Green tech innovation needs a reboot, warns WIPO
More innovation is urgently required to tackle the growing problem of climate change, the World Intellectual Property Organization (WIPO) has said in its latest World Intellectual Property Report.
WIPO’s report, released today, April 7, is published every two years and provides policy insights for the future of innovation, including the need to address the challenges of climate change.
In a statement accompanying the report, WIPO director general, Daren Tang, said: “This important report helps us understand what we all need to do to ensure that human ingenuity is harnessed and directed efficiently and with the greatest impact towards a range of common global challenges, notably climate change,”
He added that governments have a critical role to play: “Governments are uniquely placed to promote innovation, for example, by mobilising resources, offering a wider perspective of society’s needs and generally creating the right incentives and [an] enabling environment to promote and harness human potential.”
Pandemic lessons
Addressing the climate change imperative, the report drew parallels with the urgency and innovation prompted by the COVID-19 pandemic.
“The rapid global response to the outbreak of the COVID-19 pandemic shows how innovative activity can adapt quickly to shifting priorities and a similar effect is needed to urgently address climate change,” noted WIPO.
But investing in non-polluting technologies remains both costly and risky, the report noted, with little guarantee of success.
Firms, said the report, tend to focus on returns on investment in the relatively short- to medium-term and do not take into consideration the potentially positive societal implications of low-carbon technology investments for the environment.
Challenges for smaller companies
Newer, smaller and specialised firms that decide to invest in low-carbon technologies face substantial barriers to scaling up their operations, noted the report.
This is because they find it more difficult to finance their activities than do other small firms operating in the fossil-fuel business and the report observed that: “even those start-ups that do manage to develop new renewable technologies will need hundreds of millions of dollars to demonstrate their commercial viability”.
For this reason, WIPO suggested that firms may hesitate to invest in or shift to low-carbon technologies, including acquiring firms that specialise in them, because these technologies may end up competing with them for market share and even make their existing technologies redundant.
These factors mean that firms’ reliance on fossil-fuel technologies is likely to continue in the future, and even where firms face higher prices for fossil-fuel inputs, they are more likely to substitute one fossil fuel for another than switch to low-carbon inputs.
“The strong inertia and technological path dependence on fossil-fuel technologies create feedback loops, the so-called ‘carbon lock-in’,” warned the report, underscoring how “firms face strong incentives to choose technologies with existing infrastructures rather than experiment with new ones, thereby trapping innovation trajectories in high-carbon areas”.
WIPO emphasised that government standards, rules and regulations play key roles in the adoption of environmental technologies by both industry and private households.
While the report noted that the number of policies geared to the adoption and diffusion of environmental technologies has been growing steadily, the impact of such policies varies according to the type of incentive or inducement mechanism employed.
Inducement mechanisms are government policies aimed at producing a specific behaviour that may not have otherwise occurred.
Green technologies at an early stage of development tend to be less certain of success and may require public funding to mitigate the risks, noted the report.
Government support
WIPO also urged governments to adopt mechanisms such as taxes on carbon emissions, which facilitate the adoption of environmental technologies and steer consumers away from a reliance on fossil fuels.
“This misalignment between private firm's profit-maximising objectives and society’s overall wellbeing—the private and social returns—is one of the main arguments in support of government intervention,” it said.
Carbon-pricing policies are less likely to be suddenly withdrawn than, subsidies, which can fluctuate with electoral and budgetary cycles, advised the report, which added:
“For firms, the implementation of carbon-pricing policies that penalise high-carbon activities can signal that a government has a long-term commitment to carbon-reduction policies.”
By imposing carbon taxes, for example, governments force companies to factor the costs of their CO2 emissions into decision-making, it added.
Government support, the report explained, either through help financing pilot projects to test ideas or by providing the technological support to develop them, may be better directed at commercially-risky low-carbon technologies, such as large-scale carbon-capture facilities.
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