2.2.2 Official Development Assistance and Official Aid
Issues
ODA/OA remains the main conduit for government supported technology transfer
efforts, particularly those aimed at the poorest developing countries. By definition,
support to a developing country counted as Official Development Assistance must
be both developmental and concessional. ODA statistics are collected from members
of the OECD's Development Assistance Committee (DAC), which consists of 21 OECD
member governments (of 29 total) and the Commission of the European Communities
(see also Section 5.2.2 on ODA).
DAC statistics describe aid flows (grants and loans) to recipients by major
category of expenditure. In addition to ODA/OA, data are collected on other
official flows, private market transactions, and assistance from non-governmental
organisations to each recipient country and recipient countries combined. The
OECD also reports on development assistance provided by other groups (OECD,
1998a).
ODA involves much more than technology transfer and looking at overall ODA
trends tells little about actual financial flows for this purpose, except to
set an upper limit on official government transfers. The OECD's Creditor Reporting
System (CRS) is an information system comprising more detailed data on the components
of ODA and other lending by the official sector. Data relate to individual grant
and loan commitments and specify their purpose, tying status, and, for loans,
terms of repayment. The DAC Secretariat converts the amounts of the projects
into US dollars using annual average exchange rates. Approximately 15,000 transactions
are recorded annually. The CRS does not report details on aid flows from NGOs,
non-DAC donors, FDI, unguaranteed bank lending, or portfolio investment (Felcke,
1997).
DAC/CRS statistics on the purpose of aid cover three dimensions: the sector
of destination, the nature or form of the aid, and the policy objectives of
the aid. Three of 26 principal sectors (broken down into some 200 sub-sectors)
have a plausibly stronger relationship to climate change: energy generation
and supply, transport, and industry. In principle, the CRS can be used to identify
how much ODA (and to a lesser degree OA) is directed to these sectors. Non-sector
specific aid to the environment is contained within the "multi-sector/cross-cutting"
category.
The policy objectives of aid efforts are tracked across most sectors and forms
of aid using a "marker system" introduced several years ago to support
changing DAC policy objectives. The marker system facilitates monitoring aid
in relation to cross-cutting themes (that is, issues that can be addressed through
aid activities across all economic sectors), such as environment. Donor governments
are supposed to report an environment-oriented policy objective for aid if the
activity 1) is intended to produce an improvement in the physical or biological
environment of the recipient country, area, or target group concerned or 2)
"includes specific action to integrate environmental concerns with a range
of development objectives through institution building and/or capacity development"
(OECD, 1997b). The marker system is not used by all donor governments. In the
sectors of transport, energy and industry, however, the data are reasonably
complete since 1996.
The DAC has recently begun a pilot study with the secretariats of the conventions
on biological diversity, desertification, and climate change to see whether
the marker system can be strengthened to allow tracking of developed country
financial assistance required under those conventions. The goal is to avoid
creating new and possibly overlapping reporting requirements for donor governments.
If implemented fully the expanded marker system would track ODA directed to
sectors relevant to the objectives of the UNFCCC (see section 3.4), including
buildings, transport, industry, energy, agriculture, forestry, waste management
and coastal adaptation. Results of the pilot study will be available in March
2000 from the DAC Working Party on Statistics, and will be presented to SBSTA
12 in June 2000 (UNFCCC, 1999).
Apart from operating various reporting systems, the DAC helps donor governments
share information about each other's aid programmes to promote coordination
and avoid overlap. In November 1996, the OECD Working Party on Development Assistance
and Environment gathered basic information about donor strategies, policies
and programmes involving what it called "cleaner technology" (OECD,
1997a). In their responses to a questionnaire, about half the donors identified
cleaner technology as a major focus of their technology cooperation activities.
The other half of the donors responding reported minor or negligible emphasis
on cleaner technology approaches.
Support for overall capacity development to use cleaner technology was the
most important goal of activities directed towards cleaner technology. Demonstration
projects, training, and education were the main instruments used. This highlights
the importance of ODA/OA in leveraging funds for technology transfer, particularly
in developing capacity to make good technology choices and use improved technologies.
Virtually all donors saw the private sector in developing countries as a major
target for cleaner technology activities, with the establishment of joint ventures
between enterprises in their countries and developing countries a primary goal.
This blurring of the formerly distinct role of government in ODA is one characteristic
change in recent years; many governments now view their primary role in technology
transfer as facilitating the role of the private sector in transferring hardware
and skills, particularly those from the donating country. The creation of networks
between business associations in industrialised and developing countries and
the development of new types of public-private partnerships were identified
as areas of growing interest for donors.
In the majority of donor countries aid organisations are not the only agencies
supporting the transfer of environmental technology. Environment and trade departments,
export promotion agencies, and research and development agencies are also involved
in ODA efforts related to cleaner technologies, pointing to the need for coordination
within both donor and recipient governments.
Ten donors responding to the OECD survey reported using export promotion programmes
to support the transfer of environmental technologies, although the promotion
of environmental technology is not always an explicit goal of such schemes.
Risk funds and seed funds, as well as financing for small-scale investment,
were identified as special financing instruments to support cleaner technology.
Financing for patent right acquisition is generally not provided.
ODA Trends
The OECD (1999c) reported that in 1998 ODA reversed a five year downward trend,
rising to US$51.5 billion from US$47.6 billion in 1997, an almost nine per cent
increase in real terms (Figure 2.1). Official aid to
economies in transition amounted to some US$5.4 billion in 1998, a slight decrease
from 1997. The technical cooperation component of ODA in 1997 was US$13 billion,
with some US$1.3 billion spent on students and trainees.
The OECD's summary of 1998 ODA (OECD, 1999c) notes that the recovery in aid
in 1998 was in part due to the timing of contributions to multilateral agencies
and short-term measures to deal with the Asian crisis, but also reflected some
members' commitments to maintain or increase aid flows. Fourteen of the 21 DAC
Members reported a rise in ODA in real terms, but the percentage of GNP spent
on ODA averaged 0.23 percent for DAC member countries; only Norway and Sweden
maintained ODA above the United Nations target of 0.7 percent of GNP (OECD,
1999c).
Looking at trends, DAC countries' ODA to transport, energy, and industry sectors
in 1993 to 1997 amounted to US$47 billion. In comparison to their total bilateral
ODA, aid to transport (US$24 billion) was nine per cent, aid to energy generation
and supply (US$20 billion) eight per cent, and aid to industry (US$3.5 billion)
one per cent.
Aid to transport can be further broken down to road, rail, water and air transport.
Half of all activities were to support road transport and one-fourth to support
rail transport. Water and air transport received 15 per cent of aid to transport
each. On the basis of the "aid to environment" marker data (which
are reasonably complete since 1996), over 60 per cent of aid activities in the
transport sector addressed environmental concerns as a significant objective.
Regarding aid to energy projects, CRS data allow a distinction between that
directed to renewable and non-renewable sources. Roughly one-third of aid to
energy in 1993 to 1998 was allocated to "renewable sources", one-third
to "non-renewable sources" and one-third to electrical transmission
and distribution. Hydro-power is by far the largest component (75 per cent)
in the renewable category, but aid activities in the field of geothermal, solar
and wind power have been increasing during the last few years. Projects involving
coal-fired power plants make up the largest component in the non-renewable energy
generation category. Over 70 per cent of all aid activities in the energy sector,
and 95 per cent involving coal-fired power plants, were marked against aid to
environment as a significant objective.
Aid to industry has decreased during the 1990s. In particular, there has been
a substantial drop in aid to fertiliser, chemicals and cement manufacturing,
and to the basic metal and transport equipment industries. Industrial development
and SME development are at present the largest sub-sectors. Approximately 40
per cent of aid to industry are reported as having environment as a significant
objective.
Finally, there has been an increase in aid flows to general environmental protection.
This may be partly due to the revision of the DAC sector classification in 1996,
which clarified the reporting of environment-related aid activities. The total
for 1993 to 1997 was close to US$5 billion. Slightly over 20 per cent of this
amount was reported to be for flood prevention/control, nine per cent for biosphere
protection (air pollution control, ozone layer preservation and marine pollution
control) and eight per cent for biodiversity conservation. The remainder was
reported as aid to environmental policy/administrative management and unspecified
environmental protection activities.
The sectoral data can be broken down by recipient, giving some idea about aid
targeting by donor countries. Bilateral aid to energy, for example, has been
highly concentrated on Asia, the region with the largest growth in CO2
emissions. The ten largest Asian recipients - India, China, Indonesia, Pakistan,
Philippines, Thailand, Viet Nam, Malaysia, Sri Lanka and Bangladesh - have received
63 per cent of DAC Members' bilateral aid to energy since 1980. The extent to
which aid has influenced the path of energy development depends on the relative
importance of ODA in overall energy sector finance. But as noted above, aid
can contribute in ways that are not quantifiable, transfer of technology through
aid projects also means transfer of knowledge, which in turn can influence developing
countries' internal investments in energy infrastructure. The DAC's pilot study
with the FCCC Secretariat referred to above is examining this relationship,
as well as the targeting of aid in other climate change related sectors.
The OECD notes that the general decrease in ODA has occurred during a period
in which there have been widespread improvements in the economic and budgetary
situations of DAC Member countries. The G8 Summit leaders meeting in May 1998
reconfirmed the commitment to mobilising resources for development, including
a goal (among others) of promoting environmental sustainability in developing
countries. The organisation notes that "... without a renewed commitment
to invest adequate and well targeted resources, progress cannot be expected
and achievement of the internationally agreed goals will be jeopardised"
(OECD, 1998a).
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