Innovation and Technology Transfer

Framework for a Global Climate Deal

Shane Tomlinson, Pelin Zorlu and Claire Langley

An E3G report with contributions from Chatham House

November 2008 About E3G E3G is an independent, non-profit European organisation operating in the public interest to accelerate the global transition to sustainable development. E3G builds cross-sectoral coalitions to achieve carefully defined outcomes, chosen for their capacity to leverage change. E3G works closely with like-minded partners in government, politics, business, civil society, science, the media, public interest foundations and elsewhere. More information is available at www.e3g.org

About Chatham House Chatham House is one of the world’s leading institutes for analysis of international issues. It is an independent organisation that brings together people from government, politics, NGOs, business, the academic world and the media to be at the forefront of developments in an ever-changing and increasingly complex world. The organisation has a strong track record in carrying out research and facilitating meetings and processes and that enables governments and other actors to address major challenges on the international agenda.

Third Generation Environmentalism (E3G) The Royal Institute of International Affairs 4th floor, In Tuition House Chatham House 210 Borough High Street 10 St. James’s Square London SE1 1JX London SW1Y 4LE Tel: +44 (0)20 7234 9880 Tel: +44 (0)20 7957 5700 Fax: +44 (0)20 7234 0851 Fax: +44 (0)20 7957 5710 www.e3g.org www.chathamhouse.org.uk

2 r e f s n a r T y g o l o n h c e T d n a n o

i © E3G/Chatham House 2008 t a

v This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 2.0 License. o n n I You are free to: • Copy, distribute, display, and perform the work. • Make derivative works.

under the following conditions: • You must attribute the work in the manner specified by the author or licensor. • You may not use this work for commercial purposes. • If you alter, transform, or build upon this work, you may distribute the resulting work only under a license identical to this one. • For any reuse or distribution, you must make clear to others the license terms of this work. • Any of these conditions can be waived if you get permission from the copyright holder. Acknowledgements

This report has been produced by E3G and Chatham House. The research was led by Shane Tomlinson and Pelin Zorlu of E3G with contributions from Antony Froggatt and Shilpa Viswanath of Chatham House . Nick Mabey from E3G provided overall direction and conceptualisation to the project and report.

The report benefited greatly from the extensive comments and input of Bernice Lee (Chatham House) along with Jennifer Morgan and Matthew Findlay (E3G ).

The research towards this paper has benefited from the thoughtful research support of Claire Langley, and Taylor Dimsdale, of E3G, to whom the project team would like to extend their sincere appreciation. s In addition to the above, the support of Martin Rands and Shin Wei Ng towards the t n e

publication is also appreciated. Particular gratitude goes to Meera Shah for her m e g

support and patience throughout the production process. d e l w o

Chatham House would like to thank the UK Department for International n k c

Development (DfID) for their generous contribution toward the project. A

The authors would like to acknowledge the courtesy and generosity of The World 3 Bank on sharing the underlying dataset: Andrew Burns, Teng Jiang, and Antonio r e David of World Bank Global Economic Prospects 2008 team. f s n a r T

Finally, the authors wish to thank all those who have been involved, on calls and in y g o meetings, to discuss, challenge and push further our evolving thinking. l o n h c e T d n a n o i t a v o n n I

Further details about this paper, translated versions, downloadable resources and news of related activities are available at www.e3g.org.

The opinions expressed in this publication are the responsibility of the authors and do not necessarily reflect the position or view of E3G and Chatham House. Executive Summary

Faster and broader innovation is critical for delivering climate security while preserving energy security

Faster and broader innovation of new technology is critical for achieving low carbon and climate resilient development. Stabilising global temperature increases below 2°C will require global emissions to peak and reduce in the next 10-15 years. 1 Achieving this pathway reduces the probability of exceeding 4°C of warming – where crossing catastrophic climate change tipping points is highly likely – to under 1%; delaying global peaking by 20 years would increase the probability of 4°C to 10% .2 y r Meeting these goals poses a unique public policy challenge: delivery of new technolo - a

m gies and massive shifts of investment on a global scale inside a specific timeframe. The m u

S urgency of developing new technology is compounded by the existing global energy e v

i system investment cycle. The next 20 years will see an unprecedented increase in t u

c energy investment as developed countries replace power plants built in the 1960s and e x

E 70s, and rapidly industrialising economies accelerate their construction of modern energy systems. The US, Europe and China will each build around 800-1,000GW of 4 new power stations by 2030. Concerns over energy security and prices are also driving defensive investments in high carbon sources, such as tar sands and coal-to-liquids. r e f s n a

r Failure to provide workable low carbon alternatives for these investments will mean T

y much of the world becomes “locked in” to carbon intensive development. IEA scenarios g o l to meet the 2°C target require power plants with carbon capture and storage (CCS) to o n

h make up 20% of global power investment up to 2030; from 2030 all new power plants c e

T in developed countries will need to be zero-carbon. However, there is currently no d n

a commercial scale CCS demonstration plants planned to be in operation before 2015, n

o making this schedule highly unlikely. Even under an optimistic technological scenario i t a

v the IEA estimates that 15% of existing fossil fuel plant - around 350 GW - needs to be o

n retired before the end of their economic lifetime. Similar issues exist in all major n I emitting sectors: energy, transport, industry, infrastructure and buildings .3

While these scenarios require only an 18% increase in investment over business as usual, they imply a huge investment shift from high to low carbon technologies .4 The additional investment needs in clean energy technologies and energy efficiency are 18 times the current level of investment in these areas . A significant amount of the

1 Barker et al., 2007 2 Meinshausen, 2005 3 IEA, 2008a 4 IEA’s BLUE Map Scenario in IEA (2008a) in the c to co n devel Cu r t pub i c a w ev r c d i o v A c N on d e h T Thi I al th a 6 5 d a h up T no t c n r he v o n n d a d e oun onc ost. oun r a dva re ri igh he il n a atio an I I e prov d are d t b EA ve new s rr as . t n o b n s i t c u c i di ti on id St ep t i re li o a olv al o p s ris er er n , w . tr tr c i s a b o l a a deq c f l a n o i en t 20 na ern a i 6 or ce low n i o i t a loy pm t nt Mu lt i il i i te enrgy s i 0% pro s i n o es es 08a k m de pres ng l fo n i r l g s; fr erna d wide co t ua req men polices rep s ent o a s lo w s n om h n o b r a c o re t e s a the port mu k r of a unt f he il 4 $ a v o o c e ver as t h w ct il nd ent e d n a tro uire t c at e p ort t e tion p pub sprea ion t th e fu glob t 5 ol R& de ltipe rig r o at rie ca r l i o n io fu o i t dr iv fit the . ra l r o f s n a r t el n i l l i r t e h o icy hway cline met ince n d ndin ht al s a a li sp ac D ave ti c i m alo , n i c n a h n e c o l pla al i bo s long c o a with ng n o i s u f f d e last colabr pol icy fundig ct io n climate f t i fail fund d n a n o eco ef fo ne agremnt ntive - k c resa n nts d s g. e when al s t f i h s d n a the a n i f in the ra 25 no are i i t a m no Unf le nd ures rom rt m t s e v n ing t ca is c d no r e h s frame works g n i w climate my rch e on yea bindg f o i inov t rbon fo for re qu unlikey o ncr change, ta has c e to , s n o l l o t is va ti on tio rtun 1% s r e ‘o w o l and r has rs u c e i n h spe t inn i u q e r a e ge spent i w rp e r o m he n as . t n e ir ed f tha -ca doubli 5 alen ation ts atel in o t a ha n l l i r c ndig shown Ener i o c ph a change n ngly l a h ptu b r a red vation y t depn e b d 1985 d e d e e n a r en e r t igher to pr og ra mme s cu y, suporting o ’ e v i s n e p x e help t s y s f o rma i p re se arch by and ergy re uctio n o ng chain. a gy su gi ve c re e inves s e i r t n u o stimates y l d in g s i up port read to ts of l p p u m e o l R in nt d n a ce ut ic a chaleng. ince nti coret the ranges a security in ce n D& n a b t p a d a R& 3% o t t to nd ne low bilit s l a In in com y . y en i t a t p a d a 50% , 0 5 0 2 w t s i x e are as, D the or p p u s r e d n u technol in techno w o l private t I y carbon ti ve s ova for are as ls funding, ves o t rgy crital capble 205. c e t t o l l i w globa in du st ry of itmens in and a a as a c adaptat m i tion deli o t to Despit h su ch re r a sector sha fo r real logies o b r y g o l o n climate and d e m n o fo e b d n u o i l e d clima 6 sector in gie ve no t wi re ad cus Pub market p n a a o e t o p m i r terms y l in ublic nd s l ; s a i ovatin di ti on al . f r e v ion of t v than wh c for Th e ra are dr o ad biomas th h e o also some l e t a li o n h te , % 0 7 o t a f toal ns R&D. c wi is ich i c i eq u much t n a t r senitvy i res h t y exampl, n u spendi furthe n god v e d in cr i f i and e l der in o l novat g be orm n n d a e s e h provid ilenc s n recnt t a v o l l i w e i g ma ti ca l progames na ti on al RD& t at other g n i p o l e o o ned w Studies set re policy o t p va larger at co-f aspect e s e t h t i jo t ion ng si st a n o i ive c c o tiv to l l i w devlop. n a l p is su e h c of r w o l e by irng. ares devlop r e w o l pro remains increas e emissions needs l o n c ma na ge sol in r u nt i oun failures. increase cap ac yr t n u o c n a to making r su a c ,d a e h a b ct io n u q e O is uti of g o n i cr op s. n a m lems. drive ch , o b r ECD tries This ho w le u f and la c i low ons eh t are are er i it as s, n a y y , 5 Innovation and Technology Transfer Executive Summary virtually non-existent , and represent a major gap in knowledge which must be priori - tised in the international climate change process.

These figures probably underestimate the amount of R&D needed, as they assume an efficient least-cost pathway to known levels of global emission reductions. In reality future mitigation pathways are highly uncertain. The IEA estimates that over 50% of abatement by 2050 will come from energy efficiency measures, but experience shows these savings are often hard to capture and policies often fail; savings from reducing deforestation rates also face very challenging policy delivery environments. Estimates of climate sensitivity to greenhouse gases may continue to worsen; increasing the rate of emission reductions needed to meet temperature stabilisation goals. Some technologies which play a large part in many scenarios, for example, advanced biofuels, advanced nuclear power, may fail to emerge owing to technological failure or public acceptance issues. In all cases a larger range of low carbon energy alterna - y r tives - especially in power generation and transportation – will be needed earlier than a

m current models predict. m u S e v

i Aggressive innovation efforts across a portfolio of critical technologies is part of a t u

c responsible risk management approach which hedges against climate policy failures, e x

E technology failures and worst case scientific scenarios. Failure to incorporate these potential scenarios into future mitigation plans will dramatically lower the likelihood 6 of successful climate stabilisation. r e f Delivering a portfolio of critical low carbon options by 2020 will require large scale s n a

r demonstration of key technologies, the building of lead markets and rapid develop - T

y ment of large scale supply chains. This will often be beyond the capacity of individual g o l countries to achieve; as shown by the 2008 G8 proposal for a global programme of 20 o n

h large scale CCS demonstration plants. Other technologies which will require similar c e

T scale and focused support include solar thermal power, distributed grids, power d n

a storage, advance flood management and low carbon vehicle technology. Enhanced n

o international cooperation is needed but must be rigorously prioritised – focusing on i t a

v portfolios of technologies critical to achieving aggressive mitigation scenarios, and o

n areas requiring large-scale investment with high public good components; especially n I those with high benefits to developing countries.

The Stern report and the UNFCCC estimate that research, development and demon - stration (RD&D) funding into low carbon technology would need to be increased by an additional $10 billion per annum, although it is acknowledged that these estimates are highly uncertain. Taking into account the need for a wider portfolio of technolo - gies to give adequate risk management and funding to accelerate the demonstration of critical technologies, a global RD&D increase of $15-$20 billion per annum would seem a more adequate average for the next 10-15 years. This sum is not without prece - dent for accelerated public RD&D programmes by the USA alone, as it lies between by Devl syt wi t D m Copenhag th R A na o w ou ts id in i w poli ou nat a c pr Devl R c N u p d ( 7 th r & R apr on str fai e h T $ e lim esp &D D & espi atio ak nov r i u q e ma e Via o b r 2 h t ti t lur ly l b ior ong th k r h D io 0bn sc o p c ona in g at la em c i oa it q i n u de v ie , f e so eak n C jo es a t na n l o c o r p at te an €1 e n i a g a e d e e a d op op e le s e s e n i h ti i t c a c c r me , . l i l n i lo m na t ev s l in h accelera a 20 s a el op on .3 es , shif l Clim com a l in ecu RD& r g in rb nd n o i t a r o b a e u evl in ed ng en o n an nd n 08 t a 20 n o o bi t of io na l d n lope s e m m a po ot o if er v t s g y v t rit in g risk ag core te rm ov n n ll cou pa pe 02 a o i t a wh in cou i co lice r o w io p to r u t a ju i w e te price reeme y; n en at ce a p i c i t r a titiven d e f f n c te s s ter i pr ich m s l l m ion s ou nn ov ati on nt in world; tra ti pendig n perativ worth a ne k t ecurity nt s d t c e ake . , on ices). t t o n angemt re as g n i nar nt ries ri focus this nat globalisation, i o i t c A d n a market tegic e v i wil f o – ri s wil nt de is t es e e t i l w es interao a ss r h t t o i t incl su i d. e h of c c wa il ap pro p o o c ev onal e l t prov V R M ned ow not ed , n prio is ino r ch I , n u o u o o agremnts ag reem en ts pr equi n ud nc y l c s i n su ppor n a b fa on ot climate oje as t n n o h g t be i e t a r e t e e globa the in China rities, echn e t a m u q e r ilu va ac h co n a a i r e t i r c au to su increa r e t n g y l f ti cts nd suf re a m r o tio res uc l thr oper ves War n o i tomaic ces € shift te is d e r i t w t e b ficent, under inve s n w k r l 5 3 olgy . ea e g n a h c el ough n ch estima pu upor n cola fo r inovat At t s r o priotes ot . s t e sing igi sfu ee d s a r on nology o ation a i m blic n o fu si on stme t a n the t to n e e enh their bl e l t the co- ed boratin the Tero rec ipro cit y l a c s A e h e h t at n o i l natio ly produc n o i t a r o b a l l o c trans given god moent to t an ced e s p to e d nt fi y a IEA. h t i w EU’s to is m e l b o r bring . nanci invention co un t u m tha nati large e r a Cu rre n f i t n e i c s en d e p o l e v n e w in and t , build policy the ($ fer o and su a r e t a l i t l t e a co lla bor l Fr e v o g on a t n e m a d n u f be over 12 ng t global o portfli competi re technol aproc ag scale. globa am of o t nal colabr bn) delivry r t low sup a c i efctiv ai ns t e r i u q e efct difers kno n m n r s e n i h C s e i r t n u o c hig h ework 85% a at io na r a n e c s n a straegic nd an port l pub a ca The wl e l e v e l public ogies t t n e d tivens in d hes io n in rbon pr ob of of s ive n k th li ter nat io n for tive can sharply dg no 6 e l m c a patens low s o i e p s l co uld in no va tio n e wil re w o y l o t e r g e va forwad a o m col ab il inovat Apol in o n i god se s only rket R&D s o g n i d n ods d l i u b d e l ti ha carbon a e novati . in laborative r be ar e e r on e h t g d it y b i s rin s s o p r c fro nova . e h c – al be ned in h g a nature e F i is b of s e n g i t c r e n e Pro or o programme evn sr e m ob s ui lt o at many dom securd very in n e l b i a h de li ve n s d st ra te gie s e v exam li gati on stan olutins, tion . the la n o i t a n grame na ti ona l g n i r f e d 7 wo in to o r a y g RD&D P p inat with of o p weak, at l b u b u of dar rk ec n e pace ae r a rin g dn u p low yc i l the th e o f its e by l le, at ci ci s. d a r 7 Innovation and Technology Transfer Executive Summary core high tech economic sectors are owned by developed country companies .8 This concentration of innovative capacity in developed countries does not match the distri - bution of diverse mitigation and adaptation technology needs.

Traditional concepts of public technology transfer follow a relatively narrow approach with limited funding and capacity building support; private sector approaches focus on balancing market access with limited licensing to local industries, including joint ventures. These approaches are unlikely to transform the way low carbon and climate resilient technologies are diffused to developing countries, especially those without fast growing markets. Diffusion of new innovations is as much about the institutions, structures and organisations in a country as it is about narrow funding support to access specific technologies. Recent work by the World Bank 9 shows that diffusion of technologies differs markedly between countries at similar levels of income. Successful diffusion has a strong relationship with core economic attributes such as ease of doing y r business, trade and FDI flows and tertiary education. a m m u

S This research suggests that large increases in low carbon diffusion rates can be e v

i achieved across countries at differing development stages through an emphasis on t u

c system-wide capacity building to improve internal innovation and absorption systems. e x

E This approach must be embedded in the Copenhagen mechanisms for technology transfer, through both policy incentives and direct capacity building support. 8 There is also a need for international support to ensure a wider spread of innovation r e f capacity which can deliver three important types of innovation in developing countries: s n a r T

y • disruptive innovation suitable for new business models designed for devel - g o l oping country markets e.g. equipment to support distributed utility models; low o n

h carbon building material technology and design ; c e T d n

a • ‘orphan’ areas of research where developed markets provide few incentives for n

o innovation e.g. drought resistant African crops; small scale desalination ; i t a v o

n to make new innovations suitable for developing country n • adaptive innovation I circumstances e.g. adapting gasifiers to local coal sources; making efficient domestic appliances for tropical conditions; advanced biofuel technology for using local feed-stocks.

Developing countries with significant domestic innovative capacity, such as China, India, South Africa, Brazil and Malaysia have a critical role in undertaking innovation in these areas; either individually or in cooperation with developed countries. By

8 Liu, J., 2007 9 World Bank, 2008 b • str c n F ofte Deli i s f an e h T c si jus low o i t opi co t The c a n a m r In • sar c a p se me t c a ec ange hange atlyz u o t c op und ew ze o k r a rvi cr nsis d s y l a c i t r ong , n h n t g n i i cha ng e i r t n ly o re n ea c nu and no l te pr s bu act te a r veri c o t n i s r a t e am t e m s i era f es l u d chno c ch tent o o d e rb si o is ni e t mb er il e s a i u s o i t . ion elivr f og cu l l i w in ar vi ncet . y l r a ng di unt s enta certa l o P nol s on sm n necs no Wit o ng ti s e o t uch de w e n ies s g h t a p e h t ng ma ket f w c es log the on s c i d t a v o n n i ries t n i omm d o a re c o ith la o i c a l hin gy down wil ev s r e t e y ny ne iv on inty l f y when n a f s y-dri y, ta rge s a m i r e d n i f n r e siz ction: m co e t u n a c es a i nit co for t r t s n als nd c a e t ry lopment s is ransf ovat t a it mp e n i m be o iz rea e he e k r unt of and for e k r t a mpani me ards o ven a intervos th and e u r o f y a l i other ati i s t n e m u l a n o i n o n the e ned nov UNFC s r fits s s t e rie e t dev ti to r s ed nt er. t s u b o ion certa and ves in n r o f sec c r e n e of t h w d n a certainy f i and e h s s ma r al e es ed e dev R&D ba pa t s s tor t s a ov loping fast e .g. at e h de w e n l uport u o f rke in o i t e r in y g wi s d r a d n a ries po i d thw n a s to r g a atio i al elopm liv uply re ve / k s i r markets a l i s u f f n i r r a b a d n t; lic er d framewok provide c i f f e fun ag new se ering d e e t in ay a n size s e i g o l o n h c e e low y, of down cou d n re ct or . and e f f ves prevnt n o i t ch to ding n o d r a w e r plans e e i b chain eme nts, a the t a y c n e c s r nt ain b ut g e r and build d n a ntry t the ve i t carbo s i le s in for n e g a h n e p o C Fo r to a o t ma the and globa the . r o f n o i t a l u nd en e t c e f f a . H lo profile right i t a l u g e r crea w The scale e c c a w o l inovat, ino rke s the uptake ea c erg y re a l a b owev er, w inovat pov e r e h ecto u f intel as n carbon ar t w u t ir tion h ca r a c Copenh r e l part products va balnce certainy ert d e c n h t i stand e ral in no va e r in r a requis of le rb m tive t a y b n o b n o a y ; c of e o a g i t i m R&D t e k r a e a w tual the of lim ovati s i reduction n t s u m t a h t o b grem ino lo i t l u m ( e d i n n i ard pro deve lo market h g i r n o i t va no i agen coperatin, ti on w ch l car bon o ted t s a e p investm; f n o i t a v o o fo s; ducts p p a ro ca u l i a f ain vatio n o i t incetvs. a m n and b . t r n the pe c rbon e a l s sytem agremnt nts ino ic ha in pi e l i h W et . s a a c i l t e k r a a r e t rt wil prior s e r he a ng l b n mark and a of d n y o p m i creation have an e o i t technolgis; va d n a m diversty righ th e c l facto s n o i t i d n o c o p be e r a o t ountr r o d a t p a d a ark iti tive o p drive s n an et in c i l a a t r d a es ba la nc e rate es. th t n o i s u f f i d p celr y c i l s t i r c et wil d n i line rs y r u l must e r d ( products t n i entia I Ot sharing; e n i zer down potenial PR l tha d of s s e s a c i n o i t a l i of s u c s i d no t n i her e v e with enhance d a ate o- of tu ) a r e t . l strong provide of l e p s h c u s d e h t protec c rnove can p o l to ne ces t c a devel i v i r this O ar cost; difu e th es e their no i s .t s i x ) l e h t ci f i c pul bon and ll u f not no i gn i gn be sa ot to is r - - - - 9 Innovation and Technology Transfer Executive Summary • innovation in globally competitive carbon intensive sectors such as steel, cement and aluminium where high efficiency and low carbon solutions, including CCS, need direct support for development and deployment.

In many of the key markets for mitigation and adaptation the public sector is a vital actor in driving patterns of consumption, either through regulation or public procurement; for example, infrastructure, buildings, vehicle standards and public transportation. Public sector purchasing agreements are a vital tool to accelerate innovation and diffusion in these key sectors, but have not been used that widely to date.

The need for tailored approaches to accelerate individual low carbon and climate resilient technologies in particular markets argues for a flexible approach to including these in the Copenhagen framework. Bilateral and regional cooperation agreements should be “registered” in the UNFCCC framework if they conform to agreed criteria, y r rather than an overly centralised approach where all cooperation passes through a

m a UN process which will become a bottleneck for action and potentially inhibit m u

S innovation. e v i t u c

e A failure to constructively tackle IPR and competitiveness issues will x

E limit the pace of innovation and diffusion and potentially poison the international climate negotiations 10 In addition to market issues, technology specific IPR related factors (such as the ratio r e f of R&D to total costs, ease of copying and IPR enforcement; and patent application s n a

r standards and processes) also affect the rate of innovation and diffusion. The vast T

y majority of patents are held by private firms ; on average business enterprises held g o l nearly 80% of patents over the period 2003-2005 . Climate technologies and systems o n

h will provide significant high value-added industries to the countries that gain a c e

T comparative advantage in their development and production. There is a clear – and d n

a already apparent – tension between the desire to secure these economic benefits and n

o the need to maximise technology diffusion to protect the global climate; as shown by i t a

v the discussions over whether to include projects in developing countries inside the o

n proposed EU CCS demonstration financing instrument. n I

It is also clear that without effective returns from intellectual property the private sector will not continue increasing its investment in low carbon technology; with estimates of up to $9 billion just in venture capital financing as of mid-2008 (up over 30% from 2007) .10 As a proportion of global venture capital investment, it has grown up from just 1.6% of total investment in 2003 to 11% in 2008.

There is a need to explicitly revisit the balance of incentives for private innovation

10 The Financial (2007) ; Environmental Finance (2008) may ni fe o pate se t li a maj in tec a e pha t a c ex be c Fr m - T tec em t s e R 1 prev T t w eme t “ u p in tec c e h c e r u t a h e h so arbo s i x s b n mi he ho o h t i ar ay es en Ba o s s h om e l a de c r t r hn hno hno hn so pi c n i b e ib ak en rma h c r a e or ref rt t s ugh ted pr ia rgi nt l o n g a t a i c s i i n i s a h , re oc m vel on, r in m me h t mpac t t s it olo o l len olgi n l it n i i t hey oc s e o ca st lo lo ng; he t s o o co c n y a g e t a r e s o y l a b s th 20 y g o veh eith ce oping re ur r d e con o ecto rict es gie s t gy gie o s p l whe o nt 08 n a co is t ut , a b o st e i r r a c wil g f e b this s. e t s e i v ev e m the va a a icle ) - lluti ra ct” w r o f fro t er s , c u st di pyright icals d ce in P I rr ier he . y rs m i l r o o a n en h t i dies s ila P ruct e r s w f E g cou e u f ft rn thro uch re lo m fu . R cou a c d r r a b o f rima i x a m s on pa nsive xte en e b l ble licens wh eal d ec e t a se s v e si ar o s t i IPR is e s l o p r certain r e w l t ntries, ure. ex tens a on e s u a c o ld o co ntr ol tor ugh a refd c t n a contr curently in s en re r d d a r e i evidnc t u s can ry l e diff un d aming p i m s e s i r a t o g e n h p m o c e g across is catlys t c u d o r . s l ing of aso ave agremnts A r r o f wi o t th g g n i s r o f ese a usio this captu ten i s s e d e d i u bs fina lo i m o c this H ma e th r nte l of l s e t t a i w cia w o s e i n a ar of olu w o eas erio b s i h e h t qui pm t n cl i can ra different b u p g n rke o l e u f o i a i l c ch no barie so ; n o s n o i t e p the IPR te dva vi in re ar case v e a tely is e ma te . c us b r s d i me ws e b r a From ts i ed bo of p e l c cre r e t n l c i l t , r e s s y i l a a ow he r with nced i t ound y n a m co and s i in ent o ce c e n a n ‘paten revs r o o s e t a m have is t ti e v over n o co c ate le ; t i f e n e b o i rel ated nseq wit majority an ll carbon , s t s y l a t a ntral n t s e o t ma wher techno m e e s nclusio of li ce int t n a v d a rde e c u d e r ong o fa d e w o h s polu t t o d technolgis s t o d ba h c e s i th be y ce x e l p m o c IPR cl ima te gn e uences r e h e g n a h c nc t f o y g o l o n h si only to rviews thicke’. c e e en engi e export to ing if o t in no va tio n tio es techno a co logies, t r a P o t the hnolg d n a icant in f e g a t c e s of s ma la or M G s i h t st in v a h n ign aply t p o l e v e d t a h t the rge o re can ind for contrl any re si lie nt s e i o ximse Ch with m u s s a s r o s i erin provi d ed s a r e w o p tu competi f e aces s p o r c n o i s u f f i d and Wh logies difus ustry’ o t IP number y prog in a. r t n e c n o c s e r e h t rns be d n a in defint to r t to a f u n a m rts xpe e e h t g R tech er e h t c i g e t a why drawn an d devloping proces prevnt a s fo n a limtng Ho w p e profits. r technolgis s t n a l p r p sma e io d n a see isue; t in n i bet ter r a o i p m e r a ss busin nol i n a the t n e v e di a s s single of ve , n p p ms y l l a o ov a ever , a n a of fl u t c l a ff o e u f a o r c e t on e v ex nd smal in a t r staemn a r us r ino number the gy a v d e t pa this; t r p o ess This d evid e s t g n i r y r thes aces o i h t i w io h t s n h c io home ble ho s s (e.g e c n c rticula companies, whi le n i company f o co o a e r c e c n n. countries o n e f models i va w ve e a t m r . a me patens a a t . e h l o is w Th e t n l e h a r t F 1 s f o p to a h t f o r IPR pa d case in ce c o o a e v i t proach ha no markets. to of l e w t i ge r; a e r fr e i g l r f s n d r a m s nie l P I inf l d n g n a in n te nd enc y e s w o om t ag low low this k technolgy nui ne tha r o xa protecin as l R s ben a w o n v e r r e s ormati i r e t som e hold are r f f e o f a u l o e m e s sutain throug eeme d sh c m a e d i re a c a carbon carbon type should g n i ompa n u y a l e f o pl IP m e e single s l a y a d e l dowe more often o i t o b r ev i t c ri sk s used s sen This e, .e c n R de d low e k th nt. de eb sn eg o ot ni in i of is n n n y e r - - 1 Innovation and Technology Transfer Executive Summary technologies must be widely spread into developing countries if required rapid diffu - sion rates are to be achieved.

Action is required to break the deadlock between developed and developing countries over intellectual property. There is no firm evidence of how IPR impacts diffusion across climate technologies, and available case studies show a wide range of different scenarios. Despite disputes over issues like compulsory licensing at the UNFCCC, in reality all countries already employ a variety of contractual and legal structures to ensure the diffusion of beneficial innovation; especially when R&D has benefited from public financing and public goods are involved. For example, the EU has strict require - ments on the diffusion of IPR when companies receive State Aids subsidies .12 There is no absolute system of IPR protection in any country and historically compulsory licensing has been most prevalent in countries such as the US and Canada . y r A rebalancing of the system under the UNFCCC could be based on the principles of a

m ‘protect and share’. Where IPR would be protected from unauthorised use by strength - m u

S ening implementation of IPR protection systems; while balancing this with a clear e v

i framework requiring different forms of sharing through, for example licensing and t u

c parallel markets and “pay to play” agreements to meet the climate challenge. Access e x

E to international R&D funding and credit for national R&D programmes for all Parties could be made conditional on implementation of these agreed principles for 12 protecting and sharing IPR. r e f Finally, although ensuring future innovation is very important, the urgency of moving s n a

r to a global low carbon economy within a very limited timeframe requires that the T

y balance of the global innovation system must be to maximise the rate of diffusion. g o l Any potential disincentives to technology developers which could result should be o n

h balanced by targeted public incentives for continued R&D and segmented markets c e

T for new innovations. Markets must be designed to give greater incentives for d n

a continued innovation rather than to continue reaping earnings from past inventions. n o i t a

v Proposals for action: a new institutional framework for low carbon o n

n innovation I

The analysis in this report points to critical features needed in the UNFCCC system:

• A focus on increasing absolute levels of both innovation and diffusion for adapta - tion and mitigation, through outcome based strategic approaches based on mitigation pathways and worst case scenarios of climate responses and impacts;

• The need for action both within the UNFCCC framework and outside it to ensure

12 For example see the Norwegian Ministry of Petroleum and Energy, 2006 and EFTA Surveillance Authority, 2008 Gi nat UNF and Fi tion an UN tra e h T • • • i De a p • Na • ot Co of se d Im ca mpl ve gu nd u eve a b RD Mains ns he c rbo nt exi io t n ple t rcha d FC i-la to ai i al at ona a i e h T Th e h T c o t t ad &D in n em r e r st lo ra l nc pta he io nal re f n ha C ed me io enh pment a e h ue te o ping s sin g l st th n t ma en na t r o p l pr a mins a re ns e ti r t r dar lud des d n spen al io grem in h t l an r ogr ming r a ES t tat l ng e rk dev e ati impo /regi n techn m i m e n egi uct ai com c ds ign ced ets oun in tha io in am we ing d on to ding i y n ng 1: d e onal p c lo en e b m a on m ures tac i t driv te of o e v i d a n o yr pm t r o a akne itm t f ts es d nd ino Br mpe rta cel w o l r a ol al ons b o t and ent ents ro s uild e c n a in uch , y t i s r nce eakdown a th w l p x e gy un s nd ten vation g s t e s il e r s a a o d d u of an t natio f o ned proiate o f t evlopmnt i c i se e the n d n a cu mu t u o dev techno ambitou i t r o p p u s l t o ex rent s f y us • • • me Mar ystem ltia to istng sectora an eloping st se en Ma De Car e a r o a c e r u o c n c ha velo ket MRV d l a b e h nda l bon tor n m o c be f anis of date in lev teral nc logy inte pro pu te cr ping rd ed M C es rn at intelcua e ms g n inovat ri r e e c n a s ar f poli ati ch a r p or t ac an a l; l e g a eria tab kets prog co rna o i devlopm o nd ti pu apro ona body sing e d e n un ons d v bli s n e h ci IN e lis t l sed tion de yr e v t n o c re t ra c es SI e h he a DE gi , o l live l a m an the i al on d UNF c g n i p in v t n e c n i act e u n i l me h e d in u ri pr a • • Glo ag IP Prot dev Te A obj A Te c nova e al CCC nd g t io c nd D R oper t e s a ng R s ch ch me n i re en D i ; oper a e b f usi n o elo and &D d ec d to t nol nol c al es fDif u o c re n y c er ti v aly me n if t a a pme a s e v i f o Pl o w I tion o Win pecialy an an n enga as nd e: fusion s e i r t n u su lic n nt withn 2 an g g the si ty si ation y y d d W ova Exe en ° o r p n dow o k r s res vital C i s n t deploymnt; ndow sin h righ f c t sytem F are also UNFC r o ge i u world. u on o g s o p ti v nd to n proga in e al for n n i t on a s, n n i and produ impl a d n th l stage insde devloping s prioty a v o is v o l a n o i t a n r e t n i for f r o mes. o are, t a OU in es o i t ce u TS e v i low t c a re u m In m of Na Ne Co ( tside orde of TNAs tha the n ID gi a e teg u I t a P lti i on n ds E o a sur R an n o i the framewok a ra ty r p p a n la ) U reas carbon al an al d n As t UNFC. te es NF i T on new d fun se sm d ra i ec econmis; mp t CCC o ino h t i w l l a o r h o the of i i d ds a c f no lem e f n organise e nsi or en t d e f f x lo i t s n i instu g he e h c i en st ng yg t lack v i s u devl C s n i inter ing IF tati a tion s eh t ,n o o ut for n o ta - - - - f 13 Innovation and Technology Transfer Executive Summary Within the UNFCCC we recommend five key actions:

1. Agreement to a Technology Development Objective: The technology development objective would establish a set of critical climate change technolo - gies (for both mitigation and adaptation) which must be developed to meet the goals of the agreement. The achievement of the technology development objec - tive would be supported by a set of Technology Action Plans (TAPs) for each identified technology and a Technology Development Executive. The role of the Executive would be to monitor global efforts to deliver a portfolio of critical technologies – including public and private efforts - and propose complemen - tary support and activity at the multilateral level needed to deliver agreed technology outcomes.

2. Establish criteria for measurable, reportable, verifiable (MRV) action: y r The MRV criteria should set out the conditions under which national R&D and a

m development spending by developed countries – including on sectoral agree - m u

S ments – would qualify as a contribution to their UNFCCC commitments on e v

i technology, financing and capacity building support. These conditions would t u

c need to be carefully negotiated but could contain the following main elements: e x

E additionality to existing ODA and R&D spending; reciprocal knowledge sharing with other related R&D programmes; demonstrable link to a developing country’s 14 low carbon development plan; meeting criteria for enhanced developing country access to new technology; increasing developing countries’ capacity to innovate r e f and adapt; and climate proofing ODA. s n a r T

y 3. Market creation mechanisms: Market creation mechanisms could include: g o l technology-led sectoral agreements for developing country enhanced actions; o n

h international standards agreements; and public sector purchasing commitments. c e

T These may be developed inside or outside the UNFCCC system, but must be guided d n

a by its principles and procedures if they are to count towards Parties’ commitments. n o i t a

v 4. A new multilateral Global Innovation and Diffusion Fund: In order to o

n implement the Technology Action Plans the Copenhagen Agreement should n I establish a new Global Innovation and Diffusion Fund. This fund could integrate existing activity (e.g. the World Bank Climate Investment Funds) through two windows under the new Technology Development Executive described above:

• The Research, Development and Demonstration (RD&D) Window: This would be responsible for the development of new technolo - gies with a focus on applied research and demonstration to push new technologies down the innovation chain, adapt them for use in developing countries and address orphan innovation areas; 5. t n i tec en C t r i e h ou ha n r e hno ntr • wou A • o l • p IPR • • lic wou t n i of • nc c c a a w t a ‘Pro en r lo a i r e ed e n t es n o i r ld ld bu The e c i l o sa P wi s e r th t te “Us o c S li y a P te th l G gy pr s s e si n o b r a c t a n k a a f egm mi b u sha t ch ch nge e ey r ng r t n u b o th h s r ne o pr b hat i tec progame. l a y e e ldi n i s n t e e G i t o t l h c r a nol nol ect hol o t a n o c i o t e w l a ha D ring e l of it lob o b . s p i i d n u f ng d vide o w nte h t y a ifu l a g t c e s u l io ve f c o d ec period and low la n e c i , g er l m o a s r a m st r gy; gy; e h c e t to n t e of o c l nced o t hn d/Pa S e co r o t lo echno an u f f i d e t s n a go si T me g n new t r o p p u e n o m fou carbo m m IPR se : e s echnolgy nt olo ns k Shar t n a r a u g on da vernmt-og l o n d s p b s t e asu d n a rol rale ure o it” nd u o - y u by rdise o i s gi o t o t te s t n e m t i f : s logy Wi and i g o r o f es t n t u b res ch agremnts of ime a not n e’ e r u s n e de p o t w e s o l technol s e in ndow: Framew i v o r nolgies. pa markets: d n a e h t u o copera e e ag : t from velo in l l a p clu to a s te d n a n e v e r d l Inov t gremnts o remnt d w o o M “ e d a r e d n u m o c din nts robustly D & D R ping inov ev b v o r p t e r c a the e V R i d i r t n u o c This . g e g a r u o c n e gy ork loping s s e c tive t l u p a m ation r u r direct to countr ernm (c market t c e e r i ators to ” t i d e r c I W d n e d o y r o s Agremnt provide f i - wo e R&D d n u mpu protec en w o t r o p m b u s fo O P a covering a s e a uld d e c n a v d n e h coun e fin nd sure a v r ca nt ie a v o n n i s l s e i d i s o t lsory a s n e c i d n a IPR s anc s l i n d e k c o l b n i be f D pendig comitens a t i o j te e l b a ha l b u p tries, f e d i v o r p ea if ra re low i t t r ing; respo fusion e h ve t n e v - t n T W rn n o pid and a g n i licens five for o t r o u p licensg r e d n u certain c i the ca a r g a cons s r paten . O t . dif o s a h c r r o fair the nsible f rbo ma C wou s i lic n u f suporting e p o e m e e d a Fund ing): h n E n u o k h c e t r u n e usion. isten in ens n s d acelrtd ra v e h t d t u g ld e time n e e IPR b e i r t ares: s a te o l to s for in uy r a o n a r a t n m o c to n s s e c c a also f i w for in F a p o c e ‘protec -outs; certa d n s n u wi g o l e d e This f alow would r o f wide-s g: perio e t n d t retun; ‘orphan’ u l i a f t i m be th d d e s d y I c The s b u p P s e h t n u o e ystem o t o t i g n i t i blocked could m n R o l p f h d; a coun sharing r i e t cale n ei risk o n n i devloping o t e s R P I agremnt - c i l p o a r t e r t d s t n o t e m y r nd r n i l e r i o capaci e d s ex are e v i r p g n t consit t c e t u er u s n e h s a e r c necs a v ries er e h w u s a v e istng pt l e v avin t n hare’ fro f e d n e h t r o sr o t and s a no i et a po ke tn es to m fo of ty n g a r - 15 Innovation and Technology Transfer Executive Summary