Environmental Technologies Industries

Environmental Technologies Industries

Market Plans

Climate Change Report

Chapter 4 - Strategies for Success

Climate change mitigation technologies and services, as described in chapter 2, are diverse, ranging from
advanced power generation technologies that reduce GHG emissions while improving the overall process
efficiency, to consulting services that assist in developing and implementing emission mitigation policies.
To succeed in the international market for such technologies and services, U.S. firms should be aware of the
realities of doing business in developing countries, know and be able to take advantage of particular market
characteristics, and use available information support services.

This chapter presents market strategies for both large and small companies. It provides important hints on how
to enter and compete in relevant local markets and how to pursue international climate change projects. It also
gives an overview of U.S. Government programs to assist U.S. environmental technology and services companies
in developing business overseas.

Entering and Competing in Local Markets

Country Market Intelligence

The first step toward developing a successful export market strategy is knowing where the markets are and how
to access them. Export markets can seem inaccessible to companies with limited experience in specific countries.
To make these concerns less daunting, large and small companies should conduct preliminary market research.
Knowing the stage and pace of market development as well as the local business culture is critical in prioritizing
business development efforts. Many large companies find that to gain a substantial market share, they must be
the first on the ground in the targeted country, which often involves years of education and product orientation
prior to any direct sales.

The relevant U.S. Government assistance programs are described in the section entitled "Taking Advantage of
U.S. Government Assistance Programs". Other sources that can provide market intelligence information include the World Trade
Centers Association, consisting of over 300 trade centers worldwide, international accounting firms, and many
consulting firms. For some companies, having access to proprietary information that, though costly, gives them
the edge over competitors is a worthwhile marketing investment. A company can utilize these resources to begin
to identify and prioritize country markets for particular products or services. At the same time, firms can learn which
U.S. and foreign companies are active in the country and evaluate their competitiveness.

Climate change markets may be fragmented by economic sectors as well as within each of these sectors. There
is almost never a single market structure that encompasses all products or services relevant to this market. The
complexity of the climate change market is illustrated by the following:
The market includes a diverse group of finished goods, components, engineered systems, and climate
change-related services.
The industry encompasses diverse energy end-use applications in the residential and commercial, industrial,
and transportation sectors.
Project sizes also vary significantly. The cost of energy efficiency projects, for instance, may range from a
few hundred dollars for steam traps to millions of dollars for cogeneration systems and more extensive
industrial system retrofits.

Due to this high fragmentation of climate change markets, it is impossible to recommend universal marketing
rules. Marketing approaches depend on four country-specific factors: distribution channels, product knowledge,
buyer concentration, and market barriers.
Distribution channels include local agents and exclusive distributors that take products to the market.
Large industrial or commercial consumers may obtain products directly from the distributor, while residential
consumers may purchase goods in retail stores. For example, in India, a three-tier selling and distribution
structure is commonly used by most manufacturers, including a distributor, wholesaler, and retailer.
To ensure effective marketing and after-sales service, manufacturers typically provide their distributors,
local agents, or other key marketers with specialized product training. Accurate product knowledge can
be critical to overcoming information barriers that limit product sales, particularly for new products.
Buyer concentration is also an important factor, since initial market entry and development can often be
facilitated by the existence of concentrated sources of demand. For example, many climate change
projects focus on particular geographical areas of the country where the GHG mitigation potential is the
greatest.
Market barriers may include, but are not limited to, trade barriers (import duties or quotas), high
consumer discount rates, lack of investment capital or availability of financing, inadequate pricing,
sector-specific inefficiencies, lack of information and training, lack of government capability and
leadership, and lack of involvement on the part of the donor community.

The decision-making process in developing nations is typically less transparent and is subject to less
oversight than in the United States. There is often a lack of coordination between government agencies
making decisions at the national, regional, or local level. Understanding the country's institutional and
regulatory frameworks and decision-making procedures, and establishing local political connections and
partnerships are critical to achieving success in export markets.

Establishing Local Partnerships and Representation

Local partnerships and representation provide U.S. firms with the advantage of learning about opportunities
before their competitors. Establishing a presence in a country requires both time and investment of human
and financial resources. Methods for establishing a local presence range from hiring a local consultant or
agent to represent the firm, to setting up a local office. In exploring the options for local representation, the
firm must determine which option is the most viable given its financial and human resource limitations. U.S.
companies should also be familiar with the host country's rules and regulations concerning the establishment
of local offices and partnerships with local organizations. Valuable information can be found in the U.S.
Department of Commerce's Country Commercial Guides.

Typical Options for Local Representation
Local consultant, representative, or agent
Local office or branch
Partnership with a local firm
Partnership with a third-country firm
Wholly-owned subsidiary
Joint venture company

There are several ways U.S. companies may establish a local presence in a developing country market:
U.S. companies may want to establish a joint venture or partnership with a local firm. Local firms bring
critical familiarity with the in-country regulatory environment and exclusive technical knowledge
important in adopting U.S. technologies and engineering to local conditions. A joint venture or partnership
also allows access to projects that are bid in the country itself. Therefore, finding a well-established
local partner or firm is extremely important. A U.S. company should become familiar with its prospective
partner before making business decisions. Understanding the culture of a local market can also be
extremely important in finding a right partner.
U.S. equipment manufacturers may establish relationships with agents to import and sell their products
in the local market. There are a number of U.S. Government programs that assist exporters in finding local
agents and distributors.
U.S. firms may choose to enter a country market through a partnership with a third-country firm that
has strong local representation. For example, teaming with Indian firms can help U.S. companies gain access
to other Asian markets. Teaming with European or Japanese firms that already have a substantial market
share in the country may also prove beneficial.
Establishing a local office helps companies respond faster to sales opportunities. In equipment sales, a
local branch can provide comprehensive service from the customized design and installation of a technology
to technical support and after-sale maintenance. This strategy is generally most effective for bidding on
large infrastructure or technical assistance projects sponsored by the U.S. Agency for International
Development, the World Bank, and other donors whose tenders are open for U.S. companies.

Pursuing International Climate Change Projects

Multilateral and Bilateral Projects

Bilateral and multilateral development agencies provide the bulk of funding and financing for environmental
and infrastructure projects in developing countries. Among the various types of market opportunities that
arise from bilateral and multilateral funding sources, the two primary opportunities are equipment sales and
technical assistance. To reduce the risk for U.S. companies providing goods and services, payments are
typically made in foreign exchange (often U.S. dollars), which makes donor-supported projects particularly
attractive to U.S. firms. Project funds are used to procure the goods, equipment, contract works, and
consultant services needed to design and implement these projects, either directly from the funding agency
or through loans to the host country government.

Multilateral development banks (MDBs) that are central to many U.S. companies’ export market strategies
include the World Bank, the Asian Development Bank (ADB), the Inter-American Development Bank (IDB),
and, to a lesser extent, the African Development Bank (AfDB). The World Bank also manages the Global
Environment Facility which has emerged as a key funding source for climate change programs.

An overview of the key multilateral and bilateral development banks is provided below (contact information
for these institutions is listed in appendix B). Information can be gathered by contacting each individual
agency. Multilateral Development Bank Operations within the U.S. Department of Commerce's International
Trade Administration provides a single source for obtaining information about multilateral development
agencies (contact information for this office can also be found in appendix B).

The World Bank Group. The World Bank Group is the largest source of international development financing
and includes the International Bank for Reconstruction and Development (IBRD), the International
Development Agency (IDA), the Multilateral Investment Guarantee Agency (MIGA), and the International
Finance Corporation (IFC). The borrower, not the World Bank, is always responsible for procurement. The
World Bank provides financing from its loans for the contracts, but the contract itself is between the borrower
and the supplier or contractor. The World Bank's role is to make sure that the borrower's work is done
properly, that the agreed procurement procedures (e.g., international competitive bidding) are observed, and
that the entire process is conducted with efficiency, fairness, transparency, and impartiality.

Suppliers, contractors, and consultants can learn more about this process by attending Monthly Business
Briefings at the World Bank's headquarters in Washington, D.C., or reading the Guide to International
Business Opportunities. The briefings explore strategies for keeping informed about projects and methods
for pursuing foreign investment opportunities. The bank issues numerous publications, including
Environment Matters, which summarizes its environmental operations. The World Bank's environmental
projects are summarized in its published portfolio, Facing the Global Challenge: A Progress Report on the
World Bank Global Environment Operations.

To assess the qualifications of firms and to assist borrowers in establishing a short list, the World Bank
maintains a computerized roster of consulting firms interested in doing business on bank-financed projects,
called the Data on Consulting Firms (DACON) system. (There is no similar registration system for
manufacturers and other suppliers of goods or contractors for works.)

The United Nations publishes a biweekly tabloid called Development Business which is available by
subscription. Development Business carries information on business opportunities generated through the
World Bank, regional development banks, and other development agencies. Development Business is also
available by on-line subscription. More information may be obtained by contacting the World Bank's
Development Business Liaison Office (http//www.devbusiness.com).

Global Environment Facility (GEF). Projects funded by the GEF are implemented by the World Bank, the
United Nations Development Programme (UNDP), and the United Nations Environment Programme (UNEP).
The GEF has funded more than 500 projects in 120 countries. GEF funds contribute to the costs of making
planned projects environmentally friendly. The GEF supports projects that are directed toward saving energy
and opening markets for renewable energy technologies. Such projects are aimed at reducing reliance on
inefficient technologies that cause air pollution and contribute to climate change.

Inter-American Development Bank (IDB). The IDB provides capital for different types of infrastructure
projects in 26 Latin American and Caribbean nations. It uses funds to sponsor the development of its
member countries by supplementing private investment when private capital is inaccessible. Technical
assistance for the preparation, financing, and implementation of development plans and projects is also
provided by the IDB. Individuals, firms, and organizations that want to learn how to bid on contracts
to provide goods and services for projects financed by the IDB should attend its Business Seminars. The
topics covered in the seminars will help participants develop or expand their participation as suppliers of
goods and services in the wide variety of sectors financed by the IDB. These seminars are highly recommended
for equipment manufacturers, goods suppliers, work and construction contractors, independent consultants
and consultants from universities, think tanks, and nongovernment organizations. The IDB publishes the
IDB Project Magazine.

Asian Development Bank (ADB). The ADB provides assistance to 33 developing countries in the Asia–Pacific
region, including China, India, and the Philippines. The bank makes loans and equity investments, and
provides technical assistance for the preparation and execution of development projects and programs.
The ADB holds Business Opportunities Seminars in different member countries throughout the year (the
ADB's North American office is located in Washington, D.C.). The ADB also publishes the ADB Business
Opportunities on a monthly basis. The on-line edition of the ADB Business Opportunities can be found on
the ADB website and is updated weekly.

African Development Bank (AfDB). The AfDB primarily assists the governments or government-owned
corporations in member African countries. To better direct financial assistance to environmental sectors,
the bank has prepared country environmental profiles. The AfDB’s operational program has four main
priorities: elimination of poverty, reconstruction and rehabilitation, development of the private sector, and
increasing trade and economic integration. The AfDB is also involved in various other sectors, ranging from
infrastructure to the economy, including the environment, health care, and demography.

To participate successfully in multilateral donor-assisted projects, companies must understand the donor's
project cycles and bidding procedures. Companies can identify and track project opportunities by subscribing
to a donor agency's project notices publication. The typical stages of a project cycle are project identification,
preparation, appraisal, and implementation. The project cycle can be quite lengthy, up to several years. During
this long lead time, companies should familiarize themselves with relevant host country institutions and market
conditions.

Although companies may contact donor agencies and/or relevant recipient country agencies at any stage of
the project preparation, early involvement is often critical. For example, feasibility studies sometimes conducted
in the early phases of the project usually contain valuable technical and contact information. It is also advisable
to start forming alliances with local counterparts at the early stages of project development.

U.S. Agency for International Development (USAID). USAID is the main U.S. bilateral donor agency. It offers
economic development and humanitarian assistance (in the form of grants) to advance U.S. economic and
political interests overseas. U.S. foreign aid also creates markets abroad for U.S. goods and services by offering
a competitive advantage to U.S. suppliers (procuring from U.S. suppliers is mandated by USAID). USAID
promotes environmental improvements in host countries by providing technical demonstrations designed to
help industries recognize the need for and benefits of cleaner production and cleaner technology. The agency
also provides policy and institutional support to aid host country governments in developing environmental
management and pollution prevention policies and regulations.

USAID projects are usually bid out of in-country USAID Missions and are announced in the Commerce
Business Daily. Contracts are typically one to five years in duration, with value between $1 million and
$100 million. Consortia of several companies, usually consulting and engineering firms, have greater chances
for success in bidding for USAID projects than individual companies. Companies with local offices that are
known to USAID Missions find themselves in an advantageous position compared to firms unfamiliar to
USAID.

CDM Projects

The Clean Development Mechanism (CDM) of the Kyoto Protocol is expected to present opportunities for
climate change mitigation-related technologies and services exports. Several aspects of the CDM remain
unclear, including project funding procedures and certification of emission reduction credits. It is anticipated
that the CDM rules will be adopted at the Sixth Conference of the Parties to the UNFCCC in 2000. With the
rules of the CDM still being discussed, funding is not yet available. The U.S. Senate has to ratify the Kyoto
Protocol in order for U.S. firms to be able to participate in the CDM projects. Currently, there is no national
CDM program in the United States.

As the scope and details of the CDM become finalized, companies can prepare themselves for possible project
opportunities. Researching options now can provide a firm with a competitive advantage as, when the market
opens, such firms will know the potential opportunities and/or can be the first to penetrate the market. To
monitor the progress of the CDM negotiations, U.S. firms can visit the UNFCCC website (http://www.unfccc.de).
The website offers the full text of the Kyoto Protocol, accompanied by a useful commentary. The website also
offers a calendar of up-coming international events related to the CDM, as well as proceedings of the past
meetings.

Firms should become familiar with the potential multilateral and individual private investors in future CDM
projects. The World Bank's Prototype Carbon Fund (PCF) is the only CDM-related multilateral initiative
currently being developed. (However, other multilateral initiatives may emerge, depending on PCF’s success.)
The PCF will operate under the provisions of the UNFCCC and the Kyoto Protocol. The operational procedures
for the PCF will not be finalized until the CDM rules are established. Most PCF projects are expected to be
supplemental to projects in the existing and planned World Bank project pipeline. Therefore, it is likely that
the procurement practices of the PCF will follow those of the World Bank. Information about the PCF, ranging
from project selection criteria to the project cycle, can be found on the World Bank website.

Information on potential individual private investors can be found through a variety of resources. The U.S.
Department of Energy (U.S. DOE), the lead U.S. Government agency for climate change issues, maintains the
JI Online website (http://www.ji.org), which contains information about worldwide joint implementation (JI)
activities under the UNFCCC, including CDM-related issues. Relevant existing projects are listed by category
(e.g., clean coal and renewable energy) and by country. This website is intended to facilitate communication
among parties with an interest in JI and CDM projects. It guides users to private sector climate change
initiatives.

One such program is the International Utility Efficiency Partnerships, Inc. (IUEP) — a separately funded
activity within the Edison Electric Institute (EEI). IUEP was formed in early 1995 to identify international
energy project development opportunities, to sponsor workshops with host country government personnel
in facilitating project investment and development, and to demonstrate U.S. utility commitment to voluntary
approaches to global climate change issues. IUEP also solicits proposals from parties interested in developing
and implementing international energy efficiency projects that will mitigate GHG emissions. Participation in the
IUEP is open to EEI investor-owned electric companies, EEI international affiliates, EEI associates, and energy
product manufacturers and service providers.

Since 1994, the U.S. DOE and the U.S. Environmental Protection Agency (EPA) have been co-managing the
pilot U.S. Initiative on Joint Implementation (USIJI). The USIJI Secretariat is currently the only U.S. office
that works on issues related to JI and the CDM. Over the course of the program, the USIJI has developed
extensive contacts among U.S. private companies willing to invest in future JI and CDM projects. Such
contacts are helpful to U.S. firms seeking to export climate change mitigation technologies and services
using CDM funding. Although the USIJI is expected to be completed in 1999 (signifying the end of the
pilot phase of JI/CDM), the U.S. DOE and the U.S. EPA are considering maintaining the USIJI Secretariat as a
clearinghouse for U.S. firms in anticipation of the growing demand for informational and technical support for
JI and CDM projects.

Although U.S. private investment in CDM projects presents the largest market opportunities for U.S. suppliers
of climate change-related technologies and services, U.S. exporters may want to explore the market potential
related to other countries’ CDM initiatives. Some third country-funded CDM projects may be in need of
advanced U.S. technologies. To research such possibilities, companies can get information from JI/CDM
programs in other developed countries. One example of such programs is the Joint Implementation Network of
the Netherlands, which can be accessed through its website (http://www.northsea.nl/jiq).

Taking Advantage of U.S. Government Assistance Programs

The U.S. Government has a number of programs that provide support services to U.S. environmental
technology exporters. The main U.S. Government agencies involved in U.S. export promotion are the
U.S. Department of Commerce, the U.S. Trade and Development Agency, and USAID.

U.S. Department of Commerce

Within the U.S. Department of Commerce (U.S. DOC), several offices and centers provide services that assist
U.S. exporters in their business development efforts. The relevant contact information is provided in appendix B.

The Environmental Technologies Exports (ETE) office provides U.S. firms with market and project information
focusing on key emerging markets, upcoming trade promotion events, other organized activities for environmental
exports, and key overseas contacts in the market. It also promotes U.S. environmental exports by leading
environmental business missions around the world. The office issues a series of publications, including
Environmental Technology Exports: A Guide to U.S. Government Resources and Environmental Export Market
Plans for many of the big emerging markets.

The U.S. Commercial Service ( The Commercial Service) has offices located in over 220 cities around the
world to assist U.S. exporters. The organization offers U.S. businesses advocacy support and services such
as export counseling, trade finance information, customized market research, and identification of trade leads.
It also organizes trade missions and events, and offers a Gold Key Service to link U.S. firms with agents and
distributors around the world by allowing visiting U.S. company representatives to get a firsthand
understanding of the local market and make key contacts so critical to successful exporting.

The Matchmaker Trade Delegations Program helps small and medium-sized U.S. companies establish business
relationships in major markets abroad. Each Matchmaker Trade Delegation targets major markets in two or three
countries with strong sales potential for U.S. goods and services. Commercial specialists at U.S. embassies and
consulates in the targeted countries prescreen contacts and arrange business appointments for participating U.S.
firms. The Matchmaker Program also offers market research and evaluation of the market potential for a specific
product or service; in-depth country market and trade finance briefings; interpreter services and logistical support;
and export counseling before, during, and after the trip.

The Advocacy Center promotes U.S. firms through advocacy by high-level U.S. Government officials and
tracks environmental projects worldwide. The Trade Information Center (TIC) is a comprehensive resource
for information on all federal government export assistance programs. The TIC staff counsel small and
medium-sized U.S. companies that are entering the export market. Multilateral Development Bank Operations
provides the U.S. exporting community with comprehensive information on all multilateral development bank
programs and opportunities.

Export Assistance Centers (EACs) are a joint effort of the U.S. Commercial Service, the Small Business
Administration (SBA), the U.S. Export–Import Bank, and USAID. The EACs personnel counsel small and
medium-sized export-ready businesses and help them develop customized international business strategies.
Export assistance centers are located throughout the United States and in nearly 70 countries abroad.

U.S. Trade and Development Agency

The U.S. Trade and Development Agency (U.S. TDA) is an independent federal agency dedicated to assisting
U.S. companies in pursuing business opportunities in developing countries and responding to foreign
competition. It sponsors feasibility studies, definitional missions, and desk studies for major public and private
sector projects in order to promote the use of U.S. goods and services in project implementation. By funding
feasibility studies that evaluate the technical, legal, economic, and financial aspects of development projects,
U.S. TDA provides U.S. companies with an opportunity to get in on the “ground floor” of a project.

U.S. TDA focuses primarily on feasibility studies for infrastructure development projects. Funding from the
agency usually ranges from $150,000 to $750,000 for public sector projects. These feasibility studies also
advise project sponsors about the availability of specific U.S. equipment and services. US. TDA publishes
the TDA Pipeline, its biweekly newsletter, that highlights new definitional missions, feasibility study
opportunities (also advertised in the Commerce Business Daily), and upcoming orientation visits and
conferences.

U.S. Agency for International Development

The U.S. Agency for International Development (US-AID) also conducts assistance programs for U.S. firms
that export technology and services overseas, including the Global Technology Network, Technology
Assistance Centers, and NASDA grants.

The Global Technology Network (GTN) is operated and administered by the USAID’s Office of Business
Development. The primary objective of the office is to leverage the agency's resources by establishing
partnerships with the private sector in support of USAID’s global economic development mission. The GTN
develops and disseminates sector-specific guides about USAID programs and activities.

Technology Assistance Centers (TACs) are a service of the Global Technology Network. The TACs are
USAID-funded business development operations designed to help private sector companies in developing
countries access the technology and expertise needed to compete effectively in local and global markets.
TACs serve as a mechanism for organizing and assisting developing country firms, especially small and
medium-sized enterprises seeking access to U.S. technology and expertise. TACs also provide trade leads
to U.S. firms seeking to market their products and services abroad.

NASDA Grants. The National Association of State Development Agencies (NASDA) administers two similar
grant programs promoting U.S. environmental technology exports to Asia and Latin America. The Environmental
Technology Fund, created under the U.S.–Asia Partnership Program, provides matching grants of up to $20,000
to help small and medium-sized U.S. companies enter Asian environmental markets. (China is not included in the
Environmental Technology Fund. NASDA administers a separate, China-focused Program for Environmental
Technology Transfer funded by the U.S. EPA.) Along the same lines, the Latin America Fund for the Environment
offer matching grants of up to $10,000. Grants can be used for such activities as technology workshops, equipment
demonstrations, focused business missions, and professional exchange programs. Both funds focus on pollution
control, cleaner technologies, and energy efficiency.

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