Griffith Hack Clean & Sustainable Technologies


The debate surrounding patents and low carbon technology is heating up by Justin Blows
Tim Wilson

Tim Wilson

Last week the latest United Nations Framework Convention on Climate Change (UNFCCC) meeting concluded in Bonn, Germany. A core focus of the meeting’s work program was the role of technology to reduce global greenhouse gas emissions in a post-Kyoto agreement, and rightly so.

If a post-Kyoto agreement is to be negotiated at the December Copenhagen meeting later this year it is likely to include emissions reduction targets for developing and developed countries alike. Developing countries are particularly sensitive about reducing emissions when their economies still require significant growth to lift people out of poverty. Technology provides the opportunity to reduce emissions and continue economic growth.

Technology matters because it provides options to reduce emissions from existing sources of energy (such as carbon capture and storage), decrease demand for energy through more efficient consumption (such as fluorescent lamps) and utilise new low/no-emissions energy production (such as solar panels and wind farm).

There is no dispute about the vital role of low-carbon technologies in achieving carbon dioxide reduction targets. At the Bonn UNFCCC meeting Indian government official, Ajay Mathur, argued “technology is the only way”.[1]

But there is a problem many developing countries are raising in accessing these technologies – price. Low-carbon technologies are often expensive, especially on the scale required for developing countries to meet prospective emissions reduction commitments. And many are blaming patents.

Opponents of patents on low-carbon technology are arguing they unnecessarily increase the price of technologies and therefore reduce access and technology transfer. Their solution is to reinvent the campaign against patents on pharmaceuticals by arguing for compulsory licensing options.

In submissions to a working group of the UNFCCC countries submitted their ideas of what should be included in a post-Kyoto agreement. Submissions from a number of countries identified the need for looking at the role patents play in technology transfer. The submission from China called for policy instruments to be considered, including “compulsory licensing for patented ESTs (environmentally sound technologies), etc.”.[2]

Similar proposals were put by Cuba. They argued “technology mechanism(s) should also give consideration to the role of patent protection and IPR’s along with an examination of their impact on the access to and transfer of technology that may significantly booster (sic) the capacity of developing countries to address climate change”.[3]

These proposals are only the latest salvo in the campaign against patents on low-carbon technology.

The campaign originated in 2007 around that year’s G8 meeting. In the lead up to the meeting press reports called for “an agreement on … IPRS on technological efforts in developing countries paralleling the successful agreement on compulsory licensing of pharmaceuticals”.[4]

Some activists are going further, than compulsory licensing. International NGO, Friends of the Earth, has called for the removal of patents on low-carbon technology all together. Friends of the Earth has advocated “amend(ing) TRIPs (Trade Related Aspects of Intellectual Property Rights) … so that developing countries can exclude from patentability green technologies”.[5]

And the campaign gained significant traction at the December 2007 UNFCCC Bali Summit. During the Bali Summit there was an informal meeting of Trade Ministers discussing the relationship between climate change and trade policy. At a side-event on the Monday following the informal meeting Indonesian Trade Minister, Mari Pangestu, commented that Trade Ministers discussed using flexibilities provided for in the World Trade Organisation’s TRIPS Agreement.

TRIPS currently provides for countries to compulsory license patented technologies in cases of “national emergency or other circumstances of extreme urgency or in cases of public non-commercial use”.[6] But the flexibility mechanisms were primarily designed for use in the case of pharmaceuticals, not low-carbon technology.

By the end of the Bali Summit developing countries had negotiated for anti-IP language into the Bali Road Map, stating countries should avoid “intellectual property rights policies, or lack thereof, restricting transfer of technologies”.[7] And it is within the context of this language that governments are now strongly pushing against patents on low carbon technology.

But the text of the Bali Road Map also hit on an important point – a lack of intellectual property rights can also negatively impact on the diffusion of technology.

The World Bank has found that weak IP regimes are undermining the transfer of climate friendly technologies.[8] Professor Barton of Stanford Law School has come to similar conclusions, arguing intellectual property is not a “significant” barrier to technology transfer of low-carbon technology and that weak IP regimes provide disincentives for foreign investors to transfer their technology.[9]

The Stern Review came to similar conclusions arguing “there are a number of measures that governments can take to create a suitable investment climate for energy investment and the adoption of new technologies, such as … strengthening intellectual property rights”.[10]

And removing patents will have a very real impact on innovation of next-generation low carbon technologies. Patents provide the temporary property right to offset the risks associated with investment into speculative innovation. Many low carbon technologies are incredibly immature. As Chris Israel from the Institute for Policy Innovation argued in his paper on the subject matter, the low carbon technology industry is at a comparable stage as the semiconductor and biotechnology industries were 35 and 25 years ago respectively.[11]

Attacking patents is a distraction from the real challenges that face reducing the cost of low carbon technologies. Low carbon technologies are often expensive because of the costs of adaptation of the individual technology and labor and material costs. The cost impact of a patent on a wind farm is miniscule in comparison to the labor and material costs of its construction. Similarly, the cost impact of a patent for adapting a coal fire powered power plant to be able to capture carbon dioxide for storage is also insignificant to the labor and material costs.

But the cost barrier of these technologies is real. However, countries can do something to reduce the cost of low-carbon technology – remove taxes and tariffs. A 2007 World Bank report International Trade and Climate Change, investigated the role of tariff barriers on ‘green’ technologies. The study found that the diffusion of technologies would increase by between 7 and 14 per cent per year based on different models of liberalisation.[12]

Applied average tariff and NTBs for climate friendly technologies in the 18 high-GHG-emitting developing countries

timewilsontable

And the table above identifies why tariffs are a problem. Amongst the top 18 developing country emitters of greenhouse gases, the combined tariff and non-tariff barriers can be as high as 165 per cent on some technologies.

Simplistically removing patents may appear to support the diffusion of low carbon technologies, but it will actually undermine it. Removing patents will discourage investment and undermine the tradable nature of property rights that patents confer. Undermining licensing of these technologies will discourage foreign direct investment (FDI) into developing countries to transfer technologies.

The cost of undermining patents is well understood. Hence previous international environmental treaties, including the Convention for the Protection of the Ozone Layer and the Kyoto Protocol, recognise the contribution that property rights play in transferring environmental technologies to the countries that need them. Sometimes history is worth repeating. 

Tim Wilson is Director of the IP and Free Trade Unit at the Institute of Public Affairs – www.ipa.org.au

 
1 ___, 07/04/2009, “India has a bright idea at climate talks”, The Hindu, at http://www.hindu.com/thehindu/holnus/008200904071911.htm
2 Government of China, 06/02/2009, “China’s views on the fulfilment of the Bali Action Plan and the components of the agreed outcome to be adopted by the conference of the parties at its 15th session”, Paper Number 5 in the “United Nations Framework Convention on Climate Change Ad Hoc Working Group on Long-Term Cooperative Action under the Convention”, 13/03/2009
3 Government of Cuba, 13/03/2009, “The fulfilment of the Bali Action Plan and the components of the agreed outcome to be adopted by the Conference of the Parties at its fifteenth session (AWG-LCA). Submission of Views”, , Paper Number 7 in the “United Nations Framework Convention on Climate Change Ad Hoc Working Group on Long-Term Cooperative Action under the Convention”, 13/03/2009
4 Madhavan, N., 06/06/2007, “China and India set to make common cause on global warming”, Hindustan Times, 06/06/2007, at  http://www.hindustantimes.com/StoryPage/FullcoverageStoryPage.aspx?sectionName=&id=d6e876b4-17c3-453a-b29b-c3ece7cec32fG8Summit2007_Special&Headline=India+hardens+stand+on+climate+change
5 Raman, M., 27/06/2007, “Climate and Trade”, Friends of the Earth International and Malaysia, p2
6 World Trade Organisation, 1995, “Trade Related Aspects of Intellectual Property Rights Agreement”
7 United Nations Framework Convention on Climate Change, 2007, “Bali Road Map”, p18
8 World Bank, 2007, “International Trade and Climate Change: Economic, Legal and Institutional Perspectives”, p59
9 Barton, J., 02/2008, “Patenting and access to clean energy technologies in developing countries”, WIPO Magazine, at http://www.wipo.in/wipo_magazine/en/2008/01/article_0003.html
10 Stern, N., “Stern Review on the Economics of Climate Change”, Part IV, 2006, p6
11 Israel, C., 05/2008, “Don’t kill the green goose: The Importance of Stimulating and Rewarding Clean Energy Breakthroughs”, IPI Ideas, n48, p1
12 World Bank, 2007, “International Trade and Climate Change: Economic, Legal and Institutional Perspectives”, p53

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