Climate change is universally acknowledged as one of the most overpowering global threats. It can, to that extent, be viewed as a “unifying factor” in a world otherwise characterized by the “I, me and myself” approach. Given the fact that any tardy or inadequate action in countering climate change will not only lead to an irreversible destruction of the environment but can impact the very existence of Planet Earth and all the life that it supports, it is not surprising that the global community is eager to develop a prompt and effective mechanism to counter climate change. All roads hence currently lead to the Copenhagen talks; and all countries are busy innovating and proposing solutions to tackle climate change. But while the requirement is a prompt consensual approach, the solutions flying around are ironically fairly diverse in nature.
It is here that the mantra of “me first” is becoming a problem; while all the countries are at one in wanting to be a part of the solution, each wants the solution to be of such type, scope and extent that it does not substantially de-rail their own future development plans and projects. Hence, the diversity of solutions and stands.
That countries are fully sensitive to the menace of global change is evident from events such as the underwater meeting of the cabinet ministers organized in Maldives in protest against the inability of the word community to agree upon a consensual approach to address climate change issues, and the sudden interest of developed countries in promoting clean technology investments and reducing carbon emissions, albeit without incurring any legally binding obligations to do so.
Despite such widespread sensitization to the challenge of climate change, the world still stands undecided on the way forward. Debates are heating up on emission reduction targets, and whether or not they should be legally binding, the criteria for imposing such targets, etc. Amidst all this chaos, the one consensus that appears to be emerging is that climate change can most effectively be tackled by clean technology. And the promptest means of implementing clean technology worldwide would be that the developed countries transfer the clean technology mechanisms innovated by them to the developing countries.
It would be helpful to take a look at the basis of the aforesaid collaboration.
On the one hand, developing countries are desirous of implementing infrastructural projects which can help them grow while preserving their environment i.e. they are desirous of exploiting their available energy and natural resources efficiently and responsibly. The developing countries are well aware that efficient and environment friendly utilisation of energy and other natural resources is possible only if they have access to the latest know-how and techniques of clean technology. But the impediment that these countries are facing is the means of sourcing such clean technology mechanisms at reasonable costs and within expeditious timelines.
Broadly speaking, developing countries can procure clean technology by either of the two routes outlined below. The first route is to conduct in-house research and development, thereby innovating and inventing new clean technology techniques, and the second route is to procure from developed countries the clean technology that they have already innovated. The first route, which would be a duplication of the exercise already carried out by the developed countries, would amount to re-inventing the wheel at the cost of investing substantial time and expense; and time is of primary essence in countering the menace of climate change. Hence the second route, i.e. transfer of clean technology from developed countries to developing countries, would be the fastest means of disseminating clean technology techniques, The second route should also be viable from the perspective of developed countries, who are actively exploring attractive investment opportunities in new markets to help bring their economies back on track after undergoing the recent recession; hence, they would be open to transferring clean technology in consideration of economic opportunities and gain. To this extent, developed and developing countries can be said to share a symbiotic relationship.
However, this seemingly convenient quid pro quo is fraught with its own set of challenges. The primary one being that the developed countries are seeking special intellectual property rights protection for any clean technology/techniques that they transfer. Developing countries, on the other hand, are unwilling to provide any additional or special IP protection (over and above the level of IP protection generally available for comparable technology), since they are of the view that it could lead to additional costs and compliances, thereby deterring the transfer of technology instead of facilitating it.
This is where the role of the policy makers and of global events like the Copenhagen summit assume greater significance. They can serve as platforms to help the developed and developing countries strike the right balance, in the interest of preserving the world’s environment.
It is for this reason that the last few years have seen considerable activity towards facilitation of technology transfer. Starting with the Bali Action Plan 2007, where the concepts of clean technology transfer and IP protection were formally debated at length for the first time, detailed discussions were also held during the seminar on “Climate Change, Technology Transfer and IPRs” held at Copenhagen in June 2008. More recently, the “Beijing High-level Conference on Climate Change: Technology Development and Technology Transfer” and the “Delhi High-level Conference on Climate Change: Technology Development and Technology Transfer” were co-organized by the respective governments of the host countries along with the United Nations Department of Economic and Social Affairs. During these conferences, major developing countries like India and China have shown serious interest in countering climate change by encouraging technology transfer, subject to strict enforcement of the currently prevailing IP regimes.
India is demonstrating itself to be increasingly pro-active, and ready and willing to introduce policy changes to encourage transfer of technology transfer (even though it is unwilling to extend any additional IP protection to the clean technology transferred by the developed countries.
To back words with actions, and with a view to promote free and unfettered transfer of high-end technology, the Union Cabinet has recently issued a press release, which proposes that all payments for royalty, lump-sum fee for transfer of technology and payments for use of trademark/brand name should be permitted under the automatic route and without any restrictions (except some post facto compliances). This proposal is clearly aimed at encouraging transfer of technical know-how between domestic and foreign entities, thereby indicating India’s commitment to play an active role in countering this global menace.
The significance of the proposed change in policy as outlined above becomes all the more evident when seen in juxtaposition to the policy prevailing thus far. Hitherto, automatic approval was permitted for foreign technology collaborations involving payment of lump sum fee of up to $2 million; and royalty of 5 per cent on domestics sales and 8% on exports, without any restriction on the duration of the royalty payment. In addition, in cases where no transfer of technology is taking place, royalty up to 2 per cent for exports and 1 per cent for domestic sales is permitted under the automatic route for use of trademark and brand name of a foreign collaborator. Proposals exceeding the limits mentioned above are required to be screened by Project Approval Board, which is chaired by the DIPP Secretary. The press release mentioned above, when brought into effect, will do away with the requirement for the PAB approval i.e. there will no longer be any limits on payment of royalties, lump sum fee etc. This change of policy, virtually on the eve of the Copenhagen summit, transmits a strong message to the world of India’s commitment to the cause of countering climate change.
As the Copenhagen summit is drawing closer, several countries can be seen to be canvassing their individual wish-lists. Hence, while there may well be a deadlock on issues such as legal obligations to cut emissions etc, it is more than likely that technology transfer and IP protection will gain greater recognition, and emerge as the acceptable vehicles for countering climate change, for both developed and developing countries to counter climate change. What remains to be seen is the shape, size and structure that these vehicles are likely to take.
The author is Principal Associate, Amarchand Mangaldas. She is part of the firm's M&A team and specialises in clean energy projects.
