Technology Transfer and Innovation for Low-Carbon Development

Containing global warming to 1.5 degrees is technically feasible with existing low-carbon technology—but only if it is deployed on a massive scale to developing countries, according to this World Bank Group publication.

Technology Transfer and Innovation for Low-Carbon Development observes that the cost of low-carbon technology (LCT) is decreasing while investment, trade, and innovation in this sector are on the rise. But the benefits of that progress have largely eluded the world’s poorest countries, which play a minuscule role in low-carbon technology markets as buyers, sellers or innovators—despite being the most vulnerable to extreme weather events, flooding, damage to infrastructure, and habitat loss.

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Global transfer and deployment of LCT from developed to developing economies is a necessity—but also an opportunity, according to the report. Actions that promote LCT absorption, use and production—such as investments in human capital, infrastructure and firms—also benefit entire economies. These investments can increase a country’s competitiveness, output, and employment while producing other benefits that improve the lives of citizens.

“There is an urgent need to facilitate the transfer of technology to developing countries,” said Ceyla Pazarbasioglu, Vice President for Equitable Growth, Finance and Institutions at the World Bank Group. “This requires getting energy prices right, building human and institutional capital, supporting LCT investment through de-risking mechanisms, and introducing policies that support the uptake of LCT. But it can be done. It is possible to limit global warming with existing LCT—provided it is deployed on a massive scale to developing countries.”

“Climate change is compounding the challenges of poverty reduction,” said Miria Pigato, a World Bank Group lead economist and one of the authors of the report. “International institutions and donor countries need to explore all possible strategies for combating climate change. LCT transfer is an underutilized approach that could help developing countries get on a path to a low-carbon future.”

Key Findings

Mass deployment of existing technology in just four sectors—energy, industry, transport and buildings—can account for two-thirds of the emissions reductions needed by 2030. 

High-income countries produced 80 percent of all low-carbon innovations between 2005 and 2015. In 2016, the poorest countries accounted for just 0.01 percent of LCT exports. 

Technological capabilities in developing countries are improving—although slowly, and from a small base.

• In 1992, just 5.2 percent of global LCT exports went from developing to advanced economies. By 2016, this share had increased to 18.1 percent.

China is the world’s largest importer and exporter of LCT.

• In 2016, China accounted for 15.9 percent of total LCT imports, ranking ahead of the United States (13.2 percent) and Germany (6.9 percent). China also accounted for 16.8 percent of LCT exports in 2016.

LCT are becoming less expensive, more widely traded and the basis for increasing innovation.

• Between 2010-2018, the installed cost per gigawatt fell 80% for solar energy, 54% for energy storage and 22% for onshore wind power. 
• Between 1990–2000 and 2005–15, the total number of LCT innovations increased by 316 percent. Exports in LCT have risen nearly 20-fold since 1990 - from US$43.6 billion to an estimated US$809.9 billion in 2017.

LCT have certain characteristics that make their adoption and transfer difficult.

• These include high up-front capital requirements, highly complex production inputs, and intense inertia and competition from the fossil fuel industry.

There are a variety of domestic and international policies that can help promote LCT technology transfer. These include:

• Create demand for LCT products and encourage innovation through domestic policies such as subsidies, public procurement and financing; 
• Commit to complementary investments in human capital, infrastructure and financial markets to increase a country’s ability to absorb and use technology;
• Reduce trade and FDI restrictions on LCTs through international trade and investment agreements;
• Formalize a process through which international institutions can acquire and make available LCT patents to the poorest countries.