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Leading developing countries for the first time made commitments to limit or curb their greenhouse gas emissions as part of the Copenhagen accords at the end of last year.

What remains to be seen, is whether the targets are sufficiently ambitious and how fast companies in these countries can respond.

To assist them, developed countries have pledged technical and financial assistance. Loans such as the World Bank’s climate investment funds (CIFs) have been put in place to help finance projects in emerging markets that reduce greenhouse gas emissions.

Other support is available from non-governmental organisations (NGOs), such as the Joint US-China Co-operation on Clean Energy (Juccce). One of its initiatives brings together experts, companies and utilities to promote understanding in China of how smart grids – which manage power flows more effectively – could increase energy efficiency.

However, while targets set at Copenhagen – supported by multilateral assistance packages and NGO initiatives – will prompt developing countries to embrace energy efficiency, these will not be the only factors driving progress.

“There’s ample reason to be optimistic about efficiency generating enormous savings,” says David Yarnold, executive director of Environmental Defense Fund, a US-based non-profit environmental advocacy group.

“But having said that, are the voluntary targets going to drive that? What’s actually going to drive it, is bottom-line profitability.”

At least developing countries embarking on carbon-reduction strategies can leapfrog technologies.

“In these countries, you have old factories that are very inefficient from an energy perspective,” says Ramon Baeza, a Madrid-based senior partner in the Boston Consulting Group’s energy practice. “But because of the growth in some of these countries, you also have some very modern facilities.”

The same is true when it comes to the built environment. While owners and managers in US and European cities struggle to put more efficient technology in old infrastructure, developing countries are often building residential and office districts from scratch.

Allan Schurr, head of strategy for IBM’s energy and utilities unit, compares cars. “Old cars are less efficient because energy was cheaper when they were manufactured. New cars are more fuel-efficient,” he says.

“That’s happening with buildings in China, India and other developing markets – where there’s more growth. New ones tend to be more efficient.”

Because the economies, climates and topographies of developing countries vary, so should their carbon-reduction strategies, says Mr Baeza.

While in China the focus might be on industrial energy efficiency, in Latin America the most effective way to fight climate change could be to invest in measures such as reducing emissions from deforestation and land de­gradation.

Moreover, while there is much talk of technology transfer to assist less developed nations, in some areas those countries are emerging as leaders. In Brazil, for example, the government has set deforestation reduction targets. Meanwhile, the country has forged ahead with sugarcane-based ethanol production, with most of its new vehicles able to switch between petrol and ethanol.

“The best opportunities are in emerging markets,” says Joao Geraldo Ferreira, president and chief executive of GE Brazil, citing the January launch in Brazil by GE and Petrobras of the first power plant able to generate electricity based on ethanol.

“Brazil plays a crucial role in developing green technologies,” he says.

As in mature markets, regulation plays a big role. In India, government subsidies have supported the growth of a wind power industry, with Suzlon Energy, a former textile business, emerging as the world’s third-largest wind turbine supplier.

At the same time, small-scale initiatives can make a difference. In Ghana and Kenya, the World Bank is financing a project called Lighting Africa to make light-emitting diode (LED) lanterns available in rural areas that are not connected to the electricity grid, providing an affordable, non-polluting alternative to kerosene lamps.

“The use of kerosene in rural parts of developing countries is a surprisingly large market,” says Alan Miller, climate change specialist at the International Finance Corporation, part of the World Bank Group.

“And if you can get the price low enough, [LED lighting] is something that doesn’t need a big subsidy because people are already paying $1 to $2 a month for a kerosene lamp,” he says.

However, while progressive policy commitments, technology innovations and carbon reduction strategies are starting to be seen in emerging markets, climate change strategies come against a pressing need to accelerate growth in gross domestic product, particularly in countries such as India and China.

Moreover, in some countries – notably China – industrial expansion has been supported by power generated in large part by highly polluting coal-fired power stations.

For this reason, Mr Yarnold says, developing countries need to do more. “It’s terrific that for the first time these countries have made commitments,” he says.

“But those commitments are like sales targets that you know you can achieve. It’s a net plus – but I wouldn’t get carried away with the potential impact.”

Copyright The Financial Times Limited 2017. All rights reserved.
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