, Ethiopia in January 2008.
Regulatory framework for transforming resources into
sustained development
26. In the forthcoming UNIDO Industrial
Development Report 2009 subtitled "Breaking in and moving
up: New industrial development challenges for the bottom billion
and the middle-income countries" UNIDO spells out a concrete,
practical framework for transforming resources into sustainable
industrial development. The Report has been written with Prof.
Paul Collier, author of "The Bottom Billion" and will
be launched at Lancaster House in London on 23 February 2009.
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