U.N. urges investment policy to foster low-carbon growth

GENEVA (Reuters) - Developing economies can jumpstart low-carbon economic growth through "clean" investment promotion policies, despite slow progress in international climate negotiations, a United Nations agency said.

The U.N. Conference on Trade and Development (UNCTAD) urged developing country governments to harness investments by multinational companies to ensure that economic growth does not drive up carbon emissions.

Multinationals can help cut emissions by improving production processes in their operations and along their value chains and by making and marketing cleaner goods and services, UNCTAD said in its annual World Investment Report on Thursday.

Flows of foreign direct investment (FDI) into key low-carbon business areas such as renewables, recycling and low-carbon technology amounted to roughly $90 billion in 2009, it said.

But taking into account low-carbon investments in other industries, the actual total is much higher, it said.

UNCTAD Secretary-General Supachai Panitchpakdi told a briefing that green technology was likely to see an investment boom similar to railways, cars and information technology in previous centuries.

UNCTAD officials believe developing countries should seize the opportunity or risk being shut out of developed markets. For instance, geographical location gives developing states huge potential to develop solar power.

The sectors with the most potential for this kind of investment are power and industry, but transport, construction, waste management, forestry and agriculture can also benefit, the UNCTAD report said.

At the same time there is a risk that companies will move high-emission operations to locations with laxer regulation, which can generate short-term economic growth for the country concerned while impeding global efforts to cut emissions.

UNCTAD said this problem of "carbon leakage" should be tackled at its source through corporate governance measures such as improved environmental reporting, rather than through border measures such as tariffs on carbon content.

The report forecasts overall FDI inflows will pick up to $1.2 trillion this year and rise to $1.3-1.5 trillion in 2011.

(For report documents go to http://www.unctad.org/wir )

(Reporting by Jonathan Lynn; Editing by Stephanie Nebehay)