13.3.3.4 Actions

13.3.3.4.1 Targets

While many types of commitments are identified in the literature on climate change, the most frequently evaluated commitment is that of the binding absolute emission reduction target as included in the Kyoto Protocol for Annex I countries. The broad conclusion that can be drawn from the literature is that such targets provide certainty about future emission levels of the participating countries (assuming targets will be met). These targets can also be reached in a flexible manner across GHGs and sectors as well as across borders through emission trading and/or project-based mechanisms (in the Kyoto Protocol case, this is referred to as Joint Implementation (JI) and as the Clean Development Mechanism (CDM).

One crucial element is defining and agreeing on the level of the emission targets. Examples of processes to agree on a target include:

• Participating countries make proposals (pledges) for individual reductions on a bottom-up basis. This approach has the risk that proposed reductions may not be adequate to lead to the desired stabilization levels.
• A common formula can be agreed upon for determining the emission targets. This rule could lead to reduction percentages for each individual country (which could subsequently be modified by negotiations).
• An overall target can be given to a group of countries, with the group deciding internally on how to share the target amongst the participants. This approach has been applied to the EU for the purpose of the Kyoto Protocol. It could, in principle, also be applied to any other group of countries.

Many authors have raised concerns that the absolute or fixed targets may be too rigid and cap economic growth (Philibert and Pershing, 2001; Höhne et al., 2003; Bodansky, 2004). To address these concerns, a number of more flexible national emission targets have been proposed (see alternative types of emission targets in Table 13.2). These options aim at maintaining the advantages of international emissions trading while providing more flexibility to countries to avoid extremely high costs and, thereby, potentially allowing for the adoption of more stringent targets. However, this flexibility reduces the certainty that a given emission level will be reached. Thus, there is a trade-off between costs and certainty in achieving an emissions level (see Jotzo and Pezzey, 2005). Other disadvantages that have been mentioned are adding to the complexity of the system or, in the case of intensity targets, the difficulty in coping with economic recession as well as the potential for creating ambiguity for market investors.

Additional understanding comes from the political science literature which emphasizes the importance of analysing the full range of factors bearing on decisions by nation states, including domestic pressures from the public and affected interest groups, the role of norms and the contribution of NGOs (environment, business and labour) to the negotiation processes. Studies of the European Acid Rain Regime have revealed, for example, that although agreements on an ambitious target can serve as a driver for policy implementation, they may not necessarily result in a good environmental consequence if the countries involved do not have the capacity to comply with what they have committed themselves to in good faith (Victor, 1998). While such case study-based analyses yield conclusions that are dependent on the choice of cases and the manner in which the analysis is carried out, they can provide insights which are more accessible to policymakers than more quantitative economic analyses.

13.3.3.4.2 Flexibility provisions

Many environment agreements seek to address complex issues by allowing for additional flexibility as a means to achieve their goals. Flexibility has been suggested as to ‘how’, ‘when’, ‘where’ and ‘what’ emissions are to be reduced. In the climate change context, emission reductions under an international agreement can conceptually be achieved any ‘where’ on the globe. It is also possible to shift the timing (‘when’) of emission reductions (depending on the emission pathway), the ‘how’ (i.e. choice of policy instrument) and the ‘what’ in terms of the specific emission source or sink that is the target of the policy.

The Kyoto Protocol incorporates three articles that provide flexibility as to ‘where’ emission reductions occur, namely, through provisions on international emission trading, JI and the CDM. Under Kyoto’s international ETS, emission allowances may be traded between governments of Annex B parties if a surplus occurs in one country. Emission reductions achieved through projects between Annex I countries are called JI, while emission reduction projects located in non-Annex I countries are called CDM projects. Extensive rules have been agreed upon to ensure that credits created under these project mechanisms actually represent the emissions reduced.

International Emissions Trading

Emissions’ trading has become an important implementation mechanism for addressing climate change in many countries. The overall value of the global carbon market was over 10 billion US$ in 2005, and in the first quarter of 2006 the transaction level reached 7.5 billion US$ (World Bank and IETA, 2006).The most advanced ETS is that developed by the EU. While this system is an international one, it bears many of the characteristics of a national programme, with oversight by the European Commission and a centralized regulatory and review mechanism (see Box 13.4 for details, including those on trading prices and volumes). A larger global system of international trading is slowly developing through emission credits generated by the project-based mechanisms.^[33] Theoretically, a fully global ETS would provide market players and policymakers with information thus far absent from decision-making: the actual, unfettered, global cost of GHG mitigation in a range of economic activities. In this context, at the international level, such a regime would mirror the information provided by national trading programmes at a global scale.

Lecocq and Capoor (2005) note that while the international GHG emissions market remains fragmented, trading activity has increased substantially during the last 5 years. According to their analysis, regional, national and sub-national trading programmes are all operating under different rules, which could inhibit ‘market convergence’ and increase the costs of trading. Others indicate that a global market can incorporate diverse domestic and regional systems despite differences in design; they reiterate the point made by others that such a system may be significantly less efficient that a single globally optimized regime (Baron and Philibert, 2005).

A full assessment of the elements required to link multiple regimes is provided by Haites (2003a), who identifies only a few situations that might prevent linkages (a formal prohibition in one system to allow links, and circumstances where a single firm’s membership in multiple programmes creates the potential for double counting). However, issues that could complicate links between two or more emissions trading programmes include concerns on the effectiveness of compliance enforcement and on whether the linked regimes provide adequate protection of either system’s environmental objectives. As Bygrave and Bosi (2004a,b) note, links do not need to be formal; market arbitrage can provide opportunities for purchasing allowances in multiple markets even if there is no specific recognition of one system’s permits under another’s structure.

Various authors have analysed the size of the allowance surplus of the countries in transition, barriers to accessing allowances, the potential market power of cartels and links to energy security. Such surpluses can alter the overall costs of compliance with the Kyoto commitments – but only if trade in such surplus allowances is undertaken. Victor et al. (2001a) estimated the joint Russian and Ukrainian surplus at 3.7 billion tCO₂ for the entire commitment period 2008–2012. Berkhout and Smith (2003) estimate the surplus level of the former Soviet Union through to 2030 and state that it could only cover half of an assumed 30% reduction target for a 28-member state EU. Golub and Strukova (2004) see the Russian surplus as being up to 3 billion tCO₂, arguing that due to barriers in the Russian capital market, forward trading with OECD countries represents the only opportunity to raise initial capital to mobilize no-regret and low-cost GHG reductions. Maeda (2003) shows that permits for surplus emissions in the international emissions trading regime may affect the economic efficiency of the Kyoto mechanism and suggests that considerable market power exerted by sellers could affect the price (e.g. if all of the economies in transition form a cartel, if Ukraine forms a cartel with Russia or even if Russia acts alone). Kuik (2003) sees a trade-off between economic efficiency, energy security and carbon dependency with respect to the EU acquisition of Russian and Ukrainian assigned amount units. One proposal for reducing concerns over trading in surplus allowances is that of the ‘Green Investment Scheme’, in which revenues from sales of surplus allowances are spent on national policies, programmes and projects to further reduce emissions; this option is explained further below.

Project-based mechanisms (Joint Implementation and the Clean Development Mechanism)

The earliest project-based mechanism of the UN Climate Convention process was the pilot phase of ‘Activities Implemented Jointly’ (AIJ). Most of the 150 AIJ projects were small, and many were only partially implemented due to the lack of financing that resulted from the lack of emissions credits. Only half a dozen investor countries and even fewer host countries developed real, national AIJ programmes. Selection criteria for AIJ programmes often delayed the acceptance of projects, and most that were undertaken were commercially viable only if additional financing was provided by a separate investment subsidy (Michaelowa, 2002).

Since 2000, the CDM has allowed crediting of project-based emission reductions in developing countries; this is the first of the Kyoto Protocol’s market mechanisms to be implemented. A number of analysts have estimated CDM volume and price. Chen (2003) derived prices of 2.6–4.9 US$/tCO₂ and annual volumes of approximately 600–1000 million certified emissions reductions (CERs). Jotzo and Michaelowa (2002) and Michaelowa and Jotzo (2005) model an annual CER demand of 360 million tCO₂ and a price of 3.6 €/tCO₂. Springer and Varilek (2004) predict a likely CER price of less than 10 US$/tCO₂ in 2010. CER prices increased from approximately 3 €/tCO₂ in 2003 to more than 20 €/ton in early 2006 (at the time of peak prices in the EU ETS); as of October 2006, they had declined to about 13 €/tCO₂. CER prices have been relatively closely tied to EU ETS prices over time.

As of May 2006, the volume of CERs estimated from nearly 1000 proposed projects in 69 countries was 200 MtCO₂-eq/year in 2008–2012 and 330 Mt MtCO₂-eq/year in the pre-2008 period (Ellis and Karousakis, 2006; specific project information can be found at http://cdm.unfccc.int; recent updates on the CDM/JI pipeline can also be found at the UNEP/RISO site, www.cd4cdm.org/publications/CDMpipeline.xls) (See Figure 13.3). While not all projects will be implemented, the UNFCCC cites 491 registered projects and estimates CERs equal to 740 MtCO₂-eq from those projects through to the end of 2012.^[34] Ellis and Karousakis (2006) also indicate that almost half of the proposed CDM projects are in the electricity sector and that many are small renewable projects occurring in 40 countries. However, the majority of credits have come from CDM projects reducing nitrous oxide (N₂O), trifluoromethane (HFC-23) and, to a lesser extent, methane (CH₄). Projects that have not yet had methodologies approved will be under-represented in the project mix – even if they represent opportunities for significant emissions reductions at the national or global level. Publicly committed budgets for CER acquisition stood at approximately 7.5 billion US$ (World Bank, 2006) (See Figure 13.4). At such a scale, the CDM begins to reach the same order of magnitude as Global Environment Facility (GEF) and Official Development Assistance (ODA) resources.

Figure 13.3: Evolution of the Clean Development Mechanism portfolio in terms of CO₂ -equivalents per year and number of projects.

Source: Ellis and Karousakis (2006).

Figure 13.4: Budgets for the acquisition of certified emissions reductions (CERs) and emission reductions units (ERUs).

Note: Status as of October 10, 2006 at which time the total budget was almost € 6 billion.

It was initially assumed that CDM projects would be undertaken as bilateral arrangements between Annex I and non-Annex I convention Parties (and private sector companies in those countries). As of October 2006, 56% of registered projects were being undertaken unilaterally, indicating that companies in developing countries are procuring the financing to implement projects and sell the CERs to industrialized countries.^[35]

A CDM project has to go through an elaborate project cycle that includes external validation and which has been defined by a decision of the 7^th Conference of the Parties to the UNFCCC (2001) and is in keeping with the decisions of the CDM Executive Board that is overseeing the project cycle (see, for example, UNFCCC, 2003a–c). As CDM projects are implemented in countries without emissions targets, project ‘additionality’ becomes important to avoid generating fictitious emission reduction credits through ‘business as usual’ activities. Several tests of additionality have been discussed in the literature; these include investment additionality (see Greiner and Michaelowa, 2003) and environmental additionality (see Shrestha and Timilsina, 2002). The CDM Executive Board has developed an additionality tool that project proponents can use to test and demonstrate the additionality of a CDM project (http://cdm.unfccc.int/methodologies/PAmethodologies/ Additionality_tool.pdf).

If a project is additional, the next step is to determine a ‘baseline’ – the emissions that would have occurred if the project had not taken place. One potential risk is the overestimation of baseline emissions, which is a major problem as all participants profit from an overestimate as there is then no incentive to correct it. Stringent rules and modalities are required for determining baselines affecting the efficient processing of the CDM (Bailey et al., 2001). Fischer (2006) argues that due to pressure from industry, rules for standard emission rates are likely to be systematically biased to over-allocation and also risk creating inefficient investment incentives. Alternatively, Broekhoff (2004) focuses on costs and efficiency, arguing that the availability of data and the level of data aggregation determine to a large extent the cost of deriving multi-project baselines. Other authors examine specific baseline issues in the energy sector, particularly the use of models, the need to consider size, vintage, generation type and operational characteristics and issues relating to technology and sectoral approaches (see Fichtner et al., 2001; Zhang et al., 2001; Spalding-Fecher et al., 2002; Begg and Van der Horst, 2004; Illum and Meyer, 2004; Kartha et al., 2004; Rosen et al., 2004; Sathaye et al., 2004).

In order to account for any emissions that occur outside of the CDM project boundary but which are a consequence of the CDM project – emissions referred to a ‘carbon leakage’ – a CDM project should also include a leakage estimate. According to the UNFCCC CDM glossary of terms, leakage is defined as the net change of anthropogenic emissions by sources of GHGs that occur outside the project boundary and which is measurable and attributable to the activity of the CDM project. Leakage issues have been discussed by a number of authors (see, for example, Geres and Michaelowa (2002) and Kartha et al. (2002) for the electricity sector and the Working Group on Baseline for CDM/JI Project (2001)). There is a general consensus that the determination of project boundaries is critical to any evaluation of leakage.

The coverage of forestry and forest-related projects is a contentious issue under the CDM. The problems primarily relate to the impermanence of the forest and to leakage to other regions. Dutschke (2002) suggests leasing CDM credits to address the non-permanence of forestry sinks. The CDM has addressed the issue of non-permanence through the creation of separate CDM credits, which are called temporary CERs. According to Nelson and de Jong (2003), development priorities can be lost. This is illustrated by the case of a forestry project in Chiapas in which Mexico shifted from a development emphasis with multiple species to two species when the focus changed to carbon sales by individual farmers. Data (or its scarcity) as well as price uncertainty also pose problems. Vöhringer (2004) notes that establishing historical deforestation rates is a major problem in Costa Rica. Van Vliet et al. (2003) analysed six proposed plantation forestry projects in Brazil for uncertainty and, based on their results, they suggest that fluctuations in product prices cause variations of up to 200% in CERs and net present value, leading to difficulties in determining the additionality of such projects, thereby making five of the six projects ineligible for CDM.

Perhaps the most critical issue in the context of the viability of the CDM over the longer term is whether there will be an ongoing price signal that encourages both emission reduction commitments and a market demand – over the longer term. This will clearly depend on the shape of both international agreements and evolving national programmes that might support project offsets. Independent of the market demand issues, an important suggestion to enhance the CDM relates to improving the sustainable development benefits of a CDM. One proposal^[36] for doing this is the ‘Gold Standard’, which calls for enhanced environmental assessment, stakeholder consultations and the use of a qualitative sustainability matrix, expanding the CDM regime to allow programmes and policies to be credited – a concept elaborated on in a decision by the first meeting of the Kyoto Parties in 2005, and analysed by Ellis (2006) – and extending CDM project incentives beyond 2012.

Joint Implementation has been much less extensively researched than the CDM. Its later start date and unclear international rules (for example, the ‘second track’ rules were only agreed upon in October 2006) have generated considerable uncertainty with regard to implementation. Transactions under JI are seen as both cumbersome and beset with institutional obstacles (Korppoo, 2005). In addition, several authors have argued that JI projects will potentially be ‘double counted’ – given credit under both the project mechanism as well as under the rules for EU ETS. A number of proposals have been made to address this issue. Koch and Michaelowa (1999) and Moe et al. (2003) have suggested a ‘Green Investment Scheme’ (GIS) in which revenues from sales of Assigned Amount Units (AAU) are allocated to projects that reduce GHG emissions. Blyth and Baron (2003) suggest that the scale of a GIS in Russia could reach as much as € 1.25–3.5 billion per annum. This is a very approximate figure and depends on the balance of supply and demand and the prevailing allowance price. Fernandez and Michaelowa (2003) discuss the impact of defining the ‘acquis communautaire’ as the baseline for JI projects in the new EU Member States and stress the need to establish a predictable legal framework in the host countries, while Van der Gaast (2002) sees a reduced scope for JI in Eastern Europe due to the ‘acquis’ which could also be increased by using a GIS.

National institutions for project-based mechanisms have been slow to develop. The institutional problem is often exacerbated in countries with unstable economies and institutions and by project developers who often have very short time horizons, are unwilling to wait for the revenues and who cannot provide regular and ongoing monitoring and verification reports of emission reductions (see Michaelowa (2003a) for an overview of such issues in CDM host countries, Korppoo (2005) for specific issues related to the Russian Federation and Figueres (2004) for issues specific to Latin America).

Sectoral approaches

A number of researchers have suggested that sectoral approaches may provide an appropriate framework for post-Kyoto agreements (see sectoral approaches in Table 13.2). Under such a system, specified targets could be set, starting with specific sectors or industries that are particularly important, politically easier to address, globally homogeneous and/or relatively insulated from competition with other sectors. Such an approach may be binding (e.g. such as an agreement in the International Civil Aviation Organization) or voluntary (such as an agreement through the International Standardization Organization). Targets may be fixed or dynamic, and ‘no-lose’, binding or non-binding (Philibert and Pershing, 2001; Samaniego and Figures, 2002; Bodansky, 2004). Bosi and Ellis (2005) and Baron and Ellis (2006) have explored different design options for sectoral crediting, including policy, rate-based and fixed limit approaches, and Ellis and Baron (2005) have assessed how these options could be applied to the aluminium and electricity sectors.

Sectoral commitments have the advantage of being able to be specified on a narrower basis than total national emissions. Baumert et al. (2005b) consider specific options in aluminium, cement, iron and steel, transportation and electricity generation and conclude that while not all sectors are amenable to such approaches, considerable precedent already exists for agreement both between companies and by governments. Sectoral approaches provide an additional degree of policy flexibility and make the comparison of efforts between countries within a sector a relatively easy process – although comparing efforts across sectors may be difficult (see Philibert, 2005a). An additional disadvantage to sectoral approaches is that they may create economic inefficiency. Trading across all sectors will inherently be at a lower cost than trading only within a single sector.

13.3.3.4.3 Coordination/harmonization of policies

As an alternative to or complementary to internationally agreed caps on emissions, it has been proposed that countries agree to coordinated policies and measures that reduce the emission of GHGs. A number of policies that would achieve this goal have been discussed in the literature, including taxes (such as carbon or energy taxes), trade coordination/liberalization, R&D, sectoral policies and policies that modify foreign direct investment (FDI). Sectoral policies have been discussed above, R&D is discussed in Section 13.2.1.6 and FDI is discussed below on financing. This discussion focuses on harmonized taxes as well on as trade and other policies.

One of the leading proponents of a harmonized tax has been Cooper (1998, 2001). Under his proposals, all participating nations – industrialized and developing alike – would tax their domestic carbon usage at a common rate, thereby achieving cost-effectiveness. Aldy et al. (2003) have suggested a number of problems with Cooper’s proposals, including issues of fairness (whether developed and developing countries should have identical tax rates given the relative welfare and relative responsibilities), whether any incentive exists for developed countries to adopt a tax and how to manage gaming behaviour (in which a government may change tax codes to neutralize its effects or to benefit certain economic sectors). Additional criticism of a common tax structure comes from the modelling community: Babiker et al. (2003) note that while an equal marginal abatement cost across countries is economically efficient, it may not be politically feasible in the context of existing tax distortions. They also note that many countries which currently apply such taxes have exempted certain industries, thereby significantly increasing the overall costs of the tax regime. In addition, competitive concerns can arise if one country adopts a tax and a trading partner does not. Several solutions have been proposed, including the use of trade bans or tariffs to induce action. Governments may also seek to use border tax adjustments under such circumstances (Charnovitz, 2003). However, it has been argued that such a measure could be as disadvantageous to a target foreign country as a trade measure. To date, World Trade Organization (WTO) case law has not provided specific rulings on climate-related taxes. Any proposed border adjustments would need careful design and also take WTO law into account (Biermann and Brohm, 2005) (see Box 13.7b).

The importance of harmonizing environmental standards – including those related to climate change – has been evaluated by Esty and Ivanova (2002), who conclude that both economic and ecological interdependence demand coordinated national policies and international collective action. To this end, they propose the creation of a Global Environmental Mechanism to help manage the environmental components of a globalizing world, primarily through information and analysis and the creation of a policy space for environmental negotiation and bargaining.

Other fora, in addition to the WTO, also offer opportunities to exchange information and coordinate climate-related policies and activities. For example, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) offers an opportunity to unite efforts in a common cause to both protect endangered species and the climate. Similarly, meetings of Asia Pacific Economic Cooperation (APEC) provide a platform for regional economies to take steps that meaningfully address the adverse impact of climate change (Ivanova and Angeles, 2005). The APEC Virtual Center (APEC-VC) for region-wide Environmental Technology Exchange launched by the Asia-Pacific economies provides information on environmental technology gathered by regional and local governmental authorities as well as by companies and environment-related organizations. The North American Commission on Environmental Cooperation (the NACEC or CEC), which was created within the North America Free Trade agreement (NAFTA), offers another model: Canada, Mexico and the USA signed an agreement to cooperate on reducing the threat of global change. The trilateral agreement is the basis for public-private partnerships to reduce GHG emissions in North America and to boost investment in green technology. It should be acknowledged that the NACEC could not prevent the detrimental decline in the Mexican environment during their participation in NAFTA (Gallagher, 2004); therefore, some caution must be exercised with regard to the environment when engaging in trade agreements.

13.3.3.4.4 Technology

A number of issues related to technology research, development and deployment (including transfers and investment) have been explored in the literature on climate change. Many authors have asserted that a key element of a successful climate change agreement will be its ability to stimulate the development and transfer of technology – without which it may be difficult or impossible to achieve emissions reductions at a significant scale (Edmonds and Wise, 1999; Barrett, 2003; Pacala and Socolow, 2004).

Technology agreements

The studies reported in the literature make it very clear that R&D support, price signals and other arrangements can all contribute to technology development and diffusion. Financial and human resources, often scarce in developing countries, will be needed to promote R&D, while monetary and political incentives as well as institutional arrangements will be required to promote diffusion (see IPCC (2000) which contains a comprehensive review of technology transfer issues, including proposals for improving international agreements.) Technology agreements may also seek to address barriers in technology research, development and diffusion. (For additional details on specific sectors and technologies, see Chapters 4–10).

One variant of a technology agreement is formulated by Barrett (2001, 2003) in a proposal which emphasizes both common incentives for climate-friendly technology research and development (R&D) and technology protocols (common standards) rather than targets and timetables. While this proposal could potentially be environmentally effective, depending on the payoffs to the cooperative R&D efforts and the rate of technology deployment, Barrett notes that the system would neither be efficient nor cost-effective, not least because the technology standards would not apply to every sector of the global economy and may entail some technological lock-in. However, Barrett assumes that if standards are set in enough key countries, a ‘tipping effect’ is created which ultimately would lead to widespread global adoption. In reviewing Barrett’s assessment, Philibert (2004) expresses doubts as to whether such a tipping effect would be applicable and suggests, alternatively, that for some technologies (e.g. CO₂ capture and storage), cost constraints may be more critical than acceptability in determining market penetration.

The concept of regional technology-specific agreements has also been explored by Sugiyama and Sinton (2005), who suggest that they may offer an interim path to promote cooperation and develop new, lower cost options to mitigation climate change – allowing any future negotiations on emission caps to proceed more smoothly. Box 13.8 lists some examples of existing international technology coordination programmes.

Technology transfer

One mechanism for technology transfer is through the establishment of – and subsequent contributions to – special funding agencies that disburse money to finance emissions reduction projects or adaptation activities. The UNFCCC and the Kyoto Protocol already include provisions for establishing and funding project activities, although contributions to and participation in these are mostly voluntary. UNFCCC also includes provisions for technology transfer under Article 4.5. The CDM could also be a vehicle for technology transfer, but the effects are unclear at this point.

As part of the Marrakesh Accords, at the seventh Conference of the Parties (COP 7), Parties were able to reach an agreement to work together on a set of technology transfer activities, which were grouped under a framework for meaningful and effective actions to enhance the implementation of Article 4.5 of the Convention. This framework^[37] has five main themes:

1. Technology needs and needs assessments;

2. Technology information;

3. Enabling environments;

4. Capacity building;

5. Mechanisms for technology transfer.

Actions to implement the framework include the organization of meetings and workshops, the development of methodologies to undertake technology needs assessment plans, the development of a technology transfer information clearinghouse, including a network of technology information centres, actions by governments to create enabling environments that will improve the effectiveness of the transfer of environmentally sound technologies and capacity building activities for the enhancement of technology transfer under the Convention. Funding for technology needs assessments has been provided, and further funds for technology may become available from the UNFCCC’s Special Climate Change Fund.

Other international efforts have also been undertaken to promote technology transfer in support of climate change mitigation efforts, including those by the UN Industrial Development Organization (UNIDO) and by the Climate Technology Initiative (CTI) of the IEA. As noted by the US National Research Council, additional work is particularly needed to assist poor countries as these lack scientific resources and economic infrastructure as well as the appropriate technologies to reduce their vulnerabilities to potential climate changes (NRC, 2003).

The distinction between public financing for climate change mitigation and private financing for technology investment is often blurred: Clean energy projects are frequently a blend of the two, with public financing used to leverage private investment. For example, the International Finance Corporation (IFC) clean energy financing projects in Eastern Europe, Russia, China and the Philippines use technical assistance funds to train commercial banks in energy efficiency while concurrently lending partial risk guarantees and offering credit lines to encourage banks to provide loans. In this manner public funds are heavily leveraged and provide a source financing for clean energy investments.^[38]

Development oriented actions

A ‘Sustainable Development Policies and Measures’ (SDPAMS) approach proposed by Winkler et al. (2002b) and further elaborated by Bradley et al. (2005) focuses on linking climate mitigation and adaptation to priority development needs. In its standard form, such an approach would be domestic and unilateral and – with its focus on developmental needs – would also bring GHG benefits. However, the authors also suggest that simultaneous SDPAMS pledges (and possibly harmonized pledges) could be made by both developing and developed countries. However, Bradley et al. (2005) do note several limits to this approach and suggest that it may not be suitable for developed countries, nor for every technology or policy. Finally, they note that SDPAMS may not attract the necessary funding for it to be implemented on the scale required for global climate change mitigation.