Patents and trade policy in the era of climate change

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV.COM Ltd.

Calls for patent-free green technologies on the one hand and for trade barriers on the other highlight the deep rift between developing and industrial countries, write Thomas Dapp and Eric Heymann of Deutsche Bank Research.

The following analysis was authored by Thomas Dapp and Eric Heymann of Deutsche Bank Research.

"In the debate about climate protection, there have recently been calls for the abolition of patent protection for climate-friendly technologies to allow faster dissemination of these technologies among the world's poorer countries.

At first glance, one can understand the countries' push for free green tech. Giving away clean technologies for free may actually be seen as repayment of climate debt (i.e. high historical greenhouse gas emissions) which the industrialised countries have been accumulating for decades.

This is precisely the argument used by energy-hungry developing countries and emerging markets, which require modern technology to generate sustainable economic growth. Of course, where a global public good is concerned it is in the interest of all nations if developing nations can reduce their emissions with the help of clean tech and thus help mitigate climate change.

However, in an economic system based on private property, patent protection is seen as an important precondition for innovation and should therefore not be considered for abolition in this field of technology either.

Similarly, demands by a number of industrial countries that climate tariffs or similar barriers to trade should be introduced for countries with less ambitious climate policies must be rejected. Such barriers would probably trigger countermeasures and dampen these countries' climate protection efforts.

The end of patent protection would mean a change of paradigm in our economic order: it is about a thought experiment to imagine what the world would look like without patent protection.

In our current system, the protection of intellectual property is a guarantor of research and development as well as entrepreneurial application of innovations in many areas and provides the necessary (monetary) incentives to invest and take risks.

By protecting a temporary monopoly, slower diffusion of know-how and reduced transfer of technology is tolerated to ensure that more knowledge-intensive technological innovation is induced over the long term. Access to knowledge is temporarily privatised via patenting. Given that product lifecycles are becoming shorter and global competition is increasing, though, the current 20 year protection period is not always used up in any case.

A new patent paradigm

An interesting subsidiary aspect in this context is the question of the motivation that drives innovation in the digital sector and in climate and environmental technologies. In the development of open-source software, for instance, there are individuals who are not centrally organised and have no monetary incentive but all the same are permanently making contributions to improving the software.

However, unlike in the digital world, the implementation of green ideas or the dissemination of technology often fails because of a lack of investment capital.

Ideal patent protection would thus be a trade-off between a strong incentive to innovate and a strong incentive to replicate.

There are possible solutions to both the issue of patent protection and trade policy, which would yield better results than the calls for patent-free green tech and/or climate tariffs. Technology transfer could be financed via climate funds replenished by the industrial countries. To avoid competitive distortions and shifts in production to countries without ambitious climate policies, (temporary) exceptions to climate regulation could be a sensible alternative for certain sectors of the economy."

To read the analysis in full, please click here.

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