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MEA Bulletin - Guest Article No. 55 - Thursday, 9 October 2008
Clean Energy Investment in Developing Countries
By Aaron Cosbey, Jennifer Ellis, Mahnaz Malik and Howard Mann, IISD
There is a flurry of activity, funding and political capital being directed at the challenge of clean energy technology, aimed at influencing investors as they make decisions in developing countries that will have climate change impacts for generations to come. The World Bank has established its Clean Investment Funds, Japan has announced its Cool Earth Partnership, the UK and US have followed suit with billions of dollars committed. Other multilateral development banks and individual donor countries are also active in supporting dissemination of technology to address climate change concerns.

The related theme of technology transfer is also attracting an increasing amount of attention. For the first time in UNFCCC negotiating history it is a key issue, having been incorporated in the Bali Action Plan commitments. Negotiators are searching (with varying degrees of success) for ways in which to give effect to the technology transfer obligations to which they have subscribed under the UNFCCC, the Kyoto Protocol and the Bali Action Plan.

In the area of clean energy investment the two agendas come together. The problem of technology transfer is essentially an investment problem; not enough investment is taking place in transformative technologies that will both provide new sources of energy, and do so at a significantly lower cost to the environment. Successfully addressing the barriers to clean energy investment, making host countries more attractive for that investment, is essential for technology transfer. It is, in fact, arguably one of the most effective policy options that governments have available for fostering technology transfer. Governments cannot muster the scale of resources necessary to make them the primary drivers of technology transfer. Some argue further that they are ill-equipped because ownership of the requisite intellectual property rights rests with the private sector. In any case, improving the domestic investment environment for clean energy technology is an entirely appropriate role for governments, multilateral development banks and aid agencies in the pursuit of both development and environmental benefits. It is therefore surprising that in all the activity related to clean energy investment and technology transfer there has not been more attention paid to this challenge.

More attention also should be paid to the implications of international investment agreements for climate-related investment. The uncertainties of interpretation, particularly with respect to indirect expropriation but also with respect to obligations on fair and equitable treatment, may in the final analysis chill new regulations designed to address climate change. And there may be potential for international investment agreements to take on an unprecedented proactive role in promoting clean investment, as opposed to any and all investment, but this possibility needs more thoughtful analysis.

The full report and a summary for policymakers are available at http://www.iisd.org/energy/investment.asp
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