Innovation for Sustainable Development

Jean-Yves Grosclaude Executive Director, Head of Strategy, AFD (Agence française de développement), Paris, France Rajendra K. Pachauri Director General, TERI (The Energy and Resources Institute), TERI University, New Delhi, India Laurence Tubiana Director, IDDRI (Institute for Sustainable Development and International Relations), Paris, France

Damien Demailly Coordinator New Prosperity Program, IDDRI, Paris, France Raphaël Jozan Project Officer, Strategy Division, AFD (Agence Française de Développement), Paris, France Sanjivi Sundar Distinguished Fellow, TERI (The Energy and Resources Institute), and Professor, TERI University, New Delhi India 5 Foreword

7 INTRODUCTION Innovation for sustainable development

19 CHAPTER 1 Technology, globalization and the environment: is the world ready for a global golden age? Carlota Perez 29 UNDER THE RADAR 1 A revolution in green technologies? Damien DEMAILLY, Patrick VERLEY

33 CHAPTER 2 ICT: beyond the myth of the dematerialized economy Fabrice Flipo 45 UNDER THE RADAR 2 Information and telecommunication technologies in Africa: a potential Revolution? Warigia Bowman, Marianne Mensah, Kevin Urama

51 CHAPTER 3 Innovation in mobility: combining vision, technology and behavioural change David Banister 67 UNDER THE RADAR 3 Double or real: towards green agro-ecological revolutions Rajeswari S. Raina

75 CHAPTER 4 Emerging and converging technologies: wild card for sustainable development? Alfred Nordmann 85 UNDER THE RADAR 4 Ecology and technology: are we experiencing a shift from technophobia to technophilia? Grégory Quenet

91 CHAPTER 5 Towards hybrid socio-technical solutions for urban water and energy provision Olivier Coutard, Jonathan Rutherford, Daniel Florentin

101 CHAPTER 6 Agri-food, innovation and sustainable development Stéphane Fournier, Marcelo Champredonde 117 UNDER THE RADAR 5 Innovation in agriculture: fields of alliances and controversies Frédéric Goulet

123 CHAPTER 7 Are sustainable consumption modes emerging? Alison Armstrong, 139 UNDER THE RADAR 6 Is sharing more sustainable? The environmental promises of the sharing economy Anne-Sophie Novel 145 CHAPTER 8 Disentangling the debate on open access for meeting global challenges in life science Selim Louafi, Eric Welch 161 UNDER THE RADAR 8 Open source software: a social and economic innovation Gaël Depoorter

167 CHAPTER 9 The public policy of sustainable development: innovation for a real utopia Lucien Chabason 183 UNDER THE RADAR 9 Innovation in biodiversity funding: combining tools and mechanisms for conservation Irène Alvarez, Ray Victurine

189 CHAPTER 10 Nothing new under the sun: institutional innovation for the governance of sustainability Jon Marco Church 201 UNDER THE RADAR 10 Using ICT in civil society consultations: its contribution to the global governance of sustainable development Carole-Anne Sénit

207 CHAPTER 11 Water governance in megacities: innovation facing the techno-political hurdle Bernard Barraqué, Rosa Maria Formiga-Johnsson 215 UNDER THE RADAR 11 Modelling the sustainable management of natural resources. The example of water in post-Soviet central Asia Raphaël Jozan

221 CHAPTER 12 Frugal innovation: a pioneering strategy from the South Navi Radjou 235 UNDER THE RADAR 12 Catalysts for change: Development banks and green innovation Henry de Cazotte, Raphaël Jozan, Mustapha Kleiche

241 CHAPTER 13 Do national systems of innovation benefit from foreign investment? Lessons from the BRICS José E. Cassiolato 257 UNDER THE RADAR 13 National governments and the promotion of innovations: the Indian experience Sunil Mani

263 CHAPTER 14 How does China’s take on capitalism influence its capacity for innovation? Wei Zhao, Senior Joel Ruet

281 CHAPTER 15 Could innovation dwindle? Insights from the photovoltaic trade conflict Tancrède Voituriez, Xin Wang 299 UNDER THE RADAR 15 Green development, innovation and intellectual property rights John Mathews, Keun Lee m The Agence Française de Développement (AFD) is A Planet for Life – Innovation and Sustainable Translation and adaptation from French: a public development finance institution that has been Development Jim Johnson and Katell Guernic with the working to fight poverty and foster economic growth in Jean-Yves Grosclaude, Rajendra K. Pachauri invaluable assistance of Suzan Nolan, Pablo developing countries and the French Overseas Provinces for and Laurence Tubiana (Editors) Strauss and Katia Grubisic seventy years. It executes the policy defined by the French Delhi: TERI, 2014 Text- and copy-editing: Jim Johnson and Government. AFD is present on four continents where ISBN 9788179935569 Katell Guernic. Foreword and Introduction it has an international network of seventy agencies and © 2014, AFD, IDDRI translated by Suzan Nolan and Leila representation offices, including nine in the French Overseas © 2014, TERI Whittemore (BlueSky International) and Jim Provinces and one in Brussels. It finances and supports The 1957 French Intellectual Property Johnson projects that improve people’s living conditions, promote Act expressly prohibits photocopying for Print-Production: TERI Press economic growth and protect the planet, such as schooling collective use without authorization from Maps and figures: Légendes Cartographie, for children, maternal health, support for farmers and small the copyright holders (only photocopying SARL. businesses, water supply, tropical forest preservation, and for personal use is authorized). Any Graphic design: Alain Chevallier, design the fight against climate change. In 2012, AFD approved reproduction, partial or total, of the present and cover. €7 billion to finance activities in developing countries and the work is prohibited without authorization Photo credits: Cover: Getty Images France’s overseas provinces. The funds will help get 10 million from the publisher or from the French Office Thanks to: Pierre Barthélemy, Charles children into primary school and 3 million into secondary for Copyright Exploitation Baubion, Meryem Bedaie, Carl Bernadac, school; they will also improve drinking water supply for (Centre francais d’exploitation du droit de Maurice Bernard, Agnès Bistaglia, Xavier 1.79 million people. Energy efficiency projects financed copie [CFC], 3, rue Hautefeuille, Blanchard, Alexis Bonnel, Anne-Sophie by AFD in 2012 will save nearly 3.6 million tons of carbon 75006 Paris). Bourg, Julien Calas, Henry de Cazotte, dioxide emissions annually. Editors. Jean-Yves Grosclaude, Executive Bertrand Charrier, Lucien Chabason, Michel More information and publications available at Director, Head of Strategy, French Colombier, Elise Coudane, Olivier Coutard, www.afd.fr/lang/en/home Development Agency (AFD); Rajendra K. Lisa Dacosta, Eric Dagiral, Aurélie Delemarle, m The Institute for Sustainable Development and Pachauri, Director General of The Energy and François-Xavier Duporges, Bernard Esnouf, International Relations (IDDRI) is a non-profit policy Resources Institute (TERI) and Aude Flogny-Catrisse, Pierre Forestier, research institute based in Paris. Its objective is to determine Chairman of the Intergovernmental Panel on Isabelle Fortuit, Matthieu Glachand, Fabio and share the keys for analyzing and understanding strategic Climate Change (IPCC), which was awarded Grazi, Didier Gromard, Alain Henry, Daniel issues linked to sustainable development from a global a Nobel Prize in 2007; and Laurence Tubiana, Kamelgarn, Annick Kayitesi, Gilles Kleitz, perspective. IDDRI helps stakeholders in deliberating on Director of the Institute for Sustainable Gautier Kohler, Rima Le Coguic, Xavier global governance of the major issues of common interest: Development and International Relations Leflaive, Tiphaine Leménager, Jean-Pierre action to attenuate climate change, to protect biodiversity, (IDDRI) and the Sustainable Development Listre, Denis Loyer, Stéphane Madaule, to enhance food security and to manage urbanisation. It Centre at Sciences Po. Benoît Martimort-Asso, Jacques Moineville, applies a cross-cutting approach to its work, which focuses Associate Editors: Raphaël Jozan (AFD), Ashveen Peerbaye, Hélène Petitimbert, Lucie on five themes—global governance, energy and climate Damien Demailly (IDDRI), Sanjivi Sundar Perez, Armand Rioust de Largentaye, Nadia change, biodiversity, urban fabric, agriculture—and one cross- (TERI University). Saint-Vil, Annick Salama, Pierre-Alain Schieb, disciplinary programme—new prosperity. Editorial coordinators: Raphaël Jozan Camille Séverac, Léna Spinazzé, Pap Talla, More information and publications available at www.iddri.org (AFD) and Isabelle Biagiotti (Courrier de la Antonin Vergez, Pierre Veltz, Jean-Bernard m The Energy and Resources Institute (TERI) was set up planète). Véron, Tancrède Voituriez. in 1974 to deal inter alia with issues relating to sustainable development, the environment, energy efficiency and the sustainable use of natural resources. Its goal is to develop innovative solutions for achieving sustainable development. Its activities range from the formulation of local and national strategies, to proposals for global solutions, to energy and environment-related issues. TERI is based in New Delhi, and also present in many other regions of India. It has over 900 employees and is headed by Rajendra K. Pachauri who is also the Chairman of the Intergovernmental Panel on Climate Change (IPCC), which was awarded the 2007 Nobel Prize. More information and publications available at www.teriin.org

4 A PLANET FOR LIFE FOREWORD

Jean-Yves Grosclaude Executive Director, Head of Strategy, AFD (Agence française de développement), Paris, France Rajendra K. Pachauri Director General, TERI (The Energy and Resources Institute), New Delhi, India Laurence Tubiana Director, IDDRI (Institute for Sustainable Development and International Relations), Paris, France

Foreword

he challenges that we face in the 21st century have forced us to rethink the development paradigms and models of the twentieth- century and question their relevance. Rapid urbanization, climate change, growing inequalities, the deteriorating environment and the many other challenges that we face now oblige us to evolve new responses and strategies. Innovation and institutional reform for sustainable development will be a key-strategy. Rising as a counterpoint to today’s challenges, we see deeply transformative and hope-inspiring new models and technologies, such as green tech, nanotech, and digital technologies emerging; we also see new institutions, transformative changes in our economies and polities, Tand new production and consumption patterns. These innovations are changing our economies, our relationship to the environment, and our way of living together. Only creative capacity, flexibility, and a certain audacity can create the innovative solutions that we need to overcome today’s challenges. We believe that innovation will assume its central place among the tools and action-oriented methods that will drive the post-2015 international sustainable development agenda. Changes in lifestyles would also be an important part of solutions that cannot be ignored much longer. To give concrete shape to the concept of innovation, AFD, IDDRI and TERI called on their vast network of renowned experts and scholars from across the world to share their analyses, critically examine the different dimension of innovation and its role in promoting and supporting sustainable development.

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Our three organizations hold stakes in this endeavour to promote innovation across the globe to meet local, regional and international challenges. We present this volume as part of our effort to think about and build tools for today and for the future, and encourage development to take place in an environmentally friendly, more open and collaborative fashion. This book, we hope, will inspire readers to look at innovation as a key strategy to hasten sustainable development. ❚

6 A PLANET FOR LIFE INNOVATING FOR SUSTAINABLE DEVELOPMENT INTRODUCTION

Damien Demailly, Coordinator New Prosperity Program, IDDRI, Paris, France Raphaël Jozan, Project Officer, Strategy Division, Agence française de développement (AFD), Paris, France Sanjivi Sundar, Distinguished Fellow, TERI (The Energy and Resources Institute), and Professor, TERI University, New Delhi India

Innovation for sustainable development

nnovation has become the new buzzword across the globe. International organizations, governments, corporates, academia and civil society see it as the answer to major contemporary challenges. Societies and economies are under pressure from a set of profound changes: economic transformation such as globalization, new industrial geography, liberalization, commercialization and privatization; political transformation such as the rise of a multipolar world and loss of sovereignty of nation states; technological revolutions in informatics and biotechnology; and global environmental change. All these processes interact in complex ways and challenge the political, economic and social models of the 20th century. Innovations are occurring and alternative solutions to the existing problems are Iemerging in all sectors. Electric cars, organic farming, renewable energy and e-learning are good examples. They are growing as major programmes, supported by governments and the private sector, often integrated into sustainable economic development plans. These alternatives are also seen as green initiatives, and are assigned virtues, such as being decentralized, frugal, flexible, smart and democratic, qualities that are lacking in conventional models. They are also attributed with the potential to meet the overall global challenges such as climate change and the growth of inequalities between and within countries. Innovations and alternatives are emerging not only in industrialized countries but also in developing countries. In fact, the latter have emerged as leaders in certain technologies, such as China in solar technology, and as pioneers in the development of revolutionary applications, such as mobile banking in Kenya.

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These emerging innovations and alternatives raise five major issues: (1) Should the focus be on the technological dimension of innovation, including digital and green technologies? What is their real potential? Would their rapid deployment lead towards a more sustainable society? (2) What is the role of socio-economic and policy innovations in promoting and supporting sustainable development and interacting with the technological innovations? (3) Are the emerging alternatives more sustainable and do they replace the conventional models or merely interconnect and co-evolve with them? (4) What institutional changes are required to promote innovation for sustainable development? How can public policy drive change? (5) How should governments and corporates promote innovation and widen the geography of innovation? A Planet for Life 2014 aims to explore innovation in all its aspects, through a series of texts written by international experts on innovation and its role in supporting sustainable development. The objective of these texts is to analyse experiences from across the world and the role of innovation in a variety of areas of development such as urbanization, agriculture and food, the mobility of people and freight, education and the provision of water and energy to all (Figure 1).

Can the promises of emerging technologies be realized? The early chapters of A Planet for Life question the promises of new technologies: can ‘green tech’ usher in a new industrial revolution? Does digital technology create a more inclusive and environmentally-friendly society? The authors oscillate between optimism and pessimism, but seem to agree that innovation could either benefit or be detrimental to ecosystems and society. Whether the former or the latter outcome prevails will depend on how economic and social forces drive individual and collective choices. Is technology the cause of or the solution to the world’s ecological and social problems? The historian Grégory Quénet (Radar 4) points out that in Europe and the United States, the ecological movement – whether intellectually, politically or charitably focused – has been buffeted since its beginnings by its love-hate relationship with technology. Beyond the ecological movement, all societies wonder if technology will save them from environmental threats. The philosopher Alfred Nordmann (Chapter 4) argues that society has renewed its faith in technological progress. Many who live in the industrialized world no longer see technology as a force for social progress, but as their last hope for solving environmental threats. According to Nordmann, even this hope implies a certain naivety about the technological and scientific promise of nanotechnology, life sciences and digital solutions. He underscores a particularly important message: we must not become ‘credulous believers’. The authors in A Planet for Life try to avoid this problem of credulousness, as seen in the work of Damien Demailly and Patrick Verley (Radar 1). Without denying the crucial need to develop new energy technologies, such as renewables, their

8 A PLANET FOR LIFE INNOVATION FOR SUSTAINABLE DEVELOPMENT INTRODUCTION

FIGURE 1 Countries and regions covered in this edition

work questions whether such technologies can radically change our economies and generate growth equal to that driven by the steam engine or electricity. The earlier innovations fundamentally reorganized the economy, particularly by allowing factories to scale-up production. The authors note that so-called green technologies do not create similar opportunities for restructurings: green electrons remain electrons, green cars are still cars, and both rest on widespread twentieth-century technologies, electricity and the automobile. Carlota Perez (Chapter 1) emphasizes the importance of the digital revolution now underway, because it goes beyond creating a few new industries. Taking a historical perspective, she views new information and communication technologies as powerful tools that can completely transform the economy and create what she calls a ‘new techno-economic paradigm’ compatible with green manufacturing and lifestyles. In sum, Carlota Perez argues that the world is ready for a new planetary Golden Age. On the other hand, Fabrice Flipo (Chapter 2) underscores the material impact of these new technologies. He argues that computers, servers, devices and networks consume energy and require rare earths and toxic materials for their construction. Above all, they foster lifestyles and production systems that are far from immate- rial. New uses, which are ‘lighter’ in terms of resource use, complement rather than

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replace those which have ‘heavier’ demands; videoconferencing does not replace air travel so much as facilitate communication and trade, thereby occasioning more flights in the long run. Although Flipo and Perez express contrasting opinions about the sustainability of new information and communication technology, they agree on its potential to be used for the benefit or detriment of the planet. Kevin Urama, Mariane Mensah and Warigia Bowman (Radar 2) shed light on Africa’s digital revolution, which is visible on every street corner and in nearly every village. It is the source of great hope for faster economic growth, greater democratization and more widespread development. While this revolution has had an impact on banking, healthcare, agriculture and education, the three authors emphasize the need for Africa to adopt and appropriate technologies and to ensure their universal accessibility. They conclude that ensuring ICT access to all Africans requires the building of physical, regulatory, political, commercial and social infrastructure. It must rely on the ability of citizens to use the technology, to advance democracy, participation, competency and transparency. This indeed is a major challenge.

Beyond technological innovation, what socio-economic transformation is required? The history of industrial revolutions teaches us that technological revolutions drive or accompany social and economic changes (Perez, Chapter 1). The automobile-technology revolution in the United States, vastly disseminated with the advent of Ford’s Model T, brought about a new way of working, new infrastructure, and new organizational principles that transformed the economy. The automobile revolution also drove mass consumption and aspirations for the American way of life. If humanity is serious about solving ecological and social challenges, innovations on the scale of the industrial revolution must create pathways towards sustainable development. This will require inventing and disseminating new technologies as well as new urban forms, business models, agricultural practices, food habits, lifestyles, and so forth. In short, innovation must occur in social and economic as well as technological dimensions, as several chapters of A Planet for Life illustrate. According to David Banister (Chapter 3), an expert in mobility, if the aim is to reduce carbon-dioxide emissions enough to prevent climate warming of more than two degrees centigrade, it will not suffice to simply increase the number of fuel-efficient or electric cars in industrialized and developing countries. Instead, it will be necessary to reduce travel demand. He explains that if we limit ourselves to purely technological considerations when thinking about transportation options, we risk becoming trapped on unsustainable development paths. Thus he calls for rethinking the shape of cities, the geographic distribution of services and facilities, and other factors that would support the adoption of a more sustainable and low carbon pathway for mobility. This finding is echoed by Rajeswari S. Raina (Radar 3) who argues that the purely technological approach of various green revolutions is incapable of meeting the social and environmental challenges of India’s agricultural

10 A PLANET FOR LIFE INNOVATION FOR SUSTAINABLE DEVELOPMENT INTRODUCTION

industry. She calls for broader engagement of farmers and all those involved in scientifically-informed, ecologically, economically and socially sustainable agroeco- systems. Olivier Coutard, Jonathan Rutherford and Daniel Florentin (Chapter 5), like Stéphane Fournier and Marcelo Champredonde (Chapter 6) also argue that model transformations should go beyond purely technological developments, whether it be the supply of water and energy, or agriculture and food. Anne-Sophie Novel (Radar 7) gives an example of a possible socio-economic revolution: the emergence of a more collaborative economy, a sharing economy facilitated by the digital revolution. Through the pooling of goods, by giving them a second life, this ‘new’ economy enables the optimization of the use of physical and economic capital and therefore holds the promise of green growth, although, as the author notes, the evidence to support this idea has yet to emerge. ‘Sharing’, in particular, illustrates the potential capacity for innovation in business models, with a shift from the sale of goods to the provision of a service, and also in consumption patterns. Alison Armstrong (Chapter 7) discusses consumption, listing innovations and faint signs of movements toward a frugal lifestyle, such as the Transition Networks communities or the Slow Living converts. Frugality discourages buying goods and services and encourages shared production and consumption. The author celebrates these status-quo-challenging initiatives while remaining pessimistic about the scope of their adoption. Powerful psychological factors drive hyperconsumerism, such as the pleasures of purchasing, strengthening a sense of self, and differentiating oneself from others. In addition, individuals often think they are greener than they really are. Armstrong nonetheless argues for public policies that could encourage more sustainable consumption.

Sustainable innovation – can it be designed? How do these new technologies and alternatives emerge and spread across the world? Several chapters concur in finding that they do not emerge from a standardized or planned process, designed in vitro in a laboratory. Rather, collectives of diverse, distributed, uncoordinated actors create a myriad of innovative configurations in situ. Furthermore, new innovations do not merely replace existing solutions; rather, dominant, traditional models ‘confront’ and hybridize with supposedly more- sustainable alternatives. Innovation cannot be viewed independently from competition. Various, often competing alliances of actors champion each technology and model. In the case of pursuing or abandoning ploughing in agriculture, Frédéric Goulet (Radar 6) tells us that behind a ‘unisonous discourse’ and a ‘displayed consensus on innovation’ lies intense competition that expresses itself through major controversies. He claims that ‘innovation is not only about uniting, associating, linking and creating synergies: very often, as emphasized by Schumpeter (1911), it also involves destroying, dividing and criticizing’ in order to get rid of competitors and promote one’s interests and values.

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Innovative and alternative systems articulate with existing ones, as Olivier Coutard, Jonathan Rutherford and Daniel Florentin (Chapter 5) show through a comparative analysis of the provision of water and power in three European cities. Woking, Stockholm and Magdeburg followed very different paths when their centralized electrical grids faced environmental, social and financial problems that challenged the centralized model’s supremacy. One path led to a wholly decentralized off-grid model, while another revived a pre-grid approach, and the third rehabilitated the centralized grid following the re-grid model. Depending on the city, questions of innovation, sustainable development and the supply and use of infrastructure have very distinct meanings. It has led to totally different links between the centralized grid and alternative systems, even though those involved have made similar claims regarding the ‘greenness’ and ‘sustainability’ of each model. Stéphane Fournier and Marcello Champredonde (Chapter 6) also illustrate this process of hybridization in the food-processing and agriculture industry. Producers often sell their produce through different channels to diversify their income and strategies. Consumers in turn look for diversified purchase sources, such as supermarkets, farmers’ markets and organic stores; and in the process they enlarge their range of products. The conventional and alternative models evolve together, constantly influencing each other. Alternative systems frequently turn into conventional systems when, for example, producers intensify production, or processors of agricultural products seek economies of scale. Conventional food producers, processors and packagers often adopt alternative practices – organic farming and fair trade, short supply chains, and so forth – making them part of the retailing mainstream. Alternative models are not necessarily more beneficial and sustainable than conventional ones, in contrast to popular perception. The real strength and interest of alternatives resides in their constant challenge to existing technologies, actors and models, and the ways they change economies and societies. It is no longer valid to think in terms of an eco-innovation machine that one can simply turn on; or to put our faith in the emergence of miracle technologies and models that will enable us to meet the looming challenges. The cases discussed in this volume clearly show that innovation is far removed from a linear, unidirectional process, created in a laboratory and marketed by large corporations. Instead innovations occur in many different places, created by numerous, and not necessarily coordinated, professionals and amateurs. The rise of open innovation models recognizes the creative possibilities inherent in co-operation and collaboration. Gaël Depoorter (Radar 8) recounts the history and industrial links of shareware, a forerunner of the open movement. Selim Louafi and Eric Welch (Chapter 8) provide valuable insight by describing different aspects of the movement: open source, open access, open science, open data, and so forth. Countering common wisdom, he explains how these collaborations are not necessarily at odds with proprietary regimes based on strong intellectual property rights, nor do they affirm a romantic vision of free access to knowledge and technology. Collaborative arrangements can be quite complex, depending on the industry and the

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resources exchanged. Although collaborative, such arrangements do not empower all actors the same way: both Depoorter and Louafi insist that certain conditions must be fulfilled for open systems to truly work for the benefit of all.

Does sustainable development require policy innovations? Promoting innovation for sustainable development seems a Herculean task. Alfred Nordmann (Chapter 4) warns us against the arrogant belief that we can fashion the future in any way we choose. For public officials, the challenge lies in setting up the multiple institutions and public policies needed to set the course toward sustainable development. Lucien Chabason (Chapter 9) reviews political innovations at three territorial scales: national, regional and supranational. He uses France, the Mediterranean region and the United Nations to show how public institutions have changed in order to integrate sustainable development challenges, to invent more participatory decision-making processes, and to adopt public-policy tools. His analysis leads to a very fine reading of these attempts. For instance, he highlights how an ecologically- oriented fiscal policy can innovate by aiming to influence behaviour. At the same time, he underscores the political difficulties in implementing such a policy and calls for the adoption of a more traditional policy mix. He reminds us that those who influence and make policy must liaise with civic society and various stakeholders. Irène Alvarez, Julien Calas and Ray Victurine (Radar 9) analyse a set of innovative policies used to finance biodiversity. They include simple innovations, such as ecotourism in nature reserves, and more complicated ones, such as conservation trust funds or compensation. Such sources of funding provide relevant solutions to the chronic underfunding that afflicts biodiversity preservation. The authors emphasize the need to combine rather than substitute these innovations with traditional public financing tools. The usefulness of the former goes beyond their status as new sources of funding: they provide virtuous models for natural resource use and management while involving a wide variety of actors – the true challenge of sustainability. Jon Marco Church (Chapter 10) examines innovation in terms of the governance of sustainability challenges. He concludes, somewhat provocatively, that ‘there is nothing new under the sun’. Since the early 1990s, experts and decision-makers have called for new institutions capable of taking a long-term view – promoting international treaties, convening expert commissions, and animating public debate, among other strategies. They have called, in short, for exactly the same kinds of measures taken for decades on other issues. Despite a pervasive discourse about expert and civil society participation, national governments will ultimately wield sustainable development governance to affirm their power domestically and internationally. Some have presented the digital revolution as a means of rebalancing the power of individuals in society and improving citizen access to the decision-making process. Carole-Anne Sénit (Radar 10) notes that the Internet has multiplied the number of innovative consultative practices. The most visible is citizen input to the United

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Nations’ post-2015 development agenda. Such examples raise hope that a more inclusive and larger body of people will help design international policies, and that better access to information will increase transparency. However, the author cautions that most input comes from traditional civil-society organizations in wealthy countries. Internet access requires major improvements before citizens from all classes of society and all countries are able to provide input. A historical analysis of sustainable development policy implementation helps us understand the power of inertia. Bernard Barraqué and Rosa Formiga-Johnsson (Chapter 11) describe the difficulty with which large Brazilian cities migrate from a technological approach to water management (based on large-scale projects) to a territorial one (favouring resource conservation and protection). While cities have set up new institutions, they do not replace the existing institutions on which the cities were built – vested interests and old institutions act as roadblocks to change. Models and simulations have become de rigueur tools for integrating environmental, economic and social challenges. Raphael Jozan (Radar 11) shows the limits of such tools by studying watershed management around the Aral Sea: the sophisticated tools rely on official statistics, provide a truncated view of the economy, and are used exclusively by officials. In the case of the Aral Sea, the use of models ultimately perpetuates the old solutions, namely major hydraulic projects. The author’s analysis reveals a fundamental challenge to changing the current social and technological trajectory: how to encourage and accommodate a plurality of experts and alternative forms of knowledge and counter-models.

Globalizing innovation The final chapters of A Planet for Life 2014 put the spotlight on innovations in the context of globalization and rising emerging economies. Is the geography of innovation changing worldwide? Conventional wisdom holds that ‘the North innovates and the South copies’, particularly when it comes to technology. However, Navi Radjou (Chapter 12) counters that idea. He argues that China, Brazil, India and Africa are emerging centres of innovation, propelled by ever-increasing demand from their immense domestic markets and thousands of indigenous entrepreneurs and companies. The author argues that the geography of innovation is creating an opportunity for sustainable development worldwide. He holds that emerging countries now pioneer a new approach: ‘frugal innovation’, or maximum value creation at the least cost with the fewest resources. This approach has already reconfigured some industries, such as pharmaceuticals and healthcare. Frugal innovation is faster and cheaper than traditional innovation that is elitist and non-inclusive. According to Radjou, the industrialized world could learn much from this ‘new paradigm’. Indeed, many Western companies have reworked their research and development models within a globalized network of innovation that extends to developing countries. How can developing countries become a part of the globalized innovation network? Through analysing national innovation systems in Brazil, Russia, China and South

14 A PLANET FOR LIFE INNOVATION FOR SUSTAINABLE DEVELOPMENT INTRODUCTION

Africa (BRICS), José Eduardo Cassiolato (Chapter 13) shows that BRICS governments have indeed increased efforts to promote domestic innovation; the author analyses their common strategies to attract foreign direct investment (FDI), particularly from multinationals, to ensure technology transfers, to modernize manufacturing and increase productivity. In the final analysis, attracting multinational companies and FDI have had only a small impact on the BRICS’ ability to innovate. Multinationals enter emerging economies seeking benefits and tax breaks, chiefly cheap labour and access to domestic markets. Some have established domestic research and development centres, which usually adapt technologies conceived in developed countries to meet their needs. The failure of FDI to make an impact on the capacity to innovate in developing countries is also due to the weak absorption capacity of domestic industry in these countries. Cassiolato argues that the BRICS must guide foreign investment, ensuring that it ties into the local industrial fabric and benefits domestic firms. Building the absorptive capacity is not an easy task, as explained by Wei Zhao and Joël Ruet (Chapter 14). They present a China that operates halfway between imitation and indigenous innovation, despite huge efforts to promote domestic innovation capacity. Since the 1980s, the Chinese government has led constant and voluntary measures to encourage research and development and the expansion of companies into high-tech industries. It has created all kinds of technology centres and industrial parks. It has also financed laboratories, procured goods and services, created a dedicated banking system, and obligated foreign companies to transfer technology. China counts the highest number of professionals employed in research and development activities in the world, but the centres and industries remain siloed for the most part, and the favoured companies have gained market share ‘as distributors and sellers, not technology innovators’. China’s brand of capitalism shows major weaknesses in the rest of the private sector, which finds it very hard to engage in innovation. Consequently, China has revised its innovation strategy, targeting fewer technology sectors and aiming for better articulation between scientific/technical institutions and private enterprise, particularly small and medium-sized businesses. In analysing India’s national innovation system, Sunil Mani (Radar 13) sees a similar situation. Domestic research and development capacity remains weak despite the Indian government’s relentless tax incentives and other efforts to boost investment in domestic research and development. The author suggests that India faces another major development challenge: an overconcentration of innovation capacity in some sectors and regions. While India has successfully innovated in the IT, pharmaceuticals and automobile manufacturing industries, other sectors, such as agriculture or green technology, receive inadequate attention. The author also observes two different worlds appearing in the one country: some regions, lacking connections to the innovation economy, wither and grow poorer, while other regions that are better integrated into globalization not only benefit from it but also stand to gain from the pro-innovation public policies.

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The caricature of a global south that can only copy is on its last legs, as Navi Radjou claims. However, many developing countries still count on imitation for reliable growth. John Mathews and Keun Lee (Radar 15) show that this leap-frogging industrialization strategy is an old one: Germany pursued it in the nineteenth century, and Japan and South Korea in the twentieth. Unfortunately for sustainability concerns, the authors show that a ‘wall of patents’ may curb the dissemination of environmentally-friendly technologies, such as solar energy and light- emitting diodes. Is the globalization of trade, particularly green goods and services, a boon for sustainable development? Tancrède Voituriez and Xin Wang (Chapter 15) draw lessons from the solar-energy trade war fought in 2013 by China and the European Union. The Europeans threatened to slap import tariffs on Chinese photovoltaic panels, accusing China – unconvincingly, in the authors’ view – of dumping. The authors question an idealized vision of globalization that perfectly combines Europe’s ability to invent things with China’s low-cost manufacturing ability. The looming threat is that China’s control of solar-panel production could inhibit research and development of next-generation technologies – in industrialized countries in general, and in Europe in particular. The international community must rise to the challenge of defining more conducive and better-coordinated trade rules that support green technology innovation and dissemination.

Conclusion Finally, we can gather the lessons learnt from this book into the five aforementioned issues, to understand innovation for sustainable development. (1) Although technology holds much promise in terms of sustainable development, we should not be credulous believers in the power of technology. Technological innovation is essential for sustainable development, but – like digital technology – its transformational potential can be exploited for the benefit or the detriment of ecosystems and societies. (2) The articles highlight that innovation for sustainable development is not only about making changes to technologies, and that innovation in technologies cannot be separated from socio-economic developments. Innovating for sustainable development must be understood and carried out within this broader context. (3) Alternative solutions are not necessarily more sustainable than conventional models. In any case, the alternatives do not develop by substitution and the different models are interconnected, they co-evolve and lead to a myriad of unprecedented socio-technical configurations. Alternative models challenge the established models, and lead actors to significantly revise their business models, to rethink the governance of infrastructure, territories and resources. (4) Clearly, we do not have an eco-innovation machine that can be started at will. Sustainable innovation cannot be imposed arbitrarily, and efforts to drive change face multiple obstacles of a technical, political, financial and economic nature. (5) While we may be witnessing the collapse of the myth that Northern countries

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innovate and Southern ones copy, the reality of the geography of innovation is always that of highly concentrated clusters that are mainly located in the North. In developing countries, governments should have a much broader and integrated vision that extends beyond the massive promotion of R&D, or the attraction of FDI. Inter- national organizations, governments, and corporates must recognize that innovation is not developed within confined spaces, but instead arises in the field, and should promote the establishment of collaborative open innovation models that fully involve society. The challenge of innovation for sustainable development is immense: it is nothing less than setting entire societies in motion. ❚

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CHAPTER 1

Technology, globalization and the environment: is the world ready for a global golden age?

ecent experience teaches us that the future is certainly not an extrapolation of the recent past. Witness the difference between Carlota Perez, Centennial Professor, the stagflation of the 1980s and the great boom of the late London School of 1990s.1 However, the near future is more likely to follow longer- Economics, UK term historical patterns. On the basis of a long-term view, we and Professor of can say that, after the collapse of the global financial bubble in Technology and 2007-08, the world is ready for a global golden age. Whether Development, Tallinn University of the international community wastes or seizes the opportunity Technology, Estonia to unleash the enormous innovation and growth potential available for the benefit of all is an open question. The technological opportunity space ahead is defined by information and communications technolo- Rgies (ICT), by full globalization and by the environmental imperatives. With ICT, globalization is the logical growth trajectory, but full globalization is incompatible with the American way of life (we don’t have seven planets), while it is also threatening jobs and incomes in the advanced world. The conversion to sustainable products plus sustainable production and transport systems may well be the most fruitful salvation path for recovery. Widespread renovation provides the best opportunity space for wealth and profit creation in OECD countries. It also enables full globalization, increasing job creation and well-being in all parts of the globe while widening markets for all countries. And we are at the precise historical

1. This article is based on a presentation for the OME International Foresight Forum, Barcelona, October 2009, and follows the theoretical framework presented by the author in Technological revolutions and Financial Capital: the Dynamics of Bubbles and Golden Ages (London: Elgar 2002)

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moment when such a shift in patterns of production and consumption can - or, perhaps, should - be made.

Regular historical sequences of diffusion and assimilation of technological revolutions The analysis of how technological revolutions are assimilated in the economy and society shows powerful regularities and identifiable specificities. There is a technological revolution coming together every 40 or 60 years (at maturity of the previous). Each of them drives a great surge of development that is broken into two different periods, one led by finance, the other by production. A major financial collapse marks the beginning of the switch. Each of these regular revolutionary changes in technology is highly specific. The nature of the potential for growth is different each time because of the characteristics of the new technologies and, for that reason, each revolution brings a paradigm shift in the direction of innovation and the criteria for competitiveness. But that is only the available potential, it will be the social forces and their institutions that will define what part of the new opportunity space will be deployed and how. Thus, each great surge is unique due to historical, political and other contingent factors, but the recurring patterns have fundamental causal explanations that have to do with the way the economy and society assimilate successive surges of technical change. There have been five technological revolutions in 240 years: the first was the industrial revolution (machines, factories and canals) from 1771; then, from 1829, we had the age of steam, coal, iron and railways; from 1875 there was the age of steel and heavy engineering (electrical, chemical, civil, naval); in 1908, with Ford’s Model-T, began the age of the automobile, oil, petrochemicals and mass production and in 1971, the year Intel’s microprocessor was launched, our current age of information technology and telecommunications was initiated. This information era is only halfway through its diffusion path. If history is a guide, it has 20 to 30 years of deployment ahead. The next revolution is likely to bring the age of biotech, bioel- ectronics, nanotech and new materials, in some combination, depending on unpre- dictable scientific breakthroughs. Each of these revolutions drives a great surge of development and shapes innovation for half a century or more. Of course, this is a stylized description, because social reality is always much richer than the models that help us understand it. Yet, why do we call them revolutions? Because they go far beyond the powerful set of new industries; they also transform the whole economy providing a new techno-economic paradigm – or common sense best practice – for all. What is most visible is, of course, the powerful cluster of interdependent new and dynamic industries and infrastructures. These result in explosive growth and structural change including the replacement of the industries that had been the engines of growth during the previous surge. On the other hand, each of these revolutions provides

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new multi-purpose technologies, infrastructures and organizational principles that are capable of modernizing all the existing industries too. The result is a quantum jump in innovation and productivity potential for all. The whole process involves a massive alteration in the overall direction of change, transforming the opportunity space and the ways of living, working and communicating.

Technological revolutions and shifts in lifestyles Each technological revolution provides a new interrelated set of life-shaping goods and services at affordable prices. The age of steam, coal, iron and railways saw the emergence of Victorian living. The British middle classes established an industry- based urban lifestyle (different from that of the country-based aristocracy) which spread to new upper classes elsewhere. In the age of steel and heavy engineering, which was the first globalization, we had the Belle Époque. The British, European and American upper and middle classes established a cosmopolitan lifestyle spreading to the upper classes of the world. Then, in the age of the automobile, oil, petrochemicals and mass production there was the American way of life, adopted at first by the upper and middle classes that established a suburban energy-intensive lifestyle, and spreading to the working classes of the advanced countries and to the middle classes of the developing world. In the current age of information technology and telecommunications there could be sustainable global lifestyles. The question is whether the affluent educated classes of the developed and emerging countries will establish an ICT-intensive knowledge society with a variety of environmentally friendly lifestyles and consumption patterns. What is important to note is that each of these styles becomes the model of the good life and, as such, shapes the desires of the majority and guides innovation trajectories. To have an idea of the depth of change involved in each of these transitions we can observe the emergence of the American way of life as a paradigm shift from the 1910s and its consolidation as the general lifestyle after World War II (to a great extent, that lifestyle is still with us). The essential shift was from energy-scarce living when energy was expensive and often inaccessible, to energy-intensive homes and mobility, with energy being cheap and its availability seemingly unlimited. The shift covered every aspect of life: from trains, horses, carriages, stage coaches, ships and bicycles to automobiles, buses, trucks, airplanes and motorcycles; from local newspapers, posters, theatres and parties to mass media, radio, movies and televi- sion; from ice boxes and coal stoves to refrigerators and central heating; from doing housework by hand to doing housework with electrical equipment; from natural materials (cotton, wool, leather, silk) to synthetic materials; from paper, cardboard, wood and glass packaging to a preference for disposable plastics of all sorts; from fresh food bought daily from specialized suppliers to refrigerated, frozen or preserved food bought periodically in supermarkets; and from urban or country living and working to suburban living separate from work. All these changes took time and were strongly aided by advertising, business strategies and government policies.

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The intrinsic characteristics of ICT are compatible with green production and living. The techno-economic paradigm shift beginning in the 1970s was meant to move society from the logic of cheap energy (oil) for transport, electricity, synthetic materials, etc. to the logic of cheap information and its processing, transmission and productive use. As a consequence it is possible to shift from preferring tangible products and disposability to preferring services and intangible value; from unthinking use of energy and materials to taking advantage of the huge potential of ICT for savings in energy and materials. Essentially we can shift from unavoidable environmental destruction to potential environmental friendliness, but paradigm shifts confront inertia and contingencies; they are turbulent and take time. The first automobiles looked like horse-driven carriages. The driver sat uncovered at the front, in the same place as he would have done to hold the reins, the engine below him was measured in horsepower and every other part was made by the same engineering shops that made the carriages. It takes decades to arrive at a design that is consistent with the essence of a new technology. But, once it happens, you know it! Today’s automobiles, for all their sophistication, are not fundamentally different from a Model-T Ford. Nevertheless, in spite of the potential of ICT for changing the way we live towards more services and less products, what still prevails is mass production disposability with its high use of energy and materials. Why? Because, in the crucial 1990s – precisely when ICT producers were defining their growth strategies – there was cheap oil and cheap Asian labour. So it was not necessary to change the old marketing habits of planned obsolescence through rapid changes in fashion. Yet to continue on this route, as alluded to in the introduction, would require the resources of more than one planet Earth.

Favourable conditions for a major transition Nevertheless, conditions may now be changing in the direction of favouring the full shift. Two main events are leading us there: on the one hand, the financial crisis showing the need to find an opportunity space to guide the recovery and, on the other, the threat of global warming (combined with the limits to availability of natural resources). The recent financial meltdown marks a structural shift in the economy that is typical of the way technological revolutions have propagated and been assimilated by business and society. Each great surge of development has seen a major financial crisis midway along the diffusion path of the technological revolution driving it. Due to natural human resistance to radical change and the difficulty of social absorption of revolutions and new paradigms, each great surge is broken into two different periods. These periods can be termed installation and deployment and each lasts about 20 to 30 years. The installation period is led by financial capital, which is mobile and can rapidly shift investment from the mature and declining industries to a major experiment with the new technologies, making fast millions in the process. It is a time of laissez faire,

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FIGURE 1 Bubbles, recessions and golden ages

Technological innovations correspond to historical economic models. Their phases of installation, deployment and collapse follow parallel trends. Why should the current crisis be immune from this process?

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of Schumpeterian creative destruction, when the new paradigm battles against the old, when investment concentrates in new-tech and finance, and income is polarized, making the rich richer and the poor poorer. This period leads to a major financial bubble and ends with its collapse. What follows – which is where the world has been since 2008 – can be called the turning point (even though it can last more than a decade, as it did in the 1930s) because it signals the need for a major shift in context. To revive the economy, the State must come back actively and control of investment must shift from the hands of finance to the hands of production capital. By this time, some of the small companies led by bold engineer-entrepreneurs have turned into giants that can serve as engines of growth of the economy and take long-term decisions without short-term pressures from the stock market. Of course, this shift can only happen because there is a fundamental change in the social mood. From admiring the success of the financial masters of the universe, public opinion turns to demanding strict control of finance. The losses incurred by people who had never before engaged in financial gambles, together with the ensuing recession and loss of jobs and the revelations about the irresponsible and even fraudulent behaviour of the financial world, cause popular indignation which puts pressure on politicians to bring the State back into the picture. If and when the appropriate changes in the institutional framework are made, the 20 or 30 years of the deployment period will begin. It will depend on measures to restrain the casino behaviour and guide finance towards funding the real economy as well as on policies that will expand demand through State expenditure, income distribution and regulatory guidance towards the most promising and most socially rewarding technological opportunity spaces. This brings a time of creative construction and widespread application of the new paradigm for innovation and growth across the economy and of spreading of social benefits. Deployment is led by production capital and spans from a golden age of increasing growth and well-being to the maturity and exhaustion of that paradigm. Then the cycle repeats itself with the next revolution. We can see the sequence in the historical record, where golden ages have regularly followed the boom and bust episodes that end the installation periods. Figure 2 puts the five surges in parallel in a stylized way. The pattern is in reality much less mechanical than shown; there are overlaps and delays and various other unique features in each case, but the basic sequence follows a fundamental causal chain. The industrial revolution produced canal mania and panic in the 1790s in England, which were followed by the great British leap during the Napoleonic wars. The age of steam and railways saw the railway mania and panic of the late 1840s in the UK, followed by the Victorian boom. The age of steel and heavy engineering witnessed the great crashes in the southern hemisphere of the London-financed global market infrastructure build-up in Argentina, Australia (and also the USA). After that, we had the Belle Époque in Europe and the Progressive Era in the USA. During that first globalization, there was also a major competition for world hegemony, where

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the USA and Germany challenged the British leadership. By the time the roaring twenties built up the installation bubble of mass production, the USA had taken the lead with the new technologies (after intensive growth from supplying Europe in WWI). The crash of 1929 brought the longest turning point yet. It lasted through the 1930s and until almost the end of WWII. What was installed in the 1910s and 20s was the basis for the age of automobiles, oil, plastics and mass production. After the war, the so-called Western world saw the greatest boom in history and the emergence of a fully established welfare state. The potential for innovation was given two main directions: fulfilling the demands created by suburbanization (cheap houses on cheap land, full of electrical appliances and with a car at the door) and those of the Cold War. By the end of the 1960s, those technologies had matured and exhausted their innovation and productivity growth potential.2 It was then that the microprocessor gave birth to the information revolution in 1971 in Silicon Valley, USA. By the 1990s, there were bubbles and crashes in the emerging markets of the globalized economy, there was the boom and collapse of the dotcom and Internet mania and finally the financial casino boom of the 2000s, which collapsed in 2007 and sent much of the world into recession. Will this lead to a sustainable global knowledge-society golden age? That will depend on enabling regulation and policies geared to favouring the real economy over the paper economy, to shaping and widening markets and to ensuring social stability.

Are we moving toward a truly global golden age of growth? The structural shift also involves a shift in the agents of innovation. During installation, the drivers and innovators are finance and the new entrepreneurs, with the State in a facilitating service role. During deployment, production and the State move to the driver’s seat as innovators and agents of growth, while finance returns to a facilitating service role. Under present circumstances, it will not be easy to tame the enormous power of the financial world. However much it may have been weakened by the losses and the scandals, it has been reinforced and reinvigorated by the massive rescue packages and the provision of funds at negligible interest rates. The conditions for moving finance out of the casino and into backing innovation in production will depend on having enough political pressure for effective policy change. This time the role of civil society could be crucial. This particular paradigm has empowered people far more than the political organizations of the past. At present, all the conditions are there for unleashing a truly global golden age of growth. The installation period has left a powerful legacy: the new paradigm

2. This happened in the US, which was the core country for the mass production revolution. Europe – and soon also the Third World – were still catching up in the 1970s. The real effect of the technological exhaustion was felt everywhere in the 1980s, with stagflation in the North and the lost decade in the South.

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has been learned by both producers and consumers; the new industrial giants are ready and able to serve as engines of growth; most of the old industries are rejuve- nated; the new infrastructure (the Internet) has widened and deepened access to consumers and suppliers and a huge potential for innovation and growth has been installed, but needs a direction. Its deployment in the next two or three decades will be shaped and guided by three forces: government policies; consumer values and business strategies. To bring about a golden age the three must be: (a) consistent with the potential of the paradigm; (b) mutually compatible and reinforcing and (c) a positive-sum game for all participants. The post war golden age (in OECD countries) was shaped by: welfare state policies, salary levels that could turn workers into middle income consumers, the values of the American way of life and the strategies of economies of scale, disposability and planned obsolescence. The Third World did not fully participate; it produced cheap energy and raw materials and provided additional peripheral consumers. This time, sustainable globalized growth across the whole planet can do for world population what social democratic policies did for North America and Europe during the fourth surge. The revamping of infrastructures, production systems and consumption patterns can do for investment what the post-war reconstruction did in the 1950s. And full access to telecommunications can guide consumption towards services and intangibles as much as universal electricity, suburban housing and automobiles did for guiding consumption towards energy intensive lifestyles. The profile of the dynamics of demand will shape the golden age to come. And it is policies that ultimately define that profile. Is this utopian or realistic? It would have sounded utopian to say in the mid-1930s depression that blue-collar workers would have lifetime jobs and fully equipped suburban houses with a car at the door. Yet, it proved realistic because increasing wages created many more millions of consumers for mass production and intensive growth. It also sounded utopian to say that most colonies would gain independence, yet it was realistic because they did so (by peaceful or violent means) and then the rising middle classes in the developing world adopted the American way of life, which widened world markets for mass production. Similarly, it would have sounded utopian or rather outlandish to have said in the late 1960s that some of the values of the hippie movement (back to natural materials, organic food, etc.) would become the luxury norms. Yet it proved realistic. Innovations in natural textile fibres have transformed the world of fashion, while innovations in distribution logistics have made organic foods the premium segment in supermarkets. Indeed, major shifts in consumption patterns are possible and viable, especially when they also shift profit- making opportunities and can lead to enduring positive-sum games.

Choosing the future Consumption patterns are guided by the values defining luxury and the good life. These usually emerge at the top of the income scale and spread down by imitation. Part of the paradigm shift to sustainability is already happening among the

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wealthier and more educated classes. Values are already changing in an environmentally friendly direction and from quantity to quality: small is seen as better than big; natural materials are better than synthetic; multipurpose is better than single function; gourmet food is better than standard; fresh organic fruit and vegetables are healthier; exercise is important for well-being; global warming is a real danger; not commuting to work is possible and preferable; solar power is luxurious; and Internet communications, shopping, learning and entertainment are better than the old ways. Environmentally friendly values will spread by desire and aspiration (not by guilt or fear). Yet, business interests and government policy must converge in order to intensify the shift in direction. Will they? Full globalization is only possible in practice if it is environmentally sustainable. The current globalization pattern with its excessive use of materials and energy, while production is centred in Asia and consumption concentrated in the advanced countries, has obvious limits that will be reflected in market prices and lead to behavioural changes. Current patterns entail an almost unavoidable path towards rising prices of oil and raw materials as the economy recovers. This will, in turn, increase the costs of packaging (which is done with energy-intensive cardboard and plastics) and of freight (by oil fuelled trucks, trains, ships and planes). The continuing increase of CO2 intensified by globalized growth will augment the visible effects of greater global warming, leading to a rise in climatic risk insurance premiums and in the cost of projects for facing or avoiding catastrophes. The overall effect will be a change in the economics of the production, transport and distribution of tangible goods that will in turn lead to changes in business strategies and in government policies. This is likely to result in the massive relocation and geographic re-specialization of physical production into optimal local, regional and global networks, in the gradual shift from tangible to intangibles in the composition of world production and in the redefinition of the consumption patterns for the good life. Of course, the future is open to socio-political decisions and the range of the possible is very wide. At one extreme, there is the option of letting the financial world continue to make decisions on investment, with its short-term gambling focus, leading us to a gilded age of shining prosperity on the surface and with continued polarization of income within and between countries. This would mean confronting violence and migratory pressures along a bumpy road of successive booms and crashes. Alternatively, policies can be set up to favour the growth and expansion of the interests of production, facilitating long-term job-creating investment and innovation across the globe. This would lead to a global golden age; a positive-sum game with increasing prosperity for all, a major expansion of world demand and trade, providing healthy profits for business (in both production and finance) all in a more peaceful atmosphere. The choice is in the hands of every country, region and company, but especially in the hands of the international community. Indeed, the technological stage is set for the global golden age of the 21st century. It will require imagination, determination and knowledge to obtain all the welfare

A PLANET FOR LIFE 27 potential they offer while preserving the planet for future generations. The forces favouring a sustainable route to growth are coming together, while the resistance of the financial world is still very strong. It is up to government, business and society to agree on the convergent actions to bring forth the best of the possible futures. Successfully effecting this transition is the major task of our time. ❚

REFERENCES

Freeman, C. and Louça, F. (2001) As Time Goes By, Perez, C. (2002) Technological revolutions and Fi- from the Industrial Revolution to the Information nancial Capital: the Dynamics of Bubbles and Golden Revolution, Oxford: OUP Ages (London: Elgar 2002) Grin, J., Rotmans J. and Schot, J. -(2010) Transitions Perez, C. (2012) ‘The greening of the global econo- to Sustainable Development. New Directions in the my’, Inside Track, Issue 30, pp. 3-5 Study of Long term Structural Change. New York: Perez, C. (2013) ‘Unleashing a golden age after the Routledge financial collapse: Drawing lessons from history’, in Jacobs, M. (1991). The Green Economy: environment, Environmental Innovations and Societal Transitions, sustainable development, and the politics of the fu- Vol. 80, No. 1, pp. 11–23 ture..London: Pluto Press Perez, C. (2013) ‘Financial bubbles, crises and the Landes, D. (1969) Prometheus Unbound: Technologi- role of government in unleashing Golden Ages’ in cal Change and Industrial Development in Western Pyka, A. and Burghof, H.P. (eds.) Innovation and Europe from 1750 to the Present. Cambridge: Cam- Finance. London: Routledge, pp. 11 -25 bridge University press Schumpeter, J. A. (1939: 1982) Business Cycles: A Mulgan, G. (2013), The Locust and the Bee: Predators Theoretical, Historical and Statistical Analysis of the and Creators in Capitalism’s Future. London: Prince- Capitalist Process. Philadelphia: Porcupine Press ton University Press

28 A PLANET FOR LIFE CHAPTER 1 A revolution in green technologies?

Damien DEMAILLY, Coordinator New Prosperity Programme, Iddri, Paris, France Patrick VERLEY, Professor of Economic History, University of Geneva, Geneva, Switzerland

hile local and global environmental chal- and inspiring story, which focuses on opportunities rather lenges are continuing to grow, many than on the dangers of environmental degradation? We industrialized countries have been facing have addressed this question through the adoption of a lower productivity gains since the end of historical perspective. After having identified the charac- the period of high growth in the 1950s teristics of technologies that have marked the industrial Wand 1960s, along with a serious economic crisis in recent revolutions of the past two centuries, we will see if the years. In this context, authors such as Jeremy Rifkin (2011) green technologies fit this profile. and Nicholas Stern (2012) predict a new industrial revolu- As GIR advocates, we focus here on environmental tion with a strong ecological content, based on green tech- issues at the interface of energy and climate. In referring nology, and which we refer to herein as the green industrial to green technologies we therefore mean those related to revolution (GIR) (Figure 1). Making reference to the history the production and consumption of energy and those that of the industrial revolution in the nineteenth and twenti- offer alternatives to fossil fuels. We also delimit the scope eth centuries, these authors, along with others with similar of this analysis by restricting ourselves to technologies that outlooks, raise hopes – voluntarily or not – for a burst of are now at centre stage and that make up the heart of economic activity that will last for several decades and will green investment, starting with renewable energy – solar generate a new wave of productivity gains and therefore and wind, primarily – carbon capture and storage (CCS), growth, which will be ‘comparable, or superior, to those electric vehicles, etc. generated by the introduction of the steam engine, rail- For some authors, including Nicholas Stern, the new ways, electricity or information technology’ (Stern, 2012).1 industrial revolution has already begun and has the same Under what conditions would this new wave of green power as previous technology cycles to transform the growth be credible? Is the GIR anything other than a positive economy.

1. The concept of technological revolution is at the heart of the Schum- Technologies that have left their mark on history peterian tradition to explain the long economic cycles. Can we easily link, historically, the technological cycle and the economic cycle? Firstly, although fairly evident, it is worth remembering As recognized by all authors, for a great invention to spread and to that the great innovations of the past have led to increased have a significant macroeconomic impact, many reorganizations are necessary. Thus, electricity had to wait a long time before leaving its productivity, i.e. to the provision of goods or services at a luxury niche in department stores and entering into factories, and it much lower cost than previously possible through other is only when the organization of work in factories was modified and when workers were suitably trained, that companies were able to techniques. At its beginnings, a new technology may rely on derive substantial economic benefits. But this primarily concerned a non-cost benefits to create a niche market, such as electric few pioneering companies, and it took decades before these practices became widespread. It is then empirically extremely difficult, if not lighting, which was readily taken up by high-end depart- impossible, to make a link between the invention of electricity and the ment stores due to the luxurious image it conveyed. But a macroeconomic development of a country. The exercise is even more difficult when one looks not at one invention but at a constellation of technology must gradually generate significant productivity new technologies, and when one tries to link such technologies with gains if it is to extend beyond its niche and have a lasting a wave of growth. The empirical basis of the Schumpeterian school of thought is therefore fragile. impact on its areas of application.

A PLANET FOR LIFE 29 How do technologies that influence economic history FIGURE 1. Towards a new industrial and energy generate their productivity gains? This can be in a fairly revolution? simple and direct way, such as for example the mechaniza- tion of the textile industry that increased worker productivity within a few decades and brought down the price of yarn and fabrics. Synthetic chemistry provides another example of this type of influence: it has developed by providing the textile industry with substitutes for natural dyes that are often scarce and subject to speculation, such as indigo from India. In addition, the ‘major technologies’ have, more indirectly, opened the door to profound economic reorganization. The steam engine for example, through the substitution of hydropower derived from water courses, not only provided a For some authors, including Nicholas Stern, the new industrial cheaper energy source, it also made possible the geograph- revolution has already begun and has the same power as previous ical concentration of factories – previously it would not have technology cycles to transform the economy. been possible to group together several mills onto the same site – and allowed them to be located nearer to primary Green technologies and direct productivity gains resources and/or to places of consumption. The advent of Do green technologies correspond to the same profile as electricity meant that the link between the energy source the major innovations that have marked economic history and industrial locations could be extended even further2, and generated significant productivity gains? and the electric motor opened the door to a spatial reorgani- Let us start with the direct gains, which in this case are zation within factories towards greater rationality.3 the costs of energy production based on renewable sources Finally, as regards reorganization, we must not forget to or CCS, or the cost of electric vehicles. It is obviously very mention the role of network technologies, i.e. technologies difficult to make projections of the costs of green technolo- to transport goods or information: vehicles and roads, trains gies over ten, twenty or thirty years. Given the present and railways, telegraph, telephone and now the new tools of state of knowledge and by limiting ourselves to technolo- information and communications technology (ICT). Railways gies that are at the heart of energy transition today, we have enabled the expansion of markets, the exploitation of must be cautious. economies of scale and comparative advantage, speciali- CCS does not reduce the cost of fossil fuels, but in fact zation of territories, etc. Similarly, information and commu- the opposite. The cost of nuclear power – if it can be classi- nications technologies, new or not, have facilitated inter- fied as a green technology – is widely discussed, but it must national trade, just-in-time production, coordination within be noted that the current trend is towards its increase. On networked companies and of very large companies. the contrary, the costs of renewable energies and electric vehicles are decreasing, and some hope that the renewable mix will be competitive in the short or medium-terms 2. Transportation of coal was only economically profitable by sea or compared to fossil fuels and conventional internal combus- inland waterway. Therefore coal could only be used in close proximity to ports and waterways. Electricity, however, could be distributed tion engines, even when taking into account the necessary more widely, although it did not take off until advances had been changes to various networks. However, even for green tech made in high voltage transport and in network construction, which were originally regional. promoters (Fraunhofer, 2012), it is difficult to imagine a 3. A factory can then be organized to reduce the transport of materials drastic drop in the price of energy or mobility compared to as much as possible (e.g. in steel mills) or to adopt the assembly line the current situation (Figure 2). In future, energy is likely to method (moving the product, rather than the workers) which already existed in an embryonic form, in particular for car bodywork. become more expensive rather than the opposite. Surely,

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FIGURE 2. Clean energy will remain expensive

The Fraunhofer Institute estimates that in Germany, by 2030, the diversification of production will not enable a real decrease in energy prices. energy-saving technologies would be able to soften or even we can imagine one that is completely decentralized, where counteract this trend. But the role of energy transition and every consumer and every industrial site is a producer of in this case of green technologies seems to be to protect energy. The question we ask here is whether green technol- the global economy from oil shocks rather than to drive ogies can induce deeper reorganizations in the consumer down the price of energy services. sectors and the rest of the economy, as did the steam If we limit ourselves to green technologies that are already engine, electricity and transport networks. available and growing, we can therefore be sceptical about Following the logic of J. Rifkin, let us imagine a completely the potential of growth through ‘direct’ productivity gains. different organization of energy production, with a boom Can they induce a profound reorganization of the economy? in the development of renewables and the domination of The Fraunhofer Institute estimates that in Germany, by electrically powered vehicles. Electricity would no longer be 2030, the diversification of production will not enable a real produced in large power plants, each building would be a decrease in energy prices. source of energy, and the use of a smart grid would facilitate electricity exchanges, including with electric vehicles. Green technologies and the transformation of the This decentralized scenario is possible, as is a centralized economy renewable scenario. But how does it transform the organi- Green technologies can profoundly transform the way zation of the production of other goods and services in the energy is produced. Instead of a centralized energy system, economy? CCS, nuclear and renewable energies transform

A PLANET FOR LIFE 31 energy production, but do not provide a new energy vector. investments in energy transition. This is not because they Surely the electric grid would become smarter in the context concern only a small part of the economy, but it is due to the of a transition towards a system that is 100% renewable. doubts over their ability to generate significant productivity But ultimately it is always about a ‘switch’ that is turned gains: directly, by lowering the price of energy or mobility; on or off, in a factory or a building, as and when neces- or indirectly by opening the door to profound economic sary. Who can differentiate between an electron derived reorganization. from a coal plant or one from a solar panel (Zysman et al., Technologies that have shaped history have enabled 2012), between an electron transported by an old electric such reorganizations, such as electricity, and supporters grid or one carried by a super-smart grid? What difference of the GIR must specify how green technologies can do the does it make to the consumer? Electrons may be ‘green’ same. Surely the energy system can evolve dramatically instead of ‘brown’, but they are still electrons. The same is with the emergence of renewable energy, electric vehicles true for the electric car: it is a car with a different engine, and the development of smart grids, and it can shift from a which we may refer to as green, but it remains a car that centralized system to one that is completely decentralized. will be driven on the same roads as today, and will be used But how could the rest of the economy be encouraged to in the same way. We change the engine of the vector, in reorganize itself? If we do not want to give in to techno- this case the car, but there is no new vector opening the logical determinism, then it is clear that green technologies door to new uses. will not deliver an obvious reorganization. Let us remember, therefore, that the reorganization The concept of GIR is therefore fragile and there is room enabled by green technologies already seems to have been for doubt on the ability of green technologies to stimulate ‘exploited’ by the twentieth century diffusion of electricity, a new wave of growth comparable to the industrial revolu- automobiles and their respective networks. We can there- tions of the nineteenth and twentieth centuries. However, fore remain sceptical about the potential indirect produc- surprises are always possible, whether technological or tivity gains of such technologies. The economic organiza- organizational. After all, those who lived during the previous tion is certainly likely to change in the coming decades, industrial revolutions were not aware of the transforma- especially with the spread of ICT that will open doors to tions underway and of what they would bring in terms of new usages, but it is difficult to see green technology as their standards of living. The best approach therefore is to having a leading role in this transformation. achieve green transformation to avoid environmental degradation: whether this will lead to a new wave of growth will Conclusion be left for history to decide. The academic literature is full of arguments in favour of compatibility between growth and the environment, which REFERENCES are grouped under the term green growth. The strongest Fraunhofer, 2012, Levelized cost of electricity renewable ener- of these arguments remains that of the environmental gies. Rifkin J., 2011, The third industrial revolution. Palgrave Mac- damages that must be avoided, particularly the impact of millan, 304 p. abrupt climate change, ‘tipping points’, or future energy Stern N., 2012, ‘How we can respond and prosper: the new shocks. Environmental protection is therefore a necessity. energy-industrial revolution’. Lionel Robbins Memorial Lec- Can we go further and, as GIR proponents believe, hope for ture Series. Stern N. and Rydge J., 2012, ‘The New Energy-Industrial Revo- a real growth wave that lasts several decades as a result lution and an International Agreement on Climate Change. of new green technologies? The GIR is clearly a positive Economics of Energy and Environmental Policy’, Volume 1: and inspiring story, but we must be aware that unfulfilled 1-19. Zysman J. and Huberty M., 2012, From religion to reality: aspirations can lead to major steps backwards. energy systems transformation and sustainable prosperity. We have seen that the hope for a GIR is fragile if we Working Paper 192. Berkeley Roundtable on the International consider green technologies that are at the heart of Economy

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ICT: beyond the myth of the dematerialized economy

n 1990, digital technology was practically non-existent. There was next to Fabrice Flipo, nothing in the way of digital household equipment. Then came the digital Lecturer in philosophy networks, the information highways. In 1993, Netscape Navigator was at Telecom & Management released, opening the door to a virtual, completely unknown, world, on SudParis (Institute Mines-Télécom), which only 130 websites existed. Four years later, there were more than a Paris, France million. A very attractive vision then emerged. A new economy, an intangible one, driven by information was in the process of being born. Information is ‘negentropy’1 (Schrödinger, 1944), that enables us to go beyond the limits of growth. Information and communications technology (ICT) bring information, enabling this ‘control of the control’ as suggested by Michel Serres in his book Natural Contract. All this had somehow arrived just in time. IICT certainly arose at an opportune moment: ‘at the time of climate crisis, food crisis, financial crisis and global economic recession, and lastly the crisis of confidence in democratic institutions, whether national, European or global. The salvation of the world, social cohesion and the resumption of growth in a new form seem to require the success and speed of this revolution (Faucheux S., Hue Ch. and Nicolaï I., 2010). It was asserted that ICT could validate the claim that the development of economies would follow a curve similar to the one Simon Kuznets demonstrated for social inequality: an inverted ‘U’ shaped curve, i.e. after a period of strong growth in inequality and pollution, roughly corresponding to the nineteenth century in Europe, beyond a certain level of GDP, the trend would reverse and the economy would tend to ‘dematerialize’.

1. According to the physicist Erwin Schrödinger (What is life?, 1944), in a well chosen word.

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FIGURE 1 A still unequal connected world

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FIGURE 2 Will French households continue to consume more ICT products ?

This vision is a bit too good to be true. What are the real impacts of ICT? This chapter provides some answers. The findings are more alarming than reassuring.

The environmental footprint of digital technologies In recent years, after health expenditure, ICT has seen the fastest growth in any spending category: 15% in 2007, i.e. nearly a third of the growth of total household expenditure. More than three quarters of French households are equipped with computers (76% in 2010 against 54% in 2007), and as many have Internet access at home2, which is a few points above the EU-27 average. While those households with smartphones (phones with internet access) had increased by 76% in 2011.

ICT, RESPONSIBLE FOR 2% OF GLOBAL GREENHOUSE GAS EMISSIONS These trends have a dark side that is invisible to the user: the deployment of infrastructure, base stations (telephones), networks and data centres; along with, further upstream, product manufacture and the extraction of raw materials. In 2007 the consultant Gartner put forward a figure that has been widely verified since then:

2. Data from the Observatoire du Numérique.

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the ICT sector is responsible for 2% of global greenhouse gas emissions, a figure equivalent to aviation. Indeed, a recent study carried out at the global level reported that between 2007 and 2012, the overall electricity consumption of ICT had increased by 6.6% per year globally. We have moved from a world consumption of 670 terawatt hours (TWh) in 2007, to 930 TWh in 2012, more than twice the electricity consumption of France. And yet, this study ignores televisions and set-top boxes, phones, audio equipment, etc.3 In France, ICT consumption already represented about 14% of the nation’s electricity consumption (58 TWh) in 2008, i.e. the equivalent output of nearly seven nuclear power plants (Breuil et al., 2008). The fact that a Second Life avatar consumes as much energy as the average Brazilian person, i.e. 1,750 kWh, provides food for thought (Carr, 2009). To this must be added observations of dynamics. The introduction of ICT into the daily life of French people has led to an enormous increase in consumption: a rise of 635 kWh/household/year, representing nearly 20% of household consumption in 2008.4 The birth of ICT has cancelled out the energy gains made on all other domestic appliances over the last fifteen years, energy savings that have helped mask the energy impacts of the arrival of ICT.

THE NETWORK ITSELF IS NO EXCEPTION In France, data centres alone consume the equivalent of the output of three nuclear power plants.5 Google owns 900,000 servers that are spread over 32 sites. Its biggest data centre consumes as much as a city of 200,000 inhabitants. The problems posed by toxic and rare earths ICT also consists of physical matter. The overall production of waste electrical and electronic equipment (WEEE) is currently estimated to be about 40 million tonnes per year (UNEP/StEP, 2009). If this waste were to be loaded into 20m long lorries, they would form a line of 20,000km in length, or a non-stop twenty-four hours a day procession of two lorries per minute.6 In France, this represents 8kg of waste per person.7 In addition, the product available to the end user only represents 2% of the total mass of waste generated throughout the life cycle (Hilty and Ruddy, 2000; Kuehr and Williams, 2003). And with a growth rate of 3% to 5% per year, with quasi-stabilization of other categories, the amount of waste generated in 2020 is likely to have increased by a factor of between 2.7 to 7 compared to 2000 (depending on the measures taken in terms of the effectiveness of environmental regulation) (ITPS, 2004). It must be noted that much of this waste is toxic: mercury, lead, cadmium,

3. Network of Excellence in Internet Science, D8.1. Overview of ICT energy consumption, 5 February 2013. 4. Enertech, Mesure de la consommation des usages domestiques de l’audiovisuel et de l’informatique - REMODECE Project Report, ADEME – European Union - EDF, 2008. 5. BIO IS, 2008: pp. 101-114 6. http://www.ecoinfo.cnrs.fr/spip.php?article181 7. ADEME, Synthesis about electrical and electronic equipment – 2009 data.

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chromium, PBB (polybrominated biphenyls), PBDEs (polybrominated biphenyls ethers), PVC (polyvinyl chloride –the combustion of which can form dioxins), barium (used in cathode ray tubes (CRTs) to protect the user from radiation), beryllium, phosphorus and additives for screen luminescence. Neither can ICT manufacturing processes be considered as clean: solvents, acids, heavy metals and volatile organic compounds are utilized. With a low economic value and the presence of toxins, the temptation has existed from the outset to export waste to the Third World for lower cost ‘processing’. And this is indeed what has happened. Very early on, several NGOs highlighted the fact that 50% to 80% of electronic waste from the United States was not recycled locally but exported. In 2005, UNEP confirmed that the largest source of obsolete PCs in India was importation, while the conditions in recycling and disposal plants can be disastrous for human health and the environment (Toxic Link, 2003; UNEP, 2005). Can this waste be processed differently? This is certainly technically feasible, but relatively expensive. To do so would require the recovery of end of life products and to have them sent to specialized centres for processing. Such a collection of waste would be worth 45 million dollars in terms of resources. The problem is that this

BOX 1 THE NEED FOR REGULATION OVER WASTE ELECTRICAL AND ELECTRONIC EQUIPMENT, TOXIC SUBSTANCES AND ENERGY USING PRODUCTS

Improvements in terms of waste is fairly high: between 71% and consider substitutions to be too treatment must come from regu- 91%. The problems are the very difficult or impossible. lation. Without rules there would low collection rate (between 10% Finally, the EuP has led to some be no recycling or treatment. and 20%) and the re-employment modest gains. There is great For this reason, the EU adopted rate (2%) (Breuil et al., 2008). It potential in this regard: in Europe, directives on WEEE, on toxic should also be noted that there is a 75% reduction in consumption substances (ROHS) and on energy a vagueness surrounding the term of all devices in sleep mode would using products (EuP). Without ‘recycling’. Officials appear to be be equivalent to the electricity going into too much detail here, satisfied with what industry tells consumption of a country like WEEE requires producers to fund them in this regard. Despite these Sweden. But savings do not have and carry out the processing apparent improvements, it seems the same meaning for everyone, of their products, directly or that that the export of toxic waste so while the results are real, they through an eco-organization, has not stopped.1 The ineffective- are very limited. Regulation can while ROHS bans or restricts ness of the directive is such that barely keep pace with the rapid certain substances. its revision is underway. evolution of products. Projects So, what are the results? According Regarding ROHS, Europe has such as product energy label- to officials, all is going well with provided the model. Throughout ling, which has worked so well WEEE (MEEDDM, 2010). Most the world, most countries, for white goods, has remained producers are indeed adhering including China, have established unenforced and regarded as too to one of the eco-organizations similar tools in contradiction to complex to implement in a market (Ecologic, Eco-systems, ERP or the pessimism of industry which that is constantly changing. No Recylum); 18,600 collection predicted Europe’s marginaliza- real assessment is available in this points are operational, in addition. However, the ROHS direc- area. tion to 3,400 provided by local tive includes many exemptions authorities. The recycling rate for products where producers 1. According to the StEP consortium, 2009.

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value is too dispersed, compared to the cost of collection. As things stand therefore, it remains in the interest of manufacturers to leave this potential untapped, even if recycling consumes much less energy than primary production (only 5% to 10% of the energy of primary production). ICT represents 3% of the global demand for gold and silver, 13% of palladium and 15% of cobalt (batteries). According to Umicore, one of the global leaders in materials, the electrical and electronics industry as a whole accounts for about 30% of the world demand for silver, 12% gold, 30% copper and up to 80% of ruthenium and indium.8 Some sectors, such as coltan (cobalt), have been singled out as responsible for fuelling wars in Africa (Democratic Republic of Congo). Others materials, such as rare earths, require the exploitation of extraordinarily large amounts of land for their extraction, and the demand for these elements is doubling every seven years (Bihouix and de Guillebon, 2010).9 Globally, according to UNEP, less than a third of metals used have a recycling rate of over 50%; 34 metals have a recycling rate of less than 1% – and among them 17 are used in electronics.

ICT and the rise of a hyper-industrial world Studies such as the SMART 2020 report showed that the important thing is not the (overall) 2% of greenhouse gas emissions caused by ICT, but how ICT is particularly well suited to reducing the remaining 98%. Two approaches appear: the mechanical (and said to be natural) improvement of the sector regarding its own footprint and the potential of ICT in other sectors. There are indeed some rather positive signals. The SMART 2020 study was very enthusiastic about the fact that the growth in the energy consumption of personal computers will, all things being equal, only triple when it could have increased sevenfold with the transition from 600 million to 4 billion machines.10 This relatively good news is, however, somewhat overshadowed by some less encouraging aspects. In terms of screens, it is evident that we are not witnessing a substitution, but rather a multiplication. The flat screen, which can be built to provide a larger viewing area and a smaller footprint, has permeated throughout our environment – train stations, underground transport networks, post offices and numerous other locations. This diffusion has led to the average number of screens per family reaching 6.8, or even 9 if the head of household is between 25 and 49 years old.11 These trends have resulted in irrevocable data: consumption classifiable as ‘video’

8. http://www.preciousmetals.umicore.com/PMR/Media/e-scrap/; Hocquart (2005). 9. http://minerals.usgs.gov/minerals/pubs/commodity/rare_earths/mcs-2011-raree.pdf 10. The gains are mainly from: (1) IT, from the improvement of the energy efficiency of processors (the energy used for a given calculation is halved every 18 months), servers, their usage rate (through virtualization) and the management of their air conditioning, PCs, laptop innovation, the transition from CRT to LCD, the transition to more advanced standards of energy management (EnergyStar software for the management of sleep modes, etc.); (2) telecommunications, from the transition to optical fibre and more efficient routers; (3) electronics in consumer goods, the elimination of VHS players, the transition to flat screen TVs or LEDs. 11. GfK/Médiamétrie data.

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has increased considerably as a part of the household energy budget.12 The majority of new televisions (LCD and plasma), given their larger size, consume on average respectively 1.6 and 3.5 times more than old CRT televisions. While image-projection devices (video and overhead projectors) consume even more. On the networks side, Cisco reported that this trend is exponential: global mobile traffic tripled in 2010 for the third consecutive year, and should continue to grow at a rate of 50% per year until at least 2016, resulting in a multiplication of traffic by a factor of seven. According to ABI Research, mobile traffic in 2014 is expected to be 39 times greater than in 2009, the network will annually carry the equivalent of 1 billion DVDs. Lucent Submarine, a Calais-based company, produces and installs 40,000km of cables each year. The advent of smartphones has had a significant effect on the company’s activity. In 2015, tablets will generate traffic equivalent to the entire global mobile network in 2010: 248 petabytes per month. Similar observations can be made in the field of programming. Competition has driven a growth in ‘quick and dirty’ programs, resulting in an endless and useless inflation of program size. Windows 7 and Office 2010 use approximately 15 times more processing power, 70 times more RAM and 47 times more disk space than the 1997 versions. The 2010 Université du Système d’Information competition showed that optimization could generate savings of 600% at the user level and 20% on the server.13 Indeed, there is no discernible limit to the increase of data production and transfer. Considering appliances individually, the tremendous progress in terms of energy efficiency is undeniable. But this statement ignores the exponential dynamic of data production, the multiplication of screens, etc. What is the use of life cycle analyses when there is no economic value associated with aspects such as product lifespan? Despite the many studies that emphasize the importance of lifespan, in 1960 the life of a computer was around ten years, while today it stands at no more than two to four years. Most of these objects have become fashion items in industrialized countries.

The remaining 98%: substitution or complementarity? The spontaneous reduction of the ecological footprint of ICT is not therefore guaranteed through natural progress in the sector. In fact, the best we can say is that it is only likely to increase significantly, whereas it could have increased very dramatically. Yet various stakeholders seek to shift the debate to the remaining 98%. The French Fédération des industries électriques, électroniques et de communication (FIEEC) thus attempted to reassure the French public with a press release saying that ‘the environmental impact of ICT will remain modest in relation to the CO2 savings that their diffusion will generate in the French economy.’ Since the 2003 Tunis Summit14, a series of reports has been published that support

12. See Enertech study, 2008. 13. Groupe EcoInfo, Impacts écologiques des TIC, EDP Sciences, 2012, p. 191 14. GeSI WWF 2003; GeSI SMART 2020, 2008

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this opinion, with the blessing of a number of NGOs, such as WWF. In 2005 a study by WWF and the Brussels-based European Telecommunication Network Operator’s Association (ETNO), Saving the climate at the speed of light, estimates the possible contribution of ICT to be a 15% to 30% reduction of greenhouse gas emissions by 2020, or ten times its own footprint. It claims that although the industry has certainly not produced a ‘killer app’ (that is to say, one that solves all problems at once) to combat climate change, it can provide a multitude of solutions that, put end to end, would massively reduce emissions. These arguments have been adopted and developed by public authorities, but with a little more restraint about the potential. In France, for example, it has been estimated that ICT could help save 1 to 4 times its own greenhouse gas emissions (Breuil et al., 2008). The solutions mentioned are teleworking, remote meetings, the optimization of transport and travel, e-commerce and online shopping, the dematerialization of administrative procedures, the regulation of energy in buildings and smart electrical grids. These aspirations are based mainly on the substitution phenomena: a light resource use replacing a heavy one, for example video conferencing replacing air transport. So are things really that simple? Not entirely. Let’s consider some examples. At first glance, the idea of replacing air travel with virtual meetings to produce a five-fold reduction of CO2 emissions, seems persuasive. However, in an earlier study (Digital Europe, 2002), the Wuppertal Institute had highlighted one major objec- tion to this notion: doesn’t audio or videoconferencing actually encourage exchange? Everything therefore relies on the definition of ‘social function’, which is not as obvious as it seems, especially given that the academic literature has shown that the relationship that has so far prevailed between telecommunications and transportation is not substitution, but rather a complementary relationship, with ICT bringing both greater communication and greater displacement (Claisse, 1983; Mokhtarian, 1997; Graham and Marvin, 1996). The burden of proof should logically be on those who argue that ICT is likely to cause a rupture in this relationship. However, none of these optimistic reports bother to explain why digital technology will break this trend. The same applies to e-commerce. Again, the idea is simple, which is what makes it so attractive in the studies cited: making purchases without leaving the home, ordering e-books rather than paper, etc. The SMART 2020 report sees huge gains in this regard, with savings of 30 million tonnes of CO2. Detailed studies, however, strongly moderate this enthusiasm. In terms of e-commerce, the gains appear clearly only where a product is ‘lightweight and easy to deliver’ (Breuil et al., 2008). This is appropriate in an information-based economy, but is this really the direction in which we are headed? This is doubtful. We still use cars, houses, etc. A study by the BIO Intelligence Service (BIO IS) concludes that: all we can conclude in terms of e-commerce is that we cannot conclude anything – and this is mainly due to social complexities. If e-commerce is imposing itself, with companies such as Dell and Amazon, it is for reasons that have nothing to do with ecological matters. What is sometimes called ‘disintermediation’ results in multiple changes, and adverse

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ecological effects are obvious: economic savings are used to fund an overall increase in production. It could also be said that there is a lack of conclusive proof about the benefits of e-paper (Herring and Roy, 2002; Heiskanen and Pantzar, 1997; BIO IS, 2008) one can even consider that it is better to read on paper rather than reading more than 50 pages on screen (Hilty, 2008). And there continues to be strong arguments for actual paper: it is made entirely of renewable resources. The BIO IS report explores several other avenues, and none seem able to create the much expected ‘decoupling’ of GDP and ecological pressure. One of the few unambiguous examples is the online system of tax declaration, which is an example ICT being used to its fullest advantage: the exchange of pure, dematerialized data. The question is whether online tax declaration will, over time and according to changing political regimes, prove to be as reliable as paper. In any case, this example is relatively trivial compared to the bold statements of reports such as SMART 2020. The BIO IS study (2008) cited teleworking as one of the most important areas where gains could be made, as did the CGEDD-CGTI report: teleworking accounts for 70% of the possible total savings for dematerialization and the remainder is essentially due to videoconferencing. However, these savings are low for several reasons: this would relate to no more than 0.1% of traffic15 – and then only apply to very service-based economies. Furthermore, such savings would only be achieved if the consumption generated at home was less than that in the workplace. The SusTel Project, which identified 30 case studies on the subject16, shows that nothing is simple.

The rebound effect: how efficiency gains could lead to increased emissions In short, the decisive factor in these examples is the rebound effect. This is a well- known issue to those with an interest in the subject. The term was used by Stanley Jevons whose famous book The Coal Question (1865) dealt with the possible exhaustion of coal, showing that a more efficient use of a product engendered a decrease in cost, which in turn caused an increase in demand... In an article published by Terminal, Flipo and Gossart (2009a) described two types of rebound effect: lower costs due to the use of less raw materials, allowing users to buy more products at the same cost; and secondly the reallocation of gains in terms of finance or time (for example, in teleworking) to resource-intensive activities. In these different examples, economic gain is in contradiction with environmental gain. The SMART 2020 report (GeSI, 2008) recognized the problem but kicked it into touch: ‘ICT technologies can improve efficiency and this will lead to reduced emissions. However, prevention of the rebound effect requires an emissions- containing framework (such as emission caps linked to a global price for carbon)

15. Wuppertal Institute, Digital Europe, 2000. 16. See www.sustel.org/d10_d&&.htm

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to encourage the transition to a low carbon economy. Without such constraints there is no guarantee that efficiency gains will not lead to increased emissions.’ It is true that some of the declared reductions have been, or will be, obtained: those that are broadly compatible with the development of the sector according to a conventional economic logic. Indeed, what company would renounce the massive use of its products to coordinate public transport, regulate traffic usage, etc.? None, as little as it may be mobilized on the ecological question. The reason for this is simple: because it is for the increase of its production that it is good to do so. But it will inevitably have an increasing impact on the planet. The only savings that will therefore be made will be the ones that enable an increase in spending. And regulation is there to get the reductions which, without harming growth, cannot be achieved for various reasons (regulatory, standardization etc., for example the connectors, which, being specific to each manufacturer, are discarded rather than being reused). Work by the Institute for Prospective Technological Studies (IPTS) completes this observation17: the ICT sector, in itself, is not the determining factor of a shift in lifestyles – lifestyles are based on values, and companies reinforce dominant values rather than changing them. Deployment of ICT may well lead to a deterioration of the situation, if nothing is done.

Conclusion: the consumer’s fault? Public authorities and businesses tend to hold the consumer responsible, as shown by the study of Flipo et al. (2012). After all, consumers can express their choices on the market, which is a democratic place for the formation of needs. This representation totally ignores the actual situation the consumer is faced with, who, for the sake of the economy and its growth, is totally misinformed about everything that could discourage spending. The consumer is only glimpsed in the narrow scope of the manoeuvre room of companies in a well-defined market, that the state considers serves its own power. The consumer’s ability to pay is a central concern, which must be controlled. It therefore seems that the compromise between the environment and economic growth was abandoned at the expense of the former. In this context, how useful are the timid campaigns of the various public institutions lobbying for energy savings in their country (Bureau of Energy Efficiency in India, Agency for the Environment and Energy Management in France, etc.)?❚

17. IPTS, The future impact of ICT on environmental sustainability, 2004.

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REFERENCES

Bihouix Ph. and de Guillebon B., 2010, Quel futur Hocquart C., 2005, ‘Les enjeux des nouveaux maté- pour les métaux ? Raréfaction des métaux : un nou- riaux métalliques’, Géosciences, n°1, January. veau défi pour la société, EDP Sciences IPTS, The future impact of ICTs on environmental sus- Breuil H. et al., 2008, Rapport TIC et développement du- tainability, 2004 rable, CGEDD (Conseil Général de l’Environnement Jouanno C., 2010, Bilan de la filière pour la période et du Développement Durable) & CGTI (Conseil Gé- 2006-2009 et les nouveaux défis fixés pour 2010-2014, néral des Technologies de l’Information). Available MEEDDM Executive summary, 22 February. on http://www.telecom.gouv.fr Kuehr R. and Williams E. (Eds.), 2003, Computers Carr N., 2009, The Big Switch, Norton & Co. and the environment: understanding and managing Claisse G., 1983, Transports ou télécommunications : their impacts, Kluwer Academic Publishers and United les ambiguïtés de l’ubiquité, PUL. Nations University. Faucheux S., Hue C. and Nicolaï I., 2010, TIC et Mokhtarian P.-L., 1997, ‘Now that travel can be vir- développement durable – Les conditions du succès, De tual, will congestion virtually disappear?’, Scientific Boeck, p.191. American, October. Flipo F., Deltour F., Dobré M. and Michot M., Romer P., 2001, Post-scarcity prophet, Reason. 2012, Peut-on croire aux TIC vertes ? Technologies de Schrödinger E., 1944, What is life?, Cambridge Uni- l’information et crise environnementale, Presses des versity Press. Mines. Toxic Link, 2003, Scrapping the hi-tech myth: Comput- Graham S. and Marvin S., 1996, Telecommunication er waste in India, Research Report, New Delhi. and the city: Electronics spaces, urban places, Rout- ledge. UNEP, 2005, Les Déchets Electroniques, la face cachée de l’ascension des technologies de l’information et de Heiskanen E. and Pantzar M., 1997, ‘Toward Sustainable la communication, in Early warning on emerging en- Consumption: New Perspectives’, Journal of Consumer vironmental threats, n°5, January. Policy, vol.20. UNEP/StEP, 2009, From E-waste to resources. Hilty L., 2008, Information Technology and Sustain- ability. Books on Demand.

Hilty L. and Ruddy T., 2000, “Towards a Sustainable In- formation Society”, Informatik No. 4, August.

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CHAPTER 2 Information and telecommunication technologies in Africa: a potential Revolution?

Warigia Bowman, Assistant Professor, Clinton School of Public Service, University of Arkansas, Little Rock, Arkansas, United States of America Marianne Mensah, Project Oficer, CEFEB, Marseille, France Kevin Urama, Executive Director, African Technology Policy Studies Network, Nairobi, Kenya

frica represents the world’s greatest informa- across the continent. We review the extent and value of tion and communication technology (ICT) chal- these investments. Using Rwanda as an example, we show lenge. It has the lowest telephone density in how ICT infrastructure investments can combine with robust the world and the lowest level of Internet con- public policies to promote education access and economic nectivity. The number of Internet users in Africa growth. We conclude by analysing the enormous potential isA still low, and tariffs remain high compared to penetra- for online education to further transform African economies tion rates and costs in the rest of the world (Akue-Kpakpo, and societies. 2013). Nevertheless, ICT has met an unexpected level of Support for ICT in Africa by international success in Africa. Several analyses highlight the technol- organizations and companies ogies’ macroeconomic impacts and their transformative In the late 1990s and early 2000s, transnational organi- effects on societies and economies, particularly in banking, zations such as the World Bank, the International Telecom- healthcare and agriculture. Public officials, development munications Union (ITU) and the UN acted as proponents practitioners, social activists and businessmen see Africa and conduits for policies to install and expand ICT on the as a new frontier where ICT will drive a transformation African continent. They encouraged free-market reforms of of African economies and societies. Some promote the the African telecommunications market and shored up ICT so-called ICT revolution, extolling its potential to increase infrastructure. In addition, multi-stakeholder collaboration civic and market participation, productivity, competencies between various African states, international non-govern- and transparency. What are the hopes and challenges of mental organizations and indigenous community-based this ICT revolution in Africa? Are African populations and organizations pushed for universal access to the Internet economies adopting and appropriating the technology? and telephony as development and social justice tools.1 This Might ICT create a real revolution or simply an evolution donor funding for infrastructure, community support, market with some leap-frogging effects? liberalization and the promise of large domestic markets This paper examines the way that the international community and companies have invested substantial political and economic resources in reforms and infrastructure 1. Universal access is an idea promulgated in the United States during the mid-1900s to extend landline telephones to every part to promote access and open telecommunications markets of the nation.

A PLANET FOR LIFE 45 FIGURE 1 The growing African connectivity

lured private sector telecommunications companies into the Organisation for African Unity’s (OAU) Heads of State the region, further expanding ICT investment. Summit in Yaoundé, Cameroon in 1996. AISI supported Over the 1990s and into the new millennium, scholars the efforts of 28 African countries to develop ICT policies, and donors expanded the notion of universal service, which UNECA calls ‘national information and communica- arguing that national governments should play a role in tion infrastructure’ policies. creating an environment which fosters technology (Woherem, African domestic activists participated together with 1993). Some observed that ‘Consensus is building on the global activists in internationally sponsored forums such importance of Internet usage as a catalyst for interna- as the World Summit for Information Society, organized by tional development’ (Dzidonu, 2002). Former UN Secre- the International Telecommunications Union, a subsection tary General Kofi Annan espoused policymakers’ belief of the UN. The General Assembly of the UN endorsed the that ICT could help Africa modernize while allowing devel- World Summit on the Information Society in 2001. Civil oping countries to pursue social welfare goals.2 The African society members, private sector organizations, govern- Information Society Initiative (AISI) was launched concur- ments, UN organizations and other donors all participated. rently with the rise of ICT as a social goal in 1996. The Social activists observing the emergence of the new set United Nations Economic Commission for Africa (UNECA), of technologies recognized ICT as a potential economic which is a donor body, ensured that AISI was adopted by and political resource, and importantly, one that acts as a vehicle to discuss long held social justice objectives such as combating poverty, empowering women and improving 2. Annan, K., 2002, ‘ICT: A Priority for Africa’s Development.’ Press Release. SG/SM/8496 AFR/516. Geneva: United Nations. education and health care in a modern context. These

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FIGURE 2 African Internet Infrastructure

activists followed the lead of domestic actors in the United the rest of the globe reported rates closer to 40.0%.3 Most States and set about creating a discourse that emphasized countries remain far from reaching the goal of universal the need to distribute that resource equitably. These inter- access, not least because household and business Internet national activists presented ICT as a development tool for connections in sub-Saharan Africa are more expensive than disadvantaged rural areas. Private sector companies saw anywhere else in the world (Akue-Kpakpo, 2013). that these reforms and policies presented opportunities to Nonetheless, significant progress has been made in establish large cable companies and telecommunications terms of shoring up ICT infrastructure in Africa over the groups on the continent. past decade. As recently as 2009, submarine cables did not surround the entire continent, making high-speed Internet Investments in ICT infrastructure in Africa and data largely unavailable and prohibitively expensive for According to the ITU, the Internet arrived in sub-Saharan East Africa. In 2010, the Eastern Africa Submarine Cable Africa in the early 1990s, in Kenya in 1993 and Nigeria in System (EASSy), a $265 million, 10,000 mile undersea fibre 1995. Since 2000, Africa has posted the highest rates of optic cable system partially funded by the World Bank, the growth – up to 44% per year – in the worldwide mobile African Development Bank and other donors, connected telephony market (Deloitte, 2012). However, overall penetra- countries in Eastern Africa to the rest of the world (Akue- tion of both Internet and telephony is much lower than Kpakpo, 2013). In addition, private sector telecommunica- in either lower middle income countries or higher income tions companies based in South Africa, including Vodacom countries (Chabossou, Stork, and Zahonogo, 2009). In 2012, Internet penetration in Africa stood at about 15.6% while 3. Internet World Stats, at www.internetworldstats.com.

A PLANET FOR LIFE 47 and MTN played a key role in expanding infrastructure and led by President Paul Kagame, made a commitment to services. Meanwhile, two other African cable operators, strengthening the national ICT network; since then it has TEAMS and SEACOM, largely closed the Internet connec- significantly invested in placing ICTs in schools, hospitals tion gap for other regions. SEACOM spans 13,700 kilome- and public offices. Kagame announced his aim to ‘use the tres; built by a consortium including the Aga Khan Fund power of science and technology to transform’ Rwandan for Economic Development, it was completed at a cost society (Kagame, 2008). He sought rhetorical inspiration from of approximately $650 million. TEAMS (the East African the United States, and promised to leverage science and Marine System), which spans 4,500km and cost $130 education to permit ‘a more rapid socioeconomic trans- million to build, is mainly owned by Kenyan stakeholders, formation’ and help the country make better development including state-owned Telkom Kenya, as well as Etisalat of choices. Enormous support from the outside world for this the United Arab Emirates (NPAD, 2014). vision translated into significant resources from donors. In addition to dramatic improvements in cable Internet Kagame’s Rwandan Patriotic Front government believes links between the African continent and Europe, which have that ICTs offer Rwanda the opportunity to ‘leap-frog the key led to reduced cost and dramatically increased transmission stages of industrialization and transform her subsistence speed, another key area of growth in African ICTs has been agriculture dominated economy into a service-sector driven, the boom in cellular telephony on the continent (ITU, 2013). high value-added information and knowledge economy that Mobile telephony services now cover most of the population can compete on the global market’. Kagame asserts that of sub-Saharan Africa. Telecom network operators in five ‘Rwanda is at risk of being...marginalized if she fails to key sub-Saharan markets (Nigeria, Tanzania, South Africa, embrace these technologies to transform her economy and Kenya and Ghana) have invested $16.5 billion since 2008 society’. He believes the potential of ICT can help achieve (Deloitte, 2012). Indeed, these operators are key providers the ‘vision of a modern economy for Rwanda’. Albert Butare, of all forms of ICT, including telephony, Internet, and data Rwanda’s Minister of State for Energy and Communica- services – more so in Africa than in any part of the world. tions, seconds Kagame, calling ICT ‘an indispensable tool for...modernization’. Public policies drive ICT infrastructure and The centrepiece of the Rwandan government’s effort adoption: the case of Rwanda to distribute ICT to the Rwandan population lies in educa- In addition to garnering funding for network infrastruc- tion. Education is one of the eight pillars in the nation’s ture, some African countries have aggressively promoted ICT policy. Education-related ICT projects are wide-ranging, ICT through public policies. One strong example of this from training teachers to rolling out computers, installing is the country of Rwanda: it has aggressively promoted Internet connectivity and pursuing monitoring and evalua- ICT’s role as a socio-economic driver. Nearly two decades tion, writing content in Kinyarwanda (a dialect) to digitizing after the genocide, Rwanda still has crushing social and mathematics, biology, chemistry, and physics curricula. economic problems. In 2008, Rwanda ranked among the Rwanda provides primary school and the first three years world’s least developed countries; approximately 60% of of secondary school to students for free. Rwandans earned less than a dollar a day and the Human The government places especially strong emphasis on Development Index ranked Rwanda 161st out of 177 science and technology in education. As of 2008, govern- countries. Life expectancy at birth was only 45 years. Now, ment spending to promote science reached 1.6% of its Rwanda’s predominately rural population is set to double gross domestic product. In the words of the director of by 2030. planning for the Rwandan Ministry of Education, ‘We want to Against this background, ICT for development represents use ICTs for education. We want a skilled workforce.’4 One a crucial ingredient for Rwanda to transform itself from an of the government’s key goals is to deploy the technological agricultural third-world country into a technologically-driven second-world country. In 2008, the government of Rwanda, 4. Interview with Karangwa and Claver, 13 August 2007.

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resources needed to implement educational reform and ICT Democratic Republic of Congo, Senegal, South Africa and initiatives. A specific objective is to ‘transform Rwanda into Tunisia.5 While it is too early to fully appreciate the full an IT literate nation’, and improve the educational system extent of the project’s impact, it presents both positive and over a ten-year period. As part of the process of attaining negative lessons for those who wish to emulate the online digital literacy, the government initiated a comprehensive education concept. programme to deploy and ‘exploit’ computers in schools. In terms of positive points, online learning does present Starting in 2006, this effort included the placement of the capacity to disseminate knowledge more widely to those computers in public and private schools; the objective was to located far from traditional bricks-and-mortar academic give every school an identical number of computers regard- centres or those who could not otherwise attend courses. less of school size or location. Primary schools received However, online learning requires a rethinking of pedagog- one laptop each, while secondary schools were slated to ical content, and improvements to it, to avoid or reduce receive ten laptops each. In addition, each of Rwanda’s 30 dropout rates, which often prove high. Obviously, more districts was to receive precisely one telecentre. Further interactivity between learner and teacher and/or peers is efforts included bringing the Internet to elementary school necessary to maintain the former’s attention. Online learning children, attempts to put a computer science curriculum in may also create innovative, more horizontal relationships place, and training thousands of teachers in basic computer between teachers and learners, and between peers who literacy, in cooperation with Microsoft. contribute to each other’s learning. It also allows for better The impact of ICT on African economies has often been monitoring of the student’s learning experience – some described using well-known examples, such as mobile might say it enables spying on students – by analysing data phone banking in Kenya (Obulutsa, 2005) or Ugandan related to the time the learner spends online, the content farmers’ use of mobile phones to connect with suppliers consulted, tests taken and so forth. While many for-profit and markets. Such usages hold enormous potential and online courses have yet to make a profit, online learning have clearly been appropriated by their users. does cost less in terms of logistics for buildings, transpor- We present here a less well-known example of an ICT tation and other infrastructure. As a bonus, it may reduce application that holds huge potential to transform Africa: carbon emissions, at least those tied to transportation, if online education or e-learning. As African countries invest not those related to generating electricity to run the online in infrastructure and move towards a greater uptake of ICT, networks and computers. we may see the adoption of online education for the masses These positive points may be countered by some – for schoolchildren and teachers, and also parents and the technical, organizational and economic pitfalls. The primary business community. Countries such as Rwanda may be one lies in the digital divide: the learner needs access able to draw on experiments currently being conducted in not only to a digital device and the Internet, but also to other countries, such as the Massive Open Online Courses high-speed Internet for bandwidth-heavy content such as (MOOCs) made famous by Stanford and Harvard Univer- videos or animations. These applications run up against sities in the United States, or the France Digital Univer- connectivity problems in countries such as Chad or Congo. sity (France Université Numérique - FUN) launched by the Online learning also requires more ‘mental bandwidth’ from French Ministry of Higher Education and Research at the teachers, who must learn how to use new technologies and end of 2013. The potential extent of MOOCs in terms of how to teach with them. Traditional teaching practices need their adoption and appropriation remains controversial. to be updated, an effort that may find resistance among Some insight can be gained through the analysis ofng some teachers and experts. Online learning also requires more traditional e-learning projects focused on a close tutoring of the students. The e-Dev project promoted by 5. In these countries, AFD is building on the French government’s own the French Development Agency was launched that has 2013 launch of a MOOC platform known as FUN (France Université Numérique), together with CEFEB, and the francophone university taken place in six African countries in 2013: Algeria, Chad, agency, AUF.

A PLANET FOR LIFE 49 new standards to measure the efficacy of digital versus leap-frog from developing nation status to become a more traditional learning methods. In some cases, the optimal democratic emerging power. solution may be a combination of online courses with face- to-face education. Some instructors suggest the ‘flipped Conclusion classroom’ (Mazur, 1997) is the best way forward. In their Technical, social, economic and political considerations view, the flipped classroom model allows students to learn interpenetrate and overlap in the arena of deploying ICT for by watching video lectures online, usually at home, and development. Ensuring ICT access for all Africans presents doing what used to be homework in the classroom, with a challenge: it is not just a matter of buying computers and more guidance from the teacher and helpful peer participa- placing them in telecentres and schools in rural towns. tion. Last but certainly not least, online education requires a Rather, spreading ICT throughout Africa presents a complex large upfront investment in producing the courses. Gener- set of inter-related problems. It requires the building of ally speaking, online courses with little to no video or anima- the physical, regulatory, political, commercial and social tion cost about €3,500 to €5,000 per hour to produce, infrastructure needed to capitalize on technology’s promise while highly animated courses may reach €10,000 to of revolution, and it must rely on the ability of citizens to €20,000 per hour. The substantial production and delivery use the technology to advance democracy, participation, costs may deter some countries or schools from pursuing competency and transparency. online education projects. This is even more true for the original American MOOC model, which so far has been REFERENCES based on free access to courses. Given the already large Akue-Kpakpo A., 2013, ‘Study on International Internet Connec- investments required for networks, software, hardware and tivity in Sub-Saharan Africa.’ Geneva: International Telecom- munications Union. power, access to education via online courses may expand Chabossou A., Stork C., Stork M., Zahonogo Z., 2009, ‘Mobile in Rwanda, for instance, but it may no longer be free. Telephony Access and Usage in Africa.’ Research Institute Afri- Or, as with previous and current investments in physical ca. http://whiteafrican.com/wp-content/uploads/2009/04/ researchictafrica-ictd2009.pdf ICT infrastructure, Africans may turn to the donor commu- Deloitte, 2012, Sub-Saharan Africa Mobile Observatory. Re- nity for funding. Such is the path followed to support the trieved from http://www.gsma.com/publicpolicy/wp-con- first MOOC designed by Africans for Africans, currently tent/uploads/2012/03/SSA_FullReport_v6.1_clean.pdf being established by the African Management Initia- Dzidonu C., 2002, A Blueprint for Developing National ICT Policy in Africa. Nairobi: African Technology Policy Studies Network. tive (AMI). AMI has already launched Africa’s first free Government of Rwanda, 2007, Vision 2020 Umurenge: An in- online learning platform for managers and entrepreneurs tegrated local development program poverty eradication, rural through its Virtual Campus. The organization now aims to growth and social protection. Harrison R., 2013, Free online learning: AMI to develop Africa’s deliver free online business and management education first ‘MOOC’. Johannesburg: African Management Initiative. to African small business owners and young managers ITU, 2013, Measuring the information society. International Tel- using a hybrid model that combines offline peer-led ecommunications Union: Geneva. learning with online coursework. In addition to seeking Kagame P., 2008, ‘Challenges and Prospects of Advancing Sci- ence and Technology in Africa: The Case of Rwanda.’ Science grant monies, AMI hopes to partner with business schools 24, Vol. 322 (no. 5901), pp. 545-551. so it can ‘leapfrog traditional bricks-and-mortar training by Obulutsa G. 2005, ‘Mobile Phone Explosion Helps to Boost In- driving practical, personalized learning and development formal Businesses,’ The Standard (Kenya), July 19. for African managers and entrepreneurs on an ongoing Woherem E. E., 1993, Information Technology in Africa. Nairobi: ACTS Press. basis’ (Harrison, 2013). As is often the case with new Mazur E., 1997, Peer Instruction. A User’s Manual. Upper Saddle technologies, the positive points appear to outweigh the River, NJ: Prentice Hall. negative ones, while still demanding a certain leap of faith on the part of funders, governments and the participants themselves that the investment and effort will help them

50 A PLANET FOR LIFE CHAPTER 3

Innovation in mobility: combining vision, technology and behavioural change

ransport plays an important role in society, as production, business, leisure and everyday activities all depend on movement. It has David Banister Professor of Transport been instrumental in allowing the increase in trade and globali- Studies and Director zation to take place, and in allowing new forms of networking of the Transport Studies Unit, Oxford between people and businesses. This global mobility has been University, UK built on efficient aviation and shipping networks, enhanced by the new communications technologies. At the more local level, there have also been substantial increases in mobility by all forms of transport as income levels have risen (Banister, 2011). Whilst other sectors of the economy have decarbonized, transport has continued to increase its consumption of energy and its CO2 emissions. It Tnow accounts for over 25% of global CO2e and this figure is expected to increase to 50% by 2030 (on 2005 levels), as other sectors decarbonize and as transport emissions continue to grow (IEA, 2010 and NEAA, 2009). Global reduction targets need to be set. In the transport sector a 50% reduction in CO2 emissions would be required by 2050 (on 1990 levels), if this sector were to make a real contribution to avoiding a +2oC in global temperature and substantial sea level rise (ITPS, 2011; IPCC, 2013). This means that the richer countries should be targeting an 80-90% reduction over this period, but this would require major policy interventions that go considerably further than can be achieved by technological innovation alone. At the city level, the concerns are less about global environmental issues (CO2) and more about the quality of life (clean air and a safe environment), accessibility and affordability of transport, and the quality of the local neighbourhood. Sustainable mobility must address long-term ecological sustainability, and this can be achieved

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through technological innovation and the efficient use of (clean) energy. But sustainable mobility should also address individual needs for travel, together with ensuring greater equity in terms of access to transport and its affordability. This means that the environmental and social dimensions of sustainable mobility are as important as the technological and efficiency dimensions. This chapter is about sustainable mobility, with the case being made that the solution is not only technological. A more fundamental debate is required that explores the full range of policy actions that can be taken to address all of the elements of sustainable mobility. These actions can be implemented individually, but it is only when there is a coherent vision of the sustainable city that real progress can be made through putting mutually supporting policy measures together to achieve both the global objectives (CO2 and energy efficiency) and the local objectives (quality of life, accessibility and affordability). The chapter comments on the growth in travel, in particular travel distance, but its main focus is on the options for mobility in the low carbon city, where innovative thinking on technology is combined with examining the potential for new forms of organization and management, so that a more holistic approach to meeting the mobility needs of all those living and working in the city can be achieved.

The global growth in transport with substantial social and environmental costs At present (2014) there are about 900 million cars and light trucks globally, and this figure is likely to almost triple by 2050 to 2,500 million (updated from OECD/ ITF, 2011). Cars and trucks are a global business, involving the motor manufacturers, the oil industry, many suppliers, energy providers, the construction business, support and maintenance providers, and others. This in turn means that it plays a substantial role for economies in providing employment, allowing the distribution of goods and services, and in its extension to many parts of everyday life. The transport business is truly global. Travel distances have increased substantially over the last 50 years (Figure 1), and the debate is now over whether this exponential increase will continue, or whether there are limits to how far we can travel. The prognosis is not good when both distance travelled and population are increasing. Schäfer et al.’s (2009) global analysis demonstrates the huge increases in passenger travel since 1950 and two contrasting views of future growth, driven by increases in population and wealth, as well as by the continued globalization of the world economy and the maturity of the new network society (Figure 1). Mobility levels in industrialized countries remain substantially higher than those elsewhere, but there may be signs that saturation levels are being reached. This is the peak car phenomenon that is now emerging in several countries, where high levels of car ownership are being matched with lower levels of car use (Goodwin and Stokes, 2013). There also seems to be some convergence in the developing (association of Southeast Asian Nations, the Mercosur countries, G77, etc.) and reforming

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FIGURE 1 Increasing travel distances

1. The IEA mobility model (MoMo) is a spreadsheet model used to estimate and project travel indicators, energy consumption, pollution emissions and greenhouse gases generated for worldwide mobility (Cuenot et al., 2012)

economies (Eastern Europe and former Soviet Union). But the real change is in the growth in the global population and in the distribution of that population. By 2050 it is estimated that travel distance per person will have increased by two to three times the current level; which when taking population growth into account amounts to an increase in travel distance (from 2005 to 2050) of 2.73 times (MIT-EPPA model) or by nearly four times (IPCC SRES-B1 Scenario). History suggests that travel distance is driven by income, education and globalization, and that travel itself is becoming global as well as local. Thus, the limits to mobility have not yet been reached as both wealth and population are expected to continue to increase.

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Since 1950, travel distances have increased sharply in the developed world, as well as in developing countries. This increase is likely to continue and the only question is at what rate it will do so, which will depend on population and income. The figures here are substantially lower than those being suggested by the International Trans- port Forum, where the growth in the OECD countries is expected to be 10% to 50% higher in 2050 (on 2010 levels) in the passenger sector and between 50% and 130% in the freight sector. Outside the OECD, levels will be much higher at about 3 times greater for passenger mobility and between 2.5 times and 5.5 times for the freight sector. It is expected that CO2 emission levels will increase by between 1.5 times and 2.4 times the 2010 levels, reflecting the greater efficiency within the vehicle fleet, the use of new technologies and better quality fuels (OECD/ITF, 2012). Figure 2 summarizes the OECD/ITF (2012) estimates of increases in the passenger and freight sectors over the next 40 years, given estimated growth in GDP, which is seen as the main driving force for transport. These estimates from different sources using different methods demonstrate the uncertainty over the expected increases in mobility levels to 2050, yet the key variables used are similar. They all expect substantial growth in the levels of movement by people and freight. Even the most cautious estimates are for a doubling of travel to 2050 with an 80% increase in CO2 emissions. This global picture does not demonstrate sustainable transport, a conclusion that is reinforced when other factors are considered, such as transport fatali- ties (1.2 million killed and more than 50 million injured globally each year), the use of oil (61% of global oil consumption is in transport), transport congestion and time wasted in travel, and the reduced quality of life and health from other transport pollutants (principally particulate matter (PM) that contributes to premature deaths, and nitrogen oxides and volatile organic compounds are both important contributors to ground level ozone pollution). Sustainable mobility is not happening (all figures from UN Habitat, 2013). The OECD expects a sharp increase in the demand for transport in the next 40 years. Without any significant change in modes of transport, this would result in an increased growth of CO2 emissions of at least 80%. More comprehensive and radical action is required, as there is considerable inertia within the transport system and any substantial change takes time to be effective. There is also considerable path dependence and lock in to reinforce the current situation (Schwanen et al., 2011). It is very difficult to move from one well-established system to another, even if the alternative is well defined and provides a much better way of moving around.

Urban mobility within societal and planetary boundaries: doing more with less The growth in mobility has been and will continue to be very substantial, and this growth is also compounded by the increase in the global population from 7 billion (2013) to more than 9 billion (2050), with the proportion living in cities expected to rise from 50% to nearly 70% (UN, 2012). Although the speed and scale of change

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FIGURE 2 The expected boom of transport and CO2 emissions

The OECD expects a sharp increase in the demand for transport in the next 40 years. Without any significant change in modes of transport, this would result in an increased growth of CO2 emissions of at least 80%. taking place is unprecedented, with the growth in megacities and other cities, this new urbanization allows a greater range of policy actions to be implemented, as most travel will take place in the city over relatively short distances. The rationale for the city now and in the future is based on the continued importance of face-to-face contact, networking and social interactions. Location is seen as being central to the economic rationale of the city and the efficiency with which business can be carried out. If the intention is to create a sustainable city then it must have a high quality of life and it must become less resource intensive. This would include the movement of goods and people within the city, but it also needs to address the supply chains for the goods and services required by the city, and the infrastructure necessary for business and leisure activities to be undertaken by the city residents. The net effects will not necessarily be a diminution in the use of energy in transport, or in a reduction in the levels of CO2. For example, much of the population increase will take place in cities in developing countries, where some 2-3 billion people will become middle class by 2020, defined by the McKinsey Report (2012) as those with a per capita income of between $2000-$3000. These people are likely

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to have increased levels of mobility, as they acquire motorized transport, and this in turn will lead to additional pressures on resource consumption and the environment. The inequalities in the distribution of mobility are illustrated by the fact that the high-income countries currently account for 75% of global oil consumption and 41% of carbon emissions, but only accommodate 16% of the world population (World Bank, 2012). This is where the complexity of policy decisions becomes apparent as conflicting priorities are often resolved in ways that do not improve the overall sustainability of the transport system. The Sustainable Mobility Paradigm (SMP) is intended to shift thinking through encouraging lower levels of mobility and shorter distances within cities, as well as promoting more efficient low carbon transport. It is also concerned about the creation of spaces and localities in the city that are attractive and affordable, as neighbourhood quality is central to sustainable mobility (Banister, 2008). Part of this discussion is not just about the measures that can be used, but the process by which alternatives are discussed, so that there is an understanding of the rationale behind the policy changes and an increased likelihood that behavioural change follows. Public acceptability is central to successful implementation of major change, and it should involve community and stakeholder commitment to the process of discussion, decision making and implementation. The SMP addresses the need to reassess the basic thinking and to question the need for high levels of motorized mobility, with its high levels of associated environmental, safety and health costs. The SMP (Figure 3) challenges the importance of speed and travel time savings, through emphasizing the need for sustainability which means slower travel, reasonable travel times and travel time reliability. Although this approach has been applied mainly in the developed countries, similar arguments can be made for the rapidly growing Asian cities, as demonstrated by the Asian Development Bank’s (ADB) Sustainable Urban Transport paradigm and its five core themes (Figure 3 and Box 1), and the development of the Avoid, Shift, Improve (ASI) framework that is now being widely adopted as a structure with

BOX 1 ADB’S SUSTAINABLE URBAN TRANSPORT PARADIGM

1. Transport policy is defined by port and reduce the need for travel. policy makers recognize that soft what works. No longer is policy the 3. Transport demand is managed measures such as public transport preserve of the technical specialist: alongside supply and projects are advertising, internet shopping, tele- stakeholders — including end centred on traffic restraint and the commuting and teleconferencing, users — participate in the policy- greater use of public transport. No and better information are effec- making process to ensure that longer is road traffic capacity auto- tive ways to influence behaviour. 5. plans and projects reflect actual matically expanded in response Policy effectiveness is demonstrated needs. 2. Land use planning is to demand forecasts. 4. Transport to a sceptical stakeholder commu- part of the solution. The erstwhile plans and projects reflect a wider nity. link between land use and trans- city vision or spatial strategy. They Source: ADB, 2009, p.4 port planning is recreated to facil- are also affordable, adaptable and itate the provision of public trans- implementable. Furthermore,

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FIGURE 3. The Sustainable Mobility Paradigm

which the full range of sustainable mobility options can be adopted. The ADB takes an essentially pragmatic approach that makes participation and involvement central to sustainable mobility. It also makes explicit the importance of integration within transport and between land use and transport. The two most important elements in the ASI framework are firstly that demand-based approaches (predict and provide) do not work and there is a need for demand management, and secondly that there is a need for a city vision that provides affordable, adaptable and implementable mobility. The overall purpose of transport planning should be to develop sustainable and socially inclusive cities. These two complementary approaches are beginning to help redefine the important elements of the sustainable transport system for cities, that address the need to substantially reduce CO2 emissions, through integrating mobility more effectively with the new economies of cities, through addressing the mobility and ageing population, and through participatory processes where there is active involvement with stakeholder communities so that ownership of strategies can take place.

Tackling transport in cities through innovation: technological, management, organizational and behavioural change much of the current discussion (e.g. IPCC, 2013) has concentrated on the important role that technology can have in moving towards sustainable mobility, principally

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through the introduction of new lower carbon fuels, more efficient engine technologies and a range of small improvements in materials, aerodynamics, tyres and control systems. Innovation within the existing paradigm is central to reducing levels of carbon use in transport, and the latest IPCC (2013) report suggests that there is still considerable potential for further technological improvements. These could amount to between 40-70% reductions in fuel consumption in cars, between 30-50% reductions in fuel consumption in goods vehicles, about a 50% improvement in efficiency in aviation and between 5-30% reductions in fuel used in maritime shipping, over the period 2010-2035. But these levels of improvement may only reflect the potential for improvement. On their own they will not reach the target reduction levels for transport, particularly if the anticipated growth levels are realized. At best, these technological improvements will maintain overall carbon emissions in transport at their current levels. For example, there is the huge effort that the car manufacturers and governments are putting into electric vehicles (EVs) as a replacement technology for the conventional car. Here again there are problems, as there are still considerable amounts of carbon embedded in the energy supply chain1, and the strategy seems to be to replicate the existing car in terms of the functionality, the size and the range of the vehicle. In a well-established mature market, it is extremely difficult to replace an existing technology with an alternative one, because of the sunk costs in the support infrastructure, the lower costs of the existing technology, the slow rate of turnover of the stock and, probably most importantly, the risk averseness of the consumer (Tran et al., 2012). The question being asked is: are there any real benefits of the new technology over the old one? The potential for the new technology may be in countries where there are currently lower levels of car ownership and a less well- established support infrastructure. The main impact of the EV may eventually be seen as the means by which the established car manufacturers are able to reduce energy consumption in conventional cars and trucks. The SMP places the focus on promoting behavioural change, through reducing the need to travel, through shorter travel distances and through the greater use of public transport, walking and cycling. Two alternative but complementary pathways to sustainable urban mobility are presented here:

Visioning cities that effectively integrate land use and transport This perspective identifies a city vision in terms of its functions, structure, organization and ambitions, now and in the future, through a clear sustainable development strategy. It then discusses what sort of transport system would best help achieve that objective. Transport would become truly integrated with city development. This

1. EVs use energy taken from the national grids, so in France that energy is fairly clean as 75% of all energy is nuclear, but in the UK most energy is generated from carbon-based sources (gas and coal), giving a figure of about 100 g CO2/km for EVs, similar to the carbon profile of an efficient hybrid car.

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vision could be the same as the present or it could be radically different, and there may need to be more than one future. Scenario building provides a key opportunity to explicitly include sustainable mobility as part of city development (Hickman and Banister, 2013). There is an extensive range of policy interventions that can be introduced to respond to the need for more sustainable transport in cities, mainly as stand-alone strategies to address particular problems, but more recently as a set of coordinated policies. Such policy interventions to encourage sustainable mobility include investment in public transport, priority for walking and cycling, pricing for access and parking, urban planning (including higher densities, mixed use developments, transport development areas2, high quality local design and use of street space), slower speeds, consolidated freight distribution, technological innovation, alternative fuels and a range of soft measures3. All of these policy interventions can be assembled into policy packages that are designed to work together in mutually supporting ways, so that the intended benefits of a change are more likely to be locked in and the rebound effects4 minimized (Banister, 2005; Givoni et al., 2013). From this longer list, three factors seem to be important and would contribute to any city vision for sustainable mobility – the quality of life in cities and the use of space (social), the close links between land use and transport (shorter distances and multipurpose journeys) and the need to slow down traffic and to explore the concept of reasonable travel times (safety).

THE QUALITY OF LIFE AND USE OF STREET SPACE The quality of life and the use of street space in the city is a major constraint on all forms of movement. Road space requirements increase with vehicle speed and size. Litman (2012) has produced a set of figures to illustrate the space requirements for different forms of movement when stationary and moving (Figure 4). The basic arithmetic here is clear, namely that the pedestrian and bus passenger take up least space when stationary or moving, and the bicycle is also an efficient user of city space. At low speed the car takes up about 10 times as much space as a pedestrian, and this increases to 100 times when moving at speed. The space available for movement in cities is critical for its economic success, but it must be used efficiently. Many cities were never designed for their current levels of mobility. Street space is limited and it has many other uses apart from traffic movement (e.g. for markets, social space and work space). Typically, about a quarter of the ground level urban area is available for streets (Figure 5), but this figure decreases substantially in many

2. Transport development areas encourage high-rise development around accessible public transport interchanges, that provide employment opportunities together with a range of facilities and services. 3. Soft measures include information and communication with users, travel plans, local level initiatives to encourage car sharing, car leasing, bike schemes, travel awareness, etc. 4. Rebound effects mean that environmental policies do not achieve all of their stated aims, as people tend to travel more if they think that they are doing it more efficiently or even more sustainably (Herring and Sorrell, 2008).

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FIGURE 4 Typical space requirements by transport mode

Speed, distance travelled or energy spent are not the only factors to consider when comparing modes of transport. The space requirement is an important dimension in increasingly crowded cities.

of the largest and most rapidly developing cities.5 Speed, distance travelled or energy spent are not the only factors to consider when comparing modes of transport. The space requirement is an important dimension in increasingly crowded cities.

CLOSE LINKS BETWEEN LAND USE AND TRANSPORT It includes well-known questions on density, mixed use development and the concentration of activities around accessible public transport locations, including Transit Oriented Developments (TODs) and Transport Development Areas (TDAs) (Ewing and Cervero, 2010). Empirical work in the US suggests that increased densification over a period of time could reduce annual CO2 emissions by between 9-16% in the more central parts of the city, and by between 20-40% in the lower density suburbs,

5. Note that the area devoted to streets gives a distorted view as density is not controlled for. So a city with low density can have a low percentage of land allocated to streets, whilst a city of high density can have a higher percentage. For example, the San Francisco peninsula has a population density of 17,166 persons per square mile and 26% of land devoted to streets; the corresponding figures for Downtown Dallas are 4,339 and 13% and the core of Shanghai 17,728 and 7%. Many rapidly growing cities have high densities and low percentages of land allocated to streets, thus exacerbating the problems of movement.

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FIGURE 5 Road supply as a percentage of urbanized area

Streets cover on average a quarter of urban areas. Densely populated cities that have experienced very rapid growth cannot devote much space to roads, thereby restricting vehicular traffic. as compared with the expected growth (Ewing, 2007). In all cases, the objectives are similar, namely to bring together levels of demand so that public transport can be provided, and to reduce trip distances so that the green forms of transport (walking and cycling) can be used. The creative and flexible use of space, together with a real integration of land use and transport, would both result in less transport being needed to support the city. Streets cover on average a quarter of urban areas. Densely populated cities that have experienced very rapid growth cannot devote much space to roads, thereby restricting vehicular traffic.

SLOWING DOWN TRAFFIC Underlying the concept of slowing down traffic in the city is the view that a new holistic perspective is being proposed that begins to embrace the complexity of decisions about the priorities for urban mobility to 2050. The key here is that speed needs to be replaced by the notion of reasonable travel times, where accessibility is central to thinking about city futures. Slower travel over shorter distances by efficient forms of transport, including public transport, cycling and walking, with sufficient space allocated to each of

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these modes so that all of the components of sustainability can be addressed – environmental (low carbon and resource efficient), economic (efficient) and social (accessible to all). It also addresses the Avoid and Shift in the ASI framework, and three of the elements of the SMP – reducing the need to travel, shortening travel distances and modal shift.

Visioning cities that allow shared access and affordable transport for all This concept combines the need for efficient and modern public transport systems (Bus Rapid Transit (BRT)6, trams, metro and buses) with new forms of ownership where vehicles are shared rather than owned. This has already happened with cycle hire schemes in many cities, and it is now being extended to small slow EVs (including E-bikes) that are rented. Many cities do not have the space for high levels of car-based mobility, so the concern should be over the efficient use of space that determines the nature of urban mobility, limited by the additional imperative of low (or zero) carbon. The space currently used by cars for moving around and for parking could be substantially reduced and reallocated to alternative uses, such as walking and cycling networks, open space, or play areas. It is in cities, where most of the population growth is expected to take place, and where the space available for transport is limited unless massive reconstruction is undertaken. This means that the overall capacity is known and transport planners should be looking at the means by which the best use can be made of that resource. Achieving sustainable mobility requires demand management to allocate scarce street space to different users by price or by regulation (or a combination of both), so that priority users and uses can be made of it, and this will vary by time of day and day of week. New management methods are also required. These include load management so that all forms of transport are fully used. In both the passenger and freight sectors, there is substantial empty running with cars only having one (rather than four) passengers and lorries travelling around empty (McKinnon and Ge, 2006; Edwards et al., 2010). New computer applications can be used to match loads, times and directions so that spare capacity is used. Yield management has been effectively used in the aviation and rail sectors, but this could be extended to cover other forms of public transport, so that much more flexibility is introduced into the system. Reorganization towards sustainable mobility is not only based on technological innovation in transport, but in using the new technology to make much better use of available capacity in the transport system and to allocate space to priority users and uses. It is aimed at moving away from the current thinking about individualism and ownership towards lower levels of consumption and sharing access to transport.

6. BRT systems combine the low cost and flexibility of bus services with dedicated track and priority associated with trams systems. More than 150 cities have implemented BRT systems and over 27 million passengers use them daily, with about 17 million in Latin America alone – www.brtdata.org

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It is moving towards thinking of transport as a service to which people buy access when they need it, in the form that is best for them at that point in time, and the intention would be to provide a quality door to door service that is accessible and affordable to all.

Conclusion In discussing issues concerning sustainable mobility, it is not just a question of what can be done, but how such a transition can take place. Giddens (2009) stated that fear is not the best way to induce low carbon futures, and that there needs to be a positive alternative and new path dependencies. Arthur (2009) suggested that innovation takes 30-40 years and depends on new combinations of elements working together synchronously to create new habits and imaginations. These two views do not suggest that the achievement of sustainable mobility would be easy, but at present too much emphasis has been placed on the role that improvements in technology can play in achieving change. This perspective is too simple, as the scale of change required, the expected growth in mobility levels, and the inherent inertia in the system make the technological future attractive, yet unrealistic in terms of reducing global transport carbon emissions (by 2050), and in addressing the other priorities such as safe, clean, healthy and high quality transport. This means that much more attention must be given to the A and S parts of the ASI framework, and the first three elements of the SMP, and it is only through comprehensive and complementary approaches using all available measures that the carbon reduction targets will be achieved. The quality of life in cities is central, as signified by the designation of clear zones and open spaces for people to meet and spend time together, and as high levels of local pollutants have a direct effect on health (Gehl, 2010). The promotion of active transport also encourages a healthy lifestyle, and the reallocation of space in cities to cyclists and walkers with their own separate networks of routes would create the most suitable conditions for change. By altering the speed and scale of activity, many spaces would become places that people would want to spend time and money. This is where urban structure, urban design and the use of space all become central in determining the means by which sustainable urban forms can be established. Complementary approaches are needed that would be based on increased levels of urban density and reduced levels of urban sprawl, so that journey lengths and the levels of car dependence can be reduced. The distribution of services and facilities would be organized to minimize trip lengths and increase accessibility, as many activities can then be undertaken on one journey (the linking of activities), and destinations would be close together, as this allows multi-purpose trips and less travel, as well as providing the flows for efficient public transport. Thirdly the allocation of space would give priority to different uses to make it clear as to whose space it is - this has implications for the conversion of streets to pedestrian, residen- tial and shopping areas, as well as providing networks for cyclists and walkers, and it relates to the ownership of urban space.

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At a more fundamental level, it is moving beyond the concern about what can be done with the physical environment to actually improving the conditions for low carbon movement. It is engaging with citizens and talking about a flexible, comfortable, secure personal mobility that is safe and allows travel at a reasonable speed. This is the means by which all three elements of sustainability can be brought together, so that the city operates efficiently, fairly, and in a way that makes reasonable demands on the environment. ❚

REFERENCES

ACEA,2012, The automobile industry pocket guide, Ewing R. and Cervero R., 2010, Travel and the built European Automobile Manufacturers Association, environment: A Meta-analysis, Journal of the Amer- Brussels, September. ican Planning Association 76: 265-294. ADB (Asian Development Bank), 2009, ‘Changing Gehl J., 2010, Cities for People, London and Washing- Course: A New Paradigm for Sustainable Urban ton: Island Press. Transport’, ADB, Manila, http://www.adb.org/ Giddens A., 2009, The Politics of Climate Change, Documents/Brochures/Paradigm-Sustainable- Cambridge: Polity Press. Urban-Transport/transport-manual.pdf, accessed 18th July 2013 Givoni M., Macmillen J., Banister D. and Feitelson E., 2013, From policy measures to policy packages, Arthur B., 2009, The Nature of Technology: What it is Transport Reviews 33(1): 1-20. and how it evolves, New York: Free Press. Goodwin P. and Stokes G., 2013, Guest Editors of Banister D., 2005, Unsustainable Transport: City a Special Issue of Transport Reviews on Peak Car, Transport in the New Century, Routledge, London. 33(3): 243-375. Banister D., 2008, The sustainable mobility para- Herring H. and Sorrell S. (eds), 2008, Energy Ef- digm, Transport Policy 15(1): 73–80. ficiency and Sustainable Consumption: Dealing with Banister D., 2011, The trilogy of distance, speed and the Rebound Effect, London: Palgrave Macmillan. time, Journal of Transport Geography 19(4): 950- Hickman R. and Banister D., 2013, Transport, Cli- 959. mate Change and Cities , London: Routledge. Banister D., 2013, Foresight Futures: Scanning the Institute for Transport Policy Studies, 2011, Transport Horizon, Review prepared for the UK Final Report – Transport Systems in a Low Carbon Government’s Foresight Futures Horizon Scanning Society, Final report to the Nippon Foundation, papers, Government Office of Science, July. Tokyo, February, http://www.jterc.or.jp/english/ Cuenot F., Fulton L. and Staub J., 2012, The pros- itps/index.html, accessed 1st July 2013. pect for modal shifts in passenger transport world- International Energy Agency (IEA), 2010, Trans- wide and impacts on energy use and CO2, Energy port, energy and CO2: Moving towards sustainabil- Policy 41: 98-106. ity, Working Paper, Paris. Edwards J.B., McKinnon A.C. and Cullinane S.L., International Energy Agency (IEA), 2013, World 2010, Comparative analysis of the carbon foot- Energy Outlook 2013, Paris: IEA, November. prints of conventional and online retailing. A ‘last mile’ perspective, International Journal of Physical IPCC, 2013, Summary for Policymakers, Intergovern- Distribution and Logistics Management 40: 103-123. mental Panel on Climate Change, Working Group I – The Physical Science Base, 5th Assessment Report, Ewing R., 2007, Growing cooler: The evidence on ur- September. ban development and climate change, Urban Land Institute, Chicago. Litman T., 2012, Transportation Land Valuation: Evaluating Policies and Practices that Affect the

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Amount of Land Devoted to Transportation Facili- Schwanen T., Banister D. and Anable J., 2011, Sci- ties, Victoria Transport Policy Institute, January, entific research about climate change mitigation in http://www.vtpi.org/land.pdf, accessed 30th July transport: A critical review, Transportation Research 2013. A 45: 993-1006. McKinsey Global Institute, 2012, Urban World: Tran M., Bishop J.D.K., Banister D. and McCull- Cities and the Rise of the Consuming Class, June. och M., 2012, Realizing the electric vehicle revolu- McKinnon A. and Ge Y., 2006, The potential for re- tion, Nature: Climate Change 2, pp328-333. ducing empty running by trucks: A retrospective UN, 2012, World Urbanisation Prospects: The 2011 analysis, International Journal of Physical Distribu- Revision, economic and Social Affairs, UN, New tion and Logistics Management 36: 391-410. York, March, http://esa.un.org/unup/pdf/ Netherlands Environmental Assessment Agency, WUP2011_Highlights.pdf, accessed 28th July 2009, Getting into the Right Lane, Report with the 2013. Stockholm Resilience Centre and Stockholm Uni- UN Habitat, 2013, Planning and Design for Sustain- versity, Bilthoven, October. able Urban Mobility, Global Report on Human Set- OECD/ITF, 2011, Transport Outlook: Meeting the tlements 2013, October, Nairobi. needs of 9 billion people, Organisation for Econom- Vasconcellos E., 2001, Urban Transport, Environ- ic Cooperation and Development/International ment and Equity: The Case of Developing Countries, Transport Forum, Paris, May. London: Earthscan. OECD/ITF, 2012, Transport Outlook: Seamless World Bank, 2012, Inclusive Green Growth – The growth for green transport, Organisation for Eco- Pathway to Sustainable Development, Overview nomic Cooperation and Development/Internation- Document, World Bank, Washington, May. al Transport Forum, Paris. Schäfer A., Heywood J., Jacoby H. and Waitz I., 2009, Transportation in a Climate-Constrained World, Cambridge, Massachusetts and London, England: The MIT Press.

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CHAPTER 3 Double or real: towards green agro-ecological revolutions

Rajeswari S. Raina, Principal Scientist, National Institute of Science, Technology and Development Studies (CSIR-NISTADS), New Delhi, India

‘doubly green revolution’ has been proposed for investing in healthy and sustainable societies, ecosys- as the solution to global food security and tems and economies. environmental sustainability (Conway, 1997). The first green revolution (mid-1960s to mid- Weakening agricultural innovation 1980s) did substantially increase food produc- Many politicians and scholars laud India’s successful tion,A but it did not reduce the number of hungry and mal- green revolution. Yet, there is policy awareness that ‘a nourished people. It added to the nature and magnitude double or second green revolution is impossible today’ of resource degradation and loss of bio-diversity (IFPRI, (Bhayani and Mukherjee, 2011, quoting Prof. Abhijit Sen). The 2002). This paper discusses the double green revolution, green revolution of the 1960s saw technologies (varieties a movement that has also been called sustainable intensi- of wheat and rice, chemical fertilizers, pesticides and agri- fication (Royal Society, 2009), and examines how and why machinery) being delivered through the unique conver- it is different from and more pernicious than the green gence between aid programmes, research projects and revolution. most importantly concerned international philanthropic Proponents of sustainable intensification note that it organizations. There was also a state, providing public is a goal in itself (Garnett et al., 2013) and not merely sector capital investments (over 90% in irrigation), appro- an approach to achieve the goal of food security and priate pricing of major cereals and subsidies for all modern environmental sustainability. They demand engagement agricultural inputs. with the sustainable development agenda, despite devel- In the twenty first century governed by intellectual oping country problems like institutional failures and property rights and rapid gains in genetic knowledge, few insufficient capital, lack of data to assess crucial land technologies are supplied to developing countries under use questions, and obvious environmental and welfare the same conditions as during the green revolution period. limits to intensification (especially animal production) Today, the state that enabled public and private indus- (Garnett et al., 2013). Though there is some willingness trial investments for agriculture is keen to disinvest in the now to engage with a knowledge-based bio-economic public sector and provide an enabling environment for paradigm, favouring agro-ecological approaches, the private corporate actors, the owners of new technologies. production successes of the green revolution prompt Given the evidence that the green revolution had petered governments to continue supporting the life science- out by the mid-1980s even in the favourable districts based paradigm of agricultural innovation and develop- endowed with all the components of the green revolu- ment (Levidow et al., 2012). The double green revolution tion technology package (Bhalla and Singh, 2010), and undermines national and global agricultural knowledge, the declining incremental response to unit input use (both science and technology, and wastes several opportunities irrigation and chemical fertilizers), the new technologies

A PLANET FOR LIFE 67 try to compensate for the absence of new crop varie- (more than twice the number of cultivators, main and ties with comparable yield differentials as were available marginal workers as it did in the 1960s) on a steadily during the 1960s. shrinking share of the economy, the poor aggregate The defensive research strategies of the public sector demand has become a constraint on industrial and overall research system in the 1950s (combining horizontal resist- economic growth. Given that marginal and small farms ance with desirable crop traits) are history now. Today, (less than two hectares in size) constitute over 84% of many reductionist technologies (like genetic traits, specific operational holdings, the worsening terms of trade and genes or sequences within, offering resistance to specific unfavourable incremental capital output ratio, which went chemicals, expressing specific chemicals or toxins within from two in the 1980s to over four in the late 2000s, the plant) are being promoted. These new reductionist shrivel the already poor incomes and purchasing power of technologies are more capital intensive and need more these small farmers. Despite diversification towards horti- energy inputs. Besides which, they neglect impacts on culture, animal husbandry and non-food crops, agricultural soil, water and biological diversity. Since they are supplied GDP grew far slower than other sectors in the economy, externally (these are not seeds that farmers can save or farm incomes fared even worse with deteriorating terms of exchange) from private or public industrial sources, they trade, resulting in inadequate rural purchasing power and lead to a loss of systems knowledge, both among the aggregate demand, and a spate of farmer suicides (Planning farming communities and the research system. With Commission, 2011). Input intensive production schemes, climate change impacts on natural resources and crop- which are politically legitimized to feed a growing popula- livestock systems, the loss of systems knowledge portends tion, ignore these macro-economic processes and the fact multiple consequences for agri-food systems. that these hungry mouths also come with two hands to In the 1960s, centralization of research, consolidation of work and a knowledge of local production systems that the research agenda to generate input-intensive homog- can increase incomes and aggregate demand. enous irrigated monoculture cereal production technolo- In the trends of growth in key inputs (irrigation, high gies, and central sector production schemes and admin- yielding varieties, chemical fertilizer use) and foodgrain istration were considered necessary to enable the green production (indices in Figure 2), the rapid growth of revolution (Raina, 2011). By the turn of the century, there chemical fertilizer use stands out against the relative was a realization that this research content as well as stagnation in production, irrigation and high yielding varie- the research system needed reform (Planning Commission, ties. It is this fall in productivity per unit of input used (Vaidy- 2008), and attempts to reform them have been inadequate anathan, 2010) that fuels fanciful claims that pest control (ibid). Given the size and diversity of Indian agriculture, a technologies embedded in seeds (Bt brinjal) can address single centralized research agenda tuned to irrigation and declining or plateauing agricultural productivity in India chemical intensive technology generation, has resulted in (Kolady and Lesser, 2006). an extremely limited contextual understanding of production problems. Organizational and institutional reform have been recommended, with decentralized participa- Box 1: The pain of structural unemployment tory research tuned to agro-ecological features at the Block level, to support public investment in infrastructure, In India, the theoretically expected shrinking of the extension, credit and community seed banks, especially agricultural economy with limited structural transfor- in highly diverse rainfed farming systems (accounting for mation, jobless industrial growth and high-tech service over 60% of cultivated land) where the green revolution sector growth, has resulted in structural unemploy- approach does not work (Planning Commission, 2012; Raina ment. Today, 58% of the national workforce still and Vijay Shankar, 2011). depends on agriculture. With the agriculture sector supporting more people

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FIGURE 1 The shrinking share of agriculture in the Indian economy

Productivity, with the promise of economic growth state legitimizes these subsidies for fossil fuel guzzling finds political and scientific support even in the face of resource degrading agriculture and mobilization of foreign evidence that India’s average rate of growth of foodgrain direct investment for food retail, while refusing to notice yield per year fell from 4.4% (between 1980-90) to the precarious livelihoods of unemployed and under- 2.8% (between 1991-98) and further to 0.6% (between employed small farmers. The latter, along with landless 1999-2009) (Gillespie et al., 2012). The massive industrial labour and urban poor are facing the worst food price and intermediary actors enabled by the state for the green inflation in India; there is an evident disconnect between revolution, demand continuation of the same approach. food production and nutrition (Gillespie et al., 2012). Despite scientific evidence of soil and water problems, When India’s National Development Council met in 2007 loss of biodiversity, and increasing input costs, these past to discuss the agrarian crisis, it established that ‘in addition investments are favoured over and above investments in to stressed natural resources and very inadequate rural science and technology (S&T). During the period 1990 to infrastructure, there was clear evidence of technology 2010, less than 0.4% of agricultural GDP was allocated fatigue, run-down delivery systems in credit, extension and to agricultural research (excluding education expenditure) marketing services and of insufficient agricultural planning while input subsidies alone accounted for between 8% and at the district and lower levels’ (Planning Commission, 11% of agricultural GDP (Raina, 2012). Input subsidies in 2011, p. 89). Yet, the Eleventh and Twelfth Five Year Plan 2006-07 accounted for 88% of the total plan outlay for documents and programmes included therein promote the agriculture, irrigation and rural development (Vaidyanathan, same green revolution approach, using fatigued technol- 2010). Like an ostrich that hides its head in the sand, the ogies and run down credit and extension systems. The

A PLANET FOR LIFE 69 FIGURE 2 Indian agriculture: a relative failure?

Despite its increase in input consumption, including fertilizers, Indian agriculture has not improved its productivity by the same proportion.

twin components of the National Food Security Mission multinational agencies, academics, environmental activ- (launched in 2011), are (i) expansion of the green revolu- ists and consumers, seeking a paradigmatic shift in the tion into the eastern states with ample ground water and relationships between knowledge, technology and food (ii) extending production support to other crops besides security, remarked that the long awaited tipping point cereals, by focusing on pulses, oilseeds and millets. had arrived (IAASTD, 2009; Tansey and Rajotte, 2008). This tipping point refers to the moment when govern- Persistent norms: global influences ments recognize the criticality of including environmental Just as the green revolution was heralded to counter the and social costs of production into their policy goals and threat of a red revolution in Asia in the 1960s (Anderson et specific eco-friendly policy instruments into production al., 1982), the double green revolution is a global phenom- policy and practices. At the tipping point, ‘business as enon heralded to address increasing agri-environmental usual’ is no longer enough; poverty, hunger and malnu- degradation. Given the environmental costs of the green trition cannot be solved by producing more food through revolution and the emergence of a wide range of agro- means that have destroyed social and ecological systems ecological alternatives that increasingly capture signifi- (UN-HRC, 2010; Nellemann et al., 2009). However, it cant consumer support and markets, the double green appears that this tipping point has yet to be acknowl- revolution is globally packaged as environmentally friendly edged by governments, international agencies, trans- (Conway, 1997; Garnett et al., 2013). national firms, farming communities located in ‘favour- In the midst of the food crisis of 2008, groups of able’ irrigated tracts and agro-industries supported by

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public subsidies. These actors reiterate their commitment Agro-ecological alternatives: really green to aggressively invest in and expand industrial agricul- Many production systems in rainfed farming, mountain ture, mainly cash crops or biofuel production to develop and coastal ecosystems gained little from the green revolu- markets and trade, in order to feed the increasing number tion. Almost all the alternatives we know of today origi- of hungry mouths in developing countries (for example, nate in these bypassed production systems; producing and the Alliance for a Green Revolution in Africa). Globally, exchanging food in ways that are ideal for local bio-physical sustainable intensification with social security provision and socio-economic regimes. Today, the Social Movements by the state (called ‘business as unusual’, Fan, 2010) for Alternative Asia, the Hansalim movement in Korea, the for those who are excluded from participation (for want South American peasant movement La Via Campesina, of capital, skills, or access to technology and markets) and the organic agriculture systems in Austria and Cuba, becomes a modified norm within the green revolution including the ecological justice based Organic Consumers paradigm. Association in the USA, are a few examples that offer Economists who celebrated the green revolution are insights into what modern scientifically informed, ecolog- sceptical about the faith in molecular genetics and genetic ically, economically and socially sustainable agri-food engineering (undoubtedly powerful) to counter the long- systems can be. While there can be several business term diminishing returns from research in the green models (membership based, etc.), the two core principles revolution paradigm (Ruttan, 2005). Some economists that set these alternatives apart are (i) respect and value claim that though the physical productivity gains did peter for diversity, natural resources, people’s local incomes, out by the mid-1980s, the broader socially embedded knowledge and cultures, and (ii) community level compe- green revolution lives on, in the organized knowledge and tence to ensure the fundamental right to food to all its policy actors, in the national and international agricultural members. This reframing of the agricultural innovation research systems, technologies, subsidies, pricing mecha- system, from the linear centralized, industrial and input- nisms and other input policies (Evenson and Pingali, 2009). based green revolution, to decentralized knowledge-inten- This broader knowledge-policy framework is embodied sive local input-based agro-ecosystems, demands new in the Consultative Group on International Agricultural policy and knowledge innovations from the state. Research (CGIAR) and its research centres. While productivity comparisons in grain yield per hectare In India, the CGIAR centres support expansion of of land between any of these alternatives and the input the second green revolution to the Eastern Indian intensive green revolution production may not always states, investments in groundwater extraction, geneti- favour the former, the alternatives are winners with a cally modified crops and intensive energy and chemical re-conceptualization of productivity as systems produc- fertilizer use. Their mandate initially was to generate tivity, with ecological costs and integration benefits. Many of frontier strategic knowledge to support national agricul- these agrarian alternatives use modern scientific research tural research systems; but these international centres and scientifically sourced local inputs for production. The increasingly work with select civil society organizations investments and capacities to keep value-chains short and corporate firms, mainly promoting the adoption of and retain maximum value-added within local communi- technologies. This global S&T agenda complements the ties confront global trade regimes and massive margins multinational corporations that control more than 80% of that accrue to domestic and multinational agro-industrial foodgrain trade, chemical and mechanical input markets. actors. Unlike science for the generation of appropriable The age-old development economics conceptualization of technologies, knowledge and practice in many of these global knowledge public goods that were to be generated alternatives are based on a thorough understanding of the to support resource poor farmers, increase their incomes history and bio-physical dynamics, as well as the socio- and enable multiplier effects for economic growth are economic profile of each production ecosystem. forgotten. An acute awareness of energy use and energy

A PLANET FOR LIFE 71 production is a characteristic of most of these alterna- frameworks, decentralized location specific technolog- tives. These knowledge-based agro-ecological alterna- ical and institutional support, and valuation of system tives ensure employment, and the generation of rural productivity and sustainability are good starting points. purchasing power and aggregate demand (UN-HRC, 2010; McKay, 2012; Scrieciu, 2011). They use their REFERENCES systems perspectives and capacities within communi- Anderson R., Brass P.R., Levy E., Morrisson B., 1982, Science, ties and networks to build resilience and handle stress. Politics and the Agricultural Revolution in Asia, Westview Press: Colorado. Within the IPCC and CoP meetings, these alternatives Bhalla G.S. and Singh G., 2010, Final report on Planning Com- have always pushed for climate adaptation and mitiga- mission project Growth of Indian agriculture a district level tion strategies, emphasising that the food security legiti- study, CSRD, Jawaharlal Nehru University: New Delhi. Bhayani R. and Mukherjee S., 2011, Another Green Revolution mization claimed by governments to support prevalent Not Possible. (Interview with Prof. Ahijit Sen, Member, Plan- GHG emitting practices are detrimental domestically and ning Commission), The Business Standard, March 10. globally. Though not directly citing or drawing from Nobel Conway G., 1997, The Doubly Green Revolution – Food for all in the 21st Century, Penguin: New York. Prize winning arguments about co-production (Ostrom, Evenson R. and Pingali P., 2009, Handbook of Agricultural Eco- 1996), many of these alternatives enhance the social nomics Vol. 4., North Holland: and ecological value of resources and production systems Fan S., 2010, Halving Hunger: Meeting the First Millennium De- by complementing the state’s limited investment with velopment Goal Through Business as Unusual, IFPRI: Wash- community-based investment and capacities. They seem ington, D.C. FAO, 2013, Reviewed Strategic Framework – Conference, 15-22 to build secure bridges between the ‘isolated empires’ June 2013. FAO: Rome. of agricultural, environmental and health sciences and Garnett T. et al., 2013, Sustainable Intensification in Agricul- enable many ‘institutional innovations’; the ones recom- ture: Premises and Policies, Science, Vol 341, No. 6141: 33-34. mended for solving the S&T constraints on agriculture Gillespie S., Harriss J. and Kadiyala S., 2012, The Agriculture Nutrition Disconnect in India- What do we know? IFPRI Dis- (Ruttan, 2005). cussion Paper 01187, IFPRI: Washington, D.C. Institutional innovations like the recent re-worked IAASTD, 2009, Agriculture at a Crossroads: Synthesis Report. strategic objectives of FAO (UN) can transform global Island Press. agricultural knowledge and policy. The five objectives (i) IFPRI, 2002, Green Revolution – Curse or Blessing?, Briefing Pa- per, IFPRI: Washington,D.C. elimination of hunger, food insecurity and malnourish- Kolady D. E. and Lesser M., 2006, Who adopts what kind of ment, (ii) more productive and sustainable agriculture, technologies? The case of Bt eggplant in India, AgBioForum, fisheries and forestry systems, (iii) reduction of rural 9(2): 94-103. poverty, (iv) inclusive and efficient agri-food systems, and Levidow L., Birch K. and Papaioannou T., 2012, Divergent Par- adigms of European Agro-Food Innovation: The Knowledge- (v) increased resilience of livelihoods from disasters, are Based Bio-Economy (KBBE) as an R&D Agenda, Science, Tech- similar to the goals of several agro-ecological alternatives nology and Human Values, Vol. 38(1): 94-125. (FAO, 2013). Given these key objectives, FAO (India) has McKay B., 2012, A Socially Inclusive Pathway to Food Security: The Agro-ecological Alternative, Research Brief, No. 23, Inter- in its Country Framework Programme in India over the national Policy Centre for Inclusive Growth: Brasilia. next five years (2013-18), resolved to build decentralized Nellemann C., MacDevette M., Manders T., Eickhout B., Svi- innovation capacities in rainfed agriculture. It will focus hus B., Prins A. G., Kaltenborn B. P. (Eds), 2009, The environmental food crisis – The environment’s role in averting future on farming systems productivity and resource manage- food crises. United Nations Environment Programme: Arendal ment for sustainable and equitable development in each Ostrom E., 1996, Crossing the great divide: Co-production, specific rainfed farming typology. synergy and development, World Development, Vol. 24 (6): 1073-1087. Government support is necessary for several real green revolutions to contribute to economic growth through sustainable and equitable production and distribution systems. Institutional innovations in knowledge-policy

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Planning Commission, 2008, Eleventh Five Year Plan (2007- Royal Society, 2009, Reaping the Benefits: Science and Sus- 2012), Vol. III. Planning Commission, Government of India: tainable Intensification of Global Agriculture, Royal Society: iversity Press: New Delhi. London. Planning Commission, 2011, Approach paper to the XII Five Ruttan V. W., 2005, Scientific and technical constraints on ag- year Plan, Planning Commission: Government of India. ricultural production: Prospects for the future, Proceedings of Planning Commission, 2012, Twelfth Five Year Plan 2012-17 the American Philosophical Society, Vol.149(4):453-468. (Vol. II) Planning Commission, Government of India. Scrieciu S., 2011, Socio-economic and Environmental Impact Raina R. S., 2011, Institutional Strangleholds: Agricultural Sci- on Agriculture in the New Europe, Routledge. ence and the State in India, Narayana, D. and Mahadevan, R. Tansey G. and Rajotte T., 2008, The Future Control of Food. (Eds), Shaping India – Economic Change in Historical Perspec- Earthscan: London tive, Routledge: New Delhi. Pp. 99-123. UN-HRC, 2010. Agro-ecology – Report submitted by the Special Raina, R. S. and Vijay Shankar P. S., 2011, ‘Rainfed Agriculture: Rapporteur on the right to Food, Oliver De Schutter, to the UN Enabling New Rules of the Game,’ SIID Policy Options, No.1, General Assembly, Dec. 2010. December 2011, Centre for Policy Research, New Delhi. Vaidyanathan A., 2010, Agricultural growth in India: The role Raina R. S., 2012, Institutional Immunity: Limiting the Scope of technology, incentives and institutions, Oxford University and Space for Innovation and Development in India, Pre- Press: New Delhi. sented at the Conference on India’s Economy – A longer and broader view, Nehru Memorial Museum and Library : New Delhi, 14-15 December 2012.

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Emerging and converging technologies: wild card for sustainable development?

ngoing developments in the areas of nanotechnology, the life Alfred Nordmann, sciences and so-called converging technologies are fostering Professor of the hope that responsible research and innovation in these Philosophy and History of Science areas can achieve long-term technological, environmental and Technoscience at Darmstadt Technical and economic sustainability. The following pages focus on this University, Germany hope, its origin and its prospects, and they do so by contrasting different conceptions of how we might best care for preserving conditions for human life on our Blue Planet. The current mode is characterized by a curious coupling of anxiety and optimism, even hubris – on the one hand, technology is our desperate last hope that we might avoid drastic climate change, resource depletion and environ- Omental degradation. On the other hand, this hope involves becoming overly credulous regarding technoscientific promises, believing in our ability to design the future world not only technologically but also by way of forging national, even international consensus regarding directions of change. Without offering a comprehensive argument for this, the strange coupling of hubris and anxiety will be seen at work in current science policy and agenda setting for emerging technologies, and traced to its origin in the concept of sustainability with its promise that we might exceed the limits of the Blue Planet without actually leaving it. A telling anecdote can provide a simple point of entry to all of this. It is sympto- matic for the present condition of policy makers, technology observers and ordinary citizens. In June 2011, the German weekly Die Zeit published a short essay on our renewed faith in the power of technology to save us (Fischermann, Randow et al., 2011). Comparing the technological optimism of the 19th century to the current

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situation, the authors note one major difference: whereas the 19th century saw technology within a larger movement towards social progress, our current faith in technology is also our last hope to escape the damaging consequences of technological progress during the last several centuries. The hope that technology can save us from the effects of resource depletion or climate change is not underwritten by a firm belief in a further improvement of the human condition but desperately clings to technology as our last straw. But then, the authors continue, who knows, technology might just deliver the goods: ‘miracles do happen’. On that somewhat ironic note they go on to present eight more or less far-fetched gadgets, the likes of which have engaged the popular imagination for a while, such as solar-powered planes, neuro-enhancing drugs, plants that produce construction materials along with feedstock and personal assistants that guide us to a more efficient lifestyle. The discrepancy within this Die Zeit essay, which starts with a sobering reflection on the questionable hope that technology might save us and ends on an enthusiastic outlook towards ‘the new wonders of the world’, is not quite the conclusion of this anecdote. Some ten days after its publication, a policy maker enjoined social scientists, with a copy of this newspaper in hand, to consider the impacts of these eight technological breakthroughs, as if their coming was only a matter of course (Riegler, 2011; Nordmann, 2007). If this anecdote paints a confused picture of the current state of science policy, technology assessment and public hopes and expectations, the following review attempts to address and as far as possible clarify this confusion, especially as it concerns emerging technologies and their convergence. At the beginning of the 21st century and spearheaded by nanotechnology, the so-called knowledge societies entered a ‘regime of economics of technoscientific promises’ (Felt, 2007, pp.24- 26), challenging citizens and policy makers to orient themselves in this brave new world of hope and promise, anxiety and concern. In which sense did nanotechnology, synthetic biology, robotics, information and communication technologies, or the programmes for a convergence of these emerging technologies bring about an economy of technoscientific promises? What does this signify for the sustenance of life and culture on planet Earth? To best answer these questions it is perhaps necessary to first take a step back and tell a brief, albeit caricatured history of our Blue Planet.

The Blue Planet: Earth and its boundaries In more ways than one, the Blue Planet is a product of the space age, its technological achievements and disillusionments. When John F. Kennedy announced in 1961 that before the end of the decade the United States would be sending a man to the moon, he inaugurated an ambitious, wide-ranging, highly goal-oriented R&D programme. On one of its missions – Apollo 8, to be precise – the Blue Planet came into view. Photographs of the whole Earth alone in the vast darkness of space, rising and setting above the moon, quickly captured the imagination. Getting ready to leave the planet and in a sense transcend its boundaries, humanity looked back and

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discovered its exquisitely beautiful, precariously limited home. Benjamin (2003, pp. 47-49) eloquently described this new consciousness: ‘(H)omesickness prevailed over the imperative to press onward and upward. Images of our lush fragile globe beamed back from afar made cooing, protec- tive converts of the most forward-thinking rationalists, and before long many of these had swaddled themselves in Gaia and environmentalism. Explora- tion was out and conservation was in. (…) (E)ven as the astronauts eagerly soaked up sights never before witnessed by human eyes – the more magnifi- cent for having been familiar from a distance and yet for so many centuries unresolved in their full and very foreign detail – their hearts hankered for home. What captivated them most were not the wonders of the proximate world, gray and barren beneath them, but the beauty of the far-off one they had left behind (…) As Apollo 9 astronaut Russell Schweickart, an early proponent of planetary consciousness, saw fit to remind us, “That little blue and white thing” he was lucky enough to gaze down on like a guardian angel was everything – “all of history and music and poetry and art and death and life and love, tears, joy, games.” In effect, the astronauts of Apollo collectively redefined the moon shot for future generations as the gestalt-shifting moment that gave us singular insight into the fragility and preciousness of our home planet. As Dick Gordon confided to me on that hot Los Angeles day, “People are always asking what we discovered when we went to the Moon: what we discovered was the Earth”.’ Arguably, then, the Blue Planet as an object of environmental concern was one of the greatest discoveries of space exploration and the race for the moon. It drove home the conception not only of a whole earth but also of a limited earth with limited resources and limits of growth. Conservation served the goal of passing on to future generations and keeping within a cycle of reproduction a sufficiently plentiful stock of natural resources. And for those worried that the Earth’s population would soon exceed its limited carrying capacity, there was only the race to the moon and that it might prepare us to, one day, colonize space. Thus, after the discovery of the Blue Planet, the space programme took on a new purpose of finding more room for all those who could not be accommodated within its limits - what goes around, comes around.

The unbounded promises of emerging and converging technologies Against the background of this brief story of the Blue Planet, the regime of the economy of technoscientific promises takes on a very different character (Nordmann and Schwarz, 2011). In this regime, the predicament of planet Earth appears in a very different light. Consider, first of all, the difference between President Kennedy’s man-on-the- moon ambitions and President Clinton’s National Nanotechnology Initiative and its clones in Europe and elsewhere. More so even than the war on cancer or the push

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towards a certain percentage of solar energy in the national energy mix, the race to the moon was driven by a particular, highly specific goal. To be sure, not all research developments contributed to the achievement of the goal as planned, while other technologies originated from these lines of research. Nanotechnology, in contrast, is not dedicated to any particular goal and serves no national ambition save that of creativity and innovation as engines, presumably, of economic development. In terms of public investment, the US National Nanotechnology Initiative enjoys very high levels of funding and prestige, but we expect it not only to solve very specific problems, but to also provide general-purpose development of new technological capacities to control complex phenomena, to provide new methods of manufacturing, to design and fine-tune whole classes of new materials, to usher in a new generation of technologies, to provide a Silicon-Valley type of economic stimulus. This simultaneously vacuous and unbounded promise of nanotechnology found its expression in the 1999 brochure Shaping the World Atom by Atom that introduced the US public to nanotechnology as a national funding initiative (Amato, 1999; Nordmann, 2004). The cover of Shaping the World Atom by Atom again confronted us with an image of space, but this time outer space stands for inner space and for Richard Feynman’s 1959 lecture Plenty of Room at the Bottom, an early space age document that many took to be prophetic of nanotechnology (Toumey, 2008). The limits of space recede and the human being is conspicuously absent as an intermediary between the scales of the very large and the very small, and what we see instead is an image of exploration, conquest and transcendence: moving beyond the nanostructured surface in the foreground of an object that represents microtechnology and the computer revolution, our eyes are drawn into the vastness of space, to the Blue Planet and a prophetic comet. As we enter the nanocosm, we find ourselves in a space that represents seemingly unlimited technological possibility. The very term emerging technologies expresses that the realization of technical possibility is conceived as a quasi-natural rather than political process – new technologies are thought to arise from laboratories that are conceived as incubators of sometimes astonishing novelty. On this account, the best we can do is try to antici- pate, prepare, or brace ourselves for what is to come, especially if the visions and promises of what might be possible were to come to fruition (Guston, 2010). Indeed, the absence of planning, of blueprints, of roadmaps towards set goals and instead the promotion of general-purpose technologies signifies a retreat, if not a surrender of science policy.1 Instead of encouraging incremental developments within well- defined technological trajectories, nanotechnological funding schemes aim to provide a broadly supportive infrastructure for creativity, an innovation ecosystem in which the seeds of mere ideas for another industrial revolution can produce a tender growth of new technological capabilities that will grow up to become robust pillars of industry. This, however, is only half of the story.

1. This pattern continues in oversized funding schemes (e.g. the European Flagship Initiative and its endowment of the Human Brain Project) which delegate funding decisions to large consortia.

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The very vagueness and lack of determinacy of an emerging general-purpose technology also provides an opening to political processes and invites the inclusion of stakeholders in public deliberation and other informal agenda-setting processes. Since research regarding enabling technologies can promote many purposes and since it is not committed towards specific pre-set national goals, there is a need and the room for ongoing deliberation about the best ways to match emerging capabilities to societal demands and vice versa. At this point, researchers are generally the first to enter the regime of technoscientific promises since they are always required to provide some idea of what their explorations and discoveries might prove to be good for. But clearly, one can create technology platforms, consumer conferences, stakeholder deliberations to engage the research and development process in real time with the hopes of achieving efficient translations from the laboratory to the work floor or, in medicine, from bench to bedside.2 In this context, the idea of a convergence of emerging and enabling technologies was introduced, not so much as yet another emerging trend but as a policy instrument to promote deliberative processes on a larger scale. According to one definition, ‘converging technologies are enabling technologies (…) that enable each other in pursuit of a common goal’ (HLEG, 2004), and another report defines convergence as ‘the escalating and transformative interaction of seemingly separate disciplines, technologies, communities, and domains of human activity to achieve mutual compatibility, synergism, and integration, and through this process to create added value and branch out into emerging areas to meet shared goals’ (Roco et al., 2012). For example, the first prominent programme for converging technologies promoted the convergence of nanotechnology, biotechnology, information technology and cognitive science (NBIC) for the goal of enhancing human performance (Roco et al., 2002). Just as easily, and just as obviously, subject to stakeholder deliberation, one can imagine the convergence of geriatrics, intergenerational studies, information and communication technologies, as well as cognitive science towards the technological needs of an ageing population. The very idea of convergence, therefore, provides the frame for conceiving a strategy that gears many collaborators to a societal problem in need of a solution. It thereby serves as one platform among others to facilitate a deliberative, if not explicitly political social process.

Responsible innovation and the development of technologies in society Counteracting the retreat of science policy, emerging and converging technologies prove to be a venue for experiments in governance that are carried forward, for example, under the heading responsible innovation (Schomberg, 2011; Nordmann, 2009). Responsible innovation seeks to take the next step beyond the invitation to promoters and critics, consumers and producers, environmentalists and industrialists

2. In the context of the biomedical sciences, translational research is explicitly dedicated to effect these transitions, and this research is often built around the inclusion of multiple stakeholders.

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that they might all come together as stakeholders and share responsibility for the development of emerging technologies in society. From this rather diffuse common bond that allows everyone to take responsibility without incurring obligations or becoming accountable, the idea of responsible research and innovation seeks to forge more specific relations of mutual responsiveness. For example, those who participate in a deliberative stakeholder process might become obligated to disclose any information they hold concerning opportunities and risks about materials or processes. Nanotechnology, synthetic biology, information and communication technology, converging technologies – are all labels that beg for more precise specification. In the regime of the economy of technoscientific promises, these specifications are deferred to a quasi-natural process of emergence, but one in which stakeholders can participate. On the one hand, the general expectation is that wide public investment in the development of basic technological capabilities will yield sooner or later a good crop of worthwhile innovations, if only because general-purpose technologies open up a whole new world of technical possibilities that just wait to be realized: brain-machine interfaces, targeted drug delivery, a perfectly detailed map of the human brain, emission-free power plants, and the like. On the other hand, within this regime, it is possible to accommodate deliberative processes that inform, guide and perhaps determine a sensible coordination of technological capabilities, other cultural resources and societal needs. The concept of responsible innovation seeks to hold these deliberative soft governance schemes to at least minimal requirements of commitment and accountability.

The sustainable development and technology nexus In the regime of technoscientific promises, the concerns of our societies and our planet appear differently, they are managed and negotiated differently than in a regime of national aspirations as in the Cold War with its arms race and its space race. These concerns are subject to inclusive, open-ended stakeholder deliberations that unfold in real time in the hope of navigating our societies to an acceptable or – by current standards – sustainable state. But this is not the only difference that comes to mind as we seek to come to terms with our current, somewhat confusing situation in comparison to that of apparently simpler days when the Blue Planet was discovered as a cipher for our precarious existence in a limited world. Already, emerging and converging technologies were characterized by their unbounded promise. It comes with their development of basic capabilities which enable the realization of amazing technical possibilities. But there is a more telling way in which emerging and converging technologies defy limitations, including notions of limited resources or limits to growth. They thereby represent an altered image of the planet and our ways of inhabiting it. The idea that technology is our last, perhaps desperate hope, and the idea that emerging technologies might satisfy this hope are closely related to the concept of sustainability. According to the most popular definition, ‘sustainable development is the development that meets the needs of the present without compromising the

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ability of future generations to meet their own needs’. By offering this definition, the Brundtland report of 1987 leaves various options as to how sustainable development is achieved. The conservation of scarce resources in a limited world is one option, as is the difficult requirement to replenish what is consumed. While this approach might make it hard to meet the needs of present or future generations, one can be sure, at least, not to disadvantage those who come after us. At the other end of the spectrum, if the world were not limited at all and the energy of the sun were to replenish and repair whatever we consume, sustainable development would be easy – we could do nothing to compromise the ability of future generations to meet their own needs. Where we actually stand between these two extremes is a matter largely of technology. It offers the hope that we can effectively expand the limits of the world, one that affords a lot more than we previously expected. In the words of the Brundtland report: ‘Growth has no set limits in terms of population or resource use beyond which lies ecological disaster. (…) The accumulation of knowledge and the development of technology can enhance the carrying capacity of the resource base. (…) In essence, sustainable development is a process of change in which the exploitation of resources, the direction of investments, the orientation of technological development, and institutional change are all in harmony and enhance both current and future potential to meet human needs and aspirations.’ (Brundtland, 1987, chapter 2, paragraphs 10 and 15).3 The definition of sustainable development, then, gives licence to do whatever it takes to meet our own needs and simultaneously to invest in enabling technologies with their promise to create for future generations the ability to meet their own needs as we do ours. If we want to keep our economic promise to future generations without compromising on consumption and economic growth, technology is our one and only hope, the wild card that protects us from having to conserve or to live within set limits.4 Within this conception of sustainable development, emerging technologies enter the stage, overtaxed from the start by unrealistic expectations. In general terms, as enabling technologies and without commitment to the solution of specific problems only, they are supposed to advance the general purpose of increasing productive potential and enhancing the carrying capacity of our planet.5 This becomes apparent in the very vocabulary that is used in respect to these technologies, and also in the debates or discussions they provoke.

3. In a very different, more contemporary and scientific vein, the notion that there are no set limits of population and economic growth is underwritten also by so-called resilience theory, see Rockström et al. 2009. 4. The Brundtand report mentions only one alternative route and there are few indications that this path is about to be taken, namely a better political system of accessing and distributing goods: ‘sustainable development requires that societies meet human needs both by increasing productive potential and by ensuring equitable opportunities for all’ (Brundt- land, 1987, chapter 2, paragraph 6). 5. This is analyzed by Vogt (2010) from the point of view of a nanotechnology researcher.

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Techno-scientific promises: a desperate gamble to achieve sustainability At the most basic level, there is an appeal to novelty and the new. About a limited world where resources are to be conserved, restored, recycled or replenished, it is usually said that there cannot be anything genuinely new but (as in conservation of matter) only rearrangements and redistribution of what already exists. The Blue Planet and the whole stock of nature are inherited by us and will have to be passed on to future generations without renewal. The economic regime of technoscientific promises, in contrast, is the regime of innovation, of the search for renewables and the systematic investigation of novel properties. Nanotechnology, for example, seeks to exploit so-called scale-dependent discontinuities, that is, those properties that arise only at the nanoscale when familiar objects or materials start behaving in unfamiliar ways. It is these novel behaviours and our emerging ability to elicit and control them that is to enable new technologies, to innovate the economy and to ensure sustainable development. At a more specific level, emerging and converging technologies are often discussed for their ambition to exceed or transcend present limitations in one respect, namely to enhance human nature. Here, the National Science Foundation-sponsored report on the convergence of NBIC to improve human performance achieved particular prominence (Roco et al., 2002) but by no means stood alone. While technological ambitions to increase human lifespan, to enhance mental and physical abilities may seem a bit far-fetched, nanotechnology, materials research and synthetic biology are working to enhance material nature. What used to be dead matter is meant to become smart material as, for example, information technologies are used to draw things and people together in environments with ambient intelligence (Nordmann, 2010). At the level of planet Earth, finally, the transcendence of the Blue Planet with its limited resources, limited carrying capacity, and necessary limits of growth produces

BOX 1. FROM THE CONQUEST OF SPACE TO NANOTECHNOLOGIES: THE POLITICAL MYTH OF GOVERNING RESEARCH

. 1961 25th May . 14th December . 2000 24th January ‘Foresighting the New Pres. Kennedy announces Humans last walked on Pres. Clinton announces Technology Wave’ ‘Man on the Moon’ the moon (Apollo 17) National Nanotechnology publishes Converging . 1968 24th December . 1987 Brundlandt Initiative. 2nd February Technologies for the Earthrise picture taken report introduces the EU adopts precautionary European Knowledge (Apollo 8) ‘sustainability’ agenda principle Society. . 1971 23th December with her report ‘Our . 2002 June The NSF . 2011 4th March Pres. Nixon announces common future’ and the DOE publish EU proposes Code of war on cancer . 1990 23rd April EU the report Converging Conduct for Responsible . 1972 1st March Club limits the use and study Technologies Research of Rome report proclaims of GMOs to confined . 2004 The EU High Limits of Growth environments Level Expert Group

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a different picture, namely one of apparently infinite plasticity such that materials, organisms, the planet itself and the future of human life on this planet all become objects of design. Our only hope that technology might save us here becomes a form of hubris. As we extract ourselves from an evolutionary history, we boldly posit not only that we can shape the world atom by atom but that material and social realities are subject to our choices, thus of our making, and thus as we design them.

Conclusion This essay began with an anecdote that exemplified a state of confusion. Sceptical of technology as the solution to all of our problems, we must nevertheless place all our hopes on this wild card in a somewhat desperate gamble to achieve sustainability, and thus we turn from sceptical critics of technology to credulous believers in its power to transform life. Accordingly, this essay also ends in a confused state. After all, it is in no way evident that we can move from the insight ‘the world as we know it, is a world of our own making’ to the bold claim that ‘the future of the world is an object of design’. Rather, it is wishful thinking to assume that the effects of human action can be made to conform to purposeful human design. This wishful thinking is a powerful driver of our technological ambitions and thus may prove to be a valuable heuristic. It is not to be taken for a fact of history or technology, however, and to do so is to invite the confusion at hand. And to understand how we became to be confused is perhaps a first step towards a more humble, circumspect and cautionary approach than the one that overestimates the power of emerging technologies. ❚

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Amato I., 1999, Shaping the World Atom by Atom. Riegler C., 2011, “Anforderungen an eine zukunfts- Washington, D. C.: National Science and Technol- fähige Arbeitsforschung”, presentation at the ogy Council. Workshop Transdisziplinäre Arbeits- und Innovati- Benjamin M., 2003, Rocket Dreams: How the Space onsforschung, Dortmund, June 29. Age Shaped our Vision of a World Beyond. New York: Rockström J. et al., 2009, “Planetary Boundaries: Free Press. Exploring the Safe Operating Space for Humanity”, Brundtland G. H. (chair of the World Commission Ecology and Society 14:2, Art. 32. on Environment and Development), 1987, Our Roco M. and Bainbridge W. eds., 2002, NBIC Con- common future. New York: United Nations. verging Technologies for Improving Human Perfor- Felt U. (rapporteur for the Expert Group on Science mance: Nanotechnology, Biotechnology, Information and Governance), 2007, Taking European Knowl- Technology and Cognitive Science. Arlington: Na- edge Society Seriously. Brussels: Report for the Eu- tional Science Foundation. ropean Commission. Roco M., Bainbridge W., Tonn B., Whitesides G. Fischermann T., von Randow G. et al.,2011, “Rettet eds., 2013, Convergence of Knowledge, Technology, uns die Technik? Der neue Glaube an die Machbar- and Society: Beyond Convergence of Nano-Bio-Info- keit” and “Die neuen Weltwunder: Acht technische Cognitive Technologies. Lancaster: WTEC (available Durchbrüche, die unser Leben von Grund auf ver- online at http://www.wtec.org/NBIC2). ändern könnten”, Die Zeit, no. 25, June 16. von Schomberg R., 2011, “Prospects for Technology Guston D., 2010, “The Anticipatory Governance Assessment in a framework of responsible research of Emerging Technologies”, Journal of the Korean and innovation”, Technikfolgen abschätzen lehren: Vacuum Society, 19: 6, 432-441. Bildungspotenziale transdisziplinärer Methode, Wiesbaden: Springer VS, pp. 39-61. HLEG (High Level Expert Group “Foresighting the New Technology Wave”), 2004, Converging Tech- Schwarz A. and Nordmann A., 2011, “The Political nologies: Shaping the Future of European Societies. Economy of Technoscience”, in Martin Carrier and Luxemburg: Office for Official Publications of the Alfred Nordmann (eds.) Science in the Context of European Communities. Application, Dordrecht: Springer, pp. 317-336. Nordmann A., 2004, “Nanotechnology’s Worldview: Toumey C., 2008, “Reading Feynman into Nanotech- New Space for Old Cosmologies”, IEEE Technology nology: A Text for a New Science”, Technè 12: 3, and Society Magazine 23:4, pp. 48-54. 133-168. Nordmann A., 2007, “If and Then: A Critique of Spec- Vogt T., 2010, “Buying Time – Using Nanotechnolo- ulative NanoEthics”, NanoEthics, 1:1, pp. 31-46. gies and Other Emerging Technologies for a Sus- tainable Future”, in Ulrich Fiedeler, Christopher Nordmann A., 2009, “European Experiments”, Osiris Coenen, Sarah Davies, and Arianna Ferrari, eds., 24, pp. 278-302. Understanding Nanotechnology: Philosophy, Policy Nordmann A., 2010, “Enhancing Material Nature”, and Publics, Heidelberg: Akademische Verlagsge- in Kamilla Lein Kjølberg and Fern Wickson, eds., sellschaft AKA, pp. 43–60. Nano meets Macro: Social Perspectives on Nanoscale Sciences and Technologies, Singapore: Pan Stanford, pp. 283-306.

84 A PLANET FOR LIFE CHAPTER 4 Ecology and technology: are we experiencing a shift from technophobia to technophilia?

Grégory Quenet, Professor of History at the University of Versailles-Saint-Quentin-en-Yvelines, France

s technophobia a characteristic of ecological aware- marked by the convergence between the elites, scientists ness and of the first environmental movements? Rather and the State. In this context, the ideal of wilderness, than merely stating that these terms oppose each other, that of an unspoilt and wild nature, was built on the it is necessary to consider the relationship with tech- model of Eden, a disappearing paradise that should be nology as a tension that has polarized ecology from the preserved. Yosemite’s ‘cathedrals of nature’, described Ioutset. This tension has organized itself in different forms by John Muir, a tireless promoter of conservation policies, in different countries, fluctuating between technophobia are the opposite of the city, where technology triumphs. and technophilia, and over the course of two centuries Literature, especially Melville, Hawthorne and Emerson, shifting towards the latter. thematized the Machine in the Garden (Marx, 1964) because technological progress was seen as the dramatic The ‘machine in the garden’: the industrial eruption of machines in the landscapes of the US that revolution and the destruction of nature had hitherto been preserved. In fact, and for a long time, Technophobia appeared with the Industrial Revolution technology-mediated human labour was considered by when machines were said to be responsible for a form of environmentalist movements as a factor in the destruction alienation from nature, while at the same time creating of nature, this world that humans had not created, which the image of archaic ways of working in harmony with designate a form of physicality that is external to human the environment. Workers have contributed to this societies (White, 1995). interpretation from the time of the Luddite movement From that founding moment onwards, there was, involving the destruction of machinery, which began in however, no clear division between these opposing the UK in 1811-1812 (Jarrige, 2009). The early texts of sides. This critique of technology derives from those who Marx described the way in which the alienation of people benefit from it and who are its main stakeholders. Indeed, from work (through capital and ownership of the means in what constitutes one of the more ironic paradoxes of of production) stemmed from a previous alienation of the wilderness, it is urban elites, due to their increasing humanity from nature, caused by the rupture of metabolic remoteness from a daily contact with nature, that have exchange between humans and nature, a direct relationship developed an ideal vision of nature and who have fought that was now mediated by machines or cities. for the conservation measures that constitute the roots of The relationship between technophobia and ecology ecology. Some controversies, such as the flooding of the appears more clearly at the birth of environmentalism Hetch Hetchy Valley in 1913 following the implementation as an organized movement at the end of the nineteenth of the dam project to supply San Francisco with water, century in the United States, i.e. conservation policies, showed that the pre-environmental movement era was

A PLANET FOR LIFE 85 divided between radical advocates of pristine nature and view was typically expounded by a growing university- those who wanted preservation but with an opening for educated white collar class, who were sensitive to the rational use of technology for human well-being. In environmental arguments and for reasons of an improved Europe, this supposed contrast between technophobes/ quality of life, moved away from city centres, promoted environmentalists and technophiles/optimists is also recreational sports and the protection of nature. Inspired questionable, for example during the development of by the anti-Vietnam movement, the first Earth Day in 1970 the chemical industry, of gas lighting in nineteenth was strongly marked by this type of criticism regarding century London and of steam engines, the impact of the destructive effects of technology. Ecological awareness technology on the environment was emphasized by the began to be structured around a number of high profile technophiles themselves. Moreover, these negative effects technological accidents, such as the 1967 Torrey Canyon of industrialization were made acceptable by disinhibiting oil spill and the 1979 Three Mile Island accident. In 1971, devices, a paradoxical effect of regulatory procedures the Keep America Beautiful organization launched its and expertise, and the shift from environmental to social, ‘Crying Indian’ campaign which promoted a westernized making the working classes morally responsible for the figure of the ecological Indian, living in harmony with nature health problems they suffered (Fressoz, 2012). because he does not exploit it, conjuring up the archaic and romantic image of work. The traditional conservation Cold-war industrial capitalism and the rise of movement and its new modes of protest, which were more techno-scientific controversies worldwide democratic, then joined forces. Nuclear disaster served After World War II, the relationship between ecology as a matrix for the representation of the ecological crisis, and technology was reformulated, based on developments helping to establish the identifying link between ecology initiated between the two wars, but particularly fuelled by and the rejection of nuclear power (Greenpeace was a context marked by the atomic bomb, the Cold War and founded in 1971 to mobilize against nuclear power). In the arms race, the spread of the consumerism (and the 1972, The Ecologist magazine predicted the collapse of first airing of doubts about such a society), decolonization society and Earth by the end of the century, in the same and the emergence of a multipolar world. Globalization year as the Club of Rome published its famous Limits to in the environmental field promoted the export of the US Growth report, which recommended limiting the growth idea of wilderness, through international associations of the industrial machine, the population and agriculture. for the protection of nature, even if sensitivities varied France had a different outlook, one that according between countries and particularly between environmental to Michael Bess could be called ‘light green’. Indeed, movements. post-WWII France was attached to nuclear power and In the US, the 1962 publication of Rachel Carson’s, Silent rural landscapes, there was pride in the TGV (the French Spring, marked the birth of mass movements, emanating high-speed electric passenger train) and in the nation’s from a condemnation of the effects of the pesticide industry, particularly DDT (dichlorodiphenyltrichloroethane). Ecological destruction was presented as a consequence . At the time of their formation, environmental of the human desire to conquer nature, and the criticism groups campaigned to protect nature conserva- of technology took up a core tenet in the criticism of the tion from the extension of industry, the modifica- capitalist system, a system that causes its own downfall. tion of landscapes and the exploitation of natural It was the 1960s that saw the first criticisms of a societal resources. Such positions led them to denigrate technological advances. In the late twentieth model that excluded a proportion of Americans, and of the century, a new hope arose for the development of fact that material improvements – synthetic revolution, technological innovations that would reduce the sprawling suburbs, abundant energy – came at a high impact of human life on the environment. environmental cost and had a high impact on health. This

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FIGURE 1 From technophobia to technophilia

A PLANET FOR LIFE 87 farmers and the country was sensitive to the environment threat, which can only be understood through the use but hostile to ecology (Bess, 2011). After the war, the of modelling and very complex scientific theories: thus, idea of a bright, progressive, technocratic and scientific the enemy of ecology becomes the enemy of science, future transcended the political divide, uniting Gaullists, the ignorant one. A second impetus derives from the Communists and Christian Democrats (Frost, 1991). internationalization of environmental issues and the However, new ecological trends were heavily critical of provincialization of the West, as a result of globalization: technology. Since the 1930s, the French personalist the opposition between technology and ecology makes no movement, incarnated by Bernard Charbonneau, has sense in other cultural contexts, especially in India where questioned the rapid development of machinery, the the environmentalism of those living in poverty chimes rationalization of work and social life, and the deep with inexpensive and diffusible technical solutions. The transformations induced by technical progress: is cold figure of the engineer covers very different realities in material sterilizing the spirit? Are the gains to humanity different countries and it is striking that, in India, two in terms of material well-being obtained at the cost of of the institutions that have the most influence over the liberty? All of these concerns were revived after 1945 by environment, but in its social dimension, were founded a new source of anxiety triggered by the use of the nuclear by engineers, linking technology and local traditions: the bomb and the effects of war on science and the State. This Energy and Resources Institute (TERI) founded by the Tata situation was exemplified by the mathematician Alexandre Group in 1974 and the Centre for Science and Environment Grothendieck, recipient of the Fields Medal in 1966 and (CSE) founded by Anil Agarwal in 1980. The third stimulus considered one of the greatest mathematicians of the relates to the ecological potential of new technologies: twentieth century: he abandoned his scientific activities without going as far as geoengineering, which is probably in the name of ecology and strongly opposed the use only the modern face of a very nineteenth century of science by the military. In La technique ou l’enjeu du technophilia (Hamilton, 2013), digital technologies have siècle (1954)1, Jacques Ellul claimed that the nature of opened new opportunities for reducing our impact on the technology changed in the early twentieth century, by planet, in spite of their energy consumption. seeking efficiency at all costs, replacing the ends by the Moreover, talk of a turning point is misplaced means in an autonomous movement, which self-generates because tension is present, within ecological theories and accelerates without any possible human control. and movements, between good and bad techniques, or At the time of their formation, environmental groups rather between types of determination that vary between campaigned to protect nature conservation from the exten- techniques (Ecologie et Politique, 2012). According to sion of industry, the modification of landscapes and the André Gorz, technology is part of the rationale of capitalist exploitation of natural resources. Such positions led them accumulation and its negative effects, but it can also serve to denigrate technological advances. In the late twentieth to move away from nature and to affirm one’s freedom. century, a new hope arose for the development of techno- Two types of ecological awareness result. One is rather logical innovations that would reduce the impact of human sensitive to the potentially liberating role of technology, life on the environment. such as solar energy, information technology and clean tech. The other, conversely, promotes a radical criticism of Beyond the irrelevant opposition between technology, which can lead to the reactivation of the Luddite technology and ecology tradition. Each of these positions engages with different How have we reached this turning point from political models on issues of decentralization, democracy, technophobia to technophilia? The first impetus has come relations with local people and their knowledge. Today’s from a new type of environmental, global and climatic mobilization against energy (nuclear, dams, oil), water management (irrigation), transport (rail, TGV) as well as 1. The Technological Society. Trans. John Wilkinson. New York: Knopf, 1964. GMOs and nanotechnologies, show that the technophobe

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perspective remains strong. Criticism of technology REFERENCES is also made in the name of science, since knowledge Bess M., 2003, The Light-Green Society: Ecology and Technologi- today is spread across a multitude of places and no longer cal Modernity in France, 1960–2000, Chicago, University of Chi- cago Press. remains the preserve of experts. The heritage value of the Ecologie et politique, ‘Penser l’écologie politique en France au XXe environment, which is one form of the memory obsession siècle’, 2012/1, n°44. of Western societies, also includes an implied criticism Fressoz J.-B., 2012, L’Apocalypse joyeuse une histoire du risque of technology by the isolation of an ideal state prior to technologique, Paris, Le Seuil. Frost R., 1991, Alternating Currents. Nationalized Power in technological influence and by freezing these places in France, 1946-1970, Cornell University Press, Ithaca. a stationary time. Hamilton C., 2013, Les apprentis sorciers du climat. Raisons et déraisons de la géo-ingénierie, Paris, Le Seuil. Jarrige F., 2009, Face au monstre mécanique. Une histoire des résistances à la technique, Paris, Imho. Marx L., 1964, The Machine in the Garden: Technology and the Pastoral Ideal in America. Sale K., 1993, The Green Revolution. The American Environmen- tal Movement 1962-1992, New York, Hill and Wang White R., 1995, ‘Are you an environmentalist or do you work for a living ?’ in William Cronon (ed.), Uncommon ground. Toward reinventing Nature, New York, Norton, p. 171-185

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CHAPTER 5

Towards hybrid socio-technical solutions for urban water and energy provision

Is the model of the networked city obsolete? n European and North American cities, the traditional models of large Olivier Coutard, technical systems that have been effectively and harmoniously deployed Director of the LATTS research centre, between and within cities to supply water and energy and to dispose of waste- Université Paris Est, water are now being challenged on the grounds of their alleged unsustain- France ability. The liberalization of network industries, growing concerns for the Jonathan use of environmental resources and the impacts on these resources, new Rutherford, financial arrangements and the increasing individualization of lifestyles are Researcher, LATTS all challenging the supremacy of centralized solutions and promoting the Daniel Florentin, development of alternative technological systems at a more local scale, which PhD candidate, are often considered more ‘sustainable’. LATTS In African, Asian and Latin American cities, it is far from clear whether the network Imodel forged in Europe and North America is appropriate, adaptable or even particularly desirable as a means of expanding people’s access to basic urban services. Recent research has thus highlighted that new socio-technical systems, as alternatives to large infrastructure networks, do not constitute genuine innovations but are based on existing practices. These alternative systems are used daily by urban inhabitants, and are connected to other traditional systems that correspond, to varying degrees, to the network form (see, for example, Jaglin 2012). Issues of innovation, sustainable development and the provision and use of infrastructure all have fairly distinct meanings for people around the world. Alternative socio-technical configurations are emerging at the margins and in the interstices of, or even simply replacing, existing centralized networks. The resulting hybrid- ized socio-technical systems have crucial implications for the functioning of urban

A PLANET FOR LIFE 91 metabolism1, the daily routines of citizens and the political economy of urban areas (Coutard and Rutherford, 2011). The driving role that centralized infrastructure networks have played in the transformation of urban areas for 150 years (see Tarr and Konvitz, 1981; Hughes, 1983; Tarr and Dupuy, 1988; Dupuy, 1991) makes current infrastructural transitions all the more important. This dynamic is particularly central in light of the challenges of climate change (mitigation of its scale, adaptation to its effects) and of the need to secure energy supply in a context of the depletion of fossil fuel reserves.2 Indeed, activists, experts and policy makers at all levels consider the promotion of alternative and decentralized systems as a promising way to build more ‘sustainable’ cities. The development of ‘localized’, ‘decentralized’, ‘distributed’ or ‘alternative’ technologies affects the inherently interconnected nature of the urban, on environmental, spatial, social and political levels. In this article, we thus aim to go beyond the simplistic idea that these alternative and decentralized technology solutions are always more ‘beneficial’ and ‘sustainable’ than large traditional urban infrastructure. In doing so, we propose the notion of a ‘post-networked city’ to describe the forms of organization of urban spaces associated with the hybrid assemblage of a myriad of emerging urban infrastructure configurations. This notion of a post-networked city does not imply that contemporary socio- technical configurations disconnect territories from traditional centralized networks. The aim is to critically examine the various forms of socio-technical recombination of territories and infrastructure systems and the ways in which they are emerging. To illustrate this diversity, we briefly discuss below three distinct configurations (innovations?): ‘disconnection’, ‘pre-connection’ and ‘reconnection’.

Disconnection/off-grid: Woking’s ‘decentralized energy revolution’ Since the 1990s, the commuter town of Woking, located 45 miles from London with a population of 90,000 inhabitants, has appeared at the forefront of good practice in terms of local energy policies. The town council has initiated and developed projects based on local production and energy distribution, and promoted a form of autonomy from the national network in terms of energy supply. In this way, Woking has joined the ranks of other European medium-sized city pioneers in the search for forms of energy independence. From an initial interest in energy efficiency, in the late 1990s the council went a stage further and, through the commitment of a senior official and chief financial officer, took a second step with the creation of its own local energy service company (ESCo), Thameswey Energy Limited. The town is both the owner and the operator of a plant that produces electricity, heat and cooling. The company

1. In political ecology and industrial ecology, this metaphor that compares the city to a living being is often used. It is based on the idea that cities are circulations of multiple flows, including flows of goods or people, and intangible flows of money and of power. As a whole, these flows create a dynamic system, an urban metabolism (see, for example, Heynen et al., 2006; Barles, 2010). 2. On infrastructure and urban energy transitions, see Rutherford and Coutard (2013).

92 A PLANET FOR LIFE FIGURE 1 Woking’s energy mix

Source: Woking Borough Council

Woking has developed an highly innovative cogeneration system, providing electricity, heating as well as cooling services and using public and private infrastructures. Highly decentralized, it is also connected to national grid as a last resort provider. develops and implements technologies for the production and supply of energy. As Thameswey is a joint venture on Public Private Partnership basis it avoids central government control over its capital, which limits the scale of projects and local government investment. Thameswey has therefore mainly used private funding to build and operate a large number of energy projects in the town. Among these projects is a cogeneration (electricity and heat) system, which also provides cooling through the absorption of the heat released; there is also a private network of renewable energy that directly supplies municipal housing and town centre shops; as well as the first fuel cell system to be operated commercially for the combined production of electricity, heat and cooling. While this decentralized system operates completely independently, it is still connected to the national grid as a last resort provider: Woking’s Holiday Inn, for example, was built without a direct connection to the national grid. National legislation, however, limits the size of the local system and the number of clients that can be served. Overall, the Woking project has allowed the town to make savings in terms of money, energy and carbon emissions, and to earn the distinction of the title of innovative community three times in four years. In addition, the senior official of Woking who initiated and supervised this policy was recruited by the then Mayor

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of London to be the director of the London Climate Change Agency at its creation in June 2005, with the mission to initiate ‘a decentralized energy revolution’ and to ‘do a Woking in London’. A small town has thus become a national model that a global city has sought to emulate. Woking has developed a very innovative cogeneration system that provides electricity, heating and cooling services, through the use of public and private infrastructure. Highly decentralized, it is also connected to the national grid as a last resort provider.

Pre-connection/pre-grid: Stockholm beyond the ‘total network coverage’ In the peripheral areas of European cities that are not (yet?) served by traditional centralized infrastructure, public officials are questioning the relevance of network extensions. In these contexts of low population density, the authorities are weighing up the options, between on the one side the possible return on investment from network deployment, and on the other the technical difficulties and additional costs that would result from laying the necessary cables and pipelines. This is especially true for wastewater and energy (non-electric) systems, but also in some cases for water supply. These areas that lie beyond the network may be included in future extension plans or may be more dependent on alternative forms of service delivery, which in some cases may provide more satisfactory or relevant results. Several municipalities in the Greater Stockholm periphery make clear distinctions in their planning strategies between areas already connected to a municipal or inter-municipal water and wastewater network, areas that are expected to be linked to such networks in the future and those that will permanently remain beyond municipal networks for various technical, geographic and economic reasons. These latter areas, where individual wells and septic systems predominate, constitute a sizeable proportion of the Stock- holm archipelago. A total of 100,000 households in the region are not connected to official water or wastewater networks, or both. In Norrtälje, which is the largest municipality in terms of area, 45% of the population lives beyond the reach of centralized infrastructure networks. The rationale of ‘total network coverage’ is far from the reality here. Several techniques, depending on the locality, are employed for the provision of water and sanitation services. In between a direct connection to a centralized network at one end of the scale, and individual solutions such as wells and septic tanks at the other, are several options that are utilized for small groups of dwellings, which are often located some distance from urban centres. Either the dwellings cluster together to connect to a centralized network, or they implement collective autonomous solutions, such as a small treatment plant for example, which are used only by the local residents. This hierarchy of technical solutions according to several local factors (density, distance from network, geographical conditions, costs, etc.) therefore allows the adaptation of services to vary to some extent, depending on specific contexts and living conditions (Boucher-Hedenström and Rutherford 2010). This approach, which operates on the principle that a number of sparsely populated

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areas will never be supplied by centralized network systems, opposes the largely dominant view that network expansion tends to follow, accompany or even antici- pate the urbanization of new suburban areas.

Reconnection/re-grid: how urban decline became the opportunity to upgrade the centralized network of Magdeburg Magdeburg, the regional capital of Saxony-Anhalt in Germany, provides an example of another kind, that of a reconfiguration of infrastructure systems where the network is reaffirmed and upgraded. Like most cities in Eastern Germany that were part of the former Eastern bloc, Magdeburg had to deal with the major changes associated with the post-socialist transformation and its two corollaries, massive and rapid deindus- trialization and ever-changing urban decay. The population has substantially declined and aged over a single decade, going from 290,000 inhabitants before the fall of the Berlin Wall to 230,000 in the early 2000s. Meanwhile, the industrial fabric has eroded, with the disappearance of almost all industrial companies in less than three years. These processes have profoundly undermined the operating balance of different technical networks, including those for water and energy. While huge investments were made in various technical networks in the aftermath of reunification, with the objective to raise the quality and operational standards of infrastructure, the use of these networks has declined sharply. For example, the total water consumption of the town has dropped by two thirds between 1990 and 2010, and other technical networks such as district heating are experiencing similar trends. Faced with this unprecedented situation of an urban economy without growth and a declining demand, the rationale of a centralized network has been questioned. The local multi-network public works department (Stadtwerk), Städtische Werke Magde- burg (SWM) identified two possible infrastructure coping strategies within this new context: the creation of decentralized solutions or the reorganization of the network rationale around a more centralized system. It was the second option that was chosen, following a dual strategy: a regionalization and a recentralization of production. The SWM was among the first Stadtwerke to position itself in the liberalized energy market, and particularly the electricity one. Thus, SWM has many market offerings for electricity and gas in Schwerin or Hamburg, to the point that in 2012 the company was selling more electricity outside Magdeburg than within its original market. Meanwhile, the Stadtwerk has also expanded its area of influence at the regional level for electricity, gas and water. SWM has thus taken control over the operators responsible for the technical and commercial management of local water and electricity. These expansions have allowed the Stadtwerk to undergo a form of territorial consolidation and to change the scale of its management and area of influence. Its clearly stated goal is to become a regional (or sub-regional) player in the water and energy markets. This transformation reflects the strong adaptation strategy of the Stadtwerk to the situation: facing a declining market, the regional city Stadtwerk gradually acquires shares of local Stadtwerke and extends its market to offset the

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FIGURE 2 Redeploying a network to adapt it to urban development

In Magdeburg, the network of heat production was re-centralized and extended to cope with declining demand in certain areas of the city.

decline of its original market. It is this strategy that feeds much of the company’s profits, with no less than 40% of the profits coming from subsidiaries created by the SWM group. In parallel to this territorial expansion strategy, the Stadtwerk also follows a second path, that of a recentralization of production of water and energy. Many regional water pumping stations were closed and production was shifted to a central hub, the Colbitz station, to reduce infrastructure costs and the dispersion of production. The district heating network has followed a similar trajectory. The town’s three heat production plants that are fuelled by gas or oil have thus been replaced by a single heat and electricity cogeneration plant, Mühlheizkraftwerk (MHKW), which is fuelled by waste incineration. This heating system, which was adapted to the declining consumption, enables the heating demand to be met for more than 95% of the time (a small gas plant serves as a supplementary support system for annual heat consumption peaks). Its construction also made it possible to respond to changing environmental standards, and to comply with federal legislation on waste that, in particular, imposed regulations from 2006 on the treatment of all incinerated wastes. Meanwhile, the establishment of MHKW makes the reduction of production costs feasible, by reducing dependence on international markets such as hydrocarbon ones. The MHKW socio- technical system also has a socio-economic role, since it offers a district heating

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service at a very good price, which is also attractive to the city authorities and the accommodation it provides, mainly large housing estates. In Magdeburg, the network of heat production was re-centralized and extended to cope with declining demand in certain areas of the city. In this example, the process of decline has been used as an opportunity to rethink the network, to develop a management system that is driven by demand while achieving compliance with new environmental standards. The modified heating system shows the sustainability of the inclusive, innovative and effective capacity of the large centralized network model and its potential role in a balanced and sustainable development.

The post-networked city as urban reassemblage Far from providing instruments and capacities for empowerment and disconnection to cities and local actors, these three examples of the post-networked city reflect reconfigurations, and new relationships between centralized infrastructure and alternative systems that reassemble the various facets of the socio-technical urban fabric.

FINANCING THE PROVISION OF ESSENTIAL SERVICES Post-networked systems of urban energy and environmental service provision require changes to the ways in which these services are financed. The total cost of service provision is likely to increase significantly because of: the growing number of requirements in terms of quality and respect for the environment; the regulations and standards; and the duplication of infrastructure that is often necessary for the development of decentralized systems.3 Thus, although the public authorities in Woking and London have encouraged disconnection, it has largely depended on the mobilization of private financing. In Woking, the energy services company, although a joint venture, has invested in the cogeneration plant, the heating and cooling system and other local projects using funds from a private partner (which enabled it to achieve greater financial freedom in accordance with government regulations). Elsewhere, large companies providing energy and environmental services such as Suez and EDF must completely rethink their business models in a context of increasing overall costs and, most importantly, of a change to income and remuneration sources4, as has already been taken into account in a city like Magdeburg. Indeed, these changes are causing a shake up of economic models and of the financial viability of traditional infrastructure networks.

REDEFINING SOCIO-SPATIAL SOLIDARITIES Transition processes towards forms of post-networked cities involve a redefinition of the socio-spatial solidarities on which networked cities are based. The introduction and promotion of decentralized technological systems, often under the auspices of

3. For example, costs associated with the provision of sanitation services have doubled or tripled in most (western) European countries over the past twenty years. 4. Revenues tend to be less based on volumes sold, and more on volumes or resources saved.

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environmental and sustainability obligations, may be conflictual with the traditional forms of social cohesion in terms of network service provision based on cross-subsidies between user groups, between service areas and/or between service sectors. Indeed, these systems (cf. Woking, London) often operate at the very local scale of neigh- bourhoods or even individual buildings, and their users tend to make a lower contribution to the techno-economic viability of large centralized networks. On the edges of networks, in Greater Stockholm for example, it is existing users that support the costs of extending municipal networks into sparsely populated areas, as well as the costs associated with controlling environmental regulations for ‘autonomous’ houses and groups of dwellings. An annual increase of fees can create tensions between old and new residents, sparked by income differences between these two categories. Conversely, the Magdeburg operator made a different choice, opting to smooth the spatial differentiation and to adopt systems of solidarity pricing to maintain a territorial balance and to prevent acceleration in processes of decline. The way that the costs of new networks and new services are justly distributed is therefore subject to debate.

TRANSFORMING URBAN METABOLISM The rise of the post-networked city implies potential changes in urban metabolisms and in urbanizations of environmental resource flows. The two examples of Woking and Magdeburg are based on the circulation of decarbonized energy, local energy production plants and the development of district heating systems in order to use the heat generated by the local cogeneration plants, waste reuse, etc. They show that the important element in the political economy and ecology of urban services is now the movement of material and energy flows, more so than the simple construction of concrete and fixed infrastructure. From another point of view, it is also important to note that, while Thameswey in Woking focuses only on energy flows around the town, companies involved in the energy supply of Magdeburg have interests beyond the local level, which necessitates the establishment of connections between the local grid and power and waste management systems on a larger spatial scale. Local metabolisms, in this case, are subject to a broader evolution in the logics of the political economy of networks: the circulation of resources and flows at the urban scale is intrinsically dependent on extra-local political and economic decisions.

GOVERNING HYBRID SOCIO-TECHNICAL SYSTEMS The rise of post-networked urbanism also necessitates a rethinking of infrastructure governance and, more broadly, the relationship between city authorities and residents for the provision of basic services. The three examples discussed in this article illustrate rather different reconfigurations. In Woking, local authorities consider the control of infrastructure as a renewed instrument of government, enabling in particular the provision of cheaper, cleaner and more secure energy for their citizens. This control also serves as a model for a decentralized approach engaging a shift towards a low carbon society and infrastructure. This approach stands implicitly in opposition to the centralized configuration of the network which has, for a municipality

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like Woking, a triple disadvantage: it does not allow the provision of access to affordable energy for households and businesses, it strengthens the dependence on energy derived from fossil fuels, and it limits the capacity of local authorities to introduce change. In other words, some municipalities have used the low-carbon environmental argument to both implement decentralized alternative systems and recover, at least partially, the responsibility for the provision of basic services and for the sociotech- nical infrastructure necessary to achieve this objective. In the Stockholm region, beyond the area serviced by centralized networks, people are more dependent on very local infrastructure or on systems at the scale of individual dwellings. In this case, the authorities have decided that these geographically isolated and sparsely populated areas are beyond the limits, whether financial, organizational or spatial, and beyond the possibilities for collective infrastructure governance. In Magdeburg, the management of the energy supply system has been redesigned and resized. Although the city remains the main shareholder of the operator in charge of water and energy networks, the scale of governance has been modified. To adapt to the durable urban crisis linked to the post-socialist transformation, the main local operator has gradually developed into a regional player. It is at this scale especially that pricing policies and cross-subsidy processes can be implemented to offset the effects of urban decline and to maintain a rationale of industrial growth in a context of urban shrinkage. In this way, the multi-service company becomes a pillar of regional development, acquiring a new political role beyond its original area of jurisdiction.

Conclusion The post-networked city emerges in various forms and with ambivalent economic, technical and socio-political implications that deserve the attention of researchers. Post-networked urbanism can be considered in various configurations to match the diverging designs, visions and requirements of advocates of ‘market sustainability’ (technologically innovative and economically competitive cities) and those of ‘strong sustainability’ (cities with frugal lifestyles that enable reduced energy consumption). However, beyond this interpretative and political flexibility, the diffusion of decentralized technologies and the resulting (relative) decline of large technical networks will inevitably have ensuing implications for different social regulations, and it is important to understand all aspects of these implications.5

5. In this article we have focused on the emergence of a post-networked city in Europe. The various issues associated with hybrid socio-technical configurations for the provision of essential services are equally important in other contexts. Sylvy Jaglin (2012), for example, has offered an analytical framework of the conditions for the deployment of diverse configurations of service provision in African cities. She emphasizes the unsuitability in these contexts of the European- style network service model, which concerns ‘the whole of the socio-technical system required for conventional service: its technical infrastructure, its organizational arrangement, its management and financing mode, the actors and skills mobilized, but also the political objectives it carries or for which it is the instrument, the values it embodies’ (Jaglin, 2012, p.64). She shows the centrality of more ‘pragmatic’ solutions as alternatives to an incomplete network service: ‘market offers of private, individual or collective initiative, which are formal or informal, and often illegal with regards to exclusive contracts of the operators officially in charge of the service... [are aimed] depending on the type of urban space, at wealthy clients or at poor clients that are excluded due to their low purchasing power, geographical remoteness or their illegal status’. (Jaglin, 2012, p.53).

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More in-depth theoretical and empirical work is needed to make sense of multiple and often contradictory rationales associated with the notion of a post-networked city, considered at once as a rational infrastructure ideal, as an analytical tool, as a progressive alternative, as a new techno-spatial-ecological fix and as a process reinforcing urban fragmentation. Regarded as having resulted from the questioning of traditional models of basic service provision, themselves considered as ultimate and irreversible solutions, the advent of the post-networked city is actually an emergent, systemic and controversial process, which remains to be invented. Nevertheless, we suggest that this process renews the ways in which we view how technology forges and remoulds urban society, whether within or beyond current efforts towards sustainable development. ❚

REFERENCES

Barles S., 2010, ‘Society, energy and materials: the Hughes T., 1983, Networks of Power: Electrifica- contribution of urban metabolism studies to sus- tion in Western Society, 1880-1930. London, Johns tainable urban development issues.’ Journal of Hopkins University Press. Environmental Planning and Management 53(4): Jaglin S., 2012, ‘Services en réseaux et villes afric- 439-455. aines : l’universalité par d’autres voies ?’ L’Espace Boucher-Hedenström F. and Rutherford J., 2010, Géographique 41: 51-67. ‘Services d’eau et d’assainissement et dispersion Rutherford J. and Coutard O., 2013, ‘Urban en- ‘urbaine’ dans le comté de Stockholm: politiques ergy transitions: places, processes and politics of locales, solutions techniques et implications socios- socio-technical change.’ Urban Studies. patiales.’ Flux 79-80: 54-68. Tarr J. and Dupuy G. Eds., 1988, Technology and the Coutard O. and Rutherford J., 2011, The rise of Rise of the Networked City in Europe and America. post-networked cities in Europe? Recombining in- Philadephia, Temple University Press. frastructural, ecological and urban transformations in low carbon transitions. H. Bulkeley, V. Castan Tarr J. and Konvitz J., 1981, Patterns in the Devel- Broto, M. Hodson and S. Marvin, Eds. Cities and opment of the Urban Infrastructure. H. Iette and Z. Low Carbon Transitions. London, Routledge: 107- Miller, Eds. American Urbanism. New York, Green- 125. wood Press. Dupuy G., 1991, L’Urbanisme des Réseaux: Théories et Méthodes. Paris, Armand Colin. Heynen N., Kaika M. and Swyngedouw E. Eds.,2006, In the Nature of Cities: Urban Political Ecology and the Politics of Urban Metabolism. London, Rout- ledge.

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Agri-food, innovation and sustainable development

he sustainable development of systems of production, processing and food distribution is a challenge for the twenty first century. Stéphane Fournier, The technical innovations of the green revolution (1960-1990) Researcher, and those of the agri-food sector, along with the associated Montpellier SupAgro, processes of economic concentration and the financialization of Montpellier, France agricultural and food sectors, have created an agro-industrial Marcelo model that has become dominant (or conventional) in Northern Champredonde, countries, and is undergoing strong expansion in Southern ones. Researcher, Université de Toulouse Le Mirail, This model, which is based on the rationale of mass supply, has Toulouse, France been able to ensure food security for a proportion of the world’s population, despite its rapid growth, but its limitations are clear. The model has led Tto the degradation, or even exhaustion, of natural resources, the impoverishment of farmers and massive rural exodus. It is thus becoming increasingly evident that other solutions and other forms of organization must affirm themselves to sustainably feed the nine billion people that will occupy the planet in 2050. This conclusion points to the reconsideration of so-called alternative systems, which in the North and South have existed alongside the development of the agro-industrial model (short supply chains, local products...), or have been developed or (re)defined relatively recently (organic farming, fair trade...). For a long time, these systems have been given little consideration because of their relative marginality (although this is much less true in recent times) and their inability to ‘feed the world’. It is now becoming increasingly accepted that a different type of agriculture would be able to supply enough food for the planet (the generalization of organic farming in particular, according to the FAO (2007),

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could meet global food demand). Some prospective studies have been carried out which consider two possible models of production and trade: the agro-industrial model and a model based on family farming and local networks (Rastoin, 2012). The latter appears viable and able to meet global food demand (Paillard, Treyer and Dorin, 2010). It has been suggested that the most likely option would be ‘the pursuit of a third scenario of coexistence between the two models’, and that this is necessary due to the inertia of the system and the lack of a strong political will (Rastoin, 2012). The coexistence of different models of production and trade has always been the rule for feeding different societies. In fact, alternative and conventional systems interact within the same meta-system (which we refer to here as the food system), in which they are interrelated, complementary and competitive in a process of co-evolution (Colonna et al., 2013; Fournier and Touzard, 2013): mm Interrelated, because at the different levels of the industry, from the producer to the consumer, there is a coexistence of various supply chains: farms and cooperatives, for example, which often sell their produce through different channels (short, conventional, certified...); and the same applies at the consumer level, where in most cases there is a diversification of supply sources (supermarkets, farmers’ markets, organic stores...). mm Complementary: the coexistence of these different types of food supply chains is an advantage for producers, who can diversify their incomes and strategies. For consumers, this coexistence also has advantages, including the ability to choose from a wider range of products. At the scale of food systems, this coexistence is valuable in terms of food security: the risks appear lower in the case where a city, region, etc. is supplied by a diverse range of food chains (Touzard and Temple, 2012). Similarly, conventional agriculture is not competitive in many rural areas (isolated areas, mountains...), where only production with high added value can be developed. mm Competitive and in a process of co-evolution: competition with the agro-industrial sector often leads alternative models towards progressive forms of ‘conventionalization’ (intensification, seeking economies of scale and lower costs). We emphasize here the influence that alternative models have on the agro-industrial model. Alternative supply chains provide an avenue for criticism of the agro-industrial model, and also an opportunity for experimenting with technical and organizational solutions that are often, once their viability has been demonstrated, integrated into the strategies of stakeholders in the dominant model. There are numerous examples of such integration, from organic farming and fair trade to short supply chains, all of which are now widely present in supermarkets. The conventional and alternative models are thus a constant influence on each other.

This conceptualization of food systems, based on different models interacting with each other, leads to a quite different understanding of alternative supply chains. Beyond the low market share percentage they represent, these supply chains are

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complementary to the agro-industrial system and have a strong ability to influence it; they are therefore of primary importance in the development trajectory of food systems. We therefore propose a new interpretation of the different organizational innovations that have transformed food systems in recent decades: sustainable standards (Fouilleux, 2012) and the revival of local supply chains (short and/or local, or the maintenance of a strong link between local production and consumers who are connoisseurs of these products). In both cases, we try to show the basis of their sustainability, the challenges these innovations are faced with due to competition with other models of production and trade within food systems, and the recombination of these systems that they cause.

Sustainable labels: the reaffirmation of ethical values, the fight against intensification and a strengthening of the capacity for collective action The coffee sector is proving to be a very relevant example for understanding the effects of sustainable standards. Coffee culture, which has globalized between the seventeenth and twentieth centuries, has played an important role in ecosystems: it is the only practicable culture in many steeply sloping mountainous areas in the tropics and it helps to protect the soil (provides resistance to erosion) and preserve biodiversity (fauna and flora) if practiced under shade. Its importance from a social and economic perspective has become equally essential: it currently sustains 125 million people and is a vital income source for more than 40 countries.

THE DEVELOPMENT OF AGRO-INDUSTRIAL SECTORS The sustainability of this sector began to be questioned during the twentieth century when a number of countries, including Brazil, began major deforestation programmes for the development of large plantations. From the 1960s, the green revolution also introduced new practices, that were more harmful to the environment, which gradually resulted in the replacement of traditional coffee growing: maximum productivity was sought in coffee growing zones located in direct sunlight through the heavy reliance on chemical inputs. This intensification also led to standardization: the most productive varieties spread globally and crop management techniques were homogenized, both at the agricultural and the post-harvest levels, while regional specificities were no longer enhanced. International trade increased during the nineteenth and twentieth centuries. This globalization did not go smoothly. While the growth in demand occurred at a relatively steady pace, it was not the same for the supply, which was subject to considerable fluctuations due to weather conditions. Crises of overproduction tended to follow periods of shortage. The resulting price instability was problematic for producers. In the 1930s, solutions were sought at the national level in producing countries (stabilization funds, marketing boards...), and then internationally (international coffee agreement, signed in 1962 by producer and consumer countries,

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FIGURE 1 Non-sustainability of the agro-industrial model in the coffee sector

which remained in force until 1989), although this did not seem to be sufficient to stabilize prices (Daviron and Ponte, 2005). Another factor was added to price instability, threatening the sector’s sustainability: the share of the price paid by the final consumer (in importing countries) that went to the producer was decreasing significantly. There are various reasons behind this development and the strong horizontal concentration of the industry at the coffee roaster level is often cited as one of the main ones.1 However, accompanying this trend has been a major process of sectoral development: symbolic attributes have gradually become more important than the intrinsic quality of the coffee (Daviron and Ponte, 2005). Through global sourcing and the necessary skills to create coffee brands with specific and stabilized flavour profiles, and an active and expensive marketing strategy, large downstream groups in the sector have been able to appropriate these symbolic attributes and have taken up a dominant position, allowing them to exert constant pressure on producer prices, whose green coffee has become a commodity. During periods of low prices, the only choice for growers is to increase production (by using more chemical inputs) or to abandon production

1. Five multinationals hold almost half of the market share globally: Nestlé, Philip Morris/Kraft, Tchibo, Procter and Gamble, Sara Lee/Douwe Egberts.

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FIGURE 2 Virtuous circle of sustainable labels

altogether, which is not beneficial considering the environmental services derived from this type of cultivation. There is, however, another way. Shaded coffee plantations and more qualita- tive practices produce a crop with superior organoleptic qualities that exhibit their specific terroir, i.e. flavour profiles typically associated with a certain region that are appreciated by connoisseurs. These shaded plantations can significantly reduce input use and promote the maintenance of biodiversity. There is therefore a strong link between organoleptic and environmental quality, a systemic dimension of sustainability: the guarantee of remunerative markets is an essential condition for growers to make the necessary investments in the development of these new practices. A virtuous circle of sustainability can be put in place: better remuneration for growers, greener practices, better quality coffee, etc. This virtuous circle, however, has to cope with the supply chains that are currently in place: without certainty on the possibilities of economically enhancing sustainable production, growers cannot easily develop.

EMERGENCE OF SUSTAINABLE LABELS Different actors have attempted to overcome the status quo and to change the way the sector functions. Since the 1970s, fair trade coffee initiatives have multiplied,

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ensuring that consumers in Northern countries fairly remunerate producers. In the late 1980s, there was an evolution in fair trade with the appearance of labels. Various national initiatives, now gathered within Fairtrade International (FLO), provided an opportunity for coffee roasters to sell certified products, offering a guarantee to consumers that producers would be fairly paid. The certification of producers requires them to gather into cooperatives, which allows local development processes in production areas. Environmental protection is also sought, with environmental standards for all certified production. As a result, a new sustainability scheme was put in place. A label, which guarantees fair remuneration for producers, the improvement of their capacity for collective action and environmental protection, and which also helps educate consumers, to retain their custom through the supply of quality products, and thus to sustain the industry.

THE REACTIONS OF MACRO ACTORS Alongside the organic and fair trade labels, new labels quickly appeared (Utz certified, Rainforest Alliance...), and the certified coffee market grew. There has been a two-stage reaction from the large coffee roasting (and distribution) companies. First, a majority of these companies tended to create their own specifications and labels and to undertake communication strategies that best demonstrated their corporate responsibility. Starbucks provides probably the most emblematic example of this trend, with its Coffee And Farmer Equity (CAFE) Practices, which were developed in the late 1990s with the NGO Conservation Inter- national. These specifications gave an assurance to consumers that the company was taking economic, social and environmental dimensions into account. Other companies have also developed their own specifications, such as the Common Code for the Coffee Community (4C), which was created in 2003. A recent trend is for these large companies to develop specific alliances with individual labels. At the same time, supermarkets tend to systematically introduce these sustainable coffees onto their shelves, which has enabled the growth in demand to be maintained. The fact that multinational companies (roasters and distributors) entered into the world of sustainable labels has had multiple consequences: firstly, there was a change of scale, the leading labelling organizations and certification bodies had to cope with increasing volumes. Undeniably, the increase in the market share of certified coffees had a positive impact on the overall sustainability of the sector, although the ‘professionalization’ of certified channels that followed has been subject to some criticism regarding the conventionalization of business practices within the labelled channels. Competition between labels has also increased, a situation that was initially viewed as potentially positive: the most transparent, persuasive and demanding label would win the votes of consumers, assert itself and encourage others to increase the strin- gency of their requirements. However, the structure of the coffee industry is such

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that consumer choices tend to be driven by the prior decisions of large roasters. And roasters may move towards labels that are the most compatible with the requirements of economic efficiency, and not to those that provide the highest standards, which would have the most significant impact on costs. An increasing tension has therefore emerged between the less demanding labels and those that have maintained more progressive objectives, while market forces have seemed to reinforce the former. This has led to some authors calling for stronger state intervention, as it appears to be the only way of ensuring minimum requirement levels for labels (Raynolds et al., 2007).

RESULTS The scaling up of certified channels, a long sought objective by their promoters, has now occurred. Certified coffee as a whole already accounted for 8% of world trade in green coffee in 2009, but forecasts on the basis of the average annual growth rate achieved over the period 2006-2009 are of the order of 20% to 25% per year (in comparison, the conventional coffee market was only growing by 2% per year), leading to the estimation that they could represent 25% of the market share in 2015 (Pierrot et al., 2011). These figures could suffice to demonstrate the success of such initiatives, but the various criticisms mentioned above (possible conventionalization and impact reduction) raise some doubts. Scaling up has necessitated an adaptation to agro- industrial practices. However, the great upheaval caused by the introduction of these standards into the coffee sector is an indication of their importance: giving consumers the ability to express their preferences for more sustainable production and trade systems, and thus to influence the practices and strategies of those involved, these standards have played a vital role in the process of strengthening the sustainability of long supply chains such as the coffee sector. Their development has focused consumer attention on the modes of production and their impacts or on the remuneration of producers, for example, and has coerced the macro actors into incorporating these sustainable standards into their strategies, and to communicate on these different aspects for an increasing number of products in their ranges. Nevertheless, it is often stressed that these sustainable labels are currently at a crossroads. If we maintain that their incorporation into the strategies of actors from the dominant model can be seen as an element of success of the initial project, there are clearly some significant risks. The big players can indeed, as we have seen, seek to reduce the constraints imposed by these sustainable standards, thereby reducing the impacts on farming communities. These initiatives can then be confined to a niche market, serving as a safety net for populations that have been marginalized by the dominant system and as a means of minimizing the environmental impact within an agro-industrial model that, in this case, they would complement (Daviron, 2010; Lemay et al., 2010). It is indeed unlikely that they could represent the entire agro- industrial sector, even in the medium term, at least if there are no major political changes in the rules of international trade. However, it is also possible that these

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sustainable standards could continue to be a force for change and, probably through new innovations, demonstrate that it is possible to achieve success in the building of sustainable supply chains. One of the main contributions of sustainable standards is therefore to have increased the information given to consumers, thus progressively raising their awareness of modes of production. Other models of production and trade, recently boosted by various innovations, can help to establish stronger links between consumers and producers.

A return to local: territorial anchorage and the reconnection of consumers and producers The return to local production appears as another important innovation in food systems. For many consumers, it is a guarantee of greater sustainability, it allows the sourcing of quality products while helping to maintain local agriculture, or more distant agriculture but that which respects traditional modes of production. The consumer desire for a return to a focus on the local level has resulted in two distinct paths, but ones that follow the same rationale, a reconnection with farmers.

PATTERNS OF LOCAL OR LOCALIZED PRODUCTION AND TRADE The first path concerns local systems (of production and trade), and consists of multiple initiatives to enable the maintenance of a traditional (or peasant) agriculture through the enhancement of short supply chains2. While these chains have always existed, and even remained dominant in many Southern countries, different actors (consumers, producers, agricultural and rural development agencies, local authorities...) have sought to reinvigorate them, mainly in Northern countries. Their motivations are twofold: to improve the economic situation of (small) producers, and to reduce the environmental impact of food systems through the limitation of transportation. A number of organizational innovations have thus been introduced to meet the varied expectations and procurement practices of consumers, leading to a wide variety of short supply chains (direct sales, farmers’ markets, AMAP (French model of community-supported agriculture), box schemes, online selling...) (Chiffoleau, 2008). The second path that has led to the reconsideration of the local level involves an increased focus on the terroir of products (systems that can be described as localized), marketed through chains of varying lengths. In almost all regions of the world, specific know-how (agricultural or agri-food related) has been developed over the long term by farming communities, allowing the valorization of local natural resources. In many cases, these local techniques have enabled the creation of local produce with a territorial character (Casabianca et al., 2008). The sustainability of local production is based on several factors, but a major element differentiates

2. Defined here as short supply chains that consist of no more than one intermediary between the producer and the consumer, in accordance with the definition given by the French Ministry of Agriculture in 2009.

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this type of production from the agro-industrial model: the identity and symbolic value of products. On the producer side, the role of terroir products in the local cultural heritage can thus be seen as an obstacle to possible intensification, which would distort these products. On the consumer side, it creates a willingness to pay. This renewed attention on local produce does not necessarily constitute a recent innovation in European countries, where Geographical Indications (GI) have offered protection since the beginning of the twentieth century; but on the global scale, and more specifically in Southern countries, this movement truly established itself during the last decade.3 Two Argentinian case studies enable the better understanding of the basis of sustainability offered by this type of production system, but also the potential threats that they face.

SALAMI FROM COLONIA CAROYA (ARGENTINA): THE RISK OF SCALING UP The town of Colonia Caroya, in the Province of Córdoba (Argentina), was founded by Italian immigrants in the late nineteenth century. These migrants came from Italy’s Friuli region, where there is an important charcuterie tradition (cooked meats and pork products). They built their homes on the same model as in Italy, with a cellar (sótano) dedicated to the drying of cured meats; and they developed a method of salami production, initially only for their own consumption. The immigrants adapted their expertise to suit the local resources: while Friuli salami is based only on pork, the Colonia Caroya variation can consist of up to 50% beef. Production was traditionally on a domestic, small volume scale: a family working with neighbours and friends would butcher and process two or three pigs and perhaps a single cow from the same farm. Maintaining the quality and typicality of the salami was guaranteed by the strong proximity that existed within the restricted circles of producers and consumers. From the 1950s, however, production started to become more market orientated. Salami producers took advantage of their proximity to a major road (going through Argentina from north to south), where they could sell their products by the roadside, leading to a greater distribution of the salami across the country. While the reputation of the gringo4 salami from Colonia Caroya grew steadily, its domestic scale of production remained unchanged for several years. By the late 1970s, however, several local stakeholders had moved into larger scale production, focusing on the national market. This commercial salami production boomed throughout the 1980s and 1990s, with various consequences. First, a disconnection between producers and consumers emerged, with salamis being sold to consumers via increasingly long (and intermediated) supply chains. In this way, consumers became less able to recognize the quality and uniqueness of the product. This development opened up a window for the introduction of technical innovations

3. The signing of agreements on Trade Related Intellectual Property Rights (TRIPS) in 1994 within the World Trade Organization, marks the beginning of this process. 4. Nickname given to the Italians and their first descendants in Argentina.

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to meet the growing demand, such as the replacement of traditional sótanos (cellars) with cold rooms allowing the drying of much larger volumes of salami, together with the introduction of plant proteins and starter bacteria to reduce the drying time. The opening in the domestic market and the increasing demand have therefore caused a loss in the product’s uniqueness, that could in the short term question the sustainability of the production system (which is based on the acceptance of the consumer to pay more). The product faced increasing competition with the production of salami from other regions (which sometimes assume the identity of the Colonia Caroya salami), which has prompted some local businesses to continue their strategy of intensification and industrialization. A strong horizontal concentration has resulted, three companies (out of 30) account for 58% of the total production (Boué, 2012). Since 2008, a GI registration project has been in existence for the salami, the benefits of which can be significant as it enables consumers to identify typical products on the market, which can help sustain small-scale producers that have retained traditional techniques (Boué and Champredonde, 2013).

BEEF FROM THE ARGENTINE PAMPAS: WHEN SUPERMARKETS CHALLENGE TRADITIONAL BREEDING The beef from the Pampas region of Argentina has a high reputation in domestic and international markets. Its specific qualities are associated with grassland production systems, the expertise of gauchos (farmers) and with British cattle breeds, Aberdeen Angus and Hereford. Production involves such practices as the fattening of castrated cattle and heifers on grass and their slaughter at an early age (15-20 months) and at light net weight. The resulting meat is not only tender, succulent and well marbled, but also has a good balance of unsaturated and saturated fats. Traditionally, these products are offered to consumers through short channels (direct sales or via butchers) and a certain amount of expertise exists at the consumer level to assess the quality of the meat. This type of agriculture contributes to the preservation of the environment (ensuring the renewal of nitrogen in the soil to maintain fertility and thus allowing the minimization of fertilizer use), and the maintenance of biodiversity (wild fauna and flora), while having a positive impact on human health. This traditional mode of production was relatively stable until the 2000s. There- after, it was challenged by the rise of farming activities, including the cultivation of soybeans, the increase in the size and level of intermediation chains, and finally by the changing demands of consumers: by aiming to provide customers with a guarantee of meat tenderness, rather than its typicality, supermarkets have offered higher prices for cattle fed in feedlots, or that have been fed significant amounts of supplements (silage, grain or industrial supplements). A reduction of consumer knowledge, initiated by the development of long supply chains, has worsened with the development of supermarket quality criteria. The traditional Argentine Pampas beef production system owes its preservation mainly to the existence of independent butchers who only offer beef from pastoral systems and are able, if asked, to describe the meat’s origin to the consumer. A

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FIGURE 3 Sustainability of local products

possible GI certification system is currently under consideration, but it seems that the extra costs such a scheme would entail is incompatible with consumer expectations, given the current awareness of the differences induced by the various farming methods. Short supply chains allow traditionally farmed produce to be sold at similar prices to those of intensively reared supermarket-sold meat.

RESULTS: MODEL SUSTAINABILITY AND DEVELOPMENT TRAJECTORIES These examples clearly demonstrate firstly the ability of local or localized production to build special relationships between producers and consumers. The initial connections that exist between these actors give consumers a certain level of knowledge about producers or production areas, their possible constraints and the techniques used; and strengthens their propensity to buy these local products at a higher price. This price premium may be the guarantor of the maintenance of good quality agricultural and processing practices that preserve the environment and biodiversity. The sustainability of these traditional supply chains thus appears guaranteed. This type of supply chain, however, is facing multiple threats. Scaling up often proves problematic, as illustrated by the example of the Colonia Caroya salami. It can lead to a form of conventionalization. But ultimately, it is confrontation and competition with other forms of production, which are more agribusiness-like, which

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calls into question the sustainability of these traditional systems, as also seen from the example of beef from the Argentine Pampas. The examples discussed here show the value that innovations such as the ones mentioned above can deliver: in this process of confrontation between models or production modes, it is innovations such as short supply chains or geographical indications which may help maintain these systems. These local or localized industries always appear relatively marginal when the entire food distribution system is considered as a whole, at least in the North. However, they involve a large number of small farmers5, for whom they provide a livelihood. And, in the same way as the aforementioned sustainable labels, they have a strong ability to influence the entire food system, their recent (re)development having sparked a whole movement, where many actors are now promoting their products with information such as geographical origin and even the identity of producers.

Conclusion The agro-industrial model has created a distancing of producers and consumers that is economic (due to intermediation between industries), physical (linked to urbanization) and cognitive (the technicization of agriculture and the agri-food industry has made knowledge of techniques less accessible to consumers). This distancing on three counts has led to a disconnection, making consumers much less aware of agricultural developments and encouraging them to seek food at the lowest possible price. In turn, those involved in the supply chain have sought to develop economies of scale and implement technological innovations to reduce production costs, sometimes at the expense of product quality. This approach has significantly strengthened downstream sectors and impacts heavily on the ability of farmers to maintain environmentally friendly practices, since optimum performance is instead the main objective. Faced with this development, different organizational innovations have proven their ability to reconnect producers and consumers, and in so doing, to give new meaning to food (Marsden et al., 2000). The first such innovations, described in the first part of this paper, are sustainable labels that provide information and assurances to consumers on modes of production and/or trade at the early stages of the chain. A second innovation, which was the subject of the second part of this article, represents a higher level of (re)connection between consumers and producers through direct or very weakly intermediated relationships, and/or guarantees about the production area and techniques (use of GI). These alternative systems ensure greater sustainability. They represent, despite the limitations mentioned above, another model of production and exchange, which is opposed to the agro-industrial model in many ways:

5. For example, it is estimated that 18% of French farms sell at least part of their production via short supply chains, according to the General Agricultural Census of 2010.

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mm Product standardization is an essential aspect of the agro-industrial model to enable large-scale production and a globalized trade, while alternative systems enhance the typicality of local production. mm This allows these alternative systems to open new areas of growth, since economic efficiency is not based on economies of scale, but on the valorization of specific attributes. mm The agro-industrial model encourages the competitiveness of farms and agribusi- nesses at the individual level, alternative models as a whole promote instead the search for a collective efficacy within a localized network. mm The role of consumers is very different in the agro-industrial model, in which the price factor coordinates all exchanges, as compared to alternative models, in which the values of identity, ethics and citizenship are involved.

Alternative supply chains thus have the ability to fulfil the functions for which the agro-industrial model is insufficient, such as the valorization of agricultural land in marginalized regions. More generally, controversies persist as to their ability to feed the world, but they often prove necessary to market the products of small farms6, and thus involve a large number of farmers. There are limitations however. In the examples presented here, competition for these alternative supply chains has sometimes created a form of conventionalization. Labelled supply chains can also be a source of exclusion and do not always create the territorial development processes expected in the production areas. It should also be noted that some studies have not confirmed whether short supply chains do in fact have smaller environmental footprints in all cases (because transport accounts for a small proportion of greenhouse gas emissions in food production, while the last kilometre, i.e. the distance the consumer travels to shop for food, is more significant) (Esnouf et al., 2011). Doubts are also raised regarding the economic profitability of farms that sell through such supply channels when the hourly wages of farmers is brought into the analysis. These limitations may still be largely attributed to the persistent confrontation between alternative supply chains and the agro-industrial approach. The alternative models also strongly influence the agro-industrial system, and are able to trigger change in all food systems. They promote consumer awareness to the issues of food sustainability, which is then disseminated by the media and seems to spread at the societal level. Ultimately, they serve to obligate actors in the agro-industrial system to review their strategies. The diversity of models within food systems thus strengthens their capacity for innovation and adaptation. In this respect, they must be protected and promoted by public authorities. Organizational innovations within systems that are now considered as alternative therefore play an important role in the modification of the dominant food systems,

6. The number of small farmers (defined as those who farm areas of less than 2 hectares) is estimated to be 500 million in developing countries (HLPE, 2013).

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even though they remain marginal. However, there is a possibility that this marginality will not persist. The dominance of the agro-industrial model derives from its ability to provide food at very competitive prices, but once we take into account and monetize its negative externalities, this competitiveness is called into question. In addition, the agro-industrial model relies heavily on the availability of fossil fuels; and their depletion will eventually cause a total reshuffle. ❚

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REFERENCES

Boué E., 2012, La filière du salame de Colonia Caroya: Fournier S. and Touzard J.-M., 2013, Syal et glo- Quelles perspectives pour la mise en place d’une In- balisation: quelle valeur heuristique de l’approche dication Géographiques? Thesis presented in view Syal pour appréhender la complexité des systèmes to obtain a Masters degree in Food Identity, E.S.A. alimentaires ? Communication presented at the Angers, France, 111 p. fifth International conference on localized agri- Boué E. and Champredonde M., 2013, Caracteri- food system, UFSC/Cirad, 21-25 May 2013, Flori- zación de la puesta en mercado del salame de colo- anópolis, Brazil. nia caroya en el contexto de la construcción de una HLPE, 2013, Investing in smallholder agriculture for indicación geográfica como motor de desarrollo. food security. A report by the High Level Panel of In: Urbano B., Researches in Sustainability and Food Experts on Food Security and Nutrition of the Com- Safety for the Development, Ed. Agencia Internac- mittee on World Food Security, Rome, 112 p. ional Española de Cooperación para el Desarrollo, Lemay J.-F., Favreau L. and Maldidier C., 2010, Universidad de Valladolid, Spain. (to be published) Commerce équitable. Les défis de la solidarité dans Casabianca F., Sylvander B., Noël Y., Béranger C., les échanges internationaux. Presses de l’Université Coulon J.B. and Roncin F., 2008, Terroir et typi- du Québec, Collection Initiatives, 170 p. cité: deux concepts-clés des appellations d’origine Marsden T., Banks J. and Bristow G., 2000, Food contrôlées. Essai de définitions scientifiques et Supply Chain Approaches: Exploring their Role in opérationnelles. In: Sylvander B., Casabianca F., Rural Development. Sociologia Ruralis, 40(4): 424- Coulon J.B. Roncin F. (eds). Produits agricoles et 438. alimentaires d’origine: enjeux et acquis scientifiques. Inra / Inao, Paris: INRA Editions, pp. 199-213. Paillard S., Treyer S. and Dorin B. (eds.), 2010, Agrimonde, Scenarios and Challenges for Feeding the Champredonde M., and Perez Centeno M., 2010, World in 2050. Quae, Versailles: 296 p. Quand une Indication Géographique devient un outil de promotion du développement local: le cas Perez Centeno M., 2007, Transformations des stra- du Chivito Criollo del Norte Neuquino en Argentine, tégies sociales et productives des éleveurs transhu- In: Proceedings of the International Seminar ‘Spa- mants de la province de Neuquén et de leurs rela- tial Dynamics in Agri-food Systems’, 27-30 October tions avec les interventions de développement, PhD 2010, Parma (Italy), 8 p. Thesis, University of Toulouse Le Mirail, France, 308 p. Chiffoleau Y., 2008, Les circuits courts de commer- cialisation en agriculture: diversité et enjeux pour Pierrot J., Giovanucci D. and Kasterine A., 2011, le développement durable. In: Marechal G. (dir.), Trends in the trade of certified coffees. ITC, Technical Les circuits courts alimentaires. Dijon: Educagri Edi- Paper, Doc. No. MAR-11-197.E tions, pp. 21-30. Rastoin J.-L., 2012, The agri-food industry at the Colonna P., Fournier S. and Touzard J.-M., 2013, heart of the global food system. In: Jacquet P., Food Systems. In: Esnouf C., Russel M. et Bricas N. Pachauri R., Tubiana L. (dir.), A Planet for Life 2012: (coord) Food System Sustainability – Insights from Development, the environment and food: towards ag- duALIne, Cambridge University Press, pp. 69-100. ricultural change? Coll. A Planet for Life, TERI Press, pp.183-194. Daviron B. and Ponte S., 2005, The Coffee Paradox: Global Markets, Commodity Trade and the Elusive Raynolds L. T., Murray D. and Heller A., 2007, Promise of Development. London: Zed Book, 295 p. Regulating sustainability in the coffee sector: a comparative analysis of third-party environmental Daviron B., 2010, Le commerce équitable, à la croi- and social certification initiatives.Agriculture and sée des chemins. Cahiers Agriculture, vol. 19, spe- Human Values 24(2): 147-163. cial issue 1, March 2010, pp. 3-4. Touzard J. M. and Temple L., 2012, Sécurisation Esnouf C., Russel M. and Bricas N. (coord), 2011, alimentaire et innovations dans l’agriculture et Pour une alimentation durable – Réflexion stra- l’agroalimentaire: vers un nouvel agenda de re- tégique duALIne, Versailles: Editions Quae, 245 p. cherche? Une revue de la littérature. Cahiers Agri- FAO, 2007, Report of the international conference on cultures, 21(5): 293-301. organic agriculture and food security. Rome, 3-5 May 2007, OFS/2007/REP, 14 p. Fouilleux E., 2012, ‘Sustainable voluntary standards: towards privatized regulation in the food and farm sector?’, In: Jacquet P., Pachauri R., Tubiana L. (dir.), A Planet for Life 2012: Development, the environment and food: towards agricultural change? Coll. A Planet for Life, TERI Press, pp.215-225.

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CHAPTER 6 Innovation in agriculture: fields of alliances and controversies

Frédéric Goulet, CIRAD, UMR Innovation, posted at INTA (National Institute of Agricultural Technologies), Agriterris International Laboratory, Buenos Aires, Argentina

n agriculture as in other sectors, innovation has examination of the dynamics around technical innova- become a standard concept that mobilizes a wide tion reveals more complex trajectories, critical positions range of actors. Innovation is seen as a key that could and controversies. Innovations in the fields of production unlock the door to an economically, environmentally and agricultural practices are thereby instructive because and socially sustainable form of agriculture. For the they enable the friction between the different categories Ivarious mobilized actors and the institutions that represent of aforementioned actors, who are however united in them, it is also however a tool that enables them to envis- their need to innovate, to be taken into consideration. But age their own future, to legitimize and sustain themselves. beyond this, a deeper analysis of these categories enables Thus, if we believe the pronouncements, the agriculture us to question their unity, which de facto examines the of tomorrow cannot happen without agronomic research displayed consensus on innovation. Indeed, innovation is institutions and their academic forces; and neither can it not only about uniting, associating, linking and creating happen without the support of the agricultural develop- synergies: very often, as emphasized by Schumpeter ment services present in rural areas at the interface with (1911), it also involves destroying, dividing and criticizing. farmers. The capacity of these institutions to innovate and to develop new technical systems is claimed to represent Critical activity and tensions between farmers and the seeds of future agriculture, and the same is true for agronomic research the upstream industries that would be called on to play Crop and animal production systems have provided a central role in the development of more environmen- many examples of technological innovations that have tally friendly inputs, overcoming the scarcity of natural shaken up the agricultural world and its ever-growing resources and enabling the coming global food challenge intersections with a society that is eager to re-appropriate to be met. Ultimately, at a time when it is such a hot topic, agricultural, food and rural issues. The debate is usually it is as if innovation has taken on the meaning of carrying organized around a critique of the impact of technology on on with the same actors, so that they all continue to exist, the environment, consumer health or even on the future of with the proviso that things will be done (slightly) differ- rural areas. Genetically modified organisms have probably ently. There are very few actors, or perhaps even none, represented, and still do today, the richest example in for whom real innovation is an objective that would make terms of twists and turns and controversies, causing themselves obsolete. This perspective not only opposes mobilizations in favour of more controlled experiments innovation in its etymological sense of introducing some- (De Raymond, 2010) and a strong polarization within the thing new; but the refusal to change, to strive to keep scientific community (Bonneuil, 2006). things the way they are, could be regarded as provocation, However, other innovations have recently hit the or at least as a very bad strategy. headlines that have triggered, in particular, the mobiliza- Yet beneath the unisonous discourse, a thorough tion of farmers around the definition of technical models for

A PLANET FOR LIFE 117 sustainable agriculture. This mobilization has been based Agronomic Research for Development (CIRAD) with experi- on, notably, a strong criticism of research and devel- ence in the development of these systems in the tropics, opment institutions, denouncing the capability of their and from former INRA microbiologists. The pioneer groups work, conducted in laboratories and research centres, to used the work of these actors as the basis for their defence consider, assess or valorize innovations made by farmers of the environmental record of no-till, particularly in terms on farms. The dynamics concerning crop breeding on the of the physical and biological benefits to soil quality, at a farm (Demeulenaere and Bonneuil, 2011), grassland livestock time when the agricultural profession was under intense systems (Hassanein, 1999) or the techniques of no-till/direct criticism for its environmental impact. seeding1 have been instructive on this matter. The latter In the early 2000s, given the limited amount of avail- case, in which area the author has a particular involve- able knowledge on these techniques, French research ment (Goulet, 2008), indeed enables us to gain a better and development institutions implemented cropping understanding of the tensions and frustrations, but also the trials at agricultural experiment stations to measure their alliances, that have developed in the early 2000s between agronomic and environmental effects. The objective was ‘conventional’ farmers and agricultural research. Since the to take stock of this innovation during a period when it mid-2000s, this area has also witnessed the development was becoming increasingly popular with growers, some of a list of arguments around the desired and desirable of whom had turned out to be real advocates of no-till agricultural models, amid the environmental crisis inher- and gathered within associations such as the National ited from the productivist model and the recent return of Foundation for Agriculture Soil Conservation (FNACS) and world hunger, which has been raised as a global public the Breton Biodiversity, Agriculture, Soil and Environmental health problem. (BASE) group. A lively debate then broke out between these organizations and the research and development Agricultural research and its relation to the ‘real institutions when the latter published measurements of world’ the effects of no-till in terms of carbon storage, erosion The development of direct seeding techniques in France and soil quality. The trial results showed that the benefits from the late 1990s has followed a path of user-developed were far below those expected by the promoters of no-till, bottom-up innovations (Akrich, 1998; Von Hippel, 2005): especially those measured in South America and France groups of farmers, supported mostly by agricultural supply by the aforementioned scientists. The critical reaction companies selling farm machinery (including direct seeding was particularly targeted against the nature of the tests drills), fertilizers and herbicides, have developed cropping conducted at the experiment stations and the methods systems based on no-tillage and cover crops. This innova- employed. Detractors claimed that the cropping systems tion can be classified as bottom-up because most of its evaluated by the French institutions were unrepresentative development has taken place at the margins of the ‘official’ of the reality of no-till as practiced by farmers in France institutions of agricultural research and development, and elsewhere in the world: the trial plots were subject which for the French arable sector include: the National to shallow soil tillage, the crop rotation used meant that Institute for Agricultural Research (INRA), Arvalis and the the soil was left bare in winter and the plots did not have French Chambers of Agriculture. Some groups, however, a sufficient number of years of no-till. In short, no-till have received direct support from scientific actors at the proponents argued that research conducted at public ‘periphery’ of French agronomic research, such as: agron- institutions was unrepresentative of real-life direct seeding omists from the Centre for International Cooperation in systems, and the controversy centred on the ability, or inability, of agricultural experiment stations and laboratories to accurately represent reality. Supported by their 1. Cultivation techniques used in cereal production that avoid scientific allies, no-till advocates and practitioners then disturbing the soil through tillage and that depend instead on the use of non-selective herbicides such as glyphosate. responded in the form of their own experimentation: based

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FIGURE 1 The expansion of no-till farming, a network issue

Exchanges between researchers from Brazil, Argentina and France have initiated a network for the expansion of the no-till farming technique throughout the world. on measurements carried out in the fields of pioneer attention on the clinical practice of agronomy and soil farmers. The results obtained, which were far more in sciences for real-world development. It is the controver- favour of no-till than those issued by the research and sies surrounding the environmental assessment of no-till, development institutions, gave credence to the idea that more so than the mere friction that exists between lay laboratories and research stations do not provide accurate people and research and development institutions, that representations of the real world, in this case that of have enabled the various tensions to be taken into account, farmers and their farms. including those within agronomic sciences itself and those This criticism of experimental science does not, however, derived from the way research is practiced, its objectives only stem from farmers who feel neglected by agricultural and the relationships that it must maintain with the farming research and who seek recognition for their own work on community and society as a whole. the development of innovative technical systems. It also comes from those in the academic world, or its periphery, Arguing, qualifying and disqualifying: innovation who are associated with farmers. Whether these are the and the polarization of actors voices of CIRAD researchers, former INRA employees or Such controversies therefore provide insights into the retired academics, they all express disappointment that tensions that cross the social spaces of dedicated profes- their engagement with farmers in relation to agronomic sional groups, but also into the ways in which, during the research is no longer at the service of farmers, but that moments of displacement and uncertainty associated with they have become confined to laboratories and working innovation processes, the arguments are constructed in the with computer models, which has resulted in a lack of defence of one practice out of a group of several possible

A PLANET FOR LIFE 119 ones. Returning to the example of no-till, we can indeed see in terms of what they are, but especially in terms of what that the actors involved use two distinct methods to defend they are not and what they do not or no longer want to their positions. The first is to argue in a very positive way for be. For example, the no-till practitioner no longer wants the benefits offered by these practices, particularly through to be considered as a farmer who degrades soils, while the previously mentioned experiments. The second method, organic farmers do not want to be associated with pesti- which is even more important because it is a central area cides that are detrimental to the environment, their health of rhetoric that is ultimately little explored, consists of the and the health of consumers. This list of arguments is also development of an implied argument that disqualifies the shared by the above mentioned actors of research who, ability of competing or opposing models to address the as we have seen, ground their assertions by distancing challenges of society. Thus, for example, advocates of themselves from colleagues who they consider to be no-till cast doubt, despite recognizing certain assets, on dependent on mathematical models, publication require- the ability of organic farming to meet what they consider ments and, more broadly, who are cut off from reality and to be priority issues, such as soil conservation in particular, the problems of farmers. The importance of these detach- because organic farming prohibits the use of synthetic ments should therefore be considered in the innovation herbicides and therefore relies on the frequent working process and in the regimes of controversy, because the of soil for weed control. They also question the ability of definitions of good ways of doing things are often formed organic farming to maintain high production levels and by the qualification and problematization of the bad ways thus to ‘feed the world’, an issue that has been particularly of doing things. prominent since the early 2000s as world food security has Technical innovations and the controversies they (once again) become a key issue (Maye and Kirwan, 2012) generate lead to a consideration of the tensions that within the discourses of agricultural research, politics and develop between the different categories of actors in some sections of the French agricultural profession (Goulet, the agricultural worlds, and also within these categories. 2012). In return the supporters of organic farming have While innovation is a motto behind which a large range of tended to criticize the systematic use of herbicides in no-till actors can stand together, on a discursive level at least, the and the contribution of the technique to the extension of examination of the practical mechanisms through which it latifundia worldwide, an agricultural system which for the takes shape instead invites us to consider the debates and last twenty years or so has been facilitating the concen- deconstructions that accompany innovation. It is therefore tration of land in South America for intensive soybean a subject of interest for the social sciences in their work cultivation involving a reduced number of producers and on understanding the forms of organization of the social businesses (Bertrand, 2004). world and their transformations. Thus, these controversies are more than simply a debate about the intrinsic value of innovation, they encompass the REFERENCES criteria for the definition of a good farmer and his or her Akrich M., 1998, Les utilisateurs, acteurs de l’innovation. Edu- ability to address the mandate set by society as defined cation Permanente, (134): 78-89. Bernard de Raymond A., 2010, Les mobilisations autour des ucher trauss by the sociology of professions (B and S , 1961); OGM en France, une histoire politique (1987-2008). in Her- more generally, they also include the contours of agricul- vieu, B., Mayer, N., Muller, P., Purseigle, F. et Rémy, J. (éd.) tural development models that are considered fair and (2010). Les mondes agricoles en politique, Paris, Presses de Sci- ences Po, p. 293-335. useful for farmers and society as a whole. Controversies, Bertrand J.-P., 2004, L’avancée fulgurante du complexe soja and the innovations that cause them, thus take shape dans le Mato Grosso: facteurs clés et limites prévisibles, Revue and evolve with the process of attachment and detach- Tiers Monde,179, 567-594. Bonneuil C., 2006, Cultures épistémiques et engagement des ment (Goulet, Vinck, 2012), defining the desirable forms chercheurs dans la controverse OGM, Natures Sciences Société, - and non-desirable ones - of agricultural activity. Actors 14 (3), 257-268. define their activities, practices, identities and affiliations

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Bucher A.L. and Strauss A. ,1961, Professions in process, Amer- Hassanein N., 1999, Changing the Way America Farms: Knowl- ican Journal of Sociology, 66 (4), 325-334. edge and Community in the Sustainable Agriculture Movement. Demeulenaere E. and Bonneuil C., 2011, Des semences en Lincoln, University of Nebraska Press. partage. Construction sociale et identitaire d’un collectif ’pay- Maye D. and Kirwan J., 2012, Food security: a fractured consen- san’ autour de pratiques semencières alternatives, Techniques sus, Journal of Rural Studies, 29 (1), 1-6. & Culture, 57 (2), 202-221. Schumpeter J., 1911/1961, The Theory of Economic Develop- Goulet F., 2008, Des tensions épistémiques et professionnelles ment. An Inquiry into Profits, Capital, Credit, Interest, and the en agriculture. Revue d’Anthropologie des Connaissances, 2(4), Business Cycle. Oxford, Oxford University Press. 291-310. Von Hippel E., 2005, Democratizing Innovation. Cambridge, MA: Goulet F., 2012, La notion d’intensification écologique et son MIT Press. succès auprès d’un certain monde agricole français: une radi- ographie critique, Le Courrier de l’Environnement de l’Inra, 62, 19-30. Goulet F. and Vinck D., 2012, Innovation through withdrawal. Contribution to a sociology of detachment. Revue Française de Sociologie (ENGLISH) 53 (2),117-146..

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Are sustainable consumption modes emerging?

nnovation is a word more often used in connection to technology, engineering Alison and medicine than to the social, cultural or psychological worlds, and yet, Armstrong, even if the changes in these areas are a collective evolution rather than the Psychology PhD, ‘Present Minds’, pioneering work of a small number of elite workers, innovation nonethe- London, UK less occurs. The kind of innovation discussed here is that which is evolving to address one of the problems with the society and culture of much of the global North: hyper-consumption. Much of this innovation centres on lowering absolute individual consumption levels, in other words the degrowth of material throughput. Of course, we must consume to live in physiological and psychological health, and there is no suggestion here to the contrary. Consumption is also a neces- Isary part of the formation of strong social and cultural groups; it is part of the glue that binds us, and allows us to communicate. However, hyper-consumption goes way beyond satisfying these needs, even the social/cultural ones. It leads society on an unsustainable path characterized by dissatisfied individuals, social inequalities, pollution, and the depletion of natural resources. Fortunately, there are many who recognize these issues as being of fundamental importance, and who are innovating at a social level to challenge these norms. It is these pockets of innovation that are reviewed here, following a brief overview of the problem of hyper-consumption and its drivers.

The problems and consequences of over-consuming There are at least two strands to consider when reviewing modern consumption behaviour. The first is resource use and environmental impact, which have worldwide

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FIGURE 1 Happiness and GDP

An analysis of the relationship between the level of satisfaction of people towards their living conditions and their purchasing power shows that at least three types of relationships can be distinguished. While a central group seems happier when their standard of living increases, it appears that both factors are unrelated for two other groups of countries. Below and above a certain level of living standard, the definition of happiness is not only correlated with the capacity to acquire material goods.

consequences. Material consumption impacts directly on the environment. Every product purchased has required the extraction, processing and transportation of raw materials, the consumption of energy for manufacture and sometimes use, and finally at the end of a product’s useful life (or sooner if fashions change), it is discarded, either to decompose in a landfill site, or to be recycled, the processes of which also require energy. Each of these stages will impact negatively on ecological systems and climate change in terms of land use, materials (biological and mineral), water and climate. The pattern of hyper-consuming resources is seen generally across the global North, with the USA and Western Europe accounting for 60% of the world’s private consumer spending, yet total only 12% of the population.1 The second strand to consider is the individual well-being factors that result from material consumption. Well-being is a complex concept that has been associated with

1. http://www.worldwatch.org/node/810

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discourses in mood and emotional state, happiness, eudaimonia2 and physical state. It might seem intuitive to suggest that whatever well-being discourse is adopted, an increase in material wealth and comfort would be supportive of individual well- being. However, as seen in Figure 1, there is no such linear relationship (in this case between happiness and GDP as a measure of purchasing power). Instead, these indicators are ‘not measuring the same kind of utility’ (Jackson, 2009, p.42). An analysis of the relationship between the level of satisfaction of people towards their living conditions and their purchasing power shows that at least three types of relationships can be distinguished. While a central group seems happier when their standard of living increases, it appears that both factors are unrelated for two other groups of countries. Below and above a certain level of living standard, the definition of happiness is not only correlated with the capacity to acquire material goods. One way that the relationship between material goods and well-being has been explored is through assessing materialistic values, which are ‘beliefs about the role (and hoped for) psychological benefits of material possessions’ (Dittmar, 2005, p. 474), and many researchers have investigated the relationship between such values and well-being. Results consistently show a negative association (e.g. Jackson, 2009; Solberg, Diener and Robinson, 2004). So far, we have only mentioned the global North for the reason that material consumption here is currently vastly greater than in the South. But it would be wrong to assume that future global consumption patterns will continue to be biased in this way. In absolute terms, China already consumes more than the USA (although per capita, the figure is much lower). However, with the strong emergence of the middle classes in developing nations such as India, it is likely that over time, the disparity between consumption per capita in the North and South will reduce, probably as a result of increased consumption in developing countries, thereby compounding the aforementioned problems. In view of these global transformations, many advocate for the developed world to decrease its material consumption. This trend is reflected in a recent report commissioned by the National Geographic (2012): many people in the world agree with the view that societal consumption needs to be reduced3. In 2012, a large majority of respondents to a survey carried out in 17 relatively wealthy countries in the North and South considered that they were likely to have to reduce their consumption to protect the environment for future generations. The two exceptions to this rule are countries that have been industrialized for a long time – Germany and Japan. Moreover, Germany, India and the United States are the three countries where respondents are less willing to reduce their consumption.

Drivers of consumption Much has been written about the drivers that sustain these very high levels of

2. Eudaimonia is a type of happiness associated with virtuous conduct and philosophic reflection favoured by ancient Greek scholars, that retains relevance and interest today. 3. 1,000 individuals in each of 17 countries were surveyed, and 55% overall agreed or strongly agreed that as societies, we will need to consume a lot less to improve the environment for future generations.

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FIGURE 2 A growing responsibility towards future generations

In 2012, a large majority of respondents to a survey carried out in 17 relatively wealthy countries in the North and South considered that they were likely to have to reduce their consumption to protect the environment for future generations. The two exceptions to this rule are countries that have been industrialized for a long time – Germany and Japan. Moreover, Germany, India and the United States are the three countries where respondents are less willing to reduce their consumption.

consumption, despite the negative ecological, social and individual consequences, and the literature necessarily covers perspectives from multiple disciplines. Sociological and anthropological perspectives, for example, tend to emphasize the roles goods play in social interaction, their importance as hierarchy markers and the human tendency to converse through the display of material goods, the need for which may be based in the alleviation of deep fears about uncertainty and the need for meaning (e.g. Douglas and Isherwood, 1979/1996; Jackson, 2006a; McCracken, 1988). Economic models that analyse consumer behaviour and motivations prefer rational decision-making as an explanation for behaviour. These models understand consumer decisions as being based on monetary value, or more likely on the value attached to the outcome (the utility), and are thus part of a wider class of models referred to as subjective expected utility (SEU) models (e.g. Jackson, 2005; Schoemaker, 1982). SEU models have consistently been unable to match observed consumer behaviour, and although they have evolved to enable aspects

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of consumer decision-making, such as ambiguity (Kahn and Sarin, 1988), to be considered in addition to utility, their starting point of human rationality is a limit to their predictive strength. Instead we can turn to social psychological perspectives to enlighten us, and the two views considered here are sense of self and emotion. A third consumption driver, the functional qualities of material goods, does of course exist, but is rarely in evidence without at least one of the other two being also present.

Sense of self buying motivations Sense of self means the range of ways that we relate to and define ourselves. For example, consumer goods can help us with a sense of self-image, can help us define our identity, can make clear our role in society and provide a sense of belonging, can foster self-esteem, can enable us to display our uniqueness, and can give us a sense of self-efficacy and control. Material goods can also help in this arena by helping us to bridge the uncomfortable gap between who we perceive ourselves to be, and who we would ideally like to be (or society tells us we should be).It is not new to consider such issues in relation to consumer behaviour, and there is historical evidence that this has always been a part of human interaction with the material world. For example, not only do we recognize the chief of a tribe in pictures because of his headdress and adornments, but so too would the rest of the tribe recognize his superior status from these material items. To illustrate our relationship with material goods, let’s explore an example taken from a group of compulsive buyers. Although compulsive buying affects just 6% of the adult population (Koran et al., 2006), their patterns of behaviours and what drives those behaviours can be thought of as simply an extreme version of normal buying4. Mrs C is divorced with three children, is overweight and has low self-esteem. She had a good career before having children, but now feels lost for a sense of who she is aside from being a mother, a role in which she feels a failure. Mrs C is a compulsive buyer, driven in part by her belief that owning the right goods will enable her to be a better mother. So she addictively buys kitchen equipment, since this represents being a carer for her children. She also buys huge quantities of clothes, since she feels the need to look like a smart capable mother and because when in a shop, she believes that anything she tries on makes her look slimmer and thus reduces her psychological discomfort caused by being overweight. For a brief moment at least, she can increase her otherwise low self-esteem and actually function somewhat normally in the world. Mrs C is very affected by advertising; she takes on board the belief that she needs to obtain the goods being advertised to be happy, attractive and successful. Mrs C’s case may seem extreme, but she does exist (although some details have been changed to protect her identity). Many of us will recognize aspects of her

4. Compulsive Buyers are addicted to buying, and are characterized by experiencing the impulse to buy as irresistible, feeling a lack of control, and continuation of the extreme buying behaviour despite the adverse consequences that ensue.

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situation, since we all buy material goods for what they enable us to communicate to others in our social groups, to a sub-culture, to those with similar hobbies, to let strangers know about our class, status, sexual appeal or availability. And this is not wrong, it is part of being human. But with a global population at the highest ever level (and growing), we can no longer afford to take it for granted that we can continue to use material goods in this way. Especially when in our modern Western societies, we mostly have multiple identities and roles to support, there are new products brought to market continually, we have a dynamically evolving range of sub-cultures to be navigated, and the insecurity this brings increases our need to feel in control and self-efficacious, which is something material goods can also help provide.

Emotional drivers for consumption The second of the psychological motivations for consumption originates in emotions, moods or pleasure. These can generically be called affect-motivated consumption drivers, and are not entirely separate from the self and identity-motivated consumption drivers discussed above: it feels good when we have higher self-esteem, when we feel connected to others, or when we are displaying our uniqueness. The well-known modern cultural phrase, retail therapy, encourages us to seek therapeutic solutions in shopping and buying activities. As Dittmar (2004) stated, ‘anxiety, feeling bad about oneself, and depression are all common mood states for which buying and spending becomes a form of self-medication’ (p. 426), often with low mood being a trigger for a shopping trip. While many others have also written about the ‘repair’ potential of normal consumption (e.g. Cohen and Areni, 1991). Seeking consumer-related activities in this way is not abnormal or necessarily patho- logical, and can be adaptive in many circumstances. However, if consumer-related activities are used ‘as repetitive, compulsive, and undifferentiated responses to a wide variety of emotions and experiences’ (Barth, 2000, p. 271), and the underlying affective issues are not resolved, then it is unlikely that long-term meaningful psychological improvement is possible through consumption alone. To understand why consumer activities are sought to alleviate such negative mood states, it is easiest to approach from the perspective of the positives that such activities bring. The first is the social activity of shopping, which has become a significant leisure pursuit in Western cultures, especially for women (e.g. Bloch, Ridgway and Nelson, 1991). Shopping facilitates social interaction, either with friends, family, or with sales personnel, and this provides positive affect from the feelings of connection, and from the alleviation of boredom (e.g. Dittmar, 2004; O’Guinn and Faber, 1989). Secondly, there is emotional involvement in the shopping itself which provides positive emotional states. This comes through experiencing the atmosphere and buzz prevalent in the shopping environment, and in the actual process of buying (e.g. Goss, 1993; O’Guinn and Faber, 1989). In fact, both individual stores and shopping malls are specifically designed to induce stimulation, pleasure and meaning, such that shopping even without an actual purchase can still provide hedonistic value (e.g. Donovan and Rossiter, 1982). A third type of emotional involvement in shopping

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comes from direct contact with the goods themselves. Browsing, touching and trying on goods can all induce positive sensory and emotional responses. And finally, the ownership of goods can serve affective needs by their symbolizing of ties, both with others and with one’s personal history (Kamptner, 1989). Mrs C’s compulsive buying was fuelled by affect-related issues, in addition to the sense of self matters discussed above. She described being at the mall as like ‘being in a Disney world, everything sparkles’, and entering it enabled her to escape her perceived drab world. Her tendency to depression was lifted by purchasing goods, especially clothes. She did use the shopping environment to bring social connections into her life, but for her it was only with sales staff as she was too ashamed of her addictive shopping to include friends or family.

Psychological drivers of consumption: the limits of the concept Discussions on the positive affective gains associated with consumption, especially where pleasure is mentioned, usually include hedonism as a possible driver. The hedonistic pursuit of material goods presupposes that the ownership of said goods will provide pleasure, and are not sought for their utility value (e.g. Campbell, 1998). Hedonistic consumption includes the positive affect-motivations discussed above, but also entertainment, fantasy, escapism and perceived freedom and thus includes the imagining of pleasure, the dreaming of scenarios that fulfil desires, and the commodities that will enable these to occur (e.g. Arnold and Reynolds, 2003; Gabriel & Lang, 2006; Hirschman, 1983). Consequently, as with much of the discussion on consumption drivers, there is crossover between the motivations rooted in self and identity, and those coming from affect, since the desired scenario may be connected to an ideal-self image. While much about consumption does appear to be the pursuit of pleasure, the dark side, as described by Gabriel and Lang (2006) is that such a quest involves aggression, dissatisfaction and proves ultimately futile. Nevertheless, it exists and persists for many individuals as being a key part of their drive to shop. It is important to remember here that there is a significant amount of consumption that is ordinary, inconspicuous, and functionally motivated, and is therefore far less influenced by the identity or affective drivers mentioned. For example, although for some there are significant symbolic or affective gains from buying insulation for their house in terms of feeling better about reducing energy bills, keeping one’s family warm, and being seen as part of a non-consumerist and responsible social group, for most, the motivation for installing insulation is functional and economic, and there is less involvement of psychological factors in the decision-making process. It is also worth remembering that this discussion on consumption drivers is just one way of viewing this complex field (for some other views see Gabriel & Lang, 2006), and is probably only relevant within a global North context, or within the wealthy elite and emerging middle classes within the global South. For example, Hahn (2012) interpreted comments by Campbell (1998) whereby in less affluent societies, locally

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produced goods are seen as good because they satisfy needs, whereas imported goods are considered to be harmful or at least useless luxuries. This originates in thought now over 15 years old, and it is unclear whether these same perceptions are still perceived within less affluent societies, but if nothing else, this illustrates how assumptions based on a Northern context cannot be automatically extended to the developing world. Even the ways of researching and defining key terms of consumption could be markedly different within the global South context. And it is important to avoid the obvious ‘the South should learn from the North’ type of rhetoric, since the North clearly has not got consumption right, and consumers in the global South are not passive, and do not simply replicate Northern consumption patterns. In general too, most discussions about consumption are largely restricted to the middle classes, and neither the wealthy elite nor the working classes are much considered, apart from a common rhetoric around working class desire for the material comforts of the middle classes. But according to observations by Wilk (2006), hedonistic consumption in particular (consumption for pleasure and immediate experience) is probably more a working class and wealthy elite type of behaviour, more so than the careful, saving, responsible middle classes. At least the wealthy can usually afford their binges, whereas the working classes are frequently deeply in debt and may make regular use of payday loan shops.

A review of sustainable consumption modes In recognizing the current and potential future problems associated with lowered individual well-being, and the social and ecological unsustainability of Western consumption, many have been working towards sustainable consumption, starting in earnest in the mid-1990s. Sustainable consumption has been defined in many ways (see Jackson, 2006b). In essence, definitions include the need to reduce the scale and impact of consumption. Although definitions are crucial, of more importance for this chapter are the means by which the scale and impact of consumption can be reduced. Three potential solutions are generally offered. Two are within the bracket of changing the essential consumption that must occur for physiological and psychological well-being: an encouragement towards pro-ecological consumption, for example, buying organic produce; and pro-social consumption, for example, buying fairly traded goods or from local suppliers. The third entails the lowering of absolute consumption levels through encouraging frugal consumer behaviour. In essence, these could be seen as innovative ways to approach consumer behaviour.

THE EMERGENCE OF GLOBAL SUSTAINABLE CONSUMPTION NETWORKS There are several initiatives encouraging changes to consumption patterns that are pro-social, pro-ecological or encouraging frugality, and most are not distinctly one of these types of sustainable consumption to the exclusion of the others. For example, a community-based social movement that is gaining worldwide momentum is the Transition Network, which evolved out of the ‘twin threats’ of peak oil and climate change (Hopkins, 2011), and seeks to build resilience into communities. Among

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other things it is unique in crossing the traditional boundary between production and consumption, for example by encouraging community sharing of resources, growing and sharing local produce, and building sustainable homes. There are currently over 1,100 Transition Network initiatives in more than 43 countries.5 This reconfiguring of lifestyles and livelihoods could be seen as social innovation at the grassroots level (Coke, 2013) and is encouraging the emergence of values such as collectivity, inclusivity, equality, autonomy, collaboration, communal self-provisioning, practical creativity, learning, optimism and enjoyment (Coke, 2013). This crosses the three types of sustainable consumption listed. Another initiative for sustainable consumption is Slow Living, which includes categories such as Slow Food (encouraging people to buy locally and taking care in what and how we consume food), Slow Travel (living in a destination community, as opposed to short stays in a holiday location).6 It is almost impossible to gauge the scale or impact of the Slow Living initiative since it consists of advice, opportunities to connect, and the presentation of an ethos, rather than a subscription or another tangible measure. Only the scale of the Slow Food movement can easily be assessed, since the website itself claims having 65,000 members in 42 countries.7

THE DEVELOPMENT OF PRO-ENVIRONMENTAL AND PRO-SOCIAL FOOD SUPPLY CHAINS Probably the most often considered types of pro-environmental or pro-social consumption is the consumer choice to buy local, organic or fairly-traded products. This often, but not always, relates to the purchase of food. Primarily these choices are a reflection of several different values or factors, including the desire to support local businesses and traders; an aspiration to limit transportation miles; a wish to ensure that pesticides and fertilizers are not harming the consumer themselves, the land, the water supply or other non-target species; perceived superior taste; or a sense of fairness directed towards the farmers and supply chain for goods that cannot be grown locally. Often these goods are more expensive than their imported, non-organic, traditionally traded competitors, and therefore the consumer choice to buy these is based on non-economic factors. These goods are reliant on consumer trust in the schemes that certify produce as being organic or fair trade. The Soil Association recently reported that in 2012 the sale of organic goods was worth €2 billion in the UK, €3.7 billion in France, €6.6 billion in Germany and €21 billion in the USA. Globally, organic sales increased by 25% between the start of the economic downturn in 2008 and 2011.8 The UK fair trade market was worth €1.8 billion in 2012.9

5. www.transitionnetwork.org 6. www.slowmovement.com 7. www.slowmovement.com/slow_food 8. Organic Market Report 2013, Bristol: Soil Association. 9. www.fairtrade.org.uk

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REINVENTION OF FRUGAL AND COLLABORATIVE CONSUMPTION PATTERNS Frugal consumption as a concept encourages the limiting of expenditure on consumer goods and services through showing acquisitional restraint and resourcefulness in using items (Lastovicka et al., 1999). It is commonly considered congruent with deprivation, but can more accurately be considered as a ‘sacrificing of whims for the sake of obtaining a more worthy goal.’ (Lastovicka et al., 1999, p.87). The emphasis is on careful purchasing (e.g. buying in bulk), resourcefulness and increasing the longevity of products, and many ingenious tips circulate within this community regarding reuse. There are also initiatives such as Buy Nothing Day10, a day of boycotts, events and abstention from purchasing, which now takes place in over 50 countries. The concept of collaborative consumption has also gained a foothold, whereby items are shared between a number of residents, businesses or members. Here the utility of goods is maintained, i.e. as a means of transportation, but the way of obtaining the utility is changed, i.e. car pooling, which usually involves lowering ecological and financial costs. According to Botsman (2010)11, there are three types of collaborative consumption. First, there is the redistribution of unwanted goods to others who may need them, rather than sending these goods to landfill or recycling. Examples include web-based initiatives such as peer-to-peer bartering, goods-swapping, Ebay, Craigslist and Freecycle, as well as the more traditional flea markets and charity shops. One common practice in this category is the passing to family and friends of children’s clothes and toys, which is often accompanied by a discourse about waste due to the limited longevity of use as a child grows and changes, and is common even among social groups that can well afford new items. Secondly, there is a collaboration of lifestyles, as in the sharing of money, skills or time. And thirdly, there are product service systems, where members pay for the benefit of the product without needing to own the product outright, which is ideal for goods with high idling capacity, like cars and power tools. There are undoubtedly other schemes, initiatives and movements in Northern and Southern contexts that have sustainable consumption at their core, or as an ideal outcome. It is impossible to capture them all here, but merely to offer examples and flavours.

Responsibility: with consumers or producers? These alternative forms of consumption that are based in some way on sustainable consumption ideals require informed, energized and principled consumers. Many argue that it is the producers who should assume more responsibility for the sustainability issues of environmental and social damage, and resource use, and that innovation should be here, rather than with consumers. Clay (2010) argued

10. www.enough.org.uk 11. See Rachel Botsman, 2010 TED talk: http://www.ted.com/talks/rachel_botsman_the_case_for_collaborative_ consumption.html

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that sustainability should be a pre-competitive issue, since producers can leverage more effectively than consumers.12 Arguably it is already producers that are more active in this field, certainly within Europe, with the growth of Corporate Social Responsibility (CSR) targets and reporting. If globally the CSR impacts and initiatives grew in number and scope, it is possible that sustainability could really become a pre-competitive issue, thereby reducing the responsibility placed on the consumer, aside from the consumer’s need to monitor the volume of their purchasing. These pockets of activity are currently just that, and a trip to any shopping mall across the developed world will soon convince even the most ardent optimist that for many, hyper-consumption based on seeking material goods to fulfil emotional and sense of self (or other) needs is the norm, and no thought or effort is invested in educating themselves about pro-social or pro-environmental options or brands. However, general changes within what is available to the consumer means that some dematerialization may occur regardless of any loftier ideals. An example is the way that music and books are bought, stored and consumed. Downloaded digitized music offers a carbon saving of between 40% and 80% compared to a typical CD in a jewel case (Weber et al., 2009). As Botsman (2010) put it, the digitization of music (as an example) ‘enables needs and experiences to be fulfilled without the stuff’, in other words, we want the music not the CDs, and so usage trumps possession. This is all part of an ongoing dematerialization that technological innovation is helping to support.

The impact of sustainable consumption initiatives

THE INCREASE OF SUSTAINABLE AND GREEN ENGAGEMENT It is very difficult to estimate the scale of these consumption patterns that are attempting, either by design or coincidence, to encourage sustainable consumption. Some report that most consumers are not demanding more sustainable forms of consumption.13 But the recent survey commissioned by the National Geographic (2012) shows that environmentally friendly consumer behaviour has increased from 2008 levels in all but one of the 14 countries that were polled in both 2008 and 2012. The scope of the report’s environmentally friendly consumer behaviour is transportation patterns, household energy and resource use, consumption of food and everyday consumer goods, and what consumers are doing to minimize the impact of these activities on the environment. Thus, although absolute levels of engagement in sustainable consumption are virtually impossible to obtain, there is some evidence to suggest that engagement is increasing. What is also interesting about this report is that the most engaged consumers are in India and China, and the least engaged are American and Canadian consumers. Additionally, though, it is likely that individuals consider themselves to be greener than they in fact are, and this may apply to many of those engaged in the social innovations and initiatives

12. Jason Clay, WWF, 2010 TED talk: http://www.ted.com/talks/jason_clay_how_big_brands_can_save_biodiversity.html 13. See More with Less: Scaling Sustainable Consumption and Resource Efficiency. World Economic Forum, 2012.

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FIGURE 3 A greener self than society?

The study conducted for National Geographic in 2012 shows that in all countries, individuals feel that they are more environmentally friendly (on average two times more) than their society as a whole.

described above. The study conducted for National Geographic in 2012 shows that in all countries, individuals feel that they are more environmentally friendly (on average two times more) than their society as a whole.

BEWARE OF THE REBOUND EFFECT: SUSTAINABLE CONSUMPTION DOES NOT AUTOMATI- CALLY REDUCE SOCIAL AND ENVIRONMENTAL IMPACT It is also interesting to question whether engagement in sustainable consumption behaviours does actually reduce social and environmental impact. Again, this is very difficult to establish definitively. There is evidence that intentions to engage in sustainable consumption behaviours can trigger guilt when ‘lapses’ are perceived (Armstrong, 2012). And where frugal behaviours have become more prevalent day-to-day, this can simply lead to more money being spent elsewhere, such as in booking a foreign holiday. Thus, although consumers may be observing frugality in one sector, in a macro sense, frugality is not achieved. As explained in Chapter 3 of this book, this is known as the rebound effect, or backfire in instances where emissions actually increase from the alternative behaviour. Druckman et al. (2011)

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undertook a study where three different behaviours were considered in light of the possible rebound effect. They were: reducing internal temperatures by 1°C; reducing food expenditure by one third by eliminating food waste; and walking or cycling instead of using a car for trips of less than two miles. The study found that carbon savings could be as high as 88% if the money saved is invested in low carbon intensive behaviours/commodities, or could result in backfire if invested in high carbon activities, such as activities requiring gas, electricity or other fuels. Under ‘business as normal’ conditions, the carbon saving is only 66% of the total that could be achieved. This is sobering indeed.

SCALING SUSTAINABLE CONSUMPTION Alongside the difficulties in establishing the scale and possible savings of sustainable consumption behaviours, there are also difficulties in understanding how these behaviours could be scaled through individual, collective or political means. Most suggestions involve engagement of the producers and retailers rather than consumers. For example, a World Economic Forum report� suggested three options for scaling sustainable consumption: make ‘the sustainable choice the default choice’ (p. 6); transform value chains through new business models; and ‘transform the rules of the game through public-private partnerships’, in other words the ‘greening of public procurement, reform of subsidies that are harmful to the economy and environment, improving regional trade agreements, and measuring progress and the role of long-term investments’ (p. 6). In addition, the aforementioned National Geographic survey indicated that the barriers to more individual action regarding sustainable consumption fall with companies who make false claims about the environmental impact of their products, and to individual claims that they would do more if governments and industries did more.

DESIGNING PUBLIC POLICY FOR A BEHAVIOURAL CHANGE TOWARDS SUSTAINABLE CONSUMPTION So what could policymakers do to encourage sustainable consumption through new avenues, or through the avenues discussed above? This is a non-trivial question, and to answer it I will draw from the work of Jackson (2005), who listed six areas where policymakers can influence consumer behaviour to be more sustainable in quantity and type. These are: 1. Providing facilitating conditions, such as access to recycling facilities, energy efficient lighting and appliances, availability of public transport; 2. Setting standards within the institutional context, such as developing product/ building/trading/media/marketing standards; 3. Influencing the social and cultural context by sending out symbolic meanings (of attitudes, goals and aspirations) that are regarded as valued and appropriate. This includes information, regulation and tax setting, but crucially, the symbolic meanings of value and appropriateness must be consistent across department and policies, otherwise they will be mistrusted;

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4. Leading business practices: consumers are also employees, and governments can influence what companies are doing regarding procurement, transport, etc. This is likely to establish new norms that individuals adopt within their lives more broadly; 5. Supporting community-based social change, such as by ‘initiating, promoting and supporting community-led initiatives for social change; by supporting the community management of social resources; and by designing effective community-based social marketing strategies’ (p 132). These might include some of the initiatives discussed above; 6. Leading by example, such as ensuring the environmental management and sustainable procurement policies for the government’s own operations are excep- tional.

Conclusion The pockets of social and cultural innovation that are seeking to lower absolute consumption levels and to lower the social and ecological impact of essential consumption are encouraging. Those working to conceptualize and generate these new models should be congratulated for questioning the norm, for seeing through the superficial promises of material goods, and for seeking well-being from sustainable sources and activities. However, even though it is part of a common discourse in this area, there are reasons to remain more pessimistic than optimistic. The drivers for consumption are also part of being human; the inertia maintaining hyper- consumption as the norm is huge; the consequences of over-consumption are very often hidden from the consumer, thereby enabling them to remain disengaged from the ethical and moral issues; individuals often consider themselves to be greener than they in fact are; rebound and backfire are common unintended consequences that limit or reverse the potential and sought-after gains; and there is little cross- party political will to support or grow these activities in the ways proposed. ❚

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CHAPTER 7 Is sharing more sustainable? The environmental promises of the sharing economy

Anne-Sophie Novel, Journalist, Bordeaux and Paris, France

he economy of sharing and collaborative life- knowledge is exchanged in return for other goods, or styles has spread throughout the world since something of equivalent value in terms of time or money. the late 2000s. These practices of bartering, gift The last type of initiative we consider here is coliving, giving, exchanging and reselling are not new, where the primary aim is the pleasure of doing things but they are making a comeback due to the together, such as sharing a place, a time, an activity or Tcombined effect of several crises (economic and financial, experience, regardless of property. but also environmental and social) and the democratiza- The models on which these different modes of contribution of digital practices. By promoting usage over owner- tion and exchange are based are adjusted to suit the users ship, and by shifting consumption patterns from the reflex according to the nature of the objective, which may be of purchasing new things in shops to alternatives such solidarity or related to cost-sharing or the need to increase as loaning items, leasing or second-hand trading between purchasing power and make profit.1The disintermedia- individuals, these new habits are likely to promote a more tion generated by the Internet also fosters the develop- sustainable economy. ment of short circuits in the supply chain (for example via It is therefore possible to differentiate a number of AMAP or through services such as La Ruche qui dit Oui!) initiative types, starting with those that promote shared and forgoes the democratization of 3D printing (which usage and transform goods into services. In this product- in a few years will allow anyone to print objects, thus service system approach, ‘service providers’ are organi- enabling people to produce or repair products themselves). zations (private or public) or individual owners seeking to These two developments will make it possible to envisage maximize and promote the efficient use of their posses- low-carbon modes of distribution and production. However, sions. Another initiative type is the participatory dynamic several questions are raised in relation to the environ- of group purchasing or collaborative funding that makes mental impacts of this new economy. While these initia- possible the realization of a project. Associations for the tives are intuitively considered to be more eco-friendly, Maintenance of Peasant Agriculture (AMAP) provide there have been relatively few studies on the subject. The an example of participatory finance. These initiatives following pages set out some areas of open discussion function through the dynamics of production, inspired by that should be explored in the coming years. free software or the cooperative economy, and are based on the sharing of a common goal between the various contributors. Redistribution characterizes the third project category, in which it is possible to integrate the principle 1. See in this respect the work of Emilie Morcillo, which distinguishes of bartering (in a non-market approach) or of reselling between the rationale that underlies the solidarity sharing approach of non-profit set ups, and that of profitable collaborations - see www. (in a market approach). In these initiatives, property or partageandco.com

A PLANET FOR LIFE 139 FIGURE 1 Cooperation: the attraction of novelty

Participants in cooperative practices are not necessarily opposed to the entire retail chain but share a desire to experience new things and to create new relationships around consumption.

The eight characteristics of the collaborative basis, such as a house or a car, a purchase, project or economy even a skill, the rationale consists of expanding a posses- The main features of the sharing economy are defined sion’s circle of beneficiaries, thus reducing the number as follows. of new goods consumed. Allocation optimization. In the pre-digital era, Usage extension. Shared and/or mutualized objects sharing was limited to a small circle of people, today we undergo an increase in their usage duration in compar- have tools such as the Internet that enable much greater ison to their originally planned usage at the moment of distribution opportunities. Peer-to-peer technologies and acquisition by a particular individual. The development of geolocation tools reveal a multitude of local opportunities these practices, which are stimulated by a better organi- that could not previously have been appreciated in this zation among peers, results in the more careful mainte- way. Thus, the Internet has reinvented and intensified nance of items. Mutual assistance and the exchange some very old-fashioned methods. of expertise, also driven by the desire to permanently Property pooling. Through the promotion of usage preserve objects, tend to limit the effects of planned (of products or techniques), rather than focusing on obsolescence. In some cases, consumers also organize ownership, the sharing economy brings together the themselves so that they can repair broken objects possessions of participants to encourage their usage whenever possible. In other examples, the shared goods by many. Whether this relates to objects used on a daily are actually more durable, since they were purchased

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FIGURE 2 The state of cooperative practices in France

In 2012, a significant part of the French population had already practiced a cooperative form of consumption. The people that said they were ready to try them also showed a collective curiosity for these new practices. from the outset in such a perspective.Ultimately, such they may feel justified in claiming a certain amount of practices will encourage manufacturers to change their ‘moral credit’, which can lead to rebound effects. Indeed, production methods towards a more service-based does cheaper travel encourage people to travel further?2 approach, the main objective no longer being simply to Does car sharing simply encourage the more frequent sell a product but to support the experience and usage use of the car? Do the savings made by buying second of a product. The principles of bartering and models such hand clothing imply a greater expenditure on digital as the one employed by the company Eqosphere (a logis- equipment? tics platform) are expected to develop, partly because Socialization of experiences. Adherents to these they limit waste and also because of the savings they lifestyles appreciate the mutualization of uses for reasons generate. that are primarily economic, but also for the social Reducing CO2 emissions and materials. All things dynamic that they receive. In addition, in times of crisis, being equal, the combined effect of optimization (which these services offer an important sense of belonging to relocates and limits travel distances), mutualization and usage extension, causes a reduction in resource consumption and CO emissions. However, when 2. For more details on the subject, read Sophie Clot, Gilles Grolleau 2 and Lisette Ibanez, “Self-Licensing and Financial Rewards: Is Morality consumers feel that they have done something good, for Sale?”, Economics Bulletin, vol. 33, no3, pp. 2298-2306, in 2013

A PLANET FOR LIFE 141 a community. This membership is particularly reassuring 2012 by the French Environment and Energy Management given that it is based on the ability to openly evaluate the Agency (ADEME), which was based on the les 4,500 data transactions and the exchanges made. from the IPSOS Observatory of Lifestyles and Consump- Co-creation projects. The use of the web has progres- tion, was the first to focus on the motivations of French sively transformed communication strategies into conver- people who participate in AMAP, carpools, the rental of sation strategies. Organizations have started referring to private goods, bartering, group purchasing or reselling - ‘community manager’ functions which are now combined six practices that are part of the collaborative consumption with ‘community co-creation’ ones. It is no longer only model. Some of the study’s main findings are summa- about talking, but about inviting the community to partici- rized below. pate in the production of a marketing campaign, to the First observation: the sampled consumers do not customization of an object, etc. and thus ultimately to predominantly shift away from a conventional consumerist design more products that are more tailored to expecta- outlook. In a survey by l’Observatoire Société et Consom- tions and uses. mation (OBSOCO) published in November 2012, it appears Open and innovative cooperation and collabora- that adherents to these new modes of behaviour, in all tion. These new modes of production will transform the categories, are by no means mounting a challenge to the operation of internal and external relations of organiza- hyper-consumption society. The OBSOCO study revealed tions. From a vertical and prescriptive rationale, they will that the level of commitment to these emerging consump- horizontalize and give rise to the emergence of new profes- tion practices appears to be highly correlated to the inten- sions (facilitators, service designers, etc.) that are respon- sity of the budget constraints felt by respondents. In a sible for listening to the various stakeholders and to define context of crisis, we seek to give meaning and to mend an action framework derived from their different contribu- the social bond at the heart of the consumption process. tions. This development will contribute to the improvement Second observation: among collaborative lifestyle of the ownership and implementation of Corporate Social participants, those that are acting on the basis of an Responsibility (CSR) policies. environmental cause, or for the sake of societal or collec- Modification of economic models. All of these tive reasons, are in a minority. It is only within an AMAP that features are part of a fundamental change in the functioning such motivations represent the main stimulus for action of the economy and society. From the types of purchases, for those involved. However, only a small proportion of to purchase reflexes, through to the creation of new value the French population have participated in an AMAP (6% chains. The current models must therefore be revised fully of the population) compared to those involved in group or partly, to adapt to these new practices. Where some purchasing (52%), whose motivations are very individu- platforms rely on the development of technology, others alistic. will work on the ergonomics of their locations or on ‘the It should be noted however that participants share four extra service’ offered by their activity. All these criteria then common characteristics (according to the ADEME-IPSOS intersect with the choice to offer services that are free or survey): they are curious, with a desire to regularly meet have a progressive pricing policy for usage. new people; they care about society, although this concern But what are the main drivers of the collaborative does not necessarily translate into concrete action; they economy? Is ecology a motivation for participants? have an adventurous side with a propensity to explore and experiment (even in terms of risk-taking, as mentioned Collaborative practices driven by the search for in the study); and they seek to prolong the use of goods purchasing power and thus express a desire to escape from the cycle of the Proponents of collaborative consumption are mainly planned obsolescence of consumer goods. attracted to these practices by the financial gains of these Collaborative consumption therefore benefits from new modes of exchange. A recent study published in April being able to attract people for reasons that are primarily

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economic and financial, and can then create social ties and have resulted in a reduction of around 1.1 billion miles. comradeship while generating, over time, more environ- In total, 25% of respondents sold their own vehicles, and mentally-friendly behaviour. A 2011 analysis by the US 25% would consider buying a car if the car sharing option magazine Shareable and the Latitude agency found that disappeared. 75% of British people believed that sharing is good for Another study by Eliot Martin and Susan Shaheen which the environment, and that eight out of ten are happy sampled 6,200 car sharing participants (who were involved when they share.3 Similarly, 60% of American collabora- with providers such as Autolib or organizations like the tive consumers make a direct link between sharing and France Autopartage network for example), estimated that sustainable development. nine to thirteen vehicles were not in use for every one car But what are the environmental benefits of these new used in the car sharing fleet. Of this total, four to six cars behaviours? And how can they be assessed? were abandoned directly by households who joined the service. The usage of the remainder was avoided through Does collaborative consumption reduce a subscription service.5 environmental footprint? In France, the research group 6T noted in a study Relatively few studies, and even fewer independent carried out for ADEME in March 2013 that ‘the number ones, have focused on the assessment of the environ- of households that do not own a car increases by 40% mental impacts of collaborative consumption. with membership in a car sharing service. In view of the What do we learn from car sharing experiences? decrease in the number of cars owned by households, Starting from currently available estimates in the trans- each car from a car sharing scheme replaces nine personal port sector, which is the most studied sector, we find that cars and frees up eight parking spaces’.6 The study also one of the two European car sharing leaders (Blablacar) noted that the number of kilometres travelled as a driver claims on its website to have saved 500,000 tons of CO2 decreases by 41% and that car sharers save money by through the 10 million journeys made since the creation using modes of travel they otherwise would not: they walk of the business. more (30% of them), cycle (29%), use public transport With regard to car sharing between individuals (based (25%), train (24%) and car pooling (12%). on a fleet of existing vehicles), a study conducted by the It is also worth noting that a company such as SNCF (the University of Berkeley4 involving 9,500 people who car French National Railway Company) is gradually integrating share in Canada and the US highlighted two findings: an these new options of car pooling and car sharing into its increase in CO2 emissions for households who gain access transport service. With its acquisition during summer 2013 to a vehicle for the first time through car sharing; and that of Greencove and Ecolutis, SNCF was aiming to develop a this increase was offset by the reduction in emissions from ‘capillary mobility’. This is one way to compensate for the households that limit, conversely, the use of their own lack of transport in underserved areas and promotes the car – and who ultimately abandon the possession of their gradual incorporation of a very broad concept of mobility. vehicle, realizing that it costs them less to borrow a car In urban areas, the development of services will as and when needed than to maintain one throughout the generate (and already generates) a review of spatial year. A study conducted in 2008 among 6,281 members of planning to make areas more responsive to public trans- a US car sharing company showed that distances travelled port and shared transport. Today’s challenge is to develop a decreased by 27%, which from 1 January 2013 would subscription offer and a plan that accompanies and facilitates the usage of these modes of transport.

3. 8 out of 10 people say sharing makes them happy, by Kelly Mc Cartney (February 2011) 4. Innovative Mobility Carsharing Outlook: Carsharing Market 5. Article ‘Car sharing, antidote to GHG emissions in North America’ by Overview, Analysis, and Trends - Summer 2013 - http://bit. Beth Buczynski (17 January 2012). http://bit.ly/1bcgjMJ ly/17yURjH 6. http://6t.fr/download/ENA_6pages_presse_bios_130320.pdf

A PLANET FOR LIFE 143 Shared spaces and grouped housing. Moving on inadequate, if the logistics are insufficiently optimized or to the example of grouped housing or other forms of if consumer behaviour is inappropriate. shared spaces (for tourism or work): while analyses are In terms of monitoring the transactions and expenditure few, those that have been carried out suggest that the flows generated by increased purchasing power, are the optimization of existing spaces can limit new construc- savings made by collaborative consumption participants tion and urban sprawl. This applies to colocation services actually saved, or do they generate new spending? If the and to cohousing (France being way behind in this field latter, does such new expenditure feed into the traditional compared to Germany, where more than 6 million homes circuits of the economy? Or does it circulate within the can be classified as grouped habitats, and Quebec where collaborative economy? In short, does sharing more mean 22,000 housing cooperatives accommodate 250,000 consuming more? What are the rebound effects? people in 91,000 dwellings, which represents 30% of It is also necessary to conduct a close examination Quebec’s public housing).7 This category also includes of the environmental virtues promised by collaborative private storage services that enable the use of existing consumption schemes to see what the savings really are built areas and thus avoids the construction of dedicated in terms of natural resources. While the optimization of warehouses. ‘If 5,000 people offer a medium-sized use and reuse could certainly translate into a decrease in location for co-storage, which we hope will be the case the production of goods, an increase in product durability, within two years, then about 25 self-storage warehouses and goods that are easier to maintain, repair and recycle; will not have to be built. Or their locations be will be used conversely, optimized usage could simply equate to goods to build houses,’ said Adam Levy-Zauberman, founder of wearing out more quickly. To what extent would either of CoStockage. these scenarios occur? Are companies ready to provide CoStockage also operates a local service which enables more durable and repairable goods, to adapt to these new participants to store items at a neighbour’s property, usage conditions? rather than in a suburban warehouse, which involves In sectoral approaches, it will be useful to focus on new less vehicle usage - both at the time of putting items tourism practices to see whether the sharing economy into storage, but also during visits. Costockage estimates actually increases the number of trips taken, and thus the that trips are reduced by a factor of eight, along with the tons of CO2 emitted each year. corresponding decrease of CO2 emissions, thus avoiding In the finance sector, it is important to assess the impact more than 500,000 km travelled.Shared dwellings where of crowdfunding services on the polluting investments of several households share a common space also enable the banks (see studies by Utopie or Friends of the Earth), even sharing of the use of vehicles or certain appliances, limiting if this impact is likely to remain low for now. the consumption of natural resources, CO2 emissions and Finally, the question of models and their legal framework the quantity of waste generated. must also be addressed to best estimate the risks that may be created in terms of fiscal and social dumping. While Does the short-circuiting of food supply chains the sharing economy has been booming in France and contribute to the reduction of carbon emissions? around the world since the late 2000s, a better measure In May 2012, ADEME published a study8 that indicated of the induced effects on the environment and society is that this does not necessarily lead to lower greenhouse becoming essential to improve its support and inclusion gas emissions, for example if the means of transport are in public policies for sustainable development.

7. Antoine Bosse-Platière, ‘Bientôt des coopératives d’habitants ?’, Les 4 saisons du jardin bio, September-October 2010, n°184, p.63. 8. http://ademe.typepad.fr/presse/2012/05/consommer-local-cest- bien-mais-pas-toujours-.html

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Disentangling the debate on open access for meeting global challenges in life science

he open systems movement proposes legal and organizational Selim Louafi, arrangements to encourage resource exchange and increase the Research Fellow at potential for research collaboration and innovation. It is attracting CIRAD, Paris, France increasing attention from actors seeking collaborative solutions Eric Welch, to complex global challenges that cut across issues, agencies Associate Professor, and scales. The G8 effort to establish an open data initiative University of Illinois, Chicago, USA for food security provides a good example. As part of their joint commitment to addressing food security, the members agreed to ‘share relevant agricultural data available from G8 countries with African partners and convene an international conference on Open Data for Agriculture, to develop options for the establishment of a global Tplatform to make reliable agricultural and related information available to African farmers, researchers and policymakers, taking into account existing agricultural data systems.’ Other initiatives such as Science Commons, the Cambia Initiative, Creative Commons, Linux, InnoCentive, Collaborative Drug Discovery, the GeneWiki Initiative, Open Source Drug Discovery and the Open Source Seed Initiative have been pushed by various associations, governments and governance systems. Taken together these open initiatives are often considered in the business press, and by academic scholars, lawyers and policymakers to be at odds with proprietary regimes based on strong intellectual property rights (IPR).1 As it relies on the principle of cooperation to remove potential barriers to resource access, the open

1. A strong IPR system enables recognition of exclusive rights over creations. Such a system typically includes established legislation, a patent review structure and a court based enforcement mechanism.

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system approach is perceived to offer an alternative to competition-based strong IPR. This paper argues that the two systems do not necessarily conflict and are increasingly integrated in practice. It explores the continuum from purely open to purely exclusive. Additionally, the paper demonstrates that neither the open nor the strong IPR system considers the redistribution of returns for the use of resources in ways that address global inequities and that would demonstrate commitment to solving global problems such as food insecurity. To integrate the consideration of equity, even an open system would need to develop institutions that redistribute the benefits derived from use to a wide range of actors. The paper is structured as follows: the first part provides clarification of the multiple conceptions of open systems. The second part discusses the relationships between open systems and IPR and argues that any attempt to balance public and private interests in a dichotomous way elides a reality that is much better captured through a hybrid model that integrates open and proprietary systems. In this second section, we identify various parameters that could be used to describe a hybrid model. The third part develops these ideas through the specific example of the access, exchange and use of genetic resources for food and agriculture. The conclusion points to how proprietary and open systems might affect the redistribution of benefits from research that is increasingly of focus in the global context.

The multiple conceptualizations of open systems The concept of open systems captures a wide range of different concepts that creates considerable opacity around the meaning of the term open and confusion about how it is actually operationalized in actual initiatives. The differences among the terms open innovation, open data, open science, open access (OA) and open source are not immediately clear. Nor is it obvious how the concept of open system relates to the concepts of public domain or commons. Here we explain the origin of the concept and the contexts within which it operates instead of attempting to provide a single definition that encompasses all of the possible semantic variations. Historically, open systems are associated with the practice of science, an activity and profession recognized to value norms of sharing and reciprocal exchange. As the practice of science has increasingly integrated private sector partners and proprietary resources, norms of openness have been challenged, raising concerns about a consequential reduction in the production and dissemination of knowledge. There have been two general types of responses, one politically motivated and one economically motivated. The political response seeks to democratize access to knowledge by resisting the extension of monopoly and control over information. The economic response seeks to develop an alternative model in which open exchange of resources enhances production and innovation by taking advantage in particular, of rapid progress in digital information and communication technologies. We first describe briefly the open science system before turning to the descrip- tions of two responses, which we name the political model and the economic model, respectively (Figure 1).

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OPEN SCIENCE: A MODEL CHALLENGED BY THE ACTUAL INTERACTIONS BETWEEN ACADEMIA, INDUSTRY AND GOVERNMENT Open science refers to the longstanding tradition of openness that is embodied in the social conventions and practices of academic science. They are usually thought to comprise Mertonian norms of communalism (common ownership of scientific discoveries), universalism (claims of veracity that are independent from the specific attributes of the one presenting them), disinterestedness (new knowledge sought without any personal interest but purely for its own sake) and organized scepticism (importance of peer-review process) (Merton, 1973). By facilitating disclosure and diffusion of knowledge, these norms establish an incentive-based system that is conducive to cumulative knowledge production. Open science relies on a system of public (or coordinated) expenditures to reward those who contribute to this cumulative knowledge production over the long term (Mukherjee and Stern, 2009). This model has progressively been challenged by an evolution in the practice of science, particularly academic science. In general, these changes have resulted in greater emphasis on more applied and societally relevant research, and more interactive relationships between academia, industry and government. For example, research has shown that universities are increasingly involved in technology transfer and commercialization (McKelvey and Holmén, 2009) and active in a wide array of formal and informal collaborative relationships (Link et al., 2007; Grimpe and Fier, in press; Van Looy et al., 2004; Hall et al., 2001). These changes have been described by scholars through concepts such as Mode 2 science (Gibbons et al., 1994); innovation systems (Edquist, 1997); academic capitalism (Slaughter and Leslie, 1997); post-academic science (Ziman, 2000); and triple helix (Etzkowitz and Leydesdorff, 2000). Given the open science logic and its recent evolution, we observe two types of responses: the development of a political model through the open access and open data, and the development of an alternative economic model intended to take advantage of the new knowledge economy, through the open source and open innovation mechanisms.

THE POLITICAL MODEL: OPEN ACCESS AND OPEN DATA The open access movement promotes public sector values in a context of the increasingly proprietary environment for material and non-material resources of scientific significance. Open access advocates, mainly found in the academic sector, promote the removal of access barriers to academic research. This movement has gained importance with the rise of the Internet which dramatically decreased distribution costs. The open access movement originally sought to address problems of access to publications through circumventing obstacles to the sharing of information and promoting increased access to knowledge for subsequent research. Three major international initiatives on open access were launched by universities, libraries, journal editors, publishers, foundations, learned societies, professional associations and individual scholars in the 2000s: the Budapest Open Access

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Initiative2 in February 2002; the Bethesda Statement on Open Access Publishing3 in June 2003 and the Berlin Declaration on Open Access to Knowledge in the Sciences and Humanities4 in October 2003. While these initiatives strongly influenced the open access movement, their focus on publication outputs has overshadowed the issue of access to research inputs such as data, which are an essential ingredient of research and the objects of significant annual public investments (Arzberger et al., 2004). The recent push towards open data represents an extension of this open access movement to include data for research purposes. It aims to embrace the opportunity offered by information and communication technologies to make data produced by scientific research more freely available and usable outside the context of production. Data production and sharing is conceptualized as a driver for research rather than simply a component of research processes (Leonelli, 2013). As their main promoters put it, ‘The 21st century is currently witnessing the establishment of data-driven science as a complementary approach to the traditional hypothesis-driven method. This (r)evolution accompanying the paradigm shift from reductionism to complex systems sciences has already largely transformed the natural sciences and is about to bring the same changes to the techno-socio-economic sciences, viewed broadly.’5 The recent push by the G8 is also justified on the basis of a recognized growing need to systematically consider data access and sharing issues beyond national jurisdic- tions for the purpose of addressing global concerns. Finally, the open data movement has expanded to other categories of publicly- funded data and information, in particular government data, including data that has been produced or commissioned by government or by government-controlled entities and data which can be freely used, reused and redistributed by anyone).6 Although access to government or research data appears similar, the underlying tensions that constrain openness may differ. For example, restrictions on open government data may be due to privacy and confidentiality concerns but legal protection related to ownership rights may limit openness of research data. To summarize, the political model of open access has been applied to several objects including publications, research data and government data. This approach is political in the sense that it defines general principles but rarely prescribes how open access should be concretely implemented or managed. In this sense, the political model of openness designates consideration of access (with no price or permission barriers) rather than consideration of use as would be found in an economic model. Practically speaking, open access can be organized through various institutional means. By contrast, open source mechanisms, as described in the next section,

2. http://www.budapestopenaccessinitiative.org/ 3. http://legacy.earlham.edu/~peters/fos/bethesda.htm 4. http://openaccess.mpg.de/286432/Berlin-Declaration 5. http://www.epjdatascience.com/ 6. See http://opengovernmentdata.org/

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carry a more normative connotation for the entities in the sense that engagement and use must comply with legal and organizational rules meant to control behaviour and outcomes.

THE ECONOMIC MODEL: OPEN SOURCE AND OPEN INNOVATION Open source is the main mechanism by which the open systems approach is actually operationalized in various sectors. It proposes a model of production and innovation where barriers to the circulation of data, knowledge and material are lower due to safeguards that buffer the legal protections in a strict intellectual property rights (IPR) regime. Open source models originated in the software developer community to foster community-wide collaboration in a context of increased barriers created by copyrights. This system however was built upon open access practices that were established in the early days of software programming, when free distribution of source code was used as a strategy to encourage people to buy hardware (Weber, 2000). With the rise of personal computers, software turned into an extremely valuable and lucrative product and access to and use of it became protected by IPRs. These and other constraints led the community to revive the open access logic for source code. Two important initiatives established the foundation for the open source system: 1) the creation in 1984 of the Free Software Foundation by MIT researcher Richard Stallman and 2) the birth in 1990 of the free access Linux operating system by Linus Torvalds, a computer science student at the University of Helsinki. By contrasting the emerging proprietary (IPR)-based model, these two initiatives emphasized the process of software development rather than the software product (Weber, 2000). They insisted on the need to rely on the distributed, albeit coordinated, capacities of multiple participants to reach the modularity and complexity required for ongoing innovation. Concretely speaking, an open source model makes source code available to any user as long as the user promises not to appropriate it privately. The underlying rationale is to apply an IPR-based licensing strategy to establish a protected commons of accessible resources desired by the programmer (Samuelson, 2001). An open source licensee agrees to follow the same use rules that applied during acquisition when he or she transfers the source code to another user. In contrast to an open access approach, open source rules may restrict commercial use, including the creation of derivative work. The same concept has been used by the Creative Commons Initiative to provide creators with several licence options to promote openness and widespread use while protecting against misappropriation (i.e. proprietary claims on public information). Various conditions imposed on Creative Commons licences include: i) Attribution, which gives the user the right to distribute, remix, alter and build upon the work, even commercially, as long as proper credit is paid to the right holder; ii) Attribution- ShareAlike, which is similar to the open source software licences in that it gives the user the right to remix, alter and build upon the work even for commercial purposes, subject to proper attribution, and licence their new creations under identical terms;

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iii) Attribution-NoDerivs, which allows the right to redistribute the original work (with proper attribution), to commercial and non-commercial entities but does not allow derivative works based on the original; iv) Attribution-NonCommercial, which permits non-commercial use and derivative works do not have to be licenced; v) Attri- bution-NonCommercial-ShareAlike, which is a combination of cases ii and iv; and vi) Attribution-NonCommercial-NoDerivs, which is a combination of cases iii and iv.7 The extent to which open source models can be applied to other sectors, in particular agriculture or health, which may be encumbered by monopoly rights other than copyright is subject to debate. For agriculture and health, patent-based intellectual property (IP) mechanisms may not enable the same open source solutions as copyright-based IP mechanisms. Additionally, the requisite investments for research and innovation in the software sector may differ substantially from those needed in the agricultural or pharmaceutical sectors. Hence cross-sector application of the open source model is likely to be context dependent. In summary, this innovative legal arrangement has been designed to take advantage of the collaborative capacities of highly distributed networks of developers, testers and users motivated by strong personal stakes in ideas, processes and innovations (Rhoten and Powell, 2007). We find this same logic applies to the notion of open innovation, described in the next section, even though the open innovation approach does not incorporate a legal dimension and is not linked to an IP regime. Open innovation models have been developed in the business sector to describe a new way for companies to tap into resources (mainly non-material ones such as knowledge) that are found outside of their control. As noted in an OECD policy brief (2008), ‘companies look at open innovation as a close collaboration with external partners – customers, consumers, researchers or other people that may have an input to the future of their company. The main motives for joining forces between companies is to seize new business opportunities, to share risks, to pool complementary resources and to realize synergies.’ Prior work notes that firms that are not collaborative and do not exchange knowledge face long-term competitive disadvantage (Koshatzky, 2001). The open innovation model shifts focus further away from technology-push research efforts (Herstad et al., 2010) and emphasizes the importance of co-operation and collaboration efforts to increase research and development options. It recognizes that the source of knowledge is often external clients, suppliers, competitors and research institutes, while the locus of innovation can still be the firm (Enkel et al., 2009). Open innovation considers the movement of otherwise proprietary products and processes to others through licensing arrangements that enable faster innovation. It also encourages co-creation through partnerships (Vanhaverbeke et al., 2008). The trend towards greater open exchange of knowledge has been fostered by globalization which broadens ‘the choice of potential partners giving rise to the development of global innovation networks’ (OECD, 2008).

7. See http://creativecommons.org/licenses/?lang=en

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FIGURE 1 Open science: collaborative models of access to knowledge

Importantly open innovation is not equivalent to open access to knowledge or technology. Rather, it ‘may still imply the (significant) payment of licence fees between companies for intellectual property’ (OECD, 2008). Nevertheless, open innovation will require different IP considerations to those of closed IP systems (Chesbrough, 2006; Fauchart and von Hippel, 2008).

OPEN SYSTEMS, PUBLIC DOMAINS AND COMMONS This second part aims to clarify the context in which the several open systems concepts have been devised and the extent to which they have influenced a range of concrete initiatives. However, discussing in detail the relationships between the various conceptualizations of open systems and the notions of public domain and commons is outside the scope of this paper. Nevertheless, it is important to note that in the same way as there are multiple open systems, there are several conceptions of the public domain and the commons.8 What matters for this paper is the following general observation: concepts of open science, open access or open data are close to the notion of public domain in the sense that they promote access without any

8. See, in particular, Pamela Samuelson (2006) for a detailed presentation of 13 different conceptions of public domains.

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restriction to resources. The concepts of open source and, to a lesser extent, open innovation are close to the concept of commons: they carry some ‘private-collective’ features (von Hippel E., von Krogh G., 2003) where rules of access and sharing are agreed within a specific group of players and some restrictions may apply. The cost of entry into this group may not necessarily be high but it involves agreeing to these rules.

Relationship between the various conceptions of open systems and IPR As previously noted, the line between public and private sector research is becoming increasingly blurred as the three primary sectors – academia, government and industry – are increasingly collaborating, sharing knowledge and co-developing new innovations. New entrepreneurship norms and social practices have appeared in the academic sector9 and all three sectors have sought to build collaborative relationships. Within this evolving institutional context, new open systems are being adopted and integrated as means of addressing either the tenets of the political model or the recognized advantages of the economic model. Given the complex institutional environment, it is reasonable that open source relies on IP rights and licensing terms to establish open systems, while open access endeavours maintain a flexible approach to the systemic inclusion of IPR. We show in this section that a clear separation of open and proprietary interests elides a reality that is much better captured through hybrid models of interconnected open and proprietary visions.

THE FALSE DICHOTOMY BETWEEN OPEN AND PROPRIETARY VISIONS It is common to consider (material and nonmaterial) resources to be either in open access or privately held. In reality, governance of these resources is better described as a continuum where purely open access and purely private control are two end points. At the open access end we may find government-funded agricultural genebanks that provide seeds or other genetic resources upon request, free of charge, and with no restrictions on use. At the other extreme, knowledge about the function of a genetic marker for a type of livestock breed is privately held. In between, some open access resources may carry some restrictions – shown as differentiated open access rules in the previous section – and some kinds of IPR protection may offer greater access to valuable information than would otherwise occur. Moreover, firms may promote open access to resources as a strategic means of decreasing access and input costs. This could occur when health or cosmetic companies decide to discourage proprietary claims over traditional knowledge or genetic resources that were previously recognized to be freely available in the public domain. Open source models have also an intricate relationship with IPR. Open source

9. Rodriguez provides evidence showing examples of these changes in terms of ‘entrepreneurial universities, academic spinoffs, consultancy functions of professors, recruitment of PhD candidates or post-docs to develop research lines already set up by sponsors, intellectual property rights, licensing, project proposals and grants, directed programmes, university– industry collaborations, global networks, interdisciplinary centres and teams, research performance evaluations and so on’.

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models promote public domain values through the use of sophisticated institutional and legal arrangements borrowed from IPR and contractual law. As pointed out by Samuelson (2006), ‘…open source licences allow a far broader range of uses than most proprietary software licences, yet they are, as compared with wholly free IP-information resources, much more restrictive.’ Although open source models are aimed at serving public accessibility, the IPRs and licence terms on which they are built still incorporate significant restrictions and demands on users. This situation could become cumbersome when multiple open source models operate simultaneously, such as when scientific research requires integration of various datasets containing data that do not share the same restrictions. This is of particular concern for large, interdisciplinary, global scale projects. In effect, complying simultaneously with various open source legal conditions may create barriers that lead to less openness rather than more; the opposite of what was intended. By contrast, the pure public access approach allows the combination and integration of different resources without concern for legal status. Several open source initiatives have tried to respond to the problem of data integration by integrating public domain concepts. Examples include the Public Domain Dedication and License (PDDL), the Science Commons Data Protocol and the Creative Commons Zero (CC0) licence. As one conceiver of the CC0 licence puts it (Nguyen, 2008), ‘the solution (…) is to return data to the public domain by relinquishing all rights, of whatever origin or scope, that would otherwise restrict the ability to do research (i.e., the ability to extract, re-use, and distribute data). The goals of the Protocol are to keep data open, accessible, and interoperable, and its virtues lie in its simplicity, predict- ability, and consistent treatment of users and data.’ This public domain solution, where no rights are reserved for the data providers, may solve problems of data integration but it also generates new ones in relation to potential disincentives to contribute to the public domain due to lack of proper attribution and fear of data integrity loss. Ironically, the situation ends up where, as noted by Rhoten and Powell (2007) ‘just as IP law can be viewed as an impoverishment of the public domain, openness and access can dampen incentives that allow innovations to be created and incorporated into the public domain’. In summary, conceptualizing open systems as the opposite of proprietary regimes is misleading. Rather, there exist combinations and composites that establish rules for access, exchange and sharing of resources for research and innovation. More than a continuum within a single dimension, it might be more appropriate, as described in the next section, to refer to a spectrum that unfolds in several dimensions.

BEYOND ‘OPEN SYSTEMS VERSUS PROPRIETARY REGIME’ The debate between open and proprietary visions focuses almost exclusively on the accessibility dimension in relation to the legal status of resources. However, exchange of resources takes place in a broader collaborative context that involves other equally important dimensions such as: mm The incentive structure which determines who establishes the open system, what

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the system goals are, who contributes to it, what the motivations are to contribute to it, and who pays for its maintenance over time. mm Resource characteristics including the type of resource exchanged: data, information, knowledge, material. mm Structural constraints and opportunities such as the availability of contingent information about the resource, distribution or concentration of the resource, and feasibility and channels of access. mm Organization and institutional considerations such as whether the decision and control structure is hierarchical or distributed and the amount of discretion and control entities have for distribution, monitoring and tracking of exchange and use. mm Redistribution considerations that address the benefits from the use of resources including: the types of benefits, how benefits accrue, who governs allocation or reallocation of benefits, and commitment to redistribution to address broader goals such as social equity, economic capacity, food security and environmental conservation, among others. These dimensions recognize a complex context of exchange in which tensions arise between equity and efficiency goals, exchange based on explicit rules versus exchange based on reciprocity and trust, relationships, and reliance on market mechanisms versus regulatory mechanisms to induce contributions, to name a few. The ways these tensions are addressed define various points that are part of hybrid models for resource exchange in research and innovation.

Towards hybrid models of research and innovation – the case of genetic resource access and use Looking ahead to the near future, it is possible to consider the various models presented in this paper as the basis for more complex hybrid models that integrate institutional actors, norms of access and openness, proprietary constraints on resource inputs to research, innovation strategy and technological change, equity and redistribution of benefits, and collaborative organizational solutions to global problems. Yet almost any hybrid model demonstrates several inherent tensions. First, the norms of open science are steadily interacting with proprietary institutions as universities, companies and governments seek to encourage greater societal benefits from research. Second, open systems approaches are recognized to be both of strategic advantage and political import, yet there is an evolving modulation of openness and proprietary rights to simultaneously balance the value available to multiple stakeholders. Third, new international policies seek to both stimulate effective use of resources to solve complex problems and protect the private and intellectual property rights of multiple stakeholders. Yet, governments and stakeholders disagree on how to value the trade-offs. These inherent tensions are resulting in the creation of hybrid systems of research and innovation that seek to satisfy multiple objectives. While it is too early to assess the effectiveness of hybrid systems, the implementation and operationalization of one example – the access and benefit

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sharing policy established in the Nagoya Protocol to the Convention on Biodiversity – provides a good case in point.

ACCESS AND BENEFIT-SHARING IN THE NAGOYA PROTOCOL TO THE CONVENTION ON BIODIVERSITY The Access and Benefit-Sharing regime for genetic resources was set up under the Convention on Biodiversity and further negotiated under the Nagoya Protocol in 2010. When it comes into force, it will require nations to set up procedures for access and rules for the fair return on the use of genetic resources that comply with the protocol. Member nations will be required to enforce the provisions of the Nagoya Protocol in their own nations. At its core, the new context shifts control of genetic resources away from researchers in all sectors and into the hands of new government institutions. Depending on the formulation of the new organizational structures developed at the national and sub-national levels, receivers and providers of genetic resources will realize new constraints on and opportunities for access to genetic resources, which will necessarily effect distribution of the material and the ability to collaborate on research. The value and availability of the resources will also be affected by contingent structures such as the data, information, natural environment, concentration and other factors related to the genetic resource. The incentive structure represents a combination of open access and property rights. Signatory countries agree to facilitate access to genetic resources by individuals in other countries for research and other non-commercial purposes. Access is not truly open as receivers of genetic resources are required to seek access through a transparent, government approved process. Should the intended use of the genetic resource include commercialization, an agreement is required to share the benefits of commercial success with the provider country. Hence, the policy seeks to simultaneously encourage access and preserve property rights. The resource characteristics covered by the access provisions relate only to genetic resources, while the redistributional considerations concern the benefit sharing provisions. As benefits could be either monetary or non-monetary (data, information, training, etc.), it is possible for countries to receive educational resources that contribute to capacity development as a result of a successful innovation based on a nationally-held genetic resource. Given this new policy context, it is likely that multiple hybrid systems will develop to respond to and seek to strike a balance between the different tensions described above. The following two options provide alternatives that serve as heuristics for the characteristics of two future hybrid systems.

HYBRID SYSTEM 1: A CONSTRAINED OPEN SYSTEMS APPROACH This trajectory represents a continuation of the integration of the three types of institutions – university, government and industry – in which genetic resources are obtained and used on a research project or programme basis. Access is facilitated for specific purposes and use is dependent upon explicit formal agreements on benefit sharing. This hybrid is likely to produce a greater concentration of resources, a

A PLANET FOR LIFE 155 greater application of property rights that control material and data flows, potentially greater regulatory burdens and likely increases in transaction costs related to materials and data. This hybrid leads to a perspective of an increasing closure of the knowledge production and innovation system in which private property rights increasingly dominate and commercialization goals increasingly permeate the university-government-industry alliance. This closure eventually constrains exchange and collaboration among groups or clubs of researchers that depend upon membership restrictions and joint capacities to access valuable resources. Flows of data and materials are strong within clubs but not necessarily between clubs where information flow is more controlled and based on strategic advantage. This hybrid favours a competitive approach in which groups or clubs compete for solutions to global problems that have both proprietary and public goods outcomes, but where distribution and redistribution of benefits from the use of materials are highly formalized. For such a model to address equity, specific arrangements need to be made to ensure improved access to the gains arising from shared resources and commitment towards activities that maximize global welfare. In sum this approach favours a relatively strong application of property rights and a more constrained open systems approach.

HYBRID SYSTEM 2: A STRONGER OPEN SYSTEMS APPROACH This hybrid calls for a greater distribution of resources and capacity. It responds to the structural constraints that limit the ability of the first hybrid model to address major problems at a global scale. It recognizes that the combination of distributed technology and skills across all countries and the inherent stickiness of information and materials bring about a distribution, rather than a concentration, of research and innovation capacity and control of research inputs. It assumes an increasing awareness by scientists about their responsibilities towards global problems, equity considerations and balance of needs across countries. In addition, scientists increasingly receive credit for a broader array of benefits (monetary and non-monetary) for access to and use of materials. This hybrid takes advantage of the information and communication revolution that enables greater exchange of information, greater distributed capacity development, and reduced need for exchange of materials. This hybrid assumes that there will be numerous repositories of valuable biological materials and data, an increased desire to control materials locally, and a stronger local strategic approach to carefully manage the exchange of materials for non-monetary returns that benefit local capacity. Scientists will depend upon distributed sources of materials and information. Clubs or groups of scientists for multiple sectors will exist, but the barriers to entry are low and movement of human resources across them is easy. Additionally, global problems are varied enough – across fields of health, agriculture, environment – and local capacities broad enough, that membership of clubs is more fluid. This hybrid favours a stronger approach to ensuring an open system and creates greater interdependencies and greater recognition across all actors, such that exchange,

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research and innovation all take place on equitable terms. Scientists in all sectors are recognized for educating, training and providing other non-monetary benefits when accessing and using genetic resources. In this hybrid, property rights on genetic resources are still recognized, but they are activated further downstream, when commercial intent is clear and products or processes are more developed. As a result, property rights on genetic resources do not dictate collaboration structures or drive research processes. In terms of redistribution, emphasis is put on reinforcing the institutions in charge of ensuring effective use of shared resources by stakeholder groups and countries that are less endowed, and on valuing more reciprocal behaviours in order to strengthen the long-term cooperative capacities of stakeholders.

Conclusion Open systems describe a variety of collaborative approaches that focus on improving access to resources that are becoming increasingly protected by proprietary claims. These approaches recognize the collective nature of research and innovation processes and open them up to new actors that are not usually included in research collaboration models. However, the over-emphasis in OA discussions on the accessibility dimension runs the risk of developing what Chander and Sunder (2004) refer to as the romantic vision of the public domain: ‘the notion that when a resource is open to all by the force of law, all will be equally able to exploit it.’ Certainly, open systems do not empower all actors in the same way. In fact, effective use of open systems requires pre-existing infrastructures, knowledge and skills that are most likely to be found among the wealthier or higher capacity entities (e.g. research organizations, countries or stakeholders). Consequently, establishment of an open system of exchange does not solve the equity issues most often associated with IPRs. Inattention to the redistributional dimension could result in significant drawbacks that could potentially alter the ways in which various stakeholders engage in research and innovation processes and result in limitations on the sharing of resources. Redistribution goals and structures are critical factors affecting research that require collaboration among multiple actors that have different objectives and capacities. This chapter has presented two stylized hybrid models that offer viable future trajectories for research and innovation. They borrow elements to both open and proprietary systems and combine them differently to propose an institutional framework in which several actors could collaborate to contribute to global challenges. Both models integrate accessibility and redistribution issues within a broader cooperative framework. However, the way each addresses the redistribution dimension differs fundamentally. The second hybrid model adopts a human capabilities approach by improving research and innovation capacities of the widest range of actors. By promoting a club approach, the first hybrid model is less concerned with increasing participation to research and innovation processes. It rather focuses on privileging efficiency for the delivery of socially productive outcomes (i.e. global goods and services that are of interest to all). ❚

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CHAPTER 8 Open source software: a social and economic innovation

Gaël Depoorter, PhD candidate in Political Science CURAPP-ESS UMR 7319, CNRS, Université de Picardie Jules Verne, Amiens, France

A short history of free software, traded tips and created patches; these groups, he open-source movement has its roots in the which were more or less formal, were also a guarantee 1970s cyberculture of the West Coast of the of loyalty (Mounier-Kuhn, 2010). At the time, the cost of United States. Also referred to as Free/Open materials was far too high and software far too unstable to Source Software (FOSS) or Free/Libre/Open be marketed. Then, from the late 1970s, the more rigorous Source Software (FLOSS), the open-source application of copyright, as well as the emergence of a Tmovement arose out of a syncretic paradox (Turner, specific market, put an end to these early flexible, open 2006), between countercultural ‘New Communalists’ (or collaborations. hippies), public research and industry. Cyberculture trans- Those pioneers may have paved the way for democratic formed information technology, which had until then been access to computers, but proponents of free access today perceived as a centralized mechanism for social control have taken up the mantle, providing free, universal use and repression, into a tool for emancipation, autonomy, of high quality, customizable software. The free software universal communication and freedom. At the cutting movement is not interested in promises for the future; the edge of this technological avant-garde was the figure of open-source community works on concrete accomplish- the hacker (Levy, 1984), a self-taught computer fanatic, an ments that are in effect today. enlightened enthusiast, whichwho would become the driving force for technological and social innovation. Mapping the open-source movement The big information technology corporations could not Richard Stallman, recognized as the founding father of have imagined that there would one day be a market for the free software movement, came out of hacker culture personal information. In 1977, Ken Olson, president of (and has been dubbed ‘the last hacker’ [S. Levy, op. cit.]. Digital Equipment Corporation, was unequivocal: ‘There Stallman was able to mobilize hundreds of thousands of is no reason for any individual to have a computer in his professionals and safeguard an approach to computing home’ (Gayer, 2003). The information revolution of the based on sharing, exchange and hacking. In 1985, he 1990s and 2000s – the Internet, personal computers created the Free Software Foundation to promote a and so on – was born in the cyberculture and hacker software suite that was free to use, trade, modify and study. circles of the Homebrew Computer Club, at Resource By creating copyleft licences in 1989 (the GNU General One, at Community Memory and at the People’s Computer Public License), Richard Stallman and Eben Moglen Company. In 1976, Steve Jobs and Steve Wozniak, who provided users and developers with basic legal protec- were regulars at the Homebrew Computer Club, created tion. Copyleft also allowed open-source programs to be the first personal computer, the Apple I. For years, the in competition with proprietary software that was subject industry remained reliant on user groups that improved to copyright – that is, programs of which the code was

A PLANET FOR LIFE 161 FIGURE 1 Efficiency, collaboration and ethics: open source projects

not a public text, collaboratively developed and modified, individuals, and even to ‘free subjectivities’ (Cardon, 2010), but rather protected by single companies or designers. the open-source movement demonstrates that the Internet The source code of software is in some ways its recipe, can also lead to the creation of true cooperatives, innova- allowing a program to be reproduced. First written in a tive and sustainable, based on shared values. Hackers tend comprehensible programming language, the code is then to be the somewhat skewed public face of the ordinary, compiled by a computer program that translates it into practical operations of the movement, which in Europe binary code (consisting of zeros and ones), which can only comprises several hundred organizations, and which hold be understood by a computer. Open-source software is many annual away from keyboard (AFK) meetings, public provided to users with its code, while proprietary software demonstrations and direct collaborations. In the hacker code remains a trade secret. Purchasing proprietary world, computer science students and professionals meet software does not in fact make the user its owner; the retired buffs, devotees and activists. Each finds his or her user only purchases the right to use the software for a fixed place and role according to their level of commitment period. While the economic model for proprietary software and technical expertise. Not all members of this commu- is scarcity, open-source software operates on the principle nity share the same ideas, or the same motivations, but of abundance. The more users study and scrutinize source all are partners in the ‘largest collaborative project in the code, the more errors will be found and addressed – what history of humanity’ (Torvalds, 2010). The enduring focus is referred to as Linus’s Law. on technical matters, on minimal consensus and ethical While the Web is often praised for its ability to connect fundamentals, along with the industry’s dynamic economy,

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FIGURE 2 The growing European open source market of its research and development; in 2008, Sun Microsys- tems purchased an open source competitor for one billion dollars; and Google, by basing its development strategy on open source, benefits from the work of thousands of volunteer developers. This top-down market perspective should not obscure the possibilities open source offers to so-called ordinary users. Freed from licensing costs and supported by shared, socialized R&D, some programmers are able to partake of an extremely competitive market by offering services around one or several open source programs or by devel- The open source market, valued at approximately E 10 billion, is oping new software. Open source software allows smaller seeing considerable growth in Europe and particularly in France. players, with more limited financial capacity, to enter the market; they also open new, intermediate or restricted tend to keep tension and contradictions at a minimum. markets, notably in home technology services, for which Open source software has become a credible alterna- proprietary licence prices have kept profit margins low. tive to proprietary programs. Although Microsoft maintains Free software also broadens access to employment by an overwhelming share of the workstation market, open providing a range of possible knowledge and the means source software has cornered digital infrastructure to acquire those skills. (servers) and mobile telephones (in 2013, Android was the operating system on 75% of mobiles). Open source Open source software and sustainable software is used by millions of users (Firefox, Open Office, development Android, Apache) and in contracts to furnish ministries, The ease with which it has become possible to partici- cities, major firms, etc. The global open source market is pate in software development, and the proximity of the worth a huge amount of money – €10 billion in Europe in open source world to the community and to popular educa- 2010 (PAC, 2010) – and is growing each year (Benchmark tion have pushed the open source movement since its 2). Red Hat, the first open source software company, has inception to pay closer attention to the digital margins: the global revenues of more than a billion dollars. In 2011, issue of access for individuals with barriers or handicaps, France, the most rapidly evolving country in the world for which has been the focus of specific developments, or free software, open source programs accounted for 6% translations into numerous and sometimes less common of the total software and IT service market, approximately languages are two examples of this outreach. Ecological €2.5 billion (PAC, 2012), with considerable annual growth concerns have also proven compatible with open source since 2007. issues, perhaps due to a shared suspicion of technological This trend has pushed the traditional mainstays of the one-upmanship. Broad distributions of Linux ensured that software industry to re-examine their strategy, and these this operating system could function on old machines, companies now hover between instilling fear in potential with few resources. Entire organizations are devoted to users, notably regarding legal security and professionalism redistributing used computers with free software. Whether – through a technique called Fear, Uncertainty, and Doubt in more developed countries or in emerging economies, (FUD) – and making more or less significant forays into the these tools afford lower-income groups access to infor- open source market. Microsoft has made several attempts mation technology. by partially opening certain source codes; IBM has invested The open source movement has grown to truly global several billion euros in open source software since 2000, proportions; the community is particularly vibrant in Tunisia competing with Redmond Software and outsourcing part and more generally in BRICS group countries, in South

A PLANET FORA LIFEPLANET163 FOR LIFE 163 FIGURE 3. Open source use around the world

The use of open source software varies considerably from one country to the next but is increasingly gaining ground, notably in less developed countries.

America, India and South Africa, for instance (Benchmark source movement are the development of digital security 3). Yet while the skills and the software are freely available, tools, the necessity of which has been amply demonstrated it is extremely difficult to orchestrate spontaneous self- by the events of the Arab Spring and the Edward Snowden training for populations from regions without education leaks (GPG, Tor, Cryptocat or Tox, Disconnect, Anonymox, systems or relatively professional infrastructure. HTTPS everywhere, Riseup, Owncloud, etc.). In terms of digital security, opening up source codes Open source software and security leads to improved security, and at least greater transpar- Over 30 years, the now global open source commu- ency. Thanks to the recent revelations by Edward Snowden nity has successfully deployed cutting-edge expertise, regarding PRISM, the American National Security Agency ultimately resulting in universally accessible and adeptly (NSA) surveillance system (only one among many such wielded information technology tools. The movement today programs this administration uses to control the network of is facing a network that is subject to more control and networks), there is now proof as to the existence of cookies surveillance then ever (whether by political or economic and backdoors that are used in software and throughout bodies), but remains one of the few civil and technical networks, to provide sensitive information to corporations ‘organizations’ able to defend individual rights and (such as Microsoft, Apple, Facebook, Amazon or Google) or freedoms on an international scale. While this defence governments (in this case the United States, but more than can be manifested politically, the strengths of the open likely all the major industrialized states have developed

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their own means of digital data collection), and which allow and controlled universally, it would seem that the open direct access to individual computers. Whether their data is source movement will move on to widespread access to used for industrial espionage, political control, surveillance security tools, the dissemination of digital culture, and and repression of deviant users or to develop extremely the development of decentralized storage and services in detailed consumer profiles, ordinary Web users are begin- keeping with the movement’s principles of freedom and ning to realize the extent to which their online activity is individual and collective control. examined, collected, analysed and sold. The myth of cyber- In response to the broad notion of cyberwar, the FLOSS space, of the wild new electronic frontier, is the myth of movement will have to set a diametrically opposed course, impervious anonymity; the reality is the absolute opposite. for cyberpeace (Zimmerman, 2013). The protected source codes of proprietary software forces users to agree to relinquish their personal data, REFERENCES and prevents any possibility of controlling the type of infor- Cardon D., 2010, La démocratie Internet: promesses et limites. mation sent to corporations and authorities. Seuil, Paris. Gayer L., 2003, Le voleur et la matrice. Les enjeux du ‘cyberna- tionalisme’ et du “hacktivisme”. Question de Recherche CERI Conclusion (9): 2003. Protected by legal licences, supported by the dynamic Levy S., 1994 [1984], Hackers: Heroes of the Computer Revo- lution. Dell Publishing, Broadway, N.Y., 2nd edition, 1994 economics of the information technology sector and driven [1984]. by a complex and changing network that provides access Pierre Audouin Consultants, 2010, Le logiciel libre ne connaît to pertinent expertise, the open source software movement pas la crise (study). continues to ensure the democratization and openness of Pierre Audouin Consultants, 2012, Open Source France 2012 the digital world. Whether in robotics, in home automation, (study). Mounier-Kuhn P.-E., 2010, Les clubs d’utilisateurs: entre syndi- telephony or 3D printing, FLOSS is both experimenting with cats de clients, outils marketing et ‘logiciel libre’ avant la lettre. and defining the future of software. Entreprises et histoire 3 (60): 158–169. Open source work on access and mastery has shifted Torvalds L. and Diamond D., 2001, Just For Fun: The Story of an Accidental Revolutionary. Harper Collins, 2001. with the times: from the development of personal Turner F., 2010, From counterculture to cyberculture: Stewart computers to the design of programs that can be used Brand, the Whole Earth Network, and the rise of digital utopian- ism. University Of Chicago Press. Zimmerman J. and Bayart B., 2013, Closing conference, Capi- tole du Libre.

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CHAPTER 9

The public policy of sustainable development: innovation for a real utopia Energy transition: ‘one of the few areas where utopia 1 Lucien Chabason, can be a major mobilizing project’, Andreas Goergen, 2013 Institute for Sustainable Development n the proper sense of the word, a utopia is an intellectual construct of an ideal and International civil society. According to Régis Messac, it is the representation ‘of an ideal Relations, Paris, France world where all troubles and wrongs of the present society have been solved and rectified’. Viewed in this way, sustainable development can be classified as one example of a utopian vision. Indeed, the concept of sustainable development describes a society that is economically prosperous, environmentally protected and socially equitable, the governance of which involves all concerned groups on the basis of shared principles. In all respects, it is indeed a modern utopia, but a utopia that Ernst Bloch would have described as concrete, insofar as it requires radical changes, such as changes in modes of production and consumption, or our relationship with energy, and also that many Iof these changes are required urgently in our everyday economic, political and social lives, while others can occur more gradually. Historically, it is rare for states to attempt to implement utopian intellectual constructs. Yet this is the objective of sustainable development. Every UN member state has adopted the Rio Agenda, the Action Agenda of the Johannesburg Summit (2002) and more recently, the World We Want document (2012). The latter provides a terminology with a flavour of utopia in a world that is otherwise dominated by market forces, whether of goods, services or capital, which is unsuitable for the

1. Andreas Goergen, Director at Siemens-France, quoted in Le Nouvel Observateur, No 2,563 from 19th December 2013

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political constructivism that the document’s title suggests. The adoption of these agendas requires each country to strive to address sustainable development through its public policies and to make it the dominant and structuring inspiration. The UN system and its components, as well as the regional organizations, are also facing this requirement. It is this very ambition that sometimes creates doubt over the realism of the sustainable development project. Is it possible to believe that countries and the international organizations they have created could advance in a controlled manner towards the resolution of existing conflicts, enabling societies to edge closer to a harmonious world that is reconciled with nature? The specificity of sustainable development as a type of concrete utopia is the presence of states at the heart of its implementation, which is unlike many other utopian visions that would develop against, alongside or even without the action of states. However, sustainable development should represent a radical change in the paradigm, the political vision and also in practices. Through its integrated, systemic, holistic, participatory and inclusive approach, to cite some of terms commonly associated with it, sustainable development aims to make decisions based on multi- disciplinary analyses that Edgar Morin has for a long time been calling for.2 To design, plan and implement public policies for sustainable development is clearly a significant challenge that requires political innovation at three levels: the overhaul of public institutions, the invention of new decision-making processes and the adoption of new types of public policy instruments. This chapter discusses examples from three geographic scales: a country, France; a region, the Mediterranean; and finally the global level where the UN and its agencies act.

Institutional innovations for sustainable development Elinor Ostrom, professor of political science at Indiana University and recipient of the 2009 Nobel Memorial Prize in economic sciences, stressed the importance of institutions in the management of common pool resources. How should institutions be designed so that instead of reproducing the fragmentation of interests and aspirations within them, they could enable an integrative and systemic approach? An approach that bureaucratic systems have a tendency to suppress.

INSTITUTIONS OF THE FRENCH FIFTH REPUBLIC AND THEIR CONSIDERATION OF SUSTAIN- ABLE DEVELOPMENT In France, the highlight of institutional innovation for sustainable development was in the formulation of the Ecological Pact during the 2007 presidential election. Inspired by the Ecology Watch Commission of the Nicolas Hulot Foundation, this pact proposed: ‘the introduction of a vice prime minister into government architecture, who would be ranked at number two in the government, with overall responsibility

2. ‘Political reform alone, economic reform alone, educational reform alone, life reform alone, have been, are, and will be, doomed to failure. Each reform can only progress if others do. Reformation pathways are correlative, interactive, interdependent.’ Edgar Morin, La Voie-Pour l’avenir de l’Humanité, 2011

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for sustainable development and a dedicated administration’ (p. 44), a role that would be separate from the minister of ecology. The vice prime minister would be responsible for préfets. According to the Ecological Pact, this step would serve as a ‘symbol, a guarantee and a keystone’. The point here is not only to affirm the supremacy of sustainable development as a priority for public policy, but also to position its support at the highest level of coordination and arbitration. Through this objective, the proposal aims to address a classic question within the French Fifth Republic, namely that of the management of horizontal policy issues, which involves, to varying degrees, the entire government. Traditionally, two institutional techniques could enable this objective to be achieved. The first technique is to assign an assistant minister – known as a delegate minister – to the prime minister, who is given responsibility for a broad range of issues. The delegate minister participates in the organization and coordination of the prime minister on matters in the field in question. This institutional and political approach has been tried and tested by the French Fifth Republic. However, from the perspective of the Nicolas Hulot Foundation, this option would not have attributed a sufficiently prestigious title to the position it was seeking to introduce, since a delegate minister has a lower rank than a full minister in the government hierarchy. The second option – which is less political – is to create a body that supports the prime minister by providing momentum and coordination, although one that lacks proper arbitrational powers, which remain with the prime minister. This solution was implemented in the post-war period, with the creation of the Commissariat Général du Plan and again in 1963 with the Inter-ministerial Delegation for Territorial Planning and Regional Attractiveness (DATAR), two organizations that were effective and prestigious.3 However, these institutions belonged to an era of stable, powerful and respected technocracy: a situation that clearly no longer exists. Nevertheless, the fact remains that this institutional solution still looks the most appropriate. The French presidential candidates of the time endorsed the bold proposals contained within the Ecological Pact during a public signing ceremony. Yet they both knew that the institutional innovation required for the creation of a deputy prime minister could not be implemented by the government system that had been in operation since 1958. There was a risk that such a proposal could cause disorder at the top of the state, where a diarchy existed. In addition, it was futile to attempt to take away the direct supervision of the Corps Préfectoral (state representatives responsible for department subdivisions) from the minister for home affairs. It is also striking that Dominique Bourg (2011), a member of the Ecological Monitoring Committee that proposed this reform, admitted in his book Pour une VIe république écologique (For a sixth ecological Republic) that it would mean ‘running

3. The Commissariat général du Plan was a French institution, existing between 1946 and 2006, with responsibility for economic planning. DATAR is an inter-ministerial administration that oversees the state’s territorial planning policies and supports economic change by focusing on an aggressive approach to competitiveness.

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the risk of governmental cacophony... or reducing the function of the vice prime minister to that of a communication device’. The innovative proposal contained within the Ecological Pact has therefore been reduced to the creation of a minister of state in charge of ecology, energy and sustainable development, ‘thus diverting the flagship proposal of the Ecological Pact’ (Bourg, op. cit.). Indeed, even the largest possible ministry, headed by a minister of state, would not be able to cover all sustainable development issues; in addition, it would not have any powers of coordination or arbitration vis-à-vis other ministries, such as agriculture or finance for example. Consequently, the very concept of a sustainable development minister is questionable. The entirety of government must support this issue, driven by an organizational structure that is close to the prime minister. It is therefore logical that in his recent proposals, Dominique Bourg has abandoned the Ecological Pact project to explore the pathways offered by other institutional innovations that would enable a detachment from everyday life to provide the opportunity to better address the long term, such as a president without operational responsibility but who would oversee matters that relate to the long term and the common good. This concept is akin to a republican version of the constitutional monarchies of Scandinavia and The Netherlands. In addition to this executive-scale innovation, Dominique Bourg has proposed innovations at the legislative level, suggesting the creation of a chamber, an Assembly for the Long Term, which would have the right to veto legislation, a chamber composed of scientists and environmental experts, appointed from a list of suitable candidates. This chamber could be connected with a collège du futur (an institute for futures studies) that would be made up of independent researchers. Marcel Gauchet has criticized these options, disagreeing with the idea that democracy is unable to take the long term into account, and has expressed his distrust in the possible erosion of representative democracy in favour of appointed experts, describing this approach as an ‘institutional illusion’ (Gauchet, 2011). Nevertheless, in terms of sustainable development, it seems in France that the time for institutional innovation has now passed. With the creation of the Environmental Conference in 2012, it is the prime minister, in accordance with the most classic structural formations of the French Fifth Republic, who assumes the role of the coordinator and arbiter of government action in this area as in others: it is he or she that defines the government roadmap produced by the conference; he or she who signs the letters outlining the framework for each minister; and finally it is he or she that accounts for the implementation of the latter. Thus the governmental system can support sustainable development without the need for an institutional revolution.

REGIONAL INITIATIVES The UN’s Agenda 21 and the outcome document of the 2002 Earth Summit have prompted the regional authorities to take sustainable development into account. The UN responded by mandating the UN Regional Economic Commissions. This

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is a logical approach insofar as, in the wake of the Economic and Social Council (ECOSOC), the Regional Economic Commissions have the vocation to address economic and social issues at the regional level, which is a classic UN approach. Innovative initiatives have, however, been adopted for the building of common strategies for sustainable development in regional frameworks that were considered more appropriate: this was the case for the Baltic Sea States (the Baltic 21 sustainable development network) and the Mediterranean (where in 1996 the contracting parties to the Barcelona Convention established the Mediterranean Commission on Sustainable Development). The EU has also attempted to build its own sustainable development strategy by adopting the Gothenburg strategy in 2001, which was revised in 2005. It is striking to note, however, firstly that this strategy was not linked with the Lisbon strategy, which was adopted in 2000, revised in 2005 with a horizon of 2010, which sought to make the EU ‘become the most competitive and dynamic knowledge-based economy in the world’ and secondly that the Gothenburg strategy will not have any results or follow up. The EU did not seek to use the issue of sustainable development in the production of political and strategic innovation. From an institutional point of view, sustainable development has no visibility.

FROM THE UN COMMISSION FOR SUSTAINABLE DEVELOPMENT TO THE HIGH LEVEL POLITICAL FORUM At the overall level of the UN, the emergence of sustainable development did not initially generate institutional innovation. After the 1992 Rio Conference, the UN established, in a very classical manner, a subsidiary body called the Commission on Sustainable Development, which was attached to the ECOSOC and had only a relatively low status (a fact borne out by the lack of institutions and economic ministries involved). The work of the Sustainable Development Commission was dominated by environmental and natural resource issues but without much added value. It was significant that the Millennium Development Goals (MDGs) initiative that was launched at the Millennium Summit in 2000 took place without any links to the UN’s Commission on Sustainable Development and only partially integrated sustainable development indicators. It was only after Rio+20 that the question of MDG integration with future Sustainable Development Goals (SDGs) was directly raised in a post-2015 context. The Rio+20 summit officially admitted the failure of the Commission on Sustainable Development. As a replacement, it was decided to create a High-Level Political Forum which – and this is a true innovation – would be linked with both the General Assembly and the ECOSOC, enabling sustainability issues from then on to be addressed in a political, social and economic framework. The High-Level Political Forum, which met for the first time on 25th September 2013, therefore presents itself as an original construction in the UN framework. Only time will tell under what conditions it will fulfil its ambitious mandate.

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Searching for innovations in the decision-making process Among the innovations required for sustainable development is to ensure a major role for the principle of stakeholder and public participation, a principle affirmed by the Rio Declaration, confirmed in multilateral treaties such as the Aarhus Convention4 and implemented to varying degrees at local, national, regional and global levels.

FRANCE AND THE PRINCIPLE OF PARTICIPATION France deserves particular attention in terms of the principle of participation, which has been developed in this country with a real regard for political innovation. In a representative democracy, a system in which the flaws are well known, the exclusive political power tends to be reserved for executive/legislative authorities. How then can we build an innovative participatory system that expands the circle of actors without generating a new system that lacks proper representation? In France, since the establishment of the Republic, participation has traditionally been ensured by well-proven techniques: consultative administration and the carrying out of public inquiries. The system of committees or advisory boards in which we can include the Economic, Social and Environmental Council is well established. Each ministry (transport, education, family...) is flanked by one or several High Councils and Committees that represent relevant interests. These bodies provide opinions to ministers on issues under their jurisdiction. This system leads to the blinkering of ministries by the economic and social interest groups in their specific sector, along with the fragmentation of public interest. Since its inception, the Ministry of Environment has continued to replicate this system. By the time of the post-war reconstruction of the French institution, the limitations inherent to this system had already been perceived. Jean Monnet and François Bloch- Lainé theorized on this issue and devised a concerted and horizontal approach that they put into practice (see In search of a concerted economy, Bloch-Lainé, 1964). It was a system that we would today label as a multi-stakeholder approach. On this basis, the Commissariat Général du Plan, which was established and led by Jean Monnet, implemented a coordinated economic and social plan between major social groups: business leaders, unions, government officials, public banks (at the time, almost all banks were public) within the framework of the commissions meeting at the Commissariat Général au Plan, away from sectoral ministries. After the Fifth Plan (1965-1970), this approach was abandoned in favour of one that had more confidence in the market but was tempered by the bilateral dialogue between the political power and each interest group or category. With the emergence of sustainable development objectives in the early 2000s, there was a reconsideration of the idea of a multi-stakeholder partnership for the building of more inclusive public policies. However, this very limited enlargement of the consultative bodies to environmental

4. A particularly innovative text since it opens up rights to environmental information, participation and access to justice.

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NGOs was insufficient for the purposes of building the participatory processes required by sustainable development. It is in this context that the five-tiered governance of the Grenelle de l’Environnement (Grenelle Environment Round Table) (2007-2010) was conceived, which was an attempt to build a mechanism for the collective production of proposals for public policies for sustainable development, involving businesses, trade unions, local authorities, environmental groups and the state. At the time, promoters and participants of the Grenelle’s five-tiered governance regarded it as a truly innovative approach. It was designed as a dynamic and interactive process, in contrast with the static and formal nature of traditional consultative processes. Thus, the impression was given that things were taking shape, especially at the interface between agriculture and the environment, one of the main areas of conflict since 1980, both within the state and within the French territories. In the political world, this favourable sentiment remained after the 2012 presidential elections. In January 2013, the Senate’s Information Report No. 190 on the implementation of the Grenelle laws stated that: ‘the new mode of governance has been the great success of the Grenelle’. However, since 2009 there has been strong criticism from a number of environmental NGOs, while other analyses were also more reserved. Bernard Kalaora and Chloe Vlassopoulos5, quoting Daniel Boy6, considered that collegiality was present in the working groups and roundtables, but that it evaporated in the decision-making processes and that it was important to put into perspective ‘the idea of the innovativeness of the device, which in many ways is no different from what was once known as the Planning Commission.’ According to the Wahl report7 into the Grenelle’s quantitative indicators, some of the Grenelle’s more substantive innovations – i.e. measures that do not consider environmental issues in the strict sense, but that focus on the shifting of production, transport or housing processes towards a more sustainable direction – were found wanting. The use of pesticides, which was to be reduced by 50% by 2018, remains stable at best, despite the introduction of the Ecophyto plan; the decline of the share of rail in freight transport has continued, despite the objectives; the thermal renovation of existing housing has not been implemented sufficiently; and organic farming is far from advancing at the planned rate. While the Grenelle certainly suffered from the impact of suddenly negative rhetoric of the then president, from the counter- offensives launched by lobbies and from the difficult economic climate, there remains the possibility that the process itself was insufficiently anchored in the social and territorial fabric for the long term. Furthermore, there was a lack of interest from the general population in a process that was ultimately restricted to a limited circle of experts. This indifference was revealed in the French newspaper La Croix, which publishes a barometer carried out by TNS Sofres (a market research group) on the

5. Pour une sociologie de l’environnement, Champ Vallon, 2013 6. ‘Le Grenelle de l’environnement: une novation politique’, RFAP, 2010 7. In 2012, the Minister of Ecology, Sustainable Development and Energy appointed Thierry Wahl, Inspector General of Finance, with the mission of establishing a diagnosis of the situation in France with regard to the commitments made in the framework the Grenelle Environment.

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concerns of the French population. In this survey, the environment dropped from fourth place in the list of people’s priorities in January 2007, prior to the launch of the Grenelle, to seventh place in 2008 and then down to eighth in 2012. In 2011, 36% of poll respondents cited the environment as being amongst their top two concerns (usually second), a figure that fell to 27% in 2012. There is a risk that the only legacy of the Grenelle will be a ‘legislative monument’ that Jean-Louis Borloo was once proud of, a monument that is today facing the ‘shock of simplification’ and a roadmap towards the ‘modernization of environmental law’. Already in this regard, a 2013 order to facilitate construction operations is expected to enable the circumvention of ecological policies that were introduced or strengthened by the Grenelle laws. For this vision of utopia to have taken on a concrete character, through the association of stakeholders, would have required the adoption of a political agenda and methods that were much more radically innovative than most governments, who are typically more concerned about communication and instantaneous political point-scoring, could have accepted or even imagined. On this matter, Marcel Gauchet in Le Debaté magazine said that ‘the Grenelle de l’environnement was a very interesting experience, one in which we created an apparent consensus that was announced to great fanfare, but underneath it lay a massive unpopularity that emerged as soon as we moved towards measures that directly affected the lives of citizens, especially the carbon tax. This shift is instructive, first highlighting the limitations of media illusionism. These fugacious entailments have nothing to do with reasoned conviction; they easily turn into their opposite. Over the long term, the media machine is a machine that creates distrust… The shift of opinion has enabled the checking of whether the ecological technocracy had retained the defects of the other. The ingenuity of instruments cannot be an end in itself; ingenuity does not guarantee the way in which instruments will be understood and received by the population’ (Gauchet, 2011). Indeed the societal approach based on social sciences was lacking in the Grenelle, which ignored the necessary involvement of citizens. The fact is that the main results of the Grenelle, which are two important laws, 250 decrees and some new tax categories, were clearly not enough to produce the expected social appropriation.

ADDRESSING THE CITIZEN AS MUCH AS THE HOMO ECONOMICUS Confident in its analyses and the accuracy of its proposals, in particular in terms of taxation, the community of experts involved in political ecology or ecological politics tends to underestimate the societal dimensions of public action that has been reduced to the debatable concept of ‘social acceptability’. In this respect, the institutions of the French Fifth Republic must bear a heavy responsibility because, in this area as in others, they promote decision-making processes that are technocratic, a fact that was illustrated by the way the establishment of a carbon tax was decided in 2010... and then failed. After 2012, the breakdown of the Grenelle into the Transition Ecologique (Ecological Transition) and the Conférence Environnementale (Environmental Conference), the

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latter having a more limited spectrum than the former, is a lesson learned from an exercise that ultimately generated a lot of frustration. Meanwhile, the state has not renounced the traditional consultative structures, which it has extended to the national policy for sustainable development. This process started with a rather bold innovation, the creation of the Commission Française du Développement Durable (French Commission for Sustainable Development), established in 1993 as an independent body chaired by the famous academic, Jacques Testard, the state has since pursued this path with the establishment, successively, of the Conseil National du Développement Durable (National Council for Sustainable Development) (2003) and the Conseil National du Développement Durable et du Grenelle de l’Environnement (2010) and finally, in 2012 the Conseil National de la Transition Ecologique (National Council for the Ecological Transition) (CNTE), which, according to the French administrative traditions, is chaired by the ecology minister. This list of bodies is symbolic of the chronic instability that characterizes public action, an instability that has become a major weakness of French public policies. If we examine the general question of public participation beyond the Grenelle, we note there has been some undeniable innovations with: the creation of a public debate around an independent body, such as the National Commission for Public Debate; the development of collaborative systems following the 1996 publication of the Charter of the Concertation, by Corinne Lepage, the then French Minister of Ecology; the strengthening of the right to information and citizen participation including in legislative documents on the environment that are being prepared; and finally the possibility of questioning, whenever there is a dispute, the constitutionality of laws that oppose the Environment Charter, which enhances the value of this Charter that was adopted in 2005. Clearly, compared to the past, there is now more transparency on public projects, better information upstream and better consultation. However, the shock of simplification and the cyclical desire to build more and to develop faster leads to the temptation to circumvent these rights and to do so by means of statutory instruments, i.e. without parliamentary debate or transparency. Thus, the limited number of French societal innovations that have occurred remain fragile because they are considered by planners and many politicians as creators of obstacles and delays.

THE UN AND THE PROMOTION OF STAKEHOLDERS This development can be found in the participatory processes at the global level. Within the UN, the emergence of a new concept of the stakeholder goes together with a multi-stakeholder approach, which is intended to completely renew what was the participation mode of UN observers. In this regard, the first Rio Conference was a milestone with the drawing together of environmental NGOs and development NGOs. Ten years after the 2002 Earth Summit, it was local authorities, as well as businesses, organized since 1995 within the World Business Council for Sustainable Development (WBCSD) that were encouraged by the UN to participate. The UN Global Compact, which was launched in 2000, is supposed to extend this commitment from the business world into concrete actions for sustainable development.

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Therefore, there are now large numbers of non-state actors, who seek to be heard in these huge circles that are the Conferences of the Parties of the major conventions and the sustainable development conferences. At Rio+20, the mode of participation of non-state actors underwent a significant innovation with the Brazilian initiative of Sustainable Development Dialogues. This forum for civil society actors was held before the official conference, with international institutions and governments being allowed access as observers. Ten sustainable development themes were discussed during the debates that were broadcast live via the UN website, the dialogues were preceded by an online consultation that was technically facilitated by a system of translation into 40 languages, which led to voting on recommendations, which were then transmitted to the official conference. Indeed such recommendations have been adopted and transmitted. But obviously, it was not reflected in the final text, The Future We Want, which had been developed in the framework of preparatory conferences (Prep Com) and finalized by the representatives of states prior to the official conference. Under these conditions, the heads of state have only endorsed the work of their own experts without being able to consider the Dialogues. Thus, beyond an appearance of major participation, the RIO+20 Summit was in reality totally dominated by negotiations between governments regarding the final text. Finally, the most active contribution of civil society has been embodied by the abundance of side events which, through parallel pathways, have made the initiatives known, they have informed other stakeholders and enriched sustainable development issues. Basically, in recent years, the major innovation of these intergovernmental processes has been the promotion of this parallel activity of remarkable richness and diversity that fully expresses the idea of participation and the activity of non-governmental actors.

AN EXAMPLE OF PARTICIPATION IN THE MEDITERRANEAN In the regional context, the Mediterranean for example, the idea of participation is expressed by the innovative composition of the Mediterranean Commission on Sustainable Development, created in the framework of the Barcelona Convention. This convention represents on an equal basis 21 member states, the EC and representatives of local authorities, businesses and environmental NGOs. At present, despite this innovative feature, the results have been inconclusive in the sense that businesses have not invested in this body, economic and development ministries have stayed away, while civil society is absent. The participation of civil society raises unresolved issues. How can we put together the different groups under the same umbrella, while sometimes expecting them to speak with a single voice? Should we make a clearer distinction between actors that although are possibly non-governmental, nevertheless have powers (the economic power of businesses, the political power of local authorities and even the spiritual power of churches) from others that can only argue for their right to expression? The term civil society is one that divides opinion in the sense that it seeks to

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encompass entities that should not necessarily be included. Regarding development and environmental NGOs, there is a range of different types; some participate in institutional processes such as the Rio Dialogues, others distance themselves and prefer alternative forums, as was seen in Rio with the Peoples Summit for Social and Environmental Justice. It is essential that in the organization of participatory processes, the UN does not seek to remove diversity and pluralism.

Innovative instruments for sustainable development public policies Can a public policy for sustainable development act merely through the use of traditional public policy instruments, such as the setting of rules, standards and procedures, accompanied by mechanisms of enforcement and the necessary budgetary interventions to achieve objectives, all of which take the strategic form of plans, programmes and strategies? In France, the policy of environmental protection has from the outset, under the ancien régime and after 17898, has made full and even massive use of so-called policing instruments. Monitoring and measuring pollution, authorizing, prohibiting, regulating and suppressing are all part of the basic vocabulary of environmental action. The same applies in the area of hunting, which is strictly controlled, or of water pollution. More recently, even if originally proposed in 1972 by the OECD, it is economic instruments that have been put forward in the form of taxes, royalties and permit markets, with the idea of penalizing negative externalities so that prices correctly reflect the cost of pollution, giving the polluter an incentive to reduce the pollution. Through the equalization of the marginal costs of depollution, these instruments are expected to enable more economically efficient choices in terms of investment in pollution prevention.

ARE ECONOMIC INSTRUMENTS THE PREFERRED TOOLS OF SUSTAINABLE DEVELOPMENT POLICIES? With the emergence of sustainable development, these economic approaches, along with ecological taxation and market instruments have gained strength and visibility. With regard to environmental taxation, we must distinguish two categories: the first of these is the traditional type, which uses funds collected from polluters to provide financial resources to fight against pollution. This is a relatively common mechanism in France and it is one that cannot be regarded as innovative. For example, from 1950 the French Special Road Investment Fund, which is no longer in existence, was financed by taxes on fuel. This was also the original basis for the funding of the French Environment and Energy Management Agency (ADEME) and continues to be the way that Eco-Emballages operates. The second category, which is more innovative, is the establishment of taxes or

8. Geneviève Massard-Guilbaud, Histoire de la pollution industrielle, EHESS Editions, 2010.

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fees that are not designed to feed an intervention fund, but to go into the general budget by setting the levy at a sufficient amount to influence the behaviour of economic actors. If these revenues are substantial, we can imagine that these funds could replace some taxes that are regarded as undesirable because they increase the cost of labour for example. This is a case of searching for a double dividend. A small number of countries have started to opt for this second approach to taxation. While traditional environmental taxation, such as fees allocated to water agencies or TGAP (French general tax on polluting activities), is more acceptable and produces results in terms of investments; an incentive-type taxation, which is intended to guide behaviour, faces many difficulties in its installation, especially when it targets consumer behaviour with a view to obtaining far reaching results over a long time frame. Again, we must distinguish two cases: when taxes aim to discourage consumption or practices that are harmful to consumers themselves (tobacco, alcohol, sugary drinks), taxpayers can easily understand the merits of taxation, since the return in terms of health and individual well-being can be tangible. It is very different when the tax – which is truly innovative in this case – is presented as a contribution to the common good, the climate for example. Here, the route is more distant and more complicated for taxpayers, who are suspicious by nature. In addition, environmental taxes struggle to address the sustainability criteria in their demand for social equity. The taxation of households in regards to their pollution and consumption of natural resources reinforces the proportion of consumption taxes, taxes that are non-progressive and regarded as unfair. To bypass this regressive dimension, the taxes concerned, the carbon tax for example, are accompanied by exemption and reimbursement mechanisms, the complexity of which negatively affects their visibility. As put in La Tribune on 13th November 2013: ‘eco-tax: a dream for economists, a nightmare for tax experts.’ A genuine innovation in terms of economic instruments has been the French bonus-malus (bonuses and penalties) car scheme which, basing itself on the CO2 emissions of new vehicles, had the double advantage of ecological incentives and equity. Unfortunately, the scheme was incorrectly calibrated, and the income derived from the penalties never balanced the generous bonuses, and according to the French Court of Auditors, the system cost about €2 billion during 2009 to 2011. The rebalancing that has occurred since has ended a system that was ultimately equivalent to a net subsidy from the state for the purchase of cars, at a time when public transport was accumulating investment delays, particularly in the Ile de France. Of course the incessant changing of the scheme had a negative impact on citizen confidence. In conclusion, public authorities should take time to evaluate, explain and to allow public debate, and should draw inspiration from the OECD recommendations on techniques for the introduction and increase of ecological tax.9 At the very least,

9. Taxation, Innovation and the Environment, OECD, 2010

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we should use different policy approaches in the creation of taxes for businesses and those for households. Environmental taxation can progress only if it takes into account simultaneously the three pillars of sustainable development. On this issue, Terra Nova (French left-wing think tank) in a note from 14th October 2013, highlighted the thesis of Emmanuel Courbet who connected the necessary rise in energy taxation with a more comprehensive tax reform to ‘address (...) the issues of competitiveness, ecological transition and redistribution’. This is what Sweden attempted in 1990/1991, by linking rises in energy taxation to the decrease in taxes on labour and personal income. However, this measure has also made the taxation less progressive and thus fostered income inequality. Based on the observation that the traditional command and control instruments, including tax, could have limitations or develop counterproductive effects, some researchers have developed new and more flexible approaches based on actual behaviour according to individual and social psychology, which considers people as sensitive subjects rather than as hypothetical homo economicus who respond mechanically to the stimuli of macro models. Richard Thaler and Cass Sunstein, both professors at the University of Chicago and the latter a Director of Regulatory Affairs at the White House in the Obama Administration, have developed a theory derived from libertarianism which privileges individual freedom and the voluntary associations of citizens. These authors have dubbed this theory libertarian paternalism, a term that suggests that individual choices that are necessary for the public good should be encouraged through nudge methods that persuade actors to make these choices for themselves. President Obama and David Cameron have made much of this ‘soft’ approach during their electoral campaigns. This is an interesting approach, which promotes ecological and citizenship behaviour on the basis of self-determination. However, there is arguably a very small difference between ‘nudge methods to improve decisions’ and the methods of ‘hidden persuaders’ that are denounced by Vance Packard10, who draws attention to the techniques for the mental manipulation of the masses. The good intentions of the nudge method can thus become similar to the usual manipulation techniques of marketing and advertising. Nevertheless, the path towards innovation must be kept open to foster a much more active interest by the public in the objectives of sustainable development. From this perspective, social psychology and behavioural economics have much to contribute. At the same time, we should not renounce regulatory instruments, which have also proven useful, nor environmental taxation, once we have taken on board the lessons learned from recent experiences in France. Taxation is more than an economic instrument; it designates a mixture of taxes that must adhere to the rules of fiscal science. It is not a toy that is at the disposal of

10. Vance Packard, ‘The hidden persuaders’, 1957.

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an ‘ecological technocracy’ (Gauchet, 2011) that is trying to show off. It is striking to note that at the time of the collapse of the eco tax that had been designed to regulate road transport, the new energy-climate contribution integrated into the French domestic consumption tax on energy products (TICPE) was easily voted through Parliament. The sustainability of this approach has still to be assessed in the case where the proportion of carbon in the calculation of the TICPE was to rise substantially in absolute value. The greening of existing taxes, which are simple and well understood, is certainly less rewarding than the design of new taxes, but it can be more efficient. It can at least address the problem of effective recovery in the absence of addressing the issue of social equity.

INNOVATIONS OF THE KYOTO PROTOCOL Finally, it is at the international scale that the most interesting innovations in terms of public policy instruments can be found, with the flexibility mechanisms of the Kyoto Protocol, the creation of an international carbon market and the emergence of carbon finance, but also with the ongoing discussions on the compensation of ecosystem services. While the European market for emissions rights is not discussed in detail here because it is related to the domestic market and is not therefore strictly an international mechanism, we can nevertheless acknowledge its innovative character, despite major difficulties and the limited results it has achieved in its eight years of operation (and also bearing in mind the sharp criticisms from many NGOs). It thus deserves a second chance, as suggested by Marcel Ducret and Maria Scolan from CDC Climat.11 The Clean Development Mechanism (CDM) established by the Kyoto Protocol is particularly innovative. It enables, according to CDC Climat12, developed countries to finance projects to mitigate carbon emissions in developing countries, resulting in carbon credits for financing countries. The idea is that the marginal avoided carbon yield per dollar invested will be higher in developing countries than in rich countries, while simultaneously promoting development. This ingenious mechanism that has been deployed for more than ten years over 4,500 projects, representing 1.1 billion tCO2eq avoided, in return for an investment of $215 billion. There were criticisms on the way that projects were concentrated in China and India, compared to a relatively low implementation in Africa, and the fact that the additionality remains hypothetical. However, the fact remains that it represents an undeniable innovation in terms of international environmental and development policy. Will this innovation extend to REDD and REDD+, offering a way to take into account avoided deforestation? Will we go towards international systems of payments for ecosystem services?

11. ‘Le prix du carbone: la valeur d’une expérience’ in Revue Vraiment Durable, No 4, Autumn 2013. 12. Etude climat No 37.

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Conclusion: what policy mix for sustainable development? Ultimately, the emergence of sustainable development has undoubtedly been a challenged for public policy. While institutions, including the UN, have eventually displayed the level of flexibility necessary to take this question into account, the real requirement, which is to enable the association of stakeholders, concerned groups and the population, remains a major issue. In matters such as consumption, housing, mobility, energy use and lifestyles, the combination of regulatory measures and economic instruments can only function in the context of a personal and collective commitment. It is important to invent new forms of participation and democratic approaches. In France, the debate on energy transition provides an opportunity for this to happen, on the condition that we go beyond the circles of experts, professional groups, NGOs and policymakers, and to effectively involve the public. ❚

REFERENCES

Aubertin C. and Vivien F.-D., 2010, ‘Le développe- Mouvements, automne 2013, ‘La transition, une uto- ment durable’, La Documentation Française, 168 p. pie concrète’, Mouvements n°75. Bourg D., 2011, ‘Pour une 6e République écologique’, Ricoeur P.,1997, ‘L’idéologie et l’utopie’, Le Seuil, Odile Jacob, 208 p. Paris. Gauchet M., 2011, ‘La démocratie n’a pas dit son Thaler R. and Sunstein C., 2008, ‘Nudge: Improving dernier mot’, Le Débat, n°164, March-April 2011, Decisions about wealth, health and happiness’, Yale Gallimard University Prem. Hulot N., 2006, ‘Pour un pacte écologique’, Cal- mann-Lévy, 259 p. Meny Y. and Thoenig J.-C., 1989, ‘Politiques pu- bliques’, Presses universitaires de France, Paris, 392p.

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CHAPTER 9 Innovation in biodiversity funding: combining tools and mechanisms for conservation

Irène Alvarez, Consultant, and Julien Calas, Programme Officer, French Global Environment Facility, Paris, France Ray Victurine, Director, Business and Conservation Initiative & Conservation Finance, Wildlife Conservation Society, Washington, USA

he Convention on Biological Diversity sets a tar- as conservation trust funds and biodiversity offsets are get of protecting 17% of the world’s terrestrial becoming practical and mutually enriching possibilities. and inland water and 10% of coastal and marine An analysis of these approaches shows that innovation areas especially areas of particular importance creates not only new funding sources but also a wealth of for biodiversity and ecosystem services (Aichi collateral benefits. These new approaches call into question TBiodiversity Targets, No. 11). How can the resources to traditional modes of understanding and managing biodi- meet such targets be found when biodiversity is an area versity, making it a higher priority for governments, funding plagued by chronic underfunding (see Figure 1)? Biodiver- agencies, private partners and civil society to integrate sity may represent an increasingly important part of the biodiversity issues into their development plans. And they strategies of funding agencies, but several countries are bring together a large number of partners, many of whom already finding it difficult to manage existing conservation displayed little previous commitment to biodiversity, and infrastructure. In Haiti, for example, 6% of land (there are many of whom are local actors. no marine parks) is protected, but only 0.3% of these ‘protected’ areas are managed effectively; the rest are what is Diversifying traditional financing sources: public known as ‘paper parks’.1 Consistently insufficient budgets funding and ecotourism for conservation and biodiversity coupled with the recent Public biodiversity funding innovations have had a limited economic crisis have led nations party to the UN Conven- impact to date because most are based on deep and diffi- tion on Biological Diversity to develop resource mobiliza- cult fiscal reforms designed to eliminate incentives to tion strategies to meet Convention targets. degrade biodiversity and reorient efforts toward biodiver- Conservation actors have naturally focused efforts on sity conservation. The recent international financial crisis innovation as a means to diversify biodiversity funding provided decision-makers with a host of excuses not to sources. Simple initiatives like developing new ecotourism invest in biodiversity. activities in protected areas and more complex ones such The oldest and best-known model of biodiversity funding remains ecotourism, an ‘endogenous’ source whereby 1. Victor, J. A., Le cadre légal et institutionnel des aires protégées en funding is generated by the ecological asset itself and Haïti, Haïti dans le Dernier Carré. Actes du Colloque sur la Gestion channelled, at least in part, back into its protection. des Aires Protégées et le Financement de la Conservation de la Biodi- versité en Haïti, February 1997. In many countries ecotourism provides substantial

A PLANET FOR LIFE 183 FIGURE 1. The dire need for biodiversity funding

The work of Pavan Sukhdev emphasized the lack of financing adapted to conservation needs and the underestimation of services provided by protected areas.

biodiversity funding through fee collection. In some cases, beautiful photograph within a limited period of a single day. such as South Africa’s Kruger National Park, revenue However, the fact is that few parks can attract enough generated actually exceeds operating costs. Understand- visitors to fully fund operations. In some cases protected ably, protected areas have shown imagination in devel- areas are hindered by remote locations that are difficult for oping new approaches to attract ecotourism revenue. For tourists to access. Even in South Africa most parks are not example, Kenya’s Wildlife Service, which manages the as fortunate as Kruger National Park. And even the most country’s protected areas, regularly organizes popular, successful parks cannot take their future for granted; a media-friendly sporting events in certain parks. Events like global economic crisis or increases in the cost of interna- the Run in the Wild marathon or the Cycle with the Rhinos tional travel can cause dramatic fluctuations in park revenue race are held in natural surroundings but away from main levels. In the long term, tourism simply cannot be the sole fauna habitats to avoid disruption. Most participants will source of biodiversity and conservation funding. Too many never cross paths with wild animals. Yet the events generate protected areas currently focusing on ecotourism will face revenues (entry fees, sponsorship from major businesses), a serious struggle to succeed. create a media buzz around national parks and attract new park users, either through event attendance or media Conservation trust funds: a tool for innovation exposure. A similar example from a marine area is a popular The need for alternative funding sources to support underwater photography contest at Algeria’s Taza National biodiversity has become apparent. Conservation Trust Park where photographers compete to produce the most Funds (CTFs) were one of the first innovative solutions to

184 A PLANET FOR LIFE INNOVATION FOR SUSTAINABLE DEVELOPMENT CHAPITRECHAPTER 9 X

FIGURE 2 The gradual diffusion of trust funds

After a successful test in the Seychelles in the late 1980s, the first conservation trust funds were created mainly in Latin America and to a lesser extent in Asia in the 1990s; and since then have spread to Africa, where many funds were created during the last decade. the underfunding of conservation and biodiversity. They Individual CTFs have been structured to meet a range of emerged in Latin America and the Caribbean in the 1990s objectives. For example, protected area conservation trusts and later spread to Africa, Eastern Europe and other parts (PACTs) supplement recurrent state funding to support the of the world (Figure 2). There are now over 60 active CTFs operation of the national protected area system in Belize, or in the world, representing a total capitalization of over $800 for specific areas such as Bwindi and Mgahinga Naitonal million in 2010.2 Parks in Uganda. Other trusts may also support regional, CTFs were designed to fulfil three objectives: (i) generate national or international initiatives, as in Madagascar or the sufficient funds to protect the environment; (ii) secure more Tri-National de la Sangha, whose conservation focal area predictable, long-term funding; and (iii) create viable local spans three central African nations. Other trusts such as conservation institutions to break the foreign monopoly on Tany Meva in Madagascar or the Mesoamerican Reef (MAR) conservation funding. Fund in Central America also give grants to civil society actors for conservation initiatives. In all cases funding is

2. CTFs generally consist of a capital or endowment fund and/or an designed to supplement rather than replace government investment or sinking fund. Only income earned from the capital or funding, though it may be used to maintain operations endowment fund is used, leaving the principal untouched. In the case of a sinking fund the capital is used but over a much longer term than during periods of crisis (e.g., Foundation for Protected Areas standard projects, and according to rules and funding priorities estab- and Biodiversity of Madagascar and the Tany Meva Founda- lished by the CTF. This acts as a ‘common pot’ that can be replenished by the usual or by new donors. tion). Trusts can serve as catalysts for new conservation

A PLANET FOR LIFE 185 activities or leverage to secure new funding, as seen with resource protection, recognized as crucial to long-term Funbio in Brazil, which started with an investment of $20 economic growth, has given rise to a new mechanism, million from the Global Environment Facility and the World biodiversity offsets, defined by the Business and Biodiversity Bank and has since raised $390 million in capital to fund Offsets Program as ‘measurable conservation outcomes over 180 projects and 195 protected areas. of actions designed to compensate for significant residual From a governance standpoint, effective CTFs tend to adverse biodiversity impacts arising from project develop- be independent entities with minority state representation. ment’. The catalytic role of CTFs is based on the fact that they The key impetus for biodiversity offsets was national are not funding sources per se but rather tools that draw legislation requiring that new developments did not cause on multiple funding sources and are designed to manage a net loss in biodiversity. Some financial institutions require funds transparently and for the long term. The diversity of that borrowers respect the performance standards of the these funding sources is a potent symbol of the innovative International Finance Corporation (IFC, part of the World capacity of CTFs. Trusts are often created by traditional Bank Group). Businesses that use biodiversity offsets often funding sources (e.g., KfW, World Bank/IMF and AFD/FFEM have internal policies designed to manage and mitigate have funded CTFs in Madagascar, central Africa, etc.), or biodiversity risk, and an increasing number voluntarily as part of debt-reduction schemes (the US government’s adhere to international standards such as IFC Performance Tropical Forest and Conservation Act in Central America or Standard 6. the French Contrats de Désendettement et de Développe- Offsets for loss of biodiversity are based on the polluter ment), while some have been able to garner the support pays principle, with developers paying to offset the residual of major international NGOs (beyond their, albeit valuable, impacts of biodiversity to ensure there is no net biodiversity technical support), US Foundations and even private donors. loss. Residual impacts are assessed using a ‘mitigation A smaller number of CTFs have even secured recurrent hierarchy’ based on a business’s commitment to applying funding from other sources, such as a tax payable upon environmental best practices to minimize project impact. leaving a territory or a percentage of a tax on cruise ship Impacts that cannot be avoided or minimized, known as passengers in Belize. ‘residual impacts’, must be offset through actions such As flexible, transparent organizations CTFs have found as rehabilitation or the creation of new protected areas increasingly innovative ways to secure new funds. And this that would not otherwise have been protected, a concept innovation extends beyond securing funding to include known as ‘additionality’ designed to ensure offsets do not relationships with beneficiaries (protected areas, NGOs merely duplicate existing, and already funded, conserva- and sometimes private partners), whom CTFs advise on tion actions. both securing recurrent funding and biodiversity management itself. In Latin America, in particular, where they have CTFs and offsets: combining tools and been operating for over 20 years, CTFs now also act as mechanisms to fund conservation ‘pathfinders’ for conservation and the facilitation of innova- Setting a realistic budget for conservation activities is an tion in various local initiatives. Their local base has also important step in developing and implementing the offset- given them the legitimacy to express views on national ting process. Conservation goals can only be achieved if policy or become a trusted partner of funding agencies, as sufficient funding is available throughout the offset plan in Mexico, Colombia, Brazil and Madagascar. lifecycle (e.g. 20 – 30 years). In some cases businesses CTFs have thus grown from mere funding tools to may attempt to secure long-term funding by setting up a veritable drivers of innovation and coordination, as in the permanent fund to manage offsets, either before the project case of biodiversity offsets, viewed by CTFs as a new source begins or at some other juncture prior to completion. In both of funding in their diversification strategies. cases the project developer creates a financial mechanism The need to balance economic development and natural to provide long-term funding for offsets.

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Most businesses, however, have limited experience In 2014 we will begin to see the emergence of agree- managing conservation initiatives, which lie outside their ments between private businesses and CTFs. These pilot core business. Finding responsible, financially transparent agreements will be designed to secure adequate funding to partners can help companies fulfil offset conditions. It is achieve conservation objectives and, in some cases, set up here that CTFs enter the equation, to implement offsets and long-term endowment funds. This is a new chapter in the direct funding provided by the project developers towards history of innovative conservation funding models, just the appropriate offset initiatives. CTFs offer a turnkey solution first of many such projects to be implemented in the next that remains viable for the very long term. five years, and well worth watching closely. Offset programmes have yet to fully come into their own3, and many trust funds (particularly in Africa) have not been Much more than just a funding innovation as successful as Funbio in Brazil or Fondo Mexicano para Clearly, tools like CTFs and biodiversity offsets are la Conservación de la Naturaleza. Not every CTF has the designed to be part of long-term solutions, not mere funding benefit of 20 years of experience, like Uganda’s Bwindi mechanisms. They are many things at once: (i) funding Trust, and not all are ready to implement offsets in the short sources; (ii) innovative models for managing nature and term, as is Madagascar’s Aires Protégées et la Biodiver- bringing together various actors, including those previ- sité. But the promise is there, once certain obstacles have ously uninvolved in conservation; (iii) a cause for reflection been overcome. encouraging local actors to get involved in conservation, The first challenge is to overcome the difficulties and either through government or civil society; and (iv) a change the costs of creating these tools to ensure viable long- in scale for biodiversity management, either through CTFs term funding, to reinforce them with a solid financial and acting at the national level and beyond to serve ecolog- legal framework and to shield them from local and interna- ical regions that cross borders (Sangha in central Africa, tional political and economic crises (financial crises threaten Carribean Conservation Fund and the MAR Fund in Central trust funds; economic crises undermine private companies’ America) or through international forums for discussing ability to fund offsets). The second is to ensure the local conservation tools (such as the RedLAC network, Latin- adoption of these tools, i.e. they must be placed in the American- or Caribbean-wide initiatives and the truly global hands of committed local partners that have been trained Conservation Finance Alliance). to effectively govern and innovate. The third challenge is to Today biodiversity funding is part of a new framework to counteract negative externalities such as the temptation of be considered on larger regional and national scales, as we governments in developing countries to retract biodiversity have seen with CTFs and offsets. Other areas with strong funding upon the arrival of a CTF or a private-sector actor innovation potential abound. For example, much remains to that intends to provide only supplemental funding, or that be seen in terms of the behaviour and consumption patterns of project developers who view offsets as an opportunity in developed and emerging nations, which could have a to eschew their responsibility to avoid or minimize environ- substantial impact on marshalling the resources needed to mental impacts, or who argue against investing in what protect biodiversity. These range from the impact of tradi- is needed to avoid long-term environmental damage. A tional international trade to illegal traffic in endangered fourth challenge is the difficulty of assessing the environ- species: taking action in these areas will require a fundamental and social impacts of these mechanisms in the mental change in cooperation agencies’ projects, methods short term without the established yardsticks or critical and intervention approaches. Also, we must not forget that mass of experience that could make them a powerful driver limiting negative impacts may also have a spillover effect of global change. leading to increased resources for positive-impact projects or a reduced need for funding to ‘repair’ damage to biodiversity. 3. According to the criteria of the Business and Biodiversity Offset Programme, a coalition of private business, government, funding bodies and other actors.

A PLANET FOR LIFE 187 REFERENCES Adams J. S. and Victurine R., 2011, Permanent Conservation Trusts: A Study of Long-Term Benefits of Conservation Endow- ments, Conservation Finance Alliance. Business and Biodiversity Offsets Programme (BBOP), 2012, To No Net Loss and Beyond: An Overview of the Business and Biodiversity Offsets Programme, Washington, D.C. Business and Biodiversity Offsets Programme (BBOP), 2012, Standard on Biodiversity Offsets, Washington, DC. Conservation Finance Alliance (CFA), 2008, Rapid Review of Conservation Trust Funds. International Finance Corporation (IFC), 2012, Performance standards on environmental and social sustainability, 1 Janu- ary.

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Nothing new under the sun: institutional innovation for the governance of sustainability

isasters such as the explosion of the Chernobyl nuclear power Jon Marco plant in 1986 and the increased awareness about global Church, phenomena such as climate change have put the environment Senior Lecturer at the centre of the political debate. Environmental degradation in Planning, Sustainability and was perceived as a new problem and, as such, many experts Territorial Politics, Reims University, and decision-makers called for new solutions, in the form not France only of new policies, but also of new institutions. These new institutions were intended to provide a better fit for the sustainability challenge at different levels and scales, from the local community to the entire planet (Young, 2002). Existing institutions were perceived as not sufficiently responsive and reactive, as well as incapable Dof adapting and anticipating the long term. The leitmotif was that new problems needed new solutions. More than twenty years have now passed. How many initiatives have been launched? How many have made a difference to the way sustainability is actually governed? How many have survived longer than the lifespan of a pilot project? At a time when questions are being raised over the sustainability of our mode of development and of the resilience of our societies to change, we must also call into question the way in which these new institutional arrangements cope with time. First of all, are these institutional arrangements really new? In reality, not only is environmental degradation far from being a new problem, but there is also little or nothing new, as far as political theory is concerned, about institutions such as multilateral conventions, regional environmental agreements, intergovernmental panels of experts, multi-stakeholder fora, inter-ministerial committees, technical agencies,

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FIGURE 1 Regional environmental agreements: long-established and still active

Since the immediate post-war period, regional agreements have been forged in response to perceived environmental problems, particularly for rivers. Since the 1970s, they have multiplied for seas, and then in the 1990s for mountains.

user associations and community assemblies. In one way or another, they have been in existence long before the 1990s: for example, the Rhine Commission was created in 1815, the Westphalian system of diplomatic relations has been there since the 17th century, while councils of ministries have been integrating sectoral policies for centuries. What is perhaps new is the number and frequency of such institutional arrangements, but the phenomena themselves are well known. Examples abound. The fact that they are increasingly frequent does not change what they are. Since the immediate post-war period, regional agreements have been forged in response to perceived environmental problems, particularly for rivers. Since the 1970s, they have multiplied for seas, and then in the 1990s for mountains. International treaties, ecosystem management, expert commissions, independent bodies, public debates, and so on, have in fact long been a reality. It is in the view of the author that they can all be assimilated with the spectrum of traditional forms of government, particularly the different flavours of direct and representative democracy, with all their advantages and limitations. The Intergovernmental Panel on Climate Change is an expert commission just as much as any international fact- finding mission in the past several decades. Access to environmental information has

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long been available through citizen participation in municipal council and parliamentary sessions, through inquiries to civil servants and elected officials, and through direct engagement. There is no doubt that public participation is of great importance, but the well-known limits of direct democracy cannot be ignored. It is no surprise if requirements of public participation are often interpreted in a minimalistic manner, while often they are plainly disregarded. New technologies and developments only magnify or at times distort otherwise well-known dynamics. They give the impression that all information is accessible at all times and that everyone can contribute on every issue. In some countries, political groups are organizing themselves around this idea. These are wonderful experiments, but the reality of online information platforms and of decision support tools is that they are simply not used in the long term. How many communication strategies have been developed around state-of-the-art online platforms that no one uses? Their lifespan is very short. While they can be useful, history shows us plenty of examples of how quickly new technologies can make existing ones redundant: email has substituted letters, electronic documents and spreadsheets took the place of regular documents and registers, encyclopedias and other reference books became wikis and online tools and boards turned into websites. The result is a huge increase in productivity and actual production, but this has not fundamentally changed the way decisions are taken, i.e. by a majority of those who won elections or by those who control the bigger guns. It is no surprise that recent protests in Europe, North America and the Middle East focused on national governments and not on the many so-called new institutions, which are supposed to ensure the sustainability of the 21st century.

The governance of environmental change: lessons from the past In the 2003 Franco-Canadian movie Les Invasions Barbares (The Barbarian Invasions), the main character reminds us that more than fifty million indigenous people of the Americas were killed with only a few rifles, hatchets and microbes in the first fifty years or so of the conquest of the Americas. Of course, nuclear weapons and things like genetic engineering have added a new dimension to how much damage can be inflicted by the human race, but we can definitely say that in the past, despite more rudimentary technology, a great amount of damage was meted out not only to fellow humans, but also to the environment. Since the dawn of civilization, irrigation and the consequent salinization of soils in Mesopotamia contributed to the transformation of some of the most fertile lands of the planet into desert. In Roman times, a good deal of Mediterranean forest disappeared, contributing to the collapse of a whole civilization. The history of humankind is also the history of how we learned to adapt to environmental change, be it caused by natural cycles or by human interventions. Some of these actions have been extremely successful, such as the reclamation of millions of hectares of land from the sea in the Netherlands and from marshes in Italy.

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THE TRAGEDY OF EASTER ISLAND OR HOW INSTITUTIONAL FAILURE COULD LEAD TO THE EXTINCTION OF A COMMUNITY This, however, has not always been the case. One very well-known example is the tragedy of Easter Island (Diamond, 1997). Before the arrival of humans, the island was covered by forest and possessed high levels of biodiversity. The first humans arrived around the 5th century. Once their basic needs had been satisfied, they started doing things such as erecting their famous statues and farming poultry. To satisfy other needs they used the island’s natural resources to the point where a drastic loss of biodiversity occurred in the 16th century. As a result, the island’s inhabitants were rendered incapable of maintaining their livelihoods. Most tree species, and consequently their fruits and wood, disappeared. The same happened to most sea birds, all land birds and most seafood. The lack of wood, in particular, made it impossible to cook, heat and construct boats. Climate events contributed to erosion and further deterioration of the soil. The inhabitants started fighting amongst themselves, even resorting to cannibalism, while emigration was difficult due to the lack of boats. The population of the island went from an estimated 20,000 inhabitants to 155 in 1722, when the Dutch explorer Jacob Roggeveen arrived on the island. There was little vegetation, few insects and the remaining inhabitants were struggling to survive. The reasons for this tragedy are many, but they boil down to the incapacity of their institutions to, first, understand the environmental dynamics at stake on the island and, second, to take appropriate measures to ensure that the natural resources on which their livelihoods depended were not exhausted. Nowadays, traditional structures in local communities are frequently regarded as key factors in sustaining livelihoods, whereas national governments and large companies are often considered incapable of protecting the environment at the local level, because they are too far away from the problem and therefore not sufficiently legitimate. The scale of local communities should be small enough for environmental problems to be clearly visible to the governing structures. These institutions should have evolved and adapted themselves to the challenges specific to the local environment. In the case of Easter Island, even traditional structures in tightly knit communities were not able to sustain their environments.

THE FORESTS OF THE REPUBLIC OF VENICE: A TALE OF LOCAL SUSTAINABILITY There are many examples, however, where societies have been able to deal with environmental problems successfully. Appropriate institutions are usually an important part of the solution. This is the story of the forests of the Republic of Venice, Italy (Lane and Chandler, 1973). In Roman times, forests were used intensively. In the plains, they were cut and burned to free up agricultural land; in mountains, they were cut for use in construction and furniture. At the end of the Roman period a natural process of reforestation began, which stopped with the return of agriculture in the early Middle Ages. Most forest plains were used to supply wood for heating and cooking, while forests in mountainous areas were once again utilized to meet the demand for construction. By the time the Republic of Venice was created in

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the 9th century, its mountain forests had deteriorated. As its security and economic prosperity depended on the sea, wood for the construction of ships was of strategic importance. For this reason, the Republic started managing its forests, adopting laws and implementing measures for their protection. The objective was to guarantee the maintenance of the balance of the forest to ensure its sustainability. Only authorized personnel were allowed to cut down trees, specific techniques had to be employed and only trees of a minimum age could be felled. Severe penalties were inflicted on trespassers. By the mid-17th century, the mountain forests of the Republic of Venice were in excellent condition. This continued under Austrian rule in the 18th century and to a certain degree since Italian unification in the late 19th century. This had a lot to do with institutions that were precursors of the modern state. The Republic of Venice was in fact an oligarchic republic with an elected head (doge), several councils that are comparable to ministerial councils and to houses of parliament (collegio, senato, maggior consiglio and various other organs), as well as effective courts of justice (quarantie and collegi). Moreover, it protected freedom of thought and housed the University of Padua, one of the first universities in Europe, where most of its leaders studied. A close link between the emerging natural sciences, which were developed at the university, and the political elites of the Republic of Venice, within an institutional context that encouraged debate, simultaneously produced a very successful mode of development that preserved its forests and created resilient institutions that delivered economic wealth and which lasted for more than one thousand years.

ADAPTABILITY AND RESILIENCE OF THE MODERN STATE Great attention is paid today to institutional structures, particularly those at the local level, that are able to deal successfully with environmental problems and to promote sustainable modes of development (Ostrom, 1990). Much focus is placed on the features that allow them to be successful in the long term and may enable them to be adapted and reproduced elsewhere. One such feature is resilience and the capacity to adapt to environmental and particularly climate change. Will a farmers’ association still be needed if there are fewer farms? Scale constitutes another important property, because the size of an institution must be appropriate to solve the issue at stake. It doesn’t take a sledgehammer to crack a nut. Another critical feature is justice: institutions must have a general sense of legitimacy and fairness and allow the possibility of appeal if decisions appear unfair or simply wrong. If a municipality authorizes the construction of a waste management facility in your backyard, you must have ways to appeal and to receive compensation for the damage. It is argued here that modern states and particularly liberal democracies have shown, and are continuing to show, that they are institutions of extreme adaptability and resilience. They promote the sciences, as well as open access and the free circulation of information. This is key for free and democratic debate. It is also essential for environmental protection, because critical situations are usually detected by scientists, such as the ozone hole, and by observations of people on the ground,

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such as illegal landfills. It is fundamental that this information circulates among decision-makers, who can then develop and implement policies and measures, and that well-established institutions are there to make sure that this is done correctly and to provide opportunities for appeal. While imperfect, modern democracies have proven to be tremendously effective at this, definitely more so than any alternatives. This is one of the reasons why democracy is commonly seen as the prevalent and most advanced form of government, and why it tends to be relatively stable and does not easily revert to other forms of government. There is a sense that modern democracies are the model to which all governments tend towards, the only one capable of ensuring good governance.

Governments have always taken key stakeholders into consideration The absolute state has never existed. Even at the height of absolutism in the 17th century, monarchs never managed to achieve full control of government structures. Even Louis XIV of France had to face dissent and several frondes (attempted coups). Fully totalitarian regimes have also never existed. Even Hitler or Stalin were never able to fully control the societies over which they held authority. In the Soviet Union, grandmothers kept going to church even at the height of Stalinist repression. That is to say that governments always had to take into consideration the various layers of society. From this perspective, environmental governance is not different from any other sector. In all sectors, governing structures have to take into consideration all stakeholders. It may be a question of degree. Civil society and scientific circles play a particularly important role in environmental politics (Haas, 1992). However, similar situations are also found in other sectors. For example, trade unions and expert groups are essential for labour relations. Governments have always known that they should take key stakeholders into consideration if they want to avoid losing elections or civil unrest.

THE HISTORICAL EVOLUTION OF MULTI-STAKEHOLDER PROCESSES: FROM GROUP REPRE- SENTATION TO UNIVERSALITY… Historically, this has evolved into institutions that allow for dialogue among social groups. One such institution was the Spanish cortes. Similar to the French états généraux, they were assemblies convoked by the king to discuss issues of general interest to the kingdom, mostly taxes, war and matters of royal succession. Three social groups were represented: the nobility, the clergy and so-called common people, i.e. the bourgeoisie from larger cities. They met between the 12th until the early 19th century and can be considered the predecessors of the current parliament of Spain. The cortes of the Ancien Régime subsided to more modern parliamentarian institutions at the time of the French Revolution and of the Cadiz Constitution of 1812, which started the transformation of Spain into a constitutional monarchy with universal suffrage. The idea of representatives elected by the whole population prevailed over institutions that represented different social groups.

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FIGURE 2. Relatively unchanging formal organizations

Today’s major international conferences, in terms of the placement of individuals, and even the poses and clothes of leaders, have similarities with the Spanish Cortes or other such meetings in the Middle Ages. Over time, in fact, what had proven to be an efficient manner to promote the participation in government affairs of key stakeholders, became less and less efficient. By the end of the 18th century they were effectively only presiding over matters of royal succession. They had become a means for the monarch to symbolically establish himself with regard to other notables by displaying himself in a central position among them. This is also represented in several well-known paintings of that period. This is an element that remains fundamental nowadays. In so-called multi-stakeholder processes and meetings, great attention is usually simultaneously given to ensuring wide participation and also to making sure that central positions are occupied by high-level government representatives. This process is often reflected in the imagery circulated by new and old media alike. While the cortes lost their legitimacy with the diffusion of wealth and education to larger layers of society, the concept of universal representation prevailed over that of group representation. Somehow, the stakeholder group logic is a step back in time towards a less universal kind of representation.

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… AND BACK? As far as diplomatic relations are concerned, multi-stakeholder processes are not limited to environmental matters and have a long history. The International Labour Organization (ILO) was founded in 1919 in the aftermath of the First World War. Country delegations are composed of two members of national governments, one representative of trade unions and one representative of employers’ organizations and, since the very beginning, they have spoken and voted independently. This is much more than any environmental NGO has ever enjoyed in any comparable environmental process, such as the meetings under the United Nations Framework Convention on Climate Change (UNFCCC) or under the Convention on Biological Diversity (CBD). Established in the wake of the Russian Revolution, when the importance of keeping social dialogue alive in order to prevent worker unrest was realized, the ILO is a key instrument to promote fair labour standards across the world. It has contributed to the maintenance of peace and stability since the post-war period and was even awarded the 1969 Nobel Peace Prize. The closest organization to the ILO in terms of global environmental politics is the International Union for the Conservation of Nature (IUCN). Created in 1947, it includes among its members, governments, NGOs and individual scientists and experts. Within its general assembly, also known as the World Conservation Congress, government delegations have three votes, international NGOs have two votes and national NGOs one. It is the world’s most influential organization for environmental protection and its flagship is the Red List of Threatened Species. However, despite its openness and broad participation, there is a general sense that more should be done to improve global environmental governance. In this regard, the United Nations Environment Programme (UNEP) was created in 1972 and many governments and experts now call for a new World Environment Organization. The issue here is not how to increase the participation of activists and scientists, but how to improve the coordination with the United Nations system and to make the decision-making process more efficient, which usually implies giving more power to large countries and donors (Biermann et al., 2012).

THE QUEST FOR PERFECT REPRESENTATION The need to involve stakeholders has been theorized since ancient times. Rome, for example, was governed as a republic for five centuries before turning into an empire. Local notables had a voice in the senate and even common people had representatives in the tribunes. They counterbalanced the power of the nobility to ensure social and political cohesion. In the words of Juvenal, the public ‘anxiously hopes for just two things: panem et circenses.’1 That is to say, if those in power want the support of the people, they need to provide them with what they want. No one has more clearly theorized the interdependence of decision-makers and other layers of society than the Italian political thinker Niccolò Machiavelli. A firm believer in the

1. Satire 10.77-81.

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superiority of republican institutions, because of their capacity to promote inclusive processes, he went as far as advising monarchs and, in general, decision-makers on the various techniques to ensure popular support.2 This never reaches the extent of exercising full control over society, which is impossible, but includes the need to involve different stakeholders in decision-making. The pursuit of the common interest is better undertaken in cooperation. The search for institutional structures that allow for the perfect representation of society goes back several centuries. This has taken several paths: on the one extreme, the totalitarian ideal of institutions that absorb society as a whole; on the other, the liberal ideal of institutions where all are represented equally, which are the prevailing ones in democratic constitutions. Somewhere in between there is the corporatist idea of institutions where the different components of society and interest groups are represented. This is the path taken by many environmental institutions, which try to promote the participation of different types of stakeholders: national governments, international organizations, NGOs, local governments, academia, the private sector, etc. By doing so, they give the impression of building processes that are more inclusive. However, the last forty years of international environmental relations has raised serious questions about the legitimacy and effectiveness of these processes, particularly if compared to institutions composed only of legitimate representatives of the people. Besides providing opportunities for consultation and for the circulation of ideas, they mainly provide a stage to display the central position occupied by national governments with regard to environmental matters. They are a sort of cortes of our times.

National governments are back Moving on from the century that discovered globalization and multilevel governance, the last decade has shown a certain fatigue, particularly with global and regional environmental processes. Very few new institutions have been created since the mid-2000s and the existing ones have found it very difficult to come to significant agreements. While the International Panel for Climate Change (IPCC) and the meetings under the United Nations Framework Convention on Climate Change greatly contributed to the generation of new knowledge and to promote a global debate about climate change, since the 1997 Kyoto Protocol there have been few concrete achievements at the international level. The most remarkable development has arguably been the return of national governments as key actors for sustainability. As global and regional environmental agreements were produced and required implementation, it became clear that governments would play a key role. Moreover, vis-à-vis NGOs, whose candour is increasingly contested, international organizations, whose capacity is objectively limited, and local governments, whose sensitivity to environmental issues is often seriously questioned, national governments seemed to be the only ones in a position to take leadership.

2. Machiavelli (1532), The Prince.

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THE GRENELLE ENVIRONNEMENT IN FRANCE: MULTI-STAKEHOLDER CONSULTATION OR REAFFIRMATION OF THE CENTRAL GOVERNMENT? Perhaps the clearest example of this trend is the Grenelle Environnement, a multi- stakeholder consultation process that was held in France in 2007 and that led to the adoption of one of the most advanced and ambitious pieces of environmental legislation in the world. First of all, it was launched by the central government, which wanted to focus its economic policy on so-called green growth. It brought together representatives of central government, local authorities, trade unions, industry, professional associations and environmental NGOs on an equal footing. Second, the process resulted in a series of recommendations that were transformed into law by the parliament and whose implementation is monitored by government agencies. Last but not least, it produced many of the recommendations that are found in the so-called 2008 EU Energy-Climate Package, particularly the goal to achieve 20% of renewable energy by 2020. This is a clear case of the Europeanization of a national policy and not the other way around. However, one of the most surprising effects of the Grenelle Environnement is the sharp increase in environmental standards and regulations to which local authorities have to comply with, particularly for their urban planning. It is important to highlight that these standards are not set locally, but they are determined nationally. One of the reasons invoked by several parties and confirmed also in other countries is the need to avoid a race to the bottom by local authorities as far as environmental protection is concerned, as it is often wrongly perceived as a disadvantage for economic development. Paradoxically, the environmental sector, which for many is one of the most open to non-traditional actors and different kinds of stakeholders, has proven to be a stronghold of national governments and perhaps even a key point for them to reaffirm their centrality. Control over the land is after all one of their long-established prerogatives.

RIO+20: A GOVERNMENT-CONTROLLED PROCESS Another example of this trend is the negotiation process at the 2012 United Nations Conference on Sustainable Development, also known as Rio+20. The United Nations and many other development partners supported the participation of thousands of representatives from less developed countries and from civil society. More than 45,000 people attended the conference. Virtually everyone who played a role in sustainable development wanted to be there. Several events were held to ensure the meaningful participation of all these people: besides the usual panoply of official side events and other proceedings, Sustainable Development Dialogue Days were organized prior to the main conference, and a Partnerships Forum was held in parallel. All of this was supposed to promote dialogue and to contribute to the conference outcome. However, the key meetings were the three Preparatory Committee meetings, the activities of the Bureau, the three intersessional meetings and the three rounds of so-called ‘informal-informal’ negotiations. Regional preparatory meetings were also organized.

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Even if efforts were made to include experts and representatives of civil society, the composition of the Preparatory Committee and of its Bureau was of member states only, particularly country representatives to the United Nations in New York. Intersessional meetings and the ‘informal-informal’ negotiations were in some way open to participation, mainly to well-established civil society organizations. However, country delegations always had more weight than others and, most importantly, they had the final word about the outcome document of the conference, ‘The Future We Want’. More or less the same process is in place for the definition of the future Sustainable Development Goals, which are expected to replace the Millen- nium Development Goals, which have been guiding the development agenda of the international community since 2000 but will expire in 2015. On the one hand, the impression of an opening up to civil society and of inclusive discussions is created; on the other, central governments ensure that they maintain control over the outcomes.

Conclusion Despite all the fuss about nation-states losing ground to other types of stakeholders, particularly multinational corporations and networked civil society organizations and individuals, it is in the view of the author that the increase in governmental control over societies in modern times, as described by Foucault (1977), can also be observed in the governance of sustainability. Governments use institutions, the penal system and other devices to exert power not only over society but also over nature. Institutions for the governance of sustainability all ultimately aim at exerting control over nature. Extreme events, climate change and other types of environmental change have the potential to disrupt our daily lives and the way our societies and economies are organized and function, and to cause immense pain and suffering. Exerting this control is therefore not always morally wrong, although it supposes a good knowledge of natural dynamics, which is not always the case. This is where modern science and traditional knowledge play a key role. These tools are usually utilized in good faith, however, when people perceive they are employed dishonestly, they of course react promptly and deploy various resistance tactics and strategies. New technologies significantly increase the potential damage that people can cause to their environment and to each other. They bring the game to the next level where the stakes are much higher. They presuppose a better knowledge of natural and social dynamics. The capacity to manage knowledge is among the key features of modern bureaucracies. The need to combine strong institutions with high levels of capacity and dynamic societies capable of high levels of knowledge generation is at the core of several policies, such as the 2000 EU Lisbon Strategy and its follow-ups, including Europe 2020. However, this has not fundamentally changed the relationship between government, people and their environment. As long as all stakeholders use the same technologies, we are back to square one. Government continues to use its power to pursue the public good and, when it is perceived not to, people react in various ways; people continue to lead their lives and base a good deal of their livelihoods on the environment that supports their existence; the environment remains

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limited in its capacity and, once this has been exceeded, ecosystems change in ways that can be good or bad. A positive relation among government, people and the environment is crucial to any lasting civilization; history shows that a negative relation has contributed to the fall of so many. Democratic institutions are a key element of our civilization. They ensure a positive connection between government and people. Do they ensure a positive relation with the environment as well? As Bruno Latour stated, the entrance of nature in politics is one of the key societal challenges and research questions of our times (2004). This chapter has tried to show that, so far, the quest for sustainability has not fundamentally changed our institutions or created new ones. There is nothing new under the sun. ❚

REFERENCES

Biermann F., Abbott K., Andresen S., Bäckstrand Lane F. C. & Chandler A. D., 1973, Venice, a mari- K., Bernstein S., Betsill M. M., Bulkeley H., time republic, Baltimore, Johns Hopkins University Cashore B., Clapp J., Folke C., Gupta A., Gupta Press. J., Haas P. M., Jordan A., Kanie N., Kluvánková- Latour B., 2004, Politics of nature: how to bring the Oravská T., Lebel L., Liverman D., Meadowcroft sciences into democracy, Cambridge, MA, Harvard J., Mitchell R. B., Newell P., Oberthür S., Ols- University Press. son L., Pattberg P., Sánchez-Rodríguez R., Schroeder H., Underdal A., Vieira S. C., Vogel Ostrom E., 1990, Governing the commons: the evolu- C., Young O. R., Brock A. & Zondervan R., 2012, tion of institutions for collective action, Cambridge, Navigating the Anthropocene: Improving Earth Cambridge University Press. System Governance. Science, 335, 1306-1307. Young O. R., 2002, The institutional dimensions of Diamond J., 1997, Guns, germs and steel the fates of environmental change: fit, interplay, and scale,Cam - human societies, New York, Norton. bridge, MA, MIT Press. Foucault M., 1977, Discipline and punish: the birth of the prison, New York, Pantheon Books. Haas P. M., 1992, Introduction: epistemic communities and international policy coordination. Interna- tional Organization, 46.

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CHAPITRECHAPTER 10 X Using ICT in civil society consultations: its contribution to the global governance of sustainable development

Carole-Anne Sénit, Doctoral Researcher at the Institute for Environmental Studies of the Vrije Universiteit, Amsterdam, Netherlands

oday, globalization and the parallel emergence Defining legitimacy in global governance of transnational problems such as financial cri- Legitimacy is understood here as the ability of citizens ses and climate change are causing a shift in to make decisions by and for themselves regarding the authority from states to the international sys- content of the laws that organize and regulate their political tem of governance, the institutions of which are association (Nanz and Steffek, 2004). Two forms of legiti- Toften criticized for their weak democratic legitimacy. While macy derive from this classical distinction of government collective decision-making is globalizing, democracy does by and for the people: ‘input legitimacy’ requires political not seem to change scale. In recent years, innovative con- decisions to be representative of the will of the people, sultative practices that give a central place to information while ‘output legitimacy’ requires decisions to promote and communication technology (ICT), such as the Internet, the social welfare of the community (Scharpf, 1999). Thus, have been multiplying within the framework of intergov- the first refers to the decision-making process, its actors ernmental policy-making on sustainability issues. Online (representativeness) and its procedures (transparency, citizen consultations organized by the UN in the negotia- access to information), while the second refers to the tions on a global development agenda beyond 2015 are ability of political decisions to solve collective problems probably the most relevant example of these new prac- (effective results, mechanisms for monitoring and evalua- tices, in part due to their methodological creativity and a tion). Applied to online consultations, the concept of legiti- wide scope of participation (Figure 1). In this article, we macy raises two questions: are the modes of governance examine whether ICT-enabled citizen consultations in the open to public participation via ICT inclusive and repre- production of collective decisions are playing a role in sentative of the interests of different actors? And do online increasing the democratic legitimacy of international gov- consultations enable the design of more ambitious interna- ernance for sustainable development. We base our inves- tional agreements, with institutional frameworks allowing tigation on both theoretical arguments from the literature for monitoring and evaluation (a necessary condition to and on several specific examples of online consultations achieve better policy outcomes)? As intergovernmental on the post-2015 development agenda. We define firstly negotiations on the post-2015 development agenda will the concept of legitimacy and briefly review its different only commence at the 69th session of the UN General forms, and then analyse the effects of online citizen con- Assembly (UNGA) in September 2014, it is impossible here sultations on the legitimacy of decision-making. to analyse the impacts of these online consultations on the

A PLANET FOR LIFE 201 FIGURE 1 Engaging citizens in global governance

legitimacy of policy results. So this article focuses exclu- Earth Summit in Rio.2 However, few authors have analysed sively on the effects of consultations on the legitimacy of the effects of online citizen consultations on the legitimacy decision-making. of global governance for sustainable development.

Does ICT include or exclude? A wider scope of participation Since the 1970s, many authors have theorized and Certainly, since the mid-2000s ICT has served as empirically analysed the effects of citizen participation a catalyst that facilitates the use of existing means of mechanisms on the legitimacy of national decision- participation and strengthens these methods. Indeed, making processes and their results.1 At the international the consultation of citizens via the Internet theoretically level, these processes became a major topic of interest allows a broader and more inclusive representation of for researchers in the 1990s, a decade which saw the stakeholders in policy-making. Benefiting from simple increase and institutionalization of the participation of civil and often anonymous3 access to online forums, these society in international summits on sustainable develop-

ment, with the creation of the ‘Major Groups’ at the first 2. See for example the work of John Dryzek (1990, 2000, 2010), Karin Bäckstrand (2006, 2012) or Smith and Brassett (2008, 2010). 3. While membership is required to participate in the interactive platform, which implies the collection of certain social demographic 1. See for example the work of Daniel Fiorino (1990), Thomas Beierle information such as name, country of origin, age, gender and and David Konisky (2000), Thomas Webler and Seth Tuler (2000), occupation, the members can also, however, anonymously participate Julia Abelson et al. (2003), John Gastil and Peter Levine (2005), and in online discussions, use the ‘Voice’ tool and post comments. Also, the National Research Council (2008). the vote on MY World 2015 remains anonymous.

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FIGURE 2 Are consultations legitimate?

new methods of participation provide a counterbalance to hand, the digital divide, which is defined as the unequal pressure groups, whose presence and role often predomi- access to computer technologies, has significantly limited nate in conventional participatory methods. ICT can also the equality of participation opportunities. While online provide better access to and sharing of information, and and offline methods have been used for the global survey thus greater transparency. The thematic consultation on ‘MY World’, allowing a more inclusive representation of environmental sustainability, for example, which took place citizens from regions that are most affected by the digital between November 2012 and May 2013, has resulted divide, such as Africa4, Internet access remained a prereq- in 50,000 page views, 11 online moderated discussions uisite for participation in consultations organized by the and 1,100 comments and contributions from civil society UN Non-Governmental Liaison Service (NGLS) and the or individuals from 173 different countries. ICT therefore interactive platform ‘The World We Want’. Of the 1,108 provides access to active citizenship through the creation responses to the NGLS consultation questions for the High of a direct link between citizens and decision-making. Level Panel of Eminent Persons on the post-2015 development programme (HLP), about 1,000 were from civil A more representative participation? However, the use of ICT in civil society consultations in the framework of international negotiations on sustain- 4. 40% of participants who voted to express their priorities for the post-2015 development agenda as part of the MY World global survey able development has a number of limitations that hinder are African. However, the extent of mobilization depends heavily the legitimacy of global sustainable development govern- on the United Nations Teams in charge of relaying information in each country: 40% of votes come from only two countries, India and ance, in terms of both processes and results. On the one Nigeria.

A PLANET FOR LIFE 203 society, while only 92 came from individuals. In addition, Want interactive platform does not constitute a forum that for the second phase of the NGLS online consultation for allows for a real debate, which could enable the collective the HLP (30 January to 2 February 2013), nearly 50% of building of a common vision for the post-2015 develop- the responses of civil society organizations and citizens ment agenda. Beyond these limitations, there is also an came from countries with a very high Human Development issue regarding the way in which contributions are summa- Index (HDI) (> 0.9). This share reaches 60% if one includes rized by the organizers of the consultation, a process which responses from countries with a high HDI (between 0.79 remains opaque. and 0.89). This access restriction, coupled with the fact Thus, online citizen consultations organized within the that citizens who participate via the platform are self- framework of the post-2015 international negotiations selecting and already relatively well informed about show rather mixed effects on the democratic legitimacy the issues, limits the participation of a wider audience, of global sustainable development governance. Despite including laypeople and representatives of the most vulner- the numerous opportunities for participation, civil society able populations. stakeholders remain highly sceptical about the potential On the other hand, the increased availability and acces- impact of their contributions on the outcome of interna- sibility of information facilitated by the Internet can be tional negotiations (‘Major Groups and Other Stakeholders off-putting as users can quickly become overwhelmed, not Briefing Days’, UN Headquarters, 20 and 22 September only by the amount of information provided on the consul- 2013). Several approaches must therefore be analysed to tation pages (Coote and Lenaghan, 1997; McIver, 1998; improve the effectiveness of these innovative instruments. Lenaghan, 1999) but also by the number of consultations First, it is crucial to systematically combine the means of themselves, according to a senior official of the United online participation with offline instruments, such as paper Nations Department of Economic and Social Affairs (inter- or SMS questionnaires, to ensure the wider representation view, 27 September 2013). Indeed, the interactive platform of smaller civil society organizations from developing and ‘The World We Want’ provides participation opportunities less advanced countries, as well as laypersons and the that are so numerous and diffuse, and allows access to most vulnerable populations. Second, it is essential that a level of information that is so unlimited, that the cost the UN agencies, who are the main consultation organ- of entering the platform is high (for example in terms of izers, provide mechanisms to feedback information to the time investment and resources required to become civil society stakeholders that enable them to track and familiar with the available participation tools and for inter- evaluate the impact of their contributions, and thus to preting the necessary information to be able to under- help civil society overcome its lack of faith in the value stand the issues and participate in discussions), which of consultations. can discourage the participation of laypeople or small Beyond its effects on the legitimacy of international organizations from civil society in developing and less governance for sustainable development, ICT also plays developed countries. a role in the emergence of new methods of citizen partici- Therefore, it is stakeholders with significant financial pation, which organization and creation of knowledge for and human resources, and communication and social participation are increasingly collaborative, and where mobilization strategies that represent the majority of social networks are widely used to extend discussions participants in online discussions and platforms (Downs, and disseminate information. Online consultations thus 1957; Olson, 1965; Breyer 1993; Gastil et al., 2005): enable the building, or even strengthening, of the skills consultations therefore primarily reflect the voices of the of citizens and civil society organizations, which will be powerful. In addition, civil society organizations dedicate better able to claim accountability from both UN agencies their strategies to conventional advocacy activities at the and Member States. expense of more innovative activities, such as experience sharing between participants. Ultimately, The World We

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Gastil, John, and Levine, Peter. The Deliberative Democracy REFERENCES Handbook: Strategies for Effective Civic Engagement in the Twen- Breyer, Stephen G. Breaking the Vicious Circle: Toward Effective ty-first Century. San Francisco: Jossey-Bass, 2005. Risk Regulation. Cambridge, Mass.: Harvard University Press, Lenaghan, Joanne. « Involving the Public in Rationing Decisions. 1993. The Experience of Citizens Juries ». Health Policy (Amsterdam, Coote, Anna, and Lenaghan, Joanne. Citizens’ Juries: Theory Into Netherlands) 49, no 1‑2 (October 1999): 45‑61. Practice. Institute for Public Policy Research, 1997. McIver, Shirley. Healthy Debate? An Independent Evaluation of Downs, Anthony. An Economic Theory of Democracy. New York: Citizens’ Juries in Health Settings. King’s Fund, 1998. Harper & Row, 1957. Nanz, Patrizia and Jens Steffek. « Global Governance, Participa- Dryzek, John. Deliberative Democracy and Beyond: Liberals, Crit- tion and the Public Sphere ». Government & Opposition 39, no 2 ics, Contestations. Oxford University Press, 2000. (Spring 2004): 314‑335. Dryzek John, « Global Democratization: Soup, Society, or Sys- Olson, Mancur. The Logic of Collective Action Public Goods and tem? » Ethics & International Affairs 25, no 02 (2011): 211‑234. the Theory of Groups. Cambridge, Mass: Harvard University Press, 1965. Dryzek, John S., Bächtiger, André, and Milewicz, Karolina. « To- ward a Deliberative Global Citizens’ Assembly ». Global Policy Scharpf, Fritz Wilhelm. Governing in Europe: Effective and Demo- 2, no 1 (2011): 33–42. cratic? Oxford University Press, 1999. Dryzek, John S., and Stevenson, Hayley. « Global democracy and earth system governance ». Ecological Economics 70, no 11 (2011): 1865‑1874.

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CHAPTER 11

Water governance in megacities: innovation facing the techno-political hurdle

rban development has led to the emergence of megacities, which Bernard Barraqué substantially impact the environment and, notably, water quality Director of Research and quantity. These cities now need to seek out land-use based on water governance, CNRS (National Centre solutions, before resorting to increasingly expensive technolog- of Scientific Research) – CIRED (International ical fixes. Europe’s Water Framework Directive (WFD) takes a Centre of Research step in this direction by making the restoration of the quality of on Environment and Development) the aquatic environment a starting point for water policy. This and Professor at concerns all users including public water and sanitation services. AgroParisTech, Paris, France But this transition to the joint management of water services and resources is a challenging paradigm shift, particularly in megaci- Rosa Maria ties of the global South which experience difficulty moving from civil and sanitation Formiga-Johnsson Director of Water engineering towards an environmental engineering approach. We illustrate these Management and U Territories, INEA difficulties with case studies from São Paulo and Rio de Janeiro, where hydroelectric (State Institute of projects have led to a crisis in urban water quality and quantity. What is needed is a Environment) and Associate Professor, shift from the concept known in Brazil as saneamento básico (basic sanitation, i.e., UERJ (University of the drinking water and sewer systems) to the broader saneamento ambiental (environ- State of Rio de Janeiro), Rio de Janeiro, Brazil mental sanitation, which also encompasses wastewater treatment and solid waste disposal, rainwater management, etc.).

Hydroelectricity and water transfers in São Paulo and Rio de Janeiro Between the 1930s and 1940s, Brazil, like Mediterranean Europe, underwent a major infrastructure expansion under an authoritarian, highly centralized government. In this period, known in Brazil as the Estado Novo, the federal government

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FIGURE 1 Sao Paolo: technical solutions outstripped by population growth

Despite research into technical solutions, hydroelectric power and the supply of drinking water have gradually been drawn into competition with each other in Greater Sao Paolo.

managed both electricity and water resources on a large scale. Water services, however, remained under direct municipal control until the 1960s. The system was funded from the public purse and the users did not pay for water, which encouraged waste. Brazil’s engineers preferred to satisfy demand through the expansion of the hydraulic capacity and they remained more influenced by a civil engineering paradigm than their European counterparts (Britto, 2001; Costa, 1994). After 1945 international financial institutions began underwriting national governments’ participation in infrastructure projects. The US government led the way with multipurpose hydraulic infrastructure projects (TVA, Mississippi, Colorado) and there was a will to include the provision of water to cities. Moreover, in the English- speaking world many experts believed local authorities were incapable of delivering public services (for example the UK, see Saunders, 1983). In Brazil, electricity for São Paulo and Rio de Janeiro was generated by water diversion schemes, leading in the long term to a shortage of water in urban areas (Formiga-Johnsson and Kemper, 2005). The Guarapiranga and Billings reservoirs and dams, built in the 1920s and 1930s respectively, carried water in a penstock from the Tietê river basin, where São Paulo stands, to the ocean, so that the resulting

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FIGURE 2 The diversion of water from the Paraiba do Sul river

For a long time, the diversion of water from the Paraiba do Sul via the Barra Mansa hydroelectric infrastructure has facilitated the supply of drinking water to Rio de Janeiro. Water pollution and land use conflicts are now threatening this technical solution. steep gradient could power an electricity plant. After the Second World War there was interest in using this water to service São Paulo. But the city’s sanitation system had not kept pace with population and urban growth, and the Billings dam water was polluted: indeed, to boost electricity production, water from the Tietê, now a highly polluted urban river, was diverted into the reservoir (Keck, 2002). In 1992 environmentalists managed to stop the practice of pumping polluted water into the reservoir, except in cases of serious urban flooding. But tensions are still running high, as the electricity company wants to resume pumping, even if that water has to be treated first. Conversely, another project to divert water for hydroelectricity production has actually helped service Rio de Janeiro’s water needs (Formiga-Johnsson et al., 2007). Two thirds of the flow of the Paraiba do Sul, which runs to Brazil’s east coast, are diverted southward towards the ocean via a small coastal river near Rio, with the same kind of gradient as for the Billings. This river, the Guandu, registered a sevenfold flow increase, and has thus been able to serve as the main source of drinking and industrial water for the entire Rio de Janeiro metropolitan area (RMRJ), some eight million inhabitants. But what little water remains in the Paraiba do Sul, downstream

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from the diversion, is now seriously polluted from various urban and industrial developments stretching down to the river’s mouth at the eastern end of the state of Rio. And the situation could worsen if the state of São Paulo, west, where the head of the basin is located, also decided to divert water to the city of São Paulo, or if the state of Minas Gerais, home to several of the river’s northern tributaries, decides it wants to use more of the water. La diversion des eaux pu Paraiba do Sul par le biais des infrastructures hydro- électriques de Barra Mansa a historiquement aidé à alimenter Rio de Janeiro en eau potable. La pollution des eaux et les conflits d’usage menacent aujourd’hui cette solution technique.

Saneamento básico and centralized services: a tale of water management challenges in two Brazilian megacities

THE 1950s: BIRTH OF THE CONCEPT OF ‘SANEAMENTO BÁSICO’ In the mid-1950s, the concept of Saneamento básico came to the fore. Essentially, it involved autonomy of water and sanitation services, as opposed to urban development and urban infrastructure integration that characterized the previous management (Rezende and Heller, 2002). Though they remained under public control, both networks had to be managed together with a separate budget, by specific organizations. Planning and management were to be guided by the latest engineering techniques and entrepreneurial models, including water pricing on a per-volume basis. Improving self-financing capacity involved the creation of autar- quias municipais, i.e. new public organizations with independent budgets.1 Refuse collection and rainwater management, however, remained taxpayer-funded municipal services. Networks began to spread to city peripheries. But as soon as the sanitary situation improved, federal and federated states preferred to put public resources towards productive infrastructure (energy, transport) instead of local sanitation. Underin- vestment coupled with rapid urban growth created a divide between the city centre and the periphery: most low-income suburbs were poorly served. To compound matters, underserved areas often developed without public planning or control. No plan for water provision was made prior to development, and once it had occurred service was often denied because settlements were illegal. In addition, in areas that were unfit for development (such as areas that were overly steep, damp or prone to flooding), the installation of public infrastructure was usually technically impossible (Britto, 2001).

1. The equivalent in France would be either Régies autonomes or EPICs, but controlled by the State instead of the local authorities.

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THE 1970’S: EXTENSION OF SANITATION NETWORKS UNDER THE CHALLENGE OF RAPID URBANIZATION In the 1970s Brazil experienced intense industrialization, a demographic explosion and rapid urbanization. The 1964 military coup installed an authoritarian regime that instituted Plano Nacional de Saneamento Básico (PLANASA) in 1971 to stream- line its investments and overhaul sanitation infrastructure within 10 years. Central- izing administration at the state level was an instrumental part of the plan as it would permit the averaging out of costs. Each state created its own saneamento básico company (CESB). The CESB of the state of Rio de Janeiro, known as CEDAE, was founded in 1975. In practice, it took over water provision from almost every municipality in the state of Rio de Janeiro. In São Paulo, SABESP was born in 1973 through the merger of different administrative units. Despite the focus on the expansion of networks, CESBs were public utilities encouraged to operate like private companies. This meant prioritizing large-scale projects and quick profits. After a few years of initial successes in improving services, they were bound to run into financial difficulties due to the inevitable rise in interest rates. Although the 1967 federal constitution gave municipalities the legal responsibility for water distribution, the new public policy reduced their role to signing conces- sion contracts with the state public companies. Handing over water services was their only means of gaining access to new forms of funding. For several years, most municipal governments did not question the new model. The predominance of the CESBs was the flip side of the denial of their constitutional responsibilities with respect to water and sanitation, particularly in the poorer northern states (Braga et al., 1995; Fabriani and Pereira, 1987). This new approach had disastrous effects on infrastructure quality and the urban environment. CESBs rarely heeded local city planning guidelines, except where they coincided with their own interests. And the way Saneamento básico was defined – prioritizing water provision and sanitation networks, but excluding drainage and solid waste collection, and deferring wastewater treatment measures – led to critical situations such as flooding and the pollution of water resources.

THE 1980’S AND 1990’S: RISING ENVIRONMENTAL AWARENESS AROUND WATER RESOURCES Eventually the need for integration between water resource and water service management became apparent. Environmental agencies were created to control pollution, and integrated water management was experimented locally by Greater São Paulo. Though these initiatives had little practical effect, they were important precursors of a new paradigm that would seek to not only provide water services but also protect water resources and improve their quality. In 1986 a profound institutional crisis put an end to PLANASA. Its initial successes in improving the rate of water connection was linked to Brazil’s economic vitality between 1967 and 1980. But investment was too heavily concentrated on drinking water; sanitation and especially wastewater treatment were overlooked. Indeed,

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the cost of providing water is lower and more easily passed on to users, delivering better return on investment than collecting and treating wastewater. Additionally, the percentage of the population able to pay the actual cost of service delivery was too low to achieve a self-financing system, as planned. As a consequence, PLANASA investment was concentrated in affluent urban areas, while connection rates in the poorest municipalities and especially in illegally occupied areas failed to improve (Barraqué and Britto, 2006). State companies were blinkered by a monolithic focus on supply underpinned by a belief in unlimited resources and technological solutions to all water provisioning problems. In the 1970s, Greater São Paulo, still lacking high-quality water, undertook a new project to divert water from the neighbouring Piracicaba catchment. This project was at the root of the conflict between local usages and the needs of the natural environment that broke out ten years later, leading to the sweeping resource management reforms of the 1990s that began with the state of São Paulo and later reached the federal government. There is no question about it: both São Paulo and Rio de Janeiro suffer from poor drinking water quality and inadequate sanitation. How can water resources be properly managed before adequate sanitation systems are in place?

Environmental engineering innovations: Towards an interaction between services and resources? In Brazil the environmental engineering model is gaining ground, largely because urban and industrial growth are making water service and sanitation major issues. In the Alto-Tietê basin, for example, balancing water supply and demand for Greater São Paulo’s 18 million residents is a considerable challenge. Urbanization has created an intricate web of interests and debates on water sectoral policy, inter-basin transfers, and more (Formiga-Johnsson and Kemper, 2005). The same is true, though to a lesser extent, in the RMRJ: the Guandu has become very polluted and water must now be treated with large amounts of chemicals. Since the early 1990s, environmental engineering approaches are developing, including demand management, the development of more flexible water allocation rules, the protection of resources and water conservation. Since the Lula government, user participation and the management of rainwater and urban solid waste must be taken into account: it is the central issue of the saneamento ambiental. In Greater São Paulo, state legislation has attempted to reclaim control over land use and curtail unplanned urbanization in drinking water abstraction areas, a return to a policy introduced in the mid-1970s. This has proved one of the thorn- iest problems to address, as urban planning comes under municipal jurisdiction (Formiga-Johnsson and Kemper, 2005). But the process also entails the implementation of new forms of multi-level governance, since most municipalities still delegate water service provision to CESBs. Moreover, the growing power of basin commissions has created a de facto interre- lationship between sectors viewed as separate in the previous sanitation engineering

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paradigm. Thus, a wastewater treatment problem becomes an issue of good resource management at basin scale – something seen in France with Agences de l’eau. Again, this approach requires consensus on the definition of water resources within a basin. What is an appropriate scale for managing services? The new left-wing government has rekindled an old debate between the return to municipal management and a renovation of the public companies managed at the federated state level. Since 2009 a new possibility has emerged as municipalities have finally been empowered to form joint boards to work together (consorcios intermunicipais). This model may be a step towards the solidarity-based funding of services at the megacity scale and finding better solutions to the challenges of urbanization. However, for municipalities to truly address urban fragmentation, a political will is required to overcome rivalries among political parties, and even individual egos, and between different cities. Consorcio ABC (a large consortium of the various communes of suburban São Paulo) and the Alto Tietê basin committee are promising steps in this direction that deserve further study.

Conclusion In Europe, public water and sanitation services have long been managed independently of water resource issues, due to investment in drinking water and wastewater treatment technologies. Today these solutions are viewed as very costly, and attempts are being made to develop more long-term solutions from a land-use planning perspective, an approach encouraged by the EU Water Framework Direc- tive (2000/60/EC). Progress in decentralized technologies (notably on site sanitation) has highlighted the mediocre cost/benefits performance of centralized systems in rural areas and even in city peripheries. Decentralized technologies could well replace networks if an approach could be found that allowed the abandonment of the ‘all network’ rule without forsaking the notion of public service provision. In France, for example, the service public de l’assainissement non-collectif (public service of non-collective sanitation) was created to publicly control and manage the five million septic systems that still operate in this country, which has a low population density. Even for drinking water, relatively safe alternatives to current systems are technically feasible, but the institutional framework is lacking. Such alternatives might facilitate the development of more extensive water services in Brazil. Up to now, in this large country, the middle classes have been unable to impose a policy of user- funded public services with socially acceptable costs. The failure of the large-scale hydraulic infrastructure model has brought about a crisis in water quality without resolving the issue of quantity, which in turn opens up new possibilities. A longer-term relationship between public services and water resources coupled with more flexible technical solutions must, however, first clear a formidable political hurdle: achieving cooperation (instead of confrontation) among different levels of government. ❚

A PLANET FOR LIFE 213 REFERENCES

Barraqué B. and Britto A. L. N., 2006, Urban water Fabriani C. B., Pereira V. M., 1987, Tendências e Di- services: a sustainability issue at both ends?, Annu- vergências sobre o Modelo de Intervenção Pública al International Conference of Royal Geographical no Saneamento Básico, Texto pra Discussão n°124, Society, London, England, 30 August - 01 Septem- UFRJ/IEI, Brazil. ber. Formiga-Johnsson R. M. and Kemper K. E., 2005, Braga J. C., Medici A. C. and Arretche M., 1995, Institutional and policy analysis of river basin man- Novos Horizontes para a Regulação do Sistema de agement in the Alto-Tiete river basin, São Paulo, Saneamento no Brasil, Revista de Administração Brazil, The World Bank, Policy Research Working Pública, 29, 115-148. Paper 3650, Washington, 53 pp. Britto A. L. N., 2001, A regulação dos serviços de sa- Formiga-Johnsson R. M., Kumler L. and Lemos M. neamento no Brasil: perspectiva histórica, contexto C., 2007, The politics of bulk water pricing in Bra- atual e novas exigências de uma regulação pública, zil: lessons from the Paraíba do Sul basin, Water Anais do IX Encontro Nacional da ANPUR, Rio de Policy 9, 87-104, 2007. Janeiro, Brazil, 28 May-1 June, 1080-1093. Rezende S. C. and Heller L., 2002, O saneamento Costa A. M., 1994, Análise histórica do saneamento no Brasil: políticas e interfaces, Editora UFMG, Belo no Brasil. M.Sc. thesis, ENSP, FIOCRUZ, Rio de Ja- Horizonte, Brazil. neiro, Brazil.

214 A PLANET FOR LIFE CHAPTER 11 Modelling the sustainable management of natural resources. The example of water in post-Soviet central Asia

Raphaël Jozan, Advisor to the Executive Director, Head of Strategy, Agence française de développement (AFD), Paris, France, and Research Associate, Laboratoire Territoires, Techniques et Sociétés (LATTS), Champs-sur-Marne, France

odelling and simulations have become to the mid 2000s, the area has witnessed the deployment essential tools for the analysis of the rela- of a truly international laboratory for the creation of innova- tionships between nature and society. The tive tools designed to assess the environmental situation increasingly powerful calculation capabili- and (re)orient its development trajectory. In the context of ties of computers has enabled the estab- the post-Soviet transition, the use of increasingly powerful Mlishment of protocols and methods to integrate multiple models and computer simulations has raised hopes for databases, enabling the analysis of territorial problems the emergence of a new set of economic principles for in their multiple dimensions (physical, biological, tech- resource management, and a renewed relationship with nological, economic and social). Systems for monitoring nature and technology. This analysis finds that, paradoxi- and evaluation, which are at the heart of the methods cally, the apparent sophistication of the tools used does and tools for strategic development and decision support, not guarantee the unlocking of a public problem and, rely on calculation devices in areas as varied as natural depending on the way in which the models are used, resource management, urban development, agriculture, can reinforce non-sustainable development trajectories. etc. To what extent do these systems facilitate changes Large dams are not the only influence on Central Asia’s to public policy? Do they enable real-world complexities hydrographic network. However, successive models have to be taken into account in the decision-making process continued to disregard important elements, particularly and allow the integration of new factors (particularly social water resources. This has led to a hydraulic representa- and environmental)? tion where only controlled water resources were taken into This paper examines the hydro-economic models used account. Accordingly, Uzbekistan becomes a vulnerable in water management in the Aral Sea basin. These models ‘upstream country’, whereas it has access to sufficient have been progressively introduced for the purposes of water regardless of the management regime of neigh- ‘saving the Aral Sea’ and to avoid a ‘water war’ between bouring Kyrgyzstan. the former Soviet republics following the collapse of the USSR in 1991 (see Figure 1). This region, in which water Towards more efficient management of the Aral management is considered as irrational and the least Sea’s watershed efficient in the world, is emblematic of international mobili- In Central Asia, the first modelling exercise was zation around an environmental problem. From the 1980s carried out through international scientific and technical

A PLANET FOR LIFE 215 The representation of reality for decision-making purposes: the paradoxical example of the Aral Sea The representation of reality for decision-making purposes: the paradoxical example FIGURE 1 Large dams are not the only influence on Central Asia’s hydrographic network. However, successive models have continued to disregard important elements, particularly water successive models have continued to disregard important elements, However, hydrographic network. Asia’s Large dams are not the only influence on Central ‘upstream Uzbekistan becomes a vulnerable Accordingly, This has led to a hydraulic representation where only controlled water resources were taken into account. resources. whereas it has access to sufficient water regardless of the managementcountry’, regime of neighbouring Kyrgyzstan.

216 A PLANET216 FORA LIFEPLANET FOR LIFE INNOVATION FOR SUSTAINABLE DEVELOPMENT CHAPTER 11

cooperation in the late 1980s. Following the Chernobyl and bringing an end to the siphoning off of state budget disaster in 1986, and in the context of perestroika, the by industrial sector lobby groups. Apart from the USSR, Soviet government chose to accelerate international Central Asia was also a pilot region for the reform project, cooperation on the environment. In the context of an where the Soviet government planned to experiment with increasing focus on water at the international level, a new principles of resource management through the intro- subject that was at the heart of international negotia- duction of new decision-making tools.2 These tools were tions on environment and development, the international provided by advances in computer and hydraulic technolo- community turned its attention towards the Aral Sea. This gies that were more efficient and effective than large-scale lake was rapidly drying up as a result of the exponen- hydraulics, an already ongoing rhetoric in the USSR before tial increase in the use of water resources for irrigation the discourse of international expertise was established in a region undergoing a spiral of ever-larger construc- during the 1990s and 2000s. tion works (canals and dams), legitimized by plans for an The WEAP model achieved rapid success. The simula- expansion in cotton production. Scientific and technical tion results were published in 1992, ahead of the Rio cooperation led to the publication of an article in the Conference – and, by chance, just a few months after the journal Science in 1988 that blew the whistle at the implosion of the USSR – that formally certified the drying international level on the subject of the retreating Aral out of the Aral Sea and the need for change. The motto Sea. The cooperation continued with a team of American ‘Saving the Aral Sea’ appeared, which served as a catch- and Soviet researchers, brought together by the Stock- all for several objectives, including: the desire and need holm Environmental Institute (SEI), created in 1989 by the for Central Asian elites to cut ties with the USSR (which Swedish Government in preparation for the Rio Confer- they nevertheless sought to maintain until the dissolu- ence (1992). This team chose the Aral Sea as the first tion); the search for international finance by ministries site for the application of a model, the Water Evaluation and local research centres seeking to implement hydraulic and Planning System (WEAP), for which they developed projects and which were deprived of Soviet funding; the algorithms to simulate the management of water resources ambitions of international support organizations to lead the in large basins. new republics towards the market economy; addressing The choice of the region and methods was in tune with pressure from international environmentalists regarding internal developments in the USSR, which had placed an the shrinking Aral Sea; and the desire of a handful of increasing attention on the Aral Sea since the late 1970s. international experts to provide models for the design of Opponents of the Soviet regime that focused on the environ- action plans to move away from socialism through a single ment – the only area where criticism was possible in the variable – water. USSR – targeted the Sibaral project, a disproportionate Moreover, the strength of the WEAP model was that hydraulic project that aimed to divert Siberian rivers over it allowed the aggregation, within new scenarios, of thousands of miles towards Central Asia. Since the early technical solutions (concreting of channels, modern 1980s, this programme was supported by the new Soviet irrigation techniques such as drip irrigation, etc.) and ruling elite, i.e. the young economists that seized control institutional ones, which are considered according to of the government following the death of Brezhnev1 and who sought to reform the socialist economic system by: promoting the flexibilization of the economy (and innovation), moving away from productivist principles, ensuring a better rationality in the management of financial resources 2. During the 1980s, Central Asia was particularly targeted by the Soviet government because of the excesses of the Sibaral project that was promoted by Central Asian 1. General Secretary of the Central Committee (CC) of the Communist Party of the policymakers, and because of the identification, in the early 1980s, of significant Soviet Union (CPSU) presiding from 1964 until his death in 1982 corruption networks formed around the hydraulic and cotton agro-industrial sector.

A PLANET FORA LIFEPLANET217 FOR LIFE 217 the same technicist and diffusionist approach.3 Several rivers, and were controlled by officials, particularly those regional institutions were created and organized within the from Uzbekistan, who promoted a hydro-agricultural vision Interstate Council for the Aral Sea (ICAS) to propose the of water management, in accordance with the sectoral formulation of an action plan and the implementation of a balance of power inherited from the Soviet period, when funding body (International Fund for the Aral Sea – IFAS), the hydraulic structures were designed for the service of integrated into the Aral Sea Basin Program supported by irrigation. the World Bank, UNEP and UNDP. The emergence of the energy issue reinforced the idea, which had become fashionable at the international From the ‘rescue of the Aral Sea’ to the ‘Central level, of a possible water war between the downstream Asian water war’ countries (that focused on irrigated agricultural production) The action plans developed through international and the upstream ones where hydroelectric dams were cooperation were rapidly overwhelmed by new elements sited. This thesis emphasized the importance of hydrau- that were not represented in the problem as formulated by lics as a factor in the issue of Central Asian develop- the WEAP simulations, which were built prior to the Soviet ment in the 1990s: while the level of the Aral Sea had dissolution. The borders between the newly independent previously been considered as the standard by which the republics (especially Uzbekistan and Kyrgyzstan, see sustainability of the development path should be judged, Figure 1) were becoming more defined and their political it was ultimately the Toktogul Dam that eventually stole and economic trajectories differed. A new water use arose, the limelight, while the project to save the Aral Sea was or at least one that had not been previously taken into completely ousted, thus signalling the virtual disappear- account in the formulation of the problem: this was the ance of environmental issues from the definition of the water used for electricity production in the dams, most of public problem. At this juncture, advances were made in which were situated in Kyrgyzstan, a country dominated by the modelling field by experts at US research centres who high mountains which gather the majority of the precipita- developed the General Algebraic Modeling System (GAMS), tion that enters into the basin, before flowing into the Aral which was more dynamic and powerful than WEAP, had the Sea and the irrigated areas, which are mainly in Uzbeki- ability to factor in the energy sector (in addition to agricul- stan and Kazakhstan. Whereas Uzbekistan was pursuing a ture and the environment), to incorporate the differentiated development path that was largely dependent on irrigated national strategies and to include a number of economic cotton production (especially during the 1990s), Kyrgyz- calculations for the optimization of water allocations for stan expected to benefit from these hydroelectric facilities the different usages. (including the Toktogul Dam, the largest reservoir in the Once again, the advent of a new tool raised hopes region – 19.5 km3) to ensure its energy security, especially within the international community, as GAMS seemed during the winter period, which it considered incompatible capable of addressing the complexity of the problem. Its with summer irrigation. The fact remained: the problem of integrated dimension meant that this model could only Central Asian water management could not be resolved be implemented by the intervention of a new player, the without taking the energy issue into account. Institutions US Agency for International Development (USAID), which and tools developed through international cooperation were had an impact on water management as USAID already inefficient: the organizations created had no jurisdiction had an involvement in energy sector reform, particu- over hydroelectric works, nor on stretches of international larly the privatization of the Kyrgyz energy sector, where a number of American companies were on the scene. The modelling simulations were then performed within a 3. The example of charging for the use of water resources can be mentioned, which is perceived by many as a means of encouraging innovation and investment in irriga- new arena, the Interstate Council for Kazakhstan, Kyrgyz- tion technology. In Central Asia, the introduction of such a measure indeed led to the stan and Uzbekistan (ICKKU), which was established in reduction of water usage, but only in what was declared: civil servants and farmers were able to declare less than their actual consumption for the official statistics. 1993 and was independent from Aral Sea Basin Program

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institutions, which destabilized the monopoly of hydro- to the infrastructure management bodies who opposed agricultural expertise. Several simulations were produced de-compartmentalization of energy and agriculture. In any during 1997, all of which demonstrated the need for the case, the simulations were dependent on administrative new states to enter into a cooperative plan, or run the risk statistics that have been shown to exclude a significant of the Toktogul reservoir reaching a critical state that would proportion of agricultural uses (a massive 30% of the land jeopardize both electrical production and the availability area of Uzbekistan, the main water consumer in the basin, of water for irrigation. was unlisted).4 The analysis of the models shows that In 1998, with great fanfare, the new states signed an they overestimate the water shortage of the region. Only international treaty that had been promoted by the UN the water controlled by dams is taken into account, but and a number of bilateral donors, such as USAID, which this represents a minor proportion of the water used by contained the terms of trade derived from the simula- farmers.5 tion work. While this step was initially seen as a great In fact, the very objective of searching for a balance success, the treaty was soon challenged by the states in the model imposes an enormous constraint on the themselves, who refused to comply with the recommenda- research: modellers are forced to classify countries into tions. For instance, although the modelling results found two categories (upstream or downstream countries), which that Uzbekistan was ‘extremely vulnerable’ and ‘depen- is the only way to obtain a digital solution for modelling, as dent’ on the energy from the Kyrgyz dam, the country has been well established by game theory. However, it has turned its back on the treaty until the early 2000s, despite been demonstrated that Uzbekistan, which is considered repeated simulations that confirmed the same conclusion. as a downstream country, is in fact a ‘middle’ country, From the early 2000s until 2005, the case was taken up meaning that it receives water from Kyrgyzstan, regard- by the World Bank, which built its own simulation tool less of the regime under which the Krygyz dams are with the objective being to persuade Uzbekistan to enter controlled; the models, however, assign the dams with into cooperative arrangements. Despite the production of the capacity of absolute control over the water that falls new results, which converged with those of the GAMS, onto the Kyrgyz mountains, an assumption that is contra- Uzbekistan maintained its position of staying away from dicted by the analysis. the negotiating table, an attitude that was hard to under- In fact, the water war that was declared by the experts, stand in terms of international cooperation, which consid- politicians and diplomats, exists only if one ignores an ered Uzbekistan’s government to be irresponsible, given important part of the water resources and management the recommendations of the models that seemed to show methods of the hydraulic infrastructure, as well as a whole the rational path to follow. range of factors (geographic locations of electricity cables, structure of energy markets, technical means of electricity Political economy in the use of modelling production) that are not represented by the model, and Was it the realism of the model’s representation that are thus excluded from the public policy issue, which encouraged states to sign up to the treaty? Should a more only focuses on the dam regime. As a consequence, the precise model be developed to better reflect reality and model’s results are overwhelmed by elements that are thus convince more countries to cooperate? An analysis not taken into account (including a surplus of water!). conducted by the author showed that, for a long time, Paradoxically, the more the models were overwhelmed, the GAMS models remained, surprisingly, at the stage the more the experts left aside new elements and offered of an abstract and theoretical representation of reality. truncated representations of reality, which was seen The simulations were based on incomplete data and were considered as ‘highly uncertain’ by those working on the 4. This is a major element that explains why the efficiency indicators for water usage models: despite their missions in Central Asia, US experts are so low in Central Asia. were unable to get hold of the data that was available 5. Water that is not controlled by dams flows into canals and agricultural fields.

A PLANET FOR LIFE 219 when the simulations were carried out, especially when Indeed, a model does not describe the world as it is: but it the World Bank took on the modelling work in the 2000s is a ‘symbolic narrative’ mobilized for action and decision (the third stage of the modelling work described above). by ‘partisan actors’ (Bouleau, 1999). The question is not Everything shows that the experts were constrained to whether models can accurately describe the world, but to force the representation of reality to sustain the balance see what ability they have to rearrange reality. of the models. It is important to recognize the benefits of using models Realistically, modelling should become increasingly to explore complex systems that integrate multiple dimen- precise as time goes on, as the accumulation of knowl- sions. However, in the example of Central Asia, it did not edge should enable us to get progressively closer to the allow a paradigm shift. This led to the surprising situa- real economy. However, hydraulic bias is a counterin- tion where the use of models has contributed to the tuitive phenomenon. As time passed the representation continuation of a hydraulic paradigm that was, however, actually became increasingly caricatured, excluding dissi- criticized by those working on the models, and which dent elements that did not fit with the problem as it had ultimately neglected the environment and society. Over been framed. The representations of the models were time, the model was no longer used to explore reality in the common denominators of the interests and values its complexity and uncertainty, but was considered as a of the represented stakeholders (in this case the states), panopticon, while the model superimposed constraints on which eventually aligned with the development models the results, and itself became part of the reality that the that the republics wanted to follow.6 On one side stood modellers sought to address. Uzbekistan, which the models represented as a country of thirsty cotton fields that was eligible for international REFERENCES funding to modernize its irrigation system; on the other Bouleau N., 1999, Philosophie des mathématiques et de la mo- was Kyrgyzstan, which was represented as a hydroelec- délisation, du chercheur à l’ingénieur, Paris, L’Harmattan Jozan R., 2013, Les débordements de la mer d’Aral, une sociologie tric station that had control over water resources in their de la guerre de l’eau, Presses Universitaires de France, Paris entirety, thus becoming eligible for international funding for the construction of new dams. The problem was that by truncating a part of reality, the models contributed towards the adverse effects of this grotesque situation: they built the water war – against which they proposed a solution, because they led states towards signing agreements which would ultimately be overwhelmed by those factors that were not taken into account, including water flows. In the specific case of Central Asia, they created transgression and therefore tension between states.

Conclusion The Central Asian experience demonstrates that we should be especially cautious in the more generalized use of models for public policy, especially on topics that relate to sustainable development and natural resources.

6. The issue of representation is as much that of actors around the negotiating table, as that which is proposed in the modelling work. Ultimately, the models only consider the strategies of states, which are based on fragmentary information (administrative statistics) that do not reflect all uses.

220 A PLANET FOR LIFE CHAPTER 12

Frugal innovation: a pioneering strategy from the South

or a long time, it has been assumed that the North innovates and the South copies.1 This is no longer the case. On a daily basis in Navi Radjou, Fellow, Judge emerging economies such as China, Brazil, India and Africa, Business School, thousands of ingenious entrepreneurs and firms are coming up University of Cambridge, UK with cost-effective and sustainable solutions that address the socio- economic needs of local communities using minimum resources. They are pioneering a whole new approach to innovation called ‘frugal innovation’, a disruptive new paradigm that the West has much to learn and benefit from.

Too expensive, lack of flexibility, elitist: the Flimits of the Western approach to innovation In the twentieth century, as North American and European economies expanded, Western corporations began to institutionalize their innovation capabilities, creating dedicated research and development (R&D) departments and standardizing the business processes needed to take their ideas to market. They focused on managing innovation, just as they managed any other business activity. This industrialization of the creative process led to a structured approach to innovation with the following key characteristics: big budgets, standardized business processes and controlled access to knowledge. But this structured innovation approach, which helped Western economies become highly successful in the second half of the twentieth century, has

1. This chapter is partially adapted from Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth (Jossey-Bass, 2012).

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three clear limitations in the volatile and resource-constrained twenty-first century. First, the Western approach to innovation is too expensive and resource consuming. Western economies have come to believe that their innovation system – like any industrial system – will generate more output (inventions) if fed more input (resources). As a result, the structured innovation engine is capital intensive. It requires an abundant supply of financial and natural resources at a time when both are increasingly scarce. The approach is designed to deliver ‘more with more’ – that is, firms charge customers a hefty premium for over-engineered products and services that are expensive to develop and produce. For instance, the thousand companies in the world that invest the most in innovation – many of which are Western firms – spent a whopping $603,000,000,000 (yes, that’s US$603 billion!) on R&D in 2011 alone. But what did they get in return for this expense? Not much, according to research conducted by the management consultancy Booz & Company. They found that the three Western industries that spend the most on R&D – computing and electronics, healthcare and automotive – struggle to generate a steady stream of groundbreaking inventions, despite their hefty R&D investments. Hence there is a weak correlation between how much money your firm spends in R&D and how well it performs in terms of developing and marketing products that generate a significant financial return. To put it bluntly, money can’t buy innovation. The Western pharmaceutical industry is one sector where the ‘bigger is better’ R&D strategy is clearly running out of steam. R&D spending by big pharmaceutical firms – most of whom are European and US – ballooned from $15 billion in 1995 to $45 billion in 2009. Yet the number of new drugs launched annually has dropped by 44% since 1997. This is especially bad news for big pharmaceutical firms, given that between 2011 and 2016 drugs worth a massive $139 billion are set to go off patent. Second, the Western approach to innovation lacks flexibility. With so much money invested in R&D, Western firms have become risk averse in their approach to innovation. They have implemented standardized business processes such as Six Sigma (an integrated set of management techniques designed to decrease production defects and increase operational efficiency by standardizing processes) and ‘stage gate analysis’ to manage and control their innovation projects. These structured processes were expected to drastically reduce uncertainty – and the risk of failure – from the entire innovation process and make R&D projects more predictable in both execu- tion and outcomes. But these structured business processes and methods are unfit to deliver the agility and differentiation that enterprises need in a fast-paced and volatile world. Built around stable and predictable processes, programmes like Six Sigma cannot enable the rapid change that companies need as they seek the necessary agility to mass customize products and services, to satisfy increasingly diverse and finicky customers, and to keep up with technology shifts. Third, the Western innovation model is elitist, insular and non-inclusive. Throughout the twentieth century, Western firms built large R&D laboratories that employed hundreds of top scientists and engineers, based on a belief that knowledge is power and that controlling access to it was key to success. Thus innovation

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became an elite activity controlled by a few high priests: engineers and scientists working under conditions of secrecy in in-house laboratories situated close to their headquarters. Only these chosen few were invited into the R&D department and given the resources and permission to innovate. Any new knowledge they generated was closely guarded. Collaboration with other employees – let alone outsiders – was shunned. The assumption was that to dominate markets through innovation one needed two things: top-of-the-line technology and ownership of the best intellectual property, both of which could be bought with enough money. However true that assumption might have been in an earlier industrial era, it is far less valid now. Part of the old belief was that only a bunch of smart PhD scientists could invent new things. As a result, top-down R&D systems are often unable to open up and integrate bottom-up input from grassroots citizens. The Western R&D model is elitist also on another level: it yields over-priced products and services that only the affluent mainstream customers in the West can afford, thus not availing these offerings to low-income segments of Western economies who cannot afford them. Thus, this elitist R&D system further marginalizes these underprivileged groups.

Innovate faster, better and cheaper: the need to build a new innovation engine in the West Bottom line: the processes, systems and mindsets that underpin the structured approach to innovation that dominated Western economies throughout the twentieth century are now failing. The Western innovation engine has become too rigid, elitist and bloated to remain effective. It consumes a lot of resources and makes a lot of noise, but produces little of much significance. Sadly, this bigger is better approach to innovation seems ill-suited to address the needs of millions of cost-conscious middle-class consumers – the bedrock of Western economies – who have suffered from stagnant wages and dwindling purchasing power in recent years. Adjusted for inflation, the average middle-income American family earned only 11% more in 2010 than it did in 1980, whereas the richest 5% in America have gained a 42% income boost. As a result, the 5% of Americans with the highest incomes now account for 37% of all consumer purchases. Fifty million Americans currently lack medical insurance, and a whopping sixty eight million Americans are unbanked or under- banked – i.e., they cannot avail themselves of the full range of financial services offered by traditional banks. These numbers are not expected to improve significantly in the coming years given the slow US economic recovery. As a result, for a growing number of marginalized middle-class Americans, the American dream might remain just that: a dream. The situation is worse in European societies where a lingering economic recession is deepening poverty and rapidly depleting the consuming middle class. While Spain and Greece are most afflicted by the crisis, wealthier nations like France and Germany aren’t spared either. For instance, the number of Germans identified as middle class has dropped from 65% in 1997 to 58% in 2012. And in France, the average salary has fallen by 24% while living costs have shot up by 30% between

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2008 and 2012. As a result, US and European consumers are becoming frugal and choosing to buy affordable products and services that deliver more value for less cost. For example, nearly one third of European consumers are willing to buy a low-cost car rather than a premium vehicle. This frugal mindset is especially prevalent among Western youth who grew up in a recessionary period, which explains why, for instance, the purchase of new cars among young Americans aged 18 to 34 dropped by 30% between 2007 and 2011. In addition to becoming more cost-conscious, Western consumers are also more environmentally conscious and clamouring for eco-friendly goods and services that use fewer natural resources. For instance, 71% of American consumers now consider the environment when they shop, up from 66% in 2008. And more than 80% of European citizens believe that a product’s environmental impact is a critical element in their purchasing decisions. It is clear that Western corporations must build a new innovation engine that allows it to innovate faster, better and cheaper – and produce affordable and sustainable offerings that serve the needs of increasingly frugal and eco-conscious Western consumers. To do so, the North must look for inspiration in… the South.

Frugal innovation: a new approach pioneered in the South Developing and emerging nations like India, China, Brazil and some African countries are pioneering frugal innovation – a new model of innovation that is diametrically opposed to the costly, rigid and elitist R&D-driven approach to innovation prevalent in the West. Unlike the structured and resource-intensive Western innovation model which strives to do more with more, frugal innovation is the ability to do more with less – that is, to create significantly more social value while minimizing the use of scarce financial and natural resources. Frugal innovation is the method used by thousands of ingenious entrepreneurs and companies in emerging economies like Kenya, India, Peru and the Philippines to develop affordable and sustainable solutions using limited resources. These frugal innovators view harsh constraints – e.g., lack of electricity or water – not as a restraining factor but as a creative opportunity to innovate and generate more value for local communities. For example, in India, Harish Hande founded SELCO – which provides solar energy at affordable prices to over 125,000 households in far-flung rural areas by leveraging an extensive grassroots network of micro-entrepreneurs who sell and maintain solar lanterns in their local communities (for this achievement, Hande won the 2011 Ramon Magsaysay Award, that is often referred to as “Asia’s Nobel Prize”). And in Peru, a country with high humidity and little rainfall, local engineers have invented an advertisement billboard that converts humidity in the air into drinkable water (generating nearly 10,000 litres of potable water within three months). In addition to grassroots entrepreneurs, many local companies in emerging markets are also using frugal innovation techniques to create affordable solutions on a large

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scale to deliver greater value at lower cost to millions of low-income consumers. For instance, the Indian industrial conglomerate Tata Group has developed Nano, the world’s cheapest car priced at $2,000. The group has also invented Swach, a low-cost water purifier that uses natural elements like rice husk to filter water. Both the Nano and Swach are frugal solutions aimed at the hundreds of millions of Indians who live at the bottom of the economic pyramid. Similarly, the Kenyan telecom operator Safaricom pioneered M-PESA, a mobile payment service that enables Kenyans to send and receive money using their mobile phones without needing a bank account. Today, over 15 million Kenyans use the M-PESA – that’s larger than the number of Kenyans who have a bank account! All these entrepreneurs and companies in the developing world who practice frugal innovation embody the spirit of jugaad – a colloquial Hindi word that translates into ‘an innovative fix, an improvised solution born from ingenuity and clever- ness’. Jugaad is the resilient art of detecting opportunities in the most adverse situations and resourcefully improvising ingenious solutions with limited means. Jugaad goes by different names in different emerging markets: Brazilians call it jeitinho; the Chinese refer to it as zizhu chuangxin (in contrast with shanzhai, which means copycat); the Kenyans call it jua kali. Whatever the name of its regional variants, the jugaad spirit is evidence that developing nations are able to come up with original solutions on their own to solve local problems. The frugal innovation model – enabled by an ingenious jugaad mindset – that is pioneered in Africa, Latin America and developing Asian countries not only debunks ‘the North invents, the South copies’ myth but also provides a cost-effective and sustainable alternative to the resource-intensive Western innovation model that is showing its limitations. In striking contrast with the expensive, rigid and elitist Western R&D model, frugal innovation is an approach that minimizes use of resources, allows for greater flexibility and facilitates greater collaboration and engagement in local communities. Let us study how, in practice, this is achieved by analysing the operating methods of frugal innovators.

The modus operandi of frugal innovators The pervasive scarcity and the demanding nature of the consumer base in developing nations make local innovators masters of frugality. These innovators are able to get more from less by applying frugality to every activity they perform at every step along the value chain. They are frugal in how they design products, how they build them, how they deliver them and how they perform after-sales maintenance. Their frugality shows up not only in their parsimonious use of capital and natural resources but also in how they maximize their limited time and energy: rather that doing everything themselves, they rely extensively on partners to perform various operations, thus saving time and energy. These innovators employ several frugal approaches to gain more from less. First, they strive to reuse and recombine what they already have. Unlike Western R&D engineers, innovators in emerging markets avoid creating something entirely new, from scratch. Instead, they seek to reuse or

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discover new combinations of existing technologies or resources both to come up with new solutions and to commercialize them in markets. For instance, Zhongxing Medical, a Chinese medical device maker, borrowed Digital Direct X-ray (DDX) equipment technology from its parent company (Beijing Aerospace) – which wasn’t using it effectively – and re-engineered DDX for use in everyday applications like chest X-rays. As a result, its X-ray machines cost just $20,000 to build, compared to $150,000 for the equivalent GE and Philips models (which use DDX only for high-end applications). By creating low-cost, mass-market applications out of an underused technology, Zhongxing cornered 50% of the Chinese X-ray machine market – forcing its rival, GE, to cut its prices by 50% while Philips, unable to compete, withdrew from this segment altogether. A second strategy employed by frugal innovators to create more value at less cost is to design ‘good enough’ solutions that are simple to use and easy to maintain rather than over-engineered, complex and onerous offerings. Rather than wowing customers with the latest technologies and sophisticated features, these innovators develop functionally minimalist solutions that address their customers’ most fundamental needs – rather than desires. They may not get it right the very first time. Through trial and error and rapid experimentation, however, they eventually zero in on the set of features – and the business model – that would deliver the highest value at lowest cost for their customers. For instance, eager to save the lives of the twenty million premature babies who are born each year worldwide – many in developing nations – Jane Chen, Linus Liang, Naganand Murty and Rahul Panicker cofounded Embrace. Based in Bangalore, India, Embrace designs and markets a portable infant warmer that looks like a tiny sleeping bag and gives mothers in rural areas of India, China and Africa greater mobility and more intimate contact with their early born babies. The bag contains a pouch of a wax-like phase-change material (PCM) that keeps babies warm for up to six hours at regular body temperatures. Intuitive to use and easy to maintain, this infant warmer requires only 30 minutes of electricity to heat up the PCM pouch using a portable electric heater. Furthermore, this design dovetails well with the recommended practice of kangaroo care, whereby a mother holds her baby against her skin (hence the company name Embrace). Most importantly, the Embrace portable infant warmer costs less than 2% of the cost of incubators available in Western markets sold at $20,000 or more. A third strategy that frugal innovators use to deliver more value at less cost is by enabling low-income customers to procure their goods and services using a flexible pricing model. Take M-KOPA, which was established in Nairobi, Kenya in 2011 with the ambition of becoming the world’s first solar leasing product that uses mobile money (as mentioned earlier, Kenya’s M- PESA service has already made the country a world leader in mobile money). M-KOPA delivers solar lighting to Kenyan rural households using a flexible pay-as-you-go pricing model. M-KOPA initially charges customers a modest amount for the purchase of a base station that includes a solar panel, three lamps and a mobile phone charger. Customers then use M-PESA to pay off the balance in small instalments with mobile money. Customers are supplied light

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and power as long as they keep up with the payments. When the entire balance is paid off, customers own the M-KOPA system and get solar power for free. Thanks to its flexible pricing structure, M-KOPA has already enabled over 40,000 Kenyan households to leapfrog from high-cost and polluting kerosene lamps to high-quality systems that deliver affordable and clean solar energy. A fourth more-with-less strategy that frugal innovators use is focused on solving the last mile problem – that is, the difficulty of reaching far-flung customers in an economical way. Rather than investing in expensive logistics networks, frugal entrepreneurs in India, Brazil, Africa and the Philippines leverage existing networks to cost-effectively deliver their products and services to people in hard-to-reach markets. In particular, they rely on grassroots partners in local communities to reach more customers and personalize their offerings for them. These grassroots distribution partners are often micro-entrepreneurs themselves. By building on already developed and trusted social networks in emerging markets, frugal innovators can compensate for the poor state of the physical infrastructure there. More importantly, by enrolling grassroots entrepreneurs as their channel partners, frugal innovators drive their own financial sustainability while also creating new economic opportunities in local communities. This is the case for MicroVentures in the Philippines – cofounded in 2006 by Bam Aquino, nephew of former President Corazon Aquino – which is making a wide range of consumer products and services accessible to consumers at the base of the (socioeconomic) pyramid (BOP). Rather than setting up its own distribution network – a costly and nearly impossible task, given the fragmentation of the BOP market spread across hundreds of villages – MicroVentures leveraged an existing ad hoc logistics network made up of eight hundred thousand sari-sari stores (small family-run shops). These tiny stores – found across all seven thousand islands of the Philippine archipelago – are operated by entrepreneurial women who set them up as extensions of their own homes. MicroVentures applied what is known as the conversion franchising model which consists in converting already existing, independently owned stores into members of a standardized and branded network known as the Hapinoy Program. By converting and upgrading some of the existing sari-sari stores into branded Hapinoy Community Stores, MicroVen- tures rapidly scaled up its distribution network: ten thousand sari-sari stores have joined the Hapinoy Program since 2007 – a figure that Aquino predicts could go up to a hundred thousand in the coming years.

How the West is embracing frugal innovation Frugal innovation – the ability to create more value with fewer resources – is making its way into Western economies through many channels. To begin with, a new generation of entrepreneurs in the US and Europe are upending existing industry business models by providing Western consumers with alternative products and services that are affordable and sustainable. Inspired in part by their peers in Nairobi, Bangalore and Sao Paulo these Western entrepreneurs in Silicon Valley, New York, Paris and London are adopting the core principles of frugal innovation – that is, they design

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good enough products and services that are offered to Western consumers using a flexible pricing model and through an extensive network of partners. Take, for instance, BlaBlaCar, which has rapidly emerged as Europe’s leading car-sharing community. Launched in 2004 by three young entrepreneurs, BlaBlaCar provides passengers with a less expensive and more flexible alternative to traditional means of transportation like trains. Operating across ten European countries, BlaBlaCar transports over 700,000 passengers every month – more people than the number of passengers travelling on Eurostar (the high-speed train that connects London to Paris and Brussels). BlaBlaCar estimates it has saved £100 million for its drivers every year and saved 700,000 tons of CO2 emissions. Another frugal innovator developing eco-friendly solutions is Paul Benoit, a brilliant French engineer who founded Qarnot Computing, a start-up that makes digital radiators equipped with microchips that are connected to the Internet. These networked processors can perform computation much faster and cheaper than costlier and energy-hungry data centres – thus making super-computer-like processing power affordable and accessible to the masses. Even better, the energy generated by these high-performance processors gets converted into free and eco-friendly heating for commercial buildings and houses equipped with these digital radiators. The French government is keen to partner Qarnot Computing to integrate its sustainable solution into its social housing projects. Besides asset-intensive transportation and energy sectors, Western entrepreneurs are using frugal innovation techniques to disrupt other established industries like healthcare, education and financial services – all of which have become too bloated and are failing to provide affordable solutions to all Western citizens. Take healthcare: Erik Douglas and Amy Sheng met at UC Berkeley in Professor Dan Fletcher’s bioengineering laboratory in 2009. The Fletcher laboratory had invented low-cost mobile-phone-based microscopes for remote diagnosis of infectious diseases such as malaria and tuberculosis. Pilot projects in India, Uganda and Vietnam validated the effectiveness of these frugal diagnostic devices. Inspired by this success in developing nations and recognizing the need for affordable healthcare in the US itself, Douglas and Sheng spun out CellScope from the Berkeley laboratory. Based in San Francisco, CellScope is currently developing a suite of optical attachments for smartphones that can convert them into an affordable and easy-to-use at home self-diagnostic device – be it an otoscope or a dermascope – thus giving patients immediate peace of mind and saving them from an expensive and time-consuming visit to a doctor. Other Western entrepreneurs are adopting frugal innovation models to provide affordable financial services to European and US citizens. Recognizing that 24% of US households have neither a debit nor a credit card to buy bus or train tickets online or pay their utility bills or loans online, Danny Shader founded PayNearMe – which enables consumers to make transactions on the Internet and then make cash payments at local stores across the US such as the 7,000 7-Eleven stores. Similarly, in France, Hughes Le Bret, a former banker, cofounded Compte Nickel with tech- wizard Ryad Boulanouar. Compte Nickel is a prepaid debit card that can be activated

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in just five minutes at one of thousands of French cafés and convenience stores and costs only 20 euros for an annual subscription fee. Compte Nickel is a boon for the 2.5 million French citizens who are denied service by traditional banks – and it provides an additional source of revenue for small independent shop owners in France, who are reeling under the recession. Le Bret, author of the provocatively titled NO BANK, boldly predicts that within ten years, frugal offerings like Compte Nickel will account for 15% to 20% of the French consumer finance market. The growing success and impact of these entrepreneurs in the US and Europe is a wake up call for Western corporations. Leaders of Western companies are starting to realize that unless they embrace frugal innovation models, they risk losing their core markets in the US and Europe to nimble rivals who are able to provide affordable and sustainable solutions to cost-conscious and eco-aware consumers. As a result, several Western companies have begun to develop – or invest in – frugal solutions that deliver more value at less cost to Western consumers. For instance, alarmed by BlaBlaCar’s phenomenal growth – with 4,000 new members joining every day – the French national railway company SNCF has decided to revamp its own business model around frugal mobility by, for instance, investing in Greencove, a car-sharing platform that competes with BlaBlaCar. Some Western multinationals are also introducing into US and European markets low-cost products and services that they initially developed and marketed in emerging economies. For instance, GE Healthcare is now commercializing in the US its MAC 400 – a low-cost and energy-efficient ECG device (electrocardiogram) designed by its Indian engineers and originally sold in Indian rural markets. Other multinationals are bringing into recession-hit European markets frugal supply chain processes and techniques that they successfully implemented in developing nations. For example, inspired by its great success in selling shampoo and tea in inexpensive single-serve sachets in India, Unilever is now selling small Surf detergent packages for only five washes in Spain and marketing mayonnaise mashed potatoes in tiny packages in Greece. Similarly, PepsiCo is motivating its supply chain managers in the US and Europe to do more with less by emulating their frugal colleagues in developing nations like India where PepsiCo’s beverage plants generate two-fifths of their energy input from renewable sources like biomass and wind turbines. The good news for Western corporations is that they can accelerate their frugal innovation initiatives by recruiting a new generation of engineers and managers being trained in leading Western universities. Indeed, top US universities like MIT and Stanford now offer programmes to train future leaders who are able to design and deliver frugal solutions that are relevant not only for developing nations but also for developed economies in the West. At Stanford, the Entrepreneurial Design for Extreme Affordability course teaches students from across disciplines – engineering, business, medicine, public policy and law – how to design and commercialize inexpensive, sustainable and yet high-quality solutions that address the pressing needs of citizens around the world in healthcare, energy and transportation. Similarly, the Tata Center for Technology and Design at MIT is training a new breed of engineers

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and managers who can conceive frugal solutions that address basic human needs in resource-constrained communities in emerging economies – and potentially also in developed nations. In Europe, the University of Cambridge and the Hamburg University of Technology host research centres dedicated to creating and disseminating new knowledge in the field of frugal innovation for the benefit of Western corporate leaders and policy makers. While emerging economies have already internalized the principles of frugal innovation, Western societies have yet to master the art of doing more with less. In the coming years, as the global economy becomes more integrated, one can expect North-South cooperation to intensify – enabling greater two-way knowledge exchange that can accelerate and deepen the adoption of frugal innovation in both developing as well as developed economies in a synergistic fashion. In the next section we examine how frugal innovation is poised to become the unifying force in North-South engagement in the next decade.

Frugal innovation: the unifying force in North-South cooperation The dramatic rise of emerging markets is accelerating the transition from a unipolar economic world long dominated by the West to a multipolar economic environment. As a result, the global innovation landscape is also evolving from unicentric (all R&D and innovation concentrated in the North) to polycentric (innovation happening in a diffused manner in multiple regions worldwide). As a result, the trajectories of global innovation – i.e., the various locations where innovative ideas emerge, where they are then developed into solutions and finally commercialized – are starting to change. Taking the perspective of the South, let us study the evolution of global innovation trajectories in a chronological order:

1980S: IMPORTED INNOVATION Until the 1980s, innovation activities remained concentrated in the West. Multi- nationals used their big R&D laboratories in the US and Europe to develop new products and services mainly for affluent Western markets, which acted as inspiration for these solutions. Their subsidiaries in developing nations merely imported these Western products and either added or removed features in them to make these offerings more adapted and marketable for low-income consumers in local markets. This phase perpetuated the “North invents, South copies” belief.

1990S: EXPORT-LED INNOVATION In the late 1990s, multinationals like Procter & Gamble and GE launched large R&D laboratories in India and China. Their main objective was mainly cost saving as they sought to employ qualified but low-cost engineers and scientists in developing nations to work on products still inspired by, and destined for, Western markets. During this period, offshore IT outsourcing providers in India like Infosys and Wipro began to provide outsourced R&D services to multinationals but again to design

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FIGURE 1 The Changing Geography of Innovation

solutions primarily destined for Western markets. The South finally proved it could innovate, but did so mainly for the benefit of Western markets.

2000S: END-TO-END LOCAL INNOVATION As developing nations emerged as the core engine of global economic growth, multinationals began localizing their entire innovation value chains – from R&D to manufacturing – in Africa, India, Brazil and China to effectively serve the local mass markets. For example, Nokia designed and produced all its low-cost phones in India and China using exclusively local R&D and manufacturing capabilities. Similarly, GE Healthcare used its R&D talent in India and China to design from scratch frugal medical solutions – like the low-cost MAC400 and MAC i ECG devices – for local markets. These multinationals were inspired by entrepreneurs and companies in emerging economies who applied frugal innovation techniques to develop and market affordable and sustainable solutions for the masses – like Tata Motors’ $2,000 Nano car or Safaricom’s M-PESA mobile payment service in Kenya.

2010 ONWARD: GLOBALLY NETWORKED INNOVATION The prolonged economic crisis in the West and the growing scarcity of natural resources have made consumers in the US and Europe frugal and environmentally conscious. As a result, low-cost and energy-efficient solutions are finding relevance

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in developed markets as well. Consequently, multinationals like Unilever, GE, Siemens and PepsiCo are now using their R&D laboratories in India and China to test frugal business models and solutions that can then be commercialized in recession-hit Western economies. This phenomenon is called ‘reverse innovation’. For instance, Siemens’s Indian and Chinese engineers are developing an entirely new product segment called SMART (Simple, Maintenance friendly, Affordable, Reliable and Timely to market) that includes affordable and energy-efficient solutions for emerging market sectors such as healthcare, energy and transportation. Siemens has recently begun commercializing these frugal SMART products in the US and Europe as well. In the coming years, however, as the global economy becomes more tightly integrated and interconnected, resourceful innovators in the South will be able to combine their ingenuity and expertise with specialized R&D competences in the North to co-create breakthrough frugal solutions that no single region could have entirely conceived on its own. One might designate this synergistic form of North- South collaboration as globally networked innovation. Vanguard Western multinationals are already building – and learning to orchestrate – global innovation networks that integrate globally dispersed R&D talent, ideas and capital to provide greater value at less cost to customers worldwide. For instance, the resource-poor Indian rural markets inspired GE to design Vscan, a compact ultrasound device, which was then co-developed by an integrated global R&D team distributed across China, France, Norway and the US. Vscan is now marketed across both emerging and developed markets. Vscan wouldn’t have seen the day if it were developed exclusively in either the North or the South. Similarly, the French carmaker Renault – which launched the bestselling $6,000 Logan car in 2005 – is currently developing the CMF-A car platform out of its R&D laboratory in Chennai, India. Renault will share this platform with its partner Nissan to co-design a whole range of ultra-low-cost and highly energy-efficient vehicles aimed at first-time buyers in India and other emerging markets. CMF-A will leverage extensively Renault-Nissan’s global innovation network that spans across France, India and Japan. Indeed, Carlos Ghosn, the multicultural CEO of the Renault-Nissan Alliance who coined the term ‘frugal engineering’ in 2006, wants to integrate the jugaad mindset of his company’s resourceful Indian engineers with the strong project management skills of its French teams and the deep technical expertise of its Japanese R&D group to create frugal vehicles for global markets. Multinationals from the South are also building global innovation networks in an attempt to scale up their frugal innovation initiatives by combining their low-cost talent with advanced technologies available in the US and Europe. For instance, Renault’s rival Tata Motors has gradually built a world-class R&D centre in the UK (located on the University of Warwick campus) that is emerging as a global hub for the development of frugal low-carbon automotive technologies for markets worldwide. Similarly, Indian wind turbine maker Suzlon now operates top-notch R&D labs in Germany, the Netherlands and Denmark. Its Western engineers collaborate

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with their Indian peers to co-develop renewable energy solutions for both developed and emerging economies.

Conclusion In today’s interconnected and interdependent world, the US energy problem is the same as the Indian one: we have one global energy problem to solve since we all share the same planet. Likewise, we can no longer dissociate the healthcare issues of European countries from those of China with its rapidly ageing population; we have one big global healthcare issue to overcome. Both emerging economies as well as developed nations need affordable and sustainable solutions to address pressing needs in sectors such as education, energy, healthcare, transportation and financial services. Traditional R&D models are too costly and rigid to deliver these objectives. Frugal innovation is a better approach for providing such cost-effectiveness and energy-efficiency. Pioneered in resource-constrained emerging markets, frugal innovation is rapidly being adopted in the recession-hit Western economies as well. One might hope that in coming years, corporate leaders and policy makers in the North will join forces with their counterparts in the South to integrate and network their innovation assets and know-how to co-create frugal solutions that tackle critical socio-economic issues that affect citizens worldwide. ❚

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Bornstein D., 2007, ‘How to Change the World: So- Radjou N., 2011, ‘Polycentric Innovation: A New cial Entrepreneurs and the Power of New Ideas’, Paradigm for Global R&D’ Manufacturing Executive Oxford University Press. Leadership Journal, May. Chandy R. and Ramdas K., 2013, ‘Let There Be Light’, Radjou N., Prabhu J. and Ahuja S., 2012, ‘Frugal Business Strategy Review, Volume 24, pp. 26-27. Innovation: Lessons from Carlos Ghosn, CEO, Re- Cone Communications, 2013, ‘Consumers take renault-Nissan’ Harvard Business Review, July 2. sponsibility for ‘green’ actions but aren’t following Radjou N., Prabhu J. and Ahuja S., 2012, ‘The through’, Cone Communications Green Gap Trend CEO’s Frugal Innovation Agenda’ Harvard Business Tracker. Review, October 5. Darnall N., Ponting C. and Vazquez-Brust D. A., Radjou N., Prabhu J. and Ahuja S., 2012, ‘Jugaad 2012, ‘Why Consumers Buy Green’, VAZQUEZ- Innovation: Think Frugal, Be Flexible, Generate BRUST D. and SARKIS J. (eds.), Green-growth: Breakthrough Growth’ San Francisco: Jossey-Bass. Managing the transition to sustainable capitalism, Radjou N. and Prabhu J., 2013, ‘Renault-Nissan’s New York: Springer, pp. 287-308. Journey to Affordable Cars’, strategy+business, Immelt J. R., Govindarajan V. and Trimble C., July 23. 2009, ‘How GE is disrupting itself’, Harvard Busi- Radjou N. and Prabhu J., 2013, ‘Siemens ness Review, October. Gets SMART by Focusing on Simplicity.’ International Federation of Red Cross and Red strategy+business, September 10. Crescent Societies, 2013, ‘Think differently: Hu- The Gallup Organisation, 2009, ‘Europeans’ atti- manitarian impacts of the economic crisis in Eu- tudes towards the issue of sustainable consumption rope’, Geneva, Report available on http://www. and production’, Flash Eurobarometer, Series #256. ifrc.org/PageFiles/134339/1260300-Econom- ic%20crisis%20Report_EN_LR.pdf Wagner K., 2013, ‘Carsharing catches on with Mil- lennials’, CNNMoney.com, March 12. Michel A., 2013, ‘L’improbable rencontre des créa- teurs de la ‘banque au café’’, Le Monde, October 7. Yunus M., 2010, ‘Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Prahalad C. K., 2004, ‘The Fortune at the Bottom of Pressing Needs’, PublicAffairs, 256 pages. the Pyramid’, Wharton School Publishing. Zeng M. and Williamson P. J., 2007, ‘Dragons at Prahalad C. K. and Mashelkar R. A., 2010, ‘Inno- Your Door: How Chinese Cost Innovation Is Dis- vation’s Holy Grail’ Harvard Business Review, July- rupting Global Competition’, Boston, MA: Harvard August. Business School Press.

234 A PLANET FOR LIFE CHAPTER 12 Catalysts for change: Development banks and green innovation

Henry de Cazotte, Director Innovation Mission, French Development Agency (Agence Française de Développement, AFD) Raphaël Jozan, Adviser to the Executive Director, Head of Strategy, French Development Agency (Agence Française de Développement, AFD) Mustapha Kleiche, Senior Investment Officer – Leading expert on Green Finance, Operations Division, French Development Agency (Agence Française de Développement, AFD)

evelopment agencies and international devel- Development agencies’ gradual strategic focus on opment finance institutions have long been the environment pioneers in endorsing sustainable economic Development agencies first experienced environmental growth on an international scale. They have issues as external, operational constraints before the shown a strong ability to innovate by respond- environment was seized on as a topic by pragmatic donors. Ding to opportunities, adapting their work to the global They harnessed concern about the environment, making it agenda, helping design and implement internationally dis- a central topic in international cooperation forums. Indeed, seminated tools, and by blending grants, subsidies and in the late 1980s, American nongovernmental organizations market funding to engineer enhanced funding mecha- (NGOs) highlighted the ecological damage that was being nisms. Environment and sustainability issues, absent from caused by World Bank-funded projects. Under pressure international aid plans thirty years ago, have gradually from the NGOs and the American public, the United States risen in prominence to become a central concern. Now Congress asked US-funded multilateral development banks, traditional donors find they must again redefine their to set up suitable social and environmental risks manage- policies and operations as worldwide changes demand a ment systems. The pressure to address environmental rethinking of cooperation models and purposes. Aid archi- issues grew, bolstered by the large ecological disasters of tecture has opened to new financiers, the geographic cen- the 1980s, even as some scientists showed evidence that tres of manufacturing and technological innovation have the development model promoted by donors should not be moved, and financial and economic crises have weakened pursued. Concurrently, major environmental agreements, several industrialized donor countries, raising new chal- such as the Montreal Protocol, CITES, and the Rio Conven- lenges for international development strategists. tion1 were being negotiated. Pressure from civil society In the first half of this paper, we provide a short history and taxpayers on the governments of other aid-funding about the way aid agencies and development banks have countries further bolstered the attention that development integrated and acted on environmental concerns over the agencies and banks paid to the environmental concerns. past thirty years. In the second half, we describe how new networks of innovative, environment-oriented funders and 1. The Rio summit built on earlier efforts, undertaken since the others pose new challenges to traditional donor funding late 1980s by the World Bank and the Organisation for Economic Co-operation and Development (OECD) to operationalize the notion models and relationships. of sustainable development.

A PLANET FOR LIFE 235 For donors, the 1992 United Nations Conference on instruments, thus increasing their presence in countries Environment and Development (UNCED)2 in Rio de Janeiro where financial markets had been advancing.. In emerging was a turning point in bringing environmental concerns economies, the overwhelming majority of projects funded to bear on development issues (Jacquet et al., 2009). The by the World Bank were stamped ‘environment’. combining of development aid and environmental policies In the months that followed the Rio Summit, the Global and projects was a cultural revolution for development Environment Facility (GEF) was created at the United agencies. This was especially true of multilateral funding Nations, based on a French and German initiative.4 The bodies that had seen development and the environment GEF was a groundbreaking instrument for funding environ- as diametrically opposed forces. They had viewed environmental global public goods, such as the climate and biodi- mental concerns as impeding economic growth; this versity, or for fighting desertification and soil degradation. perspective was amplified by the views of most Southern Other funding mechanisms followed; these included the partners, particularly aid-recipient countries. Ultimately Clean Development Mechanism (CDM) and various funds and despite strong internal resistance, the development linked to the United Nations Framework Convention on banks and agencies had to bridge the gap between their Climate Change (UNFCCC), particularly the Kyoto Protocol, internal views and those of many citizens, activists and which was signed in 1997 and ratified in 2005 (Colombier governments. et al., 2006). Carbon finance, which seeks to combine Pragmatically, throughout the 1990s, funding agencies economic and environmental efficiency, spawned “carbon revised their aid programmes and policies to remain in funds” housed by the World Bank. The European carbon step with their publics. Financial concerns also played part market was later set up to reconcile environmental and in this turnaround, as international policy and economic development interests. Furthermore, budget aid, the tradi- change raised questions about the agencies’ and banks’ tional tool of international development banks, can also be funding model. Three changes in particular – the end of used for climate purposes. the Cold War, the global debt crisis, and especially an While the environmental component of the Millennium international financial market that invested in major growth Development Goals set out at the 2002 Johannesburg regions (notably South Asia) beginning in the 1980s – had Summit was not very successfully implemented ‘green’ a negative impact on the funding agencies’ and banks’ activities, closely associated with environmental issues, intervention ability.3 Since Bretton Woods, these multi- nonetheless continued to gain ground, becoming a and bi-lateral donors had long been virtually the only significant part of aid agency activities. In most countries, bodies channelling funds from the Global North to the support for the larger concept of ‘green growth’ and for Global South. These traditional funders suddenly found projects related to sustainable cities, agroecology and themselves in competition with commercial and invest- renewables were proof positive that environmental issues ment banks when both started providing lower-interest were becoming part of funding agencies’ strategic priori- loans and other financial products to an increasing number ties and operations. of emerging countries ‘environment’ (Bourguignon, 2011). In budgetary terms this entailed significant efforts – However, the funding agencies were able to seize an over 30% of total annual contributions by major multi- opportunity after the Rio Summit: they used concern lateral donors went to environmental and climate change about the environment to implement new, special funding issues; some bilateral donors allocated much higher percentages of their funding.5 As the funding agencies 2. International environmental agreements numbered 17 in the 1950s, 21 in the 1960s, 35 in the 1970s, 36 in the 1980s, and over 56 in the 1990s. 4. The GEF’s French counterpart, the Fonds Français pour 3. At the turn of the millennium, the World Bank’s investments l’Environnement Mondial, was created in 1994. contracted dramatically; for instance, to just over $500 million in 5. For example, in the case of AFD, the French development agency, China, down from an average of over $3 billion between 1993 and more than 50% of its project finance must have a positive impact on 1997). climate change.

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invented new funding mechanisms and tools, they also biomass-generated electricity.. Other nations, including invented new intellectual and social infrastructure: stand- Morocco, South Africa and the Gulf States, are investing ards, human capital, alliances and networks. Operating in far-reaching green technology projects, partly to help procedures changed with, for instance, the assessment of them access innovation networks. Development agencies a project’s carbon footprint or an appraisal of its vulnera- played a crucial role in propelling this trend in developing bility to climate change. Funders were particularly active in countries, and especially in emerging ones, by providing developing a set of measurement and assessment tools to financial products to support public policies that promoted integrate environmental considerations into project selec- new, risky concepts that commercial banks shied away tion criteria.6 The growing importance of research on the from financing. environment and development reflected the aid agencies’ The powerful rise of green growth as a goal now has need for innovative ways to address methodological issues considerable impact on the strategic planning of funding and improve operational efficiency. Other concerns such as agencies. In 2012, for instance, the World Bank, like many gender equality, poverty reduction and education access other donors, developed a new operational strategy based also benefited from these scientific efforts, but environ- on the notion of green growth. Most donors are currently mental issues received the lion’s share of research funding active in the debate about the design of the Green Climate and attention. The development agencies had to estab- Fund which is currently being created and should be the lish or increase their research and knowledge creation largest public fund – $100 billion annually – dedicated to capacities to support their operational needs and increase helping less-developed countries combat climate change their clout in international debates about the environment- and adapt to its effects. development nexus. To achieve this, the agencies set up in-house scientific committees, as had the GEF or the The green innovation ecosystem challenges French Global Environment Facility (Fonds Français pour development agencies l’Environnement Mondial – FFEM). Paradoxically, the global rise in concern and funding for The 2008 economic crisis further fuelled this trend. green and sustainable projects is currently challenging the ”Green growth” projects held potential as tools for development banks and aid agencies. In effect, a phenom- national economic recovery and expansion in Organisa- enal interest in climate-related financing is happening tion for Economic Co-operation and Development (OECD) today: an entire ecosystem of new environmental financiers countries and in some emerging economies, particularly has grown up around the traditional donors, who now find where the green-tech sector presented industrial oppor- themselves to be one source of funds and solutions among tunities. In addition, green-growth projects matched many many. According to estimates from studies conducted over countries’ desire to diversify and deploy their energy mix the past several years by the Climate Policy Initiative, the differently, given uncertainties around fossil fuel supply global financial ecosystem currently allocates $359 billion and cost. Furthermore, civil society increased pressure per year to combat climate change. Today hundreds of on governments and donors to consider environmental global financial players – development banks, public and issues. Consequently, China has become the world private funders such as philanthropists, institutional inves- leader in solar panel production and wind power, while tors, commercial banks, and others – increasingly include India and Brazil present two of the largest markets for environmental issues in their strategic planning and operations, albeit to varying degrees (Figure 1). New actors,

6. In close relationship with academia, NGOs, foundations and notably regional and national development banks in the think tanks, development agencies have been particularly active in developing world have strengthened their role in the archi- establishing measurement and assessment tools (PES [payments for environmental services] and green accounting initiatives such tecture of international sustainable-development funding. as WAVES [Wealth Accounting and the Valuation of Ecosystem Consequently, traditional aid agencies and donors confront Services]) to take into account the flows and stock variations in natural resources. the need to redefine their position within a complex and

A PLANET FOR LIFE 237 FIGURE 1 Climate Finance flows in 2013

diverse architecture ruled by commercial and investment setting up donor clubs such as the International Develop- banks and private-sector companies ment Finance Club (IDFC). It brings together experts and Development agencies must change how they operate twenty major national, sub-regional and bilateral devel- within the global financial architecture. At the recent opment banks from developed and developing countries. Rio+20 United Nations Conference on Sustainable The founding rational for the IDFC proves interesting. Development (UNCSD), a group was created to develop The organization helps overcome the traditional north- a strategy for sustainable development financing by south divide on numerous issues, including the evolution 2015. Any such strategy will probably call for multiple of traditional sustainable-development funding (Bonnel, funding sources and instruments that enable synergies 2014). In addition, the creation of such a club testifies to and in-depth partnerships between funders, to give aid the development banks’ willingness to maximize leverage agencies an additional competitive advantage. Relying only on other funding. Doing so will allow them to have greater on grant-based solutions is unreasonable, just as it is effectiveness and impact in a financial environment where unrealistic to assume that a single institution should bear they have otherwise lost considerable influence to other the investment risk of, for instance, a renewable energy sources of financing, particularly private ones. IDFC project alone. The GEF discussed earlier and the Green members never fail to point out that their cumulative Climate Fund demonstrates the trend toward even further funding activity outranks that of the multilateral banks. The blending different types of funding with other tools. IDFC actively uses its influence in discussions about the Meanwhile, development banks are stepping up and modalities of the Green Climate Fund; the latter holds the beginning to coordinate their own efforts, for example by key to the future of IDFC member institutions, particularly

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those associated with official development assistance countries as varied as Australia, Canada, France and the (ODA). It appears that the role of aid agencies and the Netherlands. value added by multi- or bilateral donors of public funds In addition, the environment and development mandate must be further clarified and examined. Public funds, from of traditional donors is coming under strong pressure, the North and from the South, need to serve as catalysts as it can be noticed with the efforts to combat climate to private actors and orient them towards the production change, the environmental issue that development of (global) public goods. agencies have invested the most. On one hand, climate- A nother challenge facing traditional aid agencies related financing facilities have done little for the poorest revolves around their positioning within the global indus- countries, especially in sub-Saharan Africa (Colombier et trial ecosystem. Emerging economies have largely taken al., 2006). Nor have they contributed much to financing on ‘climate’ funding facilities, such as the Clean Develop- climate-change adaptation, the poor sister to climate ment Mechanism (CDM). This has certainly contributed to finance. On the other hand, anticipating synergy between gains in emerging countries’ energy efficiency and indus- financial profitability and environmental efficiency, funding trial performance. The strengthening of these rising indus- bodies have primarily structured environment-develop- trial powers compared to the weakening of the econo- ment integration around the following syllogism: climate mies of traditional donor countries looms as a growing = mitigation = renewable energy. Donors have focused concern. Indeed, the international community once thought their efforts on disseminating green, alternative-energy – or perhaps hoped – that investments in renewables production technologies (Dechezleprêtre et al., 2008) and through aid channels would benefit green industries in have spent little effort on energy demand management or developed countries. However, since the geography of efficiency. Together, the latter generate the highest social manufacturing and innovation has profoundly changed, and environmental impacts; however, their implementation moving from West to East, some emerging countries have costs are also higher. become global leaders in green technology, such as China India’s experience is a good example. From the end of for solar panels. 80’s, the Indian government plans an ambitious capacity Donors of ODA did not foresee these changes in world- development programme for renewable energy,8 targeting wide manufacturing leadership, but the diplomatic and 90 GW by 20329 (the equivalent of Italy’s installed capacity). commercial tensions such an evolution engenders (see However, based on current trends, India’s reliance on coal Chapter 15 of this volume) have repercussions on aid will continue to increase, from 52% of its energy needs in providers. Taxpayers in traditional donor countries find 2008 to 57% in 2013, reaching 67% in 2017-2018, before it increasingly hard to support the work of development it begins to drop to 59% in 2031-2032. Between 2008 agencies when this work builds the industrial and techno- and 2032, the installed capacity is projected to grown by logical capacity of competitors. Questions now arise about a factor of four, from 141 to 609 GW. The Indian govern- donors’ especially position in the worldwide industrial ment has clearly maintained development as a priority over ecosystem, particularly for “green tech” and for bilateral the environment. Institutions and programmes dedicate donors: such questions merit clear answers.7 Indeed, large resources to developing alternative energies, but late 2013 saw increased collaboration between bilateral this effort is above all aimed at diversifying India’s energy funding agencies and their own country’s trade and export mix and improving access for its citizens. More than 20 organizations. This movement, which some find in contra- years after the creation of Indian Renewable Development diction with the principle of untied aid, found purchase in

8. The National Climate Plan forecasts a 5% increase in renewable electricity production, up to 15% by 2020, and a 25% reduction in 7. The World Bank made an effort to clarify the situation in a 2012 the country’s energy intensity, also by 2020. report: “Green Growth, Technology and Innvoation.” (Dutz et al. 9. Understanding Energy Challenges in India – Policies, Players and 2012). Issues – International Energy Agency - 2012

A PLANET FOR LIFE 239 (IREDA), India’s position on renewables certainly needs to between heterogeneous actors is a key issue to incite, be updated, because the costly tools implemented so far, nurture and scale-up innovation. funded by public and private resources, are not finding These innovative ideas will be present in the environ- sufficient support to be translated in consolidated robust mental sector, taking advantage of the numerous positive industrial sectors. The institutional architecture is complex, outcomes that were tested in the fields of biodiversity or creates uncertainty and complicates efforts to align actors climate change. They will also inform social justice and and interests.10 poverty eradication efforts. We should recall that many For development agencies, the picking of low-hanging innovative financing means and public-private partner- fruit is justified by the very nature of greenhouse gas ships were first invented in the healthcare sector. Most emissions; they are global externalities – where ever agencies and development finance institutions are now they are reduced, the cheapest and most effective becoming involved with these new, pragmatic solutions, way to do so must be selected. Nevertheless, one can pursuing an impact-oriented agenda where innovation question the relevance of development agencies funding in finance, processes, technology and partnerships that a few megawatts of renewable energy while gigawatts combine know-how with funding will dominate. of conventional power are funded. Especially since the financing of the more expensive renewables. Especially REFERENCES since the financing of the more expensive renewables Bonnel A., 2014 (forthcoming), les trois revolution (poten- directly affects household budgets; citizens must shoulder tielles) du fonds vert pour le climat, in Grosclaude J.-Y., Pachauri R., Tubiana L. (ed.), Regards sur la Terre 2014, Ar- the higher cost of alternatives. The tension surrounding mand Colin, Paris aid agencies’ and especially development banks’ ‘environ- Bourguignon, F., 2011, Le pouvoir des organisations interna- ment-and-development’ mandate is very strong. Their tionales sur le développement : illusion ou réalité ?, Tracés. Re- vue de Sciences humaines [En ligne], #11 | 2011, mis en ligne emerging-country financing activities are now an integral le 01 décembre 2013. URL : http://traces.revues.org/5355 part of their business model, contributing to their finan- Climate Policy Initiative, 2003, The global landscape of cli- cial stability. mate finance 2013, CPI Report. Beyond matters of the international framework and of Colombier M., Kieken H. and Kleiche M., 2006, Le développe- ment dans les négociation climat, in Jacquet P. and Tubiana financial coordination, there are also questions about the L. (ed.), Energie et changements climatiques, Regards sur la methods and roles of various stakeholders. Here again, Terre 2006, les Presses de Sciences Po, Paris, pp. 187-200. agencies must innovate, focusing on the development of Dechezleprêtre, A., Glachant, M., Menière, Y, 2008, The clean development mechanism and the international diffu- hybrid and collaborative models.11 The post-2015 agenda sion of technologies : an empirical study, Energy Policy, 36 (4): will certainly accelerate the formation of new coalitions and 1273-83. partnerships that will be implementation-oriented and very Dutz, M, Sharma, S., 2012, Green growth, technology and In- novation, The World Bank. focused on specific targets (e.g., the Sustainable Develop- Jacquet P. and Loup J., 2009, Beyond the concept: implement- ment Goals). These alliances will try to align the interests ing sustainable development in the south, in Jacquet P., of various actors in governments, civil society and the Pachauri R., Tubiana L. (ed.), The governance of Sustainable Development, A Planet for Life 2009, AFD, Paris, pp.175-86. private sector in quite innovative models and initiatives. Zérah, M.-H., Kohler, G., 2013, Le deployment des énergies Indeed, the big push will be to see more private sector propres à Délhi aux prises avec la défiance de la société ur- involvement as the universal sustainable development baine, in Flux, n°93/94. agenda raises expectations and thus global public and private commitments and efforts. Organizing collaboration

10. See e.g. the work of Zérah and Kohler (2013). 11. See Under the radar 9 in this volume, in the field of biodiversity funding.

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Do national systems of innovation benefit from foreign investment? Lessons from the BRICS

he influence of large transnational corporations (TNCs) in José E. technology and innovation is compelling.1 According to infor- Cassiolato, mation released by the European Commission, the top 2,000 Professor, Institute of Economics, Federal companies (1,000 EU and 1,000 non-EU) invested €372 billion University of Rio de in research and development (R&D) in 2006/2007, which corre- Janeiro, Brazil sponds to approximately 80% of global business expenditure on R&D (European Commission, 2011). It is estimated that TNCs in the US are responsible for approximately 74% of the total R&D by the nation’s private sector. Approximately 80% of the 700 TNCs that invest the most in R&D originate from five countries: the US, Japan, Germany, the UK and France. TIn spite of this intensive productive and especially technological concentration, some researchers argue in favour of a tendency towards the technological internationalization of developing countries, which has benefited from the partnership between foreign enterprises and local institutions and, most of all, from an increase in the R&D activities of TNCs. These authors advocate that by attracting TNCs, developing countries may gain access to the technologies of advanced countries, stimulating the generation of technological innovation in such countries through their subsidiaries. In this article, the thesis of technological globalization is taken with more caution and we refute the idea that R&D activities will be inexorably internationalized. In

1. This paper is an abridged version of Chapter 1 of Cassiolato et al. (2013)

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particular, it considers that the complexity involved in innovative activities, like R&D, limits the automatic occurrence of technological globalization without significant costs, and argues that knowledge-intensive activities still tend to be concentrated in home countries.

Foreign direct investment in BRICS: evolution and related national policies In the 2000s there has been a strong increase in foreign direct investment (FDI) in BRICS countries, boosted by national favourable policies. Over the last two decades, China has had the highest FDI inflow of the BRICS nations, with a peak of $108 billion recorded in 2008; while, for most of this period, Brazil was the second highest FDI recipient. Russia, on the other hand, showed robust growth until 2008, reaching $75 billion. The same movement can be seen in India, but in a less intense way – there was a strong growth in FDI inflows until 2008, reaching $42 billion. South Africa is at the bottom of the list of BRICS countries with less than $10 billion a year from 1990 to 2010. In 2009, FDI inflows were reduced in all BRICS countries, with only China and Brazil recovering in 2010 to reach the same levels as they obtained in 2008. In the mid 1990s, deep structural change in the Brazilian economy propelled an FDI boom – the third in its history. The central government played a key role in attracting FDI, basically through the approval of constitutional amendments that ended public monopolies in sectors such as telecommunications, oil and gas, and the removal of distinctions between Brazilian firms of national and foreign capital. This FDI boom in Brazil mostly targeted the services sector, particularly the privatized infrastructure sector (telecommunications and electricity). It also concentrated on operations of mergers and acquisitions of local firms. The share of TNC subsidiaries on overall sales of the 18 most important production chains jumped from 36% in 1996 to 52% in 2000. In recent years, with the end of privatization, FDI flows have been strongly directed to the primary sector – oil and natural gas extraction and, especially, metallic minerals extraction. In Russia, the expansion of TNCs has been encouraged by its government, which pursues a policy aimed at providing a favourable investment climate and the development of an investment infrastructure. The government implemented a set of specific measures, with the support of a Foreign Investment Advisory Council, where the main objective is to create an attractive investment climate in Russia, and of a federal law that provides guarantees of equal rights and the protection of interests and property to all investors regardless of their ownership. Consequently, TNCs have been rapidly increasing and FDI flows went from $2.7 billion in 2001 to $75 billion in 2008. However, the liberalization of economic activities was implemented without taking into account domestic economic realities, and TNCs are generally not ready for large-scale investments in the modernization of major Russian production facilities whose equipment is mostly obsolete. In India, since the 1990s, policy makers have perceived FDI inflows to be a major source of scarce capital, which is capable of contributing to capital formation, output

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and employment, and providing access to technology, managerial skills and markets. FDI has become an important form of external financing for India. Until 1994, FDI inflows to this country were less than $1 billion, while in the second half of the 1990s they stayed around $2.6 billion per year, prior to reaching an average of $5.4 billion in the first half of the 2000s. Inflows reached $42 billion in 2008, falling to $24.6 billion in 2010. Policy makers in India have shifted away from merely focusing on higher quantities of FDI towards the targeting of a higher quality of FDI, with sectors designated as high technology receiving preferential treatment in terms of access to infrastructure, tax incentives and subsidies. As in Brazil, India’s latest FDI promotion policy is the principle of no discrimination against foreign firms. China is a dominant player amongst BRICS countries in terms of its FDI outflows. In China, during the early stages of reform and opening-up, due to policy restrictions, joint and cooperation ventures were the main forms of foreign investment. With the improvement of China’s investment environment, an increasing number of foreign investment projects have taken the form of solely foreign-funded enterprises. After the mid 1990s, non-financial TNCs began to invest in capital-intensive or technology-intensive areas, and started to emphasize the strategic position of subsidiary companies in China in terms of global business integration. However, much of China’s exports in high-technology fields continue to involve the assemblage of electronic products based on components that are produced in other countries. The South African economy is nowadays highly favourable to foreign investors, though few national documents currently contain specific references to FDI. At the international level, the country has committed to the majority of international and/or multilateral agreements relevant to ensuring the protection of foreign direct investors and their intellectual property. Generally, no discrimination is applied against foreign investors except in the banking sector. Besides its favourable TNC context, the country also offers a wide range of incentives to both domestic and foreign direct investors. Nevertheless, South Africa is still a small FDI recipient, and FDI inflows appear volatile. Sectorally, FDI has been concentrated in the primary sector, notably mining.

The limited contribution of TNCs to the innovation capacity and development of BRICS With minor exceptions, the contribution to the innovation capacity and development of BRICS has been very limited. In Brazil, a comparative analysis of large (more than 500 employees) locally-owned and TNC subsidiaries, based on the Brazilian Survey on Technological Innovation revealed that, with few exceptions, the R&D/net sales ratio of large local firms tends to be higher than that of large TNC subsidiaries across different sectors of manufacturing activity. Also, the ratios of R&D expenditure over total innovation expenditure of locally-owned large firms are greater than those of TNC subsidiaries. The innovative performance of large domestic enterprises is stronger than that of the subsidiaries. The average technological efforts (R&D/sales) of Brazilian subsidiaries

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were much lower (around 0.7% in 2005) than the worldwide TNC expenditure as a whole (5.0% in 2005). Besides its limited performance, the R&D activities of TNCs in Brazil are highly concentrated: almost half (48.6%) of the R&D carried out by large subsidiaries is performed by firms in the auto industry. In Russia at present, the creation of R&D organizations with TNC participation, except in a very few cases, does not bring to the country any outstanding results in terms of the development and promotion of advanced technologies or products. Foreign-owned companies are considered even less innovative than Russian ones. However, a relevant level of innovation activity has been shown by companies jointly owned by Russian and foreign capital, which have been twice as innovative as other types of companies. The main aspect of local expenditure that affects the innovation activities of TNCs in Russia is the low salaries of highly skilled professionals. Foreign firms also reveal a lower R&D intensity compared to domestic firms in India. The post-liberalization period has been characterised by the establishment of centres working exclusively on the objective of global R&D. This trend has spread to the fields of software engineering, chip design bioinformatics and agro-biotechnology. Recently, there has been a significant increase in the number of FDI projects carried out by US companies for design, R&D and technical support activities for the development of global products. TNC subsidiaries in India do not focus on technology absorption, but on the customization of the technologies that originated in their headquarters. The analysis of the patterns of collaborations and patent ownership indicates that TNCs are establishing a highly unequal division of labour within the national science and technology (S&T) system in India. Besides using foreign affiliates for the products under development for global markets, TNCs are actively using the instrument of intellectual property rights (IPRs) ownership to prevent spillovers from being captured by domestic entrepreneurs. So far there have been very few spin-offs from the foreign R&D centres. In general, multinational corporations use collaboration for later-stage work to avoid possible infringe- ments. Furthermore, major software firms such as Infosys, Wipro and TCS are under contractual obligation to transfer the ownership of intellectual property created in the host organization. At present, China has become an important R&D base for TNCs, especially due to the growing pool of skilled engineers and technicians, to facilitate the reduction in research expenditure and pressure from the Chinese government. In spite of the enhancement of this process, the share of subsidiaries located in China is small compared to global TNC R&D investment. Although supportive R&D remains the mainstay of foreign R&D activities in China, many TNCs have now transferred their innovative R&D facilities to China. Wholly-owned affiliates are the main ownership mode of foreign R&D centres. Foreign R&D organizations established by TNCs are highly concentrated in information and communications technology (ICT) industries (including software, telecommunication, semiconductors and other information technology (IT) products), but equipment and components, biotechnology and drugs as well as automotive industries also attract a significant amount of this investment.

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Beijing and Shanghai are the preferred locations, but more recently Guangdong, Jiangsu and Tianjin have appeared on the map of foreign R&D investors. A comprehensive analysis of foreign R&D in China’s manufacturing industries was made by Sun (2010) who showed that foreign firms commit less R&D resources than China’s domestic enterprises in terms of both human resources and as a percentage of their sales (the latter for example being 0.37% for foreign owned subsidiaries compared to 0.63% for Chinese domestic enterprises). Foreign R&D activities are concentrated into a few sectors, which include medical and pharmaceutical products; transport equipment; electronics and telecommunication; ‘instruments, meters, culture and office machinery’; electric equipment and machinery; general machinery; metal products; and chemical fibres, while foreign firms are less likely to conduct R&D in sectors where they possess strong advantages. Particularly in hi-tech sectors, Chinese domestic enterprises are contributing more resources to R&D than foreign enterprises. In sectors such as electronics and telecommunication, office machinery, and electric equipment and machinery, differences between local firms and TNC subsidiaries are particularly great. In the electronics and telecommunication industry, Chinese owned enterprises spend 3.49% of their sales in R&D compared to only 0.64% by foreign- owned subsidiaries. Finally, in sectors where foreign firms target the local market with strong competition from Chinese-owned firms, foreign firms are forced to make R&D investments in order to be successful and, as Sun (2010) pointed out, ‘if they want to achieve success in China’s domestic market, they need to customize their technologies, and they cannot simply rely on technologies generated elsewhere’. Sun’s conclusion is that ‘Chinese governments and domestic firms focus on building up indigenous innovative capabilities: the majority of foreign firms will invest in R&D when they feel the competition from domestic firms’. In South Africa, 48% of the subsidiaries of foreign firms performing R&D reported that they had collaborated with other local firms. On which topic, healthcare and aerospace deserve particular attention – aerospace has been developed through large defence budget acquisitions in South Africa and a long history of telemetry (Kahn, 2007). R&D is concentrated in two main South African provinces: Gauteng, which incorporates Johannesburg, and adjacent Pretoria

Spillover and crowding out effects of TNCs on domestic enterprises Vertical productivity spillovers have been present in some countries and in sectoral contexts, but horizontal productivity spillovers or technological ones have been harder to detect. While crowding out effects have also been found in specific situations. In Brazil, positive horizontal effects are found only when locally-owned firms have already acquired higher levels of innovative capabilities. Market seeking strategies by TNCs, particularly when combined with high levels of effective protection, have a

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FIGURE 1 Which BRICS multinationals invest the most in R&D?

The multinationals of BRICS countries are investing increasing amounts in R&D. However, these investments remain highly concentrated in certain areas and are failing to stimulate the whole economy.

negative impact on locally-owned firms including those with higher levels of relative efficiency (Laplane et al., 2004). In Russia, foreign TNCs have established training centres to ensure that Russian personnel attain the required skill levels and that the necessary amount of knowledge transfer takes place to enable the use or implementation of specific technological solutions. Practically all IT companies support training programmes to promote corporate standards for business solutions. In India, the contribution of foreign firms to the activities connected with the processes of upgrading the national system of innovation was found to be insignificant. The main beneficiaries have been TNCs and their affiliates, which have better access to technology and other intangible assets. In the case of domestic firms, the only ones to have achieved some success are those that have adopted a strategy of pursuing the non-equity route for technology imports, rather than relying on royalty payments. Other domestic firms that lack networking or non-equity strategic alliances have not done well. Furthermore, only when domestic firms have had a small technology and productivity gap in relation to TNCs have they been able to prosper under liberalization. The gains made by domestic firms in sectors such as pharmaceuticals and

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automobiles cannot be attributed to third generation policies for the promotion of FDI and innovation. On the contrary, domestic firms were able to obtain better results from the systems of innovation because the government chose to delay external liberalization in these sectors. However, the Indian case suggests that it is possible, with the use of appropriate obligations and restrictions, to favourably develop the connections between domestic science, technology and the innovation system and the emerging global institutions. Domestic firms and national level S&T organizations need to follow the paths of proactive learning to harness the spillovers and linkages for the benefit of indigenous innovation. However, in reality, indigenous R&D undertaken to assimilate foreign technology and exploit technology spillovers has still not improved significantly. The Chinese case reveals that foreign investment has failed to promote an effective improvement in the innovation abilities of local companies. Due to the lack of apparent technology spillover from TNCs to local businesses, the role of TNCs remains controversial in the country. Researchers have found that there are positive productivity spillovers from foreign firms to their local suppliers in upstream sectors, but when it comes to the effect on domestic innovative technological development, studies have not been as optimistic, highlighting insufficient spillover effects. This result was not exclusively caused by the strategies of TNCs – it can also be attributed to the poor absorption abilities of local firms and the industrial structure of the country. In South Africa, there has been a very mixed experience with the role of TNCs in domestic companies. In many sectors, such as iron and steel, telecommunications, pharmaceuticals, transport equipment and consumer goods, TNCs have been said to abuse their positions of power to the detriment of competitors or consumers, crowding out local development. However, some positive impacts can be seen in the automotive sector, such as productivity gains by domestic firms through linkages with TNCs.

Domestic TNCs of BRICS countries: evolution of their patterns of investment BRICS countries also benefit from the enhancement of FDI worldwide. Enterprises from these countries have demonstrated a significant degree of internationalization in recent years, improving their importance to the world economy.

THE DOMESTIC TNCS OF BRICS COUNTRIES TEND TO MULTIPLY AND INCREASE THEIR INVESTMENTS ABROAD The outward FDI of Brazilian enterprises has grown considerably in recent times, achieving $180 billion in 2010 according to the United Nations Conference on Trade and Development (UNCTAD). Many companies have increased their investments abroad to diversify the risk associated with operations in the domestic market. Essen- tially, the main driver of such expansion has been market access (see, for example, the Brazilian companies Marcopolo and Embraer). Some firms (such as Petrobras

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and Vale) have also invested abroad, seeking access to natural resources, while others (e.g., Gerdau, CUTRALE) have sought to avoid trade barriers or to improve the logistics infrastructure for their exports. The internationalization of large Brazilian firms gained momentum after the Brazilian National Socio-economic Development Bank (BNDES) began to provide specific supporting mechanisms. In particular, BNDES assessed financing schemes abroad and redirected them to potential Brazilian TNCs under extremely favourable conditions with particularly long repayment periods and very low spreads. In the last two years, BNDES has substantially increased its role through the use of its investment arm, BNDES Participações, to become a shareholder of these firms. Russia was the fifteenth largest foreign direct investor in 2005, according to UNCTAD. Its outward FDI increased strongly in the 2000s, from $20.1 billion in 2000 to $433 billion in 2010. To some extent, this phenomenon can be attributed to the emergence of Russian TNCs in the fuel and energy sector that took place over recent years. Significant FDI has also been made by Russian telecommunications companies. This internationalization movement was strongly promoted by the State – about 30% of Russian TNCs that have accumulated foreign assets are government- owned. Nevertheless, in recent years most outward FDI has been boosted by private companies. In India, since the early nineties, firms have been induced to expand their multinational operations. The motives for investing abroad are not only market-seeking, but have expanded to include access to strategic assets and skills overseas, enhancing the non-price segment of global competitiveness through the establishment of trade- supporting infrastructure and the circumvention of the effects of emerging trading blocs on a regional basis by gaining insider status. Indian multinationals draw their ownership advantages from their accumulated production experience, the cost-effectiveness of their production processes and other adaptations to imported technologies made with their technological effort, and sometimes with their ability to differentiate products. Since the onset of the latest phase of external liberalization, the dynamics of the processes of learning, competence building and innovation are now becoming increasingly established in the multinational operations of Indian firms. However, analyses of the emerging patterns of alliances, acquisitions and collaborations being entered into by Indian multinationals clearly show that FDI-based relationships are not enabling many resources to be leveraged from acquisitions and strategic alliances for the upgrading of national processes of technological accumulation. Generally, the efforts of Indian multinationals have not yet increased new product development capabilities in a significant way. There exists little encouragement from FDI-based operations for the development of products and systems needed to face the challenges of the socio-technical transitions that India must undertake. The national system of innovation is thus experiencing a liability in the form of a distortion in the innovation goals at all levels, including public sector research organizations. China’s outward FDI reached $297.6 billion in 2010. The majority of this overseas

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expansion involves investment in other developing and transition economies, which are the main destinations of Chinese TNCs. The first generation of Chinese TNCs was mainly driven by large State-owned enterprises. The second generation, which emerged after the early 1990s, has diverse ownership structures, including private ownership and foreign participation, and has been present in competitive manufacturing industries, in particular those related to electronics and ICT. Since the first TNC generation, Hong Kong (China) has usually been the first stop along the path to internationalization, and it remains the major location for ‘overseas’ operations. The main activities attracting Chinese investments are business activities, trade and natural resources. In recent years, FDI in manufacturing and mining has grown particularly rapidly, accounting for 60% of total Chinese FDI outflows in 2005. Due to a lack of core technology, many Chinese firms compete mainly in the markets for low value-added products. Outward FDI from South Africa reached more than $81 billion in 2010. FDI outflows started to accelerate between 1997 and 1998 – given South Africa’s democratic dispensation that was installed in 1994, and the opening up of markets after the dismantling of apartheid, its companies were afforded the opportunity to invest in economies previously closed to them for political reasons. Most TNCs from South Africa can be classified into five key categories: mining and energy; transport (aviation and road transport); retail; telecommunications; and financial services. In the industrial sectors, minerals and energy TNCs dominate, including the former State enterprise, Sasol (petrochemicals and chemical products), and the many mining giants. Although spread globally, the core of South African TNC investments are concentrated in Africa.

INCREASE IN R&D INVESTMENT BY TNCS FROM BRICS TNCs from BRICS have not only grown in number but have also become much more active in innovation and technological development. It is interesting to note the significant increase within a very short period in the number of BRICS TNCs that are now among the top 1,000 non-EU firms: in 2005, only 19 TNCs from BRICS were in the top 1,000 (three from Brazil, ten from China (including those based in Hong Kong), four from India and one each from Russia and South Africa) and none of these firms made the top 100; by 2010, the number of BRICS TNCs in the top 1,000 non-EU firms had increased to 57 (nine from Brazil, 27 from China, 18 from India, two from Russia and one from South Africa), while six of these firms (four from China and two from Brazil) had entered into the top 100 non-EU TNCs that invest the most globally in R&D. It is also worth noting that, with the exception of the Brazilian aircraft producer Embraer (which ranked 457th in 2005 and 714th in 2010), all other BRICS TNCs increased their relative position in the overall top 1,000 rankings. The implication is that the 2007-2008 crisis, which negatively affected most Western TNCs, did not have a similar impact on BRICS TNCs, with the exception of Embraer that has relied extensively on the dynamism of markets in Europe, North America and Japan.

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FIGURE 2 BRICS multinationals and R&D, a recent breakthrough

Since 2005, driven by a rise in foreign investment, huge domestic markets and proactive state support, BRICS multinationals have entered into the list of the top 1,000 non-EU multinationals that are the most dynamic in terms of R&D. Between 2005 and 2010, their number has tripled from 19 to 57. There is also a diversification in the sectors in which they operate

A pattern of specialization among BRICS countries has emerged: at one extreme, the only two Russian TNCs and a single South African one belong to the oil and gas sector, which suggests a total dependence on specialization in these resource- intensive activities. At the other extreme is China with its 27 TNCs covering a wide spectrum of activities but with an important emphasis on ICT, particularly telecom equipment – in 2010, Huawei ranked 39th and ZTE ranked 74th in the top 1,000 non-EU TNCs. Other important activities where Chinese TNCs have become established in terms of R&D investment are automobiles and parts (seven TNCs), industrial machinery (three TNCs), oil and gas (PetroChina ranked 51st and China Petro- leum ranked 114th), mining, electrical equipment, etc. India has shown an expected specialization in pharmaceuticals, automobiles and parts, and computer services and software; while Brazil has Petrobras in oil and gas, Vale in mining, Embraer in aircraft, a large software firm and several individual companies that have shown positive performances in industrial metals, agricultural implements, electrical energy utilities and chemicals.

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Implications for innovation policy During the pre-globalization phase, government-imposed obligations and restrictions regarding market access, local content and exports played an important role in persuading foreign investors to contribute to innovation processes, technological transformation and structural change in late industrializing countries. Scholars have investigated the contribution of FDI vis-à-vis the other channels of knowledge and technology transfer. In Asia, Akira Goto and Hiroyuki Odagiri (2003) have highlighted the fact that Japan acquired advanced foreign technology through all channels except from inward FDI, which is also typical of a number of other Asian catch-up countries that followed Japan’s example, such as Korea and Taiwan.

THE ROLE OF PUBLIC POLICY IN CREATING INDIGENOUS INNOVATION Although to a lesser extent the importance of this factor is also confirmed by the experience of BRICS countries, India’s achievements in pharmaceuticals and China’s in telecommunications and electronics shows that the governments of these countries still require a policy space to advance the processes of technological accumulation at home. Innovation for the purposes of technological upgrading is still contingent on the active efforts of domestic firms in terms of technological accumulation and on the improvement of national innovation systems. This can be achieved through the enhancement of investment in human resource development and the strengthening of the linkages between national-level S&T institutions and domestic firms. Also important is nurturing and protecting novel innovation processes appropriate to local conditions by maintaining the IPR regime for indigenous innovation and home market protection. However, today, policy regimes in developing countries are certainly characterized by a mix that offers more advantages to TNCs as compared to domestic firms. The balance of advantages being offered has varied and is not the same in all emerging economies. Achievements and limitations of the technological upgrading process are now much more dependent on the degree of discipline shown by domestic enterprises and the success of a country in the implementation and coordination of policies for the creation of national S&T capacity, the development of an effective demand for indigenous innovation and home market protection (Cimoli et al., 2009). The FDI channel was not a major international source of knowledge and technology transfer, at least for sectors that have ultimately proved to be somewhat dynamic in terms of innovation. The main burden of competence building had to be largely borne by national S&T institutions.

THE FAILED ATTEMPTS OF ‘THE THIRD GENERATION POLICY REGIME OF FDI PROMOTION’ Investigations into the experience of BRICS countries also highlight the fact that governments have had to make their domestic enterprises submit to a policy of conditional access to foreign sources of knowledge and technology and to bring the required discipline to recipient firms for the development of national absorptive capacity.

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However, in the BRICS countries there is now a greater influence of what we call ‘the third generation policy regime of FDI promotion’. This policy regime allows a very different set of policy mixes that give total freedom to foreign investors to establish their operations in the domestic space. Foreign investors are allowed to use the national economic and technological space without being subject to any kind of restrictions and obligations. While the balance of advantages being offered to the TNCs is certainly not the same in all countries, the new policy mixes definitely offer greater access to the national knowledge base and markets. Today, in many countries foreign subsidiaries receive almost the same treatment from the policy makers as domestic enterprises once did in earlier times. Policy makers have chosen to encourage domestic firms and S&T organizations to actively participate in the global production and innovation networks. The focus has been on encouraging domestic firms and S&T organizations to establish close linkages with foreign firms that choose host locations with the aim of seeking a supply of cheap talent and advanced skills. Recently, as factor-seeking investments originating from the TNCs of the US and Europe have, to a great extent, moved into knowledge-intensive activities, this tendency has been consciously allowed to grow in the emerging economies through the new policy mixes of FDI promotion and the support for innovation. Even policies that promote the outward FDI from BRICS countries also aim to tap the possibilities that can arise from this type of FDI in respect of the reverse flows from host economies to foreign subsidiaries. However, even through these investments, it appears that BRICS TNCs have not been able to benefit from the impact of reverse flows. The experience of BRICS countries does not confirm the emergence of a great number of spin-offs resulting from the investment of European and US TNCs. For instance, it appears that the finance required for the new start-ups and spin-offs is still not available in most BRICS countries. Private equity (PE) and venture capital (VC) companies are not interested in supporting the innovation processes of such firms. Even in the case of outward FDI, the reverse flows from European countries and the US towards the BRICS economies have not been possible because the TNCs of emerging economies apparently remain overstretched and short on resources. In very few cases have existing established strategies allowed emerging economy TNCs to tap into the national systems of host locations for the benefit of innovation and technological capability building at home. Most tie-ups and investments are directed towards the objectives of taking over production facilities and establishing marketing and distribution networks. The processes of competition that are faced by TNCs from BRICS are capable of overstretching them and draining their resources. Consequently, many of these new BRICS TNCs have been taken over by TNCs from developed countries.

BUILDING NATIONAL CAPABILITIES THROUGH POLICY MIXES OF FDI PROMOTION AND INNOVATION Although the implications of these experiences are slowly making an impact on

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the options of policy makers of BRICS countries, it is also apparent that they are not yet ready to move to a policy regime in which the innovation policy would be used in a non-neutral manner to positively discriminate in favour of indigenous innovation. It seems that the logic of achieving higher growth rates is still driving the national governments of these countries towards the adoption of more of the same pathways for greater integration with the emerging global economy. Compe- tition in respect of both inward as well as outward FDI continues to rise in the case of BRICS countries. Most of them now measure the level of success in competition by the amount of FDI their respective governments are able to attract in respect of knowledge-intensive activities. In most of the BRICS countries, governments are now in competition to attract FDI for activities such as R&D, design, development and testing, technical support centres, and education and training. FDI in designated high technology sectors is receiving preferential treatment in terms of access to infrastructure, tax incentives and subsidies. Governments have become liberal in their encouragement of FDI in sectors connected with IT, software development, biotechnology, pharmaceuticals, etc. The thrust of new policy mixes includes the introduction of measures to provide for the: a) stronger protection of intellectual property and the preferential access to infrastructure, both technological and physical, through the formation of special economic zones; b) supply of cheaper R&D services from publicly funded S&T institutions; c) availability of cheaper expertise for scientific and engineering work; d) development of educational institutions that are capable of producing well trained professionals that are fully familiar with international management and accounting practices; e) easy access to domestic markets; f) elimination of export and technology transfer obligations; g) removal of controls over monopolies and restrictive business practices; h) dilution of environmental controls; and so on. Given that TNCs can offer new production facilities, managerial practices and also technology transfer opportunities to host countries, it is necessary that in the new context, policy makers must formulate policy mixes of FDI promotion and innovation to successfully build national capabilities. After the experience of the global financial crisis, certainly there is again a renewal of interest in dealing with the implications of financial liberalization for the domestic economies in both developed and developing countries. In the emerging economies, policy makers are engaged in rethinking the policies that were responsible for transmitting the impacts of the global crisis into their economies. In this context, the role of PE and VC must also be reconstituted to take into account the specific experiences of impact transmission through the instruments of finance on innovation in the emerging economies.

Conclusion: new directions for the national innovation systems of BRICS countries? Since the new measures that are currently being implemented also belong to the sphere of innovation policy, scholars of innovation have recently started actively studying the impact of these FDI promotion policy changes on the national systems of

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innovation (NSI). José Guimón and Sergey Filippov (2010) suggest that the challenge of present times requires a different approach to one where policies focus on the quantity of FDI inflows, they claim that what is needed is a shift away from a mindset that prioritizes greenfield investments towards one where the focus is on subsidiary development and on changes to the policy mix and to performance measurement. The studies reported in this chapter have shown that domestic enterprises and the efforts of national-level S&T institutions seem to matter more in the sectors that have proven to be dynamic in terms of innovation. By shaping the institutions and incentives in the same direction for market and non-market actors, the narrowly defined pathways of growth have been instrumental in preventing processes of competence-building and innovation from going beyond the outsourcing of activities and exports to regulated markets in select product segments. Demand-side signals for the innovative activities of both non-market and market actors did not support the efforts that were undertaken for the benefit of indigenous innovation. In such a situation, the relationship between the technological activities of TNCs and the NSI of BRICS countries have been more about the exploitation of the local S&T infrastructure, while concentrating much less on supporting the generation of major innovations of the indigenous kind. China has been the only BRICS nation to counteract and mitigate the effects of such behaviour by setting up a comprehensive innovation policy based on strengthening local firms and controlling access of the local market. It is clear that policy coordination would need to focus appropriately on the management of the interplay between global push and domestic pull factors. Policy- makers need to keep in mind that foreign capital is collectively in a better position to forge a new international division of labour in which FDI is their most important instrument for the incorporation of domestic private capital and publicly funded S&T infrastructure. As far as the area of innovation policy is concerned, policy coordination would need to target especially the areas of policy interventions capable of providing opportunities to the national-level S&T organizations, the young start-ups and the domestic firms to harness the spillovers, competition and demonstration effects at home for the benefit of indigenous innovation. It is clear that the fundamental political arrangements, which structure a country’s domestic institutions and international linkages in the policy regime under implementation, are what ultimately determine a country’s propensity to undertake indigenous innovation. FDI cannot play the role of network organizer with the aim of supporting both the processes of competence building and the generation of innovations needed by local productive structures. Policy coordination should address the changes that need to be made with regard to the direction and promotion of FDI. Policy space exists in abundance in respect of the determination of policies for investment, competition, procurement, demand articulation, R&D subsidies and standards setting. It is governments that have to determine the development goals of NSI. The specific aims of the governments of all latecomer countries, in respect of policy coordination, must flow from the developmental needs of the people and the upgrading requirements arising

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from the need to alleviate the constraints facing NSI with regard to the management of technology transitions. Analysis shows that the domestic market is still the main attraction for foreign firms. ❚

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256 A PLANET FOR LIFE CHAPTER 13 National governments and the promotion of innovations: the Indian experience

Sunil Mani, Planning Commission Chair, Professor in Development Economics, Centre for Development Studies, Trivandrum, India

hat is the role of national and sub-national acquisition of new vintages of capital goods is an important (local) governments in the generation and one. The second challenge is to engineer positive spillovers diffusion of innovations? Are decisions from the operations of MNCs and foreign R&D centres to about the nature and type of technolo- India’s National System of Innovation (NSI). This is an issue gies to be developed in a specific national because at present these centres appear to have little or Weconomy to be taken in the boardrooms of a multinational no connection with the NSI. The third challenge is to make corporation (MNC) rather than in the Ministries of Science sure that the generation of innovation is spread across a and Technology of that economy?This chapter considers wider range of industries. At present it is concentrated in the case of India’s insertion into the increasing globali- just five industrial sectors. zation of innovation, at a time when foreign entities are responsible for a growing share of the industrial research Promoting innovations in the globalized India and development (R&D) conducted in the country. Since Until 1991, the Indian economy was relatively closed, India’s entrance into the international division of labour in with imports of commodities and capital, and with severe the performance of R&D, the Indian government has been restrictions on services, including technical ones. The engaged in a relentless pursuit of encouraging firms to economy was more or less insulated from the rest of the increase their investments in R&D with a host of instru- world through the imposition of high tariffs and quantita- ments and institutions to support the local generation of tive restrictions. During this phase India was one of the technology and innovation. How successful have the poli- world’s least internationalized countries.1 This all changed cies been in India and what are their shortcomings? Has in 1991 when the process of economic liberalization was India become an innovative country? set in motion and then subsequently elaborated and This analysis identifies three major challenges facing extended to virtually all sectors of the economy. India’s the government in terms of increasing India’s innovation integration into the global economy has continued over potential, which exist in addition to other challenges that the last two decades or so, albeit in an unstructured and have been identified in the literature on innovation, such as for instance, improving the quality and quantity of innovations. Policies for promoting innovation have been narrowly 1. The increase in the globalization of India’s economy is significant, as demonstrated by two indicators: the trade integration (the sum of interpreting innovation solely in terms of an R&D policy, exports and imports expressed; % of GDP) increased from 19.6% to whereas innovations are not derived from R&D alone but 37% of GDP from 1998-1999 to 2010-2011, and the financial integration (the sum of gross current and capital receipts) grew from 44% to through a whole host of non-R&D routes of which the 109% of GDP during the same period (Rao, 2011).

A PLANET FOR LIFE 257 FIGURE 1 Growing share of MNCs in the performance generation of innovations from India can have positive of business enterprise R&D in India impacts for the country. For instance, one tangible benefit is that India has become a base for what is increasingly known as frugal innovation (cf. Chapter 12). One domain where frugal innovation is now well established on a larger scale is in the area of medical devices. A number of sophisticated medical devices such as electrocardiograms and scanning machines have been developed through foreign R&D centres. These instruments have the potential of dramatically reducing the cost of diagnostics and health care services in India, a country where health expenditure is mostly privately financed through out-of-pocket payments. Also, given that the traditional channels of ad hoc manner, with tremendous growth in several sectors technology transfer from MNCs to unaffiliated firms in such as information technology (IT) services. Indeed, by India have virtually dried up, the growth of MNCs can have 2005 India had become the world’s largest exporter of a positive impact in terms of a source of technology to the IT services. domestic economy. Finally there is the possibility of spill- Economic liberalization has also transformed India’s NSI. overs to domestic firms. One industry where this has been The business enterprise sector is now emerging as the clearly visible is the automotive industry where after the core of the NSI, whereas innovation was performed almost entry of foreign firms, through the channel of competition, only by public entities in 1990 and 1991. Today, business the domestic enterprises have improved their technological enterprises account for 30% of India’s global R&D expen- capability and moved up the value chain. diture. A growing proportion, almost 30% in 2011 (see The bulk of industrial R&D in India is still performed by Figure 1), of this business enterprise R&D is now being domestic companies (which account for as much as 72% performed by MNCs. In 2001 this figure was less than of the total industrial R&D performed in the country) but 9%. This trend demonstrates the importance of India this share is rapidly decreasing, at an accelerating rate, as a location for MNC innovation. Over the last decade with the growth of foreign companies in India. The share (2000-2010), many of the knowledge assets created in of foreign companies engaged in R&D in India experi- India derive either from MNC branches or subsidiaries. enced a significant increase in 2009 – immediately after During this period, many Indian companies have become the financial crisis. It appears that, perhaps owing to the MNCs themselves, of which the conglomerate firm Tata is financial crisis, more and more MNCs are outsourcing a fine example, investing abroad to gain access to state- larger amounts of R&D to India. Most MNCs distribute of-the art technologies, markets and in some cases even their R&D activities across a range of countries and the key natural resources. Since 2000, India has become an prime reason for choosing a specific location is essentially investor in industrial assets abroad with outward Foreign dictated by the availability and cost of the human resource Direct Investment (OFDI) from India at almost 60% of the in addition to other facilitating factors, such as the strength country’s inward FDI. This growing outward FDI has helped of the intellectual property regime in that location, avail- Indian companies to secure both natural and knowledge ability of fiscal incentives for R&D, etc. assets besides increasing markets for their goods and The Indian government has been extremely active services abroad. Furthermore it has given some firms in promoting innovation and the shift in NSI. Generous the ability to ascend the technology capability ladder by tax incentives have been the main instrument used to acquiring knowledge assets abroad. increase R&D investment.(Figure 2) Almost a quarter of The growing importance of foreign companies in the the industrial R&D performed in India is subsidized through

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these tax incentives and the subsidization rate has been FIGURE 2 Generosity of tax regimes with respect to increasing during a time when technology generation has R&D been globalizing. Moreover, the government has launched a series of policies targeting the economy as a whole, such as the 2003 Science and Technology Policy and its more recent refinement the 2013 Science, Technology and Innovation Policy. The government has sought to improve both the quality and quantity of scientists and engineers that are available to industry, and have taken a number of steps to increase investment in scientific research. Sectoral policies have been set by the government that target specific industries: automotive, biotechnology, electrical equipment, electronics, IT services pharmaceutical, telecommunications and semiconductor. India has one of the most generous incentive regimes enough to warrant spending sizeable chunks of their sales for R&D, almost a quarter of industrial R&D performed revenue on the performance of intramural R&D. in India is subsidized through these tax incentives. The Behind the bright picture of MNCs being a source of extent of subsidization of the Business Expenditure on R&D technology to the domestic economy, and the possibility (BERD) by the government through its R&D tax incentive of spillovers to domestic firms, not all sectors have been schemes has increased from 15% in 2006-2007 to 26% as successful as the automotive industry. India has not by 2011-2012. become innovative but rather she has become an important location for innovative activity to occur. Very few spill- High concentration of innovation activity across over effects have been registered. If one considers patent sectors and regions in India ownership, the share of foreign companies in India has The liberalization process and the set of public policies increased quite significantly over the years (Figure 2). implemented by the government have been successful The surge of Indian patenting in the US is to be attrib- in increasing R&D activities in India. Business Enter- uted to the activities of foreign R&D centres (Mani, 2009). prise Expenditure on R&D (BERD) in India has registered In the information and communications technology (ICT) robust growth rates of over 15% per annum in nominal sector, almost all companies active in patenting from India terms (Mani, 2013c) and the average research intensity are of US origin. In pharmaceuticals, the only company of domestic firms has actually increased from 0.65% in that has patented its research output from India is the 1996 to 0.82% in 2010. hitherto Indian company, Ranbaxy, which since 2008 has Nevertheless, about two thirds of BERD is distrib- been part of Daiichi Sankyo, the Japanese pharmaceu- uted across just three industries: pharmaceutical, IT tical MNC. Despite India’s full compliance with the provi- and automotive and as such the performance of R&D is sions of the WTO’s Agreement on Trade Related Aspects not distributed across a range of industries. In fact, the of Intellectual Property Rights on 1st January 2005, the concentration of BERD distribution has actually increased, outsourcing of patent-yielding R&D projects by MNCs has which means that the R&D subsidies have really failed yet to be conducted in India. There are of course a number to support the spread of an R&D culture among firms in of international pharmaceutical companies outsourcing the manufacturing sector. Furthermore, even within these portions of large R&D projects to Indian entities, but it is three industries much of the innovative efforts are concen- clinical trials that are the most common type of such R&D trated in a few firms. In short, the majority of industries and outsourcing in India. the firms within them have not taken innovation seriously The geographical concentration of innovation in India is

A PLANET FOR LIFE 259 FIGURE 3 The high concentration of investments and activities in India

the third shortcoming highlighted in this paper. Although data is Gujarat’s low level of FDI despite its second place manufacturing and industrial activity take place in many ranking in terms of Manufacturing Value Added (MVA). sites across India, such activity tends to be concentrated Gujarat is often presented as an industry-friendly state but into a few specific areas. This means that most of the for some reason MNCs have shied away from investing country is not involved in manufacturing nor in the genera- here. In fact, India’s highly concentrated production and tion of innovations in a significant manner. This situation innovation activities show that although many policies on has arisen despite the continued efforts of central govern- these matters are decided at the national level, it is at the ment to disperse industries, especially to the so-called local level that policies are implemented and therefore backward regions, through various policy instruments and the commitment and capability of the local or state level notably the industrial licensing policy. Such concentration governments have an important bearing. is merely a reflection of the availability of physical and Nevertheless, promotion of innovation is thus very much indeed human resource infrastructure. In fact the state centralized at the level of the federal government. Although governments have been vying with each other to attract explicit policies to decentralize innovation were under- substantial investments, especially to their respective taken through the creation of state councils of science regions, by offering a variety of fiscal and other conces- technology in 1971, only a few states have active and sions. working councils in place. Most councils are primarily There is high rank correlation between FDI inflows concerned with incentivizing public sector research and do and patents as most of the patent applications in India not work directly with private sector enterprises, which as are by MNCs (Figure 3). A surprising find amongst the we have seen above is becoming the core of the country’s

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NIS. In short, innovation policy generally remains central- of this paradigm change. However, the major change has ized at the national level. Some efforts are in the offing to been the implementation of specific policies for specific decentralize innovation policymaking to the state and city industries, a move that has been triggered by dissatisfac- levels; but the only area where tangible progress is being tion with the previous one-size-fits-all policy. Thus India made is in the popularization of a patenting culture and now has specific innovation policies for the automotive, perhaps the promotion of some basic research through biotechnology, chemical, electrical equipment, electronics, the establishment of state-level government research ICT, pharmaceutical, semiconductor and telecommunica- institutes. tions industries. India’s innovation policy seems to be independent from India’s National Manufacturing Policy, issued in late other important economic development strategies like 2011, explicitly refers to government-issued compul- the National Plan for Climate Change. The government sory licences for green technology in cases where patent is encouraging power generation through various renew- holders charge unreasonable rates, or where domestic able energy programmes, such as wind, biomass, solar demand is not being met in a satisfactory manner. Also, and small hydro, and has set a mix of fiscal and financial the Indian Fund for Sustainable Energy, which is a unique incentives and other policy/regulatory measures aimed venture capital fund, focuses on investing in and mentoring at attracting private investment.2 Once again, all this is early-stage start-ups in the sustainable energy sector. taking place at the central government level (only three It is clear that the role of government in promoting Indian states, namely Gujarat, Rajasthan and Karnataka innovation has actually increased in India, becoming more have separate solar policies) and has been quite indepen- clearly articulated at a time when technology generation in dent to industrial development. the country has globalized. However, there has been very little decentralization in the implementation of policies to Towards a new innovation strategy for India? promote innovation. The role of state governments has Over the last few years and specifically since 2010, been minimal, with the exception of the promotion of new there appears to have been a paradigm change in India technology-based industries such as IT and biotechnology. as far as the promotion of innovation is concerned. There Some state governments have improved their proficiency are numerous signs of a renewed emphasis on increasing in taking out intellectual property rights on new inventions, innovation as a way to promote economic growth, in partic- which is beginning to show results in terms of increased ular: the announcement of a decade of innovations (2010- patenting at the state level. 2020), the initiation of a new Science, Technology and Innovation Policy in 2013, and the increased allocation Conclusion of $28 billion for science and technology in the 12th Five This paper identifies three major challenges facing Year Plan. Furthermore, a proposal to set up 50 centres of policymakers involved in the promotion of innovation. The excellence within existing public and private universities, first is that a broader understanding is required on the and the establishment of a number of new innovation- routes through which innovations are obtained. A new line promoting policies, such as Innovation in Science Pursuit of thinking in India is calling for non-R&D routes for innova- for Inspired Research (INSPIRE), provide further evidence tion generation to be encouraged. However, an examination of the recent innovation policy pronouncements and specifically the Science, Technology and Innovation 2. These include capital/interest subsidy, accelerated depreciation and nil/concessional excise and customs duties. Under the Electricity Policy of 2013 shows that R&D is still regarded as the Act 2003, it has been made obligatory for State Electricity Regula- main route for innovation. Almost all policy instruments tory Authorities to fix a minimum percentage for the purchase of electricity from renewable sources, taking into account local factors. are therefore directed solely towards incentivizing R&D. A preferential tariff for grid-interactive renewable power is given in The second challenge is that there are hardly any policies most states where possible, following the provisions made under the National Electricity Policy 2005 and the National Tariff Policy 2006. for engineering positive spillovers from MNC operations to

A PLANET FOR LIFE 261 local companies. There are only policies for encouraging REFERENCES FDI; and states have even been competing with each other Mani S., 2013a, ‘Evolution of the sectoral system of innovation on this front. However the third challenge appears to have of India’s aeronautical industry’, International Journal of Technology and Globalization, Vol. 7, Nos: 1 and 2, pp. 92-117. been met with the formulation of successful policies that Mani S. et al., 2013b, ‘TRIPS compliance of national patent re- are more specific and targeted at certain industries. This gimes and Domestic Innovative Activity, The Indian experi- has the potential of raising innovative activity in these ence’ in Sunil Mani and Richard Nelson (ed.), TRIPS Compli- ance, National Patent Regimes And Innovation. specific fields, which include a fairly large number of Mani S., 2013c, ‘Policy spree or policy paralysis, An evaluation technology-based industries. What is left for the policy- of India’s efforts at encouraging innovations at the firm level’, makers is to forge a clearer link between the former two Paper to be presented at the national conference on ‘India’s industrialization: How to overcome the stagnation’, New Delhi: challenges. Institute for studies in Industrial Development, December 19- 21. Mrinalini et al., 2010, Impact of FDI in R&D on Indian R&D and Produc- tion System. Report prepared for TIFAC, Department of Science and Technology, Government of India. Rao Subba D., 2011, ‘India and the Global Financial Crisis What Have We Learnt?’, K.R. Narayanan Oration, South Asia Re- search Centre of the Australian National University, Canberra, June 23.

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How does China’s take on capitalism influence its capacity for innovation?

n his 2002 book The Free-Market Innovation Machine, economist William Baumol asserted that innovation as the capitalist growth engine was possible Wei Zhao lecturer, Saint- thanks to the market price mechanism, laissez-faire competition and a body Etienne Management of rules guaranteeing the private appropriability of properties (such as School, Saint Etienne, France Affiliate patent, copyright and, in general, intellectual property). While in 2012, Researcher, Research Institute for Reform a Business Week report expressed the belief that the emergence of State & Development of capitalism is compatible (at the very least) with creativity and innovation Pearl River Delta, Sun Yatsen University, (Kurlantzick, J. 2012). Despite its nominal socialism, the Chinese economy Guangzhou, China is increasingly being described as a form of capitalism and its miraculous Joel Ruet growth is expected to continue. Associate Researcher, China now has the world’s largest number of professionals employed in research IDDRI (Institute for Sustainable and development (R&D), equating to 3.2 million people, and its annual R&D budget Development I and International has ranked third in the world since 2010. The most innovative Chinese companies Relations), Paris, are those whose names are now becoming well known in the international market, France such as Huawei, ZTE, Haier, Lenovo and BYD. These companies have, to various degrees, a government background (ZTE is a State-owned enterprise, Lenovo originated from the Chinese Academy of Science, while Huawei and BYD have government sectors as their major clients and receive financial support from the Chinese banking system, etc.). Innovation in China seems to be increasingly closely linked to the State and the emerging capitalist economy.

Is China’s State capitalism an innovation machine? If innovative State capitalism implies the active role of government in the national innovation system, extensive public intervention in technology development and

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the implementation of a series of policies on science and research, then China has been an exemplar of this economic system for more than 30 years.

REVIEW OF CHINA’S R&D POLICY THROUGHOUT THE LAST 30 YEARS By 1985, China was taking steps to reorganize its R&D structure by reducing the number of its R&D institutions and downsizing those that remained, while directing them towards more profitable activities (Gu, S. 1999). During the 1990s, the government encouraged the creation of many types of technology centres and industrial parks in the coastal provinces. By 2013, 192 national level economic and technological development zones had been established, with more zones at other local levels which included the scientific, economic and technological development zones in major urban areas. The State financed and established national and local level laboratories in all disciplines across the entire country. Often, it had direct control over the most important research laboratories, universities and technical centres, as well as maintaining authority over strategic and military sectors. In the first half of the 1990s, in combination with its national industrial policy, the Chinese government sought to imitate the ‘national champions’ model of Japan and South Korea by building its own national champions of technology and research capability (Kim 1997). These champions were often, but not exclusively, State-owned enterprises including giant Chinese companies in the telecommunications, petrochemical and transportation industries. The 1997 crisis changed Beijing’s ideas considerably. From then on it let the provinces experiment with their own models: Shanghai and Suzhou followed the example of Singapore, Guangdong modelled itself more on Taiwan, while Hong Kong was returned to China and integrated economically into the Pearl River Delta. Despite encouraging these different approaches, Beijing maintained its efforts to control big champions. Through the adoption of the concepts and frameworks of the national innovation approach, from 1999 onwards China’s national science and technology structure began to be transformed by its innovation policy, and there was a great increase in investment in R&D activities (Arvanitis et Zhao 2012). Between 2000 and 2012 China had an annual growth rate of more than 20% in the allocation of resources to R&D, the intensity of which (ratio of R&D expenditure over GDP) jumped from 1% in 2000 to 1.97% in 2012. In 2008, the average R&D ratios in Europe, the US and Japan were, respectively, 1.86%, 2.77% and 3.5%. While China’s ratio is comparable to those of OECD countries, when Chinese GDP shot up to second place in the international rankings in 2009, its absolute R&D expenditure also became second internationally, just below the US. Today China has more than 3.2 million professional personnel involved in R&D activities. Policy measures have been firmly implemented across the country which often involve the setting of fixed quantitative goals. For example, between 1997 and 2007 patent subsidies were introduced in 27 provinces to stimulate the usage of intellectual property rights and boost provincial and national patent statistics. The result was a tremendous growth of 41.3% in the number of patent applications in 2012, reaching 526,412, making China the

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number one country in terms of patent volumes. However, patenting in China has only a small impact on productivity growth and the problems of research quality and commercial relevance still exist. The 2006 National Medium and Long-Term Plan for Scientific and Technological Development finally clarified China’s innovation strategies. It set up the following goals for 2020: 1. R&D input should achieve 900 billion yuan1 2. R&D/GDP ratio should reach 2.5% 3. To build an ‘Innovative Nation’ 4. High R&D input (annual increase of 10%) 5. High contribution of science and technology (S&T) to the economy (more than 70%) 6. Indigenous innovation capability (reduce the reliance on foreign technologies from 60% to 30% in terms of licence fees) 7. High S&T output, in terms of patents for example. Shortly after the announcement of the Plan, 99 supporting policies were presented which define concrete action plans to implement the strategy. Each supporting policy was put under the responsibility of one government institution. The main priority was given to the development of technologies on energy conservation, water resources, environment protection, biotechnology, space and aviation, on the development of expertise in core technologies, on the understanding of intellectual property in the manufacturing sector and on the strengthening of basic and strategic research. Alongside the identification of detailed priority fields for future research activities, the plan also defined 16 key projects (megaprojects), which include for example sending a Chinese astronaut to the moon or developing the next generation of large planes. In 2010, the Chinese government specified seven sectors as strategic emerging industries and re-emphasized R&D investment in these sectors: (1) energy efficiency and environmental protection, (2) next generation IT, (3) biotechnology, (4) high-end equipment manufacturing, (5) new energy, (6) new materials and (7) new energy automotive.

THE NEXT STEP: BUILDING CHINA’S ‘INDIGENOUS INNOVATION MACHINE’ Since 2006 China’s innovation policy has been labelled with the term ‘indigenous innovation’. The Plan states that this objective can be achieved through various approaches (including innovation through the original creation of new devices and methods, and by innovation through the creative integration of technologies and innovation through the renewal of imported and assimilated technologies). Further- more, the term indigenous gives us some indications about the intentions of the Chinese government that underlie its innovation strategy. First, indigenous implies the independent and self-determined development of sectors that have been identified as strategic, through organizational coordination and heavy State investment in

1. Exchange rate prior to 2008 was 1 euro = 10 yuan, and then 1 euro = 9 yuan during 2009 – 2011.

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science and research activities in universities, institutes and State-owned enterprises. The implementation of this kind of science policy essentially separates technological R&D from industry production, with universities and research institutes actively engaging in downstream industrial projects and enterprises focusing on the fulfil- ment of assigned production quota. In comparison to developed countries where firms are a major source of innovation, the extensive involvement of public research in industrial R&D in China constitutes an important character of its national innovation programmes. As a result, research–invention interactions in China are often unidirectional, with knowledge flowing from universities to industry. This means that projects are organized so that universities innovate and then try to find industrial applications for their inventions. Almost all universities set up ‘centres for technology transfer’ which try to sell new technologies to industrialists. However, in most cases they find that businesses are unwilling to buy, so universities create their own enterprises to apply their technologies (spin-offs). The research projects in universities are seldom triggered by the demands of industrial companies. Since the beginning of its reforms, the Chinese central government has regarded the automobile industry as a pillar sector for the country. While the purpose of the joint ventures was to introduce foreign manufacturing technologies and management systems, China’s ideologically and politically communist government wanted to ensure that it continued to own and control the sector (it had a famous slogan ‘building a national automobile industry’). In terms of ownership, the Chinese auto industry remains a State-owned sector today, even with foreign and private participation. The government continues to aspire to improved domestic capabilities in the car industry, but many Chinese companies are content to rely on successful foreign joint ventures to contribute to their profitability. By 1997 the Chinese government was already well aware that the key to making China an indigenous innovation machine was to upgrade the capacities of its enterprise sectors. But it was only recently that it recognized that the non-State and private sectors remained the weakest part of its national innovation system. Most of the top R&D intensive enterprises in China are State-owned enterprises that operate in non-competitive markets, i.e. domestic monopolistic or oligopolistic sectors such as petroleum, railways, automobiles, telecom equipment, steel, etc. To address this, the government introduced favourable tax policies and various other fiscal incentives to increase investment in in-house R&D and enhance the innovation capabilities in the enterprise sector. By the beginning of 2013, the central government had called on companies to make greater efforts to upgrade and innovate, and by 2015 it aims to help enterprises establish ‘technological innovation systems’ which combine the functions of research, development and production. To do this, the government will directly set up R&D utilities for industrial sectors, support small and medium enterprises, provide training for those with promising talent and improve financial policies. The government also requires other public institutions, such as universities and technical centres, to cooperate with enterprise sectors, including the non-State and private sectors. With all these support policies, it remains to be seen whether

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FIGURE 1. Top 20 Chinese Companies in R&D Investment in 2012

The Chinese government strongly supports the development of R&D in large companies but also in universities and technical centres. These efforts do not always result in an increased amount of clean technology innovations reaching market.

Chinese enterprises will invest more in indigenous R&D, moving away from simple imitation and towards the development of their own technological capabilities for innovation.

Technological catch-up: enterprises halfway between imitation and innovation The experience of East Asia’s newly industrialized economies, especially those of Japan and South Korea, suggests that intensified in-house R&D is the key to enable enterprises to jump from imitation to innovation, even though R&D activities can be very costly and their results uncertain (Amsden, Chu 2003; Shu 2003).

UNDER-INVESTMENTS IN THE ASSIMILATION OF IMPORTED TECHNOLOGY: THE FAILED ATTEMPTS OF ‘REVERSE ENGINEERING’ STRATEGIES IN CHINA Taking Japanese companies as an example, it appears that they benefited from a continuous investment in reverse engineering, a specific form of R&D effort. Reverse engineering is the disassembly of a product to allow a detailed analysis of its workings, enabling a new device or program to be constructed that performs

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the same task without using or simply duplicating the original. Through reverse engineering, Japanese enterprises often added new functions or features to imported products and tailored them to fit local demand. The whole process necessitates a deep understanding of the technological and scientific mechanism of a product and system, and often leads to the development of more formal R&D. From the 1950s to the 1970s, China also used reverse engineering in an attempt to acquire technology. However, because companies were State-owned, there was less incentive to invest in R&D. So while the government declared a need for reverse engineering, it failed to become the popular or dominant way to develop indigenous technologies. Since then, the potential bridge within Chinese enterprises between in-house R&D and foreign technology transfer and importation has been broken. A lack of attention to R&D efforts has led Chinese companies to import new technology or products from advanced economies or rely on joint venture partners to provide new technologies. As a result, technology imports continue to play an important role in China and the share of expenditure on technology importation remains high. Compared to Japanese and South Korean enterprises, Chinese companies have invested little in the assimilation of imported technology for a considerable period, with an increase in the resources allocated to assimilation only recently taking place.

HIGH R&D EXPENDITURE AND SLOW TECHNOLOGICAL CATCH-UP: CHINESE COMPANIES STUCK HALFWAY BETWEEN IMITATION AND INNOVATION After 2000, R&D investment by Chinese enterprises exceeded 60% of the country’s total R&D spending, a figure that increased rapidly. Some sectors experienced intensive R&D development. For example, the top 100 domestic electronics and information technology enterprises spent on average about 3% of their annual sales revenue on R&D, with telecom equipment manufacturers Huawei Technologies, Datang Telecommunications and Zhongxing Telecommunications (ZTE) leading the way, each devoting more than 10% of their sales revenue to R&D. Nationwide, out of the more than 10 million medium and small-sized firms in the electronics and information sector, 150,000 allocated more than 5% of sales to technological development. Although R&D expenditures, patent applications and high-tech exports have markedly risen, the overall technological capabilities of Chinese enterprises remain poor. For Chinese enterprises, impressive absolute growth in R&D expenditure has failed to translate into high quality and efficient R&D investment. In 2011, only 11.5% of all industrial enterprises were engaged in R&D activities, out of which only 30.5% were large and medium-sized enterprises. The R&D intensity (R&D expenditure over sales revenue) was 0.71% for all industrial enterprises, and averaged 0.96% for large and medium-sized enterprises, which is much lower than the developed countries average of 3% to 5%, even though it has increased steadily since 2000. It is worth mentioning that R&D activities were widespread in the State-owned sector. Although only accounting for 14.6% of the R&D budget expenditure of all companies in China, State-owned enterprises represented 81%

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FIGURE 2. In which technological sectors do Chinese firms invest?

R&D investment by Chinese companies is not sufficiently directed towards basic research and development into new technologies. Many large Chinese companies have entered the global competition primarily as assemblers and distributors of technology, rather than as innovators. A situation that is slow to change. of the total number of enterprises that conducted R&D and employed 66% of the national R&D workforce (NBS & MST, 2004-2011). The limits to the extension of R&D activities by Chinese enterprises are also reflected by the investment structure and R&D outcome efficiency. The share of basic and applied research expenditure over total R&D spending is always small. It declined from 32% in 1995, 17% in 2008, 17.3% in 2009 and 2010, and 16.5% in 2011. The shares of fundamental research, applied research and experiment and development were 0.1%, 2% and 97.9% respectively, for the industrial enterprise sector. Between 2000 and 2009 the R&D intensity of Chinese enterprises increased from 0.71% to 0.96%, while its ratio of new products over sales revenue increased from 11.1% to 12.1%, with a lower amplification effect. The share of invention patents out of the total domestic patents registered was 30.4% in 2000, dropping to 25.9% in 2004 and 22.7% in 2008. Encouraged by government policy, the share of invention patents jumped dramatically to 34.8% in 2009, but fell back to 27.3% in 2011. It is estimated that enterprises now account for 25% of patent applications in China. Even the enterprises that produce the most patents still prefer utility model

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patents and those for external design, rather than invention patents. A look at the top 20 enterprises which registered the largest numbers of patents in 2011 shows that only five had more invention patents than other forms, i.e. so-called non-inventive patents, which include utility model patents and design patents. Chinese R&D has undergone a stagnation, producing auxiliary improvements based on design, rather than product innovations that are based on core technology development. Apart from a few enterprises such as Huawei and Haier that have moved successfully from R&D to marketing based on their strong integration capabilities, most Chinese companies start with investment in R&D but quickly find it difficult to deepen their R&D fields, to increase the efficiency of projects and to upgrade the quality of the results. They are stuck halfway between imitation and innovation. A survey in 2012 in the Pearl River Delta region (Guangdong Province) of 1,201 industrial enterprises showed that 44% of these enterprises set up new R&D activities after 2008 as a response to the crisis, but even then, 55% of enterprises reported that their R&D activities continued to involve the imitation of foreign technologies.

CHINA’S SLOW TECHNOLOGICAL CATCH-UP EXPLAINED BY INCAPACITY TO ABSORB EXTERNAL KNOWLEDGE AND FORGE COOPERATION WITH POTENTIAL PARTNERS For more than ten years, the Chinese government has strengthened patent law and the legal protection of technologies to give bigger incentives for enterprises to innovate. Chinese enterprises have responded to government policies by dramatically increasing R&D investment and patent applications of all forms, as proved by an analysis of the macro statistics. But why is there little sign of a deepening of R&D and why do Chinese enterprises have a tendency to continue their trajectory of imitation, instead of shifting towards indigenous innovation? The answers may lie in the fact that companies in China have, in general, very low levels of R&D ‘absorptive capacity’. One of the most important factors that is opening the gates for emerging Chinese enterprises is the growing popularity of outsourcing among western multinationals. Globalization and the de-integration of supply chains have had the side effect of reducing the barriers for newcomers, such as Chinese enterprises, who have taken over much of the production and manufacturing activities in the global value chain. Once these companies have established manufacturing as a beachhead, they then use the influence of their cost advantage and their capabilities for rapid learning to expand into other higher value activities along the chain, such as marketing and R&D. Absorptive capacity is a term used to refer to a specific way that businesses carry out R&D activities: when a company begins in-house R&D projects and simultaneously makes an effort to identify, assimilate and exploit externally produced knowledge, such as basic research findings, rather than narrowly focusing efforts inwardly without external interaction, the enterprise is said to have absorptive capacity (Cohen, Levinthal 1990). This open door R&D strategy in turn induces more R&D spending on future options, thus conditioning the success of ongoing R&D projects. Without taking such an approach, companies are less able to absorb domestic knowledge production from universities and research institutes

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FIGURE 3 . Technology sources of R&D projects of enterprises in the Pearl River Delta

Chinese private enterprises define their R&D projects based on feedback from their customers, the ideas of their employees and the orientations of their competitors. They do not sufficiently value potential contributions from the wide range of public-supported organizations: universities, research institutes, science and technology parks, business incubators and the research centres of public enterprises. and their own in-house R&D will lack dynamic input. If we liken innovation to a motor vehicle, then indigenous R&D capability and absorptive capacities are two of its wheels. If either of these wheels are missing, the vehicle cannot move forward. Although Chinese enterprises are beginning to invest more in R&D, they are tending to conduct such activities behind closed doors, i.e. to cooperate less with other organizations. A 2010 survey of 42 enterprises in Central China showed that new ideas for R&D projects were mainly derived from three sources: end users, enterprises themselves and competitors. Companies regarded suppliers, universities and research institutions as low importance in terms of technology sources (Ren, Zen, Krabbendam 2010). A similar picture emerges from a 2012 survey of 1,201 enterprises in the Pearl River Delta region of Guangdong Province in South China (Qiu, Zhao, et. al. 2012), which demonstrated that compared with efforts to upgrade independent in-house R&D capabilities (effort value grading of 6.17 out of 10), companies made much less effort to cooperate with universities, research institutes or other companies engaged in R&D (effort value grading of 3.26 out of 10). This survey also revealed that independent R&D and cooperation with customers

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– generally foreign companies – constituted major sources of R&D projects for enterprises in the Pearl River Delta region. Less than 14% of enterprises searched for R&D project sources through cooperation with universities and research institutes, and less than 10% participated in joint R&D programmes with other enterprises, universities and research institutes. In terms of searching for and absorbing external knowledge for R&D projects, Chinese enterprises remain isolated from the mass of science and technology produced around the world. Without forging connections with this rich profusion of knowledge, the ability of Chinese companies to conduct R&D will diminish.

A lack of reliable links in the Chinese innovation chain The development of absorptive capacity in enterprises depends on two things: the efforts of enterprises themselves, including the orientations of their R&D projects; and the external conditions which permit enterprises to establish various links with other organizations. The Chinese 2009 National Survey of R&D Resources (which was the second national R&D survey organized by the National Bureau of Statistics since 2002) reported that in terms of R&D project expenditure, the percentage of enterprise projects accomplished by enterprises independently was 69.4%; while 10.3% were accomplished by enterprises in cooperation with domestic universities; 5.6% in cooperation with domestic research institutes; 4.5% in cooperation with other domestic enterprises; 3.8% in cooperation with foreign organizations; and 6.4% in cooperation with other organizations. In 2011, 81,615 cooperation projects existed between enterprises, universities and research institutes. While 30% of the budgets of these projects was spent on external R&D cooperation, Chinese enterprises did not particularly value the role of domestic R&D partners in developing innovation, especially domestic universities and research institutes. The 2012 Pearl River Delta survey showed that the 1,201 enterprises gave a lower evaluation of the service provided by universities and research institutes with regard to innovation (average rating given was 4.77 out of 9) than both the evaluation of the service provided by local government public technology platforms (average rating 4.87 out of 9) and the cooperation provided by other local enterprises (average of 5.2 out of 9). Regarding the frequency of contact and the level of trust in a number of organizations at the local level, enterprises expressed the second lowest level of trust in domestic universities and research institutes, and contacted them than less than other organizations. In fact, with regards to R&D efforts, Chinese enterprises lack interest in engaging with domestic universities and research institutes. In 2009, just under 16% of the R&D budget of enterprises was spent on joint projects with universities and institutes, and these projects happened either because they were organized by the government (if the enterprises were State-owned), or in the case of non-State owned enterprises, because the State directed funding towards enterprises that would participate in such projects. The aversion expressed by enterprises towards collaborating with universities and research institutes is partially due to the situation of these science and

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FIGURE 4 Assessment of external linkages by enterprises in the Pearl River Delta (Guangdong) Average contact Average level of trust Type of organizations frequency (evaluation (evaluation scores scores between 1-9) between 1-9) Competitors in the same industry 4.80 4.82 Local suppliers, supporting vendors and subcontractors 6.89 6.43 Local distributors, domestic traders and retailers 5.50 5.54 Overseas customers 5.81 5.93 Local governmental departments 6.07 6.71 Industry associations and chambers of commerce 5.55 6.18 Local centres of technological innovation 4.17 5.07 Domestic universities and research institutes 3.62 4.87 Local education, training and recruitment services organizations 5.12 5.52 Local financial services organizations 6.04 6.39 Local management consulting and information services organizations 5.01 5.53 Related local organizations to solve labour disputes 5.12 6.16 Mass media 3.22 4.66 Local exhibition and marketing organizations 4.62 5.39

Source: Qiu, H., W. Zhao, et. al. 2012. technology organizations. The major R&D programmes that are financed and coordinated by the government stipulate that State-owned enterprises must cooperate with State-owned universities and research institutes. However, apart from this kind of imposed cooperation, local Chinese universities and research institutes have contributed very little to the R&D activities of enterprises, apart from in their capacity as suppliers of engineers, especially non-State and private enterprises. Reforms in the science and technology system since the mid-1980s have to some extent activated the enthusiasm of researchers in these institutions, but enterprises have continued to find that coordination with universities and research institutes is even more difficult than negotiating with other enterprises. Once science and technology organizations realized that enterprises were in the market to acquire technology from them, they began aggressive profit seeking, trying to maximize the value of every aspect of their knowledge. The deeply rooted problems of separation that exist between R&D and the economy, and of organizational rigidity between enterprises and S&T institutions, have thus been overlaid by the problem of the marketization of research and industry cooperation. This problem may be due to the very unique Chinese model of capitalism in which the State itself behaves like a special interest group with a profit-seeking objective in the market place, competing for resources with other non-State groups by the creation of various rules that function in favour of the State itself. While State-sector

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enterprises have to cultivate vertical relationships with bureaucrats and politicians for subsidies and other favours, outside of the State-sector the Chinese society resem- bles a purely laissez-faire market where non-State enterprises have to rely on traditionally inherited personalized trust and networks (the famous Guanxi) to establish links with research institutions, financiers, partners, suppliers and customers in transforming knowledge, capital, products and talent for innovation (European Commission, 2012; Gilboy 2004). Outside of its own controlled system, the selfish State leaves a free market lacking in a reliable legal framework that can be used to enforce contracts. If Chinese State capitalism has greatly promoted the country’s catch-up through the coordination of interactions between its production system and the national research and knowledge system, those outside of this sphere, who operate in China’s Guanxi capitalist system, are finding it difficult to innovate given the problems inherent in forging efficient linkages between different organizations based on institutionalized trust.

Non-Schumpeterian capitalism in China When market mechanisms that function on the basis of the ‘arm’s length principle’ are no longer viable, enterprises and organizations prefer to internalize their transactions instead of forming links with the outside. Until now, most Chinese enterprises have relied on their linkages with customers or clients in the market as their main source of innovation, in the absence of dynamic linkages with research and knowledge institutions. The feedback loops from distribution activities and market demands have become the most important inputs in the innovation process, from market detection through product design to development (Schumpeter 1934; Kline, Rosenberg 1986). A large number of small and medium sized enterprises are relying on American, Korean, European and Japanese enterprises as foreign clients to teach them how to employ technologies. The leading big companies are adopting a strategy based on market-oriented product diversification and technology outsourcing (buying the innovations of others) as their primary approach to innovation. This technology may derive from anywhere in the world, although most core, proprietary technology comes from the USA, Japan, Europe and Korea. The most famous Chinese multinationals, such as Huawei, Lenovo and Haier, have developed not because of their strong in-house technology capabilities, but due to their ability to survive market competition by understanding and responding to specific market needs. In other words, their success is not based on their technological capabilities for innovation, that the State promotes, but on emerging Chinese and global market opportunities (Zhao, 2013).

HUAWEI: INTEGRATING CLIENTS TO INCREASE MARKET POWER Located in Shenzhen, Huawei was founded in 1988 with a registration capital of only 20,000 yuan. Initially, Huawei imported telephone switches from Hong Kong and sold them on the mainland Chinese market. Huawei then began to make its own switches, which although inferior to the imported products, were much better

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than those made by their Chinese counterparts. Huawei had already established a sales and service system for the country. In 1990, Huawei achieved a turnover of more than 100 million yuan. Since Huawei’s establishment, 40% of its staff have been engaged in R&D, 35% in marketing and sales and less than 10% in production. In 1994, with strong support from central government, Huawei teamed up with 40 domestic Regional Telecom Bureaus to form the new Huawei Technologies Company. The creation of this community of telecom professionals gave the new Huawei company a huge sales network for their products. In the following years, more than 170 local telecom bureaus joined the Huawei Technologies Companies as shareholders. Of course, these 170 regional bureau shareholders were also some of Huawei’s main customers. Subsequently, Huawei went on to strengthen its R&D activities, establishing R&D divisions in Beijing, Shanghai and Silicon Valley in the US, while maintaining close relationships with Chinese public research institutions, working with universities and institutes in R&D projects. In terms of international expansion, Huawei then targeted markets in the developing world where western multinationals were often unwilling to invest in sufficient marketing and distribution to properly service customers. Huawei met the local needs of these markets and reverse engineered their product to meet the prevailing low price points. Huawei also refused to give up on the Russian market, an area where many telecom multinationals withdrew altogether. Thus, when the Russian economy started to bounce back, Huawei won its first Russian order. In the US market the company faced the problem of a lack of brand awareness, which it addressed by rebranding its US subsidiary as ‘Future Wei’ and focusing on simpler, smaller unit value products such as routers in an attempt to prise open the market.

LENOVO: MASTERING THE LINKAGE BETWEEN SELLING AND MANUFACTURING Lenovo was founded in 1984 by 11 research workers from the Institute for Computer Research (IRI) of the Chinese Academy of Sciences. Since its foundation, IRI has assigned three privileges to Lenovo: the responsibility system of the Director General, financial autonomy and freedom of recruitment. Through a system of incentives and penalties, Lenovo was able to address the problem of staff that were unwilling to work, which is a common issue in State-owned enterprises. Its policies included allowing staff to return to IRI if they could not adapt to working at Lenovo. Due to the areas of expertise covered by the staff present from the company’s outset, Lenovo originally worked in the maintenance and consultancy spheres, and not in production. In its inaugural years, Lenovo received 700,000 yuan from a training and maintenance contract for 500 computers at the institutes of the Academy of China. By 1988, Lenovo was the exclusive agent of the US computer company AST Research, becoming AST’s largest distributor in China, which enabled Lenovo to create a network across China, which by 1990 included 2,500 distributors, dealers and retailers. With this huge sales network, Lenovo sold 80% of AST computers in China between 1985 and 1996. It wasn’t long before Toshiba approached Lenovo to be the general agent for its laptops. In less than two years, Lenovo was able to

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increase its market share from less than 1% to 30%. Through this rapid expansion, Lenovo began to gain experience of the internal structure of computers and the connections between the microprocessor and components. It trained many engineers in these fields and by 1988 was able to launch a Hong Kong-based laptop assembly company, while the Beijing part of the company continued to buy and sell through its existing network (established for AST and Toshiba). Very rapidly, Lenovo acquired sufficient expertise and knowledge for the efficient assembly of computer motherboards and by 1992 it had a motherboard factory in Shenzhen in full production, which reached an output of 250,000 motherboards per month. In 1992 Lenovo founded a computer manufacturing plant in Beijing, which included two production chains that made 500,000 units per year. At the time of its production expansion, Lenovo also strengthened its sales capacity. From 1990 to 1997, demand increased rapidly, undergoing an annual growth rate of over 50%. To meet this demand and to address the fierce competition from foreign companies, Lenovo extended its sales network, before switching from a reliance on its own network to a proxy distribution system in 1994. In 1996 Lenovo created five sales pathways – Beijing, Shenyang, Shanghai, Guangzhou and Chengdu – along with 20 branches and 1,500 agents. The company also expanded its export production of modules and units. By 1998 Lenovo had completed the establishment of three workshops in Huizhou (Guang- dong) that produced motherboards, circuit boards and computers. Lenovo built up its technological competence through the interaction between large-scale retailers and producers, in a similar way to manufacturers of household appliances. By 1996 Lenovo’s laptops were ranked at number one in China and the company started to invest in increasing its R&D capacity for new products. Lenovo had already established a research centre in Silicon Valley in the US in 1993; and in 1998, together with the IRI, founded the Lenovo Central Research Institute. The study centre in Silicon Valley deals with the acquisition and analysis of new technologies and business intelligence; relevant information is transmitted to the Hong Kong centre and the technology is transferred to the Lenovo Central Research Institute, which conceives overall designs and puts them into production. In addition, Lenovo collaborates in R&D with Intel, Microsoft and Computer Associates for a maximum absorption of technology from foreign firms. To reduce costs, Lenovo has gradually localized its component suppliers. From 1996 Lenovo has been the top selling company in the Chinese market. In 2004 it bought the IBM laptop section and began its internationalization.

HAIER: ADAPTING FOREIGN TECHNOLOGIES TO CHINESE PRODUCTS Haier was once a State-owned enterprise based in Qingdao and its development has many similarities to the growth of other Chinese appliance producers in the 1980s and 1990s, such as Changhong, Konca, Kelon, Midea, TCL, Chunlan and Hisen. Haier’s story began when the company identified a new market segment through its work with domestic customers. Rather than creating more sophisticated products with new technologies, it used imported technology to make cheaper

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products. Haier’s R&D process has been referred to as ‘recombinative innovation’: the creation of new, improved products by recombining existing foreign technologies. Thus Haier was able to shake up the market by applying existing refrigerator and washing machine technology to make a mass-market commodity for rural Chinese consumers – low-end servers – which were both more reliable and cheaper than the competition. Haier already had experience in the trading of low price commodities and in operating through rural China’s tortuous distribution channels. The company’s success in China’s huge markets meant that it was able to match the scale advantages of its established global competitors when it decided to internationalize. In North America, Haier targeted the market in small refrigerators for hotels and student dormitories, a segment that was regarded as a low-margin standardized commodity by big American competitors. For students, Haier made a small refrigerator with a foldable top that opened into a computer desk, while it made several small refrigerator designs specifically to suit offices and hotel rooms.

BYD AUTO: PLAYING THE GAME OF LOW COST R&D Based in Shenzhen, BYD Auto was established in 1995 as a specialized battery manufacturer. It has 65% of the global market share for nickel-cadmium batteries and is the world leader in lithium-ion batteries with a 30% market share. The company decided to enter the automobile market in 2003 and is now the fourth largest Chinese car brand. Realizing the high number of potential customers in China for a low cost product – a market segment that was being largely ignored by its competitors – BYD replaced expensive equipment with a mixture of manual procedures and locally made machines. Anticipating the need for more and more buses in China’s rapidly growing cities, the company moved into the development of electric buses, which led to the signing of supply contracts with many municipal governments. Like these four major companies, many other Chinese enterprises first entered into the market as distributors and sellers, not technology innovators. The spirit of the commercial trader is maintained even in the later stages of the development of these enterprises (Zhao, Arvanitis, La Pira,2011; Zhao, La Pira, 2013). During the last 10 years, numerous emerging Chinese enterprises such as Chery Automo- bile and Bird mobile phones announced that they had made radical innovations, while in reality they had simply bought various foreign technologies and put them into a product shell designed for the Chinese or other under developed markets.

Conclusion Today, Chinese enterprises have become so accustomed to the competitive and trans- actional nature of market relations that they are unaware of the different types of links that they can have with other organizations in the economy. For instance, there are few examples in Chinese industry of the organization of R&D activities through strategic alliances, which is very popular elsewhere in the world. Where innovation networks exist in China, it is always the relationship of competition which prevails

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over cooperation and communication among network participants. On the positive side, the Chinese economy has a rich diversity of organizations of different natures, that operate at different levels and are situated in different locations. It has well established universities and institutes, a variety of intermediate organizations, newly created science and technology parks and incubators, well financed State-owned enterprises with R&D centres, accumulated foreign direct investment with R&D facilities, large emerging Chinese companies with overseas R&D hubs, and a large number of private enterprises with regional public technology centres that have been set up by local authorities. For China to become a Schumpeterian innovation machine, the big challenge for the Chinese government is whether it can overcome its long-term traditional ‘paternalism over the State sector’ as regards its innovation policy, and find an institutional substitute to correct the market failure impact on Chinese enterprises engaging in innovation capacity building. It now seems that the Chinese State has done everything to promote innovation in the country. However, there is one blind spot in China’s innovation system: its enterprises are lacking in the dynamic external linkages necessary to carry out effective R&D cooperation. ❚

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REFERENCES

Amsden, A. H. and W-w. Chu 2003, Beyond late de- OECD 2010, OECD Territorial Reviews: Guangdong, velopment : Taiwan’s upgrading policies, The MIT China 2010, OECD Publishing, 310 pages, http:// Press, Cambridge, Massachusetts, 224 pages. dx.doi.org/10.1787/9789264090088-en Arvanitis, R. and W. Zhao 2012, Les politiques par- Qiu, H., W. Zhao, et. al. 2012, Guangdong Industrial allèles du développement industriel en Chine, dans Development Report (2011-2012): Industrial Up- China Innovation Inc. Des politiques industrielles grading and Transformation, Guangdong Provincial aux entreprises innovantes, dir. par R. Bironneau, Government, China, 380 pages. Paris : Presses de Sciences Po, pp. 87-116. Ren, L., D. Zeng and K. Krabbendam 2010, Techno- Baumol, W. 2002, The Free-Market Innovation Ma- logical Innovation Progress in Central China: A chine, Princeton University Press, 336 pages. Survey to 42 Firms, Journal of Knowledge-based In- Cohen, W. and D.A. Levinthal 1990, Absorptive ca- novation in China, Vol. 2, No. 2. pacity: a new perspective on learning and innova- Schumpeter, J. A. 1934, The Theory of Economic De- tion, Administrative Science Quarterly, vol. 35, no 1, velopment, Harvard University Press, Cambridge, p. 128-152. Mass. European Commission 2012, The 2012 EU Industrial Shu, S-t. 2003, Examining Relationships Between R&D Investment SCOREBOARD, Technical Report External Linkages, Absorptive Capacity and Gains by the Joint Research Centre of the European Com- in New Product Knowledge and Impacts on New mission, 126 pages. Product Innovativeness, Doctoral Thesis, Business Gilboy G. F. 2004, The Myth Behind China’s Miracle, School of Loughborough University, 355 pages. Foreign Affairs, Vol. 83 No. 4, July/August 2004, Zhao, W., Arvanitis, R. and La Pira, F. 2011, Innova- pp. 33-48. tion policy and local cluster of entrepreneurs in Gu, S. 1999, China’s Industrial Technology: Market South China, International Journal of Management Reform and Organisational Change, London: Rout- and Enterprise Development, Vol. 11, Nos. 2/3/4, ledge in association with UNU Press. pp. 109–126. Kim, L. 1997 Imitation to Innovation. Cambridge, Zhao, W. and La Pira, F. 2013 Chinese Entrepreneur- Mass.: Harvard Business School Press, 1997. 303 ship: Institutions, Ecosystems and Growth Limits, pages. Advances in Economics and Business, No. 1, pp. 72 - 88. doi: 10.13189/aeb.2013.010204. Kline, S. J. & N. Rosenberg 1986, An overview of innovation. In R. Landau & N. Rosenberg (eds.), Zhao, W. 2013, La capacité d’innovation chinoise. The Positive Sum Strategy: Harnessing Technology Apprentissage technologique dans les industries au- for Economic Growth. Washington, D.C.: National tomobiles et électroniques, PAF Presses académique Academy Press, pp. 275–305. francophones, Catégorie : Économie, 2013, 540 pages. Kurlantzick, J. 2012, The Rise of Innovative State Capitalism, in Bloomberg Business Week, June 28, 2012. NBS & MST (National Bureau of Statistics and Min- istry of Science and Technology, ed.) 2004-2011, China Statistical Yearbooks of Science and Technol- ogy, Beijing: China Statistics Press.

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CHAPTER 15

Could innovation dwindle? Insights from the photovoltaic trade conflict ew energy policies and incentives are crucial for boosting innovation and scaling up the production of sustainable energy. In Tancrède Voituriez, addition to environmental objectives such as mitigating climate Associate researcher change and reducing air pollution, governments also promote and Programme Director Governance sustainable energy for economic and social reasons such as at Cirad, Iddri, Paris, creating a manufacturing base for sustainable energy equip- France ment and generating local jobs. Strikingly, sustainable energy Xin Wang, policies encompass supply and demand-oriented measures Research Fellow, which, for the most part, have trade effects that are likely to Climate and Energy Policies – China at cause dispute due to their impairment or nullification of the Iddri, Paris, France expected gains from trade agreements of other countries. In the sustainable energy Ntrade, what is at stake is the need for countries to agree on the appropriate balance of rights and obligations, allowing them to secure their policy space for sustainable energy innovation and deployment, while avoiding unfair trade competition. The main issue addressed in this chapter is to what extent ongoing globalization patterns and trade rules allow for the kick-starting of a transformation towards sustainability. We focus on photovoltaic (PV) technologies and highlight the lessons that can be drawn from the so-called ‘solar trade war’ which has been unfolding between OECD countries and particularly between EU countries and China during the last five years. The paper is organized in three parts. Part one briefly recounts the background to the competitive rush towards green technologies – also dubbed the ‘green race’ - and the rise of trade disputes over renewables that have occurred between the EU, US and China during the last five years. Part three reviews in greater detail the reasons

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FIGURE 1 Asian breakthrough in solar power

underlying the PV price collapses of 2009 and 2010 which triggered the solar trade war between the EU and China. Through the adoption of a European perspective, we delineate the problems with China’s exports of PV panels and equipment to Europe. In part three, some weaknesses in the EU’s arguments are highlighted and addressed. Part four focuses on what is really at stake for the EU in the solar war, which is followed by a conclusion that summarizes our main findings.

The green race between the EU, US and China Among existing renewable energy technologies, the PV sector has achieved a spectac- ular development over the last decade, driven by a mixture of push and pull policies (pull in the EU and push in China) (Wang, 2013). Solar electricity generation has grown by a factor of more than nine between 2000 and 2011 (US Department of Energy, 2012) and is expected to continue to experience higher deployment rates than other renewable energies in the near future (IEA, 2012). China and the EU are the two leaders in PV production and deployment (Figures 1). The EU, and Germany in particular, leads in PV deployment while China and other Asian countries dominate the PV cell manufacturing market with nearly 77% of the global PV cell production in 2011. Interestingly, China’s PV cell manufacturing was almost zero ten years ago.

A FRENCH PERSPECTIVE In Autumn 2008, PV panel prices plummeted in the wake of the financial and economic crisis in the US. Dropping by a factor of four within a quarter, prices then fluctuated with erratic up-and-down swings around a general downward trend (Figure 2). EU and US political leaders have been vocal in their efforts to stop the profit drain associated with falling prices from damaging their domestic PV firms. In 2009, the US and EU kicked off investigations and consultation requests at the WTO against alleged dumping by China, while adjusting their Feed-in Tariffs (FIT) downwards. Booming imports of PV panels from China were also behind the revision of FIT policies and, in the case of France, the December 2010 moratorium

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on public subsidies to solar energy. As acknowledged by the then French Environ- ment Minister Nathalie Kosciusko-Morizet during the inauguration of the Saint- Charles Solaire solar central utility in the South of France in October 2011: ‘I agreed to come because this is French technology, together with cells from Germany, which are assembled in Luxembourg. There was an occasion where I refused to inaugu- rate a centre where they make Chinese panels’.1 Attacking China for flooding the EU market and prompting the bankruptcy of EU crystalline PV module producers has been a constant theme of the French government ever since. ‘We need financial support towards the creation of jobs in France and not in China,’ were the words of Nathalie Kosciusko-Morizet, which are echoed by those of France’s Minister of Industrial Renewal Arnaud Montebourg today.

A EUROPEAN PERSPECTIVE Similar sentiments have also been expressed in other leading PV module producing EU countries, although with less consistency and unanimity. In response to a complaint by the European ProSun coalition headed by the German-based Solar- World, which represents more than 25% of the EU’s total production of crystalline silicon PV modules and key components, in September 2012 the EU launched an investigation on the possible dumping of Chinese PV panels. The same coalition of companies also filed a separate complaint alleging that China’s producers had received unfair subsidies.2 Other players in the sector such as the Alliance for Afford- able Solar Energy (AFASE) – a coalition of 450 European companies – opposed the envisaged duties (47% at that time) on the grounds that these could have adverse consequences for downstream solar energy installers or importers.3 Along with intensive talks with China, on 6 June 2013 the European Commission (EC) imposed provisional anti-dumping duties on EU imports of solar panels from China. The duties were to be imposed in two steps, starting with 11.8% on 6 June and increasing to 47.6% on average on 6 August. On 27 July 2013, the EC announced its acceptance of an undertaking by Chinese manufacturers of solar wafers, cells and modules to fix minimum import prices for their products, with a volume cap to be imposed on Chinese solar exporters to the EU. The list of Chinese manufacturers signing up to the deal negotiated by the EC trade commissioner Karel de Gucht and his counterpart in the Chinese Ministry of Commerce (Mofcom) Gao Hucheng, included all the big names such as Yingli, Suntech, GCL Poly, JA Solar, Canadian Solar, China Sunergy, Hanwha SolarOne, Hareon, Jinko Solar and Renesola.4 The

1. http://www.actupv.info/2011/10/saint_charles_solaire_ou_l_exemplarite_d_un_chantier_sans_lendemain-251878. htm#.UmZOmfncCzl 2. See: http://ictsd.org/i/news/bridgesweekly/163186/#sthash.sqLTo0u8.dpuf 3. ‘Punitive tariffs - no matter at what level - could cause irreversible damage to the entire European Photovoltaic (PV) value chain,’ AFASE said in a statement. ‘Those levels now reported would cost the EU PV industry and the whole of the EU economy dearly.’ (http://ictsd.org/i/news/bridgesweekly/163186/#sthash.sqLTo0u8.dpuf). 4. http://www.pv-magazine.com/news/details/beitrag/china-eu-solar-imports--to-cap-or-not-to-cap_ 100012250/ #axzz2fngAxOAZ

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FIGURE 2. A decade of disputes between the EU, the US and China on renewable energy

manufacturers included in the agreement would avoid paying anti-dumping duties on all their exports to Europe that fell under the volume cap. At the time of writing (September 2013), the EC was continuing the parallel anti-dumping and subsidy investigations, with a deadline for imposing definitive duties of 5 December 2013.5 Such investigations are superimposed onto a long series of disputes over renewable energy goods and equipment between the EC and US on one side and China on the other.

What is wrong with PV module imports from China?

THE EU ARGUMENT AGAINST DUMPING On 6 September 2009, the EC launched an investigation to determine whether crystalline silicon PV modules and equipment imported from China were being dumped and whether the dumped imports had caused injury to EU industry. The Notice of Initiation of an anti-dumping proceeding issued by the EC stipulated that the allegation of dumping was based on a comparison of the normal value thus established with the export price (at ex-works level) of the product under

5. See http://www.pv-magazine.com/news/details/beitrag/ec-forgoes-punitive-duties-but-continues-anti-subsidy-investigation-against-chinese-importers--_100012312/#ixzz2foeJVjIe

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investigation when sold for export to the Union (EC, 2012). Since the EU considers the People’s Republic of China (PRC) to be a non-market economy, the normal value for imports from the PRC were established on the basis of a constructed normal value (manufacturing costs; selling, general and administrative costs; and profit) in a market economy third country, namely India. After the issuance of its Notice of Initiation, the EC sent questionnaires to a sample of Chinese exporting producers (representing 80% of the total Chinese export value); as well as to a sample of EU producers (accounting for, as a percentage of the total EU production, between 18% and 21% for modules, between 17% and 24% for cells and between 28% and 35% for wafers); a sample of three unrelated importers for modules and one for cells; and upstream and downstream operators and their associations. The Commission sought and verified all the information deemed necessary for the purpose of a provisional determination of i) dumping, ii) resulting injury and iii) EU interest. The results are shown below (EC, 2013): For the sampled companies, the weighted average normal value of each type of the like product established for the analogue country was compared with the weighted average export price of the corresponding type of the product concerned. On this basis the provisional weighted average dumping margins6 expressed as a percentage of the Cost Insurance and Freight (CIF) Union frontier price, duty unpaid, ranged between 48.1% and 112.6%. Against a generally increasing consumption, overall EU production increased for modules and cells in the period considered for investigation (1 July 2011 to 30 June 2012 – hereafter referred to as the ‘investigation’ or ‘IP’). But the market share of the European Union industry shrank due to the greater increase of consumption. The EC concluded that the presence of Chinese imports and the increase of the market share of dumped imports from the PRC at prices that consistently undercut those of the European Union industry had a determining role in the material injury suffered by the European Union industry, ‘reflected in its poor financial situation and in the deterioration of most of the injury indicators such as profitability, cash flow, return on investments and ability to raise capital’ (EC, 2013). The investigation confirmed the existence of overcapacity in the global market and attributed it mainly to China. Assessing the interests of the Union industry, the Commission provisionally concluded that there were no compelling reasons against the imposition of provisional measures on imports of the product concerned originating in China. The EC started by explicating the positive impacts of anti-dumping measures, emphasizing that the profitability of the Union industry would increase, and consequently that ‘not only the existing 25,000 jobs of the Union industry would be secured but there would also be a reasonable prospect for further production expansion and increase in employment’ (EC, 2013). Regarding upstream operators such as silicon and manufacturing equipment producers and exporters, the Commission acknowledged that they

6. The dumping margin is the amount by which the normal value exceeds the export price.

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could face decreasing export prospects to China but that these could be compensated by the exports to growing third markets. Independently of the imposition of duties, the EC also indicated that the publicly available forecasts on the demand for PV installations available during the IP indicated a likely contraction in demand in 2013, ‘which would likely have in any event a negative impact on the number of jobs in the downstream market’ (EC, 2013). It was therefore concluded by the Commission that the impact of the anti-dumping duties on the downstream operators would be to a limited extent negative in the short term, in view of the higher contraction in installations than in a counterfactual scenario without duties, and to the extent that the duty could not be fully absorbed by the downstream operators.

WEAKNESSES IN EU ARGUMENTS AGAINST DUMPING In its Regulation of 4 June 2013, the EC stated that during the IP the sale prices of crystalline silicon photovoltaic modules and key components (i.e. cells and wafers) originating in or consigned from the PRC were below the production costs, thus having a negative effect on the Union industry’s profitability (EC, 2013). However, the Commission did not fully elucidate why, out of all of the trade defence policy measures available in its portfolio, anti-dumping, instead of special safeguards, was deemed appropriate. The choice of one defence instrument over another is not politically neutral. In the case of safeguard measures, a country acknowledges that it cannot cope with market price swings, whatever the underlying reasons of market imbalances. In the case of anti-dumping7, a culprit is singled out. In both situations, domestic industry is temporarily protected. Additionally in the case of anti-dumping, anti-competitive practices are corrected for. As mentioned above, Chinese practices – e.g. policies - were almost absent from the investigation. And the amicable solution found on 27 July 2013, according to De Gucht, which consisted in a price undertaking and annual import limits, did not make explicit the exact level of these two. One month after the amicable solution had been reached, no official price undertaking or annual import limits had been released. Pending the official release, the expected levels circulating in the media did not convince the complaining parties.8 As reported by PV Magazine, EU ProSun, the SolarWorld-backed lobby group that had worked hard to persuade the EC to take action against Chinese companies, remained dissatisfied with the end result.9 A related weakness in the EU’s position lies in the choice of the reference market price – or ‘normal value’ of PV modules. Approaching the real cost of production

7. Under the World Trade Organization (WTO) Agreement, dumping is condemned but is not prohibited. 8. Once month after De Gucht’s statement, the EU continued to decline to release specific details on prices and quantity limits. According to information found in the media, the minimum net import price for modules was €0.56 per watt, with an annual import limit of 7 GW; the net import price for cells was €0.29 per watt, with an import limit of 2.3 GW; and the net import price for wafers was €0.66 a piece, with an import limit of 1 GW (http://www.pv-magazine.com/news/ details/beitrag/eu-china-deal-continues-to-irk-industry_100012444/#ixzz2gNOhfvqw) 9. http://www.pv-magazine.com/news/details/beitrag/eu-china-deal-continues-to-irk-industry_100012444/#ixzz2g NJZxzMY

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of any product in a non-market economy remains fraught with difficulty; this said, the outcome of the EU’s investigation makes it hard to claim that the normal value estimated by the Commission is the best estimate of the production cost in China. A careful reading of the Regulation document released by the EC reveals that the choice of the US as an analogue country was firstly made by the Commission – as in about half of the anti-dumping cases with non-market economies (Eggert, 2006).10 The choice of the US PV price as a reference cost is debatable, as the EC itself admitted, ‘mainly due to the fact that the US market was protected from Chinese imports during part of the IP by anti-dumping and anti-subsidy measures’ (EC, 2013). India was eventually chosen. But the same criticism should have prevailed, in addition to a few others that we summarize below. When the investigation was launched by the EU, the media reported that India was expected to set in motion an anti-dumping investigation into imports of PV modules into the country. According to the Indian Ministry of Commerce, India’s solar manufactures had called for anti-dumping duties as high as 200%.11 Domestic manufacturers ‘were struggling to survive under conditions of oversupply. They ha(d) not been able to compete with their global competitors on prices’12 in spite of trade protection. For the product code CN 8541 40 (solar cells whether or not assembled in modules), the basic duty rate is nil in India, but add to this an additional countervailing duty (CVD) of 12%, a central excise education ‘cess’ rate of 3%, a custom education cess rate of 3% and a CVD special duty of 4%, which altogether amount to a duty rate equivalent of 17.24%. These duties complete domestic content measures (DCM) imposed on crystalline silicon (c-Si) solar cells and modules for projects under the National Solar Mission which aims to add 20 GW of solar power capacity to the country by 2022. On 29 April 2013, based on an application from the Solar Manufacturers Associa- tion, India’s Directorate General of Anti-dumping and Allied Duties (DGAD) initiated an investigation on imports of solar cells whether or not assembled partially or fully in modules or panels or on glass or some other suitable substrates, originating in or exported from Malaysia, China PR, Chinese Taipei and United States of America. Following this proposal, the US filed a request with the World Trade Organiza- tion (WTO) to intervene and protect the interests of American manufacturers. The Indian government subsequently challenged the American request at the WTO but was unsuccessful. India’s PV manufacture sector, at the time when the EC chose it as a reference market, was hence both protected and – to put it bluntly – in bad economic shape. In addition, two severe weaknesses must be highlighted. In the sample of the companies surveyed in India, only one provided a complete reply to the EU questionnaire.

10. For a Chinese perspective on EU ‘analogy methodology’, see Kong Qingjiang (2012). 11. http://www.pv-magazine.com/news/details/beitrag/indian-solar-manufacturers-ask-for-anti-dumping-duties-of-up- to-200_100008789/#ixzz2g6C6avi3 12. Id.

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Furthermore, contrary to the Chinese companies involved, the Indian company did not produce solar wafers, which further complicated the establishment of normal value. First, this possibly led to an overestimate of PV module costs on the grounds that this company was unable to make integration-related cost savings. Second, it was not possible to estimate the price of a PV cell using the same methodology as for a module, therefore the prices of South Korean wafers on the Indian market were used. The overall impact being to bias upward the Indian PV price and along with it the estimated dumping margin.

Considering PV panel as a commodity

ASSESSING THE LEARNING CURVE EFFECTS IN PV PRICE DECLINE An alternative hypothesis to deliberate dumping can explain the long lasting fall in PV module prices. Economic theory indeed isolates several forces likely to drive prices downward. Such bearish forces can be broken down into the two following sets (Hayward and Graham, 2011): mm Experience curves, also called learning curves, relate production costs to the accumulation of experience, often measured by cumulative production. Experi- ence curves are based on the theory of learning-by-doing, which asserts that ‘technical change in general can be ascribed to experience, that it is the very activity of production which gives rise to problems for which favourable responses are selected over time’ (Arrow, 1962). Due to learning and experience, encom- passing factors such as technological change and economies of scale, the higher the amount of PV modules produced and installed, the lower their cost. mm Market forces come in two separate but related guises: the global market for the technologies themselves and the raw materials used in their production. Supply- demand imbalances can manifest as a price bubble on the top of the ordinary cost curve and/or a price dip if circumstances contrive to create a depressed market for the technology and its raw materials. These two different forces presumably interacted in the case of PV, as upward and downward cycles along the learning curve tend to suggest. Econometric estimates of the factors influencing price reduction in photovoltaics qualify the exact contribution of the different drivers underlying the learning curve. Nemet (2005) showed that economies of scale (plant size), technological change (efficiency gains) and the declining price of silicon were the main factors driving down the price of PV during the pre-bubble period (1975-2001).13 However, their learning curve model explains less than 60% of the change in price over the period considered, which means that non-learning curve effects must be taken into account to explain PV module price motion. De La Tour, Glachant and Ménière (2013) identified an experience curve model which minimizes the difference between predicted and actual module prices over the period 1990 to 2011. Their model predicts a 67%

13. We deliberately use price and not cost when discussing learning curve effects, the latter being discussed further below.

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decrease of module price from 2011 to 2020. The authors derive from the learning curve’s forecast value that the price of solar electricity would reach that of conventional electricity by 2020 in the sunniest countries or regions with annual solar irradiation of 2000 kWh/year or more, such as California, Italy and Spain. This learning curve effect on expected PV price does not, however, seem to properly account for the ongoing and rapid convergence of PV electricity price towards grid- parity in more than ten major markets worldwide – i.e. well before the 2020 date indicated by the authors.14

THE COMMODITIZATION OF PV PANELS If learning curves provide only incomplete explanations for downturns in PV module prices, a further examination of the second set of bearish forces, namely global market imbalances, reveals more satisfactory answers. Such imbalances, manifested in price hikes and dips and temporary disconnections between the market value of a product and its marginal cost, are common features of primary commodities markets. Interestingly, they are usually considered as a rarity in the manufacture sector where operators are assumed to adjust margins to meet downstream demand at a stable price (World Bank, 1994). This distinction between primary and manufacture markets – the former being intrinsically instable, the latter the opposite - has prevailed throughout the 20th century. However, it does not account for the blurring of the frontiers of these two classes of goods and the transformation of one class of product into another – something that has been dubbed ‘commoditization’. A commodity (be it primary or manufactured) is a product that is completely undifferentiated. Commoditization occurs when a product becomes less differentiated, so that buyers care less about from whom they buy. The key effect of commoditization is that it reduces the pricing power of the producer: if products become more alike from a buyer’s point of view they tend to buy the cheapest. As pointed out by Graeme Pietersz (2013), commoditization is a key reason why many growth markets disappoint investors: sales volumes grow as expected but, as the market matures, prices come under pressure and margins shrink. The personal computer market and certain other types of computer hardware such as memory chips, which have oscillating prices around downward-sloped learning curves, provide a good example of this: ‘When this was a fast growing industry each computer manufacturer would sell a computer together with a built in operating system, both of which were unique. Different manufacturers’ products looked different, ran different

14. An unpublished Deutsche Bank research note hence asserts that ‘The [PV] sector has passed the tipping point for grid parity in more than ten major markets worldwide and has the potential to achieve competitiveness in 10-20 additional markets over the next three years. As module prices stabilize around $0.60-$0.70/W, the levelized cost of solar electricity without subsidies is now 10-20c/kWh in several major regions of the world. Rising electricity prices, a need for competitive generation sources and lowered balance of system costs will drive further improvement over the next several years.’ (quoted by James Montgomery, Associate Editor, RenewableEnergyWorld.com, http://www.renewableenergyworld.com/ rea/news/article/2013/08/analyst-grid-parity-era-now-underway-for-global-solar-markets). Estimates of grid parity value are however biased towards renewable sources in most analyses, the fixed cost of electricity supply to end users (grid investment, distribution, stability, etc.) being incurred by historical suppliers of electricity (coal, gas, nuclear) and not to the most recent and complementary ones (e.g. renewables) for which only variable costs are inferred.

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software and had very different capabilities. At this point the market attracted many growth investors as it was obvious that demand for the new technology was exploding. As the market matured two vital changes happened. The product became standardized, and therefore largely commoditized. In addition personal computer manufacturers largely ceased being significant producers of software — which is highly differentiated and commands huge margins’.15 This is very likely to have been the case in the PV module sector, where a 30-year-old technology (crystalline silicon) eventually commoditized the downstream manufactured good (the module and cells) (Chase, 2013). A temporary excess supply leading to plummeting prices is hence conceivable in the PV market, as it is in many commodity markets, such as computers, memory chips, cocoa beans, hogs and financial assets, without the involvement of dumping or subsidies. Commodity prices fluctuate randomly, to paraphrase Paul Samuelson (1963), and this randomness can generate unexpected downturns below the marginal cost. Interestingly, some interested parties consulted by the EC during the investigation argued that PV modules and equipment had become ‘a commodity where individual producers are not able anymore to set prices but where prices are subject to worldwide demand and supply’. These interested parties alleged that it was this situation that had caused the material injury of the European Union industry rather than the dumped imports (EC, 2013). The investigation did not refute the fact – or assumption – that PV modules and equipment had become a commodity, simply emphasizing that this does not account for unfair price behaviour and trade practices. Of course, should a large trading country set export subsidies or taxes, these could magnify the temporary disconnection between world prices and their competitive market equilibrium value. What remains obscure is the reasons why the EC chose a commodity with limited added value prospects – as commoditization implies – to flex its muscles against China. This is where political factors come in.

What is at stake in the solar war?

BALANCED TRADE AND MANUFACTURE JOBS In 2012, the European Parliament issued a report, Unbalanced trade?, on EU and China trade, where it emphasized that ‘trade between EU and China has been growing rapidly and continuously in the last three decades, reaching a peak amount of total trade of €395 billion in 2010, […] the imbalance in bilateral trade has been in China’s favour since 1997, this trade deficit amounted to €168.8 billion in 2010 compared to €49 billion in 2000.’ The report further elucidates that: ‘the value added to Chinese exports is very limited once the value of components imported from the EU and elsewhere is discounted; […] foreign companies established in China account for nearly 85% of all export trade deriving from assembly operations’ (European Parlia- ment, 2012). The two parts of this quotation provide us with the possible primary

15. Graeme Pietersz (2013) Commoditisation, http://moneyterms.co.uk/commoditisation/

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reasons for the EC’s decision to stand against China on the grounds of anti-dumping, rather than to explore safeguards. To further explore this line of reasoning, we start by analysing the unbalanced trade aspect of the above quotation, before moving on to the part about the limitations to the value added to Chinese exports. The fast increasing trade deficit of the EU vis-à-vis China on PV panels and cells has undoubtedly played a major role in the anti-dumping initiative from the EC’s Directorate-General for Trade (DG Trade). The addition of the trade balances on silicon, wafers, PV panels, cells and inverters, reveals that EU trade averaged a yearly deficit with China of €10 billion between 2008 and 2011, to be compared with a trade surplus five years previously (Table 1). The magnitude and speed of this deterioration are reminiscent of the events that took place in the textiles and clothing trade following the expiration of the Multi-Fibre Arrangement in January 2005: there was a sudden and sharp degradation of the EU’s trade position in relation to China. Yet two salient differences remain: in the case of PV, there is no tariff cut or quota removal to explain the sudden upsurge of EU imports from China; while the symbolic value of PV modules and components - high-tech products of the ‘third industrial revolution’, the importance of which have been underlined by EC President José Manuel Durão Barroso16 - is definitely much higher for the EU than that of timeless knickers and bras. The emblematic nature of PV also crystallizes expectations of ‘green job’ creation in the EU, and hence of reversing the declining proportion of employment in EU manufacturing, which is a particular trauma in France regardless of the very limited support the PV industry has received from France so far. The consequences of a higher (than dumped) PV price in Europe are not straight- forward. One would expect some jobs to be saved in EU PV manufacturing as a result of EU anti-dumping measures, however, some could be lost among upstream operators facing decreasing export prospects to China, and also downstream among installers. Addressing this empirical issue, the EC (2013) cites a study by Prognos which predicts that out of the 265,000 estimated jobs that existed in 2011 at all

16. ‘Europe’s energy policy and the third industrial revolution’, Loyola de Palacio energy conference, Madrid, 1 October 2007. http://europa.eu/rapid/press-release_SPEECH-07-580_en.htm.

TABLE 1 EU-CHINA TRADE, CUMULATIVE VALUE (IN EUROS MILLIONS) EU Imports from China EU Exports to China Balance Yearly Average C-Si (SH280461) 62.29939 1701.72 1639.42061 409.8551525

Wafers ( SH381800) 1134.348 420.4735 – 713.8745 – 178.468625

PV Panels and Cells (SH 854140) 40812.062 793.6694 – 40018.3926 – 10004.59815

Invertors (SH850440) 787.5527 163.041 – 624.5117 – 156.127925

Total 11-14 42796.262 3078.904 -39717.358 – 9 929.340

Source of data : EUROSTAT

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stages of the Union PV market including Union producers, importers, the upstream and downstream operators according to European Photovoltaic Industry Associa- tion (EPIA) (2011), up to 242,000 jobs would be lost in three years, depending on the level of duties. It is thought that most of the job losses would occur in the downstream market, which Prognos said employed about 220,000 people in 2011. The information obtained by the EC during a verification visit to the EPIA indicates that the number of direct PV jobs calculated for 2011 would have a margin of error of up to 20%. In addition, the estimation includes employment in other European countries outside the Union as well as employment related to thin film products, which falls outside the scope of the investigation. The investigation did not confirm the above scenario and pointed to a much lower number of direct jobs existing in the Union PV market in 2011, during the IP and in 2012.

IS CHINA CATCHING UP ON THE UPSTREAM EDGE OF THE SUPPLY CHAIN? Here we move to the second part of the aforementioned quotation – the notion that overall ‘the value added to Chinese exports is very limited once the value of components imported from the EU and elsewhere is discounted; […] foreign companies established in China account for nearly 85% of all export trade deriving from assembly operations’ (European Parliament, 2012). This rosy vision no longer holds, fuelling fears that China is catching up on the upstream edge of the supply chain. The issue at stake can be looked at in the following way: do global market forces trigger and spread innovation today according to the way described in economics textbooks? Or is the Samuelson syndrome at work, whereby massive technology transfers/imitation to/in green technology-late-mover China leads to a real income

BOX 1.THE DIMINISHING RETURNS OF GLOBALIZATION

In a 2004 controversial paper1, ative advantage that had belonged present salient features that compa- Nobel Prize winner Paul Samu- to the United States can induce for nies and countries must consider elson sketched out the possible the United States permanent lost while taking part in the green race, consequences of China catching per capita real income’ (id.). but that China and India tend to up with the US in the very sector Forecasts on future investments in specialize in the very sectors or tasks where the US enjoyed a compar- clean energy technology and antici- where, historically, ‘Quad countries’ ative advantage – in other words, pated trends in installed renewable enjoyed undisputed comparative where it was leading the so-called energy capacity between the EU27, advantages when trading with one green race. In his paper, this was China and the US provide possible another. supposed to happen as a result of illustrations of the Samuelson Source: Voituriez and Balmer technical innovation (‘imitation or syndrome: real wages in the sector (2012) home ingenuity’) and outsourcing. concerned and potential overall real ‘What does [the] arithmetic tell us GDP could decline should China 1. Samuelson, P. (2004) ‘Where Ricardo about realistic US long-run effects continue to catch up in green tech- and Mill Rebut and Confirm Arguments of from such outsourcings? The new nologies and grasp an ever wider Mainstream Economists Supporting Globali- […] productivities [levels] imply share of the value added in the zation’, The Journal of Economic Perspectives, that, this invention abroad that supply chain. The problem here is vol. 18, n° 3 (Summer, 2004): 135-146. gives to China some of the compar- not that renewable technologies

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decline in green-technology first-mover countries, such as the US or EU (Samuelson, 2004; see also Box 1) and in turn, to dwindling innovation in the latter? If this was the case, then the division of labour advocated by China’s Premier ‘(where) “designed in Europe” is combined with “made in China” and (where) European technologies are applied to the Chinese market’ would no longer produce ‘amazing results’17 due to a lack of activity in terms of ‘designed in Europe’. Without being explicitly mentioned in the EU’s 2013 Commission Regulation or in the various statements of EU leaders, the Samuelson syndrome and its long-term devastating effect on EU productivity and growth may well have been in the minds of European leaders when they asked for punitive anti-dumping duties. Buthow close are we exactly to the world envisioned by Samuelson (2004)? Technology transfers have occurred on a massive scale between OECD countries and China, mainly through trade in intermediate goods. Over the last seven years, China has acquired production technologies to develop a high performing solar PV industry by purchasing turnkey production lines from German, US and Japanese suppliers and by recruiting skilled executives from the Chinese diaspora who built pioneer PV firms, according to De la Tour, Glachant and Ménière (2010). They are now able to manufacture their own production equipment (Glachant, Dussaux, Ménière, Dechezleprêtre, 2013), an area where US and German firms once enjoyed undisputed comparative advantage. Moreover, the idea of a manufacturing China is not confirmed by the most recent patent data. Drawing on figures from the World Patent Statistical Database (PATSTAT), Glachant et al., (2013) provide us with a breakdown of climate-related patents by country. What becomes evident is that China is the only emerging economy in the Top 10, according to PATSTAT. Other major emerging economies or transition countries such as India, Russia or Brazil account for less than 1% of world innova- BOX 1.THE DIMINISHING RETURNS OF GLOBALIZATION tion. The authors emphasize that other studies dealing with waste or green chemistry confirm the stylized facts. Figure 4 shows the shares of major countries in innovation patented worldwide, for each segment of the PV industry in the two years 2006 and 2007 prior to the crisis. China’s performance is impressive: it indeed ranks third in all segments. Surprisingly, it leads with 37% of world patents in the silicon production segment for which its market shares are the tiniest. China’s patenting activity is significantly higher in silicon production, ingot and wafer manufacturing than its contribution to world production (2.5% and 5%, respectively). The reverse is true in downstream segments. China is the second largest producer with a 27% market share (leader since 2008 with more than 35%) whereas it generates only around 15% of worldwide inventions. What is the underlying strategy of Chinese companies? Do they intend to specialize further in upstream segments where the profits are the highest (Figure 3)? Part of the answer lies in the genuine innovative content of patents and also in what’s going on outside the patenting process. An often-used indicator to gauge

17. See footnote 2.

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FIGURE 3 The manufacturing of value by the photovoltaic industry

The photovoltaic industry includes various products, the control and production of which do not generate the same added value. Today we are witnessing a repositioning of Chinese manufacturers in those sectors with high added value.

the genuine innovative value of patents is the share of patents that are also filed abroad. Only valuable inventions are patented abroad – for obvious cost reasons – while minor ones are patented on the domestic market only. Of course this way of gauging the value of a patent is far from perfect and open to debate, but it can be used as a rough guide. According to the screening of the PATSTAT database by De la Tour et al., (2010), only 1% of Chinese patents are also filed abroad, as compared to 15% for Germany, 26% for Japan and 7% for the US. This figure, the authors claimed, ‘reinforces the hypothesis that the value of the average Chinese patented invention is quite low’. They considered that this hypothesis is supported by the fact that Chinese firms devoted a low percentage of revenue to R&D (0.4% to 0.8%, while these figures are between 1.4% and 5% in western companies) (id.). Chinese companies, they concluded, ‘have a higher propensity to patent than their foreign competitors – they file more patent applications for an equivalent innovation

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FIGURE 4 Actors of solar innovation

China has become a major player in solar innovation, ranking third in three of the four areas of innovation. output.’18 Going from this low patent value to the conclusion that Chinese firms do not innovate could be misleading, as the authors acknowledged. Their field work and interviews in China suggest that Chinese innovation focuses more on process, which is often not carried out in specific R&D departments but directly on the production lines, and protected by secrecy rather than patenting (id.). Even unconfirmed by comprehensive data covering patented and non-patented innovation in China, the Samuelson syndrome hypothesis cannot be rejected.

Conclusion What lessons can be drawn from the ongoing solar trade war between the EU and China? Our basic argument is threefold. Firstly, the case of dumping put forward by the Commission and endorsed by a few ministers from EU countries is not fully convincing. Long-lasting downturns in prices that occasionally fall below the cost of

18. De la Tour, Glachant and Ménière (2010) carried out investigations in China which indeed confirmed that local companies were involved in the intensive patenting of minor inventions. Interestingly, they noticed that ‘the reason is not to protect the inventions – critical inventions are usually kept secret – but to send a signal to public authorities. In particular, the allocation of public subsidies by the National Development and Reform Commission (NDRC) is significantly influenced by the quantity of patents.’

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production due to market imbalances is typical of commodity markets. The EC in its investigation was not able to reject the hypothesis that there has been a commoditization of PV panels, and neither can the authors of this chapter. This hypothesis was implicitly confirmed by the content of the temporary deal struck by the EU and China, which consisted of price floors and import quotas, which are historically genuine commodity market management devices. The acknowledgement that PV panels could be classified as commodities weakens the dumping probe and provides little support for the EU’s decision to adopt anti-dumping measures for an undifferentiated commodity that, as commoditization implies, offers declining margin prospects. Our second argument contradicts the reconciliatory view of China’s Premier, according to whom, ‘When “designed in Europe” is combined with “made in China” and when European technologies are applied to the Chinese market, there will be amazing results’.19 We contend that the division of labour in the PV supply chain is experiencing a profound reshuffling, whereby vertically integrated Chinese companies are gaining ground in the upstream value chain and there is a sharp increase in R&D expenses and patenting activities. Even though marginal in comparison with figures from the US, EU and Japan, innovation in China, be it genuine or not, could have the paradoxical effect of cooling innovation in Europe, rather than spurring it on, so long as the EU does not clarify the industrial objectives associated with its climate and energy targets. Finally, we argue that the EU’s objective to bring back Europe’s manufacturing of crystalline PV modules could result in possible benefits in terms of upstream and downstream spillover effects, although we were unable to gather empirical evidence in support of this statement. In a similar fashion, bringing back PV manufacturing to Europe could be deemed as a necessary condition for sustaining PV innovation. Yet innovation spillovers remain elusive between current crystalline PV panel manufacturing and the development of the next PV generation. The solar war crystallizes technological catch-up by China on decades-old technology. What is at stake for the leaders of the green race, such as the EU, and for the mitigation of greenhouse gases, is not so much whether China is involved in dumping and the effect that this might have on commodity export prices, but how far the technology frontier can be expanded, and to what extent the manufacture of silicon PV modules can benefit this process. ❚

19. Li Keqiang ‘China has high hopes for European ties’ Financial Times, 1 May 2012. http://www.ft.com/intl/cms/s/0/ f6911db2-92aa-11e1-b6e2-00144feab49a.html#axzz2fLPcVcj5

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REFERENCES

Barbose G., Darghouth N., Weaver S. and Wiser R., Glachant M., Dussaux D., Ménière Y., Dechezleprê- 2013, Tracking the Sun VI. An Historical Summary of tre A., 2013, Greening Global Value Chains. Innova- the Installed Price of Photovoltaics in the United States tion and the International Diffusion of Technologies from 1998 to 2012. Lawrence Berkeley National Labo- and Knowledge. World Bank Policy Research Working ratory, July 2013. Paper 6467, World Bank, Washington, DC. Bazilian M., Onyeji I., Liebreich M., MacGill I., Chase Hoium T., 2011, The Most Important Cost in Solar. Dai- J., Shah J., Gielen D., Arent D., Landfear D. and Shi lyFinance. Zhengrong, 2012, Reconsidering the Economics of ITRPV, 2012, International Technology Roadmap for Photovoltaic Power, mimeo. Photovoltaics (ITRPV) Results 2011, CTM Group and Bony L., Doing S., Hart C., Maurer E., Newman S., SEMI PV Group, ITRPV.net. 2010, Achieving Low-Cost Solar PV: Industry Work- Kersten, 2011, PV learning curves: past and future driv- shop Recommendations for Near-Term Balance of Sys- ers of of cost reduction, Proceedings of the 26th Euro- tem Cost Reductions. pean Photovoltaic Solar Hamburg 2011. Chase J., 2012, Breakthroughs in solar power, it’s not just Kong Qingjiang, 2012, China-EU Trade Disputes and about technology anymore, Bloomberg New Energy Their Management, World Scientific Publishing Co Ltd, Finance, powerpoint presentation. Singapore. De la Tour A., Glachant M., Ménière Y., 2011, “Innova- Maycock, 2001, “The World Photovoltaic Market 1975- tion and International Technology Transfer: the Case 2001”, PV Energy Systems, 2001. of the Chinese Photovoltaic Industry”. Energy Policy, 39(2), pp. 761–770. Mehta, 2011, “PV News annual data collection results: 2010 cell, module production explodes past 20 GW”, De La Tour A. and Glachant M., 2013, How do solar GTM Research, May 2011. photovoltaic feed-in-tariffs interact with solar panel and silicon prices? An empirical study. Interdiscipli- Meymandi J. and Chin S., 2013, UBS Investment Re- th nary Institute for Innovation, Working Paper 13-ME- search Solar Industry Update, March 10 2013. 04, April 2013. Nemet G.F., 2006, Beyond the learning curve: factors De La Tour A., Glachant M. and Ménière Y., 2013, What influencing cost reductions in photovoltaics, Energy cost for photovoltaic modules in 2020? Lessons from expe- Policy 34: 3218-3232. rience curve models. Interdisciplinary Institute for Inno- OECD, 2013, Interconnected Economies. Benefiting vation, Working Paper 13-ME-03. from Global Value Chains. OECD, Paris. Eggert J., 2006, Observations on the Anti-Dumping Reg- PVNews, Prometheus Institute & Greentech Media, ulation. FTA Position for the Expert Meeting. Mimeo. 2005 till 2010. Brussels, 11 July 2006. http://trade.ec.europa.eu/ REDP (China Renewable Energy Development Project), doclib/docs/2006/september/tradoc_129812.pdf 2008, Report on the development of the photovoltaic EPIA, 2012, EPIA-market-report-2011, http://www. industry in China (2008). epia.org/. Ristow, 2012, Compilation of pricing and cumulated c- European Commission, 2012, Notice of initiation of an Si-PV installations based on data published in Maycock anti-dumping proceeding concerning imports of crys- (2001), PVNews, Mehta (2011), and EPIA (2012), talline silicon photovoltaic modules and key compo- Alan Ristow, Photovoltech NV, Tienen, Belgium. nents (i.e. cells and wafers) originating in the People’s Ruoss D., 2007, Global Photovoltaics Business and PV in Republic of China (2012/C 269/04), Official Journal Malaysia, Envision report of the European Union 6.9.2012. Samuelson P., 2004, “Where Ricardo and Mill Rebut European Commission, 2013, Commission Regulation and Confirm Arguments of Mainstream Economists (EU) No 513/2013 of 4 June 2013 imposing a provi- Supporting Globalization”, The Journal of Economic sional anti-dumping duty on imports of crystalline Perspectives, vol. 18, n° 3 (Summer, 2004): 135-146. silicon photovoltaic modules and key components (i.e. cells and wafers) originating in or consigned from the Voituriez T. and Balmer B., 2012, The Muddle over People’s Republic of China and amending Regulation Green Race. IDDRI Studies 01/12 March. (EU) No 182/2013 making these imports originating World Bank, 1994, Global Economic Prospects and the in or consigned from the People’s Republic of China Developing Countries. The World Bank. Washington. subject to registration.http://eur-lex.europa.eu/Lex- DC. UriServ/LexUriServ.do?uri=OJ:C:2012:269:0005:00 Yang C.-J., 2010, Reconsidering solar grid parity. Energy 15:EN:PDF Policy 38, 3270–3273.

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CHAPTER 15 Green development, innovation and intellectual property rights

John Mathews, Professor of Strategy, MGSM, Macquarie University, Sydney, Australia, (2009-2012). Eni Chair of Competitive Dynamics and Global Strategy, LUISS Guido Carli, Rome, Italy Keun Lee, Professor of Economics, Seoul National University. Director, Center for Economic Catch-up, South Korea. Member, Committee for Development Policy, UN

n pursuit of development through industrialization, late- way for them to do so is to build up their carbon-intensive comer countries and the firms within them are able to energy systems, based on coal, oil and gas – just as the develop strategies that counteract their disadvantages, now-industrialized countries did before them. On the other and instead enable them to utilize advantages such hand, they do not wish to be left behind with dirty, noxious as drawing from the pool of available and emerging industries while the rest of the world moves ahead to a Itechnologies, which can be applied with transient low new focus on clean and green industries, starting with costs. This latecomer approach to drawing advantages renewable energy industries. How are they to resolve this from leapfrogging can be found today as China industrial- dilemma? izes, lifting hundreds of millions out of poverty, followed As in so many other ways, China provides a model. by India and Brazil – adapting the patterns laid down in China is ramping up its coal and oil-fired energy system the 20th century by Japan, Korea and Taiwan, and in the as fast as it can, as it builds the world’s largest manufac- 19th century by Germany. Developing countries looking to turing economy that has achieved stellar growth of close green their industrialization efforts for added advantage on 10% per year for the past three decades. This is the face barriers in the form of patent walls that call for further ‘black’ Chinese economy – one which is making the air in innovative strategies, as well as cost and trade barriers. Chinese cities unbreathable as well as emitting the world’s These are discussed in the cases of solar photovoltaic largest carbon emissions. However, China is simultane- (PV) cells and light emitting diodes (LEDs), two of the most ously engaged in building renewable energy and energy significant industries today promising tangible leapfrog efficiency industries faster than any other country – starting benefits for developing countries themselves and lower with solar photovoltaic (PV) and wind power industries, and carbon emissions for the world. moving to encompass concentrated thermal power (CSP) involving fields of mirrors and lenses, along with other Laying down the foundation for a sustainable industries such as light emitting diodes (LEDs) for lighting. industrial system: the Chinese model China’s ramping up of these clean and green industries Developing countries today are caught between two is taking place at an unprecedented speed; in the case apparently conflicting demands. On the one hand they of LEDs, China’s government expects the country to have are anxious to share in the wealth-generating potential of replaced a third of its traditional incandescent lighting by industrialization, to liberate themselves from conditions of 2015, thereby saving as much electricity as 1.5 times the poverty and move into the modern, globalized, industrial- annual output of the Three Gorges Dam. ized and urbanized economy. The fastest and most obvious So China is resolving the dilemma by building new clean

A PLANET FOR LIFE 299 and green industries as fast as its black, fossil-fuelled strategies to capture these benefits. They can enjoy lower power system expands, with the green system steadily costs (particularly labour costs) for a time, and they can overtaking the black system through logistic industrial access the pool of technologies already developed. Using dynamics and the rapidly falling costs of the clean and strategies of resource leverage (Hamel and Prahalad, 1992) green sector. And of course as it does so, China is building they can access these technologies (e.g. through joint major new industries that are becoming ‘pillar’ industries ventures or licensing) and then put them to work to build alongside steel and automotive, and providing the export production systems enjoying lower costs than their estab- platforms of tomorrow. lished competitors. This is a process that has worked now We discuss here how China’s strategy can be gener- for many decades. As described by Gerschenkron (1962), alized and made a model for developing and industrial- latecomers in Europe like Germany caught up with the izing countries around the world. When we abstract from leader Great Britain in the 19th century through capturing the specifics of China’s experience, we see a latecomer latent advantages and compensating for deficiencies such industrialization strategy focused clearly on catch-up, as commercial banking by creating a new industrial bank using technological capability enhancement as its driving (the Deutsche Bank) to channel savings towards investment engine. China did not invent this model. It was perfected in new industries which included dyestuffs and chemicals. in the second half of the 20th century in East Asia – first by Latecomers in East Asia in the 20th century caught up Japan, then Korea, Taiwan and Singapore, then diffusing by again deploying extraordinary institutional innovations, into Southeast Asian countries. Now in the 21st century we termed the developmental state (Johnson, 1982) and recip- see it being applied with enormous success by industrial rocal control mechanisms (RCMs) (Amsden, 2001) – such as giants like China, India and Brazil – which as they indus- the practice in Korea of providing rewards to firms prepared trialize along ‘green and black’ lines are lifting hundreds to invest in targeted catch-up industries but disciplined by of millions of people out of poverty and laying the founda- world export market competition. tions for a sustainable industrial system. Now these strategies are being deployed in their specific The foundations are being laid – but such a system institutional settings by China, India and Brazil as they has not yet been built. The carbon-emitting aspects of industrialize in the 21st century. But the difference is that the black industrialization model may yet overwhelm the this time there is a green developmental strategy along- green shoots as they mature, and condemn the world to side a black, fossil-fuelled strategy. And firms in these a nightmare future of global warming and consequential countries can look to deploy the same latecomer strate- catastrophes associated with floods, droughts, fires, hurri- gies, involving technological leapfrogging, as the earlier canes – not to mention wars and terrorism. The future is industrializers were able to do (Mathews, 2013). Successful open. Nothing has been determined. catch-up firms move on to become innovators in their own right, further adapting technologies as they build their The latecomer industrialization model and competences in newly emerging industries (Lee, 2013). technological leapfrogging The firms in the presently industrializing countries face Latecomer countries, and the latecomer firms within further barriers, including more pronounced restrictions them, face enormous obstacles as they seek to industri- on infant industry protection imposed by the WTO, and alize (Lee and Mathews, 2013). They lack initial resources, tighter enforcement of patents and intellectual property including technologies, skilled workers and engineers. rights – under the trade-related aspects of intellectual They are having difficulties entering into advanced country property rights (TRIPS) and technical barriers to trade (TBT) markets due to the competitive threats from well-estab- provisions of the WTO. lished firms – usually from firms in countries that have It is instructive to examine how these opportunities and most recently industrialized. But, latecomers also possess new barriers present themselves in the important cases certain advantages – provided they can deploy smart of two of the new energy-related industries, namely solar

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FIGURE 1 Photovoltaics: a technology now affordable for all

The general decline in costs of different solar technologies has made it possible to develop competitive solar industries in developing countries.

PV and LED industries. These industries utilize similar they represent an enormous step towards a low-carbon technologies, and promise enormous benefits to devel- future for developing countries. Solar PVs can be utilized oping countries, both in terms of reducing energy poverty to generate electric power for people far from existing and providing new, clean industries that have great devel- grids, giving villages and rural communities access to opmental and export potential. power at minimal expense. Likewise LEDs can generate light for domestic and communal uses at reduced costs, The solar PV and LED industries: huge leapfrog bringing illumination (and with it greater opportunities for gains for developing countries education) within reach of poor communities. Beyond these Each of the two emerging industries is the comple- poverty alleviation features, each industry represents a ment of the other: solar PVs turn light into electric power, potent source of development and exports, particularly for while LEDs turn electric power into light. They have similar latecomer countries that are prepared to invest in innova- core technologies, involving deposition of a semicon- tion capabilities such as national R&D laboratories that ductor onto a wafer. Solar PVs use silicon as basic raw can adopt the technologies utilized (Mathews, 2007). China material (sourced ultimately from sand, the commonest has already targeted both solar PVs and LEDs as future raw material on the planet) while LEDs are on the cusp of ‘strategic industries’ – thereby making them eligible for an evolutionary leap that will enable them to use silicon low-cost loans and other forms of assistance designed to as substrate as well. A critical feature of each is that build comprehensive value chains covering components

A PLANET FOR LIFE 301 and final production of both solar cells and LEDs. The global backed by legislation banning incandescent light bulbs. It is expansion and rapid move along the innovation chain by estimated that as many as 4,000 firms have crowded into these Chinese firms has astonished scholars and observers the LED sector in China – many of which will go bankrupt. (Lema et al., 2012; Lewis, 2012). Apart from technology They have been tempted by tax breaks, subsidies and leverage, the critical institutional innovation that underpins offers of low-cost land for factories, in line with China’s these new firms’ success is credit lines from the China targeting of the sector in the 12th Five-Year Plan (FYP) Development Bank (Sanderson and Forsythe, 2013). on account of its energy efficiency and energy consump- A key feature of these industries is their rapidly declining tion cutting potential. The Chinese Ministry of Science and costs, making them more accessible to latecomer devel- Technology plans for an industry worth 500 billion yuan oping countries. Solar PV sector costs have been coming (US$79 billion) by 2015, when LEDs should count for 30% down in recent years at 45% per year (Bazilian et al., 2013), of the lighting market. while for LEDs, costs have been dropping at 12% per year (Figure 1). Both rates of cost decline are extremely signifi- Intellectual property rights, patent walls and cant in bringing these industries within the reach of devel- hold-ups oping countries and making them more competitive with Quite apart from difficulties involved in accessing respect to incumbents. technologies protected by patents (where at least a prima The falling costs of PVs. The global market for solar facie case for licensing exists) latecomer countries face PVs is growing so fast, and its costs are coming down so further difficulties in confronting the ‘patent wall’ around dramatically, that it is transforming prospects for everyone advanced technologies (Lee et al., 2013). The barriers are – and particularly latecomer developing countries (McKinsey, particularly strong when leading firms engage in what 2012b). Costs are now achieving or approaching $1 per is termed ‘strategic patenting’ – which is where firms watt, which is close to ‘grid parity’, while the size of the extract rents from prior established (de facto) industry solar PV sector is estimated to be 65 GW by 2011 and is standards, where different firms hold patent rights to part on target to reach 1000 GW (1 TW) by 2020 – although of the technological system but not to all. The Stanford Law various obstructions might reduce that target to 600 GW professor Mark Lemley graphically labels this practice as (still an enormous total). Chinese manufacturing capacity ‘patent hold-up’ and ‘royalty stacking’; other terms used has grown at an unprecedented pace, and this has been are patent ambush, unilateral refusal to license and denial the principal factor in driving down costs (Fu and Zhang, of fair, reasonable and non-discriminatory contracts (Lemley 2011). and Shapiro, 2007). The leading firms have the upper hand LEDs: industrial leadership targeted by China. The in these kinds of cases; under the current operation of LED lighting sector is in the process of taking over the the TRIPS and TBT there are few remedies available to global lighting market, estimated to be worth $100 billion contesting countries. by 2020 (McKinsey, 2012a). McKinsey & Co sees LEDs The LED and solar PV industries have abundant patent- rising to account for 45% of this market by 2016 and 70% related cases demonstrating these difficulties. While solar by 2020 – making it a huge market full of fresh opportu- PVs have a lengthy history, and many of the patents relating nities for latecomer firms in industrializing countries. As to the dominant technology of crystalline silicon have now McKinsey puts it: ‘The [lighting] market is on a clear transi- expired, making the technology freely available, this is tion path from traditional lighting technologies to LED’. certainly not the case for the second and third generation McKinsey expects that the concern to improve energy solar PV systems such as CIGS (thin film second genera- efficiency will be one of the drivers of this transition, which tion) and organic PVs (third generation).1 Strong patent will open up a lighting market to millions (or even billions) who have been excluded so far. China has poured immense 1. CIGS is an alternative semiconductor layer, made up from Copper, resources into developing a comprehensive LED industry, Indium, Gallium and Selenide.

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barriers have been erected in the case of CIGS – but cases make the argument for fundamental reform of the these have been breached in an unexpected way by the patent system to make it of greater use in driving the diffu- Chinese firm Hanergy which was quick to buy up advanced sion of innovations, as much as their protection. technology firms that developed CIGS and protected this knowledge base with IPRs, but then fell on hard times Cost and trade: promoting green industries as crystalline silicon firms continued to lower their costs Latecomer countries looking to leapfrog to the lead and prices below those that could be maintained by the in green technologies face a variety of other challenges, CIGS firms. Hanergy took over Solibro (the CIGS subsid- including cost and trade barriers. Many of the most favour- iary of the German company Q-Cells), MiaSole and most able renewable energy systems, such as CSP (involving recently Global Solar Energy – and with these companies large arrays of lenses and mirrors to concentrate solar it acquired considerable patent rights as well.2 It is notable energy and storing it through such means as molten salt that Samsung is known to have accumulated a consid- systems), still entail costs that are in excess of those of erable ‘war chest’ of patents on CIGS technology as a dirty and unreliable coal or oil supplies. The costs are prelude to entering the sector – but at the time of writing coming down rapidly (as they are for solar PV) and will soon it has not yet entered production. In Taiwan, the Industrial be driven down faster as China enters the field of CSP. But Technology Research Institute (ITRI) has accumulated a set smart financial instruments such as green bonds/climate of patents covering CIGS technology which it has assigned bonds can get around such barriers, by lowering the cost as a ‘patent pool’ to latecomer Taiwan firms looking to of finance through aggregating projects into packages break into second generation solar PVs (Mathews et al., that can be floated on bond markets. The example of a 2011). Such patent pools represent an interesting insti- $500 million bond issued by the Korean Export-Import tutional latecomer innovation, modelled on the successful Bank (Kexim) in March 2013 demonstrates how countries patent pools created in the developed world – such as can utilize such financial innovation that supports green the MPEG-2 patent pool that was given exemption from development; the Kexim Bond was targeted at institutional anti-trust action in the US and now continues to charge investors and was oversubscribed, showing the appetite royalties on video streaming, even after the original patents for such investments.4 have expired.3 The ultimate barrier to green development through In the LEDs sector a veritable cartel of seven firms – leapfrogging is the world’s trading system, with its bias Nichia, Cree, Samsung, LG, Osram, Sharp and Phillips against green exports from developing countries (such – have maintained a tight patent ring (involving cross- as sustainable bioethanol from Brazil produced efficiently licensing deals), covering all aspects of LED lighting, such from sugar cane) and continuing trade barriers against as chips, phosphors and substrates. For example a cross- the export of green energy equipment from advanced licensing agreement between Sharp (Japan) and Osram countries. There are proposals to resolve such trade (Germany) was announced in August 2013, covering LEDs barriers through a ‘Green Goods Free Trade Agreement’ and laser diodes. Everlight from Taiwan has broken into that could accelerate global trade in environmental and this tight patent ring, but only at the cost of severe patent green goods in the same way that a similar agreement infringement suits that have sapped the company. Such covering IT goods has (in an unobtrusive way) facilitated the rapid growth of the IT sector around the world over

2. See ‘Hanergy acquires Global Solar Energy, its third CIGS PV buy’, the past two decades. The APEC countries (Asia Pacific by Eric Wesoff, 23 July 2013, available at: http://www.greentech- Economic Cooperation) including both China and the media.com/articles/read/hanergy-acquires-global-solar-energy-its- third-cigs-pv-buy US agreed on such a lowering of tariffs on a long list of 3. See ‘MPEG-LA shows the need to rebuild IP foundation’ by Brett Swanson, Forbes, 30 Apr 2013, at: http://www.forbes.com/sites/ bretswanson/2013/04/30/mpeg-la-shows-need-to-rebuild-ip- 4. See the report at Climate Bonds Initiative: http://www.climate- foundations/ bonds.net/2013/02/kexim-green-bond/

A PLANET FOR LIFE 303 novation and leapfrogging in green technology: The solar PV ‘environmental’ (essentially green) goods at their Vladiv- industry in China and India, Journal of Chinese Economic and ostok Summit in 2012, and negotiations are underway to Business Studies, 9 (4): 329-347. extend the agreement to the G20 – with a view to such Gerschenkron A., 1962, Economic Backwardness in Historical Perspective: A Book of Essays. Cambridge, MA: Belknap Press, an agreement being adopted by the WTO. This would have Harvard. more impact on global concerns over climate change than Hamel G. and Prahalad C.K., 1992, Strategy as stretch and lev- all the efforts so far expended on the Kyoto process.5 erage, Harvard Business Review, Mar-Apr: 75-84. Johnson C., 1982, MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975. Stanford, CA: Stanford University Conclusion Press. The greening of development strategies represents a Lee K., 2013, Schumpeterian Analysis of Economic Catch-up: new frontier that could prove to be of decisive importance Knowledge, Path-Creation and the Middle-Income Trap. Cam- bridge: Cambridge University Press. in maintaining and enhancing the living planet while raising Lee K. and Mathews J.A., 2013, Science, technology and inno- hundreds of millions of people out of poverty through vation for sustainable development. CDP Background paper sustainable industrialization. On the former ‘business as #16. UN: Committee for Development Policy. usual’ model fuelled by coal, oil and gas, there is no way Lee K., Kim J.-Y., Oh J.-Y. and Park K.-H., 2013, Economics of intellectual property in the context of a shifting innovation para- that these goals can be reconciled. But as China, and to digm: A review from the perspective of developing countries, some extent India and Brazil and other countries indus- Global Economic Review, 42 (1): 29-42. trializing in their wake adopt a new green model, and Lema R., Berger A. and Schmitz H., 2012, China’s impact on the global wind power industry. Discussion paper #16. Bonn: turn it through industrial strategy into a source of employ- German Development Institute. ment, wealth generation and exports, the prospects for Lemley M.A. and Shapiro C., 2007, Patent hold-up and royalty the planet are transformed. Lopsided trade arrangements stacking, Texas Law Review, 85: 1991-2041. as well as patents and intellectual property rights issues Lewis J.I., 2012, Green Innovation in China: China’s Wind Power Industry and the Global Transition to a Low-Carbon Economy. stand as potential barriers, calling for global institutional New York: Columbia University Press. innovations. In this case such innovations could be a global Mathews J.A., 2007, Latecomer strategies for catching-up: The free trade agreement for environmental goods that would cases of renewable energies and the LED programme, Interna- tional Journal of Technological Learning, Innovation and Devel- encourage technology transfer and the opening up of opment, 1 (1): 34-42. markets which help to drive down costs, making green Mathews J.A., 2013, Greening of development strategies, Seoul technologies more accessible. And patent initiatives such Journal of Economics, 26 (2): 147-172. as patent pools created by national R&D institutions could Mathews J.A. and Tan H., 2013, The transformation of the electric power sector in China, Energy Policy, 52: 170-180. help to get around potential patent walls. The countries Mathews J.A., Hu M.-C. and Wu C.-Y., 2011, Fast follower in- that have full industrialization in their sights will demand dustrial dynamics: The case of Taiwan’s emergent photovoltaic nothing less. industry, Industry and Innovation, 18 (2): 177-202. McKinsey & Co., 2012a, Lighting the way: Perspectives on the global lighting market. Available from www.mckinsey.com REFERENCES McKinsey & Co, 2012b, Solar power: Darkest before dawn. Amsden A., 2001, The Rise of ‘The Rest’: Challenges to the West Available at: http://www.mckinsey.com/client_service/sus- from Late-Industrializing Economies. New York: Oxford Univer- tainability/latest_thinking/solar_powers_next_shining sity Press. Sanderson H. and Forsythe M., 2013, China’s Superbank: Debt, Bazilian M. and others, 2013, Re-considering the economics of Oil and Influence – How China Development Bank is Rewriting photovoltaic power, Renewable Energy, 53: 329-338. the Rules of Finance. Hoboken, NJ: Bloomberg Press/Wiley. Fu X. and Zhang J., 2011, Technology transfer, indigenous in-

5. See the contribution by John Mathews to The Conversation, 20 June 2013, at: http://theconversation.com/want-a-big-idea-lets-lead- the-world-and-free-up-clean-tech-trade-15196; and to The Globalist, 4 December 2013, at: http://www.theglobalist.com/?s=global+gre en+growth+trade&submit=Submit+Query

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