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Development Account Projects

Mitigating climate change through attracting foreign direct
investment in advanced fossil fuel technologies

Background:

Mitigation of climate change will require de-carbonizing the global economy through the promotion of cleaner advanced energy technologies. Intergovernmental consultations at the fifteenth session of the Commission on Sustainable Development have confirmed that fossil fuels will continue to be the largest energy source in many developing countries in the coming decades. At the same time, countries underlined the importance of developing and deploying advanced energy technologies, which enable the use of these countries' energy resources in a compatible manner with climate change mitigation. The challenges are to attract the investment necessary to support the transition to a low carbon economy.

The sheer magnitude of required investment necessitates capital flows from foreign sources. Particular attention has been paid to foreign direct investment (FDI), which has many potential benefits, including financing capacity expansion without incurring debt, supporting technology and knowledge transfer, and acting as a catalyst for further capital inflows. Despite considerable efforts to attract FDI in the last several years, actual levels of such investment into the power and coal sectors in many countries with economies in transition have been moderate. Mobilization of the necessary capital resources will require an attractive investment climate — a business-friendly environment, favourable macroeconomic performance and a regulatory environment that is predictable, fair, transparent and efficient. It is critical to support the evolution of the economic, legal and regulatory frameworks that underpin an attractive investment climate while developing the financial skills of government and corporate officials and facilitating their interface with prospective investors.

In addition to renewable sources and energy efficiency, fossil fuel technologies such as coal gasification, underground coal gasification, coal liquefaction, could play an important role in meeting the growing energy needs of the countries with economies in transition. These technologies are more effective as well as more environmentally friendly. Together with carbon capture and storage technologies, they could make a critical contribution to the transition to low carbon economies. It is, therefore, critical that future infrastructure needs support sustainable development, and are incorporated into the investment framework.

The following developing countries and countries with economies in transition, which rely to a considerable degree on domestic coal and have expressed an interest in international sharing of experience in the development of their coal-based energy sectors, would be interested in participating in this project: Afghanistan, China, India, Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan, Ukraine, and Uzbekistan. To the extent possible, a regional approach would be taken to optimize resources, encourage cross-fertilization, and build partnerships among regional and international experts.

ECE, the DESA and ESCAP will cooperate in the implementation of the project. Other partners will be invited to participate in the project as needed. ECE has prior involvement in this issue through the work of the ad hoc group of experts on cleaner electricity production from coal and other fossil fuels and the project "Capacity-building for air quality management and the application of clean coal combustion technologies in Central Asia", funded by the fourth tranche of the Development Account. In addition, ECE also has prior involvement through the work of the ad hoc group of experts on coal mine methane. The DESA has implemented several technical cooperation projects related to cleaner coal technologies in China and Kazakhstan and also provided advisory services on clean coal technologies. ESCAP has also conducted a number of activities in energy and coal which would be conducive to this joint effort.

Objective:

To enhance Governments' abilities to attract FDI into advanced fossil fuels technologies to support energy security and low-carbon sustainable development.

Expected accomplishments:

  • Increased skills to develop and maintain an attractive investment climate to encourage FDI into the power sector to meet the growing demand for electricity and climate change goals in countries with economies in transition.
  • Improved cooperative relationships between energy policymakers in countries with economies in transition and investors.

Implementation status:

The final year of the project implementation, 2012, was successful. Overall, the project helped countries' officials understand what needs to be done to create a climate that encourages foreign direct investment into advanced fossil fuel technologies. Which countries, who are the officials, what did UNECE offer them, what have they learned, what have they done with what UNECE offered them.   

All nine baseline studies, initiated in 2011, were finalized in 2012 (activity A.1.1.). The results of these studies were presented and discussed at regional and technical workshop (activities A.1.2. and A.2.1.). Please give us hyperlinks to the results of these 9 studies and information on who carried them out and against which cost?

The synthesis study (comparative analysis of the practices in the nine countries and some reference countries) was also finalized – again hyperlink and info on who did the study and at what cost would be required -and its results will be presented at the end-of-the-project conference (activity 3.2.) to be held in November 2012. What conference is this, where will it be organized, who are the participants, how much does it cost the UNECE to organize it?

In 2012 two regional capacity-building workshops were held: in Ukraine (May) and China (September). Two technical workshops were also held: in India (June) and Kyrgyzstan (September). The four workshops were instrumental in establishing relationships among energy policy makers in countries covered by the project, foreign investors, advanced technology providers, and international institutions working in this field. Please be more specific on the costs, the participants and the concrete output of these workshops?

In July 2011 UNECE requested from the Capacity Building Office of DESA to approve changes to the budget and implementation plan. Who initiated this? Was the request endorsed by EXCOM? The proposed changes asked for an increase in capacity building expenditures (from $180,000 to $275,000) while at the same time UNECE decreased the international consultancy (from $212,900 to $96,000) What is the difference; who does the capcity building (and what exactly does this entail) and who are the consultants (and what do they do). With these changes in the budget that DESA welcomed (please include the DESA reply) more funds were dedicated to in-country capacity-building activities and less to outsourced work through hiring external consultancy. Increasing the total number of workshops from five to seven also helped avoid unnecessary travel, as the implementing agency were able to bring the content to more countries with more participants coming to the workshops at no cost to the United Nations. Who is the implementing agency, what were the 7 events, what did each of them cost, who were the participants and what was the concrete outcome?

To further increase the efficiency in the use of funds, and the overall impact of the project, the implementation team developed internally the content for capacity building workshops, both regional and technical. Hyperlinks to this "content" would be important.  In general, these workshops consisted of three modules: on advanced fossil fuel technology (developed by UNECE), on the state of electricity sector in the countries (developed by UNECE using data from the UN Statistics Division), and on foreign direct investments (developed by UNCTAD, since UNCTAD is the UN's centre of excellence for FDI). These modules were delivered either by the relevant agencies dealing on these substantive issues, or by UNECE and UNCTAD staff members. Which relevant agencies delivered what info and against what cost?

These initiatives contributed to increasing the impact of the project through better utilization of funds, while the lowered outsourcing put more pressure on UNECE staff to deliver. In this sense, the project resulted in significant savings, setting an example of how to achieve more with less. Which UNECE staff members delivered what papers?