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Perspective: Why Carbon Emissions Should Not Have Been the Focus of the UN Climate Change Summit and Why the 15th Conference of the Parties Should Have Focused on Technology Transfer
20 December 2009
Perspective by Brian J. Donovan, CEO of Renergie, Inc.
[Renergie was formed for the initial purpose of raising capital to develop, construct, own and operate a decentralized network of ten modular-designed small advanced biofuel manufacturing facilities (SABMFs) in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita.]
The Earth continues to experience record-breaking temperatures caused by increased atmospheric concentrations of carbon dioxide (CO2) and other greenhouse gases (GHGs). Experts predict that by the year 2060 global warming, if left unchecked, could result in a temperature rise of seven degrees Fahrenheit higher than temperatures before the Industrial Revolution when man started widespread use of coal and other fossil fuels. Oceans, already expanding from warmth and melting glaciers, would rise, increasing coastal flooding; a chain reaction of climate changes is projected to lead to harsher, more widespread droughts and more powerful storms. US intelligence and defense agencies say such environmental changes can lead to energy insecurity, water and food shortages, and social instability. That could mean more military involvement and massive disaster relief.
The most important environmental summit in the history of the world has concluded in Copenhagen. Unfortunately, this conference focused primarily on setting a cap on carbon emissions and providing financial aid to developing countries to build capacities to adapt to the negative impacts of climate change. This article discusses: (a) why the focus should have been on the transfer of proven renewable energy technology from developed to developing countries; and (b) how this technology transfer can be financed with currently available funds.
More than 110 heads of state met in Copenhagen to formulate a political accord to limit the causes of global warming. The two key issues were:
Reductions in Emissions—agreeing how much CO2 and GHGs each developed country should be allowed to produce and how much major developing countries, such as China and India, should aim at reducing the growth in their emissions; and
Financial Aid—agreeing how much wealthy nations should pay poor nations to help them protect themselves from climate change and to shift away from burning coal and other fossil fuels, which contribute to climate change.
Reductions in Emissions
A key working group under the United Nations Framework Convention on Climate Change (UNFCCC) released its first official draft for a climate deal on Friday, 11 Dec 2009. Authored by Michael Zammit Cutajar, Chair of the working group, the six-page draft calls for the world to keep temperatures from rising beyond a ceiling of 1.5 °C to 2 °C above pre-Industrial Revolution levels. To get there, the draft presents several targets for emission reductions from developed countries, ranging from 25% to 45% below 1990 levels by 2020. The paper also recommends that major developing nations aim to reduce emissions to between 15% and 30% below business-as-usual levels over the same time period. Island states like the Maldives and Grenada argue that a 2 °C target, which is considered by many scientists to be the safe upper limit for warming, will still result in a high enough sea-level rise to wipe them from existence.
The US proposal is to cut emissions by 3 to 4% of the amount produced in 1990. The European Union (EU) is committed to a 20% cut in emissions by 2020. Major developing countries, e.g., China and India, continue to resist mandatory ceilings on their emissions. Their negotiators argue that the developed countries have churned out greenhouse gases for decades and should bear a greater burden in reducing them. Developing nations, China adds, should not be restrained in using economic development to raise their standards of living, even if greater emissions result. China recently surpassed the US as the world’s biggest producer of GHGs. Based on calculations by the International Energy Agency (IEA), 75% of the growth in the world’s energy demand from 2005 to 2030 will come from developing countries. According to the IEA, global energy demand will grow 55% by 2030. In the period up to 2030, the energy supply infrastructure worldwide will require a total investment of US$26 trillion, with about half of that in developing countries.
The US has called for wealthy nations to pay poor nations $10 billion annually over the next three years. The EU has pledged $3.6 billion a year. It’s still unknown how much other wealthy nations, such as the US and Japan, will contribute. The UN says much higher amounts will be needed in 10 years. Poor nations want pledges more on the order of $100 billion annually by the end of the next decade, and they signaled last week that short-term pledges just would not do.
The precise amount of money that will be required over the coming decades to help developing countries adapt to the inevitable and reduce emissions is a moving target. A ballpark figure could be on the order of US$ 250 billion in 2020. But starting to raise immediate finance is more important than determining its exact future size. It is quite clear that costs for both adaptation and mitigation will increase over time, and that public money, provided by developed countries, will have to kick-start action and lead the way. The essential issue is that mechanisms are put in place which allow public and private sector finance to be significantly scaled up over time so that funding for climate action in the developing world does not have to be renegotiated every year.
Representatives of the poorest countries say they will need vast amounts of aid in coping with the consequences of climate change, like droughts, famine and rising seas that displace populations. Many of them have made it clear that they will not sign a treaty unless they receive money to help them adapt.
WHY A REDUCTION IN CARBON EMISSIONS SHOULD NOT BE THE FOCUS
In a recent interview, Mr. Bjorn Lomborg, director of the Copenhagen Consensus Center, a think tank, and author of “Cool It: The Skeptical Environmentalist’s Guide to Global Warming,” correctly states, “For almost 20 years, from Rio to Kyoto to Copenhagen, we’ve been wasting time, pursuing the failed strategy of cutting carbon-dioxide emissions. It’s about time we changed course. Do we really want to be remembered as the generation that wasted another decade? For years, we have been spinning our wheels on what I call the Rio-Kyoto-Copenhagen road to nowhere, slavishly following the notion—first endorsed at the 1992 Earth Summit in Rio de Janeiro and then extended in Kyoto 13 years later—that the only way to stop global warming is by means of draconian reductions in carbon dioxide emissions. All we have to show for this devotion is a continuing series of unmet targets, along with a startling increase in the number of people who no longer think climate change is worth worrying about.”
China and India recently announced plans to reduce the carbon intensity, or the amount of carbon-dioxide emissions per unit of gross domestic product, of their economies over the next decade. China, which increased vehicle fuel-efficiency standards in recent years, wants to cut its carbon intensity by as much as 45% from 2005 levels by 2020 while India has targeted a reduction of as much as 25% from 2005 levels over the next decade. The Chinese can promise to do this because they’re modernizing their economy. They’re investing in more efficient energy sources and nuclear power. So this in essence is basically saying, “We’re just going to promise to do what we’re going to do anyway.” The situation is the same for India. Estimates show that India will probably end up, if they do nothing, reducing its carbon intensity by almost 50%.
In order for the world to keep temperatures from rising beyond a ceiling of 1.5 °C to 2 °C above pre-Industrial Revolution levels via solely reducing carbon emissions, it is estimated that the annual cost will be US$40 trillion by the end of the century. Mr. Lomborg estimates that for every dollar spent, the world will avoid only about two cents of climate damage. Furthermore, each dollar spent on traditional cap-and-trade plans only brings about US$0.90 in benefits. However, climate economists predict that if investment in clean energy technology is dramatically increased, for every dollar spent, the world will avoid eleven dollars of climate damage.
“Why has this ‘reduction in carbon emissions’ approach led us to this dead end? Well, to begin with, it proposes a solution that costs more than the problem it’s meant to solve. It is estimated that if we don’t do anything about global warming, its damaging effects will cost the world close to US$3 trillion a year by the end of this century. In an effort to avert this ‘catastrophe’, the industrialized nations have proposed a plan that would mandate cuts in carbon emissions in order to keep average global temperatures from rising any higher than 2 °C above pre-industrial levels.
“Climate economist Richard Tol, a lead author for the UN climate panel, determined that to cut carbon emissions enough to meet the 2 ° goal, the leading industrial nations would have to slap a huge tax on carbon-emitting fuels—one that by the end of the century would reach something on the order of US$4,000 per metric ton of carbon dioxide, or US$35 per gallon of gas (US$9 per liter). According to Tol, the impact of a tax hike of this magnitude could reduce world GDP 12.9% in 2100—the equivalent of US$40 trillion a year. In other words, to save ourselves US$3 trillion a year, we’d be giving up US$40 trillion a year. No wonder we’re not getting anywhere. On figures from the IEA, it is clear that to cut carbon emissions by three-quarters over the rest of this century while maintaining reasonable economic growth, we would have to develop alternative-energy sources capable of providing roughly twenty times the energy they do now. To be sure, there are plenty of promising alternative technologies on the horizon. But for all the optimistic talk of sustainable, non-carbon-emitting energy sources, none of them are remotely ready to shoulder such a load. The fact is, about half the world’s electricity comes from coal. For emerging economies like those of China and India, the proportion is closer to 80%. Indeed, burning carbon-emitting fuels is the only way for such countries to rise out of poverty. No wonder so many of them have so much trouble with the largely Western plea that we all go on a carbon diet. It’s simply not in their interest to do so.
“Instead of trying to make fossil fuels more expensive, we should focus on making alternative energy cheaper. The cost of fully implementing the Kyoto Protocol (in terms of lost economic growth) has been estimated at roughly $180 billion a year. For just a little more than half that amount, we could fund a fifty-fold increase in spending on R&D for the kind of game-changing technological breakthroughs—like smart grids, ultra-efficient batteries or even cheap, manageable fusion—we will need to end our addiction to fossil fuels. Such a commitment would resolve many of today’s political challenges. Developing nations would be much more likely to embrace a positive path of innovation than a punitive one that handicaps their ability to grow their economies, ” Mr. Lomborg says. Trying to force drastic carbon emissions cuts in the short-term doesn’t work economically or politically. In addition to the issues raised by Mr. Lomborg, the UN Climate Change Summit should not have focused on a reduction of carbon emissions for the following reasons:
Developed and developing nations have not settled, and will probably never settle, on reliable mechanisms for monitoring emissions;
Due to the lack of transparency, reductions of carbon emissions that are measurable and verifiable will be almost impossible to achieve. For example, Chinese negotiators do not want to sign up to an agreement that involves inspectors visiting their country to verify progress on climate commitments;
While an eventual treaty would be likely to include a cap-and-trade system, under which the world’s bigger polluters would buy allowances from cleaner corporations or utilities, it is unclear how—or even if—it would work. Leonardo da Vinci stated it best when he said, “Simplicity is the highest form of sophistication.” There is no need to develop a complex cap-and-trade system that would be analogous to credit default swaps. The simple transfer of proven renewable energy technology to developing countries is what is currently required; and
In the US, many Republicans believe the threat of climate change due to carbon emissions is nothing more than a Democratic conspiracy. What cannot be argued is the fact that fossil fuels are non-renewable. It is time to jumpstart an advanced biofuel industry with the transfer of proven renewable energy technologies to developing countries.
THE TRANSFER OF RENEWABLE ENERGY TECHNOLOGY
UNFCCC’s Position on Technology Transfer
Technology transfer assists developing countries with the damage caused by climate change and incentivizes them to lower their own carbon emissions. Parties to the UNFCCC are required by the convention to engage in technology transfer from developed to developing countries. This includes an obligation both to take “practicable steps to promote, facilitate and finance, as appropriate, the transfer of, or access to, environmentally sound technologies and know-how” and to “support the development and enhancement of endogenous capacities and technologies of developing countries.” The project-based approach to technology transfer has clear political benefits. First, it is much simpler to negotiate than a more comprehensive and obligatory system.
In order for technology transfer to be effective at a macro level, a technology which has been transferred to one local firm ultimately needs to be provided to other local firms through supplier relationships with the initial firm. In this process, known as Hirschman linkages, a backward technology linkage from an international firm to a local firm is followed by forward linkages from that firm to others in the local economy. Any number of local barriers to growth of firms can hamper these forward linkages, minimizing the effective impact of technology transfer.
While the UNFCCC includes an understanding of the process of technology transfer and the steps involved, there has been little focus by the UNFCCC on establishing what technology needs to be transferred and why it is failing to be transferred currently.
Despite overall renewable energy investment picking up pace over the last few years, investment decision-making with respect to renewable energy technology transfer to developing countries continues to suffer from the prevailing practice of overlooking the relevant physical and social circumstances of users and places, particularly in rural and poor areas. As a result, a good proportion of the development assistance for renewable energy technology transfer to developing countries has, to date, been deemed somewhat of a failure.
There are several reasons for the failure of developed countries to deliver on technology transfer. The absence of political will from developed countries to provide measurable, reliable and verifiable financial support is an intermediate cause. Another cause may be the failure of developing countries, at least until just prior to the Poznan COP, to go beyond rhetorical statements and to make concrete proposals and demands. In particular, to identify specific packages of technologies that are essential for their mitigation and adaptation needs and methodologies for doing so. Finally, intellectual property rights, and the barrier it may pose, has been identified as another potential reason that developed countries have failed to deliver on technology transfer.
The lack of progress in the UNFCCC in ensuring the effective transfer of technologies may be due to a number of other contributing factors, including: difficulty in determining the scope of technologies to be transferred for mitigation and adaptation, and unreliable processes for matching identified needs with funding.
During the 4th COP, developed nations began to emphasize the issue of the lack of enabling environments as a barrier to technology transfer. Focusing on private sector delivery, they argued that developing countries needed to ensure proper regulatory environments to create demand for technologies and that they needed to ensure intellectual property protection and enforcement to ensure that companies felt comfortable licensing technology.
The Ad Hoc Working Group on Long-term Cooperative Action (AWG-LCA) was established at the 2007 Bali COP. Developing countries insisted that before they move toward binding GHG emissions reductions commitments, industrialized countries must deliver on their commitments relating to technology transfer for mitigation and adaptation. Developed countries continued to resist engaging on the issue and instead focused on trying to move China and other large developing countries to take on binding GHG emissions reduction obligations.
Post Bali, two approaches to Intellectual Property Rights (IPRs) have been articulated: Cuba, India, Tanzania, Indonesia, China and others argue that IPRs needs to be addressed as a barrier within the technology transfer discussion; Australia and the US argue that IPRs is a catalyst, rather than a barrier, to technology transfer.
It is clear that some of the demand for technology transfer in the UNFCCC debate has been part of a strategy by some developing countries to avoid discussing mitigation until industrialized countries deliver measurable, reportable and verifiable amounts of technologies and financing. Industrialized countries must recognize the demand for technology transfer and finance as a serious demand from developing countries, not just a political chip to bargain for binding mitigation targets. On the other hand, developing countries must continue to work and elaborate their demands so as to lead to workable proposals for institutions and mechanisms while addressing related concerns about maintaining incentives for innovation.
The debate over IPRs and access to “essential” technologies is highly emotional, touching on issues of human rights, fairness and the responsibility of the developed world to help those in the developing world adapt to a changing climate. To this end there have been suggestions which effectively translate into the IPRs system being undermined via a regime of compulsory licensing. But while calls to put the needs of the developing world above the need to protect IPRs may have a significant emotional appeal, the arguments do not match the empirical evidence.
Recent studies show that those developing countries that strengthened IPRs regimes experienced an increase in licensing agreements with parties in developed nations, enabling firms from developing nations to effectively access and exploit new technologies and know-how.
Licensing is a complex decision to take since it implies the sharing of rents of innovation with the licensee. For companies, a main worry constitutes the risk of imitation by the partner. In addition, contracting on technology is complex and costly. Writing and executing a reliable contract for the use of technology requires adequate specification of IPR and their use, monitoring, and enforcement of contractual terms, which are not straightforward tasks. Other transaction costs include the search of partners, the drafting of contracts, legal assistance, etc.
The literature argues that, in certain contexts, the strength of patent protection may positively influence the decision to license technologies. Stronger protection reduces the risk of opportunistic behavior by the licensee (Merges, 1998; Arora and Merges, 2004) and reinforces the licensor’s bargaining power, which enables him to appropriate a larger share of the total surplus generated by the licensing deal.
Obstacles to Licensing
Although they are expanding, licensing markets are still underdeveloped, compared to their potential. An important number of patented inventions could be commercialized and exploited by third parties but their owners have not succeeded in licensing them out. The reasons for this have to do with the difficulty in finding partners and concluding licensing deals: existence of transaction costs, how to go about seeking potential partners, lack of experience in drafting contracts, disagreements on exploitation conditions such as geographical or exclusivity restrictions or payment conditions (royalties, lump sum, etc.). Many of these difficulties are due to the particular nature of knowledge as an economic good. Notably, pieces of knowledge being all different from each other, there is little standardization, making it difficult to have references such as common price or standard contracts. The potential user of a given piece of knowledge can remain unknown to the seller, who thus cannot contact him/her. This increases the difficulty in negotiating deals, generating potential market failures (OECD 2006a).
SOURCES OF FUNDING FOR THE TRANSFER OF RENEWABLE ENERGY TECHNOLOGY
Multilateral Development Banks (MDBs)
MDBs are institutions that provide financial support and professional advice for economic and social development activities in developing countries. The term Multilateral Development Banks typically refers to the World Bank Group and four Regional Development Banks:
- The African Development Bank;
- The Asian Development Bank;
- The European Bank for Reconstruction and Development; and
- The Inter-American Development Bank Group (The IDB Group).The IDB Group is composed of the Inter-American Development Bank, the Inter-American Investment Corporation (IIC) and the Multilateral Investment Fund (MIF).
Several other banks and funds that lend to developing countries are also identified as multilateral development institutions, and are often grouped together as other Multilateral Financial Institutions (MFIs). They differ from the MDBs in a more narrow ownership/membership structure or in focusing on special sectors or activities. Among these are:
- The European Commission (EC) and The European Investment Bank (EIB);
- International Fund for Agricultural Development (IFAD);
- The Islamic Development Bank (IDB);
- The Nordic Development Fund (NDF) and The Nordic Investment Bank (NIB); and
- The OPEC Fund for International Development (OPEC Fund)
A number of Sub-Regional Banks, established for development purposes, are also classified as multilateral banks, as they are owned by a group of countries (typically borrowing members and not donors). Among these are banks such as:
- Corporación Andina de Fomento (CAF);
- Caribbean Development Bank (CDB);
- Central American Bank for Economic Integration (CABEI);
- East African Development Bank (EADB); and
- West African Development Bank (BOAD).
THE RENERGIE PLAN
The private sector faces five challenges when attempting to transfer technology from a developed country to a developing country:
- finding a suitable partner in the developing country;
- the form of transfer (license agreement, joint venture, or public-private partnership);
- the scope of technology to be transferred;
- protection of IPRs; and
Renergie addresses these five challenges in the following manner:
Finding a Suitable Partner in the Developing Country
Renergie works closely with host countries in Latin America, the Caribbean, Asia and Africa and the relevant MDB to find a suitable private sector partner.
Form of Transfer
The mission of Renergie is to:
produce superior financial returns for its shareowners by locally producing non-corn fuel ethanol via a decentralized network of modular-designed small advanced biofuel manufacturing facilities (SABMFs), developing the infrastructure necessary to grow advanced biofuel demand beyond the 10% blend (E10) market, and directly marketing hydrous E10, E20, E30 and E85 via variable blending pumps; and
maximize sustainable economic, social and institutional development in the southern United States, Latin America, the Caribbean, Asia, and Africa by drafting legislation and supporting policies that are based upon Renergie’s unique “Field-to-Pump” strategy. Field-to-Pump, which maximizes rural development and job creation while minimizing feedstock supply risk, the burden on local water supplies, and the amount of energy necessary to process sugar into fuel ethanol, disrupts the status quo by allowing advanced biofuel producers to be drivers of transportation fuel prices rather than merely price takers in the market.
The objective of the form of transfer is to accomplish both the mission of the relevant MDB and the mission of Renergie in the most efficient and effective possible manner. This objective may be achieved via one or more of the following scenarios.
Scenario No. 1: Technology Transfer Agreement. Under this scenario, the MDB would find suitable private sector partner(s) with whom Renergie would enter into a technology transfer agreement (TTA). Under the terms and conditions of the TTA, Renergie would provide the variety of sweet sorghum seed necessary to ensure maximum yield per acre, the mechanical harvesting system(s), the SABMF(s), the variable blending pumps to develop the infrastructure for hydrous E10, E20, E30 & E85, and training personnel for the initial 18-month period of operation. The SABMF(s) could be manufactured in Lafayette, Louisiana for export. Alternatively, the SABMF(s) could be manufactured by a private sector partner in a relevant MDB member country.
Scenario No. 2: Joint Venture (JV). A joint venture is a legal organization that takes the form of a short term partnership in which the persons jointly undertake a transaction for mutual profit. Generally each person contributes assets and share risks. Like a partnership, joint ventures can involve any type of business transaction and the “persons” involved can be individuals, groups of individuals, companies, or corporations. Under this scenario, the relevant MDB would find suitable private sector joint venture partner(s) with whom Renergie would enter into a joint venture agreement (JVA). Under the terms and conditions of the JVA, the joint venture partner(s) would invest in Renergie, Inc. The joint venture would work to gain entrance into the markets of the relevant MDB member countries.
Scenario No. 3: Public-Private Partnership (PPP). Obtaining accurate information and knowledge of the local and regional conditions in advance of any renewable energy technology transfer is absolutely crucial for its success. Under this scenario, the relevant MDB would identify capable local partners and invest in a new public-private joint venture company (JVC) to be incorporated under the laws of the specific MDB member country in which the PPP would be formed to develop, construct, own and operate a decentralized network of SABMFs and develop the infrastructure for hydrous E10, E20, E30 & E85 via variable blending pumps under the terms of the Renergie Field-to-Pump strategy. This investment would align with the relevant MDB’s long-term strategic framework for investments in energy efficiency and renewable energy in the MDB’s member countries. It would help MDB member countries diversify from fossil fuels for transportation fuel and benefit from underused indigenous sources of energy. The JVC would introduce the Renergie Field-to-Pump strategy to MDB member countries, which would help bring down the overall cost of funding (and hence the average cost of transportation fuel) and attract other foreign investors to the renewable energy sector.
Scope of Technology to be Transferred
Smaller is better. The Renergie Field-to-Pump strategy establishes the first commercially viable large-scale decentralized network of modular-designed SABMFs in the United States capable of operating 210 days out of the year. As with most industrial processes, large ethanol plants typically enjoy better process efficiencies and economies of scale when compared to smaller plants. However, large ethanol plants face greater supply risk than smaller plants. Each SABMF has a production capacity of 5 MGY and utilizes feedstock from acreage adjacent to the facility. Moreover, Renergie’s feedstock can grow on degraded lands that are not in use for food production. The distributed nature of a SABMF network reduces feedstock supply risk, does not burden local water supplies and maximizes rural development and job creation.
Protection of IPRs
“Patents” means all patents and patent applications developed, generated and/or acquired by Renergie and all reissues, renewals, and extensions thereof for inventions, inventors’ certificates, utility certificates, utility models, patents or certificates of addition, inventors’ certificate of addition, utility certificates of addition, design patents, and industrial design registrations and foreign counterparts thereof. “Technology” means the process, formulation, equipment and product specifications and proprietary and confidential information, trade secrets, test data/analyses, trademarks, copyrights, know-how, show-how and other technical information and improvements and modifications thereto, relating or applicable to Renergie’s process for the production of fuel-grade ethanol from sweet sorghum juice and other feedstocks.
Renergie protects its IPRs in developing countries by entering into PPPs or JVs rather than technology transfer agreements. Closely-guarded trade secrets and know-how, together with the passage of meaningful trademark protection legislation in the host country, provide the greatest degree of protection. The operational areas of seed selection, planting, harvesting, processing, blending of the hydrous advanced biofuel, and marketing are compartmentalized in a manner in which it would be virtually impossible for a competitor to reverse engineer Field-to-Pump.
Technology transfer funding needs to address not only the technologies themselves, but also potential policy barriers to the growth of recipient firms. These policy barriers may be overcome via a MDB/PPP form of transfer. The following are potential sources of funding for the transfer of proven renewable energy technology to developing countries:
Individual developing countries via currently available sources of equity and debt financing;
Private sector financing from investors in the developing countries;
The following MDBs are actively pursuing ways to increase the availability of innovative financing through existing and new instruments and to accelerate the access of developing countries to proven renewable energy technology, building on comparative advantages of the various institutions and their strong development policy dialogue with member countries:
- African Development Bank
- Asian Development Bank
- European Bank for Reconstruction and Development
- Inter-American Development Bank
- International Bank for Reconstruction and Development (IBRD)/International Development Association (the World Bank)
- International Finance Corporation; and
International Monetary Fund (IMF) Special Drawing Rights (SDRs)
George Soros, the billionaire financier, unveiled a plan at COP15 to give poor countries access to $100bn in financial assistance to deal with the threat of climate change. The money would come from the IMF, from financial instruments know as SDRs. Soros explained that these instruments are used to create liquidity. The IMF has distributed hundreds of billions of dollars worth of SDRs to its members, which lie in the reserve accounts of the countries concerned. Soros argued that these reserves are unnecessary, and that the SDRs could be lent to developing countries, through a “green fund” set up for the purpose. “It is possible to substantially increase the amount available to fight global warming in the developing world by using the existing allocations of SDRs,” he said. “All that is lacking is the political will...Yet it could make the difference between success and failure at Copenhagen.” He said this money, which has already been designated for the use of the poorest countries, could best be spent in this way. Mr. Soros’ ideas could receive more attention in the coming months as rich countries struggle to work out in detail how they can finance any pledges they make in the coming days.
The dismal failure of COP15 demonstrates that the Rio-Kyoto-Copenhagen road was a dead-end paved with nothing more than hollow promises. Due to the lack of reliable monitoring systems for emissions and the lack of transparency, reductions of carbon emissions that are measurable and verifiable will be almost impossible to achieve. Moreover, while an eventual treaty would be likely to include a cap-and-trade system, under which the world’s bigger polluters would buy allowances from cleaner corporations or utilities, it is unclear how—or even if—it would work. What is clear is that a cap-and-trade system in the US could be manipulated. The carbon trading scheme centers around derivatives. Yesterday’s credit default swap experts would become tomorrow’s cap-and-trade advisors. In the US, many Republicans believe the threat of climate change due to carbon emissions is nothing more than a Democratic conspiracy. What cannot be argued is the fact that fossil fuels are non-renewable. It is time to jumpstart an advanced biofuel industry with the transfer of proven renewable energy technologies to developing countries.
In the next thirty years, a substantial percentage of greenhouse gas increases will come from carbon emissions by developing countries. Without clean technologies in place, these developing countries will find it impossible to curb emissions. The private sector in developed countries, given assurance by the developing countries of a secure and stable investment environment that includes strong IPRs, are in the best position to develop and transfer these technologies. The most efficient and effective manner to transfer proven renewable energy technology to developing countries is via a PPP.
Under this scenario:
the relevant MDB would identify capable local partners and invest in a new public-private joint venture company (JVC) to be incorporated under the laws of the specific MDB member country in which the PPP would be formed;
the developing country would have a vested interest in the success of the JVC which in turn would assist in passage of supporting legislation and improvement of the business climate which would reduce transaction costs;
the developed country would be in a better position to protect its IPRs; and
the transfer of the proven renewable energy technology would, in the case of Renergie, reduce feedstock supply risk, not burden local water supplies and maximize rural development and job creation thereby assisting the MDB to accomplish its mission of helping its member countries reduce poverty and improve the quality of life of their people.
The transfer of proven renewable energy technology from developed to developing countries can be financed with currently available innovative financing through existing and new instruments via the above-mentioned MDBs and Clean Technology Fund (CTF) financing.
When a country expresses interest in accessing CTF financing, the relevant MDB conducts a joint mission, involving other relevant development partners, to discuss with the government, private industry and other stakeholders how the CTF may help finance the transfer of proven renewable energy technology. Ideally, to achieve greater leverage, private sector projects will blend CTF financing with MDB financing in the most efficient and effective possible manner.
Arora, A. and M. Ceccagnoli (2006), “Patent Protection, Complementary Assets, and Firms’ Incentives for Technology Licensing”, Management Science 52 (2006), pp. 293-308 doi: 10.1287/mnsc.1050.0437
COP15, United Nations Climate Change Conference Copenhagen 2009
Kim, Y. J. and N. Vonortas (2006), “Determinants of Technology Licensing”, Managerial and Decision Economics, 27 (4), pp. 235-49 doi: 10.1002/mde.1249
OECD (2006a), “Valuation and Exploitation of Intellectual Property”, by S. Kamiyama, C. Martinez and J. Sheehan (2006), STI Working Paper, OECD.
OECD (2006b), “Summary of the EPO-OECD-UKPO Conference: Patents, Realising and Securing Value”, OECD
Vonortas, N. and K. YounJung (2004), “Technology Licensing”, Patents, Innovation and Economic Performance, OECD, Paris, pp.181-199
Yang, Zili “An Analysis of Technology Transfers as a Response to Climate Change”, Copenhagen Consensus Center, August 28 2009
About the Author
Brian J. Donovan is an engineer and attorney with more than thirty-four years of international business experience. Mr. Donovan is CEO of Renergie, Inc., which was formed on 22 March 2006 for the initial purpose of raising capital to develop, construct, own and operate a decentralized network of ten modular-designed small advanced biofuel manufacturing facilities (SABMFs) in the parishes of the State of Louisiana which were devastated by hurricanes Katrina and Rita. Each SABMF has a production capacity of five million gallons per year of fuel-grade ethanol.
Renergie’s unique Field-to-Pump strategy is to produce non-corn ethanol locally and directly market non-corn ethanol locally. Field-to-Pump maximizes rural development and job creation while minimizing feedstock supply risk, the burden on local water supplies, and the amount of energy necessary to process sugar into fuel ethanol. Field-to-Pump disrupts the status quo by allowing advanced biofuel producers to be drivers of transportation fuel prices rather than merely price takers in the market. Renergie is in the process of transferring its proven renewable energy technology worldwide by working closely with developing countries in Latin America, the Caribbean, Asia and Africa.
Mr. Donovan drafted the “Advanced Biofuel Industry Development Initiative” for the State of Louisiana. On 21 June 2008, Louisiana Governor Bobby Jindal signed into law the Advanced Biofuel Industry Development Initiative (Act 382). Act 382 is based upon the Field-to-Pump strategy. On 24 February 2009, the US EPA granted Renergie a first-of-its-kind waiver for the purpose of testing hydrous E10, E20, E30 & E85 ethanol blends in non-flex-fuel vehicles and flex-fuel vehicles in Louisiana. (Earlier post.) On-site blending pumps, in lieu of splash blending, are used for this test.
Mr. Donovan, a member of The Florida Bar, The US District Court, Middle District of Florida and The United States Court of Appeals for the Eleventh Circuit, holds a JD from Syracuse University College of Law (where he was recipient of the “Global Law & Practice Award” as the outstanding graduate in the areas of International Law and International Business Law) and a BS, with honors, in Marine/Mechanical and Nuclear Engineering from the United States Merchant Marine Academy.
Mr. Donovan does not represent, nor has he received any compensation from, any party in regard to climate change or cap-and-trade legislation.
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