A Report on World Investment Report 2010- Investing in a Low- Carbon Economy - Term Paper Example

A Report on World Investment Report Investing in a Low- Carbon Economy The adverse effects of climate change are more evident in our times than ever before. Climate change has been brought about by high- carbon economy that results to high emission of harmful gases. Therefore, there is need to invest in low- carbon economy to ensure sustainable development. This report critically reviews the World Investment Report 2010- Investing in a Low- Carbon Economy. The purpose of this review is to understand the main points of the article, analyze its findings, and to critically evaluate how the arguments contained in the article relate to United Arabs Emirates (UAE). The review is based on this particular article and a few other related literature that are relevant to the arguments presented in the article. This report concludes that sustainable development can only be achieved through low- carbon economy. Such an economy is critical in sustaining the present and future generation without subjecting them to serious environmental, social, and economic risks that often characterizes high- carbon economy. Introduction The article “World Investment Report 2010- Investing in a Low- Carbon Economy” was prepared by the United Nations Conference on Trade and Development (UNCTAD) in 2010. The report has focused on various aspects of investment across the world such as Global Foreign Direct Investment (FDI), investment policy trends, and how specific sectors play a role in FDI share among other aspects. Particularly, the report has discussed investing in a low- carbon economy. Its focus on low- carbon economy is informed by the need to have sustainable economic development. This article was developed in the context of emerging impacts of climate change that are deemed to be adverse and detrimental to human survival in the long- run. As such, there is need for solutions in order to counter the implications of climate change impacts and provide sustainable environment for the present and future generations. UNCTAD is a UN’s agency and therefore the credibility of this article is unquestionable. The subject of low- carbon economy is very important and worth writing because as a society we cannot ignore the impacts of climate change which are so real. The society should be alive to the realities of climate change which threatens the very existence of humans (Sawin and Moomaw 23). That is why writing on measures that are and should be taken to counter one of the greatest challenges currently facing humans is such a noble engagement. This purpose of this report is to focus on the issues discussed in the article, which is investing in the low- carbon economy. The article is comprehensive and covers critical aspects that focus on investing in low- carbon economy. Analytical Summary of Main Arguments The article begins by arguing that Transnational Corporations (TNCs) are part of the problem and solution to the investment in a low- carbon economy due to the proposition that they can provide low- carbon technology and investment. Indeed, Foreign Direct Investment (FDI) on low carbon is already huge and its potential is immense. However, “carbon leakage” is a major concern to this investment; UNCTADA notes in its report that this concern can be addressed at source rather than at the border through ways such as engaging corporate governance mechanisms (UNCTAD 20). Moreover, investments in low- carbon economy should not occur in haphazard as this may result to high costs and reduced benefits. Therefore, there is need for policy to be put in place so as to minimize costs and maximize benefits that are linked to attracting low- carbon FDI (Constable 95). Towards this end, UNCTAD makes proposals in the report in regard to global partnership. The proposal is made up of five major components: securing contribution of IIAs to mitigation of climate change; establishment of strategies that are geared towards promoting clean investment; developing an international low- carbon technical assistance centre (L- TAC); enabling clean technology dissemination; and, harmonization of disclosure of corporate GHG emissions (UNCTAD 21). World Investment Report 2010 states that immense and appropriate actions should be taken by all concerned parties to tackle the challenge of climate change. The report notes that the existing international and national policy frameworks do not adequately and effectively target TNC and private sector contributions. The report argues that investments in low- carbon can be leveraged better than it is presently. To achieve leveraging objectives, it is important that international investment policies be integrated especially when designing new post- 2012 regime climate change framework (UNCTAD 22). The article goes further and explains what low- carbon foreign investment is. According to the report, low- carbon foreign investment refers to the transfer of products, practices, or technologies to host countries through non- equity and FDI forms. The report split low-carbon investment into two; low- carbon services and products investments and low- carbon processes investments. Low- carbon services and products investments are those that reduce GHG emissions through their use, for instance, integrated mass transport systems, “power-saving” electronics, and electric cars. Also, these investments include technology solutions that reengineer GHG- emitting processes in local companies. On the other hand, low- carbon processes investments are those that lower GHG emissions which related to the manner in which services or products are produced, for example, upgrading operations of TNC, and upgrading operations that relate to companies together with their global value chains (UNCTAD 23). The report observes that emissions are classified depending the sector involved in the emission such as agriculture and forestry; waste management, buildings, and transport; and power and industry sector. These sectors are also related with TNCs in different ways. On a positive note, the report notes that investing in low-carbon business is rapidly growing. To support this proposition, the report gives the following statistics: there were about 40% low-carbon investment projects between 2003- 2009 in developing countries; there are about 10% low- carbon FDI projects that were identifiable in 2003- 2009 as being generated by TNCs from transition and developing economies; TNCs are main investors, but there is emergence of new players; and, FDI flows in renewable/ alternative electric generation, manufacturing of environmental technology products, and recycling stood at about $90 billion in 2009 among other numerous developments in this area (UNCTAD 25). World Investment Report 2010- Investing in Low- Carbon Economy argues that investments in this area does not occur in a vacuum, but rather driven by some factors; there are key drivers of TNCs low- carbon FDI. These drivers include: one, home- government policies such as trade, incentives, and tax policies that support FDI in low- carbon investment. Two, high costs of production characterized by high energy costs and salient skilled labour. Three, trade conditions and home market whereby green branding strategies are being undertaken, and there are limited home markets for low- carbon services and products. Lastly, business conditions where shareholder or public opinion pressure encourages investments in low- carbon across global operations (UNCTAD 27). The article goes further to provide three factors that determine locations of low- carbon investment. These factors include business facilitation, economic determinants, and policy framework. Business facilitations include measures like incentives, aftercare, and investment promotion. Economic determinants include access to technology, technology upgrades, access to renewable sources, and markets for low- carbon products. General policy framework includes climate change and environmental policies, and energy policies. Despite the envisaged benefits and return on investment in low- carbon economy, the reports notes that it is important to weigh both the advantages and disadvantages of this kind of investment especially in developing countries. It explains that the advantages include: export opportunities, technological advancements, technology and investment opportunities, and strengthened export and productive capacity competitiveness. On the flipside, there is technological dependency, crowding out of local companies, and social consequences that are associated with such investments (UNCTAD 29). Since there are identifiable negative impacts of low- carbon FDI, the report provides ways of minimizing these impacts. The first way is to ensure that there are social policies that cushion the world’s population against social impacts such as unemployment. The second is to facilitate effective and industrial policies that seeks to tackle technological dependency and crowding- out of indigenous enterprises. Besides, the report states that detailed understanding of threats and opportunities from investment in low- carbon. In order to attain low- carbon investment effectively, it is crucial to strategize on the national clean investment promotion (Foxon 60). This strategizing has been noted in the report too and it entails mainstreaming FDI into low- carbon development agenda and strategies through afore- mentioned determinants of low- carbon investment locations. Additionally, the report provides for low- carbon technology dissemination that is anchored on building of an effective interface between local enterprises and TNCs (UNCTAD 32). The report also considers the International Investment Agreements (IIAs) and climate change where it points out that IIAs can either contribute towards enhancing the endeavours that attract low- carbon investment or create constrains towards achieving the objectives of this endeavour. The report also suggests that there is need to harmonize disclosure of corporate GHG emissions. Furthermore, the report suggests that there is need for international support for developing countries because these countries play crucial role in leveraging low- carbon FDI even though FDI flow is lower in these countries (UNCTAD 37) Appendix. In summation, World Investment Report 2010- Investing in a Low- Carbon Economy acknowledges that this endeavour is faced with a number of challenges which include the following: the crucial interfaces between poverty alleviation and investment; the congruence between international and national investment policies and between other public policies as well; and, the right way to balance emerging investment policy (UNCTAD 39). Strengths and Usefulness of the article “World Investment Report 2010- Investing in a Low- Carbon Economy” There is no doubt that this article has captured one of the major issues that is dominating human kind currently. The article provides detailed and precise arguments on investing in a low- carbon economy. Not only does the article argue on the need of undertaking this endeavour, but it also provides a precise manner of how its arguments and propositions should be implemented. In addition, the article has highlighted key issues that relates to investing in a low- carbon economy such as the role of TNCs and other players in pursuing this noble endeavour. It has also pointed out on some of the notable developments made towards achieving it. Apart from that, it has highlighted the ways of minimizing the negative impacts of low- carbon foreign investment in addition to providing ways of effectively harnessing investments in low- carbon economy. Most importantly, the article is alive to the real and potential challenges that lies ahead of investing in a low- carbon economy, and provides mitigating measures of meeting and tackling these challenges. With such clear and comprehensive explanation of this topic by the report, understanding the issues of TNCs within the world investment framework becomes easier. Besides, the article has not just provided the theories and arguments about the topic, but rather has provided pragmatic and applicable arguments and solutions which if implemented can greatly facilitated advancements in this endeavour. Such solutions are what are needed for effective implementation of investment in low- carbon economy (Xie 1596) Weaknesses of the Article Even though the article has provided comprehensive and detailed arguments on investing in low- carbon economy, it failed to argue on how particular countries are stifling developments in this area. It is no doubt that some of the world’s greatest economies whose economy are hinged on consumption of high- carbon energy are reluctant on facilitating investments in low- carbon economy (Kane 188). The article has failed to note this aspect which has devastating climate change impacts across the globe in the long- run. Conclusion In conclusion, it is evidently clear from the article that the need for investing in low- carbon economy is inevitable. Therefore, there is need to mobilize and galvanize efforts of TNCs, countries, and other players towards attaining this endeavour. UAE is one of the leading oil mines in the world; however, the fact that these resources are depleting cannot be disputed. Therefore, the idea discussed in this report is highly linked to UAE in the sense that investment in low- carbon economy is important in order to provide alternative energy sources to the depleting oil energy. This will enable UAE and the world in general to meet its energy needs and sustainable development in the face of depleting oil energy. The article is of great value because it has addressed nearly all aspects relating to investing in a low- carbon economy, some noted shortcomings notwithstanding. Since issues of climate change and sustainable development is critical in the world, it is important that the topic of investing in a low- carbon economy be researched further in the future with a view of providing practical and workable solutions and strategies towards climate change and sustainable development. Works Cited Constable, J. Green Mirage: Why a Low-Carbon Economy May Be Further Off Than We Think. Civitas, 2011. Print. Foxon, T. Innovation for A Low Carbon Economy: Economic, Institutional and Management Approaches. Edward Elgar Pub, 2008. Print. Kane, G. The Green Executive: Corporate Leadership in a Low Carbon Economy. Routledge, 2011. Print. Sawin, J and Moomaw, W. Renewable Revolution: Low Carbon Energy by 2030. 2009. Web. 31 Jan, 2012. < http://www.worldwatch.org/files/pdf/Renewable%20Revolution.pdf> UNCTAD. World Investment Report 2010- Investing in a Low- Carbon Economy. 2010. Web. 31 Jan, 2012. < http://www.unctad.org/en/docs/wir2010_presentation_en.pdf> XIE, K. -C. "Low Carbon Economy and Energy Technologies For A Low Carbon Future." Energy Sources Part A: Recovery, Utilization & Environmental Effects 31.18 (2009): 1593-1597. Appendix Cross-border M&As experienced a faster recovery, while Greenfield investments were more resilient during the crisis FDI flows, by region, 2007–2009 (Billions of dollars) Read More