Is clean technology transfer an empty promise?

Technology transfer is fundamental in developing countries’ aspirations to decarbonize, yet the flow of green tech from developed nations is far below what’s needed. How can we shift investment and political incentives to truly enable the proliferation of sustainable technology worldwide?

Economic developmentGlobal

A ministerial mission from Laos on a fact-finding tour of the National Renewable Energy Laboratory, USA. ©NREL/Gregory Cooper

While countries have pledged to reduce their carbon emissions under the Paris Agreement, many developing nations have argued that they will need support from the international community – and especially richer countries – to do so. Developing countries’ climate commitments are conditional on them receiving not only funding but also the technology from those richer states that will enable them to decarbonize.

Many countries aim to receive enough technology to “leapfrog” to cleaner energy systems, fulfilling Sustainable Development Goal (SDG) 7 of sustainable energy for all. At the same time, there is also the hope that technology transfer will enable green industrialization, as countries can also manufacture and invent clean technologies. This can also contribute to SDG 9 of sustainable and inclusive industrialization and innovation.

Emulating China?

The experience of China in manufacturing clean technologies – from solar panels to electric vehicles – is seen as a pathway for green development that could be replicated by other countries. Alongside China’s sizeable local innovative capacities, critical to this success was technology transfer: the knowledge-sharing that enabled recipients to adapt, integrate, or improve technologies. This goes beyond technology “diffusion” (when renewable energy tech is used in a new location.)

China was able to push foreign firms to transfer technologies by using local content requirements and joint ventures. In addition, China has a large internal market for clean technologies which incentivized firms to engage in technology transfer. Yet China’s success in gaining the technological know-how to decarbonize its industry may be more difficult to replicate for most other countries, given China’s vast industrial capacity and long-term green industrial policy. Most other countries will be less able to push green industrialization without devoted public resources to support firms and research. Other countries that have tried to build large-scale capacity in clean energy technology manufacturing using policies like local content requirements have struggled to replicate China’s success.

Arguments over intellectual property

A central reason that knowledge is not shared freely is because it is a source of competitive advantage for companies that develop technologies – and the countries where these companies are based. Some developing nations have therefore argued that for technology transfer to occur, there should be exemptions from intellectual property rights (IPRs) protections. IPRs grant technology holders a temporary monopoly on their inventions, and therefore prevent others from being able to reproduce or innovate on them. Some have also pushed for the United Nations Framework Convention on Climate Change (UNFCCC) technology transfer mechanism to include funding and support to purchase technologies for developing countries. In this way, developing countries hope to build their own local green industries.

Others, however, take the position that exemptions to IPRs will prevent technology diffusion. This is for two main reasons. First, some argue that IPRs promote innovation: innovators will only be motivated to create further if they have the certainty from IPRs that their technologies will not be imitated and that they can continue to profit from their inventions. Second, the certainty that these technologies will not be imitated, combined with lower trade barriers, should further enable the spread of these technologies around the world through international trade. This has led mainly Organisation for Economic Co-operation and Development (OECD) countries and especially the US and EU to oppose calls for IPR exemptions, and to push for the UN’s technology transfer mechanism to focus on policy support and enabling conditions rather than technologies per se. However, so far these assumptions are contradicted by China’s success in building a clean tech industry – which is instead attributed to its industrial policy, innovative capacities, and attractive and large internal market.

The limitations of markets for tech transfer

This points to a larger problem with the expectation that markets alone will enable technology transfer to developing countries. Currently, technology transfer and diffusion are largely left up to market mechanisms and foreign direct investment. However, this means that technology will only flow to larger and more attractive markets.

This is even the case for UN market-based mechanisms that aim to transfer technology while lowering emissions. The UNFCCC’s Clean Development Mechanism (CDM) was a market-based carbon offsetting scheme where countries could fund projects in developing nations that would count toward the funding countries’ emissions reductions. Therefore, states looked for projects which would get the most “bang for their buck.” Studies on the CDM show that projects that were supposed to transfer technology were more often focused on diffusion, and that most funding went to more attractive markets like China, with only around 5% going to African countries.

Clearly, it’s vital that large nations like China decarbonize – but it’s also important to ensure that other countries where populations are growing rapidly have access to sustainable energy and the industrialization and innovation advantages these technologies can bring. These countries are at risk of falling behind due to the widening green technology gap. There is therefore a need to look beyond markets alone, at initiatives that can help transfer technology to locations that may be less attractive for private finance.

Technology transfer initiatives

Despite the international community’s commitments to transfer technology, this is not often a priority compared to technology diffusion. There are currently a patchwork of initiatives that aim to transfer technology, but the resources these initiatives can offer to developing countries are insufficient compared to the support requested. These are largely development projects and public–private partnerships that focus on increasing the installations of low-carbon technologies in countries with lower rates of energy access, thereby targeting SDG 7. While these efforts are important, they do not always include a knowledge-sharing component that would help to encourage technology transfer. In addition, they are simply too few and far between to cover the low-carbon technology gap.

Promoting tech transfer going forward

There are some promising mechanisms that, if expanded, could encourage further technology transfer. One is linking the international climate and trade regimes. Already, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) stipulates that developed country “shall provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country members.” So far, the reports that developed countries produce about their technology transfer efforts reveal the shortcomings of this approach. However, there is a clear signal from the UNFCCC about which technology is needed, in the form of national technology needs assessments (TNAs). By linking the World Trade Organization (WTO) and the UN, the needs stated in TNAs could be responded to by  developed country members of the WTO.

The UN’s technology transfer mechanism offers a second promotional route – more specifically the Climate Technology Centre and Network (CTCN). This body already provides policy and technical support for developing countries, but is limited in its scope and budget (in that it does not provide funding for large-scale projects). Making this a one-stop shop for tech transfer could help to push forward both technology diffusion and transfer, helping countries to achieve their climate targets and contributing to the SDGs.

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