If the Obama administration hopes to coax China to take action on global warming — and if the administration wants to give the U.N. climate negotiations a chance of success — it will need to solve the thorny problem of technology transfer. If it does so, however, it may face a quarrel with the clean-tech industry, one of its closest allies in the business community.
In the U.N. climate talks last month in Poznan, Poland, technology transfer emerged as one of the key stumbling blocks. China demanded that the United States and Europe agree to a strategy of transferring to developing nations a wide variety of energy-saving and emissions-reducing technologies to developing nations.
Details of this proposal were not fleshed out, but much of the tech transfer discussion centered on China’s proposal for a multi-billion-dollar fund generated by wealthy nations’ contributions of at least 0.7% of their GDP. Such an outlay — which would amount to about $100 billion annually for the United States — would face tough political sledding in Congress in the best of times. But in the current recession, it’s virtually unthinkable. That’s too bad for clean-tech companies, which would stand to profit hugely from selling their patented solar cells, wind turbines, “clean coal” generators and myriad industrial software and equipment.
Less attention has been given to another element of China’s proposal — the demand for a system that would give developing nations low-cost or no-cost access to those patented technologies.
The concept is akin to the World Trade Organization’s 2003 agreement for “compulsory licensing” of AIDS and malaria drugs. Under this system, nations such as India and Brazil are allowed to break patents on life-saving drugs and produce them for domestic use and for export to smaller countries that have no pharmaceutical industries of their own. Such an arrangement had been fought tooth and nail for years by U.S. pharmaceutical corporations, which argued that strict protection for intellectual property rights was needed to incentivize the heavy investments needed for research and development of such medicines. But international health activists waged a highly effective publicity campaign that attacked the corporations for profiteering while millions died. Finally, Big Pharma and the Bush administration gave in.
Clean-tech industry groups have studiously avoided commenting on this topic, while the Bush administration and European nations have claimed the problem is being solved by the Clean Development Mechanism — the much-criticized program under the Kyoto Protocol that has sent billions of dollars to China and other nations for (purportedly) emissions-saving projects. And they have cited the World Bank’s Climate Investment Funds, which have received pledges of more than $6 billion from wealthy nations.
But China and the G77 group of developing nations say they need lots more money and concessions on patent protections. With tech transfer now one of the top items on the official agenda of the U.N. climate talks, a pressure campaign is in the works from groups like Third World Network, a Malaysia-based, international alliance of nonprofit groups that is highly influential with G77 diplomats. The first salvo came in a report issued last month that said in part:
Developed countries should not treat patents or IPRs as something sacred that has to be upheld at all costs. That would send a signal that climate change is not a serious threat, as commercial profits for a few are more important on the scale of values and priorities than are the human lives that are at stake due to global warming. Technology transfer to developing countries to enable them to combat climate change should be the far higher priority. Developed countries should not treat climate technology as a new source of monopoly profits, as this would damage the ability of developing countries to phase in existing or new climate-friendly technologies for both mitigation and adaptation. The post-Bali process should therefore adopt the principle that developing countries can exempt climate-friendly technologies from patents.
Eventually, the Obama administration’s climate team will have to drag the clean tech industry to the table to begin negotiating these issues. The clean-tech firms will not be happy, and they will probably use all their considerable influence on the Obama administration to push back against any concessions. The firms will be (legitimately) concerned that China might use any patent concessions to cheat — to create Chinese clean-tech export industries that would aggressively target global markets. The details of any deal would be devilishly complex to sort out, with trade treaties, patent law and high-tech finance clashing in unending volumes of fine print.
But until this long, hard work begins, there will be no new climate treaty.
– Robert Collier
[JR: The only thing I would add is that for the purposes of any major tech transfer deal, China should not be considered a developing country. After all, it is already a world leader in producing wind turbines, solar cells, advanced batteries, and heat pumps.]
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How about the metaphor of eminent domain? Developed countries and developing countries together could, with the bulk of funds coming from developed countries, forcibly buy out patents. The process would be analogous to use of eminent domain by local governments to purchase control over land for redevelopment when it serves an important public purpose. Arguably there’s not many greater public purposes than this. I agree that our actions as a nation, in working with others, should embody the importance of solving the climate crisis. Words are not enough. Finding a way to share technology and IP is putting our money where our mouth is (now that we have a new mouth in the White House).
I agree that China needs its own category separate from other truly developing nations.
Joe,
I have felt for sometime that technology transfer to China was essential to get her on board to seriously agree to CO2 reduction targets but I am concerned that they will turn around and undermine the very industries here in the US that created the clean tech industry and the promise of domestic jobs will, once again, [metaphor mode on]be off shored to China paid for by the US taxpayer while they loose their jobs only to become Wal-Mart greeters buying, the now affordable, solar panels produced in China using the knowledge the gained from that technology transfer.[Metaphor mode off] Am I missing something here?
US pharmaceutical corporations deduct 100% of that research cost from their taxes. It is actually the taxpayers who pay for that research. WE should be complaining, not them.
We can sell electricity in China below the Chinese cost of making electricity because we have such good technology. That should end the argument over patents. Just let the US companies own the power plants that the US companies build in China and sell only the electricity. There would be no problem with the cost of phasing in the new sources, the new sources would simply run the old sources out of business by price competition.
China also has nuclear reactors, nuclear bombs and a space program. China has more people with IQs over 180 than any other country. It will soon work the other way: WE should get the same advantage of future Chinese technology.
I just bought some compact bulbs. They are made in China. Energy saving appliances are also made in the developing world, inclding Haier in China. So what are the energy efficiency technologies that we need to “transfer” to China. And who is “we”? Are there secrets to installing insulation in buildngs, low-E windows and other energy saving features of buildings that we need to “transfer” to China or other developing countries? Is industrial cogeneration patented?
The answer to all of these questions is no? China can save energy and emissions if China wants to build better buildings and make stuff in cleaner, low energy factories. No secrets.
As for vehicles, hmm, there it gets messy. Should Toyota give China its patents for Hybrids? That way China can have 25% more cars on the same carbon emissions, or drive larger cars? Do we Americans have pattens on our Urban Assault Vehicles, Hummers, and other monsters that the Chinese or Indians need to buy from us? And do the Chinese need our patents to keep their mad pace of upturning walkable neighborhoods so they can build ring roads and car friendly suburbs?
In other words, there is little technology the Chinese need if they want to save energy? In fact, there’s lots that WE need and have but don’t want to employ. And we don’t have the will to save energy, to price it properly? SO we might actually NOT want China to learn from us
So what are we or they waiting for? More hot air?
Lee Schipper
Precourt Institute for Energy Efficiency Stanford U
Global Metropolitan Studies, UC Berkeley
As Fritz Kahrl and I emphasize in http://are.berkeley.edu/~dwrh/CERES_Web/Docs/Carbon_Inequality_KRH07090701.pdf
this problem is of course more general, and there is little multilateral capacity to address it. Obama & Co. certainly need to assert leadership, and China is the most prominent carbon emergent economy, but the whole OECD must share responsibility for both the legacy emissions problem and the necessary transfers.
David
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Professor David Roland-Holst Agricultural and Resource Economics
UC Berkeley
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please don’t print this e-mail unless you really need to
As Lee Schipper points out correctly, a bigger problem than green tech transfer is green tech implementation, in China as elsewhere. If China has $2 trillion in reserves and has companies like BYD, which recently unveiled its own plug-in automobile, what does it really need? But like it or not, the subject of tech transfer is high on the agenda at the U.N. climate talks, and it must be addressed one way or another if we want a new climate treaty. What’s probably most needed is the transfer of regulatory expertise, to help the Chinese government enforce its own emissions-cutting mandates on provincial industries, but I can’t imagine that subject will appear at the multilateral negotiating table.
Another thing China and India learned in the 1990s is that protected state industries used 2-3 times more energy to make almost about a ton of anything than competitive ones. US industries learned that in the 1970s when world trade started to give us competition. A problem the US then, China until recently, and even India have shared is cheap energy – an almost fanatic worship of cheap energy in the US has marked the d-evolution of our policies since the first oil shocks. While higher prices have been forced on us–occasionally – by world markets or hurricans, China and India have only recently started to let prices reflect something towards the replacement of today’s dirty coal and limited oil with clean version of both.
Some NEW industrial facilities in China are world class, but teh average energy / tonne is very high. Wait. S. Korea went through this in the 1960s and 1970s. Japan in the 1950s and 1960s, “aided” as it were by the rebuilding after World War II.
As long as the progress in industry has been mostly in private hands (increasingly so in India and China), who is there to “give” technology too. And as Rob points out, our car companies may be buying BYD batteries soon, so why shouldn;t Chinese companies pay for Prius Patents and Indian companies buy US pollution controls for coal fired power plants.
On the other hand, if most of the expected growth in transport is fro motorization- my published work suggests a factor of 10 in car use is what characterizes continuation of present trends to 2030, then even teh most efficient technologies applied to small cars might only cut the fuel use growth by a factor of two. But with 10 times more cars, the cities of India and China, already dysfunctional in large part because of individual vehicles, will be hopelessly clogged. Of course the Indians and Chinese could built fewer schools adn hospitals and throw money at more freeways and flyovers..and the situation would get worse, particularly for the majority that remains non motorized. Or they could raise fuel taxes significantly (in China’s case, from zero) to pay for such infrastructure development, something that would likely choke off that business as usual growth.
It’s their choice, not ours. But it has nothing to do with technology transfer. It is about sustainable communities and liveable streets. Buildings could be large hopeless glass towers just absorbing the sun in the summer, or they could be built with Indian and Chinese traditional secrets that save heat in the winter (for China) and save coolth in the summer.
Lee Schipper
Just prior to Governor Schwarzenegger’s Global Climate Summit at a meeting last November in Beijing between top officials of China’s NDRC, Cal EPA and a representative of the Obama transition team, NDRC made it abundantly clear that China did not wish to discuss the subject of clean tech transfer, but were more interested in discussing policy. It seems to me that China publicly demands almost free technology transfer, but sees little hope of actually achieving this. It’s all posturing, along with demands for “consumption-based carbon accounting” as we move towards Copenhagen in December. Rebuilding our tattered economy absolutely requires the further development of so-called green-collar jobs with the benefits accruing in the U.S. Other pressure points can be used with China like border tax adjustments and not accepting emission reduction credits from CDM projects (often refered to as the China Development Mechanism) post-2012. A less drastic and more palletable solution could be sectoral cooperation between the U.S and China in energy-intensive industries, where clean tech transfer could also play a role.
Robert Jones
President, EcoLinx Foundation
Chair, Clean Technology Forum AmCham Beijing
The Obama administration needs to really expand its horizons in engaging China on climate change — technology is really only a small piece of China’s GHG emissions story. Arguably more importantly:
* China’s financial system is currently encouraging over-investment in heavy industry, which explains at least some of the surge in China’s CO2 emissions over the past 6 years. Since 2004 China has become a net exporter in a number of heavy industrial goods (e.g., steel) that China, as a resource constrained country, does not have a comparative advantage in producing (e.g., compare the years of remaining coal reserves in China before and after 2002). The NDRC has been keen to transition China’s economy toward higher value added goods, but this transition hasn’t been particularly effective, which is seemingly a bit frustrating for the NDRC. Expert exchange on this issue could have huge payoffs.
* As Robert suggests, the Chinese central government probably doesn’t have the capacity to regulate a national climate policy anyway, but this is a consequence of an incomplete federalist system that will likely take decades to negotiate. Where U.S. regulators might have a nearer term role is in building regulatory capacity at a provincial level in China, and providing provincial agencies with a forum for more creative approaches to regulation. The CPUC relationship with Jiangsu Province is one model of this kind of cooperation.
* In substituting away from coal-fired generation, China faces many of the same problems that the U.S. does — getting more renewable energy on the grid is not simply a matter of (e.g.) building wind farms. China’s wind capacity expansion has been hailed as a success story, but wind capacity factors (i.e., how much they actually run) in China are quite low; Chinese wind producers may be “dumping” wind because they can’t get it onto the grid. Wind generation often peaks in the evenings, when the power supply curve is in its baseload region. Bringing wind onto the grid during this time period requires either turning off baseload plants, which is expensive, or some form of electricity storage, which is not currently cost-effective. The U.S. is dealing with these “renewables integration” issues right now, and technical exchange around integration issues could have huge longer-term benefits for China. A joint research agenda on things like electricity storage could be beneficial for both countries.
* I agree with Lee that climate policy in China will revolve around sustainable cities, but the U.S. needs to take the lead in defining what that actually means. Although China will ultimately do something entirely different, the U.S. needs to outline the vision, which means changing lifestyles and (gasp) coming to terms with higher relative energy prices.
This is not to say that technology transfer is not important, but my guess is that China is after next generation technologies, not off (or on) the shelf ones. Framing engagement around specific, nearer-term issues would be more useful and constructive, and would lay the groundwork for a longer-term agreement on technology transfer.
– Fritz
Robert Jones’ comments on China’s hidden negotiating agenda are very interesting indeed. Without doubting what he writes, I wonder what could entice China to stand down from its public negotiating positions and accept Western impositions such as “border tax adjustments” and the gutting of the CDM. China doesn’t usually hand out gimmes. What would it want, especially on behalf of the politically powerful industries such as steel, aluminum and autos that would be impacted by the new border tax adjustments? Would technical and regulatory assistance be enough compensation, as Fritz Kahrl suggests?
Despite the fact that Copenhagen is only 11 months out, the Chinese negotiating stance is still very fluid. With the twin threats of border tax adjustments and the withdrawal of CDM post 2012, China will have to think long and hard about what it will accept. My sense is that our best hope for some sort of agreement lies in sectoral cooperation in the more energy-intensive industries, where energy intensity baselines are agreed, rather than hard caps. The more efficient factories would then benefit from the resultant “credits” that they would earn. Anl approach of this sort could begin incrementally at the provincial level and would operate much like the CDM with investment and technology flowing into the most carbon intensive sectors. As the global financial meltdown continues to plumb new depths, negotiating positions are not likely to soften any, especially in regard to China as it watches it’s economy unravel with the implications that this will have on the social cohesion of the country. Twenty million unemployed migrant workers are only the tip of the iceberg.