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economy, be costly to implement, and may createtrade problems. In these uncertain times, the threat ofBTAs is likely to remain, yet the real focus of efforts toaddress competitiveness concerns should be to exploremore effective policy options to level the playing field.Climate policies are also needed to accelerate thedevelopment and diffusion of clean technologies.OECD analysis of innovation in clean technologiesindicates that business and other innovators needlong-term, predictable and strong policy signals. Forexample, the adoption of the Kyoto Protocol in 1997coincided with a sharp increase in the rate ofinnovation in climate-friendly technologies. However,much of this innovation is concentrated in OECDcountries. So what are the key factors that encouragedevelopment and diffusion of green technologies indeveloping countries? OECD work shows that countrieswith high domestic technological and absorptivecapacity are more likely to both develop and to importclean technologies. These capacities are driven bylocal policies in developing countries as well as byparticipation in targeted international researchprogrammes. A key priority for international climatesupport should be to further strengthen local02040CHART 1: THE IMPACT OF DIFFERENT OFFSET LIMITS INANNEX I COUNTRIES IN 2020Source: OECD (2010), "Costs, revenues, and effectiveness of the CopenhagenAccord emission pledges for 2020", Environment Working Paper 22,www.oecd.org/env/cc/econ.2.01.81.61.41.21.00.80.60.40.20.01.41.60.4GDP impact and fiscal revenues in %0.41.11.20.30.30.70.80.20.2Limit on offsets in %Low & FragmentedHigh & LinkedFiscal revenues (% of GDP)GDP impact (% change from BAU)Fiscal revenues (% of GDP)GDP impact (% change from BAU)

technological capacity in developing countries (Chart 2).The OECD will continue to provide fact-based analysisand present policy options on how to reconcileenvironmental concerns with economic and social goals.Besides the work mentioned above, the OECD willdeliver its Green Growth Strategy in May 2011 and willcontinue to work on a number of issues relevant for thefight against climate change, including governance,finance and development co-operation. Climate changeis the greatest challenge facing mankind today and theOECD is ready to continue to support internationalclimate change negotiations. nABOUT THE AUTHORAngel Gurría is the Secretary-General of theOrganisation for Economic Co-operation andDevelopment (OECD). He came to the OECD followinga distinguished career in public service, including twoministerial posts. As Mexico's Minister of ForeignAffairs from December 1994 to January 1998, MrGurría made dialogue and consensus-building one ofthe hallmarks of his approach to global issues. FromJanuary 1998 to December 2000, he was Mexico'sMinister of Finance and Public Credit. For the firsttime in a generation, he steered Mexico's economythrough a change of Administration without arecurrence of the financial crises that had previouslydogged such changes. As OECD's Secretary-General,since June 2006, Mr Gurría has reinforced theOECD's role as a "hub" for global dialogue and debateon economic policy issues while pursuing internalmodernisation and reform. TRADE & ECONOMIC DEVELOPMENT031" "OECD ANALYSISFOUND THAT REMOVING SUBSIDIES TO FOSSIL FUEL CONSUMPTIONALONE COULD REDUCE GLOBALGHG EMISSIONS BY10 PER CENT IN2050CHART 2: INNOVATION TREND IN CLIMATE MITIGATION TECHNOLOGIES 1990 (1990=100)Source: www.oecd.org/environment/innovation Change in patenting activity(three year moving average, indexed on 1990=100)