Building Competitive Green Industries

Country ContextThere is limited empirical knowledge regarding therelationship between specific developing countrycontexts and the most effective instruments topromote clean technology industries. However,there are a number of national, economy-wide,conditions necessary to support clean technologyindustries, whether investors are domestic orforeign. These include a stable macroeconomicenvironment, meaning rational interest rates, tightcontrol over inflation and competitive exchangerates. More generally, countries should haveundergone, or be in pursuit of, reforms to simplifyand minimize the cost of business registrationand formalization, including decentralizedadministration, strong rule of law, contractenforcement, pro-business bankruptcy andre-entry rules. While these may appear obviousprerequisites that stand to benefit all industries,there can be profound contradictions between agovernment‘s sector-specific policies and the widereconomic and business framework, thus hinderingclean technology industries.When designing instruments to support cleantechnology industries, governments, in particular,should take into account their country‘sadministration and innovation capacities, in orderto pursue realistic goals and strategies (UNDESA,2011). This applies to education policies throughto IPR regimes, though the need to take intoaccount national development circumstances isperhaps most important when thinking aboutclean technology transfer. For countries withweaker capacities, it makes more sense to focuson attracting foreign direct investment (FDI) and increating a role in global value chains, where jointventures with foreign firms are the best optionsfor securing technology transfer, in addition tosupporting local research capacities.An example of this is Egypt‘s Kuraymat IntegratedSolar Combined Cycle power plant, a gridconnectedproject including 20MW of concentratedsolar capacity, which became operational in June2011. Sixty percent of the value for the Kuraymatplant was captured by local SMEs through thesupply of civil works, mounting structure, tubes,electrical cables, grid connection, engineering,and procurement and construction responsibility.Many local SMEs obtained knowledge andskills regarding the design, construction andmaintenance of the solar plant, in the process ofworking with foreign firms (MEDREC, 2013).There is also a range of social and cultural barriersto the update of clean technologies that mayinhibit the growth of clean technology industries.These can include limited acceptance or trust inthe suitability or reliability of clean technologies,as well as consumer resistance on the basis ofaesthetic criteria, for example in the uptake ofroof-top rain water harvesting. Resistance at thecommunity level has also been experienced, forexample in efforts to encourage collectivized foodstorage in flood-prone areas. Tradition, socialesteem, pride and religious beliefs may also bea source of resistance to the uptake of climatetechnologies. However there are various optionsto address these barriers, including campaignsto disseminate information, educate and raiseawareness as well as public-private partnershipsand targeted assistance to promote early adoptersand technology front runners (Boldt et al., 2012).Policy Interaction and RiskIn addition to providing active, positive, supportfor clean technology markets via the menu ofinstruments detailed in tables in Appendix C,governments and regulators also need to ensurethat they remove or minimize any “negativeincentives,” that is, fiscal instruments, subsidiesor regulations that favor conventional energy andother “dirty tech” markets. Action to remove orreform such policies, thus reducing policy conflicts,is another key aspect of an enabling framework forclean technology SMEs.Negative incentives for clean technology SMEs indeveloping countries are likely to result from redtape and import taxation, as well as more sectorspecificregulations that restrict market access,such as monopoly status awarded to State utilitiesto generate electricity or operate water treatmentplants. For example, despite low levels of ruralelectrification, the Tanzanian utility TANESCOmaintained control over all grid and mini-gridpower generation up until the creation of the RuralEnergy Agency (REA) in 2008. Since then the REAhas supported small-scale independent powerproducers, thus opening up investment in smallscale hydro power and mini-grid technologies tosupply villages and rural areas (Uisso, 2011).Another source of policy conflict that underminesclean technology SMEs are subsidies issued tofossil fuels, which remain widespread in bothdeveloped and developing countries (Whitley, 2013).Chapter 7: Policy to Support Clean Technology SMEs79