In the final installment of a three-part series on the private sector and climate change, analyst Kentaro Ide discusses how market systems can potentially undermine innovation and technology transfer without appropriate policy interventions.
“Try to agree on what needs to be done rather than how it needs to be done.”
But it is precisely this question of how to promote global transfers of green technologies, particularly to developing countries, that now faces negotiators at Durban.
An important part of the UNFCCC’s answer thus far has been to tap into the innovative capacity of the private sector (see Part 1).
But a more detailed answer is needed to determine how to overcome existing barriers, some of which may be inherent to the market systems the UNFCCC hopes to harness.
Barriers in the market
By granting patent owners exclusive rights to the use of new technologies, IPR incentivizes private innovation and technology diffusion by creating opportunities for profit.
But some developing countries see IPR as a barrier to transfer, as patent owners may limit or withhold access for commercial reasons (insufficient profit opportunities) or strategic reasons (protect market share).
Furthermore, multinational firms may prefer to transfer technologies and know-how only to their own foreign affiliates, thus limiting opportunities for learning and collaboration with local actors.
For proponents of patent-based innovation, the problem is the absence of strong IPR protection in some countries, as this undermines the ability of firms to profit from licensing and prevent illicit copying by competitors.
For opponents, IPR raises costs for accessing crucial technologies, and allows businesses to monopolize innovations at the expense of effective climate action and economic development.
Toward protecting and sharing
To meet urgent climate targets, innovations need to be shared and implemented more quickly, and on a larger scale.
According to a report by the think tank Chatham House, patented technologies in the energy sector generally take decades to enter the mass market and become widely used in subsequent innovations.
To reduce this diffusion time, the report recommends several policies, including government-funded technology demonstration programs, patent pools and knowledge-sharing platforms.
Another report by the think tank E3G also outlines policy options for protecting IPR while ensuring technology diffusion.
These options include segmented markets, whereby products would be sold at different prices in different countries, and compulsory licensing, which would compel patent owners to license to third parties.
The question of how
Bruce Wilson’s suggestion to de-emphasize the question of how to achieve technology transfer may be seen as a call for pragmatism over ideology.
But having already committed to a partial answer (market mechanisms), the UNFCCC Parties have a responsibility to continue determining how to overcome existing and potential barriers.
IPR illustrates some of the limits of market mechanisms for delivering climate action, as the same competitive drive that spurs innovations may also lead businesses to protect (rather than share) those innovations.
In the absence of solutions from policymakers, private actors and NGOs will continue to make their own interventions to meet environmental needs and measure impact in an accountable manner (see Part 2).
To remain at the forefront of global climate action, negotiators at Durban must strive to reach agreement on how to better align private interests with the world’s environmental needs.
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Kentaro Ide is a London-based analyst specialising in sustainability and export controls.