Strategy for promoting low-carbon technology transfer to developing countries: The case of CCS

Energy Policy 39 (2011) 3106–3116

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Strategy for promoting low-carbon technology transfer to developing countries: The case of CCS Hengwei Liu a,b,n, Xi Liang c,d a

Energy, Climate, and Innovation Group, Tufts University, Medford, USA Energy Technology Innovation Policy Group, Harvard University, Cambridge, USA c Electricity Policy Research Group, University of Cambridge, Cambridge, UK d Electricity Policy Group, University of Exeter, Cornwall, UK b

a r t i c l e i n f o

a b s t r a c t

Article history: Received 29 June 2010 Accepted 15 February 2011 Available online 7 April 2011

Carbon Capture and Storage (CCS) is the critical enabling technology that would reduce CO2 emissions significantly while also allowing fossil fuels to meet the world’s pressing energy needs. The International Energy Agency analysis shows that although the developed world must lead the CCS effort in the next decade, there is an urgent need to spread CCS to the developing world. Given technologies for reducing GHG emissions originate mainly in developed countries, technology transfer, as an important feature emphasized by both the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol, therefore has a key role to play in bridging a gap between developed and developing countries. The main objective of this paper is to explore potential policies and schemes promoting the transfer of CCS technologies to developing countries. First, it reviews the global CCS status, analyzes the significant gap of CCS in developed and developing countries, and investigates stakeholder perceptions of diffusing CCS to China, which is a major developing country and a significant potential candidate for large-scale CCS deployment; then the authors make an attempt to understand technology transfer including its benefits, barriers, and definition. The UNFCCC explicitly commits the developed (Annex I) countries to provide financial and technical support to developing countries under favorable terms. The authors argue that the ultimate goal of technology transfer should not only be limited to apply CCS in developing countries, but also to enhance their endogenous capabilities, which will enable future innovation and ensure long-term adoption of low-carbon technologies. As a result, the authors propose a four-pronged approach to the transfer of CCS technologies, which involves physical transfer of explicit technologies, a financial mechanism, endogenous capacity building, and a monitoring mechanism. Concrete enhanced actions to promote CCS technology transfer are also proposed. The four-pronged approach and related enhanced actions proposed in this paper are also applicable to other low-carbon technology transfer. & 2011 Elsevier Ltd. All rights reserved.

Keywords: Carbon dioxide Carbon capture and storage Technology transfer

1. Introduction 1.1. Global climate context and the role of CCS Climate change is not new to us. Scientific evidence shows that past emissions of greenhouse gases (GHG) are already affecting the earth’s climate, and time appears to already have run out to completely prevent climate change (IPCC, 2005). Carbon dioxide (CO2) – the GHG considered to be the most responsible for climate change – has been emitted into the earth’s atmosphere

n Corresponding author at: Energy, Climate, and Innovation Group, The Fletcher School, Tufts University, 160 Packard Ave, Medford, MA, 02155, USA. Tel.: þ1 617 627 4735. E-mail addresses: [email protected], [email protected] (H. Liu).

0301-4215/$ - see front matter & 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2011.02.051

at a dramatically accelerating pace since 2000. Having already increased from 21 gigatonnes (Gt) in 1990 to 24 Gt in 2000 and 29 Gt in 2007, global CO2 emissions are projected to reach 35 Gt in 2020, 40 Gt in 2030, and 62 Gt in 2050, respectively. The increase is far larger in major developing countries and this pattern continues. For example, of the 11 Gt growth in global emissions between 2007 and 2030, China and India account for 6 and 2 Gt, respectively (IEA, 2009a). The United Nations Intergovernmental Panel on Climate Change (IPCC) has concluded that 50–80% cuts in global CO2 emissions by 2050 compared to the 2000 level will be needed to limit the longterm global mean temperature rise to 2.0–2.4 1C (Table 1). The 2050 target is based on the science-driven conclusion that the risks of dangerous impacts rise sharply as planetary warming exceeds 2 1C from preindustrial levels. To achieve this, low-carbon energy technologies will have a crucial role to play. There is no silver

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Table 1 The relation between emissions and climate change (IPCC, 2007). Temp. increase (1C)

GHGs (CO2-eq, ppm)

CO2 (ppm)

Year global CO2 needs to peak

Year global CO2 back at 2000 level

CO2 in 2050 (% of 2000 emissions)

CO2-eq in 2050 (Gt)

2.0–2.4 2.4–2.8 2.8–3.2 3.2–4.0

445–490 490–535 535–590 590–710

350–400 400–440 440–485 485–570

2000–2015 2000–2020 2010–2030 2020–2060

2000–2030 2000–2040 2020–2060 2050–2100

 85  60  30 þ10

6.7–22.5 18–35 35–47 49.5–72

to to to to

 50  30 þ5 þ 60

*Total GHG emissions in 2000 are 44.7 Gt CO2-eq.

Fig. 1. CCS delivers one-fifth of the lowest-cost GHG reduction solution in 2050 (IEA, 2008a).

bullet to tackle climate change. Energy efficiency, renewables, nuclear power, and clean coal technologies including CCS will all require widespread deployment (IEA, 2009b). CCS is the only technology available to mitigate GHG emissions from large-scale fossil fuel usage (MIT, 2007; IEA, 2008b; Liu and Gallagher, 2009). An integrated CCS system involves three main phases: the first phase is the capture portion whereby CO2 is captured and compressed at a large stationary source, such as a coal-fired power plant or a steel works; the second phase includes the transportation of the captured CO2 via a dedicated pipeline infrastructure to the injection site where the CO2 will be stored; and in the third phase, storage of the CO2 occurs when it is injected into a suitable geological formation for long-term isolation from the atmosphere (IPCC, 2005). CCS provides a bridge between our coal-based energy present and a low-carbon energy future. The widespread adoption of CCS technologies should reduce CO2 emissions significantly and help the world meet near-term energy demand until alternatives can provide sufficient and reliable energy supply. Although decarbonizing coal is the major motivation for the development of CCS, it is important to note that CCS is more than a strategy for ‘‘cleaner coal’’. Theoretically, any point source of CO2 can be sequestered. Even if one could imagine a global energy system without heavy reliance on coal, one would still need CCS to achieve carbon reduction goals for large natural gas power generation, for iron and steel making, for petroleum refining, for biofuels production, for cement making, and for chemical manufacturing. Of course, limiting the amount of future coal use would greatly diminish the required scale of CCS, but CCS will nonetheless represent a large portion of any global strategy to lower CO2 emissions, at least for the next century (Schrag, 2008). As shown in Fig. 1, the IEA’s BLUE Map scenario, which assessed strategies for reducing GHG emissions by 50% by 2050, concluded that CCS will need to contribute 20% of the necessary emissions reductions to achieve stabilization of GHG concentrations in the most cost-effective manner. The BLUE Map results revealed that if CCS technologies are not available, the overall cost to achieve a 50% reduction in CO2 emissions by 2050 will increase by 70%. CCS is therefore an essential part of the portfolio of GHG mitigation technologies that is needed now to significantly reduce global emissions in the coming decades.

1.2. Technology transfer: key to move beyond business-as-usual Combating climate change poses unique public policy challenges: the delivery of innovative technologies and policies within a given timeframe to avoid carbon lock-in; also, the environmental benefits of any single nation’s reductions in GHG emissions are spread worldwide, unlike the costs. This means that for any single country, the costs of action will inevitably exceed its direct benefits, despite the fact that the global costs of action will be less than global benefits. This is the nature of a global commons problem, and this is the very reason why international cooperation is required (Stavins, 2007). In addition, despite accelerated globalization, technology invention and innovation are dominated by the developed countries; it is estimated that over 85% of patents in many of its core high-tech sectors in China are owned by developed country companies (Liu, 2007). Fig. 2 shows the geographical location of the parent companies of patent owners that have more than four patents at the time of filing. Japanese organizations have a strong presence in five fields, while the United States is far ahead on carbon capture technology and second strongest in four technologies. This confirms the overall leadership of developed countries in low-carbon technologies. Regarding carbon capture technologies, most of the largest patent portfolio owners in this area are major players based in developed countries (Table 2). According to the BLUE Map scenario mentioned above, although the developed world must lead the CCS effort in the next decade as they are responsible for around 70% of historical emissions, their per capita emissions remain well above average, and they have the technological and institutional capacity, there is an urgent need to spread CCS technology to the developing world. This stresses again that addressing climate change requires global responses because of the global nature of climate. Technology transfer therefore has a key role to play in facilitating such global responses by bridging a gap between developed and developing countries. CCS is not a single technology or system. It has both a number of different components and a significant number of potential system combinations. Although it is difficult at the current time

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Fig. 2. Geographical origins of parent companies of patent assignees—with more than four patents (Lee et al., 2009). Table 2 Carbon capture—top patent holders (Lee et al., 2009). Rank

Assignee

No. of patents

Rank

Assignee

No. of patents

1 2 3 4 5 6 7 8 9 10

ExxonMobil Shell UOP Inc (Honeywell subsidiary) Air Products and Chemicals Inc Texaco Inc Chevron Conoco Phillips General Electric Co Praxair Technology Inc Ashland Inc

978 414 223 180 120 117 111 101 100 83

11 12 13 14 15 16 17 18 19 20

Alstom BP Air Liquide Mitsubishi Dow Chemical Company Ebara Corp Engelhard Corp Basf AG Occidental Petroleum Corp Union Carbide Corp

76 76 75 70 49 43 40 39 39 34

to transfer the whole CCS system from a developed country to developing countries, many technological components of CCS system are available and some have been in commercial application for many years in developed countries. Currently, countries are engaged in negotiating post-2012 international climate agreements. Although technology transfer is considered as one of the major pillars of future agreements, its negotiations frequently stall for the lack of an effective technology transfer mechanism. The study therefore attempts to propose policies for the transfer of CCS technologies under the United Nations Framework Convention on Climate Change (UNFCCC) and its Kyoto Protocol. The paper is formatted as follows. Section 2 introduces the global CCS development and analyzes the gap of CCS in developed and developing countries. Section 3 carries out a case study on China’s stakeholder perceptions of diffusing CCS technologies. Section 4 proposes a four-pronged approach to transfer of CCS technologies and enhanced actions for accelerating CCS diffusion to developing countries.

2. Global CCS development and gap analysis 2.1. Barriers to CCS development The principal barriers to CCS deployment are the lack of (a) funding mechanisms that are sufficiently large and long-term enough to support CCS demonstration projects, (b) legal and regulatory frameworks for the transport and geological storage of CO2, (c) public perception and acceptability, and (d) a technology

transfer mechanism that can facilitate CCS development in developing countries (IEA, 2008b; Liu and Gallagher, 2010a, 2010b). Maintaining economic growth and stability is the top priority for both developed and developing countries. Given the relatively high current costs of CCS, large-scale deployment is not expected in the short term unless there is a strong policy incentive (Al-Juaied, 2010; Morse et al., 2009). For power plants, a recent study of the costs of carbon capture using U.S. data found that ‘‘first-of-a-kind’’ plants using solid fuels had a levelized cost of electricity on a 2008 basis that was approximately 10 b/kWh higher with capture than for conventional plants (with a range of 8–12 b/kWh). In other words, the costs of abatement found were approximately $150/tCO2 avoided (with a range of $120–180/tCO2 avoided). For Nth-of-a-kind plants (where it is assumed that the costs of the technology have come down through learning and economies of scale), the additional cost of electricity with capture is approximately 2–5 b/kWh, with costs of the range of $35–70/tCO2 avoided (Al-Juaied and Whitmore, 2009). In general, the costs of CO2 transportation and geologic storage are estimated to be relatively small compared with the costs of capture, and the overall economics improve if the captured CO2 is used for enhanced oil recovery (EOR) (IPCC, 2005). It is worth noting that although the current costs of CCS are prohibitively high, experiences with other pollution control technologies such as the scrubbing of SO2 and NOx show that costs can be considerably lower than initial estimates (Chu, 2009). China has vibrant market, and the ability to commercialize new technologies more quickly and cheaply. A preliminary study on the cost of the pipeline transportation of CO2 with application to CCS shows that the levelized cost of CO2 transportation in China, for a

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20,000 t/d case, is about two-thirds that of the developed countries (Liu and Gallagher, 2010b). 2.2. Gap analysis of CCS in developed and developing countries Climate change policy is deemed to have a significant impact on CCS development. Major developing countries like China and India now have recognized the need to tackle climate change and enhance energy security. The focus is on improving energy efficiency and promoting renewables and alternatives including nuclear power. A large number of studies believed that developed countries must take the lead in demonstrating CCS and provide a much stronger framework of incentives for action in developing countries (Kathuria, 2002; Chikkatur and Sagar, 2007; Damodaran, 2009; Garg and Shukla, 2009; Kapila, 2009; Ockwell et al., 2009; Gallagher, 2010; Liu and Gallagher, 2010a). China is now involved in a number of multilateral and bilateral CCS cooperation initiatives and there are plans for some small-scale demonstration projects (Findlay et al., 2009; Hart and Liu, 2011). Nevertheless, CCS in developing countries is poorly understood by the general public. As a result, there is a lack of public support for CCS as compared with several other GHG mitigation options (Liang and Wu, 2009). CCS in developed countries is seen as a critical option to tackle the twin challenges of climate change and energy security. It now appears to be serious politics, but not yet serious business (Gibbins and Chalmers, 2008; Scrasea et al., 2009). However, developed countries today dominate the CCS related research and thus own most of the related patents as mentioned in Section 1.2. Below is an overview of the global status of CCS, which implies the absolutely predominance of developed countries in CCS development. 2.2.1. Integrated commercial-scale demonstration projects At present, there are only five fully integrated commercialscale CCS projects in operation. As depicted in Table 3, all the projects are developed by companies based in developed countries. In the Sleipner, Snøhvit, and In Salah projects, the CO2 content of the extracted natural gas is too high, so in order to achieve commercial-grade quality natural gas, the CO2 is stripped, collected, and then stored securely in underground geological formations. The Rangely project also uses CO2 from natural gas processing plant in Wyoming, but uses the CO2 for EOR and storage at the Rangely field in Colorado. The Weyburn-Midale project involves the capture of CO2 from a coal-based synfuels plant in North Dakota. The captured CO2 is compressed and sent via pipeline to an oil field in Canada, where it is also used for EOR as well as storage. Currently, over 5 Mt CO2/year is stored from these plants. In addition to these projects, there are 70 large-scale CCS projects worldwide in planning stages across the world (IEA, 2009b). While it is clear that the individual technologies of the CCS system are technically viable, it is difficult to improve public confidence in CCS technologies until commercial-scale CCS facilities in a variety of settings are up and running. In June 2008, G8

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leaders declared at the Hokkaido Summit that: ’’we strongly support the launching of 20 large-scale CCS demonstration projects globally by 2010, taking into account various national circumstances, with a view to beginning broad deployment of CCS by 2020’’ (G8, 2008). The European Union (EU) has made its position on CCS very clear: as a critical solution for combating climate change, its wide-scale deployment is essential. EU deployment of CCS is envisaged to progress with 10–12 large scale demonstration plants that will be in place and operational by 2015 across EU (EU, 2007). In early 2008, the U.S. flagship FutureGen project was restructured to cover the additional costs for CCS on a range of projects instead (U.S. DOE, 2008), and in 2009, Secretary Chu announced he was considering reconstituting the actual FutureGen plant in Illinois. Also in 2009, the Australian government announced a $100 million Global Carbon Capture and Storage Institute, as part of a new Global CCS Initiative to speed up the development of CCS technology (GCCSI, 2009). 2.2.2. Public funding for CCS demonstration In the absence of a market mechanism for carbon reduction, private capital will not invest in CCS because it reduces efficiency, adds cost, and lowers energy output. As a result, there is a need to catalyze public funding to provide additional financial incentives for developing CCS. Developed countries are already addressing the demonstration funding gap, as indicated by a strong increase in announcements of funding for such projects in the past year. Table 4 depicts the major funding announcements for CCS development around the world. 2.2.3. Legal and regulatory framework In order for a commercial CCS project to be successful, it must have both commercially viable CCS technology and a legal and regulatory framework that provides sufficient certainty on matters relating to transport, storage, monitoring, and especially regarding long-term liability. To address these issues, CCS regulations are under development in a number of developed countries and internationally. In the United States, CCS-specific legislation is being developed on a state-by-state basis, although some states are waiting for a final Environmental Protection Agency ruling to be developed before committing to their own legislation. The EU’s 2008 CCS Directive establishes a regulatory framework for the geological storage of CO2. Australia has also enacted comprehensive state and national CCS regulatory frameworks for CO2 storage. Additionally, regulations are currently being pursued in Canada, Norway, and Japan (IEA, 2010).

3. Stakeholder perceptions of diffusing CCS technologies—a case study on China Among developing countries, China is in a unique position to bring CCS technologies to maturity because of the size of its vibrant domestic market and its position as a world factory. The study is based on analysis of Chinese stakeholders’ surveys in 2008 and 2009 (Reiner and Liang, 2009a, 2009b; Liang et al., 2011).

Table 3 Existing integrated commercial-scale CCS projects (IEA, 2009b). Name

Location

CO2 source

CO2 sink

Sleipner Snøhvit In Salah Rangely Weyburn-Midale

Norway Norway Algeria United States United States and Canada

Natural gas processing Natural gas processing Natural gas processing Natural gas processing Coal synfuels production

Underground storage Underground storage Underground storage EOR and underground storage EOR

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 2008 survey: this survey study is conducted to improve under-



standings of the drivers and barriers of deploying CCS in China. A total of 103 stakeholders from 32 Chinese institutions were interviewed from July to September 2008. The stakeholders are involved in making decisions regarding power projects serving in power generating companies, grid companies, or governments. 2009 survey: the objective of this survey study is to understand potential strategies in developing large CCS demonstration project in China. The target group included 256 stakeholders from over 100 institutions, drawn from a database of over 500 contacts. The contact details of key stakeholders were obtained from a range of sources, including domestic and international conferences, and nominations by senior government officials, management of leading power firms and academic institutions. The following summarizes the results of both surveys.

3.1. Views on CCS in deep cut of emissions reductions In the 2009 survey, a majority of the respondents (62%) perceived CCS as being ‘‘probably necessary’’ or ‘‘very necessary’’ in achieving deep cut of GHG emissions (Fig. 3). The percentage didn’t change Table 4 Major funding announcements for CCS (IEA, 2009b). Country

Funding

Australia

 AUD 2 billion: large-scale CCS demonstration  AUD 100 million: Global CCS Institute

Canada

 CAD 1.3 billion: R&D, mapping, and demonstration  CAD 1.2 billion: CCS deployment

European Union

 EUR 1.05 billion: seven CCS projects

Japan

 JPY 10.8 billion: CCS demonstration

Norway

 NOK 1.2 billion: CCS projects

United Kingdom

 GBP 750 million to 1.5 billion (estimated): UK CCS competition (fund up to 4 demonstration projects)

United States

 USD 800 million: clean coal power initiative with a focus on carbon capture

 USD 1.52 billion: Industrial CO2 capture projects

significantly from 2006, when two thirds believed CCS was ‘‘necessary’’ or ‘‘very necessary’’ to achieve the deep cuts in emissions in China. In both 2006 and 2009, most of the pessimists were from the power industry and the national government. During follow-up interviews, three CCS opponents, who had originally supported CCS in 2006, were now concerned about the reliability of CCS technologies, the availability of storage sites, and coal supply problems. However, they were also more confident in their understanding and knowledge of CCS. Based on logistic regression, some demographic variables (such as region, time spent on CCS, climate change or energy) show no statistically significant impact on the perceived necessity of CCS, but those who believed climate change to be a serious problem were more likely to view CCS as necessary (at 95% confidence level). 3.2. Views on CCS technologies In the 2008 survey, slightly over half of stakeholders (52%) considered CCS technologies to be largely immature, although approximately one third (34%) selected ‘‘all technologies are mature’’ (6%) and ‘‘most of technoloiges are mature’’ (28%). Those repsondents more positive towards CCS technologies normally were able to list at least a planned CCS project in China, such as Greengen, the NZEC (UK-China Near Zero Emissions Coal project), or the CHNG (China Huaneng Group) test unit. Stakeholders generally felt more optimistic regarding CCS technologies, compared with the CCP2 (CO2 capture project phase 2) survey in 2006 when only 13% of all stakeholders and 17% of industrial stakeholders considered all or most technologies to be mature (Reiner et al., 2007). The evidence of increasing confidence on technologies may be explained by a number potential commercial-scale CCS power plants in the pipeline and a 3000 tonne per year capture test unit was successfully launched in Beijing just before the survey (CSIRO, 2008). 3.3. Preference of early commercial CCS project Among 131 responses in 2009, there was no consensus with respect to the scale of the first CCS demonstration project in China (Liang et al., 2011). Generally speaking, 30–100 MW units (or 100,000–400,000 tons CO2 captured) was most popular at 22% (Fig. 4). Although, most of the new coal-fired power generation capacity would be equal or above 600 MW units, most respondents believed the scale of the capture unit should be restricted to less than 100 MW, because of the significant uncertainties attached to

Fig. 3. Comparison of perceived importance of CCS in deep cut of greenhouse gas emissions in 2006 and 2009 (2009: ‘‘how necessaryy’’; 2006: ‘‘how important’’).

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Fig. 4. Distribution of stakeholders’ views on scale and technologies of the first large-scale CCS demonstration project in China (Liang et al., 2011).

CCS technologies, CO2 storage sites, transportation, and financing schemes. Despite the fact that CCS projects of less than 10 MW (or o40,000 tons CO2e) are unlikely to be considered as a commercial scale demonstration, 13% of respondents still selected this option. Regarding capture technologies, post-combustion capture (41%) received slightly higher support than pre-combustion capture technologies (31%) (Fig. 4). However, respondents from industry tended to slightly favor pre-combustion capture. Oxyfuel, as a relatively new technology in China, received minimal support. It appears that a substantial amount of stakeholders have not heard of Oxyfuel, because a quarter of respondents selected ‘‘unsure’’, including 40% of government officials. In follow-up discussions, proponents of postcombustion capture often cited the fact that most of existing and planned new coal-fired power plants are conventional pulverized coal units. However, others argued for pre-combustion technology because, according to them, it was ‘‘clean, high efficiency, and more advanced technology, and potentially applied in poly-generation. In terms of storage methods, though experience with EOR and enhanced coal bed methane recovery (ECBM) has been limited in China, both were still viewed as offering more benefits for the Chinese population than simply reducing emissions and were favored by over two-thirds of stakeholders (Fig. 4). It should be noted that there is limited storage capacity and that coal may not be used once CO2 has been injected for ECBM, but these effects were not described to stakeholders. There was a more clear-cut consensus amongst respondents regarding storage methods in contrast to the question on capture technology options.

3.4. Views on the role of CCS technology transfer During face-to-face in-depth discussion in the survey 2008, a number of stakholders from power companies and governments believed that applying a practical scheme to transfer key technologies from developed countries to China was essential to deploy CCS in China. In addition, a great majority of stakeholders from governments suggested that the Chinese government should negotiate with developed countries to transfer CCS technologies. On the other

hand, approximately half of responses from Chinese power companies believed technology transfer should not be coordianted by government; however, most of stakeholders from power companies thought foreign and Chinese governments should provide financial subsidy to guarantee the successful transfer of CCS technologies. A senior purchasing manager from a large state-owned power company claimed three key issues could affect the success of deploying CCS technologies in China in the next decade: (i) whether the most advanced commercial CCS technologies would be transfered to Chinese industry; (ii) whether Chinese national government would restrict power plants purchasing foreign technologies or equipments in capturing CO2 and; (iii) whether Chinese or foreign manufactors could build up their manufacturing and R&D capacity and significantly reduce the cost in China rapidly.

4. Strategy for promoting CCS transfer to developing countries 4.1. The benefits of technology transfer Transfer of CCS technologies brings real benefits in many ways. Apart from rapid emissions reductions, the benefits of CCS technology transfer also include delivering innovation faster and to scale, creating more jobs, and bringing CCS costs down. 4.1.1. Deliver innovation faster and to scale Current technologies for CCS are ready to be demonstrated at scale as soon as possible for ‘‘learning by doing’’ (Gibbins, 2008). Developing countries have monster growing market and relatively few regulatory obstacles for early large-scale CCS demonstration. Conducting initial CCS demonstration projects more readily available in developing countries will thus allow both sides to benefit from the faster execution and lower costs that developing countries offer. The experiences and knowledge gained from initial demonstrations in developing countries would also be available to the developed countries and would help to accelerate the deployment of CCS in the developed world.

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4.1.2. Create more job opportunities By taking advantage of developed countries’ technology and heavy equipment purchases and testing, projects in both developed and developing countries would help to improve the competitiveness of technology providers in a global market, while also supporting industry and creating jobs. Estimation shows that in a baseline scenario, the CCS sector would create 127,000 direct and indirect net new jobs in the United States by 2022. A five-year acceleration increases that to 430,000 in 2022, and a 10-year acceleration gets us 943,000 in 2022 (Schell et al., 2009). 4.1.3. Bring CCS costs down Because materials and labor are cheaper in developing countries, and there are relatively fewer regulatory obstacles for CCS projects. The costs of CCS are expected to be lower than those of the developed countries. By fostering a win–win relationship through technology transfer, developed countries can also learn from developing countries and thus accelerate cost reductions in deployment at home. Other benefits include maximizing the return on R&D investment, minimizing the duplication of research, and providing cross-disciplinary opportunities for researchers to collaborate with each other, etc. 4.2. Barriers to technology transfer There are many possible barriers to technology transfer, including high tariffs, investment risk, high interest rates, inadequate understanding of local needs and demands, lack of confidence about ‘‘unproven’’ technologies, and high transaction costs (IPCC, 2000). Any or all of these barriers to technology transfer may be important in specific circumstances, but the often-cited barriers in climate change negotiations are Intellectual Property Rights (IPR) and financial mechanism (Tawney and Weischer, 2010; Gallagher, 2009; Tomlinson et al., 2008). IPR is often cited by developing countries as the prime barrier to their access to key technologies and know-how. They believe IPR protection makes technologies less accessible and affordable and thus request compulsory licensing and other preferential treatments. Developing countries also emphasize the role of public assistance by developed countries. They propose that developed countries donate between 0.5 and 1% of GDP for climate-change-related funds, one of them being for technology transfer. On the other side, developed countries typically argue that it is often their companies, not their governments, who hold IPR. Developed countries emphasize that technology transfer occurs commercially and the role of national governments is to create business and regulatory environments that enable commercial activities. For them, IPR protection is the core of enabling environments for technology transfer. In addition, whether IPR is the barrier to technology transfer remain controversial. Recent study shows that IPR do not seem to prevent technology access by developing countries, and even stronger protection may help advanced developing countries, as foreign firms are more willing to transfer their technologies (Barton, 2007; Ueno, 2009). 4.3. Understanding technology transfer The origin of transferring sustainable energy technologies in the context of the international climate cooperation and in particular from industrialized countries to developing countries lies in Article 4, Paragraph 5 of the UNFCCC: The developed country Parties and other developed Parties included in Annex II shall take all practicable steps to promote, facilitate and finance, as appropriate, the transfer of, or access to, environmentally sound technologies and know-how to

other Parties, particularly developing country Parties, to enable them to implement the provisions of the Convention. In this process, the developed country Parties shall support the development and enhancement of endogenous capacities and technologies of developing country Parties. Other Parties and organizations in a position to do so may also assist in facilitating the transfer of such technologies (UN, 1992). Developing countries regularly call for technology transfer in international forums. However, ‘‘technology transfer’’ is a vague term (Gallagher, 2009). There is no single definition of technology transfer in international environmental law. Technology transfer is most typically understood to mean the physical transfer of explicit technologies from developed to developing countries. But a key insight into the emergence from the Article 4.5 of the UNFCCC is that technology transfer is not just the transfer of hardware from industrialized countries to developing countries; it is also the transfer of knowledge, such as how to adapt to and improve technologies, how to integrate technology systems, and how to commercialize and manufacture a given product. In particular, it is emphasized that the developed country Parties shall support the development and enhancement of both technologies and endogenous capacities of developing country Parties. The IPCC report on methodological and technological issues in technology transfer thus contains a broad definition of technology transfer: technology transfer is the broad set of processes covering the flows of knowledge , experience and equipment amongst different stakeholders such as governments, private sector entities, financial institutions, NGO’s and research/educational institutions (IPCC, 2000). Financing is indispensible for technology transfer. In many cases, low-carbon technologies are expensive, so it could potentially be a big burden to shoulder these additional costs while developing countries continue to go through their intensive period of industrialization and socio-economic development. The Article 4, Paragraph 3 of the UNFCCC states: The developed country Parties and other developed Parties included in Annex II shall provide new and additional financial resources to meet the agreed full costs incurred by developing country Parties in complying with their obligations under Article 12, paragraph 1. They shall also provide such financial resources, including for the transfer of technology, needed by the developing country Parties to meet the agreed full incremental costs of implementing measures that are covered by paragraph 1 of this Article and that are agreed between a developing country Party and the international entity or entities referred to in Article 11, in accordance with that Article. The implementation of these commitments shall take into account the need for adequacy and predictability in the flow of funds and the importance of appropriate burden sharing among the developed country Parties (UN, 1992). Also the Article 4, Paragraph 7 emphasizes: The extent to which developing country Parties will effectively implement their commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources and transfer of technology and will take fully into account that economic and social development and poverty eradication are the first and overriding priorities of the developing country Parties (UN, 1992). Technology transfer has been a continuous concern since the establishment of the UNFCCC. The Bali Action Plan, which was agreed on by the Parties to the UNFCCC in 2007 and lays out negotiation agendas for post2012 agreements, renewed interest in technology transfer in the Article 1-(d): Enhanced action on technology development and transfer to support action on mitigation and adaptation, including, inter alia, consideration of (UN, 2007): (i) Effective mechanisms and enhanced means for the removal of obstacles to, and provision of financial and other incentives for, scaling up of the development and transfer of technology to developing country Parties in order to promote access to affordable environmentally sound technologies;

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(ii) Ways to accelerate deployment, diffusion and transfer of affordable environmentally sound technologies; (iii) Cooperation on research and development of current, new and innovative technology, including win–win solutions; (iv) The effectiveness of mechanisms and tools for technology cooperation in specific sectors. Additionally, the 2007 Bali Action Plan refers to ‘‘measurable, reportable and verifiable’’ (MRV) as an important part of the international process intended to deliver concrete national actions to address climate change. The scope and scale of provisions to measure, report, and verify GHG mitigation actions, commitments, and support are still being negotiated. Regarding technology transfer, as Yvo de Boer, the current Executive Secretary of UNFCCC, said: in realistic terms measurable, reportable and verifiable mitigation action by developing countries can only be expected if there is measurable reportable and verifiable financial and technical support. Although the Copenhagen Accord is criticized for failing to deliver a legal agreement, technology transfer is one area in which definitive progress was made. In Copenhagen Accord, the related articles about technology transfer are presented in Article 10 and 11 as below (UN, 2009): 10. We decide that the Copenhagen Green Climate Fund shall be established as an operating entity of the financial mechanism of the Convention to support projects, programmes, policies and other activities in developing countries related to mitigation including REDD-plus, adaptation, capacity building, technology development and transfer. 11. In order to enhance action on development and transfer of technology we decide to establish a Technology Mechanism to accelerate technology development and transfer in support of action on adaptation and mitigation that will be guided by a country-driven approach and be based on national circumstances and priorities. It is important to notice that this paragraph in the Copenhagen Accord brought an important message that had not been achieved before—it clearly indicated strong political support for an actual technology transfer mechanism. Although details on how such a mechanism would be implemented remain to be seen, the authors assert four essential elements are critical for an effective technology transfer mechanism: physical transfer of explicit technologies, financing mechanism, endogenous capacity building, and monitoring mechanism. 4.4. Policy implications 4.4.1. A four-pronged approach to CCS technology transfer A successful technology transfer mechanism must lay the track for substantial emissions abatement and be able to evolve and grow over time. But it must also be built on mutual respect and recognition of both countries’ expertise and incentives. Based on the analysis in Section 4.1, the authors propose four essential elements should be considered to make a significant contribution to shape a new technology transfer mechanism, namely:

 Physical transfer of explicit technologies



The physical transfer of explicit technologies should include both existing technologies that are a necessary precondition for developing countries to get on the road of low-carbon emissions and new technologies that are crucial to the ultimate solution of the climate change issue. Endogenous capacity building The UNFCCC expressly commits the Annex I countries to provide financial and technical support to developing countries so as to mitigate and adapt to climate change difficulties. The authors argue that the ultimate goal of any enhanced action in the field of transfer of CCS technology should not be only just to apply CCS in





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developing countries but to enhance the endogenous capability of developing countries, which will enable future innovation and ensure long-term adoption of low-carbon technologies. Financing mechanism A financing mechanism for technology transfer is another issue that attracts attention at the negotiations. Under the UNFCCC and its Kyoto Protocol, Bali Action Plan, and Copenhagen Accord, developed countries are obliged to transfer technology to developing countries under favorable terms. The financing mechanism should not only support the physical transfer of explicit technologies, there is also a need for financial support to ensure a wider spread of innovation capacity which can strengthen the endogenous capacity in developing countries: Monitoring mechanism The review or verification of technology transfer issues can enhance action through expert advice on opportunities for MRV can also strengthen mutual confidence in countries’ actions and in the regime, thereby enabling a stronger collective effort. The Bali Action Plan established a reciprocal relationship between MRV mitigation actions by developing countries actions, which could include policies and measures supporting the development and deployment of low-carbon technologies, and the provision of finance, technology and capacity building support by developed countries that also met MRV criteria (Seligsohn et al., 2009).

In short, on the one hand, the actions from developed countries on technology transfer and corresponding financing support should be monitored; on another hand, the effects of technology transfer in developing countries should also be reviewed regularly.

4.4.2. Enhanced actions to promote CCS technology transfer The immediate aim of this paper is to sketch out a concrete, collaborative new plan of enhanced actions on CCS technology transfer. This work is also intended to complement, and not substitute, other ongoing bilateral and multilateral collaborations on CCS. The enhanced actions below can be started immediately to produce early milestones.

 Build a multi-source financial mechanism The most obvious challenge facing CCS is its higher extra cost. No one will undertake the added cost of a CCS system unless emitting CO2 has an economic cost attached to it. This research assumes that a carbon market will eventually come into being through market-oriented mechanism. So, we should have a strategy focusing on both immediate and longer-term CCS financing mechanism. Below the authors propose that the immediate strategies are to push for the inclusion of CCS in Clean Development Mechanism (CDM) regime and to establish a Global CCS Innovation and Diffusion Fund; the long-term strategy is to catalyze a carbon market as have mentioned before. (1) Include CCS in CDM regime Currently, the only official instrument providing an incentive for CO2 reductions in developing countries is the CDM, a mechanism under the 1997 Kyoto Protocol that allows industrialized countries with an emission reduction target to achieve part of their emission reductions in the developing world through trade of project-based certified emission reductions (Wang, 2010). CCS is not currently eligible for the CDM regime, which is in part because of significant opposition to coal-based sources of energy. Other barriers to allowing CCS in the CDM are partly technical, such as how to account for the emission reductions, how to estimate risks of future leakage, and how to establish the project boundary (UNFCCC, 2008; Bakker et al., 2010).

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Discussions on whether or not CCS can be included under the Kyoto Protocol’s CDM have been underway since the tenth meeting of the Conference of the Parties (COP-10) in 2005 (Forbes, 2010). The decision to include CCS project under the CDM came in the dawn hours of the closing day of climate talks by the UNFCCC in Cancun, Mexico, November 19th–December 10th, 2010. It calls for rules around CCS projects to be finalized at the next climate talks in Durban, South Africa, December 2011 and for issues such as permanence, boundaries and safety to be addressed and resolved (SBSTA, 2010). The acceptance of CCS as an offsetting activity under the CDM is a great success and marks a significant recognition of the role the technology can play in reducing the world’s greenhouse gas emissions (GCCSI, 2010). (2) Establish Global CCS Innovation and Diffusion Fund (GCIDF) Even if CCS is included in the CDM regime, it would not be sufficient to finance CCS because carbon prices are not high enough. Efforts must therefore be focused on developing a genuinely multilateral fund. It is beyond the scope of this paper to provide detailed recommendations about the GCIDF. Below are some rough ideas about the operation of the GCIDF:  Vision To build a low-carbon future.  Mission To provide funding support for the transfer of CCS technologies to developing countries to address global climate change.  Funding sources The funding resources should be mainly provided as part of developed countries’ obligations under the international climate change regime of the UNFCCC. Charitable donations are also encouraged.  Structure As depicted in Fig. 5, the GCIDF should be affiliated to the Green Fund approved in UN Climate Change Conference in Cancun and would be overseen by an Executive Board with four regional offices, and each office has three departments. The Executive Board would set the central objectives and report on progress to the Conference of the Parties (COP). The regional offices would be responsible for the tendering contracts and assessing local needs in relation to individual country circumstances. The functions of the departments of the regional offices are as below: J Department of Endogenous Capacity Building This department would be responsible for nationalwide endogenous capacity building on CCS technologies UNFCCC

Global CCS Innovation and Diffusion Fund (GCIDF)

Executive Board

Asia Office

Africa Office

Department of Endogenous Capacity Building

Europe Office

Department of Research, Development, and Demonstration

America Office

Department of Technology Diffusion

Fig. 5. Governance structure of the global CCS innovation and diffusion fund.

to ensure developing countries have the supporting systems necessary to use CCS technologies, and more importantly, to enhance the indigenous innovative capacity on CCS. The department would grant co-financing for research of CCS technologies, and would encourage applications for joint projects and scholar exchanges. J Department of Demonstration This department would be focusing on facilitating CCS demonstration in developing countries to push CCS technologies down the innovation chain. J Department of Technology Diffusion This department would be responsible for wide-scale uptake of CCS technologies including direct financing, patent buy-outs, etc. The GCIDF can be operated partly on a venture capital basis, providing seed money and requiring matching funds from the applicants wherever possible. (3) Catalyze an effective carbon market The long-term solution to the financing challenge posed by CCS is, most likely, a global market for abated carbon through cap-and-trade, carbon tax, or other alternatives. Although this is a long-term solution, efforts should be made right now to speed up the process.  Strengthen endogenous capacity on CCS Endogenous capacity building is critical to facilitate a broader process of technological change and capacity building within developing countries. This research suggests enhancing developing countries’ endogenous capacity should be emphasized as a critical element of the technology transfer chain. The following actions to build a system-wide endogenous capacity for developing countries thus are proposed: (1) Establish Joint Research, Development, and Demonstration Institutions/Programs Collaborative research, development, and demonstration (R&DD) on CCS technologies would enable both sides to share costs, share risk, and gain knowledge. A good case is the new U.S.–China Clean Energy Research Center, which will facilitate joint research between the United States and China in several areas, including CCS. Intellectual property developed jointly will be shared. To what extent IPR as a barrier to CCS technology transfer remains uncertain. Nonetheless, collaborative R&D is most likely effective way to tackle IPR issue. (2) Develop Students and Faculties Exchange Program It is endogenous capacity that will enable future innovation and ensure long-term adoption of low-carbon technologies. Central to the development of this capacity is the flow of knowledge and expertise as part of the transfer process. The program provides funding for students, scholars, and professionals to undertake climate-change-related study and research to build professional skills and enhance the innovative capacity of individuals and organizations. Skilled people, who understand the technologies are necessary to develop, install, maintain, and adapt technologies to local circumstances. (3) Encourage Technology Alliances Delivering a CCS market within a limited timeframe will require large scale demonstration of key technologies, the building of lead markets, and rapid development of large scale supply chains. This will often be beyond the capacity of individual countries or companies to achieve. Technology alliance is a good solution to this issue.  Monitor CCS diffusion The UNFCCC and the Kyoto Protocol already establish certain requirements and mechanisms providing for the measurement, reporting, and verification of parties’ actions. A MRV regime for

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reviewing or verification of technology transfer should also be enhanced. A set of indicators, data bases, steps and modalities should be developed to monitor and assess technology and finance flows from developed to developing countries.

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