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LESSONS LEARNED FOR PROMOTING CLEANER PRODUCTION AND TECHNOLOGY TRANSFER Edward Clarence-Smith & N. Hogsted Cleaner Production and Environmental Management Branch, UNIDO [email protected] J. Navratil Evaluation Section, UNIDO Vienna International Centre, P.O. Box 300, A-1400 Vienna, AUSTRIA

ABSTRACT This paper looks at technology transfer in the UNIDO/UNEP National Cleaner Production Centres (NCPC) Programme. Part one examines the experience in the NCPC programme based on an analysis of selected CP case studies from six countries. Part two discusses the process of technology transfer and the possible role of the NCPCs in this process. Part three gives recommendations for the way forward. It is argued that the NCPCs have often been called on to address previous incomplete technology transfer processes, where the know-how on how to operate the equipment at maximum capacity was not transferred with the equipment itself. Secondly, it is argued that the potential definitely exists for the NCPCs to focus more on the transfer of cleaner technology especially where cross-sectoral technologies are concerned; sector-specific specialists only can undertake meaningful assistance in the transfer of sector-specific technologies.

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1.

Introduction

In 1994, UNIDO entered into partnership with UNEP to establish the National Cleaner Production Centre (NCPC) programme. Since then, nineteen such centres have been established around the world. In Africa, centres have been established in the United Republic of Tanzania (1995), Zimbabwe (1995), Tunisia (1996), Morocco (1999), Ethiopia (2000), Kenya (2000), and Mozambique (2000); in Asia, in China (1995), India (1995), and Viet Nam (1998); in Europe, in the Czech Republic (1994), Slovakia (1995), and Hungary (1997); in Latin America, in Brazil (1995), Mexico (1995), Costa Rica (1998), El Salvador (1998), Guatemala (1999), and Nicaragua (2000). In addition, a centre that focuses on one specific industrial sector, the oil and gas centre, has been established in Russia. The NCPCs undertake the following basic activities: · Awareness-raising, including an important component of in-plant demonstrations; · Training; · Technical assistance; · Assistance with investment; · Policy advice. This paper focuses on one aspect of the technical assistance work of the NCPCs, namely assisting enterprises obtain cleaner technologies through transfer. The paper is divided into three parts. In the first part, the results of an empirical evaluation of a number of well documented CP assessments performed by mature NCPCs will be described, with a particular focus on technology transfer. In the second part, the mechanism of technology transfer is described, focusing on how it affects the transfer of cleaner technologies. Finally, in the third part, some recommendations will be given on how the NCPCs can position themselves to become a better vehicle for technology transfer. 2. An Empirical Evaluation of Technology Transfer in the NCPCs

2.1 Technology changes (CP options) Resulting from In-plant Assessments In the context of an evaluation of the NCPC Programme undertaken in 1999, the mature NCPCs were asked to provide information on the in-plant assessments they had conducted in 1997 or 1998, depending on which year they had data available for. Eight NCPCs (Brazil, China, Czech Republic, Hungary, India, Mexico, Slovakia, Zimbabwe) provided information. Of the 71 enterprises reported by these NCPCs 35 were SMEs, 25 were large enterprises and 11 were non-industrial establishments. Some NCPCs work exclusively in SMEs (India), some work mainly with the larger enterprises (China, Brazil), the others have a mixed clientele. Information from six NCPCs (Brazil, China, Czech Republic, Hungary, Mexico, Slovakia) was complete enough to allow for a structural analysis (see Table 1). The CP options were broken down into eight categories of cleaner production options (this categorization was initially developed for UNIDO's DESIRE project in India [2]). 2.2 Identification of Technology Changes When conceiving technology in broad terms (including the organizational framework), the eight categories of CP options can be interpreted as categories of technological change. The table reveals that in the years in question half of the identified CP options were improvements in housekeeping. This is quite reasonable particularly in the initial phases of introducing CP: simple measures are easier to identify and more convincing in demonstrating economic benefits (they often give very favourable cost/benefit ratios due to limited or no investment costs). Measures to upgrade process control represented 15% and changes/replacement of equipment 13% of all identified technological changes. Not surprisingly, production of useful by-products and product modifications were very rare: these technological changes are rather complex and require good knowledge of the market. Review of the identified technology changes indicates that some of them represent rationalization measures

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that could have been identified without applying the CP methodology at the level of material and energy flows and balances (substitution of coal by gas, roofing of a storage area, etc.). However, full application of the CP methodology should ensure that technological changes are identified in a systematic way, and that priorities for implementation are set. 2.3 Implementation of Technology Changes According to the information provided by the six NCPCs, on average 64% of the identified CP options had been implemented by the time the NCPC assessors left the enterprise, or were under implementation by that period. This is in line with the implementation rate recorded by other programmes (for instance, UNIDO's DESIRE project in India). Nevertheless, this figure should be treated with some caution. Good information is available from enterprises in which the NCPCs continue to work on other projects with the same enterprise. However, in general NCPCs do not provide support to the enterprises in implementing the CP options so that they do not always have updated information about option implementation. Thus it is possible that the total number of implemented technological changes may be higher, since the implementation of some measures could have been decided after the NCPC assessors had left the enterprise. When statistically insignificant categories of technological changes are eliminated (category 2 - Input material change, category 7 - Production of useful by-products, category 8 - Product modification), the highest implementation rate is achieved in the case of good housekeeping and the lowest in the change of process technology. The most obvious factor for this difference is the need for investment and the time required to introduce the change. In principle, the good housekeeping options and input material change are non-investment options. The other options, on the other hand, usually require investment. For example, in the case of Mexico, 43% of the CP measures reported required investment. Note that the size of investment varies. Only rarely does the investment exceed US$ 100,000. In many cases the investment is less than US$ 5,000 (in the Czech Republic, this was the case in approximately 50% of the options requiring investments). Only in a few cases were investment in the range of US$ 300,000 - 400,000 reported, and these were by NCPCs working primarily with large enterprises (Brazil, China). Inadequate, and therefore unconvincing, feasibility studies also contribute to postponement or abandonment of identified CP measures with strong investment needs. In most cases implementation of the technology changes requiring investment were financed from the enterprises' own funds. Government-subsidized financing schemes with soft terms were used to a limited extent only (for example, in the Czech Republic the State Environment Fund approved 5 CP projects in 1998 for a total value of US$ 2 million), and only in a few cases did the enterprises obtain bank credits (particularly in China). It is therefore understandable that non-investment options and investment options with low initial investment and short pay back period are implemented first, with the other options left for implementation at a later date, if at all. The time factor (large investment takes longer to implement) exerts a pressure in the same direction. The only exception to this rule is when the implementation of a CP measure requiring significant investment is enforced by environmental legislation, which shows the importance of a legislative framework for the implementation of CP measures. 2.4 Transfer of Technology from Abroad Transfer of technology from abroad is viewed as one of the key mechanisms to support industrial development in the developing countries and countries in transition. Transfer of technology involves a broad set of processes (selection, acquisition, adaptation) carried out primarily by the private sector but influenced by the government and communities. Most transfers of technology (and all transfers of proprietary technology) are implemented through trade, licensing, direct investment or joint ventures. For practical reasons this section takes as a proxy for the process of acquisition of technology the purchase of equipment or license from abroad by the enterprises implementing the CP options. Five Centres had information on this issue. Out of 283 CP options implemented (or under implementation) only eight options included a transfer of technology as defined above (3% on average). Most of them were CP options in the category of "equipment/hardware modifications/ replacement". All of them represent purchase of equipment, no purchase of a license having been reported. In most cases the enterprises themselves selected the technology (equipment). In a few cases some advice on the choice of technology was given by sectoral

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experts recruited by the NCPC, but in most cases the NCPCs refrain from giving such advice since they do not want to be associated with a certain producer or be charged with responsibility for such a decision. In view of the structure of CP options described above the reasons for such a limited transfer of technology from abroad are easy to identify: technological changes which are mostly implemented are non-investment or low investment CP measures. It is only to a very limited extent that such changes call for technology transfer from abroad (as defined above). Transfer of technology as defined above is of course rather narrow. There has been some transfer of know-how from abroad in the form of information and/or expertise provided by the foreign experts when used (as noted above, however, the use of foreign consultants on issues of technology was rather limited). Furthermore, the CP methodology itself, before its application by the NCPC, had first to be transferred from abroad. There was also transfer of technology among economic agents within the countries themselves (for instance, acquisition and adaptation of technology from a local university in Slovakia, purchase of technology from its local producers in China, Brazil, Mexico, etc.). It appears that local transfer of technology was more significant than transfer of technology from abroad (particularly in the case of countries with R&D capacity and capacity to manufacture capital goods). However, this was not empirically documented in the evaluation undertaken by UNIDO. 3. Making the UNIDO/UNEP NCPC Programme a Better Vehicle for Technology Transfer

3.1 The Process of Technology Transfer Many definitions of technology and technology transfer have been elaborated. Most agree, however, that technology contains both a software component (know-how) as well as a hardware component (equipment). In the process of transferring technology five different steps can be identified. · Technology Needs Identification: what does the enterprise need? · Identification of Potential Technologies: what technologies are available? · Evaluation and Selection of Technologies: what are the most suitable alternatives? · Technology Negotiation: bidding or tendering, negotiation. · Technology Adaptation and Absorption: adapt to local conditions, upgrade, develop new technologies. 3.1.1 Technology needs identification It is essential that an enterprise first be able to identify what it really needs. Though it is often taken for granted that enterprises are well aware of their technology needs and can properly evaluate them. This may often (but not always) be true for larger enterprises, but many small enterprises with limited technical staff operating in a complex market will often need external assistance. 3.1.2 Identification and evaluation of potential technologies Once an enterprise has identified its needs it has to find the technology that best fits them. This can be a very complicated process and requires in-depth knowledge both of what technology is available and which is most appropriate. Once again, large enterprises are generally favoured here; they have their own mechanisms, professionals and established channels to keep abreast of changes in technology and to evaluate the changes. SMEs, on the other hand, are very often not able to search for and find the right information. Even if they can, much of the publicly available information (accessed through libraries, the internet, or patent offices) is often of little practical use to them if it is not accompanied by expert advice. Technical information is a powerful tool in the hands of experts who know how to interpret it and apply it in a given context, whereas in the hands of laymen it is of quite limited value. SMEs recognize this problem, because usually if they need information on a technology they contact someone they know in the business and whom they trust, or a dealer or manufacturer/supplier of equipment. The SMEs normally also rely on outside advice to evaluate different technologies. This is generally not so much of a problem if the evaluation focuses narrowly on the technical characteristics of technologies. However, evaluating different technologies from a CP point of view means evaluating their eco-efficiency, and

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such evaluations can be extremely complex: many factors are involved, with dense interlinkages between product quality and environmental considerations. For instance, the NCPC in Viet Nam has found itself in the situation of having to evaluate two metal finishing technologies. The new technology was able to ensure a consistent coating of 5 mm, compared to the old technology that could only ensure a thickness between 3 and 6 mm. However, this tells us nothing about the relative eco-efficiencies of the technologies, which requires considerable amounts of information about the technologies. Since the equipment suppliers have been reluctant to provide the necessary information to the NCPC, its evaluation task has been rendered very difficult. 3.1.3 Procuring Technology Procurement is the selection and contracting of all goods and services needed to implement the technology transfer. The two options most frequently used are bidding and direct negotiation with suppliers. As in the previous cases, SMEs often are at a disadvantage in the procurement step because of a lack of in-house expertise and access to outside expertise. However, perhaps an even more important issue with respect to procuring technology is obtaining the finance to do so. The question of financing of cleaner technologies is currently under study by our partners UNEP. It has often been argued that since CP investment increases not only the economic performance but also the environmental performance of enterprises, mechanisms to promote investment in cleaner technology should be created. To this effect, there has been considerable discussion about, and some actual implementation of, such mechanisms. Naturally, a major problem with all such mechanisms is to distinguish cleaner technologies from those that are not. One camp argues for using a simple operational definition, whereby funds can be released for investment in any equipment that is more eco-efficient than the equipment it is replacing. A second camp argues that funds should be released only for those technologies that are incrementally more eco-efficient than the comparable new technologies. The advantage of the first definition is that operation of the funding mechanism is simple. The disadvantage is that it is so broad that it would involve almost any new technology, since most newer technologies are more efficient than the older technologies they replace. This disadvantage is avoided by the second definition, but it makes the operation of the funding mechanism that much harder. Whether it is possible to come up with a definition that truly singles out cleaner technologies and at the same time is operational remains to be seen. One possibility is to make it a rule of such funds that there must be evidence of requesters having attempted to obtain investment funds from other, traditional, sources and having been rejected. This could help to weed out investments in normal upgrading of technology, which should normally be "bankable" projects. 3.1.4 Technology Adaptation and Absorption After a technology is procured, it has to be adapted to the local physical conditions and raw materials. It is especially in this respect that the intrinsic dilemma of technology transfer becomes apparent. This can be made quite clear from an evaluation of the experience of the NCPCs. Many of the CP options that NCPCs help enterprises to identify and implement can actually be characterized as technology adaptations, because the options improve the efficiency of technologies the enterprises have already purchased. These inefficiencies can often be seen as the result of a previous incomplete technology transfer, where enterprises purchased the technologies without having acquired the necessary know-how to operate them efficiently. As one NCPC director once said "In our countries we often have the chance to purchase the newest equipment, however we are often operating the equipment so poorly that after three years the efficiency level is down to the same level as before the new equipment was purchased." The large amount of low and no cost options that are normally identified and implemented in the cleaner production assessments in the NCPC programme is undoubtedly a testimony to this statement. A major reason for this state of affairs lies in the purchasing process itself. The supplier of a technology must ensure that the purchaser does not fully comprehend the technology; otherwise the latter will have in effect acquired the technology at zero cost. Consequently, there is an inherent resistance on the part of technology suppliers to disclose too much information about their technologies, and this seriously limits the ability of purchasers to obtain technology that is either already well adapted to their local conditions or easily adaptable. Consequently, much transferred technology is operated below its optimum efficiency.

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3.2 Role of the NCPCs in Technology Transfer When entrepreneurs ask NCPCs the question, "What technology should I buy?" the NCPCs often cannot give a satisfactory response. However, they must be able to respond if they are to assist enterprises implement CP to the fullest extent. To understand how they can best respond, it is first necessary to understand that cleaner technologies can be divided into two different categories: · Sector-specific technologies, which are only used in one sector (e.g., computer automated colour matching systems for the textile dyeing, printing and finishing sub-sector); · Cross-sectoral technologies, which can be used by many different sectors (these can be both sophisticated equipment such as certain types of recycling equipment as well as smallware such as basic process control equipment). The NCPCs are established as cross-sectoral institutions, open to serving many industry sectors at the same time, and their staffing level is very modest. Under these circumstances, the NCPCs cannot address sector specific technology questions with their own in-house resources (or at most they can become expert in one or two specific industry sectors). Instead, they must establish a network with sectoral institutions, consulting companies, or freelance consultants to whom such services can be subcontracted or referred to. This requires the NCPCs to target such institutions when they are building up their CP network in the country at the beginning of their lifetime. So far, however, the NCPCs do not seem to have done this. Instead they have focused on building up networks with institutions and consultants that possess qualifications that are quite similar to theirs. The reason stated for this is that many of the sectoral institutions in developing countries are actually not well connected to the industry they are meant to serve and thus are not of much use. It may also be that NCPCs find it difficult to convince sectoral institutions of the value of CP and CP assessments, and so have given up trying. Doing a technology gaps assessments and technology needs identification for a specific sector at the end of a round of company assistance may be a way of collecting hard data that would get sectoral institutions interested. There seems to be much more scope for the NCPCs themselves to work with cross-sectoral cleaner technologies. Normally there are no institutions or experts focusing on these, which implies that there is a potential market niche here for NCPCs. Moreover, a focus on cross-sectoral cleaner technologies would fit well into the cross-sectoral nature of the NCPCs. Again, it is essential that the NCPCs try to develop a strategy for what cross-sectoral technologies to target. This could take the form of a technology gaps and needs identification assessment based on all the company assistance developed so far. The second step would then be to look at how such more tailor-made services could be provided to enterprises, taking advantage of the commercial interests of the technology suppliers. Efforts to develop strategies for this have already started. For instance, the NCPC in Costa Rica has developed a business plan for improving boiler efficiencies. The boiler market is dominated by a few large enterprises, and based on a preliminary analysis it seems that these enterprises would be interested in sponsoring the work of the NCPC in improving boiler efficiencies of the Costa Rican manufacturing industry. Finally, there seems to be some scope for NCPCs to foster buyer-supplier linkages between local technical personnel and enterprises in order to make small incremental innovations to the technologies already in place. Again, a systematic technology needs and gaps idenfication would seem to be a workable way to document the market for small add-on technologies or changes to existing technologies. In this respect it should be noted that the changes might not require sophisticated technical knowledge. For instance, equipment for the reuse of dye baths can often be manufactured and installed by an enterprise's own staff or the local blacksmith. 4. Conclusions and Recommendations

Within the NCPC programme, the focus so far has been on the "soft" aspects of technology transfer. The results achieved to date document that the main type of technology transfer that NCPCs have helped bring about takes the form of assisting enterprises analyze their problem and implement rather simple measures. In technology transfer terminology, the emphasis has been put on systematized technology needs identification via the development of material and energy balances that identify inefficiencies in production processes. Moreover, emphasis has been put on challenging existing production practices and identifying options for improving their efficiency. Most of these options consist of making small changes to work routines as well as

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to technology already in place, through various process optimization strategies such as good house keeping, and input change. Consequently, it can be argued that the NCPCs have often been called on to address previous incomplete technology transfer processes, where the equipment was installed but the working and maintenance routines needed to operate the equipment at maximum capacity were not. There is a potential for the NCPCs to address commercial technology transfer more in-depth, in at least the following ways: · In the case of sector-specific cleaner technologies, the NCPCs must build up early on in their lifetime a network with sectoral experts who are able to assist the individual enterprises in the selection of technology. For this to work properly, it is important for NCPCs to think of ways they may be able to make enterprises think of them as partners in their investment decisions in new technologies, otherwise the NCPCs will not be present when the decisions are being made. · In the case of cross-sectoral cleaner technologies, the NCPCs should consider building up capacity in a number of specific cross-sectoral cleaner technologies. To make this work better, NCPCs should consider linking up with commercial suppliers of cross-sectoral cleaner technologies, so that an increase in the market is directly felt on the latter's bottom-line. · There also seems to be a potential for NCPCs to push more the concept of adaptation of technologies already in place, through incremental innovations brought about by partnerships with the local technical experts of technology suppliers. All of the above should be done within the context of delivering business advisory services to enterprises. Simple dissemination of information on technology among SMEs will not help much, since the SMEs generally do not have the capacity to interpret this information correctly. Finally, it should be recognized that lack of funding is an important barrier to the transfer of technology. The NCPCs can play a role here, assisting enterprises prepare investment requests and putting them in contact with sources of investment funds focusing on cleaner technologies. However, it is critical to recognize that for whatever reasons CP-specific investment funds are rare, making this a bottleneck for the transfer of cleaner technologies. References [1] This section draws heavily on the in-depth evaluation of the UNIDO/UNEP National Cleaner Production Centres programme conducted by J. Navratil, UNIDO, in November 1999. [2] UNIDO (1998). From Waste to Profits: The Indian Experience; final report of DESIRE

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Table 1: Structural Analysis of the CP Options (Six NCPCs; Annual Performance) 1997 or 1998

Identified CP Options CP Options (Technology Changes), by Category Number (2) % (3) Implemented CP Options Number (4) % (5) = (4)/(2) 76% 80% 52% 50% 55% 37% 100% 67% 64% 8 3% 1 1 5 1 3% 5% 16% 8% Transfer of Technology from Abroad* Number (6) % (7) = (6)/(4)

1. Good housekeeping 2. Input material change 3. Better process control 4. On-site recovery & reuse of waste (recycling) 5. Equipment/hardware modifications/replacement 6. Change of process technology 7. Production of useful by-products 8. Product modification TOTAL: * Acquisition of equipment or license

218 15 67 40 58 35 3 3 439

50% 3% 15% 9% 13% 8% 1% 1% 100%

166 12 35 20 32 13 3 2 283

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