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GLOBAL CLIMATE CHANGE

Home Climate Change Conference Programme
 

Maximising Investment and Technology Access

by Dr RS. Maya, Executive Chairman,
Southern Centre for Energy and Environment

Introduction

The global concern with climate change is a common subject and so is the need to act in mitigation or adaptation. Two major issues remain contentious. One is the remnant of a body of scientists acting in clear political interest who still argue that climate change is not a true phenomenon. The other is the global approach to and distribution of mitigation efforts. The subject of this paper is simply to indicate key issues which should concern Southern Africa on the second argument (approach to and distribution of effort) and to suggest ways which the region could enhance its benefit from any encounter they may have with climate change mitigation activities.

Africa is not a major player in climate change either as a cause of climate change or as a region for mitigation. It is a marginal actor at least in the short term. For this reason, some policy makers have avoided any serious assessment of how climate change relates to their countries and their development programmes. This response is unfortunately ill advised. Africa may have a lot to gain in taking the subject of climate change seriously and indeed it already has a lot to loose by doing nothing since Africa falls within the region most vulnerable to the negative effects of climate change.

Climate change will be the most influential force in determining international economic cooperation in the very near future and Southern Africa would do well to prepare for gainful participation.

Global Approaches to Climate Change

The debate and international responses to climate change have made a swift transition from a genuine concern with climate change and its mitigation to a very highly strategic concern about protecting and advancing national interests which can be influenced by climate change.

International response to climate change has taken four major approaches as follows:

  • seeking to understand the phenomenon of climate change in scientific terms;
  • building a global baseline information base on levels of emission and their sources and sinks;
  • developing approaches to limit the emissions of greenhouse gases;
  • establishing a global formula for distributing the global effort to mitigate climate change.

How has Africa fared in all these steps?

Seeking to understand the phenomenon of climate change in scientific terms

A few African scientists have participated in the appropriate working group of IPCC (International Panel on Climate Change) scientists preparing the first and second assessment reports on the science of climate change. The third assessment report is in preparation, and still very few African scientists are participating. In addition, there is very little scientific observation on Africa to form a clear basis for influencing the global scientific conclusions on climate change.

This increases the likelihood that global conclusions have little relevance for Africa or are not accurate about Africa. Our technical and institutional preparedness is therefore constrained significantly. Moreover, Africa cannot influence technological designs and R&D for climate change mitigation and adaptation. In like manner our baseline needs cannot be effectively catered for in global searches for response options.

Building a global baseline information base on levels of emission and their sources and sinks

Africa has participated fully in this exercise including the formulation of methods for assessing emission inventories. However, the resulting country emissions profiles appear to have made very little impact in development planning even for the energy sector which is most affected by climate change mitigation decisions. Industrialised countries have utilised this information to set themselves up for access and control of global markets for climate change mitigation technologies.

Africa has not used this information to any of its own advantage.

Developing approaches for limiting the emissions of greenhouse gases.

There are various approached to GHG emissions reduction. These include technological innovations, fuel pricing policies, tax structures, fuel base transitions and what has been termed "flexible mechanisms" which include the trading of the right to emit or tradable permits.

Most of these concepts are quite controversial but for Africa the controversy has not been fully analyzed nor absorbed at official level. This is in opposition for instance to such countries as the US and Japan which have issued official positions from presidential offices and have put together teams to study the implications of certain climate change decisions on their economies.

A number of studies have been conducted in some countries of Southern Africa and these give good indications of possible mitigation areas for the region. The power sector stands out as having the greatest potential. Land use change, which is a major source of emissions in the region, is not a major source in industrialised countries. This creates a dilemma in that industrialised countries, which have taken the lead in mitigation technologies, will not focus on land use change or may do so in a misguised fashion as we have seen in the case of carbon forestry in some parts of the third world.

Some key approaches are shown.

Establishing a global formula for distributing the global effort to mitigate climate change.

Industrialised countries are seeking the widest possible participation in climate change mitigation activities in order to reduce their own domestic burden in meeting their emissions reduction targets.

Some cost indicators for selected Annex 1 countries are shown in table 1.

Table 1. Annual Cost to Cut Emission 10% below 1990, Using Tradable Permits With Assumed Price of $20/Ton of Carbon

 

Required

Cut

(mmtce)

Total Cost

Percentage of Year

2000 National Income

(Nominal GDP)

USA

323

$6.45 billion

0.072%

EU

68

$1.35 billion

0.015%

Japan

43

$0.87 billion

0.014%

Canada

27

$0.54 billion

0.073%

Total

461

$9.22 billion

0.037%

These costs are considerably lower than direct mitigation action at home and it is the hope of Annex 1 countries that this cheaper route will be adopted as a global system of reducing emissions.

To this end, countries such as the US have been forced by their Congress not to sign or ratify the Kyoto Protocol unless there is meaningful participation by at least key developing countries (Brazil, China, India, Mexico, South Africa).

What is the underlying purpose of pushing for wider (meaningful) participation?

On the face of it meaningful participation is advanced in order to avoid what has been called "free-riding" and "leakage effect".

In the first concept some industrialised countries are seeking to ensure that countries which have not participated in the mitigation effort do not have windfall benefits from actions of those which have participated. The focus here is on those key-developing nations, which have the capacity to absorb benefits from the action of others in mitigating climate change. Most countries in Southern Africa fall out of this category. On the second concept some developed countries are arguing that it does not pay for some countries to reduce emissions when similar quantities are being emitted in the other part of the world by countries which are not participating.

But the real underlying concern, expressed mainly by the United States, is the impact of unilateral action on their domestic economy. Further meaningful or expanded participation will ensure that a greater number of countries, particularly developing countries, will be under pressure to introduce cleaner technologies or participate in emissions trading resulting in a regime that affords greater technology markets and a greater sphere of action for the cheaper mitigation route of tradable permits.

What can Southern Africa do to achieve greater benefits?

The first thing to clear is whether indeed there is room not to participate. The practical answer is that there is not room to avoid participation. Southern African countries will have to participate even if marginally and this can be done without commitment. The most important thing for the region to accept is that it is not in a position to influence the direction of global cooperation even under such a single agreement as the Kyoto Protocol. It has to choose the most strategic way to participate. And to do so, there is a need at the initial stage to gain a full grip of the global processes governing global participation favourable to the region and next to outline our own regional interests so that they can be strategically aligned with the new global processes.

The present interests of most countries in the region would be infrastructure development, capacity building and industrial expansion to reduce dependence on agriculture, which has been rendered unreliable by declining rainfall.

Traditional mechanisms for achieving these include the following channels for technology transfer:

  • Joint Ventures
  • Licensing
  • Direct Foreign Investment
  • Purchasing Capital Goods
  • Purchasing Consulting services
  • Turnkey projects
  • Imitation
  • Technical Assistance
  • BOT projects

All but a few of the above approaches are declining in effectiveness. And global interests have expanded beyond market access and new investments. They are focusing at least currently on mitigating the cost of meeting emissions reduction at home. This is the new paradigm. This is a much more forcing paradigm than the traditional ones listed above. Africa unfortunately did not benefit significantly from the traditional approach and is already lagging behind on the new approach.

The present approach includes the following four key instruments:

  • Clean Development Mechanisms (CDM)
  • Joint Implementation (JI)
  • Emissions trading
  • GEF Incremental Cost Financing

Clean Development Mechanisms are driven by technology niches and their markets. The region should make itself a competitive target not only for the markets but for the industrial production of these technologies as well.

Joint Implementation is a good vehicle for Foreign Direct Investment and the region would do well to work out mechanisms by which it can empower its investors for equity participation in JI projects.

Emissions trading require that countries of the region take stock of the carbon stocks and prepare these for the global market at well-calculated prices, which take into account the long-term value of the right to emit.

The Global Environmental Facility’s incremental cost support offers good investment extension on baseline projects. It can be used to access more advanced technologies and production systems in various sectors of the economies of the region.

These are the practical instruments presently in place which the region can explore.

Besides tagging onto these immediate opportunities, it is essential for the region to consider seriously tagging onto some long term technology development initiatives such as those ongoing effort in transport fuel transitions. A similar strategy would apply in terms of tagging onto some of the new thinking in key development support institutions. These include for instance:

  • eliminating subsidies
  • improving and promote energy efficiency
  • promoting clean and efficient use
  • integrate climate change in developing planning
  • promote market transformation mechanisms to facilitate market entry of renewable energy

Conclusion

There is need for the region to act more strategically in handling global cooperation. The present climate change debate offers significant opportunities for technology access. However, it is quite likely that Africa’s interests will not be included on the global technology agenda since Africa has very little influence on global thinking when it comes to climate change mitigation. Active programmes to develop cooperation activities under CDM, JI, GEF and emissions trading should be placed on the agenda for the short-term economic development strategy for the region.