It didn't seem achievable until the early morning of December 12, 2015, after 12 days and nights of intense negotiations, 150 heads of state visits, over 40,000 attendees, not less than 14 opposing negotiating camps2 and unprecedented private business involvement, all 196 countries member of the United Nations Framework Convention on Climate Change ("UNFCCC") reached a milestone binding agreement on climate change ("Paris Agreement").3 Since then the profound threat4 caused by climate change is ranked as "human rights,"5 recognized as "universal"6 and treated as "urgent."7 The Paris Agreement is far more ambitious, meaningful and global than all past legal instruments on climate change setting worldwide binding greenhouse gases emission reduction targets and commitments to all 196 UNFCCC's Parties within a specific time frame.
The impact of the Paris Agreement on climate change technologies and their transfer is discussed through a review of its relevant provisions. The paper also addresses the foreseeable effects of the Paris Agreement on IP protection through potential exploitation of the TRIPS and other IP treaties' flexibilities.
It's over twenty years since the first convention, signed at the 1992 Rio Earth Summit,8 when countries agreed to limit their emissions of greenhouse gases ("GHG"). The intervening years have witnessed major progress in the understanding of, and response to, climate change.
The Paris Agreement is part of the UNFCCC ("The Convention") of 19929 with an objective to "stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system."10 Unlike the Paris Agreement, the Convention does not contain binding GHG limits. It simply provides a broad framework for negotiating and adopting protocols, agreements or other legal instruments as needed.
Within this context the Kyoto Protocol11 was adopted in 1997 to impose emissions reduction targets principally to developed countries. Recognizing that developed countries are principally responsible for the current high levels of GHG emissions in the atmosphere, the Protocol places heavier burden on developed nations under the controversial principle of "common but differentiated responsibilities," also known as "climate justice."12 The Protocol provides for two successive commitment periods on GHG emissions reduction. During the first period (2008- 2012), 37 developed countries and the European Union committed to reduce GHG emissions to an average of 5 percent against 1990's levels. The first period finished in 2012 and at the 17th Conference of the Parties of the UNFCCC in Durban in 2011, some parties to the Kyoto Protocol, including Australia and the EU member states, agreed to a second commitment period, the Doha Amendment to the Kyoto Protocol,13 during which developed countries would accept specific targets to reduce their GHG emissions by at least 18 percent below 1990 levels in the eight-year period from 2013 to 2020.
The Doha Amendment incorporates for the first time the concept of "loss and damage," whereby richer nations could be financially responsible to other nations for their failure to reduce GHG emissions. Expectedly, some major developed countries such as Canada, Japan and the U.S.A. refused to sign the second commitment period and efforts fallen short to mitigate climate change.
Following the failure of the Doha Amendment, the UNFCCC's Parties commenced a new round of negotiations on the so-called Durban Platform for Enhanced Action ("ADP"). The ADP was established to develop a legal instrument under the Convention, which this time will be applicable to all the Convention Parties (i.e. 196 member countries). The ADP had to complete its work no later than 2015, in order to adopt a legal instrument with legal force at the twenty-first session of the Conference of the Parties ("COP 21") and for it to come into effect and be implemented in 2020.
With not less than 14 opposing negotiating camps, ADP's working groups and committees, negotiations were complex, fraught, long and challenging. Most active camps include OPEC Group hostile to meaningful climate action, EU Group pushing for tougher climate change measures, the influential 77 + China Group voicing developing countries' concerns, Environmental Integrity Group including South Korea and Mexico proposing common ground on climate change, African Group, Coalition for Rainforest Nations, Alliance of Small Island States. However, the recent years have witnessed significant shifts in position especially from U.S. and China. Albeit a divided Congress, President Obama has committed to reducing GHG. China has an ambitious strategy to develop its renewable sector and the two countries signed the U.S.-China Joint Announcement on Climate Change on November 12, 201414 to work together on carbon reduction in crucial sectors including transport and energy efficiency.
Controversial topics such as transparency,15 loss and damage16 equity and technology development and technology transfer were extensively debated. Also, some countries' plan, like India, to cut GHG emissions has been criticized as too vague. Another point of contention was whether historical responsibility of developed countries or "climate justice" principle should be included in future Parties' commitments; small island nations emit a relatively small amount of GHG, however they have a lot to lose from rising sea levels. Most developed countries opine that the commitments to climate change should be applied in a "contemporary context" only. On the contrary, developing countries believe that universal application of the Paris Agreement should not mean uniformity of application, and that appreciating national constraints need to be accommodated.
The legal form of the Paris Climate document was also a matter of contention. Should it be an agreement, a protocol (e.g. Kyoto Protocol), a revision of the UNFCCC, a Conference of Parties' decision? Each option brings its own pros and cons. The agreement option is usually seen as the most ambitious but the most difficult to reach. The protocol's actual implementation requires the Parties to concede a level of sovereignty creating some delay. For example, the Kyoto Protocol was negotiated in 1997 but came into force only in 2005. COP's decisions bring the benefit of being applicable immediately, however, they are also usually weak.
The negotiations ended on December 12, 2015 with the adoption of an agreement and associated decision (COP 21 decision) combining binding international objectives with local implementation. The Paris Agreement sets ambitious, binding and measurable targets to combat climate change to well below 2°C and to pursue efforts to limit the temperature increase to 1.5°C in the context of sustainable development and efforts to eradicate poverty. The Paris Agreement differs significantly from the earlier legal instruments and commitments on climate change by completely shifting the focus. The strategy has moved from setting "top-down" targets to "bottom up" targets putting the responsibility for action to the national level by giving countries the latitude in deciding how to meet the international goals on GHG emissions ("Intended Nationally Determined Contributions" or INDCs) subject to a review process in 2019, one year before the entry into force of the Paris Agreement in 2020. Commitments to all UNFCCC's Parties are on climate mitigation, adaptation, loss and damage, finance, innovation and technology transfer, capacity building and transparency. To support these commitments, several mechanisms are developed. For example Technology Transfer Mechanism and Finance Mechanism are tasked to facilitate and finance the transfer of climate-change related technologies to developing countries. See Figure 1.
The Paris Agreement is silent on the low carbon energies to combat climate changes. It defines "technology" in very broad terms: "technology research, development and demonstration, development and enhancement of endogenous capacities and technologies."17 The enhancement of Environmentally Sound Technologies ("EST")18 is briefly mentioned at Article 68.19 Discriminating technologies between EST and non-EST is challenging since the same technology may be perceived differently based on economic development, industrialization needs and geographical setting. That explains the silence of the Paris Agreement on this topic. Therefore all energy technologies, low-carbon, nuclear20 and even fossil, are potentially covered by the Paris Agreement. Countries are free to specify any technology to reduce their GHG emissions in their INDCs. Another key consideration in defining the type of Climate Change Mitigation Technologies ("CCMT") is whether energies relating to adaptation should be treated equally with those relating to mitigation climate change. The Paris Agreement is also silent on this making the range of technologies very broad and includes any technology able to address the climate change.
Not all industries face the same pressure to reduce their GHG emissions. In particular, Article 2 of the Paris Agreement states that the measures to adapt to climate change shall be deployed "in a manner that does not threaten food production." The industrial agriculture contributes to various forms of environmental degradation and GHG. In 2013, GHG emissions from agriculture accounted for approximately 9 percent of total U.S. GHG emissions. GHG emissions from agriculture have increased by approximately 17 percent since 1990.21 Regrettably the Paris Agreement is silent on agricultural biodiversity and traditional knowledge which can benefit to the global population and small farming communities around the world.22 See Figure 2.
From Rio to Paris scientific understanding of climate change has improved significantly23 and prompted responses from governments, private sector and civil society. In 2015, markets in low carbon goods and services amounted to USD 5 trillion. The cost of renewable energy has also fallen substantially as markets are geographically fast expanding. There is also a strong appetite for CCMT inventions and their transfers. Alongside with countries policy on environment, patent offices around the world play an increasing key role in supporting research, development and innovation in this field, expediting examination, facilitating access to technology and information dissemination to boost trade and investments. Recently the EPO has established a new classification scheme for climate change inventions (Y02/Y04S). This makes it easier and faster to retrieve patent document that cover these technologies. Multiple patent offices around the world such as Australia, Brazil, Canada, China, Japan, South Korea, Taiwan and U.S.A. have adopted fast track programs to expedite the examination and grant of patents pertaining to green technologies. Presented at the Sustainable Innovation Forum 2015 organized alongside the COP 21, an EPO report reveals the number of inventions in sustainable technologies worldwide increased almost fivefold between 1995 and 2011, with Europe accounting for approximately 20 percent of the world's CCMT inventions. Other key players are Japan, U.S.A., and South Korea, while China remains behind. CCMT represents approx. 6 percent of the world's invention.24 See Figure 3
The report finds that the number of inventions in CCMT worldwide has risen steadily since the signing of the Kyoto Protocol in 1997 and according to Espacenet, there are more than 1.9 million patent documents related to CCMT.
2.2 Technology Transfers
The Paris Agreement creates enabling environment by enhancing the transfer of technologies to reduce GHG emissions. The transfer of technologies critical to environment traces back to the "duty to cooperate" under the UN Charter of 1945,25 the Stockholm Declaration of the UN Conference on the Human Environment in 197226 and more recently the Montreal Protocol of 1987 and the Basel Convention of 1989. In 1992, the commitment to technology transfer more explicitly occurred at the UNFCC Convention.27 Also, the Convention on Biological Diversity (CBD) of 1992 and Nagoya Protocol promote technology transfer of natural resources and traditional know-how to preserve the biodiversity through mechanisms known as Prior Informed Consent (PIC) and Access Benefit Sharing (ABS), so does the International Treaty on Plant Genetic Resources for Food and Agriculture of 2001.28 Relying on technology transfer policy to protect environment, maintain biodiversity and mitigate climate changes is therefore not really a new thing and its ability to mitigate climate change and protect biodiversity remains to be seen.29 Under the Paris Agreement, the Technology Transfer Mechanism and Finance Mechanism are tasked to make it work. Parties have agreed to scale climate finance up to USD 100 billion a year by 2020 through the Green Climate Fund (GCF). The GCF could become a transformational institution able to influence other financial institutions and private investors.
The GCF was established before the Paris Agreement at the COP 16. It is an operating entity of the Financial Mechanism of the UNFCCC. A legally independent institution hosted by South Korea, it has its own secretariat and the World Bank as its interim trustee but functions under the guidance of, and is accountable to, the UNFCCC. There are 24 GCF Board members, with equal representation of developed and developing countries. It is a unique global fund to respond to climate change by investing low-emission and climate-resilient development. Given the urgency and seriousness of the challenge, the fund is mandated to make an ambitious contribution to the united global response to climate change.
The Paris Agreement brings evolutions to the GCF by enhancing the linkages between the Technology Mechanism and the Financial Mechanism of the UNFCCC.30
By the end of 2015, at the 11th meeting of the GCF Board in Zambia, the Board approved USD 168 million for the first round of eight GCF-supported projects, which include two private sector and two mitigation projects and six public sector projects in Africa, Asia-Pacific, and in Latin America focusing on mitigation and adaptation technology transfers. It marks the move of the GCF from initial resource mobilization to full funding decision. Foremost, the approval of the first eight investments sent a clear message that the GCF is ready to play its supportive role to technology transfer to mitigate and adapt to climate changes. See Table 1.
At the 12th Meeting of the Board of the GCF31 which is the first Board meeting since the Paris Agreement, the Board worked on the GCF's strategic vision, priority actions and order of work and it is expected that further major investments funded by the GCF will be released in 2016. The GCF's Board also announced that the Cook Islands, particularly vulnerable to the impacts of climate change, have just received financial resources from the GCF to strengthen their capacity to access finance through GCF.
The Preamble of the TRIPS Agreement also refers to technology transfer.32 Article 6 mentions the exhaustion of IPRs. Article 7 promotes the transfer and dissemination of technology within specific boundaries.33 The importance of this article as a guiding principle of the TRIPS Agreement was clearly recognized by both the Doha Ministerial Declaration and the Declaration on TRIPS & Public Health of 2001.34 Article 8 establishes the rights to protect public health and the public interest. The TRIPS Agreement specifically recognizes the potential for abuse of IPRs and states unambiguously that Members have a right to oppose such abuses through, for instance, compulsory licensing.
While strong intellectual property protections increase incentives to create CCMT to reduce climate changes, those same protections may equally impede the diffusion of CCMT to the developing world. The concept of relaxing IPR or IP flexibility with regards to CCMT has recently gained increasing support from all parts of the world including U.S. President Obama:
"It's critical for us to lead by example by becoming more energy efficient and by sharing scientific breakthroughs." 35
Indian Prime Minister Narendra Modi who declared at the opening of the COP 21 in Paris:
"Energy is a basic human need. So, we need an ambitious technology initiative, driven by a public purpose, not just market incentives. This includes intellectual property. For this, we need to scale up green climate fund that will improve access to technology and intellectual property."36
And Mr. Yves Lapierre, Director of the French Patent Office (INPI) who responded to the following question:
"In green technology, the model of open source is increasingly widespread. Is it compatible with a strategy of intellectual property? Open source, already very present in the digital economy, is not in opposition to intellectual property; on the contrary, it is a tool."37
The Paris Agreement echoes the above messages in several of its key provisions:
"Acknowledging the need to promote universal access to sustainable energy in developing countries, in particular in Africa, through the enhanced deployment of renewable energy"38
"A technology framework is hereby established to provide overreaching guidance to the work of the Technology Mechanism in promoting and facilitating enhanced action on technology development and transfer in order to support the implementation of this Agreement, in pursuit of the long-term vision referred to in paragraph 1 of this Article."39
"Accelerating, encouraging and enabling innovation is critical for an effective, long-term global response to climate change and promoting economic growth and sustainable development. Such effort shall be, as appropriate, supported, including by the Technology Mechanism and, through financial means, by the Financial Mechanism of the Convention, for collaborative approaches to research and development, and facilitating access to technology, in particular for early stages of the technology cycle, to developing country Parties."40
The Paris Agreement emphasizes on the need for IP protection to be balanced with the urgent necessity for CCMT transfers to developing countries. Unlike the TRIPS Agreement, the Paris Agreement's objective is to create a regime that provides technological and financial incentives for CCMT innovation and its global dissemination and use especially in developing countries. To increase chances to achieve its goal, it frames CCMT transfers within human rights, rights of indigenous people and to protect people living in the most vulnerable locations. Since the climate change problem has reached the status of a global emergency and human rights issue, as per the Paris Agreement's own wordings, IP protections cannot be allowed unduly to hinder CCMT's and innovation transfers. However, it does not mean IP and sustainable development are incompatible:
"A study that we have just presented as part of "COP21 Solutions" finds that contrary to what is sometimes claimed, the IP can support sustainable development. A good example is one of thecompanies that we [INPI] have selected at "Solutions COP21," Nutrisat, produces food specifically for the African market. Thanks to Nutrisat's patents, it could choose to entrust the manufacture of its products by companies located in Africa, which not only allows to create local jobs, but also has a positive environmental impact as it reduces the transport of the goods from France to Africa."41
The Paris Agreement and developing world's increasing economic and political influence are likely to change negotiation dynamics on IP matters in the WTO. Reinterpretation, modification, or circumvention of the TRIPS to propel technology transfers of CCMTs to developing countries is highly foreseeable. Following the Paris Agreement, a new "Declaration on TRIPS and Climate Change" to clarify existing TRIPS' flexibilities and offer new incentives for CCMT transfers is foreseeable. CCMTs could receive special treatments like those afforded to essential medicines under compulsory licensing.
TRIPS allows for compulsory licensing of patented inventions without the authorization of the patent owner in case of "emergency." In the past, such licenses have mainly been imposed for drugs used to fight epidemics such as AIDS. The scope of compulsory licensing has been broadened in Thailand to include long-term health problems such as heart disease and cancer which does not appear to violate the TRIPS.42 Climate change is considered a long-term health problem, human rights, urgent and universal threat, so more likely there should be no bar to granting compulsory licenses for CCMTs' patents even without prior negotiation with the patentee due to "national emergency" situation.
Currently, the Paris Agreement favors softer mechanisms (e.g. the Technology Mechanism, Finance Mechanism and Green Fund) than compulsory licensing to encourage CCMT transfers. However, it clearly opens the doors for CCMT's compulsory licensing if the above mechanisms were to fail to deliver the expected outcomes in the coming years. Article 5.1 of the 2001 Doha Declaration on TRIPS further supports this direction "Each member has the right to grant compulsory licenses and the freedom to determine the grounds upon which [compulsory] licenses are granted."43 Likewise, Article 27 Paragraph 2 of the TRIPS Agreement allows WTO member states to prohibit the patentability of inventions in order "to avoid serious prejudice to the environment."44 While this provision refers to requirements for patentability, not compulsory licensing, it could be used to support compulsory licensing on CCMT's inventions.
Multinational as well as green tech companies have obtained from the Paris Agreement what they wanted: a legally binding, international agreement that would provide a long-term, predictable framework for many industries.45 The Paris Agreement should help to create a stable international context with a robust and transparent monitoring of countries' strategies and results in combating climate changes. That will allow businesses to make better informed decisions. Innovation and collaborative actions across GHG emission reduction value chain are stimulated and a clearer framework for governments to work with the private sector to provide investment in the low carbon economy is established. The Paris Agreement is unlikely to remain static. Carbon targets will need to be revised in light of future scientific developments. As confidence in the Paris Agreement grows and countries implement their INDCs there will be more evidence of the human, health, social and economic needs and benefits of the Agreement, greater confidence amongst public and private sectors and more ambitious developments in future international negotiations on climate change. Equally, the concept of relaxing IPR with regards to CCMT would continue gaining support, both in developing and developed countries, creating opportunities but also threats to innovators. Energy companies should take the above into consideration when developing and implementing winning innovation, patent, market entries and pricing strategies especially in developing countries.