“Mitigating Climate Change through Attracting
Foreign Direct Investment in Advanced Fossil Fuel Technologies”

A Project financed from UN Development Account

Fossil fuels and climate change
Fossil fuels supply over 80% of the world’s energy needs. In the UNECE region, over 60% of electricity comes from fossil fuels. According to the International Energy agency (IEA), fossil fuels will continue to be the principal source of primary energy and electricity for the foreseeable future.

An effective way to decrease greenhouse gas (GHG) emissions is to replace obsolete fossil fuel electricity generation technologies with modern and more efficient ones. Improving the efficiency of electricity generation (“upstream” efficiency) is one of the low-hanging fruits of the climate change mitigation.

Improving “upstream” efficiency has not received the attention it deserves. In the climate change discourse, fossil fuels—and coal in particular—have seldom been mentioned in a positive context. This is unfortunate because any investment in improving the efficiency of fossil fuel-fired electrical power plants has a positive domino effect that enables us to reap huge climate change benefits along the value chain of electricity generation, transmission, distribution and consumption.

Attracting foreign direct investment
Deploying advanced fossil fuel technologies, however, requires an enormous investment. The investment needed to update the world’s generation capacities is estimated at $500 billion a year, according to IEA. For many countries with economies in transition such capital requirements far exceed what is domestically available. For these countries, including practically all the nine selected project countries, attracting the investment needed is difficult because they face many geopolitical, economic, and social uncertainties, which—when taken together—make them a less attractive destination for capital. This is especially the case for large-scale electricity generation projects where the capital has to be committed for a comparably long time and has to be built into an infrastructure that is virtually impossible to relocate, should such a need arise.

UNECE intergovernmental context
In 2006, the Committee on Sustainable Energy recognized the importance of encouraging investment in the electricity sector. To carry out this work, the Committee created the Ad Hoc Group of Experts on Cleaner Electricity Production from Coal and Other Fossil Fuels. The programme of work of the Ad Hoc Group of Experts provides the framework to execute this UNDA project.

The Ad Hoc Group of Experts has on several occasions discussed the three principal challenges the world faces in the 21st century. They are to:
(i) Secure an adequate energy supply at a reasonable cost
(ii) Reduce the greenhouse gas emissions
(iii) Manage intelligently energy demand to lower consumer bills

This UNDA project deals with some parts of the first and second challenges by enhancing the ability of selected countries to attract foreign direct investment (FDI) in advanced fossil fuels technologies for electricity production.

In 2009, the UNECE Sustainable Energy Division proposed to UNDA to fund this important, complex project that goes beyond UNECE region. At its December 2009 session, the UN General Assembly endorsed the project. For detailed information, please see the Proposals for UNDA, Chapter E, on pages 14-16.

Mitigating climate change
equals FDI in Fossil Fuels

This project is funded by the UN Development Account. In its execution UNECE, as the principal agency, cooperates closely on the operational level with UNCTAD. Other cooperating agencies are ESCAP and DESA.

The project covers nine countries: Afghanistan, China, India, Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan, Ukraine, and Uzbekistan.

To insure its efficient functioning, the project has established an Advisory Board, led by the Chair of the UNECE Ad Hoc Group of Experts on Cleaner Electricity Production from Coal and Other Fossil Fuels. The Board includes a number of reputed industry and government experts and representatives.

The project document, describing in detail the major activities of this three-year project.

  • The project is expected to:
    Increase skills to develop and maintain an attractive investment climate to encourage FDI into the electricity sector based on coal-fired electricity sector, to meet the growing demand for electricity and achieve related climate change mitigation goals
  • Improve cooperative relationships between energy policy makers in the countries with economies in transition and the investors
  • Increase the skills to develop electricity-related pre-feasibility studies
  • Exchange experiences and lessons learnt in fostering investment in cleaner electricity generation among the countries covered by the project and possibly beyond.

Contact us: mccfff@unece.org

UNECE team:
Viktor Badaker, leader of electricity team
Branko Milicevic, UNDA project manager
Adam Sek, UNECE regional advisor

In cooperation with:
Ralf Krueger, UNCTAD
Masataka Fujita, UNCTAD
Andrew Yager, DESA
Kohji Iwakami, ESCAP Drag and Drop