UN World Investment Report 2010 - Office of Trade Negotiations

CHAPTER IV Leveraging Foreign Investment For A Low-Carbon Economy 105
Raw materials
•
Figure IV.1. Introduction of low-carbon processes leading to GHG emissions
reductions along a typical value chain
Suppliers
Support and influence
from principal firm
Principal firm’s core operations
Input
substitution
Process
changes
Technological upgrading
in low-carbon process
example, TNCs in agribusiness can influence
their suppliers to change towards
more sustainable, low-carbon farming
practices (e.g. through contract farming
arrangements). 9
TNCs can create or promote products
and services that are low carbon in how
they are used (not simply in how they are
made). Such low-carbon products and
services include, for instance, electric
cars (which have lower GHG emissions
than conventional cars), “power-saving”
electronics and light bulbs, renewable
energy equipment or integrated mass
transport systems. Most low-carbon
products and services require a change
in behaviour and demand patterns on the
part of users, however. Whereas market
demand is a significant incentive for such
investments in home countries, demand
for such products is unlikely to be the
same in different economies. In the case
of export-orientated foreign investment
in tradable products, the investment
can be considered low-carbon, even if
100 per cent of the output is exported,
because GHG emissions are reduced at
the global level.
A special case of the second type consists
in TNCs providing low-carbon technology
services by reengineering GHG emitting
processes in independent local companies
Waste
disposal/
recycling
Support and influence
from principal firm
Industrial
customers
Source: UNCTAD.
Note: The value chain depicted in this figure is “typical” for the manufacturing sector. Analogous activities
in other value chain or network activities, e.g. in financial services or utilities, can also be depicted.
and other organizations in host countries.
This enables firms to upgrade their own
operations and businesses to repackage
their knowledge and reach new markets.
Such foreign investment in low-carbon
technology services may not be large yet,
especially in developing countries, but firms
are increasingly offering such services. For
example, in view of the rise of the clean
energy market, Ricardo Consulting Engineers
(United Kingdom) – which started
designing and building motor car engines
in 1915 – has repackaged its technology
into a series of new businesses focusing on
low-carbon technology services. Ricardo has
become active in markets with alternative
uses for its technology, such as renewable
energy, power generation and transportation
and infrastructure. 10 This has led to various
new spin-out businesses, such as product
and process development services for wind,
solar and tidal energy systems and energy
storage systems in Asia, Europe and North
America. 11
Establishing the scale and scope of lowcarbon
foreign investment carries some
complications, however. Firstly, the identification
and measurement of low-carbon
foreign investment is not straightforward,
given the lack of an absolute measure, the
different types of such investment and the
context specificity (section B.3). Secondly,
Final consumers