The production of goods and services with smaller carbon footprints, also known as green technologies, is on the rise and presents numerous economic opportunities. However, developing countries may not be able to take advantage of these opportunities unless their national governments and the international community take decisive action.
According to UNCTAD’s Technology and Innovation Report 2023, there is a risk of increased economic inequality as developed countries are likely to benefit the most from green technologies, including artificial intelligence, the Internet of Things, and electric vehicles.
“We are at the beginning of a technological revolution based on green technologies,” the authors explain. “This new wave of technological change will have a formidable impact on the global economy. Developing countries must capture more of the value being created in this technological revolution to grow their economies.”
“Missing this technological wave because of insufficient policy attention or lack of targeted investment in building capacities would have long-lasting negative implications.”
New markets
According to UNCTAD, the green technology sector has the potential to create a market worth over $9.5 trillion by 2030, which is roughly three times the current size of the Indian economy. However, this opportunity has mostly been seized by developed countries, leaving developing countries lagging behind.
In the period between 2018 and 2021, the exports of green technologies from developed countries surged from approximately $60 billion to over $156 billion, whereas exports from developing nations only rose from $57 billion to around $75 billion. Consequently, the share of developing countries in global exports dropped from over 48% to below 33% in just three years.
UNCTAD’s analysis indicates that developing countries must act swiftly to capitalize on this opportunity and adopt a development trajectory that leads to more diversified, productive, and competitive economies. Past technological revolutions have demonstrated that early adopters have an advantage in moving ahead and creating long-lasting benefits.
Frontier ready
The report features a “frontier technology readiness index,” which indicates that only a small number of developing countries possess the necessary capabilities to leverage frontier technologies such as blockchain, drones, gene editing, nanotechnology, and solar power.
Green frontier technologies, such as electric vehicles, solar and wind energy, and green hydrogen, are projected to attain a market worth of $2.1 trillion by 2030, which is four times greater than their current value. Electric vehicle revenues may rise by five times, reaching $824 billion in 2030 from their present value of $163 billion.
The index evaluates 166 nations based on indicators such as ICT, skills, research and development, industrial capacity, and finance. High-income economies, including the United States, Sweden, Singapore, Switzerland, and the Netherlands, dominate the index.
Despite being the least equipped to adopt frontier technologies, several Asian economies have implemented critical policy changes that have enabled them to outperform expectations based on their GDP per capita. India is the top overperformer, ranking 67 places higher than expected, followed by the Philippines (54 positions higher) and Vietnam (44 positions higher).
The index reveals that countries in Latin America, the Caribbean, and sub-Saharan Africa are the least prepared to leverage frontier technologies and may miss out on current technological opportunities.
Government support needed
“Developing countries need agency and urgency in coming up with the right policy responses,” the researchers argue. “As developing countries respond to today’s urgent interconnected crises, they also need to take strategic, long-term action to build innovation and technological capacities to spur sustainable economic growth and increase their resilience to future crises.”
UNCTAD is urging developing country governments to align their environmental, science, technology, innovation, and industrial policies. The organization recommends prioritizing investment in greener and more complex sectors, providing incentives to encourage demand for greener products, and boosting investment in research and development.
Developing countries must also urgently enhance technical skills and scale up investments in ICT infrastructure, reducing connectivity gaps between small and large firms and between urban and rural areas.
However, developing countries cannot take advantage of green technologies alone. The success of their domestic policies will be largely dependent on global cooperation through international trade, necessitating reforms to existing trade rules to align with the Paris Agreement on climate change.
The report suggests that international trade regulations should allow developing countries to protect emerging green industries via tariffs, subsidies, and public procurement, enabling them to meet local demand while also achieving economies of scale that make exports more competitive.
Green transfer
International assistance to transfer green technologies to developing countries is also critical. The report proposes the application of principles used in response to the COVID-19 pandemic, where some countries were permitted to produce and distribute vaccines without the consent of the patent holder, allowing manufacturers in developing countries faster access to essential green technologies.
It also advocates for more flexibility in international trade and related intellectual property rules for developing countries to establish industrial and innovation policies to promote their emerging industries, thereby enabling new green technology sectors to emerge.
The report also calls for an international program for the guaranteed purchase of tradable green goods, coordinated multinational green technology research, increased support for regional centers of excellence for green technologies and innovation, and a multilateral fund to stimulate green innovations and promote cooperation between countries.
