Climate change is one of the great challenges facing world leaders. Cooperation, however, has proved elusive as the green-versus-growth trade-off is very difficult politically (see for example Frankel 2009 and Dietz et al. 2010 on this site). Technology, according to many, is one of the best ways of relaxing the trade-off. Driven by this realisation, economists have become increasingly interested in the mechanisms that encourage the development and diffusion of new green technologies. Chief among these is intellectual property in the form of patents.
In its latest report, the UN Framework Convention on Climate Change (UNFCCC) Ad-hoc Working Group on Long-term Cooperative Action proposed specific intellectual-property-related regulations for the post-Kyoto framework on climate change.
The regulations proposed by developing countries include patent pooling, royalty-free compulsory licensing of green technologies, excluding green technologies from patenting, and even revoking existing patent rights on green technologies (UNFCC 2010).
Considering the public good character of environmental protection, parallels have also been drawn with the implications for developing countries from patent protection in the pharmaceutical sector (Abbott 2009). Industrial economies such as the US are committed to “prevent any weakening of, and ensure robust compliance with and enforcement of, existing international legal requirements [...] for the protection of intellectual property rights related to energy or environmental technology” (US House of Representatives Representatives as quoted in Rimmer 2009).
Despite this, in December 2009 the US Patent and Trademark Office launched its 12-month “Green Technology Pilot Program” following a similar initiative in the UK in May. Under the programme, patents related to green technologies benefit from a substantially accelerated examination process. The underlying assumption behind these initiatives is that a speedier grant process of patents on green inventions will spur the development and diffusion of green technologies.
The economics of intellectual property and climate change
Intellectual property has been widely studied as a means to addressing the externality that results from imperfect “appropriability” of investments in knowledge. The climate change problem involves a second externality, however. Environmental pollution is a textbook example of an activity for which social costs exceed private costs. The problem is now even more complex. On top of this double externality, there is the global dimension of the climate change problem and a vast range of different green technologies applicable to the problem. In light of this, we re-examine the role of intellectual property protection in promoting the development, transfer, and diffusion of technology.
In a recent paper (Hall and Helmers 2010) we review the available evidence with regard to this debate and arrive at several conclusions.
- The first is that climate change-related technologies comprise a vast range of fundamentally different technologies addressing distinct climate change-related problems.
Patenting propensities and patent effectiveness differ substantially across the various technological fields. A large range of different technologies can achieve emission reductions, and for a significant share of these green technologies, the underlying technology is mature and in the public domain. Most technological progress is expected to come from incremental improvements of existing off-patent technologies. While such incremental innovation may be patentable, such patenting will leave ample scope for competing technologies.
This limits the role specific patents may play for technological progress in this area. Improved biomass cooking stoves aimed at increasing efficiency and thus reducing emissions from the burning of biomass are an example of such innovations. This suggests that insights from the existing experience with technology development and transfer in certain technological areas such as pharmaceuticals may not translate directly to green technologies and the parallels in terms of intellectual property protection drawn between the pharmaceutical industry and green technology are not warranted.
- A second conclusion is that although intellectual property rights can address the gap between private and social returns to innovation that results from the public good characteristics of knowledge, they are not designed to remediate environmental externalities.
As a result, patent protection offers only a limited instrument for mitigating environmental externalities. Therefore, it may be more conducive to frame the discussion of intellectual property rights and green technology within a setting defined by policy interventions specifically designed to address environmental externalities rather than to focus solely on the role of intellectual property rights.
Intellectual property rights and technology enhancement: Emerging economies versus least developed
The limited existing empirical evidence on intellectual property right and technology transfer suggests that there are two groups of developing countries. In the first group are emerging economies, such as Brazil, China, India, and Mexico, and in the second group a larger number of less-developed countries. The evidence on green technologies suggests that a strengthening of intellectual property rights for emerging economies will most likely have a positive impact on the domestic development of technology and its transfer from developed economies. The available evidence does not allow for a similar conclusion in the case of the least developed countries.
There are a number of other issues apart from intellectual property rights that are of first-order importance in setting incentives for the development and transfer of technologies. Developing countries themselves may generate powerful distortions inhibiting the production and transfer of green technologies.
A report by Copenhagen Economics (2009) suggests that subsidies for the consumption of fossil fuels in some developing countries, such as Venezuela, Iran and Indonesia, may represent a significant barrier to the development and transfer of green technologies in these countries.
Barton (2007) suggests that import tariffs on photo-voltaic and wind technology in place in India and China may also act as a barrier to technology development and transfer. In contrast, import tariffs and subsidies for biofuels in place in industrialised countries, above all the EU and US, are viewed as hampering the development of this industry in developing countries, such as Brazil (World Bank 2010).
Such import barriers on green technologies represent a complex issue. Due to the environmental externality, it is desirable to have policy interventions in place in developed countries dedicated to market creation, such as subsidies, to promote demand for green technologies (Taylor 2008). From a political economy perspective, however, it is unclear to what extent developed economies are willing to subsidise demand for green technology produced abroad, in particular in large emerging economies.
On the whole, the existing empirical evidence on the role of intellectual property rights in promoting the development and diffusion of climate change-related technologies is surprisingly sparse and does not provide sufficient insight to reach more substantial conclusions. This is an area in which further research on the relationship between intellectual property rights and the development and diffusion of innovation, especially with a view to developing countries, would be highly desirable.
Abbott, F (2009), “Innovation and Technology Transfer to Address Climate Change: Lessons from the Global Debate on Intellectual Property and Public Health”, International Centre for Trade and Sustainable Development Issue Paper No.24.
Barton, JH (2007), “Intellectual Property and Access to Clean Energy Technologies in Developing Countries”, International Centre for Trade and Sustainable Development Issue Paper No. 2.
Copenhagen Economics A/S and the IPR Company A/S (2009), “Are IPRs a Barrier to the Transfer of Climate Change Technology?”, Report commissioned by the European Commission (DG Trade).
Dietz, Simon, Geoffrey Heal, Antony Miller (2010), “Ambiguity is another reason to mitigate climate change”, VoxEU.org, 1 Setptember.
Frankel, Jeffrey (2009), “How to get greenhouse gas emission targets for all countries”, VoxEU.org, 18 July.
Hall, Bronwyn & Helmers, Christian ( 2010), "The role of patent protection in (clean/green) technology transfer," UNU-MERIT Working Paper Series 046, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology
Rimmer, M (2009), “The road to Copenhagen: intellectual property and climate change”, Journal of Intellectual Property Law & Practice, Advance Access.
Taylor, M (2008), “Beyond technology-push and demand-pull: Lessons from California’s solar policy”, Energy Economics, 30:2829-2854.
UNFCCC (2010), “Report of the Ad Hoc Working Group on Long-term Cooperative Action under the Convention on its eighth session, held in Copenhagen from 7 to 15 December 2009”, FCCC/AWGLCA/2009/17.
World Bank (2010), World Development Report 2010: Development and Climate Change.