In most of our Indian case studies, indigenous technological developments have also been crucial. The National Hybrid Propulsion Program (NHPP) has brought together the public and private sector to indigenize this technology – most recently through a concept car at the Delhi Commonwealth Games in October 2010. In the case of energy efficient technologies for small and medium enterprises in India, indigenous technologies have evolved over time. A step-wise, incremental approach to cooperating with others to make firms more energy efficient was followed. This incremental approach also led to a growing confidence among entrepreneurs to experiment with, develop, and adopt their own cost-effective technological solutions.
Limitations to developing country access to intellectual property rights (IPRs) are often cited as a barrier to the development of low carbon capabilities. But the empirical evidence is mixed. In some cases, access to IPRs is necessary but not sufficient for the development and deployment of low carbon technologies. IPRs for low carbon technologies are rarely codified in a single patent. Multiple patents usually exist, and significant ‘tacit’ knowledge that is not codified is required to make use of them.
For some technologies, the acquisition of IPRs is possible, at a reasonable cost. For example, Indian and Chinese firms have been able to access wind and PV technologies from international suppliers through licensing, joint ventures and even some take-overs.
However, there are important caveats to this. First, it does not apply to all low carbon technologies, some of which have much higher barriers to entry than wind or solar PV. Gas turbine technologies that are used in some advanced ‘cleaner coal’ power plants are concentrated in very few international firms, which makes it much harder for developing country firms to master core technologies. Second, while IPR barriers may not prevent companies acquiring a particular low carbon technology in principle, they can slow the rate at which they can acquire variants at the cutting edge (e.g., thin film solar PV). Third, some technologies need extensive adaptation to suit local conditions. For example, coal gasification technology developed for the US market requires adaptation to handle high ash Indian coal.
Despite significant evidence of indigenous support for low carbon innovation in India and China, problems remain in both counties. In China, there are sometimes weak links between firms and research institutes, which mean that the full benefits of the Chinese ‘national innovation system’ have yet to be realized. Firms lack engineering and design capabilities (cited, for example, in the case of electric vehicles), and often focus mainly on incremental innovation.
Similarly, for Indian PV developments, our research highlighted a disconnect between the research base and the needs of firms. Firms recognized that some of the Indian technical institutes are actively engaged in research, and that some of this research is excellent. But firms also argued that it was difficult to find a bridge between this research and the development of better commercial products.
Domestic Finance and Policy in China and India
To successfully build low carbon innovation capabilities, policy frameworks have a key role to play. In China and India, we have already argued that significant government support through research programmes has been important.
In both India and China, incentives for the deployment of wind power have been crucial in supporting domestic firms such as Goldwind, Sinovel and Suzlon. In China, this deployment support has been complemented by government funding for technology development. Controversially, there have also been local content rules and restrictions on the ability of international firms to sell products within the Chinese market. With respect to the nascent area of offshore wind, initial Chinese projects have to be majority-owned by domestic firms. Whilst some of these rules have been criticized by international players, the selective use of such measures to protect new industries is a frequent feature of catching up strategies (for example in the South Korean vehicle industry).
With respect to the Chinese cement industry, the key challenge is not the acquisition of international technologies. In the past, collaborative programmes have helped introduce such technologies to China, for example from Japan. Research by our Chinese partners suggests that incentives are needed for the deployment of indigenous energy efficiency technologies. These tend to be cheaper, but policy incentives are still required to facilitate their adoption.
Chinese government tax breaks, grants and energy intensity targets have all helped to do this. So has the Clean Development Mechanism (CDM). Efficiency within the sector has also been boosted by the closure of smaller, less efficient plants. Nevertheless a significant efficiency gap remains between plants in China and those in OECD countries.
Some of our cases revealed a more mixed picture, however. An important brake on the progress of hybrid vehicle technologies in India has been the lack of incentives for consumer adoption. Tax breaks have not been sufficient to overcome cost barriers. It may be the case that overcoming such barriers is too costly at this stage for public policy to overcome. In China, such incentives are currently being implemented, including a target that 5% of new car sales should be ‘new energy’ models (including electric vehicles) by 2011 and trials in several major cities.
However, Chinese firms still see many challenges apart from the general early stage of development of electric vehicles world-wide. These include product quality issues and significant dependence on foreign technology[3].
International Finance and Policy
Returning to the international policy realm, there is clearly large scope for action on a bilateral and multilateral basis. We found evidence of significant impacts from one of the UNFCCC’s key financing mechanisms – the CDM. As has been widely reported, the CDM has been particularly beneficial for China, though it has also been a focus for controversy. Some developing country governments have argued that it has not delivered on expectations of technology transfer. However, the CDM has been a source of additional finance – including for the Chinese cement industry, and in the early growth of China’s onshore wind power programme.
