Carbon markets and low-carbon investment in emerging economies: A synthesis of parallel workshops in Brazil and India

Abstract

While policy experiments targeted at energy and innovation transitions have not been deployed consistently across all countries, market mechanisms such as carbon pricing have been tested over the past decade in disparate development contexts, and therefore provide some opportunities for analysis. This brief communication reports on two parallel workshops recently held in Sao Paulo, Brazil and New Delhi, India to address questions of how well these carbon pricing policies have worked in affecting corporate decisions to invest in low-carbon technology. Convening practitioners and scholars from multiple countries, the workshops elicited participants’ perspectives on business investment decisions under international carbon markets in emerging economies across multiple energy-intensive sectors. We review the resulting perspectives on low-carbon policies and present guidance on a research agenda that could clarify how international and national policies could help encourage both energy transitions and energy innovations in emerging economies.

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BRICS, Columns/Op-Eds

Article in “Russia and India Report”: It’s time for a ‘BRICS Fund

by Samir Saran and Vivan Sharan
November 14th, 2011
Please find here the original article

With a post-crisis global recession deepening in the eurozone and other parts of the world, the BRICS countries can take the lead to set up a ‘BRICS Fund’ to reenergize faltering growth in both developed and developing economies, argues Samir Saran and Vivan Sharan.

The current global economic scenario is uncertain, volatile and misleading. The uncertainty stems from a breakdown in macroeconomic correlations and a continuation of a post-crisis recessionary environment in large parts of the world. The volatility emanates from the unpredictable price action across asset classes and increased sensitivity of almost all asset classes to financial and political fragilities, like those that are prevalent in the euro zone. Meanwhile, the misdirection and misallocation of capital across asset classes is a direct consequence of the lack of clear signals by political institutions and markets alike, leading to broad scale risk aversion especially in the case of sovereign investors such as central banks.

Increasingly, as such strains constrains economic development and investment flows, it is necessary for the BRICS nations to realise their new roles in the emerging global economic order. The imperative to shape the dynamics of future growth must come from these new drivers of economic momentum. One of the ways to do it could be the creation of a BRICS fund – a consolidated wealth fund with appropriate and proportionate monetary contributions from the central bank reserves of all the BRICS countries. Such a multilateral fund, with pre-determined investment mandates, could prove to be a useful tool for rebalancing capital flows, and reenergizing faltering growth in both developed and developing economies.

About one eighth of all assets managed in the US are allocated to “impact investments” or “social investments” – an impressive statistic that must be replicated by emerging economies. With a view to the future, it is clear that social, economic and environmental sustainability are going to be essential for economic development and growth – at individual company, industry and international level. A BRICS fund which invests back into sustainable initiatives both within the BRICS and outside in the least developed economies could prove to be an unparalleled tool to promote and accelerate sustainable growth trajectories. Rather than being a problem of capital generation, the key challenge in financing transitions to sustainable, low carbon trajectories is the redirection of existing and planned capital flows to financially viable allocations in non-traditional asset classes. Alternative investments into sovereign debt of struggling economies based on mutually agreed upon special purpose vehicles could be another avenue for funding which would also leverage the BRICS’ bargaining position in multilateral negotiations.

In the recent international climate negotiations at Durban, it was decided by member countries that that the second commitment period of the Kyoto Protocol will run from January 2013. Furthermore, it was decided that the Durban Platform for Enhanced Action – an agenda strongly backed by the EU and the Association of Small Island States (AOSIS) would be instituted to develop another new Protocol by 2015 – an international legal instrument that will be applicable to all parties to the UN climate convention and will come into effect after 2020. Simultaneously, the parties to the COP agreed to institute a $100 billion Green Climate Fund (GCF) – a measure largely intended to appease developing nations such as those in the AOSIS to come on board the EU agenda. The strategy worked well, although smaller economies should be aware that in the past a bulk of the funds that have been made available to developing countries through the Clean Development Mechanism of the UN have gone to private project developers in China, India and Brazil (in that order). China got the lion’s share of close to half of the total investments made till now. If the investment flows were analysed at from a primarily deterministic prism, it would be hard to conclude that the funds from the GCF would benefit small developing economies, or impact real organic change. The Durban negotiations provided a textbook case where bargaining positions of developing countries, and especially those in the BASIC group of countries including Brazil, South Africa, India and China, could have been leveraged, had these countries already committed to fund sustainable development through a parallel fund. Instead, the outcome was sub optimal – given that there still is no mechanism for the eviction of carbon squatters who have conveniently pushed the onus onto countries that are still in the low to mid income development profiles for what is effectively a $100 billion payoff.

The BRICS fund could also provide suitable SPVs to smoothen any future financial shocks to the highly integrated global economy. Just as in climate change scenarios, financial shocks and imbalances are likely to alter the growth trajectories of developing economies in a much more significant way than of advanced, developed economies which already have monetary cushions owing to high per capita incomes and strong existing infrastructure. The BRICS fund could help the central banks of the member countries counter the effects of erratic demand cycles, global resource pricing distortions, and systemic contagious failures in global financial markets, through strategic investment stimuli. Such a mechanism would not only be complementary to the policy mandates of the central banks of the BRICS nations, but would send a strong signal about their overall financial policy independence of Bretton Woods institutions such as the IMF.

Whatever the investment mandate – the overall emphasis for such a fund would have to be the generation of absolute returns to be considered worthwhile by all of the relevant stakeholders. Furthermore, it is beyond doubt that multilateral institutions have limited degrees of freedom. If a BRICS fund becomes a reality, a necessary condition would have to be complete operational and functional independence to deliver what is needed. This would only be possible with the effective and efficient delegation of policy sovereignty. The modern-day central banking trend of institutional independence would be a good model to follow. Ensuring political and financial goals are separate, and asset allocation occurs purely on the basis of the accepted common mandate and profitability would create a strong shared institution.

From purely the perspective of profitability and diversification of sovereign assets, such a fund would provide a good alternative mechanism for central banks within the BRICS to allocate appropriate portions of their reserves to riskier assets than they traditionally are mandated to invest in. Thus, the fund could substitute for Sovereign Wealth Funds, an increasingly popular concept for diversifying sovereign reserves through alternate mechanisms, while simultaneously creating significant signaling benefits which would be advantageous in matters of setting trends and norms in international financial investment agendas in the future. Today, financial institutions are zealously protective of their cash assets. This is far from being a panacea for the prevailing economic scenario with a failing European idea and a politically problematical environment in the US. A BRICS fund could provide the much-needed liquidity and confidence, especially to capitalise on resilient business models looking for seed money.

For decades, economies in the BRICS consortium have been subjected to the rhetoric of structural reform by actors that have consistently overspent on consumption. The retooling and rebalancing of the global financial system is an imperative that cannot be ignored any longer. With the increasing cooperation between BRICS countries along political and economic lines, the conceptualisation of alternative mechanisms to promote the development agenda at a time when financial institutions are cautious with their money is certainly justified. Disruptive changes to status quo policies and investment patterns are traditionally most effective in uncertain, volatile environments. Looking forward, this decade presents a mixed bag of opportunities and challenges for nations and economies. With the emphasis and impetus of growth shifting to the emerging and recently emerged economies, it is only natural that the BRICS countries take the initiative and the lead to innovate their way out of international crises.

Samir Saran is Senior Fellow and Vice President at the Observer Research Foundation. Over the past year, he has been actively involved in setting up a green business “gTrade” to promote sustainable investing in India.

Vivan Sharan is Associate Fellow at the Observer Research Foundation. He has interned at the UNDP, and PWC undertaking disparate research tasks. His primary research interests are in monetary policy, equity/debt markets in America and the BRICs.

BRICS, Columns/Op-Eds, Politics / Globalisation

Column/Opinion in The Economic Times on ‘RIC – How to evolve into an Asian trading region’

October 12, 2011
New Delhi
Please find How to evolve into an asian trading region for free PDF download here.

BRICS, Columns/Op-Eds

Samir writes in Russia & India Report on ‘Evolving an Asian Trading Region’

September 26, 2011.
by Samir Saran and Nandan Unnikrishnan. Both are Vice President(s) at the Observer Research Foundation, New Delhi.
Find here the original article.

It’s time economics replaced politics as the key driving force of the Russia-China-India (RIC) trilateral. The Big 3 of Asia has a major opportunity to create and drive an Asian Trading Region.

At a recent interaction in Moscow with scholars and editors, there was an interesting discussion on finding ways to significantly increase the economic interaction between Russia and India and, more specifically, change the nature of the G2G-driven bilateral trade. Our suggestion was spontaneous and to some outlandish. We suggested that for a paradigm shift in our trade volumes (less than $ 10 bn dollars currently) the two countries would need to work for an Asian Trading Region shaped and steered by Russia, India and China. Until then we (Russia and India) would remain prisoners of perceptions and perceived geographical distance.

It was apparent that this idea did not resonate well with many experts in the room. However, it did spark an interesting round of debate and many have subsequently written in with their own ideas on a trading zone or region in Asia. We still argue that the only sensible architecture would need to be fundamentally driven by and emerge out of the RIC arrangement. Even though the RIC was conceptualized as a club of the Big 3 in Asia and had more political overtones than economic reality, the vocabulary of cooperation emanating from previous RIC forum allows enough leeway to work towards the formation of an Asian Economic Zone beginning with an Asian Trading Region largely driven by Russia, India and China.

The then Russian Prime Minister Evgeny Primakov first voiced the idea of a Russia-India-China (RIC) Trilateral Forum publicly in December 1998 during a trip to India.The motivation was generally believed to be a desire to create a countervailing influence to the US, which at the time had unprecedented dominance in the international system. The fact that Russia, India and China saw the US as their primary interlocutor at the bilateral level did not appear to be an impediment at the time. However, despite regular Track II interactions between the three countries, it took four years for the first official interaction between the three – a meeting between Foreign Ministers on the sidelines of the United Nations General Assembly (UNGA) in 2002. The first RIC standalone meeting of the foreign ministers took place only in June 2005. Thereafter, on the sidelines of the G8 meeting in St Petersburg in July 2006, President Valadimir Putin, President Hu Jintao and Prime Minister Manmohan Singh had a tripartite meeting. From 2007 onwards, the foreign ministers are conducting regular annual meetings.

During this period, the motivations driving the three countries in the RIC underwent a change. If Primakov’s fear in 1998 was a hegemonic U.S., by 2005 Russia was more concerned about China and its possible duopoly with the U.S. – the G2 scenario. Therefore, Russia was keen to support multilateral initiatives, which involved China, but kept the US out. RIC fitted the bill perfectly. China also appeared to be keen on such a formation as it realized its increasing influence and envisioned RIC as a group dominated by China. India’s motivation perhaps was not to upset the Russians. It was also the age of clublateralism and therefore the RIC was an opportunity to get into an influential circle. Some hesitation, if any, was probably because these were the heady days of Indo-U.S. friendship.

Today the situation has changed again. The uni-polar moment of the U.S.A. is evidently over. A multi-polar or polycentric world is emerging. China has emerged as an alternate power centre and no longer requires props like the RIC. It is following an assertive foreign policy that relies more on promoting bilateral relations with the established and emerging powers. Similarly, Russia is now less nervous about the emergence of a G-2. It is enjoying the “reset” in its relations with the US and has become a little more wary about China’s spectacular rise in stature. Moscow, like New Delhi, also realises that its efforts to restructure and modernise its economy will succeed only if it able to convince the West to buy into this effort. While China-India trade is at historic highs (at over $ 60 billion), India is also focusing on developing its ties with the US and the 27-nation European Union. RIC appears stymied by the proliferation of groupings like the SCO, BRIC, and BASIC and does not as yet offer a unique ‘agenda’ to differentiate it. And most importantly, the three countries consider the US much more important than any other bilateral or multilateral relationship. Therefore, the “glue” that held the RIC together is drying up.

This inevitably affects prospects for RIC. The lack of interest and expectation from this format has led to little of any substance emerging from the interactions, despite identifying early on a vast arena for mutual cooperation such as terrorism, drug trafficking, climate change, agriculture, disaster management and relief, health and medicine, information technologies, pharmaceuticals, infrastructure and energy. Given this backdrop, is RIC now irrelevant? Is it time to bury this body? The answer has to be an unequivocal “NO”. So can regional trade and economics be that ‘glue’. Russia and India, through their own recent policy announcements, have recognized the arrival of the yuan as a global currency and it is likely that in the coming months India also decided to denominate some of its reserves in the currency of our Northern neighbour. Russia is already engaged in yuan based trade and maintains a stock of this currency. That over $ 130 billion of trade takes place between India and China, China and Russia and Russia in India also places weight of volume behind the grouping. Irrespective of political ambitions and differences there is no denying the growth of economic interactions and the only limit to the economic story is politics. Can RIC be the political response to an economic arrangement?

RIC appears to be the only format which can help to create a truly Asian Trading Region, an idea that must be pursued based on the remarkable shift of global trade to within the region. The contiguous land mass, the size of the three economies and the growing levels of consumption, each provide a basis to make this trading region viable and worth investing in. The energy and transport corridors may be the place to start. While China’s rapid advances in the energy landscape in Asia can appear intimidating, it can also be seen as an opportunity to respond to the Chinese dynamism and be a part of the project. Would India consider providing access to the Indian Ocean to China? And through China for Russia? Would this create a dependency that could serve India’s interests? Would it be beneficial to open land and pipeline routes to Central Asia and Russia through China? Would these not create mutual dependencies between the two countries that would offset some of the key imbalances that exist today? India helps de-risk China its current hydrocarbon and trade flows through the Indian Ocean, while China offers alternatives to routes that would require India to traverse Afghanistan and Pakistan. At the opportune time can Russia and China be a part of the IPI and TAPI? Can China extend pipelines from Central Asia and Russia to India? With increased volumes of trade, the pipelines become viable in spite of the distance. The participation of all the three countries in these pan-continent pipelines also reduces the political risk that these large trans-national project invariably face.

The biggest gainer would, however, be Russia. They would have a market for their resources outside of the EU and China. As the demand in West Asia is released in the next 10 years due to growing commercialization of green technologies and production of shale and frontier gas in US and East Europe, Russia would increasingly depend on the growing demand from China and India. Without a cooperative arrangement or transport infrastructure, large volumes of Russian resources may have only one buyer – China.

Russia and China have already established significant cooperation in the area of energy. It is time that India becomes part of this equation and the three countries start the process of developing an Asian Gas Grid. The first steps could be modest. Russia could ship some of its piped gas landing in China through the Chinese eastern board to India, a step both symbolic and political and a harbinger of Asian tri-lateral trade. Over the years it could result in the grid that a former Indian petroleum minister strongly advocated and a gas market in the region that could evolve its own price and commercial dynamics. The next stage could involve jointly owned SEZs in Russia’s Far East with each of the countries within the SEZ enjoying privileges of home country. This could also be the experiment to test the free movement of men, material and ideas across Asia.

BRICS

Summary of BRICS Think Tanks Symposium, March 2011

March 2011
Link to original website

Scholars and experts from BRICS (Brazil, Russia, India, China and South Africa) countries have said that the current crisis in the Middle East and North Africa (MENA) regions should be resolved expeditiously in the interest of regional stability and in conformity with the aspirations of the peoples of MENA and said that the current crisis demonstrated that the global governance system needed to be more responsive.

This formed part of a recommendation document prepared for the Third Leaders Summit to be held at Sanya, China in April this year. At a meeting of 60 scholars of think tanks from the five BRICS countries, held in Beijing on March 24 and 25, 2011. A seven-member delegation of Indian experts, led by Observer Research Foundation, took part in the meeting of the BRICS Think Tank Symposium, hosted by the China Centre for Contemporary World Studies (CCCWS) and the China Foundation for Peace and Development (CFPD). It comprised of former Indian ambassadors Mr. HHS Viswanathan (Distinguished Fellow, ORF) and Mr. T.C.A. Rangachary, Mr. Samir Saran, Vice President and Senior Fellow, ORF, Dr. Ravni Thakur Banan, Associate Professor, Delhi University, Dr. Saroj Kumar Mohanty, Professor and Senior Fellow, Research and Information Systems for Developing Countries, Dr. Jyotirmoy Bhattacharya, Fellow, Indian council for Research on International Economic Relations and Sriparna Pathak, Junior Fellow, ORF.

In the recommendations proposed for the consideration of the Third BRICS Leaders Meeting to be held in April in China, the scholars said that the leaders should give attention to the changing international context, sluggish economic recovery, governance issues, reform of the international economic and financial architecture, Sustainable Development and Climate Change.

In the opening speech, Mr. Sun Jiazheng, Vice Chairman of the National Committee of the Chinese People’s Political Consultative Conference and President of CFPD, made three suggestions regarding cooperation among BRICS: (1) Undertaking intensive studies, and recommendations on issues that concern BRICS. (2) Focusing on major areas of international finance, international order, world peace and stability (3) Strengthening exchanges between think tanks of BRICS.

At the opening session, delegates from the five countries spoke on the need for reforming the global financial institutions, democratising global governance system, avoiding unilateralism, increasing discussions within the grouping on issues of wages, poverty, energy, health and education, defining a BRICS identity and mission and widening the BRICS’ agenda.

The first session discussed “Challenges and Opportunities- Environment and Background for the Development of BRICS Countries”. The presentations focused on the opportunities and challenges for BRICS post the financial crisis and the way ahead on issues of development and global governance Delegates from BRICS countries also spoke on issues of technological innovations, moving away from reliance on OECD countries, and greater engagement with other developing countries to enable sustainable growth.

On the topic of ‘Changes and Responsibilities: Agenda and Items for BRICS Countries in Advancing Global Economic Governance’, participants elaborated the need to realise inclusive growth and emphasised on stability, peace, shared prosperity, and development, South- South cooperation, open markets and mutual trade and investment among BRICS.

The theme of the third session was ‘Unity and Cooperation- Practical Cooperation and Institutional Building of BRICS Countries’. This panel discussed how BRICS can be a bridge for North- South cooperation, and the need within the BRICS grouping to resolve differences and seek common goals. Presenters also spoke on strengthening trade among BRICS, strengthening framework for polycentric world, promoting cooperation and engaging private sector actors in agriculture and other sectors among BRICS.

‘Exchanges and Mutual Trust- Cooperation Among Think Tanks of BRICS Countries’ was the final theme of the symposium. The discussions delved into ways to deepen BRICS interactions and the need to convene international seminars on areas of bilateral and multilateral areas interests. There was a strong emphasis on the need to establish a BRICS institutional framework at the governmental and non governmental level and to create working groups on select projects. It was also agreed to create a BRICS Think Tanks website for scholars to contribute to.

The interactions were free and friendly and there were no contentious issues. It was obvious that the delegates were trying to find the relevance, mandate and evolution of the Group.

One high level political interaction was organised for the delegates to meet Mr. Dai Bingguo, a State Councillor, where he praised the work of the delegates in coming up with new ideas. He also cautioned that the leaders may not have the same ideas. He spoke of “broadening” the Organisation, a concept not liked by the Russians.

Some divergences on issues like trade and currencies notwithstanding, there was a general feeling that BRICS is here to stay and contribute to a change in global governance. How this will be achieved is the question to which nobody seemed to have a clear answer. There were references to the need for an alternative model of development in which BRICS countries do not repeat the same mistakes committed by the developed world. There were also statements that BRICS should act as a bridge between the developing and the developed countries. But would the other developing countries (particularly potential aspirants to the Group like Indonesia, Turkey and Mexico) like BRICS to play this role?

One theme that came up constantly was the lack of intra-BRICS cooperation in comparison to the potential that exists. For example, BRICS contributes to about 20% of global GDP. Further, 60% of the global Foreign Exchange Reserves today are held by BRICS. But these are parked mainly in Western countries when BRICS themselves desperately need capital for development.

Apart from some general references to the need for reforms of global financial institutions and replacement of dollar by SDR as the global currency, no in-depth discussions took place on these issues. However, the increase in the voting shares of China, Brazil and India was referred to as a beginning of a change in the mind-set of the developed world. One theme that was very evident was the need to coordinate BRICS positions in G-20 so as to have a greater voice.

BRICS, In the News

China.org.cn reports on BRICS Think Tank meeting, 2011

April 15, 2011
Xinhua, China
Link to original website

Representatives from think tanks of the BRIC countries (Brazil, Russia, India and China) discussed ways to fight climate change at a seminar here Wednesday. The seminar, called BRIC Think-Tank Summit, gathered members of think tanks from the BRIC countries to examine the global economic situation and the role of BRIC countries in the post-crisis global transformation.

World countries need to take joint action to fight climate change, said Indian representative Samir Saran from the Observer Research Foundation. Chinese representative Wu Enyuan, with the Institute of Russian, Eastern European and Central Asian Studies, Chinese Academy of Social Sciences, said the developed countries had a bigger responsibility on carbon emission reduction as the current climate change is a result of some 150 years of industrialization process of the developed nations.

But he said the developing countries, including the BRIC nations, should take their fair share of responsibility as well, and adopt measures to fight global warming. “China has fulfilled its responsibility by taking practical actions in either energy conservation or environmental protection,” he said, adding that other BRIC countries have also committed themselves to carbon emission reduction.

Brazil’s representative Eduardo Viola said that implementing these measures is more important than holding discussions. Russian representative Nikolai Mikhailov said climate change unveiled the notion that human beings can treat nature as they want without caring about the consequences. Only a radical change in their attitude could make a difference, he said.

The two-day seminar was held on the eve of the second BRIC summit scheduled for Friday in the Brazilian capital.

BRICS, In the News

Chinese Crienglish.com reports on BRICS Think Tank meeting, 2011

March 26, 2o11
Link to original website

BRICS think-tanks call for closer economic ties

Think-tanks from five major developing economies are now calling for closer economic ties among the BRICS countries, just ahead of the group’s summit in Hainan, China next month. BRICS countries include China, Brazil, India, Russia and South Africa.
International relations expert Jin Canrong from China’s Renming University says, despite booming economies, the five countries still do not have enough say in global economic dialogues.

“The top agenda of the next summit is still the economy, and especially the top ten topics talked about at this year’s G20 summit in France. For instance, the fluctuating raw material prices, and the possibility of giving an index for economic imbalance – those are all important.” Samir Saran, senior researcher with India’s Observer Foundation, says the BRICS countries could find more shared interests economy-wise. “For the BRICS countries, there is still enough room to enhance their cooperation in energy, electricity, food security, agriculture and technology. Also, the five countries could learn from each other regarding eliminating poverty, improving healthcare and education.”

BRICS, In the News

Sri Lanka’s TOPS.lk covers BRIC discussion on climate change

April 16, 2010
Link to website

BRAZIL: Representatives from think tanks of the BRIC countries(Brazil, Russia, India and China) discussed ways to fight climate change at a seminar here Wednesday. The seminar, called BRIC Think-Tank Summit, gathered members of think tanks from the BRIC countries to examine the global economic situation and the role of BRIC countries in the post-crisis global transformation.

Russian representative Nikolai Mikhailov said climate change unveiled the notion that human beings can treat nature as they want without caring about the consequences.Only a radical change in their attitude could make a difference, he said.

The two-day seminar was held on the eve of the second BRIC summit scheduled for Friday in the Brazilian capital.

BRICS, In the News

Daily News covers BRIC meeting in Brasilia on climate change, 2010

April 16, 2010
Link to original website

BRAZIL: Representatives from think tanks of the BRIC countries (Brazil, Russia, India and China) discussed ways to fight climate change at a seminar here Wednesday. The seminar, called BRIC Think-Tank Summit, gathered members of think tanks from the BRIC countries to examine the global economic situation and the role of BRIC countries in the post-crisis global transformation.

Russian representative Nikolai Mikhailov said climate change unveiled the notion that human beings can treat nature as they want without caring about the consequences. Only a radical change in their attitude could make a difference, he said.

The two-day seminar was held on the eve of the second BRIC summit scheduled for Friday in the Brazilian capital.

Columns/Op-Eds, Water / Climate

Column in The Financial Express: Climate’s Holy Trinity, 2010

by Samir Saran
May 13, 2010
in: The Financial Express

Over the last decade, climate narratives have been shaping social, political and economic beliefs—resulting in climate ideologies spread not dissimilar to religion. Like most religions, these frameworks have their share of rigidities, with each having discovered the ‘chosen path’ that offers a righteous response and lacks reflexivity. Interestingly a ruling by a UK court in November 2009 drew parallels between an individual’s views on climate change to his religious and philosophical beliefs.

The challenge of arriving at a common understanding of climate change and a common response to it is, therefore, akin to discovering a common religion for humanity. If climate is a religion, its holy script is dominated by the description of the holy trinity of finance, technology and equity. Equity remains in the realm of the spiritual; and concrete proposals towards a world that shares prosperity are confined to classrooms and social scientists even as the economists and technologists work to carve the new world.

Nonetheless, responses from each nation or a grouping seek to address these three central features in their arguments. The EU, for instance, believes that the European Trading Scheme and a carbon price would curtail emissions and serve the purpose of equity by redistributing capital through flow of funds from the developed world to the emerging and developing economies. The flaw with this is that the redistribution of wealth is only among entities located in different geographies with complex ownerships that could put the IPL team structures to shame. Critics portray this as a transaction among elites and the cost of adaptation, poverty alleviation and other development challenges remain at the periphery. And this is where the conflict lies, in the belief system of the EU and the imagination of its populace that it is the liberal market framework that offers the most efficient mechanism for redistributing wealth, historical evidence notwithstanding. The framework for allotting emission allowances and the trading of these alongside external carbon credits would need serious overhaul even if they were to have a nominal impact. Perhaps the proposal to auction EUA post 2013 would also enable national governments in the EU to commit some of the proceeds towards the adaptation challenges, state of their economies permitting.

The emerging and developing economies, however, make the case for direct fund transfers into their own treasuries that have historically (in most cases) been shown as incompetent in delivering development and governance to the millions they seek to serve. Do they have capacities to make use of the large cash transfers they so seek? And would they be better served in incentivising regulated markets and evolving state-centric capitalist frameworks for the same purpose? The cause of equity would be served only if the emerging world is able to receive funds from the complex maze of overseas funding mechanism and then enhance internal efficiency of delivery arrangements.

Technology continues to vex the global debate on climate and perhaps is the real non-negotiable, if global agreements and accords that emerge from climate conventions and summits are the frame for analysis. Over the last two decades, the language in these international documents has remained ambiguous on technology and the only certainty is that equity as an argument is not compelling for ceding intellectual property for the developed world. Pronouncements from President Obama and policies and legislations in the UK and EU clearly position green technology and high-tech industries as the basis for re-industrialisation as well as economic revival. The lavish incentive packages for low carbon business and research and the sheer subordination of policy making to corporate interests in this sector demonstrate the desire of the OECD economies to lead the race to the top in this low carbon game. The odds would have truly been stacked in their favour but for the economic meltdown.

The institutes of higher education, research and development in the developed world continue to lend them a distinct edge. They also benefit from a steady stream of the brightest minds from Asia, Latin America and Africa, who after acquiring basic education assist in furthering the research in these institutes for want of similar professional opportunities at home. Thus, even in this post-colonial world, the West continues to benefit from the resource provisions of its former colonies. Thus large pool of human talent backed by unmatched funding assists these countries to incubate innovation and invention, the two pillars of the new economy.

Much of the developing world is still caught up in the semantics surrounding technology transfer. For its sake, it must resist the temptation of being lured into conditional (indirectly priced) technology handouts and post-its-prime technology transfers. It must also realise, as the Chinese have come to realise recently that intellectual property vis-à-vis climate is not a rigid defined product but is more about tacit human knowledge. The centrality of human resources needs to be over-emphasised here. In the last 5 years, Chinese efforts to attract overseas Chinese back to its industrial and research institutes have gained momentum. Through landmark programmes such as the ‘Thousand talents programme’ it is rightly pricing and attracting human intellect located overseas.

It is also determined to tap into the Chinese diasporas that are part of the research and technology industry. Their policy initiative ‘Chinese serving China’ seeks to reverse the traditional flow of knowledge to western shores. The results of these initiatives are bearing fruit and there are reports that tens of thousands of non-resident Chinese have returned home; the process no doubt aided by the financial crisis and shortage of research funding in the US and EU. But the key learning here is that the Chinese are pricing the human capital right and offering salaries far in excess of their business as usual salary structures. They, unlike India, have realised that human resource is at the core of the IPR chain and they are now unwilling to reduce talent and merit to a UGC prescribed salary handout that India seeks to attract and retain talent with. A recent management reports has cautioned that US hegemony in scientific innovation can no longer be taken for granted. China will be investing over half a trillion dollars on green technology research in the next decade and furthermore has committed to deploy 2.5% of their GDP annually by 2012 towards R&D in line with the OECD levels. As a part of the economic stimulus China deployed $221 bn towards the green economy as against $112 bn by the US. Though much of this was for rail transport and water infrastructure, significant efficiency innovations and applications were in the mix as well.

India is committing to increase its outlay for research and is looking to be at par with OECD standards in a decade. However, outlays alone would not help. The systems that feed into the research agenda would need to be overhauled as well. Both China and India would need to improve the quality and spread of education, health of the population, social indicators and infrastructure will all need to be best in class if the environment for innovation needs to be created. There is great equity in this endeavour. Else we can live the dictum that constraint incubates innovation and hope for the ‘Slumdog Millionaires’.

Please find here the link to the original page.