Technology upgrade

The Eighteenth Meeting of the Executive Committee decided:

(a)  that costs associated with avoidable technological upgrades should not be considered as eligible incremental costs and therefore should not be funded by the Multilateral Fund; and

(b)  that the following methodology for the quantification of technological upgrades will be used as guidance in the calculation of incremental costs:

      In projects where add-on technological upgrading is established, but standard projects and production capacity/market expansion are not determined, the baseline scenarios should be constructed with respect to future investment and benefits streams. The projected investment and benefits profiles of the enterprise (with and without the conversion project) should be reviewed by the technical reviewer and the Implementing Agency to ensure broad consistency with the technological and commercial practices of the enterprise. The incremental costs would be calculated as:

      IC   =    [CC - NPV(FI)] + NPV[FB_b - Fb_p], where,

                  IC is the incremental cost,

                  CC is the capital cost of the conversion project,

                  FI is future baseline investments (that would have occurred absent the conversion),

                  Fb_b is the future baseline benefits (that would have occurred absent the conversion),

                  Fb_p is the future benefits with the conversion project.

                  NPV refers the net present value of a stream of costs/benefits.

(UNEP/OzL.Pro/ExCom/18/75, Decision 18/25 para. 57).

(Supporting document: UNEP/OzL.Pro/ExCom/18/74).

The Seventh Meeting of the Parties requested the Executive Committee to re-examine its interim conclusions contained in paragraphs 11 and 13 of that report in the light of issues raised in paragraph 45 of the report of the Eighteenth Meeting of the Executive Committee (UNEP/OzL.Pro/ExCom/18/75), the Report on the Review under Paragraph 8 of Article 5, and the Study on the Financial Mechanism of the Montreal Protocol, and other issues including equity, limited resources, conditions attached to project approvals and payment of technology transfer fees as negotiated by enterprises in Parties operating under Article 5.

The Parties also requested the Executive Committee to provide a final report on this issue to the Eighth Meeting of the Parties. In particular, in preparing this report, the Committee is requested to seek input from Article 5 Parties on their experience with impediments to technology transfer and to identify solutions to overcome such impediments. The Executive Committee is authorized to provide appropriate funding, if necessary, for this purpose.

(UNEP/OzL.Pro.7/12 Decision VII/26 (paras. 3, 4).