Saturday, August 30, 2008

Tariffs, not patents, hurt low-carbon innovation

A hundred countries are meeting in Accra, Ghana, this week in negotiations for a new climate change agreement after the Kyoto Protocol expires in 2012.  Understandably, developing countries refuse to sacrifice growth to cut emissions, so they want new low-carbon technology.

India, China and a variety of pressure groups are campaigning for "compulsory licences" on low-carbon and renewable-energy technology, saying developed nations are to blame for climate change and should underwrite the alleged solutions.

"The developed countries should get off the backs of India and China.  Instead, they should help India and China move towards a low-carbon economy with technology and finance," Rajendra Pachauri, the Indian economist and environmental scientist who chairs the Intergovernmental Panel on Climate Change, said last month.

Shri Raja, the Indian environment minister, wants an agreement "paralleling" what he calls "the successful agreement on compulsory licensing of pharmaceuticals", which has undermined supply, quality and trade.

This will destroy any incentive for invention.  Developing countries should instead remove their tariffs and other barriers that increase prices dramatically.

Some even claim patents confer a monopoly that reduces competition and stops downward pressure on prices.  But patents are not a monopoly, they are an exclusive right over a specific product.  Patents on existing products do not in any way prevent the development of other inventions.

Without the property rights that patents confer, many inventions that cost millions of dollars to develop can be copied.  So, without patents, there are no incentives for investors and innovators to spend time and money researching and developing new technology.  This is especially counterproductive as low-carbon technology is in its infancy and requires high investment to take it to the next level.

The low-carbon or "renewable" inventions that would be undermined by removing patent rights include wind turbines, clean coal, solar panels and fluorescent lamps.

A UN Development Programme study last year found compulsory licensing of low-carbon technologies would directly reduce investment.  Similarly, a World Bank report found that weak intellectual property regimes act as a barrier to the transfer of   low-carbon technology.

Attacking patents is a distraction when there are policies that require greater attention.  For example, the top 15 greenhouse-gas-emitting developing countries impose hefty tariffs and other trade barriers that can drastically increase prices on "green" technology they claim is essential.

Zambia and Egypt have tariffs on solar panels at 30 per cent and 32 per cent, respectively.  In Nigeria, barriers against "clean coal" technology add 160 per cent to the final product cost.

In Egypt, the extra cost on fluorescent lamps is 87 per cent, in the Philippines, 93 per cent, in Brazil 96 per cent and 102 per cent in India.

The egregious extent of tariffs and other barriers on low-carbon technologies has prompted the United States and the European Union to propose an environmental goods and services agreement in the World Trade Organisation, to encourage the transfer of technology.  But, since the collapse of the Doha Round last month, that seems unlikely.

By ignoring these self-imposed barriers, the anti-patent campaign is gaining traction;  it is always more attractive to blame someone else.

That spells bad news for the poor.  Companies that invest in low-carbon technology are dependent on capital to develop new products.  If patents are waived, investors will not see returns and the funding for new technology will dry up.

Forget patents:  governments in poor countries can make newer, cheaper and more efficient low-carbon technology available by dropping their trade barriers.

No comments: