The industrial sector is extremely diverse and involves a wide range of activities. Aggregate energy use and emissions depend on the structure of industry, and the energy and carbon intensity of each of the activities. The structure of industry may depend on the development of the economy, as well as factors like resource availability and historical factors. In 1995, industry accounted for 41% (133 EJ¹ ) of global energy use and up to 43% of global CO2 emissions. Besides CO2 industry also emits various other GHGs. Although the efficiency of industrial processes has increased greatly during the past decades, energy efficiency improvements remain the major opportunity to reduce CO2 emissions. Potentials for efficiency improvement and emission reduction are found in all processes and sectors. In the short term, energy efficiency improvement is the major GHG reduction measure. Fundamentally new process schemes, resource efficiency, substitution of materials, changes in design and manufacture of products resulting in less material use and increased recycling can lead to substantial reductions in GHG emissions. Future reductions in GHG emissions are technologically feasible for the industrial sector of OECD countries if technologies comparable to that of efficient industrial facilities are adopted during stock turnover. For Annex I countries with economies in transition (CEITs), GHG reducing options are intimately tied to the economic redevelopment choices and the form that industrial restructuring takes. In developing countries large potentials for adoption of energy efficient technologies exist as the role of industry is expanding in the economy.

In industry, GHG emission reduction is often the result of investments in modern equipment, stressing the attention to sound and environmentally benign investment policies. Industrialisation may affect the environment adversely, stressing the need for the transfer of clean technologies to developing countries. Technology transfer is a process involving assessment, agreement, implementation, evaluation and adaptation, and repetition. Institutional barriers and policies influence the transaction process, as well as the efficiency of the transfer process. Developing countries suffer from all barriers that inhibit technology transfer in industrialised countries plus a multitude of other problems. Investments in industrial technology (i.e. hardware and software) are dominated by the private sector. Foreign direct investment is increasing, although concentrated on a small number of rapidly industrialising countries. These countries may impact regional industrial development patterns, as seen in Southeast Asia. Private investment in other developing regions is still limited, although increasing. Public funding (in industrialised and developing countries) for technology development and transfer, although still important, is decreasing. Funding for science and technology development is important to support industrial development, especially in developing countries. Public funding in the industrial sector, although small in comparison to private funding, remains important.

It is essential that policies provide a clear framework for technology transfer. An effective process for technology transfer will require interactivity between various users, producers and developers of technology. The variety of stakeholders makes it necessary to have a clear policy framework as part of an industrial policy for technology transfer and cooperation, both for a technology donor and recipient or user. Such a framework may include environmental, energy, (international) trade, taxation and patent legislation, as well as a variety of well-aimed incentives. Policymakers are responsible for developing such a comprehensive framework. The interactive and dynamic character of technology transfer stresses the need for innovative and flexible approaches, through partnerships between various stakeholders, including public-private partnerships. There is a strong need to develop the public and private capacities to assess and select technologies, in particular for state owned and small and medium sized industries. Stakeholders (policymakers, private investors, financing institutions) in developing countries have even more difficult access to technology information, stressing the need for a clearinghouse of information on climate change abatement technology, well integrated in the policy framework. To be successful, long-term support for capacity building is essential, stressing the need for public support and cooperation of technology suppliers and users.

Adaptation of technology to local conditions is essential, but practices vary widely. Countries that spend on average more on adaptation seem to be more successful in technology transfer. As countries industrialise the technological capabilities increase rapidly, accelerating the speed of technology diffusion and development, and demonstrating that successful technology transfer includes transfer of technological capabilities.

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