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Promoting Low-carbon Investment

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The Investment Advisory Series provides practical advice and case studies of best policy practice for attracting and benefiting from foreign direct investment (FDI), in line with national development strategies. The Series draws on the experiences gained in, and lessons learned through, UNCTAD’s capacity and institution building work in developing countries and countries with economies in transition. This Series deals with issues related to investment promotion and facilitation and to the work of investment promotion agencies (IPAs) and other institutions that promote FDI and provide information and services to investors. The publication is intended to be pragmatic, with a how-to focus, and includes toolkits and handbooks. The prime target audience for it is practitioners in the field of investment promotion and facilitation, mainly in IPAs.

U n i t e d n at i o n s C o n f e r e n C e o n t r a d e a n d d e v e l o p m e n t


Investment Advisory Series
Series A, number 7


PROMOTING LOW-CARBON
INVESTMENT


UNCTAD’s Investment Advisory Series


The Investment Advisory Series provides practical advice and case
studies of best policy practice for attracting and benefiting from
foreign direct investment (FDI), in line with national development
strategies. The series draws on the experiences gained in UNCTAD’s
capacity- and institution-building work in developing countries and
countries with economies in transition. The Investment Advisory
Series consists of Series A and Series B.


Series A deals with issues related to investment promotion and
facilitation and to the work of investment promotion agencies. The
publications are intended to be pragmatic, with a how-to focus. They
include toolkits and handbooks.


Series B focuses on case studies of best practices in policy and
strategic matters related to FDI and development arising from
existing and emerging challenges.


For more information please visit
http://www.unctad.org, e-mail ips@unctad.org


or contact James Zhan, Director, Division on Investment
and Enterprise at +41 (22) 917 57 97


UN
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UNITED NATIONS




United Nations Conference on Trade and Development



Investment Advisory Series
Series A, number 7








PROMOTING LOW-CARBON INVESTMENT



















United Nations


New York and Geneva, 2013











ii


Note

As the focal point in the United Nations system for


investment, and building on more than three-and-a-half decades of
experience in this area, UNCTAD, through the Division on
Investment and Enterprise (DIAE), promotes understanding of key
issues related to foreign direct investment (FDI) and enterprise
development. DIAE also assists developing countries in enhancing
their productive capacities and international competitiveness
through the integrated treatment of investment and enterprise
development.


The designations employed and the presentation of the
material do not imply the expression of any opinion on the part of
the United Nations concerning the legal status of any country,
territory, city or area, or of authorities or concerning the
delimitation of its frontiers or boundaries. In addition, the
designations of country groups are intended solely for statistical or
analytical convenience and do not necessarily express a judgement
about the stage of development reached by a particular country or
area in the development process.


Material in this publication may be freely quoted or
reprinted, but acknowledgement is requested, together with a copy
of the publication containing the quotation or reprint to be sent to:


Chief, Investment Promotion Section
Division on Investment and Enterprise
United Nations Conference on Trade and Development
Palais des Nations, Room E-10080
CH-1211 Geneva 10, Switzerland
Fax: (41 22) 917 01 97
E-mail: ips@unctad.org


Publications are available on the website at http://www.unctad.org.
This publication has not been formally edited.





UNCTAD/DIAE/PCB/2013/2
ISSN 1995-6088


United Nations Publication




Promoting Low-Carbon Investment






iii



Preface





The Investment Advisory Series provides practical advice
and case studies of best policy practice for attracting and benefiting
from foreign direct investment (FDI), in line with national
development strategies. The Series draws on the experiences gained
in, and lessons learned through, UNCTAD’s capacity- and
institution-building work in developing countries and countries with
economies in transition.


Series A deals with issues related to investment promotion
and facilitation and to the work of investment promotion agencies
(IPAs) and other institutions that promote FDI and provide
information and services to investors. The publications are intended
to be pragmatic, with a how-to focus, and include toolkits and
handbooks. The prime target audience for Series A is practitioners
in the field of investment promotion and facilitation, mainly in
IPAs.


Series B focuses on case studies of best practices in policy
and strategic matters related to FDI and development arising from
existing and emerging challenges. The primary target audience for
Series B is policymakers in the field of investment. Other target
audiences include civil society, the private sector and international
organizations.



The Investment Advisory Series is prepared by a group of


UNCTAD staff and consultants under the guidance of James Zhan.














iv


This guide was prepared by a team led by Paul Wessendorp
and comprising Carlos Griffin and Andreas Wigren. Contributions
came from Richard Bolwijn, Alexandre de Crombrugghe, Albert
Kao, Françoise Lemagnen, Celia Ortega Sotes, Yongfu Ouyang and
UNCTAD consultant Jan Smit. The guide benefited from comments
and suggestions from Lejia Melanie Gideon, Deputy Executive
Director, Belize Trade and Investment Development Service
(Beltraide), Ralph Krüger, Chief Research Economist, African
Development Bank, Magnus Runnbeck, Senior Analyst, CEO
Office, The Swedish Trade and Invest Council, and Roel Spee,
Global Leader, Global Location Strategies, IBM Global Business
Services. It was desktop published by Teresita Ventura.


The publication was made possible by donor contributions
to UNCTAD’s technical cooperation programme on investment
promotion.



















Promoting Low-Carbon Investment






v


Contents

Abbreviations ......................................................................... vii
Executive summary ................................................................ ix
Introduction ............................................................................. 1

1. Seizing the low-carbon opportunity ….............................. 5

1.1 The low-carbon opportunity .............................................. 5
1.2 Determinants of low-carbon investments …. .................... 10

2. Developing a low-carbon investment promotion strategy ...19


2.1 Components of a low-carbon investment promotion
strategy ........................................................................ 19


2.2 Understanding sectors and practices which make up
low-carbon investment ................................................ 21


2.3 Identifying target subsectors ........................................... 25
2.4 Understanding value chains in high-potential


subsectors .................................................................... 28
2.5 Assessing the presence of success factors in an IPA’s


location ........................................................................ 31

3. Attracting low-carbon investment and the role of


partnerships ...................................................................... 39


3.1 Jumpstarting promotion: Pernambuco, Brazil ............. 40
3.2 Improving location competitiveness: Invest Hong


Kong, China ................................................................. 42
3.3 Cluster expansion: Copenhagen Capacity, Denmark ... 45
3.4 Summary: Best practices in partnering ....................... 48



4. Conclusions ........................................................................ 51
References ....................................................................................... 55


UNCTAD publications of TNCs and FDI ...................................... 57











vi


Boxes

1. Creating a market for low-carbon FDI: Feed-in tariffs .............. 12
2. Random Depreciation of Environmental Investment in the


Netherlands ................................................................................. 13
3. In search of a lighter carbon footprint: Facebook’s data centre in


cool and green Sweden ............................................................... 16
4. Promoting green FDI: UNCTAD’s business linkages


programme in Zambia ................................................................ 24
5. Low-carbon zones for the promotion of low-carbon investment


and greening of industries .......................................................... 32


Tables

1. Types of low-carbon investment .................................................. 3
2. Potential TNC involvement in sectors of emission ................... 22
3. Top 10 investors in alternative/renewable electricity generation,


2003–2012 .................................................................................. 37
4. Promotion of low-carbon investment: A selection of policy tools


and IPA practices ........................................................................ 52


Figures


1. FDI in selected low-carbon business areas, by group of host
countries ....................................................................................... 6


2. Emphasis of IPAs on attracting low-carbon FDI in the short and
medium term ................................................................................. 7


3. Barriers to efforts to attract low-carbon FDI ................................ 9
4. Share of renewable energy in total global primary energy


supply, 2008 ............................................................................... 27
5. Solar panel manufacturing process based on silicon .................. 29




Promoting Low-Carbon Investment






vii



Abbreviations




CCC Copenhagen Cleantech Cluster
CCS Complex Cleantech Solutions
CopCap Copenhagen Capacity
FDI foreign direct investment
GHG greenhouse gas
ICN International Cleantech Network
IEA International Energy Agency
IPA investment promotion agency
IPCC Intergovernmental Panel on Climate Change
SEZ special economic zone
SMEs small and medium-sized enterprises
TNC transnational corporation
ZDA Zambia Development Agency






















Promoting Low-Carbon Investment






ix


Executive Summary


Investment promotion agencies (IPAs) in many developing
and developed countries have made low-carbon investment a key
component of their promotion programmes. Due to the fast growing
opportunities in this business, with accumulated foreign direct
investment (FDI) of nearly half a trillion dollars between 2003 and
2012, and the benefits that it can bring in reaching green objectives,
attaining technologies, creating jobs and attracting capital,
competition for low-carbon investment is fierce.


Investment opportunities can be found in the introduction of
low-carbon processes by transnational corporations (TNCs), in the
generation of clean energy and in the production of low-carbon
products and services. In fact, all business activities in traditional
and new industries can potentially be included, given the wide-
ranging possibilities of low-carbon business practices and
technologies.


Although it is possible to envisage – as this guide does –
investment promotion programmes specifically targeted at low-
carbon investments, the attraction of such investment does not
depend solely on IPAs. Any strategy to develop and promote a
location’s offer for low-carbon investment will comprise broader
policies on energy, industry and the environment. A conducive
policy framework that regulates the entry, treatment and protection
of foreign investment is another fundamental component of such a
strategy and can be further improved to encourage low-carbon FDI,
for instance in strategic sectors such as energy, which some
countries have opened up selectively for FDI in renewable energy.



Wider policies that are mostly beyond the direct remit of


IPAs can also be used to build new business opportunities and
create a market for low-carbon products, like solar panels or electric
cars. These policies often involve incentives and subsidies which




Executive Summary






x


could be costly and should be weighed against public expenditures
in other priority areas, especially in developing countries. To
maximize the benefit of low-carbon FDI to the local business
community, policies could also help to diffuse low-carbon
technologies by fostering the absorptive capacities of domestic
firms and creating an environment that induces the development of
linkages, such as clean technology clusters.



The role of IPAs in attracting low-carbon investment,


therefore, includes a strong policy advocacy component. In many
countries, IPAs are well suited to take a lead role in low-carbon
investment promotion programmes as business facilitators and
partners with a reactive and proactive role as policy advocates in
creating new low-carbon investment opportunities. Direct
promotional efforts should be selective and target subsectors with
potential. The assessment of subsectors should be done with respect
to investment policies and incentives, economic factors such as
production costs, supplier–client proximity and availability of
needed technologies and skills; also critical, however, is the
effectiveness of the IPA as a business facilitator.



What is highlighted in this guide is that partnerships and


networks have proven critical in many low-carbon investment
promotion strategies. Examples of such partnerships are given in
case studies from Brazil, China and Denmark. In the case of
Pernambuco, Brazil, the partnering strategy started with
cooperation between several State and federal institutions in an
attempt to enhance local economic development. In Hong Kong,
China, partnerships between city departments and authorities in
mainland China led to the creation of an innovation cluster
initiative and in Copenhagen, partnerships between Government,
industry and the academic world were the building blocks in the
promotion and development of a clean technology cluster.




Promoting Low-Carbon Investment






xi


Building a low-carbon economy is a long-term proposition in
which FDI can play an important role. Governments that have
recognized this role should embark on policies that accommodate
such investments and create the right business opportunities. IPAs
are a critical instrument in this journey, especially in the creation of
the necessary partnerships to advocate the right policies, enhance
the investment offer, improve a location’s image, target low-carbon
investors and provide the aftercare services that will develop a low-
carbon business community.


Key messages on the promotion of low-carbon investment


 Globally, low-carbon FDI is
substantial and occurs in the
introduction of low-carbon
processes in TNCs, the
generation of clean energy and
the production of low-carbon
products and services.


 FDI plays a key role in
building low-carbon
economies by bringing in
capital and green technology as
well as management,
organizational and marketing
skills.


 Economic factors are
important in attracting low-
carbon investments, but a
strategy that includes
implementation of a policy
framework with a low-carbon
perspective, market-creation
policies, measures to promote
technology transfer and a
targeted investment promotion
programme considerably
enhances a location’s offer.


 Low-carbon target sectors should
be carefully selected based on a
government’s greenhouse gas
(GHG) mitigation and
development objectives and solid
research of a location’s factor
advantages compared to key
competitors.


 Given the importance of special
policy tools, including incentives,
for the low-carbon sector, IPAs
should pay special attention to
their role as policy advocates and
investment facilitators to help
create the right opportunities for
FDI in the sector and awareness
among investors of the location’s
green offer.


 Due to the important role of
partnerships and clusters in the
development of a low-carbon
business community, IPAs should
dedicate considerable resources to
aftercare services for the creation
of business networks and linkages.







Introduction

Background



The fight against global climate change ranks high on the


international political agenda. The current debate has moved
beyond purely environmental issues and now extends to economic
development under environmental constraints. While TNCs are a
part of the problem of climate change, they are also part of the
solution to it, and public policies should encourage corporations to
make a more positive contribution. This requires, among other
measures, the incorporation of these policies and climate change-
related opportunities into investment promotion.



In the last half century, there has been increasing pressure


to protect and conserve the Earth and its resources for present and
future generations. The widest ranging international agreement
aimed at reducing GHGs emissions is the United Nations
Framework Convention on Climate Change (UNFCCC) of 1992.
The 1997 Kyoto Protocol, which operationalizes the Convention,
sets mandatory emission limits and commits industrialized
countries to curbing emissions. The Kyoto Protocol also established
flexible market-based mechanisms to assist the process. At the 2012
Rio+20 Conference, global leaders signed off on a plan to set global
sustainable development goals and other measures, including the
promotion of a green economy while reaffirming commitment to
ensuring the promotion of an environmentally sustainable future.


Today companies are also adopting a clearer stance on
sustainability and low-carbon issues and many provide annual
reporting on both their corporate social responsibility and
sustainability. Over 7,000 businesses have signed up to the United
Nations Global Compact1 pledging them to global citizenship in a
number of areas including environmental protection.





1 www.unglobalcompact.org.




Introduction






2


What is low-carbon foreign investment?

In this publication, low-carbon foreign investment is


defined as “the transfer of technologies, practices or products by
TNCs to host countries – through equity FDI and non-equity forms
of participation – such that their own and related operations, as well
as use of their products and services, generate significantly lower
GHG emissions than would otherwise prevail in the industry under
business-as-usual circumstances”.2



It is worth mentioning that following the method used in


UNCTAD’s World Investment Report 2010: Investing in a Low-
carbon Economy, this guide focuses on “low-carbon” issues, which
are in some cases different from related notions of “green” or
“sustainable”. Whereas “low-carbon” refers solely to a process or
product that emits fewer GHGs than traditional ones, the terms
“green” and “sustainable” are broader concepts that refer to
activities that take into account a much larger set of environmental
issues.3



For the purpose of this guide, we have divided low-carbon


investment into three broad categories: (a) investment in production
processes with a reduced GHG impact; (b) investment in clean
energy generation; and (c) investment in research and production
facilities to produce GHG reducing products and provide related
services. Table 1 provides some examples of investments in these
categories.






2 UNCTAD (2010). World Investment Report 2010: Investing in a Low-


carbon Economy, p. 103.
3 Ibid., p. 148.




Promoting Low-Carbon Investment






3


Source: UNCTAD.

Developing countries are confronted with two major


challenges in responding to climate change mitigation and moving
towards a low-carbon economy: first, mobilization of the necessary
finance and investment; and second, generation and dissemination
of the relevant technology. Both are areas in which foreign
investment can make valuable contributions. This vast potential of
international low-carbon investment has led to a rapidly growing
number of countries – both developing and developed – actively
promoting foreign investment in low-carbon activities. As more and
more countries enter into the global competition for such
investment projects, policymakers and investment promoters must


Table 1. Types of low-carbon investment


Types of low-carbon
investment Examples of investments


Investment in
production processes
with a reduced GHG
impact


 Implementation of energy-saving
processes


 Introduction of processes and equipment
that reduce GHG emissions


 Use of green construction techniques in
buildings


Investment in clean
energy generation


 Solar energy
 Windmill parks
 Hydropower generation
 Geothermal energy facilities


Investment in research
and production
facilities to
manufacture GHG
reducing products and
provide related
services


 Research in energy efficiency and
recycling


 Production of solar panels, windmills
 Production of energy efficient products


(electric cars, energy-efficient light
bulbs, etc.)


 Technology services
 Waste management services




Introduction






4


look for ways to place their locations on the “radar screen” of
investors.


For some countries, low-carbon FDI may come without a
promotional effort if business opportunities occur. However, most
countries need a coherent investment promotion strategy to attract
and benefit from low-carbon investment. Such a promotional
strategy will have to take place within the broader framework that
includes, among other things, a wider economic development
strategy, an appropriate legal and institutional setting, as well as
international collaboration and support. A wide range of
stakeholders will have to be involved in the work, and success will
depend on finding the right forms of collaboration for stakeholders.



Aim of this guide


This guide aims to help IPAs, especially those in
developing countries, to promote low-carbon foreign investment
with a view to maximizing the sustainable development impact on
their host economies. The focus of the publication is on practical
guidelines for identifying, targeting and servicing investors in line
with defined development objectives.



Structure of this guide


Chapter 1 of this guide provides an overview of low-carbon
investment opportunities, chapter 2 deals with the selection and
development of investment opportunities, while the focus of chapter
3 is on targeting and servicing low-carbon investors in particular
through partnership strategies. The conclusions of the guide are
presented in chapter 4.




1. Seizing the low-carbon opportunity

1.1 The low-carbon opportunity

The rise of low-carbon foreign investment



The efforts to fight climate change have already created a


wealth of new investment opportunities. It is, however, difficult to
estimate the overall level of low-carbon foreign investment because
investment data do not always indicate if the production processes
involved or outputs produced could be defined as low carbon.
When looking at greenfield investments in three major areas, i.e.,
alternative/renewable energy, recycling activities and
environmental technology manufacturing, it can be estimated that
FDI between 2003 and 2012 accumulated to close to half a trillion
dollars, with a steep annual increase between 2003 and 2008 and a
decline after 2008 due to the financial crisis (figure 1). Despite the
crisis, the $54 billion investments in 2012 were still nearly twice
the pre-crisis (2005–2007) average of $29 billion. Most projects
went to developed economies, but between 2003 and 2012, not less
than 44 per cent of investments were in developing and transition
economies. Jobs created through these greenfield foreign
investments are substantial; in the renewable energy sector alone
there were an estimated 210,000 new jobs between 2003 and 2012.4



Companies in areas of low-carbon business, such as clean


technology firms, are chasing increased international market
potential, while more traditional players may be reassessing their
existing investments from the low-carbon perspective. As global
awareness gathers pace, low-carbon investment across sectors
presents not only a business opportunity but also the chance to
improve corporate image through the application of more
sustainable business models.






4 IBM-Plant Location International, Global Investment Locations


Database (GILD).




Seizing the low-carbon opportunity






6


Figure 1. FDI in selected low-carbon business areas, by group
of host countries




Source: UNCTAD, based on information from the Financial Times Ltd, fDi
Markets (www.fDimarkets.com).
Note: Values refer to estimated amounts of capital investment.



A 2010 UNCTAD survey of 116 IPAs indicated that low-


carbon business areas would play an increasingly important role in
agencies’ work programmes in the medium term.5 This was true for
developed and especially developing countries, with respectively
around 20 per cent and 40 per cent of respondents expecting to
place high or very high emphasis on low-carbon investments in the
period 2013–2020 (figure 2). This is reflected in a 2013 survey of
websites of IPAs with 48 per cent of 164 national agencies
featuring information on green investments at the sectoral or
subsectoral level.6



5 UNCTAD (2011a).
6 UNCTAD IPA website survey, 2013.




Promoting Low-Carbon Investment






7


Figure 2. Emphasis of IPAs on attracting low-carbon FDI in the
short and medium term


(Percentage of respondents indicating high/very high emphasis)



Source: UNCTAD Survey of IPAs, 2010.



Where can low-carbon investment opportunities be found?


As indicated in table 1, TNCs can introduce low-carbon
processes, clean energy and low-carbon products and services.
Potentially, any sector or business activity can be suited for low-
carbon investment. Low-carbon investments in traditional sectors,
with a view to improving their energy, material or resource
efficiency, could have a significant impact on the carbon intensity
of production in developing countries.7 Moreover, existing FDI can
have a low-carbon element added, for example by obtaining ISO
14000 certifications8 or requiring existing projects to meet more
rigorous emission standards. Along its value chain or in its other
networks, a foreign investor can also require suppliers, industrial

7 UNCTAD (2010). World Investment Report 2010: Investing in a Low-


carbon Economy, p. 123.
8 International Organization for Standardization certifications addressing


aspects of environmental management.


0%


5%


10%


15%


20%


25%


30%


35%


40%


Developed countries Economies in transition


Short term 2013–2020


Developing countries




Seizing the low-carbon opportunity






8


customers or other partners to upgrade to low-carbon processes as
part of its objective to switch to lower-carbon inputs.



Separate from the benefits that come with low-carbon


investment, there are potentially a number of disadvantages that
should be weighed against these benefits. The advantages of low-
carbon FDI include the reduction or avoidance of GHG emissions
through the enhancement of energy, material and resource
efficiency in the host economy; the provision of needed finance and
investment for low-carbon projects; the improvement of the image
of a location that can create opportunities for diversification in
related low-carbon and other economic activities; and the
emergence of first mover advantages over competitors that results
in possible export opportunities. The possible disadvantages of low-
carbon FDI are the costs of incentive schemes for low-carbon
investment and the potential overdependence on TNC technologies,
goods and services.

Challenges in promoting low-carbon FDI



Many countries, including developing economies,


encounter difficulties in attracting low-carbon foreign investment.
General problems that may emerge can be grouped into two
categories: (a) legal/institutional and (b) socioeconomic/financial.



Legal and institutional difficulties include, above all, the


absence of supportive regulatory frameworks that would drive low-
carbon investments, notably the lack of sector-specific regulation
and incentives, insufficient legal protection (such as intellectual
property rights), lack of transparency and weak local non-
governmental organizations (NGOs) unable to advocate an
environmental agenda. As indicated in figure 3, the regulatory
framework and lack of incentives and institutional capacities rank
high among difficulties IPAs face in attracting low-carbon foreign
investment.




Promoting Low-Carbon Investment






9


Figure 3. Barriers to efforts to attract low-carbon FDI
(Percentage of respondents)


0% 5% 10% 15% 20%


Other


Market access


Infrastructure


Policy uncertainty


Investment costs


Market size


Lack of expertise and skills


Institutional capacity


Lack of incentives


Regulatory framework



Source: UNCTAD Survey of IPAs, 2010.



Socioeconomic and financial challenges include the lack of


skills, expertise or training in the host country. A low level of
technological development may hamper a location’s ability to
attract knowledge-intensive types of low-carbon investment, as may
the lack of providers of support services to low-carbon businesses
(e.g. legal, accounting and information technology services). The
insufficient size of the host market and the lack of adequate
infrastructure also constitute key economic challenges to attracting
investors in low-carbon business areas.



These challenges, which are reflected in the determinants of


low-carbon investments (section 1.2), can be addressed through an
investment promotion strategy that includes policies and support
measures for attracting low-carbon investments (chapter 2).




Seizing the low-carbon opportunity






10


1.2 Determinants of low-carbon investments


Locational determinants, or pull factors, are factors
specific to the host location that influence TNCs’ decisions on
where to set up their operations. Broadly speaking, these
determinants can be related to economic factors, the policy
framework and business facilitation, including investment
promotion. Economic factors are, broadly speaking, the same as for
foreign investment in general. Low-carbon investments can be
market-seeking; e.g. electric carmakers or energy-saving appliance
manufacturers may be motivated to invest abroad to access new or
expanding markets – in such cases market-creation policies for low-
carbon products and services can play a role in increasing demand.
Low-carbon investments can also be of the natural resource seeking
type, e.g. power producers may invest to access low-carbon energy
sources. They can be efficiency-seeking, e.g. windmill
manufacturing companies may move part of the production to a
different location to lower the cost of production. And they can be
strategic asset-seeking, e.g. clean technology companies may seek
to enter new markets to gain access to created assets such as low-
carbon technologies.

The policy framework


Governments, primarily those at the national level, set the
rules for the markets in which investors seek profits. Factors of
importance to FDI in general include economic, political and social
stability; good governance; and policies on entry, establishment,
treatment and protection of foreign companies.



Policy areas of specific importance to low-carbon


investment include environmental policy, industrial policy and
energy policy. If current market rules are failing to attract – or drive
– private investors to lower GHG emissions, there are a number of
measures governments can take to address these shortcomings.




Promoting Low-Carbon Investment






11


Implementing such measures would have an influence on domestic
as well as foreign sources of investment. Different types of
regulatory and fiscal measures that help create a market for low-
carbon investment are presented below. The role of IPAs in policy
advocacy can be important here. In any case, a specific mandate for
an IPA to actively promote low-carbon investment without the
broader framework policies in place is potentially
counterproductive.



Policymakers can help investors overcome entry barriers,


for example by requiring regulated, monopoly providers (such as
electricity grids) to provide access to and purchase power from
power suppliers that use low-carbon sources of energy on
financially attractive terms. One example of such a policy
mechanism is feed-in tariffs (box 1). Reducing or removing
standards that hold back implementation of low-carbon solutions
(such as building codes) is another example.



Policies could also be designed to encourage the use of


advanced, less polluting technologies. Examples of such policies
include imposing GHG emission limits or performance standards
on operations and products (such as vehicle emission standards);
and imposing taxes or other charges on GHG emissions or fossil
fuel use (such as a tax on coal use).















Seizing the low-carbon opportunity






12


Box 1. Creating a market for low-carbon FDI: Feed-in tariffs


According to an UNCTAD survey of IPAs, the most important
policy measures to attract low-carbon investment are those that help
create a market for renewable energy. One incentive that can make a
major contribution to attracting FDI in renewable energy is a feed-in
tariff. Under such a mechanism, eligible electricity generators are paid
a pre-defined price for the renewable electricity that they produce. This
provides investors in renewable energy with a reasonable return on
their investments.


The core elements of feed-in tariffs are:
 Defined, eligible technologies;
 Tariff pricing differentiated by technology;
 A standard offer (frequently expressed through a contract), for


a guaranteed payment for renewable electricity generation;
 Payments over a long time frame.


New or recently amended feed-in tariffs have been introduced
in many countries, for example Brazil, China, India, Japan, South
Africa, Thailand, Uganda and the United Kingdom of Great Britain
and Northern Ireland.



Source: UNCTAD.



Paying the innovator may also encourage low-carbon


investors. Creating tradable rights to reward investments in
reducing GHG emissions (such as a cap-and-trade regime)9 is one
way. Offering fiscal incentives for investments in low-carbon
methods (such as production tax credits for renewable energy), tax
incentives for the use of more environmentally friendly
technologies (box 2) and providing direct public support for lower-



9 A cap-and-trade regime places a limit on the amount of GHG


emissions allowed (the cap) and permits the possibility of trading these
allowances between firms internationally.




Promoting Low-Carbon Investment






13


carbon activities (such as funding for research and development)
are others.



Box 2. Random Depreciation of Environmental Investment in


the Netherlands


In 1991, the Netherlands introduced the Random Depreciation
of Environmental Investment (VAMIL) measure to promote the
dissemination and market the introduction of newly developed
environmental technologies by replacing environmentally less friendly
technologies with more benign ones. The tax facility offer companies
the opportunity to apply accelerated depreciation on environmentally
friendly equipment. If the equipment is operational and paid for, it
allows depreciation of the full purchase price in the year when the
equipment is acquired, which results in the reduction of operating
profit and tax payments. Accelerated depreciation is only applicable to
equipment that is specified on the Government’s “Environmental
Technologies List” of approved technologies, which is regularly
updated. In 2000, another support incentive was introduced, the
“Investment Allowance”, which allows a partial write-off of an
investment in environmental technology against tax. The
environmental technologies eligible and the level of deduction
applicable for each technology appear again on the “Environmental
Technologies List”.



An evaluation of the measures in 2007 concluded that the


response from the business community and banking sectors had been
above expectations and that the measures had encouraged the
introduction of innovation in the business sector, especially in small
and medium-sized enterprises (SMEs).

Sources: OECD (2007) and European Commission
(http://ec.europa.eu/environment/sme/cases/cases06_en.htm);
VROM (2007), Evaluatie MIA, VAMIL en Groen Beleggen 2000–2004
(http://www.agentschapnl.nl).




Seizing the low-carbon opportunity






14


Policymakers can also enact measures to fill information
gaps, for example by requiring disclosure of data on GHG
emissions from production operations or energy use by products;
supporting voluntary efforts to make such data available; and by
directly providing data helpful to potential investors (such as on
wind resources or investment incentives).



Another measure that the public sector can take to


encourage private low-carbon investment is through public
procurement of energy efficient products. This could have a wide-
reaching impact and act as a stimulus for technology inflows, joint
ventures and other FDI. It would also raise general awareness of the
importance of environmental matters. Specifications may also
include requirements to develop local supply chains.



Governments can also help drive low-carbon investment by


shifting public investments. The public sector tends to be
responsible for 10–25 per cent of the investment in new physical
assets and most of those investments are driven by local
development priorities, whether they are jobs, power, transport,
education, health or other public benefits. For developing countries
in particular, shifting funding to climate change mitigation has to
take social and development issues into account. The challenge is to
shift more public investment into low-carbon, more climate-proof
measures without sacrificing other development priorities.
Integrating climate change adaptation and mitigation considerations
into national planning (such as considering investments in clean
technology or energy planning, or the costs associated with climate
change impacts on new infrastructure, such as bridges or roads) is
part of the solution.







Promoting Low-Carbon Investment






15


Business facilitation


Despite the fact that 55 per cent of the respondents in a
recent UNCTAD survey of IPAs indicated that they were targeting
low-carbon investors, and that almost 40 per cent pointed to some
cooperation with other government agencies in this area, only 17
per cent of the IPAs responded that they had a supporting policy or
strategy document for low-carbon investment, either prepared by
the IPA itself or that referred to a broader national strategy. 10
Therefore, although it is a relatively new area for national
policymakers, adopting an explicit low-carbon development
strategy would be a recommended first step.



IPAs and other support agencies are important players in


attracting low-carbon investments, and promotional efforts need to
be articulated around the three functions of policy advocacy,
investor targeting and aftercare services. As such, IPAs may have to
refocus some of their practices.



Since promoting low-carbon investment requires specific


regulatory and policy measures, particular attention should be given
to policy advocacy. As the primary interface between TNCs and
Governments, IPAs can raise awareness on regulatory needs and
ensure that the national policy framework serves the purpose of
attracting low-carbon investment. Examples of key issues to be
considered are market-creation mechanisms, FDI entry and
treatment, and incentives for low-carbon investments.



Another important task of IPAs is the provision of detailed


and accurate information on industrial, energy and environmental
policies for the low-carbon sectors that they target and facilitation
of access to incentives related to GHG emissions. Invest Sweden’s
work in attracting Facebook’s first European data centre illustrates



10 UNCTAD (2011a), p. 8.




Seizing the low-carbon opportunity






16


how an IPA can be effective in preparing the business case,
targeting and facilitating an investment decision (box 3).





Box 3. In search of a lighter carbon footprint: Facebook’s data
centre in cool and green Sweden



In 2011, the American social networking site Facebook decided


to build its first data centre outside the United States of America, in the
northern Swedish town of Luleå, to handle all data processing from
Europe, the Middle East and Africa. The move will help Facebook to
better serve more than one billion users, in addition to lightening its
environmental footprint. This data centre will be the first to draw
power primarily from renewables and will have a 70 per cent reduction
in reliance on backup generators.



With Sweden being a global leader in green electricity,


especially hydropower, and with data centres consuming more than 1.5
per cent of total electricity usage worldwide, Invest Sweden, the
national Swedish IPA, decided to target data centres for locating in
Sweden. In 2009, the agency made contact with Facebook, and that
same year the online social network company invited a delegation of
Swedish experts and regional representatives to its headquarters.



Given the demand from its growing international presence,


Facebook was planning to expand outside the United States where it
has its own data centres and leased capacity in the States of California,
Oregon, North Carolina and Virginia. With the large electricity
demand of its data centres, Facebook was considering a site with
energy-saving systems and low-carbon power sources. Other
considerations were the presence of a skilled workforce and security
issues.


/…




Promoting Low-Carbon Investment






17



Box 3. In search of a lighter carbon footprint: Facebook’s data


centre in cool and green Sweden (concluded)


Invest Sweden put forward a number of site proposals to assist
Facebook in its decision-making process for a European data centre. In
the final phases, Facebook vetted Swedish candidate locations from a
list of pre-qualified sites, where Luleå and Östersund came out the
strongest. In the two-year site selection period, Invest Sweden
provided Facebook with continuous support, ranging from information
on possible data centre sites, laws and procedures, local taxes, pricing
and details of experts. The IPA helped organize site visits and meetings
with potential suppliers and specialists on the energy market and
connectivity. It also advised on contacts with Swedish companies and
institutions.



As a result, Facebook concluded that Luleå, located just 100 km


south of the Arctic Circle, offered the best package of resources,
including a suitable climate for environmental cooling, clean power
resources, available land, a talented regional workforce and a
supportive business and corporate environment.

Source: UNCTAD based on Invest Sweden.
Note: As of 1 January 2013, Invest Sweden is known as the Swedish Trade and
Invest Council.



Aftercare services should be designed to enhance the


diffusion of low-carbon processes and know-how. Agencies can
help build linkages between TNCs and local firms by looking at
complementarities in skills and technologies and where possible
should develop partnerships, as shown in chapter 3. Even
companies that do not have a low-carbon profile can connect with
low-carbon foreign investors.



Chapter 2 of this guide will focus on the work of IPAs


within the development of an investment promotion strategy.











2. Developing a low-carbon investment
promotion strategy



2.1 Components of a low-carbon investment promotion strategy


Promoting low-carbon investment requires an integrated
marketing approach that combines product development, incentives
and promotion within a broader framework that often includes
international collaboration and support, wider economic
development strategy and an appropriate legal and institutional
setting. UNCTAD identified four key components of a strategy to
attract low-carbon investment (World Investment Report 2010:
Investing in a Low-carbon Economy):


(a) Implement a conducive policy framework for low-carbon
investment. Among the key elements is the adoption of
regulations that facilitate the entry, treatment and protection of
foreign investment. Specific sector regulation should be
enacted with a low-carbon perspective (e.g. a policy objective
to attract FDI in renewable energy requires at least selective
opening of the sector to foreign investment). Facilitating
market access for TNCs and enlarging markets, notably
through regional integration, can also be an important element
of the policy framework as many internal markets are of
insufficient size to justify local production of goods.


(b) Enact market creation policies that foster the demand for new
low-carbon products and services. Such mechanisms,
including the provision of incentives for domestic industries to
shift to low-carbon production, have mainly been used in
developed economies. Although developing countries have
limited financial resources to set up such mechanisms, several
policy instruments can be used according to sectors that are
being prioritized. They include feed-in tariffs and renewable
portfolio standards (in the case of renewable energy), blending
mandates (in the case of biofuels), energy performance
standards (in the case of increased energy efficiency) and
public procurement.





Developing a low-carbon investment promotion strategy






20


(c) Develop measures to help the diffusion of technology such as
prioritizing and targeting foreign low-carbon investments
where technology dissemination to local firms is most
favourable; promote technology transfer through linkages with
domestic firms; and foster absorptive and adaptive capacities
in domestic firms so that they are able to further develop the
knowledge they have acquired. Special technology parks and
clusters that support the development of business linkages
could be an effective tool in this respect.


(d) Develop a promotion programme for low-carbon investment,
with a key role for national and subnational IPAs. An
important task of an IPA will be to develop and implement the
investment promotion programme, but IPAs can also make
significant contributions to the targeting and diffusion of low-
carbon technology, as well as to identifying policies that help
attract foreign investors and create new low-carbon investment
opportunities.



An IPA that decides to pursue low-carbon FDI should aim


to establish clear and measurable objectives against which to gauge
its performance. Its investment promotion programme and targets
will be dictated by a range of factors, including its government’s
objectives in the area of FDI and GHG emissions and the
investment opportunities that a location has to offer. Therefore, a
fundamental step is to assess the country’s offer and possible
targets in a step-by-step fashion, as set out in this chapter:


 Understanding the sectors and practices which make up low-
carbon investment


 Identifying target subsectors
 Understanding value chains in high-potential subsectors
 Assessing the presence of success factors in the IPA’s


location.




Promoting Low-Carbon Investment






21


2.2 Understanding sectors and practices which make up low-
carbon investment


The first step in promoting low-carbon investment is for an
IPA to understand exactly which sectors and practices impact the
low-carbon agenda, with reference to the country’s economic
objectives and emerging sectors. This will include its current
sectors and clusters and their potential in a future low-carbon
strategy.



This creates the IPA’s “long list” of sectors and subsectors


which may be worth targeting. The IPA needs additional research to
help it whittle down the list, similar to the process that an investor
would follow in the site selection process. Subsectors that qualify
for the short list will be those in which the IPA’s country is most
competitive and where it has the most to gain in terms of economic
benefit and development, as will be seen in section 2.5.


Table 2 presents a list of sectors of emission in which
TNCs can play a role in mitigating these emissions. An IPA should
spell out opportunity areas for any sector which it knows to be of
particular national priority. At this stage it is important to
differentiate between companies that have the potential to mitigate
emissions through their processes (e.g. in manufacturing, recycling
of waste, use of energy) and those that provide low-carbon products
or services (e.g. appliance manufacturers, environmental consulting
firms).



For example, a low-carbon energy focus might develop the


local production of renewable energy, thus targeting companies
supplying the chain and at the same time encouraging existing/new
investors to green their activity through energy-efficient practices
and the incorporation of renewables in their processes. This makes
the IPA’s task of analysing its competitive position a complex one,
since the target sectors and companies may have very different
profiles, even if grouped under a single heading or initiative.




Developing a low-carbon investment promotion strategy






22


Table 2. Potential TNC involvement in sectors of emission


Sectors of
emission Demand for low-carbon foreign investment


Low-carbon process foreign
investment (examples)


Low-carbon
product/services foreign
investment (examples)


Power Input switching: Use
renewable/low-carbon energy
sources
Input reducing: Increase
efficiency of existing facilities
Enhanced recycling: Capture
heat for other uses; carbon
capture and storage


- Power machinery and
infrastructure
manufacturers
- Energy services
companies
- Grid optimizing firms
- Engineering/
environmental consulting
firms


Industry Input switching: Source low-
carbon energy; more use of
biomass
Input reducing: Process
improvements; increase
efficiency of existing facilities
Enhanced recycling: Reduce or
eliminate flaring oil and gas
production and refining; carbon
capture and storage
Value chain – upstream:
Support to and influence on
suppliers


- Equipment manufacturers
- Engineering/
environmental consulting
firms


Transport Input switching: Use biofuels,
natural gas, electric
Input reducing: Hybrid cars;
make use of more efficient
vehicles, planes, etc.


- Transportation equipment
manufacturers (car, air,
rail, etc.)
- Systems providers (e.g.
mass transit railways)
- Engineering/
environmental consulting
firms




Promoting Low-Carbon Investment






23


Buildings Input switching: Source low-
carbon energy, generate own
solar energy
Input reducing: Make use of
more energy efficient
appliances, lighting etc.;
improve insulation of facilities
to reduce emissions due to
heating/cooling


- Appliance manufacturers
- Building materials
manufacturers
- Heating/cooling
manufacturers
- Lighting manufacturers
- Architecture services
- Energy services
companies


Waste
management


Enhanced recycling: Capture
and use of methane emissions


- Waste management
services firms
- Engineering/
environmental consulting
firms


Forestry Enhanced recycling: Use
biowaste
Value chain – upstream: Wood
and wood product
manufacturers supporting and
influencing their suppliers in the
sector


- Technology services
companies
- Environmental services
companies


Agriculture Input switching: Less use or
improved types of fertilizer
Enhanced recycling: Use of
biowaste
Value chain – upstream: Food
and beverage manufacturers,
food retailers (supermarkets)
supporting and influencing their
suppliers (farmers, plantations)
in the sector


- Seed companies
- Fertilizer producers
- Technology services



Source: World Investment Report 2010: Investing in a Low-carbon Economy.


An IPA considering promoting low-carbon investment
should start with a clear reason for that focus and explicit objectives
by which to measure its success. Is the IPA prioritizing low-carbon
investment because it believes the country to be competitive in
corresponding sectors? Does it want to ensure the country’s




Developing a low-carbon investment promotion strategy






24


participation in a sector of the future? Or is it that policymakers
want the IPA to help mitigate GHG emissions? The reason will
dictate the objectives and affect what types of investments are
sought. An example is the priority that the Government of Zambia
is giving to the greening of the construction industry which is the
fastest growing sector in the country. The IPA is playing a role in
attracting foreign investors that can provide green technologies and
green solutions and in creating business linkages with local
companies (box 4).



Box 4. Promoting green FDI: UNCTAD’s business linkages


programme in Zambia


Driven largely by its burgeoning mining sector, Zambia has
seen a boom in infrastructural investment in road and building
construction. Contributing already 21 per cent to gross domestic
product (2010), the construction sector is rapidly attracting foreign
investors, including South–South FDI from countries such as China,
Malaysia and South Africa.


Demand is growing strongly, in particular, from Zambia’s
emerging middle-income sector, with UN-Habitat estimating a need
for 1.3 million additional housing units by 2030, attracting developers
who are looking to adapt existing affordable housing models to the
Zambian market.


Yet concerns have also emerged regarding the environmental
impact of Zambia’s construction boom, particularly with regard to the
country’s domestic small and medium-sized sub-contractors, which
often continue to rely on outdated and inefficient building materials
and methods, affecting their environmental performance and locking
them into low value added activities. Recognizing this challenge, the
Government of Zambia, with support from the United Nations, has
engaged in a multi-year (2013–2017) initiative to promote the creation
of “green jobs” and sustainability in the Zambian construction
industry.


/…




Promoting Low-Carbon Investment






25


Box 4. Promoting green FDI: UNCTAD’s business linkages
programme in Zambia (concluded)



Under the programme, UNCTAD is working with the Zambia


Development Agency (ZDA) to implement a targeted business
linkages programme to enable Zambian contractors to acquire state-of-
the-art sustainable construction know-how. The cornerstone of the
programme is the attraction of international companies that can
provide green technologies and solutions and the promotion of public–
private sector partnerships with these technology leaders in areas such
as the construction of energy-efficient buildings, retrofitting and the
use of low-carbon building materials.


Leading international real estate developers now routinely
emphasize the business case for sustainable and low-carbon
construction methods and materials with regard to the often significant
cost savings for owning, servicing and maintaining such an investment
over the building’s total life cycle. Accordingly, promotion activities
by ZDA and UNCTAD include domestic awareness-raising as an
important element to stimulate widespread uptake in the Zambian
market.
Source: UNCTAD.



The different TNC activities that reduce emissions in


various economic sectors, as mentioned in table 2, fall within one of
the three main types of low-carbon investment that were
distinguished in table 1. Examples that follow in this guide cover
investment in each of these broad categories, but the focus will be
on investment in research or production facilities to produce GHG-
reducing products and related services.



2.3 Identifying target subsectors


Equipped with an understanding of the low-carbon
industry, an IPA should next determine which subsectors have the
greatest potential impact on investment inflows and GHG




Developing a low-carbon investment promotion strategy






26


emissions. To do this, it may refine its assessment according to
three key characteristics: (a) attractiveness of the subsector in terms
of size and growth; (b) suitability of the subsector for the location;
and (c) potential for GHG mitigation. A large and growing industry
is most attractive in terms of investment potential, as it represents a
big opportunity now and a larger one in the future. A location
should also provide factor advantages through natural resources,
created assets or other characteristics. Projections should also be
made on the GHG mitigation potential.



For example, an IPA considering renewable energy


generation should review available data sources. Figures from the
Intergovernmental Panel on Climate Change (IPCC) show that
renewable sources currently meet only 12.9 per cent of global
energy supply (figure 4), but in the context of rising global energy
demand and the drive to reduce dependency on fossil fuels,
renewable energy is a relatively small but growing sector. Low-
carbon energy production was worth $422 billion in 2009.11



In its World Energy Outlook 2012, the International Energy


Agency (IEA) predicts a steady increase in hydropower and
expansion of wind and solar power over the next 20 years. IEA
forecasts that by 2035 renewables will account for almost one-third
of total electricity output (from 19 per cent in 2009).12 With a share
of 26 per cent, energy supply is also the largest contributor to global
anthropogenic GHG emissions, reinforcing the rationale for this
sector.13






11 HSBC Global Research (2010), p. 3.
12 International Energy Agency (2012). World Energy Outlook 2012.
13 IPCC (2007), p. 104.




Promoting Low-Carbon Investment






27


Figure 4. Share of renewable energy in total global primary
energy supply, 200814





Source: IPCC (2011). Special Report on Renewable Energy Sources and Climate
Change Mitigation.


Clearly, energy will constitute one of the primary areas for
IPAs pursuing a low-carbon FDI strategy. Indeed this is borne out
by UNCTAD research showing that in 2010 the energy sector was
targeted by one-third of IPAs that attract low-carbon FDI, making it
their main target for low-carbon investment.15 However, it remains
important for IPAs to validate this within the national framework,
as indicated previously, and be aware of disqualifying weaknesses,
such as the lack of a suitable regulatory framework. Government
financial support has also played an important role in attracting FDI
in renewables, although there are trends showing that companies
are seeking to become more financially independent of subsidies.



The methodology used to identify sector groups can be


applied to subsectors, thus determining those that best fit an IPA’s

14 Bioenergy is energy generated from biomass, e.g., wood, energy crops


and organic wastes and residues
(http://www.fao.org/energy/bioenergy/en/).


15 UNCTAD IPA survey on investing in low-carbon FDI (2010).




Developing a low-carbon investment promotion strategy






28


objectives and its locational profile and taking into consideration
the value, projected growth and potential for GHG mitigation of
each segment. Operations in renewable subsectors, such as wind,
solar or geothermal energy, can be divided into production, research
and development, maintenance, logistics, sales and headquarter
functions. One can also distinguish different company types within
each subsector, from power plant manufacturers to component
manufacturers, power generation plants and supply and repair
companies.



A location’s natural resource is an important factor in


narrowing potential subsectors, but not the sole one. A sunny
location is more likely to move towards solar, yet Germany, with its
modest sunshine levels, has become one of the world’s top solar
installers due to its long-term vision and associated policies. Other
indicators could be gathered to further help determine potential
subsectors, including data on technical advancements, international
mobility trends and skill demands by subsectors. This phase of the
research process culminates in a list of subsectors with the greatest
potential for low-carbon FDI. An IPA can then proceed to further
investigate the chosen subsectors.

2.4 Understanding value chains in high-potential subsectors


An IPA’s long list of subsectors is based on a clear
understanding of the national framework in which a low-carbon
FDI promotion strategy can operate, including the sectors matching
the country’s objectives and profile, and the subsectors that
constitute the best growth and development potential. The next
stage, involving the analysis of the value chains of selected
subsectors, can become highly technical and the IPA may require
support from other government departments and specialist partners
or external providers.




Promoting Low-Carbon Investment






29


This next stage helps determine the investment promotion
strategy, improve in-house technical knowledge, provide data for
marketing materials and ensure the effectiveness of the marketing
message. The IPA will develop an understanding of markets,
production processes, operating costs, suppliers, major constraints,
major competitors, dominant trends and key location drivers. To
illustrate this, the example used is of the photovoltaic value chain
and the differences in investment characteristics and location
requirements in each step in this value chain (figure 5).


It is of interest that companies run stand-alone operations
for each step in this value chain, but also integrated operations in
which two or more components of the supply chain are co-located.
This provides multiple opportunities for IPAs to assess whether
their location offers an attractive proposition for a stand-alone
component or integrated operations.


Figure 5. Solar panel manufacturing process based on silicon














/…



Profile


Capital intensive
Energy intensive
Space consuming
Long construction


Labor intensive
Market sensitive


Investment
Very high


1-1,5
billion dollars


High
500-750


million dollars


High
500-750


million dollars


Moderate
200-300


million dollars


Jobs 200-300 500-600 1400-1600 1800-2000


Implementation 36 months 24 months 18 months 15 months


POLYSILICON WAFER CELL PANEL




Developing a low-carbon investment promotion strategy






30


Figure 5. Solar panel manufacturing process based on silicon
(concluded)



Critical location factors or “must haves”














Source: IBM-Plant Location International, based on input from solar energy
companies.


IPAs should therefore address the question of their
competitive advantage in one or more links of the value chain.
Certain answers to these questions will be obvious, such as the fact
that assembly of solar panels usually occurs near the market given
the prohibitive costs of transporting components. For this particular
industry, activities closer to the end product are more mobile and
easier to target, since investments in the beginning of the value
chain are large and subject to specific local conditions which have
led to a concentration of these operations in only a few countries.



Once an IPA has conducted this analysis, it will be in a


position to eliminate subsectors from its list, if appropriate. The
next step is to investigate the country’s ability to provide the
success factors for each subsector.


Utilities


Power-water-heat
Reliability & cost


Power reliability
Water discharge


Power reliability
Water discharge


Human
Resources


Skills availability Skills availability Skills availability &
cost


Skills availability &
cost


Logistics
Access to raw
materials


Access to market


POLYSILICON WAFER CELL PANEL




Promoting Low-Carbon Investment






31


2.5 Assessing the presence of success factors in an IPA’s
location


Armed with a comprehensive understanding of potential
target subsectors, an IPA should revisit its offer and ask what its
location can do to meet subsector requirements. These are the
determinants outlined in chapter 1, i.e. policy framework, economic
factors and business facilitation. The importance of these factors to
investors will vary by subsector and for the reasons described
below. An in-depth analysis of a location’s offer by subsector will
also add important content to the materials for investor targeting
and promotion.


Many low-carbon sectors are relatively new and may not be
covered explicitly by existing policies, laws and regulations.
Measures to encourage low-carbon investment as outlined in
section 1.2 may be lacking or inadequate. This needs to be reviewed
for each target subsector.


In addition to the policy framework and legal protections,
many competitive investment locations provide active support to
individual companies in low-carbon sectors in the form of tax
breaks, grants, low-interest loans and loan guarantees. Low-carbon
special economic zones (SEZs) have also been used successfully as
a tool to implement special regulatory regimes with incentives that
are not available outside the zones for the promotion of low-carbon
investment or for the greening of existing industries (box 5). A
concise explanation of the package of support should be prepared
not only for informational purposes, but also to support efforts to
brand a location as a forward-looking green location, which can be
important for jump-starting the industry.






Developing a low-carbon investment promotion strategy






32


Box 5. Low-carbon zones for the promotion of low-carbon
investment and greening of industries



In many developing countries, industrial parks or SEZs have


played a central role in fostering industrial development, but have also
been major contributors of GHG emissions. This means that SEZs can
be platforms to systematically reduce GHG emissions in industrial
sectors as well as to attract companies producing low-carbon goods
and services and to promote energy-efficient solutions within the
zones. Low-carbon SEZs that are set up for this purpose can be defined
as industrial zones which aim at lowering the carbon footprint within
the zones in a consistent, cost-effective way with eco-friendly policy
frameworks in place.


Some industrial parks have evolved into eco-industrial parks,
driven by tenant-identified opportunities to find cost-saving and
income-generating uses for their waste. For example, the industrial
park at Kalundborg, Denmark, developed a complex web of bilateral
exchanges of waste energy and materials between its tenants and
nearby entities based on the principle that “one’s company’s waste is
another company’s wealth”. These waste products include steam,
heated salt water, sulfur, fly ash, gypsum, sludge, yeast and fish by-
products. This has resulted in less pollution in air, water and land,
conserved water and other resources and led to substantial savings to
participants. Recognizing the environmental as well as economic
benefits of such eco-friendly zones, many developing countries such as
Bangladesh, China, India, the Republic of Korea and the United Arab
Emirates are moving fast to adopt low-carbon SEZ concepts and
practices. For instance, Governments can take the initiative, like in the
Republic of Korea, where the Government in 2005 started a pilot
project for the greening of 915 industrial parks, aiming at transforming
them into eco-industrial parks. The project includes inter-company
collaboration based on industrial symbiosis, shared services and
facilities, as well as the exchange of material, energy, water and waste
between companies.


/…




Promoting Low-Carbon Investment






33


Box 5. Low-carbon zones for the promotion of low-carbon
investment and greening of industries (concluded)

To scale up this approach, the International Finance


Corporation (IFC) launched in 2011 a low-carbon zone project in the
Chittagong Export Processing Zone of Bangladesh, with support from
the European Union, the Republic of Korea and the United Kingdom.
Through the development of a low-carbon zone road map and
voluntary low-carbon zone guidelines, the project identified promising
mitigation opportunities in the zone, which companies could take on in
commercially viable ways. Some of the “low-hanging” mitigation
opportunities were materialized through energy efficiency measures
such as waste-heat recovery which helped the greening of existing
industries.



Source: International Finance Corporation, World Bank Group.


An IPA will consider economic factors in relation to the
subsectors identified, since locational determinants and key drivers
may vary by sector, company and activity type. Companies driven
by market opportunity are likely to locate in or near their strategic
markets. Others may favour proximity to suppliers, depending on
their product or service, and many suppliers will follow large, client
TNCs. It is to be noted that in the newer low-carbon sectors, large
market leaders of this type are still emerging.


For a manufacturer of energy-efficient products used in
construction, lighting and HVAC (heating, ventilation and air
conditioning), the public sector market can be especially important.
Consumer markets for these products are still relatively small,
partly because of price competitiveness issues. However, a public
procurement policy that favours energy-efficient products may
jump-start a market and provides at the same time energy savings
and GHG emission reductions. Such a policy can also introduce
consumers to innovative products through public places, while
providing firms with the production orders needed to achieve




Developing a low-carbon investment promotion strategy






34


economies of scale and consequent price competitiveness in
consumer markets. In South Africa, for instance, national energy
savings policies have led to a joint venture between Philips (the
Netherlands), the Central Energy Fund (South Africa) and Karebo
Systems (South Africa) which opened a new plant in Lesotho in
2009 to produce energy-saving light bulbs. A large part of the
plant’s output is now sold to South Africa’s power utility Eskom.16



The cost of electricity is a key consideration for energy-


intensive production. Transport costs may be decisive for
companies importing heavy components. Rare earth metals, many
of which make low-carbon technologies possible, may be critical
for others. For solar energy production, the cost and availability of
land close to transmission lines are factors that will influence an
investor’s decision. For the majority of companies, particularly
high-technology firms, finding the right skills amongst technicians
and engineers will be essential to operations such as maintenance
and research and development activity. For a wider perspective on
skills and green jobs, see research by the International Labour
Organization (ILO).17


An IPA wishing to methodically assess its ability to
compete in terms of subsector-specific requirements may produce a
competitiveness worksheet that includes success factors by
subsector, such as “cheap energy”, “proximity to suppliers” or
“availability of specialized technicians”. Beside each factor it



16 UNCTAD, based on “Philips to build CFL plant in Lesotho”,


SouthAfrica.info, 28 March 2008, available at
www.southafrica.info/africa/cfli-280308.htm and “Lesotho plant
supplies first million CFLs to Eskom”, Engineering News, 10 May
2010, available at http://www.engineeringnews.co.za/article/lesotho-jv-
supplies-first-million-cfls-to-eskom-2010-05-10.


17 International Labour Organization (2011). Skills for Green Jobs: A
Global View.





Promoting Low-Carbon Investment






35


should list what its location has to offer, doing its best to quantify
that offering. In this way, the IPA begins to collect the ingredients
for a compelling business case for its location and the basis for
objective comparison against its competitors.


A detailed review of the business facilitation requirements
for low-carbon FDI, by subsector, including what the location
currently offers or needs to offer, is important in assessing the
success factors in the IPA’s country or region. With increased
global competition from IPAs, business facilitation, ranging from
network introductions to aftercare services, is an important success
factor in attracting low-carbon investors, given the important links
between the policy framework, incentives and the potential of the
local market. Strong business support and facilitation will add value
to investors in navigating the often complex and technical
environment of low-carbon business.


At each stage of the process of identifying opportunities
and building a business case, an IPA’s knowledge of subsectors
deepens and it becomes clear where a location can be most
competitive, in line with overall national GHG and FDI objectives.
Ideally, an IPA should limit its list of potential subsectors for
targeting to only a few industries.

Comparing the country to its key competitors


Having assessed its position and offer in target subsectors, it
is essential for an IPA to benchmark its location against regions and
countries that could compete for the same investments. Companies
will consider a range of locations prior to their final decision. In
cases of globally mobile projects, a company’s long list may
include locations in different regions of the world.


An analysis of identified subsectors in competing locations
could provide insight into the IPA offer and strategies of
competitors as well as their partner networks and clusters. Although




Developing a low-carbon investment promotion strategy






36


this research may entail challenges, data should be available
through sector-specific sources, official government publications
and third-party reports. An IPA could engage a consultant or market
research firm to benchmark its location against those of
competitors, just as an investor might. IPAs should also follow
investment trends in the industry. In the renewable energy sector,
for instance, companies such as Enel from Italy now focus more on
emerging economies such as Brazil, Chile and Mexico and less on
their traditional European markets.18


Proximity to markets is one of the criteria for cross-country
comparison. Another is factor costs, which is more challenging to
determine. The costs and availability of land and a particular
medium-technology skill, for example, are not easily compared
across countries. Comparing competitive advantages of locations
across countries can start from an analysis of the location of market
leaders in each subsector, since potential investors will likely first
turn to locations where other companies have already demonstrated
that they can profitably operate and have stimulated the growth of
support industries. Table 3 provides a listing of market leaders in
alternative and renewable electricity generation for the period
2003–2012.


As can be seen in the final step to building a business case
for low-carbon investment, the process of location benchmarking
generates important data about other locations and reveals new
factors about an IPA’s country, especially when performed from an
investor’s perspective. It is important to note that competitors can
also offer opportunities, such as partnerships with other IPAs in the
same country or across national boundaries. It has also been
established that clusters are particularly effective in promoting low-
carbon projects. Developing networks and partnerships or being a
member of a larger cluster can make an important contribution to

18 International Herald Tribune (2013). Clean energy learns how to


compete. 16 May 2013.




Promoting Low-Carbon Investment






37


the business facilitation and investment promotion process, as shall
be seen in chapter 3.

Table 3. Top 10 investors* in alternative/renewable electricity


generation, 2003–2012
(Number of greenfield projects)



TNC name World Developed economies


Developing
economies


Transition
economies


Iberdrola (Spain) 47 39 8 -


Electricite de France (EDF) 39 37 2 -


Enel (Italy) 37 30 7 -


Acciona (Spain) 27 18 8 1


E.On (Germany) 27 27 - -


RWE (Germany) 27 25 1 1


GDF SUEZ (Gaz de France) 22 14 8 -


Energias de Portugal (EDP) 20 18 2 -
Tokyo Electric Power (Tepco)
(Japan) 15 13 2 -
MEMC Electronic Materials
(United States) 14 7 7 -


Source: UNCTAD, based on data from the Financial Times (fDiIntelligence
database).
* Greenfield projects only.








3. Attracting low-carbon investment and the role
of partnerships



Chapter 2 laid out the components of an investment


promotion strategy and the process for developing the sector
intelligence and location knowledge needed on the most
competitive low-carbon subsectors. Once the opportunity areas are
determined and an investment promotion strategy is developed,
promoting low-carbon FDI is applied as in other sectors, in areas
such as location-branding, investor-targeting, aftercare or policy
advocacy. Nevertheless, as pointed out earlier, policy advocacy and
aftercare in the low-carbon sector may be even more important due
to the considerable role of special instruments and incentives and
the creation of networks in this sector.



Promoting investment in green technologies or greening


more traditional sectors, like agriculture and manufacturing, will
require the same systematic approach used by an IPA in other
priority sectors. However, across the board IPAs have realized that
partnerships are key to amplifying the effectiveness of traditional
promotion techniques in cutting-edge, low-carbon sectors.
Partnerships extend widely to include many types of networks and
organizations that impact the IPA investment promotion effort,
ranging from local to international, public to private and also
developing technology clusters between universities, businesses and
governments.


Although there is a fair number of big energy and utility
companies operating in the low-carbon sector, many enterprises are
still in their infancy with quality information on competitors and
companies in the supply chain hard to come by. This makes
partnerships with local firms, existing investors and industry
experts an invaluable source of investment leads and a confidence-
enhancing mechanism. The sections below offer a close look at the
experiences of three IPAs with different operating environments
and levels of institutional development that have set themselves the
target of attracting green FDI and used partnerships effectively for
investment promotion.




Attracting low-carbon investment and the role of partnerships






40


3.1 Jumpstarting promotion: Pernambuco, Brazil19


In September 2008, IMPSA, an Argentine manufacturer of
renewable energy equipment, established a wind generator
manufacturing plant in Pernambuco, a State located in the northeast
of Brazil and one of the least developed parts of the country. At the
time, IMPSA was the only low-carbon company in the region.
Pernambuco’s three investment promotion bodies – the Executive
Secretary for Business Development, the Suape Port and Industrial
Complex and the Agência de Desenvolvimento Econômico de
Pernambuco, which were not fully coordinated – had yet to
identify renewable energy as a priority sector, and none of them
was undertaking proactive promotion.


In 2009, the challenge for the state of Pernambuco was to
parallel track the urgency of economic development and the long
time frames to build capacity and reform existing institutional
arrangements. In this context, front-loading aftercare seemed like
the safest and least costly option. In order to overcome its limited
resources and experience in investment promotion, Pernambuco
decided to extend its reach through the adoption of a partnering
strategy, inclusive of both government and the private sector.
Several steps were taken.



Step 1: Pernambuco’s three investment promotion bodies


partnered under the umbrella of Invest in Pernambuco, along with
the incentive-administering body, while retaining their current
mandates. The Invest in Pernambuco virtual IPA then engaged in a
key partnership with APEX-Brasil, the national IPA, to benefit
from capacity-building assistance and undertake joint investment
promotion.





19 UNCTAD, based on information provided by the Economic


Development Secretariat (SDEC) of Pernambuco.




Promoting Low-Carbon Investment






41


In cooperation with APEX, the Invest in Pernambuco
platform mapped out major foreign investors in the last two years
and interviewed them to understand the key drivers behind their
investment decisions. The interview with IMPSA was an eye-
opener, as promoters learned about their own location advantages
for heavy equipment manufacturing and power generation in
renewables. IMPSA made Pernambucan officials aware of their
network of partner companies and the rationale for them to locate
nearby. It also indicated the bottlenecks for further sector growth,
including human resources, government planning for land, for
housing and for transportation, and private and public sources of
innovation and technology.



Step 2: In cooperation with APEX, Invest in Pernambuco


commissioned a sector competitiveness study and used the data to
develop a promotional message to target IMPSA suppliers based
elsewhere in Brazil, as well as other international companies that
could fill the gaps in Pernambuco’s wind-power production chain.
The results of this highly focused targeting campaign came fast.
IMPSA’s wind turbines are now complemented by a tower
manufacturer from Spain, Gonvarri, and were joined in 2013 by a
manufacturer of blades and flanges, a joint venture between LM
Wind Power of Denmark and Eolice of Brazil. IMPSA’s production
chain has been reinforced to a point where the company has
confidently expanded twice since 2008. IMPSA is now planning on
diversifying its Pernambucan facilities to include hydroturbines.
Development plans ahead represent over $200 million in
investments and 2,500 new jobs in green technologies.


Step 3: Invest in Pernambuco also partnered with over 50
stakeholders, including firms, government bodies, universities and
research institutions through a public–private forum. This policy
advocacy and aftercare vehicle is dedicated to developing the
renewable energy sector through the recommendations developed
by six working groups. The groups are focused on issues, looking at
human resource development, business climate, innovation and




Attracting low-carbon investment and the role of partnerships






42


technology, government planning, housing and transportation, the
environment and public relations. Company concerns are addressed,
such as formalizing land titles. In this way Italian giant Enel Green
Power has secured the area needed for its wind turbines. Issues are
also focused on sectors, such as establishing in 2013 Brazil’s first
technical school to specialize in wind, solar and biomass.


Step 4: Finally, Invest in Pernambuco’s direct partnerships
with renewable energy companies is generating solid leads for more
industry suppliers to accelerate the State’s cluster development. The
sector’s largest companies gladly join business development
meetings organized by Invest in Pernambuco for the explicit
purpose of targeting the best international and domestic prospects
for the next generation of investments, a model that strengthens the
cluster and encourages reinvestment.



Pernambuco has no formal IPA nor are there plans to


reform the current institutional set-up. However the virtual Invest in
Pernambuco initiative is a good example of how sector-specific
promotion can be effectively undertaken by several agencies with a
clear vision and a well-coordinated platform.

3.2 Improving location competitiveness: Invest Hong Kong,
China20


Hong Kong, China’s reputation as a world-class financial
and logistics hub has, in large part, underpinned its successful FDI
strategy to date. When the head of the government of Hong Kong,
China, identified green industries as one of the six industries crucial
to the city’s long-term development, Invest Hong Kong aligned
itself to target green investment. In pursuing such a strategy, it
faced strong competition from other locations, including nearby
Singapore. Part of the solution was for Invest Hong Kong to

20 UNCTAD, based on information provided by Invest Hong Kong


(China).




Promoting Low-Carbon Investment






43


leverage a green strategic partnership programme in order to
improve its competitive position. The “Shenzhen/Hong Kong
Innovation Circle”, its initiative with the city of Shenzhen, was a
key component of this new approach.


Invest Hong Kong combined the city’s traditional strengths
with new low-carbon policies, some early low-carbon success
stories and the city’s broader strengths in capital-intensive, high-
technology industries to build it a new image as Asia’s “innovation
and technology services hub”. It held private–public consultations
to identify competitive subsectors and adopted a three-track
strategy in pursuit of these, comprising (a) a cross-cutting “green”
policy for image-building and market creation, (b) sector-specific
policies to create a compelling business case and (c) strategic
partnerships and joint promotions.


First, Invest Hong Kong supported and helped to promote a
series of general policies to build the image of Hong Kong, China,
as a green city. These included, for example, the exemption of
electric vehicles from the First Registration Tax and the Pilot Green
Transport Fund to cover the initial outlay of transport companies
buying low-emission vehicles. With the First Registration Tax close
to 100 per cent of the cost of new, luxury vehicles, exemption from
this tax for electric vehicles makes ownership much more attractive
and has had a definite impact on electric vehicle adoption. This
policy has helped to create a market for electric vehicles and attract
an FDI project from the United States company Tesla Motors, a
manufacturer of zero-emission luxury electric vehicles, to set up its
second-largest East Asian sales operation and service centre in
Hong Kong, China.


The Commerce and Economic Development Bureau, the
policy formulation bureau of the government of Hong Kong, China,
on matters relating to innovation and technology, having identified
thin-film photovoltaic research and development as a priority
subsector, proceeded to establish a photovoltaic cluster at the Hong




Attracting low-carbon investment and the role of partnerships






44


Kong Science and Technology Park. The decision-making process
was intense and inclusive, as picking this priority subsector implied
a long-term commitment and investment from the public sector in
installing and maintaining a specialized photovoltaic laboratory.
The laboratory has been made available to all companies involved
in related research and development activities at subsidized rates,
providing savings in capital, installation and maintenance costs.


The investment signalled to DuPont Apollo that the
government of Hong Kong, China, was committed to supporting
green technology development. DuPont became the anchor operator
and was granted the first project under the “Shenzhen/Hong Kong
Innovation Circle” initiative, creating a thin-film photovoltaic
business and research and development operation with over 100
highly-skilled jobs in Hong Kong, China, and about 300 additional
manufacturing jobs in the nearby Shenzhen Special Economic
Zone, where it established a manufacturing plant. This joint effort is
geared towards establishing a strong solar energy research and
industrial platform in the region, with Hong Kong, China, as the
research and development hub and Shenzhen as the manufacturing
base, forming a full value chain for the photovoltaic industry.


The “Shenzhen/Hong Kong Innovation Circle” was launched
in 2007 to establish the region as a hub for sustainable technologies.
In addition to strengthening exchange in innovative talent,
equipment, and project information, the initiative sets out to foster
research and development excellence, cooperation throughout the
network and funding support. Joint promotion of this collaborative
innovation platform encompasses attracting investments. This
makes up a key part of the value proposition that Invest Hong Kong
and its Shenzhen partners now jointly promote internationally.




Promoting Low-Carbon Investment






45


3.3 Cluster expansion: Copenhagen Capacity, Denmark21


The Copenhagen Cleantech Cluster (CCC) was established
to foster and promote Danish clean technology companies,
organizations, joint ventures and research and development
activities. International investors and their technology and research
capabilities are essential to the mix in a leading cluster. Therefore
the vision of CCC is to attract these investors by developing one of
the world’s leading clean technology clusters, creating superior
value for the cluster companies and the research environment. CCC
has already demonstrated that a well-managed and promoted cluster
can achieve tangible results and international recognition in a short
period.



In a survey of 245 foreign and national clean technology


companies in Denmark, Copenhagen Capacity (CopCap), the
region’s investment promotion and business development agency,
established that innovation partnerships, both business and
technological, are rated as the most important success factor for
creating growth. With a strong track record in promoting its core
industry and technology strengths through local and global
clustering strategies, the CCC was a logical step. Medicon Valley
Alliance, a fully integrated life science cluster that CopCap jointly
operates with Invest in Skåne (Sweden) is an early example of this
approach.


Established in 2009 by Danish clean technology
companies, research institutions and public organizations, CCC was
Denmark’s largest ever European Union Structural Funds project.
With a budget of €20 million over five years, financing is split 50
per cent from the European Union, 25 per cent from Region
Zealand and the Copenhagen Region and 25 per cent from the
founding partner organizations and companies. CCC is a
consortium based on a model of university-industry-government

21 UNCTAD, based on information provided by Copenhagen Capacity.




Attracting low-carbon investment and the role of partnerships






46


interactions, key to innovation in knowledge-based societies.
CopCap is one of nine founding partners, responsible for the overall
promotion, coordination and facilitation of the cluster, reporting to
a board of directors comprised of 12 key stakeholders. The
secretariat manages the interface between directors, executive
partners, members and stakeholders.



With ambitious targets for job creation, foreign investors,


research collaborations and international cluster partnering, CCC
carries out projects in five focus areas: facilitation, matchmaking,
test and demonstration, innovation and entrepreneurship. CCC is
engaged in two large international projects, the International
Cleantech Network (ICN) and Complex Cleantech Solutions
(CCS).


The ICN is a proactive network of visionary and leading
clean technology clusters around the world, sharing a collaborative
platform to provide each cluster with the best opportunities for their
cluster members (companies, universities/research institutions and
local authorities). Today, ICN has 10 partners, from Europe, North
America and Asia. In 2011, CCC initiated an innovation platform
for smart cities and in March 2012 hosted “Open Smart City 2012”,
where ICN members and other international clean technology
players met to discuss the smart city of the future with the aim of
creating cross-regional green growth.


CCS has a technology focus, initiating joint business
projects that deliver integrated green solutions globally, via the
CCC network. Such projects are geared towards combining the best
aspects of a wide range of technologies to deal with the low-carbon
challenge. In this manner, CCS also helps Danish clean technology
companies to gain markets, knowledge and business opportunities.


The Copenhagen Cleantech Cluster’s most important task is
to bring key clean technology players together. The matchmaking




Promoting Low-Carbon Investment






47


activity consists of business-to-business networks and research-to-
business programmes. The matchmaking working group and
investor-targeting team focus research efforts on four sources of
data to identify potential foreign investors and partners: (a) existing
cluster members; (b) a “Scout Network” of lawyers, consultants and
representative organizations of foreign companies in Denmark; (c)
CopCap offices and agents based in five target foreign markets –
China, Germany, India, the United Kingdom and the United States;
and (d) the International Cleantech Network and other clusters such
as the European Cluster Consortium.



The CopCap investor targeting team and its CCC partners


are then able to engage with potential investors through face-to-face
meetings, presentations of opportunities, matchmaking events at
industry fairs and conferences, business days in target markets and
facilitating business missions for visiting companies and officials.
In this case, CopCap and CCC network members combined their
outreach skills, sector knowledge and technical expertise to produce
a compelling investment proposition.


With the right team, clear goals, targeted activities and
funding, CCC has reaped quick successes in its first two years. It
has attracted five new foreign companies, representing 230 high-
skill, high-paying jobs in smart grids, electric vehicles, biofuels,
water and energy efficiency. CCC has also sourced gap funding for
the world’s first interoperability test centre for electric cars and
mapped the Danish smart grid, water and waste sectors, providing
further relevant materials for the FDI attraction effort. CCC’s
reputation is beginning to grow; a member of the Global Cleantech
Cluster Association, it is now regularly cited as one of the world’s
leading clean technology clusters.



The key role played by CopCap in building the cluster


through domestic and international partnering is important in the
City of Copenhagen’s long-term objectives to turn Copenhagen into
the world’s first carbon-neutral capital. CCC has targeted, by 2014,




Attracting low-carbon investment and the role of partnerships






48


1,000 new jobs, 25 foreign investors, 30 new research and
innovation collaborations and work with 15 international clean
technology clusters. In 2014, the European Union grant will run
out, meaning CCC partners will be responsible for the full cost of
the platform, based in part on its service-oriented formula. From
that point on, CCC members will contribute according to the
benefits and returns that the cluster provides.

3.4 Summary: Best practices in partnering


As has been shown in the above examples, partnering
strategies, whether these are based on aftercare, through the
development of strong low-carbon technology clusters or with a
focus on research and development, can provide tangible benefits in
terms of image-raising, international promotion, lead generation
and securing new investments. To enhance investment propositions
and to anticipate investor needs, IPAs should consider partnerships
as a fundamental building block in their low-carbon strategies.


Cluster development is a key policy tool, vital to
developing a pipeline of emerging companies and to creating a
favourable infrastructure and environment for foreign investment.
Securing active participation and support from universities,
research bodies and local companies is an important success factor.


An IPA that becomes a credible facilitator in the provision
of advice on regulation, incentives and networking will be in a
position to add greater value to the site selection process. This
expertise should be developed both in-house and through rapid
access to external experts in the partnering network. An IPA
committed to a low-carbon investment strategy will therefore seek
to engage regularly with near networks but also establish strong
relationships in the wider base of stakeholders, so as to strengthen
the partnering services offered to investors.




Promoting Low-Carbon Investment






49


Effectively communicating the services and the value of an
IPA to its potential investors is a prerequisite to a successful low-
carbon FDI programme, and there again, a partnering platform can
be used smartly to build and disseminate information in a credible
and cost-effective fashion.








4. Conclusions


Worldwide concern about global warming and local
demands to reduce the negative environmental impacts of human
activity have reached a critical mass for widespread demand of low-
carbon products and processes. With increasing speed and effect,
Governments are promulgating and refining public policies to
stimulate the economic competitiveness of alternative technologies
and industries. In many cases, these policies have created markets,
accelerated their growth or guaranteed their survival. This presents
investors with the potential for good returns over an extended
period, and it also provides IPAs with opportunities to play their
part in building clusters, generating wealth and greening
economies, through the promotion of inward investment.



“Low-carbon FDI” is a label that encompasses many sectors with
highly diverse benefits in terms of GHG mitigation, job creation
and technology transfer. It is not a panacea and should only be
pursued by Governments and their IPAs if this fits with the
location’s profile, needs and goals. A Government hoping to reduce
energy consumption, keep the country’s air and water clean or
comply with international environmental commitments can do so
by resorting to various sources of finance which may or may not
include FDI.


Rather, low-carbon FDI should be pursued when an IPA
can present a strong case for investing in specific subsectors,
identified as competitive and important to the economic and low-
carbon future of a location. The process for determining a country’s
competitiveness in a particular low-carbon subsector as illustrated
earlier provides the elements for building a compelling case to
appeal to investors.



Policies and investment promotion practices have proven to


be important elements of a strategy to attract low-carbon FDI. Table
4 gives an overview of different policy tools and IPA practices that
were referred to in this guide. In addition to these, for many
industries in the low-carbon sector it is also critical to create a green
image of a location. Such an image is not built overnight and efforts




Conclusions






52


to develop it will involve many stakeholders, including IPAs as part
of their targeting campaign.



The strong interdependency between business success in


low-carbon sectors and the achievement of national environmental
goals makes low-carbon investors the perfect subjects for aftercare
and crucial sources for inputs to the critical task of IPAs as policy
advocates. A clear IPA position on long-term relationship-building
from the outset will reassure new investors, help a Government
fine-tune its policies for maximum impact and help both sides
identify and convert opportunities for low-carbon economic growth.


Table 4. Promotion of low-carbon investment: A selection of
policy tools and IPA practices




Policy tools


 Emission standards
 Product standards
 Taxation rebates on environmentally friendly equipment
 Fuel taxes, fuel efficiency standards and biofuel blending mandates
 Subsidies for research and development in low-carbon technologies
 Subsidies for households to install solar panels
 Special credit lines for renewable energy projects
 Feed-in tariffs
 Public procurement of energy-efficient products
 Industrial development tools, like green SEZs, including clean


technology parks
 Programmes to promote business linkages in low-carbon industries


and foster absorptive and adaptive capacities in domestic firms
 Encouraging corporate social responsibility



/…




Promoting Low-Carbon Investment






53


Table 4. Promotion of low-carbon investment: A selection of
policy tools and IPA practices (concluded)




IPA practices



 Targeted promotion of low-carbon investment, in which IPAs select


and target low-carbon subsectors that match the country’s
development objectives and for which a location is competitive, e.g.
attracting FDI in the manufacturing of solar panels for a fast
expanding local market.


 Facilitation and aftercare with a specific focus on networking,
matchmaking and the forging of partnerships between low-carbon
development stakeholders, including international and domestic
companies, local authorities and research institutions, e.g., support
in the development of clean technology clusters.


 Policy advocacy, promoting low-carbon friendly policies and
measures for target sectors, e.g. encourage the use of feed-in tariffs
mechanisms for renewable energies.


Source: UNCTAD.








References



European Commission, Joint Research Centre – Institute for Energy
and Transport (2011). Critical Metals in Strategic Energy
Technologies. The Netherlands.

HSBC Global Research (2010). Sizing the Climate Economy.
London.

IPCC (2007). Climate Change 2007: Synthesis Report.
Contribution of Working Groups I, II and III to the Fourth
Assessment Report of the Intergovernmental Panel on Climate
Change. Geneva.

OECD (2007). Issues of Dual Use and Reviewing Product
Coverage of Environmental Goods. Trade and Environment
Working Paper, 2007/01. Paris.

OECD (2011). Defining and Measuring Green FDI: An
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Papers on International Investment, No. 2011/2. Paris.

UNCTAD (2007). Aftercare: A Core Function in Investment
Promotion. Investment Advisory Series. Series A, number 1. New
York and Geneva. United Nations publication
UNCTAD/ITE/IPC/2007/1.

UNCTAD (2008a). Investment Promotion Agencies as Policy
Advocates. Investment Advisory Series. Series A, number 2. New
York and Geneva. United Nations publication.
UNCTAD/ITE/IPC/2007/6.

UNCTAD (2008b). Evaluating Investment Promotion Agencies.
Investment Advisory Series A, number 3. New York and Geneva.
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UNCTAD (2010). World Investment Report 2010. Investing in a
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UNCTAD (2011a). Investing in a Low-Carbon Economy. A survey
of investment promotion agencies. Occasional note.

United Nations (2011b). Working towards a Balanced and Inclusive
Green Economy: A UN Systems-wide Perspective. Geneva.




UNCTAD publications on TNCs and FDI


For more information on UNCTAD’s publications on TNCs and
FDI, please visit www.unctad.org/en/pub



Other publications in UNCTAD’s Investment Advisory Series A


and B



Series A

No. 6. Investment Promotion Handbook for Diplomats. 70 p.
UNCTAD/DIAE/PCB/2011/2
http://www.unctad.org/en/docs/diaepcb2011d2_en.pdf

No. 5. Promoting Investment in Tourism. 68 p.
UNCTAD/DIAE/PCB/2009/16
http://www.unctad.org/en/docs//diaepcb200916_en.pdf.

No. 4. Promoting Investment and Trade: Practices and Issues.
78 p. UNCTAD/DIAE/PCB/2009/9
http://www.unctad.org/en/docs/diaepcb20099_en.pdf.

No. 3. Evaluating Investment Promotion Agencies. 85 p.
UNCTAD/DIAE/PCB/2008/2
http://www.unctad.org/en/docs/diaepcb20082_en.pdf.

No. 2. Investment Promotion Agencies as Policy Advocates. 112
p. UNCTAD/ITE/IPC/2007/6
http://www.unctad.org/en/docs/iteipc20076_en.pdf.

No. 1. Aftercare: A Core Function in Investment Promotion. 82
p. UNCTAD/ITE/IPC/2007/1
http://www.unctad.org/en/docs/iteipc20071_en.pdf.









UNCTAD publications on TNCs and FDI






58


Series B

No. 9. Best Practices in Investment for Development: How to
Prevent and Manage Investor-State Disputes – Lessons from
Peru. 86 p.
UNCTAD/WEB/DIAE/PCB/2011/9
http://unctad.org/en/Docs/webdiaepcb2011d9_en.pdf.

No. 8. Best Practices in Investment for Development: How to
utilize FDI to improve transport infrastructure – ports: Lessons
from Nigeria. 87 p.
UNCTAD/DIAE/PCB/2011/8
http://unctad.org/en/Docs/diaepcb2011d8_en.pdf.

No. 7. Best Practices in Investment for Development. How to
Attract and Benefit from FDI in Mining. Lessons from Canada
and Chile. 141 p.
UNCTAD/DIAE/PCB/2010/11
http://www.unctad.org/en/docs/diaepcb2010d11_en.pdf.

No. 6. Best Practices in Investment for Development. How to
Attract and Benefit from FDI in Small Countries. Lessons from
Estonia and Jamaica. 110 p.
UNCTAD/DIAE/PCB/2010/4
http://www.unctad.org/en/docs/diaepcb2010d4_en.pdf.

No. 5. Best Practices in Investment for Development. How to
Integrate FDI and Skill Development. Lessons from Canada
and Singapore. 82 p.
UNCTAD/DIAE/PCB/2010/5
http://www.unctad.org/en/docs/diaepcb2010d5_en.pdf.





Promoting Low-Carbon Investment






59


No. 4. Best Practices in Investment for Development. How to
Create and Benefit from FDI-SME Linkages. Lessons from
Malaysia and Singapore. 106 p.
UNCTAD/DIAE/PCB/2009/18
http://www.unctad.org/en/docs/diaepcb200918_en.pdf.

No. 3. Best Practices in Investment for Development. How Post-
Conflict Countries can Attract and Benefit from FDI. Lessons
from Croatia and Mozambique. 139 p.
UNCTAD/DIAE/PCB/2009/15
http://www.unctad.org/en/docs/diaepcb200915_en.pdf.

No. 2. Best Practices in Investment for Development. How to
Utilize FDI to Improve Transport Infrastructure – Roads.
Lessons from Australia and Peru. 113 p.
UNCTAD/DIAE/PCB/2009/2
http://www.unctad.org/en/docs/diaepcb20092_en.pdf.

No. 1. Best Practices in Investment for Development. How to
Utilize FDI to Improve Infrastructure – Electricity. Lessons
from Chile and New Zealand. 92 p.
UNCTAD/DIAE/PCB/2009/1
http://www.unctad.org/en/docs/diaepcb20091_en.pdf.










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E-mail: publications@un.org



For further information on the work of the Division on Investment
and Enterprise, UNCTAD, please address inquiries to:


United Nations Conference on Trade and Development
Division on Investment and Enterprise


Palais des Nations, Room E-10054
CH-1211 Geneva 10, Switzerland


Telephone: +41 22 917 5751
Telefax: +41 22 917 0498


http://www.unctad.org









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