Compensating developing countries for use of environmentally sound technologies

Context

In some cases, developing countries have demanded compensation from developed countries for the difference in investment costs between environmentally sounder technology and the existing alternative in use.

Counter-claim

In the long run, this is not a desirable procedure, since it exacts an opportunity cost in terms of resources available in the developed countries for development aid. The long-run objective should rather be to phase out such special deals because, although they may be represented as add-ons in, the short-term, they will inevitably eat into development aid in the long-term, and they may retard the build-up of endogenous innovation capacity in respect of the technologies involved.