4 December 2015 4:20PM

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In September this year, the Sustainable Development Goals (SDGs) were agreed upon by world leaders in New York and this month, countries will attempt to agree on a global deal to combat climate change in Paris. The actual success (going beyond the symbolic consensus) of both the SDGs and a potential climate agreement is contingent on technology and the extent to which it is shared, adopted and dispersed successfully.

Technology innovation, development and transfer are key to eradicating poverty, striving for equity in global lifestyles, and avoiding dangerous levels of climate change. For technology to be effectively applied to the global development and climate agenda, however, a few systemic flaws and some new realities need to be acknowledged and then responded to. A technology-centric response to the problems of the 21st century will require formulation of policies that reflect the changing nature of global technology flows, production and consumption paradigms.

The regimes of technology innovation and transfer currently in use are from a period when developed countries were both producing and consuming the products of technology innovation. This meant innovation led to increased purchasing power in the local community and the extended neighbourhood. It was therefore easier for people to absorb such innovation and pay for it. These structures are incongruous with the consumption realities of today, underpinned by globalisation. Technology innovation and production still occur in developed countries but the largest group of consumers are now in developing countries.

The scale of consumption in Asia in particular is creating new markets for corporations from the OECD countries. This trend is going to become a new reality in coming years. The McKinsey Global Institute predicts that nearly half of the economic growth between 2010 and 2025 will come from 440 cities in emerging markets. China and India will naturally lead this new consumption paradigm. And Asia will soon be joined by Africa in the shopping aisle.

Alongside these new consumers is another nuance that must be factored into the debate around technology. The largest economies of tomorrow will comprise large numbers of low income and poor households. Big economies will remain poor societies for some time to come in this century. Therefore, technology and royalty regimes around technology must cohere with development assistance paradigm and the global development agenda that seek to improve the lives of the poor.

Developed countries have provided Official Development Assistance (ODA) (defined as financial flows administered by governments towards economic development and welfare of developing countries) of about 0.29% of their own gross national products. However, what would be interesting to uncover is the amount of returns that have been repatriated to the rich economies by way of royalties that allow technology access for the developing world. For example, as per figures from the World Bank, India received US$2.4 billion in ‘net official development assistance and official aid’ in 2013. To put such figures in context, Merck, a global pharmaceutical giant, reported pre-tax profits of just under $1.6 billion in 2014. The contribution of technology royalties earned from the developing world to that figure needs to be calculated. Imagine 500 such companies which are leaders in their domain, and it is easy to see why the developmental aid flowing to parts of Asia and Africa simply does not match the scale of the money flowing out to pay for access to technology. The OECD countries, their corporations and institutions are giving with one hand and taking back with both.

A recent example of the burden of technology access are the Nokia royalty payments that flowed from India to Finland. Between 2006 and 2014, Nokia’s Indian subsidiary paid over INR 20,000 crore to its Finnish parent as royalties for the technology used in its manufacturing facility in Tamil Nadu. In 2013, Indian authorities alleged that Nokia owed over INR 2,000 crores to India on tax on the royalty payments. While this tax dispute continues, the outflow of $3 billion as royalty for handsets made by Indian factory workers — that Nokia was selling to lower and middle class Indian consumers – clearly demonstrates the profit motive of the parent is supreme.

Since royalty outflows far outweigh inflows from developmental assistance, it might make more sense for developed countries to subsidise technology diffusion in developing countries by paying their own corporations, to allow for open access to technology in developing country markets. That would perhaps deliver a better return on the money being spent by Western nations to support development in the global south, particularly given the increasing linkages between technology access and economic development.

In order to achieve the SDGs, it is also time to re-evaluate the global patents regime. For instance, Michele Boldrin and David K Levine, two economists from Washington University, St. Louis, have pointed out that the current patent/copyright system discourages inventions from actually entering the market. They opine the intellectual property rights (IPR) system only helps large corporations and multinational corporations rake up profits, noting that the majority of patents are registered by corporations rather than individual innovators. Boldrin labels intellectual property ‘intellectual monopoly’, arguing that it hinders innovation and wealth creation.

All of this does not mean that India and other developing countries do not need to look inwards and explore policies and practices for creating a culture and system that encourages innovation. The demographic dividend offers these countries a chance to develop a generation of technologists innovating for the bottom of pyramid needs. At the same time, real cooperation with the OECD countries on joint R&D will enable a blending of product innovation capabilities of the developed world and process innovation that some of the developing countries have excelled in. India’s position is that technology transfer is not enough in itself, just like Foreign Direct Investment (FDI). Domestication and indigenisation of technology are prerequisites to development as well as for a non-liner growth trajectory.

Joseph Stiglitz has noted that the most defining innovations of our time were not motivated by profit but rather by the quest for knowledge. The patent system was created to reward innovators but is now stifling innovation, feeding the hunger for profits and perpetuating the north-south divide. In order to support the development agenda, combat climate change, achieve parity in global lifestyles and shape an equitable planet, the tyranny of technology must be replaced by the technology panacea.

Governmental resources and policies must be directed towards encouraging open innovation so as to avoid the incumbent’s monopoly on the current system, which is compromising the ability of developing countries to fight poverty and guarantee the right to life. There is a need for studies that examine the impact of the IPR regime on economic activity in specific sectors that will demonstrate where IPR can stimulate innovation and where it does not. The SDG and climate agendas, perhaps the defining themes of the next few decades, cannot be held hostage to the ability to pay, for a perceived entitlement to profit perversely. It is time to examine the economic distortions that have altered the founding principles of patent and intellectual property right regimes. And it is absolutely the time to re-price innovation, to deliver for the bottom of the pyramid.

A longer version of this article appeared in Global Policy and can be found here.

Photo courtesy of Flickr user World Bank

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The Indian proposition at Paris is fairly apparent and uncomplicated; it is also ambitious and steeped in India’s reality. The proposition which is delineated in India’s Intended Nationally Determined Contribution (INDC), can be seen to be responding to three core principles. The first foundational principle of any Indian contribution to the global effort on combatting climate change has to be to ensure that India’s wealthy – individuals, corporations and institutions — must not hide behind the country’s poor. They must bear the same level of responsibility and adhere to the same set of rules (agreed or normative) as global elites anywhere else in the world.

This can be accomplished in fairly simple ways, and certainly by taxing conspicuous consumption at many transaction points (rather that making production costlier and thereby socialising the cost of climate mitigation). This is already underway. The bulk industrial user pays comparable commercial tariff to similar users in the developed world. Indian cities have introduced consumption-based graded electricity tariffs and this principle is being, and needs to be extended to transportation fuels, gadgets and appliances and indeed to other spheres where embedded energy use tends to be socialised. Already, on an average, an Indian spends more on procuring renewable energy relative to their incomes than the average American, Chinese and Japanese. India is determined to showcase its leadership in renewable energy consumption. It is today, the world’s largest biomass, third-largest solar, and fourth-largest wind energy producer. The INDC outlines India’s ambition to significantly scale up renewable energy capacity in the country with a target to achieve 175 GW of renewable energy capacity by 2022. The elite and entrepreneurial Indians form part of this first INDC proposition.

The second principle is that India does not see any fundamental incoherence between being structurally dependent on coal while also leading a global green transition. These are mutually exclusive realities and if India can get this transition right, it will have a unique model of industrialisation that can be shared with many other countries that are further down the development pathway. Coal is still a necessity for multiple lifeline initiatives of the country to lift millions out of poverty. Clean energy, on the other hand, is a transformational opportunity – a moment for India to not only assume moral leadership but to develop competitive advantage in a new paradigm for growth in a fast-changing world. The INDC document recognises that India’s electricity demand is set to increase from 774 TWh in 2012 to 2,499 TWh in 2030.

This increase is necessary if the country is to industrialise, eradicate poverty and provide its population with better living standards. This growth in energy base is predicated not only on the exponential ramp up of the clean energy generation capacity as mentioned earlier, but also through a steady and calibrated increase in its fossil fuel based generation. And as facts indicate, the unnecessary alarmism on India’s ramp-up of coal is shallow. An average Indian today burns less than 20 percent of the coal consumed by an average American or Chinese and about a third of the per capita OECD appetite¹ . Further, India’s peaking per-capita emissions even after this four-fold growth in energy consumption is not likely to cross the threshold of between five to six tons per capita. In fact, based on the INDC submissions, none of the major developed nations will achieve this level of per capita emissions. The bottom line then is that, while India will “Go Green” and is seeking to lead the green transition (Solar Alliance is an example), it will also have to “Grow Coal” to meet its development objectives.

And while it is doing that, there is no reason why the veil of faux moralism that envelops the lazy European political class should prevent India from seeking efficiency gains in the coal sector. If we are to grow coal, it makes sense to do it in the cleanest way possible. 111 coal-fired power plants in India resulted in 665 million tonnes of carbon dioxide emissions in 2010 – 2011 from an installed capacity of 121 GW. In 2030, it is estimated that India’s coal capacity will be anywhere between 300 – 400 GW. The World Coal Association (WCA) estimates that a 1% improvement in the efficiency of a coal power plant results in reductions of 2-3% in CO2 emissions. Investment in improving efficiency of coal-fired power stations through improvements in boiler efficiency and support for purchase of super critical technology is the low hanging fruit in the climate battle. A 1% improvement over 10 years in the efficiency of just currently operating coal power plants in India will save the entire current emissions of Belgium. A 1% improvement in future coal capacity will save the entire current emissions of Australia² . At the same time, the irrational alarmists residing within India and in the developed world must note that despite the necessary growth of coal, India’s emission will peak lower than any other country that would have industrialised before it and its transition time will be much quicker.

Finally, India, due to its diverse agro-climatic regions, is already experiencing the negative impacts of climate change and extreme weather conditions. It will need to create innovative social policies and business models that are able to increase the resilience of local communities and help fund and strengthen the nation’s adaptive capacities to climate change. Any development policy implemented today must always be to increase the ability of the poor and weak to respond to climate change. Despite the adverse impact climate change will have on sectors such as agriculture and coastal economies, the Indian government recognises that assistance from the developed world on climate change adaptation will not be forthcoming. Taking this into consideration, the Government of India has indicated its intention to set up its own domestic adaptation fund in its INDC. If global partnerships contribute in this effort, vital resources can then be diverted to further bolster mitigation actions.

Having outlined the Indian proposition, let me now define three structural infirmities in the global system that must be resolved if collective action on climate change is to be successful. The first stems from the tyranny of incumbency. Carbon space capture by incumbents has created limited room for the development needs of those who require this space to breathe and grow. Therefore, before carbon space or resource space can be retrieved, the discursive space needs to be reclaimed for a sensible conversation on climate change. The discourse needs to change from the unavailability of carbon space in light of climate realities to one where carbon space is vacated by developed countries so as to accommodate the needs of developing nations. For every new coal plant that comes up in India, one in the West should be shut down. The early raiders of the 19th and 20th century got away with the carbon loot but it’s time that carbon space is reclaimed. When a shift from unavailability to accommodation takes place and when incumbents within and across nations are encouraged and compelled to cede space, we will find that there is new room to manoeuvre.

Second, if green energy is seen as a collective global response to mitigate carbon emissions, it is self-defeating to sustain a global system where the cost of green energy installations in countries that have the potential to ramp up such installations quickly and more widely, such as India. Is 24% to 32% more costly? In essence, we are perpetuating a system that reduces mitigating capacities by a fourth. To correct this, we will have to seriously re-organise the alignment of banking norms, global financial institutions, and climate and development imperatives at a granular level. The bankers, investors and innovators must be made co-stakeholders and must bear similar responsibilities to those borne by nations and communities. At present, the financial system is agnostic, if not explicitly climate-unfriendly.

This brings me finally to the vexed issue of technology. If access to technology has a price tag (by way of royalty payments) higher than the forthcoming development aid or climate finance, then we must realise we are in a system where the poor are underwriting the cost of mitigating climate change and we have succeeded in creating a system where the polluter profits and victim pays. This not only undermines the moral pivot of responsibility but turns the idea of differentiated responsibility on its head. Difficulties in technology flows will also compromise ambitious action by developing countries such as India.

India’s INDC predicate the success of India’s ambitions on the availability of technology (some of which are listed) and financial flows (not aid) at commercial, competitive rates from the financial system. Specifically on financial flows, the INDC’s call for new and additional finance for climate change, recognising the fact that there is currently a huge shortfall in supply and demand for climate finance. The International Energy Agency (IEA) has stated that except for a “breakthrough at the Paris UN climate conference in 2015,” the existing international framework and market structures will be unable to mobilise funds for climate action at the required pace or scale. Simply put, the fewer the impediments to access technology and finance, the greater the probability of success for India to lead an ambitious effort on climate change.

Samir Saran is vice president at the Observer Research Foundation

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¹European Council on Foreign Relations, Samir Saran & Vivan Sharan, The false debate on India’s energy consumption,
http://www.ecfr.eu/what_does_india_think/analysis/the_false_debate_on_indias_energy_consumption.

²Based on author calculations