Index

Environmental Technologies

Sandeep Singh

“Although, some developing countries have been able to develop limited domestic capacities in the production of these technologies, the majority are still dependent on the developed world for high-end and sophisticated technologies.”

Technology is considered to be one of the key determinants of socio-economic development and its transfer and dissemination to the developing world is deemed essential in the context of sustainable development. Environmental technologies—or environmentally sound technologies (ESTs)—have emerged as a distinct category of technologies; the need for innovation, transfer and dissemination of which has been emphasised in several international agreements, including the 1992 Rio Declaration emerging from the Rio Earth Summit, and various multilateral environmental agreements (MEAs).

Rapid industrialization coupled with urbanization and population growth has caused serious environmental problems in many parts of the developing world. Recognition of the increased magnitude of these problems by the public, industry and governments has lead to tremendous growth in the market in ESTs. Although, some developing countries have been able to develop limited domestic capacities in the production of these technologies, the majority are still dependent on the developed world for high-end and sophisticated technologies.

The significance of ESTs

While the transfer of ESTs has several commonalties with the transfer of any other technology, ESTs are distinct in terms of their significance for sustainable development. ESTs have featured prominently on the agenda of international environmental and trade negotiations. Developing countries require ESTs to ensure (a) compliance with MEA targets; (b) environmental requirements in export markets; and (c) improving environmental quality and achieving sustainable development in the domestic context. The significance also stems from the fact that the dissemination of ESTs is defined by increasing international consensus for environmental protection in addition to commercial interests that go along with the initiative.

Over thirty years ago, the UN Conference on the Human Environment (UNCHE) in 1972 in Stockholm highlighted the need to promote scientific research and development in the context of environmental problems. The UNCHE emphasized that ESTs should be made available to developing countries on terms that would encourage their wide dissemination without constituting an economic burden.

Two decades, later the Agenda 21 action plan for sustainable development, adopted at the 1992 UN Conference on Environment and Development (UNCED), reiterated the importance of ESTs, calling for the transfer of environmentally sound technology “on favourable terms including concessional and preferential terms.”

International discussions on trade, environment and development in the World Trade Organization (WTO), the United Nations Conference on Trade and Development (UNCTAD) and other parts of the United Nations system have repeatedly referred to the importance of access to and transfer of technology. The WTO Committee on Trade and Environment (CTE) has focused on the relationship between the generation of, access to, and transfer of ESTs and the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS). WTO Members have also raised the issue of access to and transfer of technology with respect to environmental requirements and market access, eco-labelling, trade liberalization and MEAs.

Comprehending ESTs

There is no universally accepted definition of ESTs. However, Agenda 21 sets out that ESTs are technologies that “protect the environment, are less polluting, use all resources in a more sustainable manner, recycle more of their wastes and products, and handle residual wastes in a more acceptable manner than they technologies for which they are substitutes.”

In the context of industrial manufacturing, ESTs can be broadly clustered in two categories: end-of-pipe technologies and cleaner technologies. End-of-pipe technologies are essentially those focusing on removal and treatment of pollutants from the waste stream at the end of the manufacturing process. Technologies necessary for solid waste treatment, wastewater treatments and air pollution control fall into this category. Cleaner technologies are those that seek to optimize the process of production by making necessary changes in order to avoid generation of pollution.

There are four major components of ESTs: hardware, software, brainware and support net. The hardware component relates to the physical equipment, structure of components and layout. Software is the “know-how” needed to accomplish a specific task, such as the operation and maintenance of equipment. The “brainware” component is more intricate as it includes the necessary knowledge and understanding related to the application and justification of hardware and software deployment. It is also called the “knowwhat” and “know-why” of technology. Finally, “support-net” comprises the complex network needed to support the effective use and management of technology.

From the sustainable development perspective, transfer of “brainware” and “support-net” are crucial to ensure effective innovation and technology transfer to the developing world.

The Trade and Environment Context

In the evolving debate on trade and environment, the issue of ESTs has always been an important one. In the WTO negotiations, Paragraphs 31(iii) and 37 of the Doha Ministerial Declaration and Paragraph II(ii) of the Decision on Implementation-related Issues and Concerns are relevant to ESTs. Paragraph 31(iii) provides a mandate to negotiate “the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services.” The definition of environmental goods could include ESTs as well. Paragraph 37 mandates WTO Members to examine the relationship between trade and technology transfer in general. Paragraph 11(ii) reaffirms that the provisions of Article 66(ii) of the TRIPS Agreement are mandatory. Article 66(ii) of the TRIPS Agreement commits developed countries to provide incentives to their own enterprises to transfer technologies to leastdeveloped countries.

Interests and Fault Lines

Broadly, there are two sets of overlapping interests in trade in and transfer of ESTs— commercial interests and environmental interests. In the majority of cases, the set of commercial interests are altogether different for developing and developed countries. Developed countries dominate the production of these technologies and are primarily interested in capturing emerging markets in the developing word. According to UNCTAD, the worldwide market in environmental goods and services (EGS)—of which environmental technologies are an important pillar—is bigger than the pharmaceutical market, with 85 per cent captured by Western firms. Hence, the trade interests are significant.

Although some developing countries are also net exporters of these technologies, e.g., India in the case of renewable energy technologies, for most part developing countries are net importers. The commercial interest of developing countries mainly lies in the fact that the import of environmental technologies enables them to meet environmental requirements on exports of other products to Western countries. On the other hand, some developing countries that have over time developed some capacity in the environmental sector are also concerned about maintaining and further augmenting their capacity. The environmental industry in most developing and least-developed countries is largely dominated by small and medium-sized enterprises.

From the submissions in various WTO bodies, it is clear that developed countries are primarily interested in selling environmental equipment and necessary knowledge of maintenance and operation. This constitutes only the “hardware” and “software” components of technology transfer. As outlined in the accompanying figure, such transfers correspond to the inputs needed to deliver a capital good/plant or to modernize an existing one, and the know how to operate and maintain it.

Developing countries, on the other hand, are increasingly realizing that their developed counterparts tend to gain additional market access, but remain reluctant to transfer core technologies. Increased trade in environmental equipment might enable recipient countries to upgrade their end-of-pipe pollution control capacities as well as promote cleaner processes in the short term. As a result of low trade barriers, they are likely to have relatively easy access to relevant engineering and managerial services, capital goods and relevant knowledge for operation and maintenance.

In the long term, however, merely transferring capital goods does not necessarily raise the technological level of recipient countries. Environmental technologies are not a static concept; technologies that are in use today will become outdated tomorrow. Hence, with a short-term approach, the recipient countries are likely to remain dependent on the technology suppliers.

The recipient country should promote the generation of indigenous technological capacity—stream C in the accompanying figure; i.e., “brainware” and “support net”—and the necessary knowledge and expertise required for implementing technological change. Recipient countries need to develop their own capacity to produce and manage ESTs that are suitable for their respective and specific requirements.

This remains a missing link in the ongoing WTO negotiations.

Paragraph 31(iii): EGS Negotiations

Under the Paragraph 31(iii) negotiations, it has been proposed by some WTO Members that the negotiations to reduce trade barriers should take place according to a list-based approach, rather than a definitional approach, as it is difficult to agree upon a common definition of environmental goods. Such a list could include both end-of-pipe pollution control equipment and cleaner technologies.

Most developed countries have taken an offensive position and are in support of rapid trade liberalization in selected goods and technologies as their companies stand to gain in terms of increased market access in developing country markets. These countries include the United States, Japan, the European Union, Korea and New Zealand.

Developing countries, on the other hand, have not shown much enthusiasm to put forward proposals in the negotiations thus far as most of the proposals by developed countries only discuss the need for reductions in trade barriers in developing countries. Submission by India and China have highlighted the importance of concrete technology transfer initiatives, the negative impact of rapid reduction of tariffs on infant environmental industries in developing countries and issues related to the development of the environmental industry in these countries in the long-term. However, not much progress has yet been made on defining the scope of the negotiations mandated under Paragraph 31(iii).

Paragraph 37: Working Group on Trade and Transfer of Technology

The Working Group on Trade and Technology Transfer was established under the mandate of Paragraph 37 of the Doha Ministerial Declaration. Its mandate covers technology transfer in general and includes ESTs. As developing countries are the main demandeurs of technology transfer, they are playing an active role in the Working Group. Joint submissions from several developing countries outline the provisions in the WTO agreements stipulating the need for technology transfer. In particular, developing countries have called upon the Working Group to examine the following:

• The provisions in various WTO agreements relating to technology transfer with a view to making these provisions operational and meaningful.

• Those provisions that may have the effect of hindering transfer of technology to developing countries and how to mitigate their negative effects.

• The restrictive practices adopted by multinational enterprises in the area of technology transfer.

• The impact of tariff peaks and tariff escalation in developed countries on technology transfer and come up with recommendations to remove the adverse impact.

• The difficulties faced by the developing countries in meeting the standards set by different agreements because of nonavailability of the relevant or required technology.

• The need for internationally agreed disciplines on transfer of technology with a view to promote trade and development.

While developing countries have outlined an ambitious agenda for the Working Group, developed countries, including the U.S. and Japan, have shown little enthusiasm to embark on substantive debate, defining the exercise as merely analytical and academic. The expectation of developing countries is that the Working Group can formulate appropriate recommendations to assist them in strengthening their technology base.

Paragraph 11(ii): Links to Intellectual Property Rights

The mandate of Paragraph 11(ii) is also applicable to technology transfer in general, which covers ESTs as well. The TRIPS Council has taken a decision that requires developed countries to submit annual reports on actions taken or planned in pursuance of their commitment under Article 66.2. In general, however, developing countries remain skeptical about sincere efforts by developed countries in this regard. They maintain that developed countries need to establish norms and practices that lower the transaction costs of intellectual property and technology dissemination.

Other Fault Lines

In negotiations on trade and environment issues, the focus has mostly been only on removing trade barriers. A close analysis of the associated problems, however, reveals that reducing trade barriers is only one of the factors that could encourage technology transfer. It does not address the basic issue of affordable prices that are often determined by patent holder Western companies.

There has been no emphasis on provision for finance for ESTs and on the lack of capacity with regard to technology identification, assessment and selection, adaptation and assimilation in many developing countries. Without tackling these issues, the current approach may have negative consequences for some developing countries, which have developed a certain level of capacity to produce ESTs. Competition from Western companies may erode this capacity, which clearly falls in the infant industry category. In addition, as a result of significantly lower tariffs, Western companies are likely to prefer the trading route, thereby negatively affecting investment in the environmental sector in developing countries.

Trends and Future Directions

Like innovation, technology transfer is a dynamic and complex process, which is shaped and influenced by interactions between various factors ranging from international political economy to the adaptability and affordability of technology. Transfer and dissemination of appropriate ESTs to developing countries needs to be perceived in terms of achieving the twin objectives of transferring plant and equipment with acquiring the necessary operation and maintenance knowledge, as well as generating new knowledge.

Unfortunately, the current approach in the trade-environment negotiations only focuses on the former. The transfer of “know-what,” “know-why” and “support-net”—which is essential for enhancing the technological capacity of developing countries—has been a missing link. In the EGS negotiations, commercial interests have clearly overshadowed the environmental objectives of the initiative. Thus far, developed countries have only shown interest in maximizing market access for their industries, with little willingness to promote effective technology transfer.

It is also important to note that the technology transfer that takes place among developed countries is fundamentally different from the one that takes place from developed countries to developing countries. The former is relatively straightforward because the technological level is comparable whereas the latter is more fluid due to the technological disparity between supplying and receiving countries.

The differences between developed and developing countries go beyond technological levels to differences in terms of organizational and managerial systems, economic characteristics, telecommunication systems, skills, and value systems, among others, all of which matter for transfer of ESTs. Trade liberalization helps in the process but does not guarantee dissemination of “appropriate ESTs.”

Another trend worth noting is restrictive practices by multinational companies as highlighted in developing countries’ submissions in the Working Group on Trade and Technology Transfer. With the removal of barriers on investment many multinationals are setting up wholly owned subsidiaries in developing countries and are increasingly becoming reluctant to transfer technology through licensing or joint ventures.

Transfer and dissemination of technology is the central focus of the TRIPS Agreement’s objectives. Article 8.2 of the Agreement clearly notes that abuse of intellectual property rights may adversely affect the international transfer of technology. Thus operationalizing these provisions is important because providing developing countries with access to appropriate technologies is an essential way to accelerate their economic and social development. It would be worthwhile if the review of the TRIPS Agreement also takes into account the impact of implementing the TRIPS Agreement on the transfer and dissemination of technology and the related trade and development prospects of developing countries.

In sum to be effective, transfer of ESTs should harness the development of indigenous capabilities, which in turn have many dimensions ranging from technology search, assessment and selection, adaptation and assimilation, replication, development and, ultimately, innovation.

For a higher resolution version of this figure, click here.