Tuesday, September 02, 2008

How not to halt progress

The Pioneer

More than a hundred countries met in Accra last week in negotiations for a new climate change agreement after the Kyoto Protocol expires in 2012.  Understandably, developing countries refused to sacrifice economic growth in order to cut emissions, so they want new low-carbon technology.

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

This will destroy any incentive to develop new inventions.  Developing countries should instead remove the tariffs and other barriers that they impose on their own people and that increase prices dramatically.

Mr D Raja, the Environment Minister, has said he wants an agreement "paralleling" what he calls "the successful agreement on compulsory licensing of pharmaceuticals," which has undermined supply, quality and trade.

Some even claim patents confer a monopoly that reduces competition and stops downward pressure on prices.  But patents are not a monopoly on a market, 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 counter-productive as low-carbon technology is still in its infancy and requires high investment for the next level of innovation.

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 2007 United Nations Development Programme study found compulsory licensing of low-carbon technologies would directly reduce investment.  Similarly, a World Bank report from the same year found that weak Intellectual Property regimes act as a barrier to the transfer of low-carbon technology, meaning that patent owners are reluctant to transfer their technology to countries that do not respect patents and other property rights.

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 a staggering 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 because 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 now by dropping their self-harming trade barriers.

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