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 the industry may depend on the development of the economy, as well as factors like resource availability and historical context. In 1995, industry accounted for 41% 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, the potentials for energy efficiency improvement in all processes remain large. Fundamentally new process schemes, energy and resource efficiency, substitution of materials, changes in design and manufacture of products resulting in less material use and increased recycling, can lead to substantial reduction in GHG emissions.

Technology transfer can be most effective in OECD countries if technologies comparable to that of efficient industrial facilities are adopted during stock turnover. For countries with economies in transition, technology transfer 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. Hence, in industry, GHG emission reduction is often the result of investments in modern equipment, stressing the attention to sound and environmentally benign investment policies.

Barriers for technology transfer in the industrial sector include corporate decision-making rules, lack of information, limited capital availability, shortage of trained personnel (especially in small and medium sized enterprises), low energy prices, and the "invisibility" of energy savings. Developing countries suffer from all barriers that inhibit technology transfer in industrialised countries plus a multitude of other problems.

Global investments in industrial technology (i.e. hardware and software) are dominated by the private sector, although in some countries government-owned enterprises are still important. Foreign capital investment in the industrial sector is increasing (see Figure TS2). Foreign Direct Investment (FDI) is a large part of the total foreign investments. FDI is increasing, although concentrated on a small number of rapidly industrialising countries (see Figure TS3). Despite the concentration, the development in these countries may impact regional industrial development patterns, as seen in Southeast Asia. Private investment is increasing in other developing regions but still limited. 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 and declining in comparison to private funding, remains important for longer term development.

An effective process for technology transfer requires active networks among users, producers and developers of technology. The variety of stakeholders makes it necessary to have comprehensive industrial policies for technology transfer and co-operation, both from a technology donor and technology recipient perspective. Such a framework may include environmental, energy, (international) trade, taxation and, patent legislation, as well as a variety of well-aimed incentives. Changing economic and technical developments stress the need for innovative and flexible approaches. Instead of regulation specifying the means, policies such as voluntary agreements with well-defined goals for energy efficiency improvements, can be more successful. 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 for information on climate change abatement technology, well integrated in the policy framework. To be successful, long term support for capacity building is essential to meet the need for public support and co-operation 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. Successful technology transfer includes the development of technological capabilities of the user or host. This will accelerate the technology transfer process through assimilation, adaptation and development of new technologies.

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