Ecological Impact Fund

Developing countries lag in deploying advanced green technologies. Absent strong environmental regulations, substantial taxes on emissions and green subsidies, there is little motivation to invest in overcoming the challenges posed by patents and technical know-how. Better incentives are needed to intensify the development of green innovations suitable for the developing world and their rapid and wide deployment.
 
The Ecological Impact Fund (EIF) is a proposed new international financing facility that would enable originators of innovative green technologies to exchange some of their monopoly privileges in return for impact rewards. The invited exchange would apply only in the lower-income countries: originators choosing to forgo their monopoly markups in this EIF Zone would receive shares of predictable annual disbursements that are divided according to the emission reductions achieved with deployments of their “greenovation” in that EIF Zone. The EIF would create an artificial market on which greenovations of many different kinds would be able to compete.
 
The EIF’s main purpose is greatly to improve the diffusion of impactful green technologies in the Global South. It would do so first by inducing participating originators to waive licensing fees and monopoly markups, and second by giving these originators a financial interest in the wide and effective use of their participating innovations. In addition, the EIF would stimulate development of additional greenovations that – tailored to prevailing needs, cultures, circumstances, and preferences in the EIF Zone – would be especially impactful there. These two effects would produce a third: the EIF would help build capacities to develop, manufacture, distribute, install, operate, and maintain greenovations in the EIF Zone.
 

Advantages of the EIF

Efficiency: it creates strong incentives to develop and deploy green technologies for the most cost-effective emission reductions across a wide range of sectors and technologies.

Performance: it pays strictly according to actual impact.

Cost control: it limits cost by means of a fixed annual budget and secures cost-effectiveness through competition among a wide variety of green innovations.

Innovator Attitude: it motivates originators actively to support cost-free deployment of their innovations by helping with installation and know-how, and even through subsidies to poor buyers – to the extent that the additional green impact rewards earned by such efforts are expected to outweigh their cost

Fairness: it is funded by the main beneficiaries of historical emissions, ensures ample rewards to participating innovators, supports developing countries in their green transformation, and reduces the dangers of climate change for all and especially for the most vulnerable..

Consonance with SDGs: it advances sustainable industrial and technological development in low-income countries (SDG 9) and could immediately mitigate emissions to reduce climate change (SDG 13), including through helping to support access to clean energy (SDG 7) while strengthening international partnership (SDG 17).

Immediate Goal: Ecological Impact Fund (EIF) Pilot in Africa

One or more high-income countries would offer a reward of up to $25 per ton of CO2e emissions averted by the deployment of green technologies in Africa. The pilot would be limited in scope, with each participant earning rewards based on the assessed emissions reductions over three years. Total payments would be capped so that if the projects over-performed, there would be an equiproportionate reduction in payments for each participant. Additionality would be an essential criterion for payments.

More information

A one-page policy brief on the EIF.

A fuller discussion of the EIF (winner of an OHE policy innovation prize).

The EIF at Ideas Lab in Brussels (CEPS).

The EIF at the German Council on Foreign Relations (DGAP).

A statement by the German technology assessment agency TÜV SÜD on the feasibility of assessing emission reductions, as required in the EIF’s operation.