Clean Technology for Developing Countries -- Bright Road Ahead

March 02, 2009

Solar PanelsI'd like to put last week's move by the U.S. Congress to eliminate a proposed contribution to the Clean Technology Fund (CTF) in perspective. At the risk of reviving an overworked metaphor from late 20th Century discussions of the Internet: the move was rather like an unexpected pothole on the onramp to what promises to be a clean technology superhighway. Which is to say, despite this setback, I am increasingly optimistic that the U.S. will lead the way to a rich-world agreement with the developing world to cut greenhouse gas emissions. And a fund very much like the CTF will be central to that agreement.

Happily, the Obama administration shows every sign of rapid, aggressive action on carbon emissions mitigation. And climate change was very much on the agenda when Secretary of State Clinton recently met with China's leaders. So we have every reason to hope for an end to the US/China impasse that has log-jammed progress toward a global agreement at Copenhagen. China itself has demonstrated a striking commitment to progress on renewable energy, which Matt Hoffman and I will document in a forthcoming blog.It has also become clear to most actors that emissions cuts in the industrial world will only buy a few years for the global community. As Kevin Ummel and I have documented, the struggle to contain greenhouse gas emissions will be won or lost in the developing world. Global monitoring and market-based regulation of emissions would be desirable, but experience with conventional pollution regulation suggests that it will be a number of years before many developing countries can implement such an approach.At the same time, as Kirk Hamilton of the World Bank has recently shown in a compelling economic analysis that has yet to be released, major developing-country emitters such as China and India will maximize their long-run economic interest by moving very soon on limitation of carbon emissions. The same is certainly true of the United States, European Union, Japan and Canada. Since carbon regulation in many developing countries will be difficult in the near future, it would be very desirable to pursue emissions reductions on another track (a complement to eventual global regulation, not a substitute), if one can be found.Fortunately, such a track is clearly available: clean technology investments, principally in the power sector and subsidized by the rich countries, that will accelerate learning and scale economies so that renewable energy technologies are pushed rapidly down the cost curve to become competitive with fossil fuels. Once this happens, the private sector can propel the clean energy revolution in developing countries. Kevin Ummel and I provide an illustration in our recent paper on solar thermal power in North Africa and the Middle East.The good news is that, as far as I can tell (and I spend a lot of time talking to relevant policy people), all the major players agree that we need a multilateral clean technology investment program. So with that in mind, I offer this prediction with considerable confidence: sometime within the next two years, probably after Copenhagen, all the world's major emitters will coalesce around a large investment fund that will cover the incremental cost of catalyzing rapid clean technology growth in the developing world. This fund will be multilateral, inspired by the recently-initiated Clean Technology Fund at the World Bank, and its governance will be shared among the major developed- and developing-country emitters. It will focus on clean technologies that hold the promise of large-scale emissions reductions, principally solar, wind and other renewables, but also including pilot applications of carbon capture and storage (CCS) for advanced coal-fired plants. If pilot CCS projects prove to be viable, safe and cost-competitive (all big if's -- we'll see), CCS will probably play a major role alongside solar, wind, hydropower and other renewables in the coming decades.The structure and venue of the ultimate clean technology fund remain unclear, and they are not likely to be finalized until after Copenhagen. The fund may evolve from the current CTF at the World Bank, if the Bank can demonstrate to potential donors that it is a reliable steward, while also winning the trust of fund recipients. It also remains to be seen whether the Bank's staff, already hard-pressed by crucial development tasks, will be able to administer a post-Copenhagen clean technology fund whose annual investments may match or exceed the Bank's current scale of operations.But in any case, recent developments strongly indicate that a multilateral clean technology fund will play a major role in promoting carbon emissions mitigation during the coming decades. All parties support the concept, and they are actually quite close to a consensus on operating principles. For my small part, I continue to endorse a properly-designed clean technology fund with great enthusiasm. In fact, I view it as critical for our common future.In summary, the road ahead looks pretty sunny at this point. And that's fortunate, since we have no time to lose.


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