China’s Entrepreneurs Are Ready, But Is Their Government?

Dec 12, 2009

Reporting from Copenhagen

It is a human rights issue. It is a development issue. It is more than only an environment issue. This is China's view of climate change, as explained by He Yafei, China's Vice Minister for Foreign Affairs.

One phrase that has been reiterated uniformly from the Chinese and the G77 is that developed countries have a "historical responsibility" to help developing countries adapt to and mitigate climate change through financial mechanisms and technology transfer. But demands for technology transfer, especially when they run into private intellectual property rights, have made or broken many a treaty.

"Technology transfer should not be used as an excuse for them [developed countries] not to deliver on their promise," China's He said as the first week of international climate talks wrapped up in Copenhagen.

"Intellectual property rights, its protection has been improved for it in developing countries including China. ... But that doesn't give developed countries any reason to do less than what they have committed in terms of technology transfer."

Regardless of the Chinese government's stance, the Chinese entrepreneurs of the Society of Entrepreneurs and Ecology (SEE) are poised to develop and transfer climate adaptation technology themselves.

The SEE is currently among the largest and most influential green business NGOs in China. Half of its activities are dedicated to conservation, and the other half, on a member-funded budget of 10 million Yuan, goes to finance work by like-minded entrepreneurs.

Two SEE member entrepreneurs, Wang Shi and Feng Lun, have already risen to the challenge, and they have the capacity to help fund more like them.

Feng Lun is CEO of Vantone, a real estate company in China. But real estate is only how he made his money. Feng is now funding a pilot project for drought resistant maize 500 km North of Beijing. The project works to involve and educate local people in ecological conservation and the harvest is a source of income for them. He is also piloting a new type of conical, sustainable, energy efficient urban structure for heavily populated areas to aid in China's increasing urbanization.

Wang Shi is chairman of Vanke, a pre-fab construction firm. The pre-fab pattern Wang purchased from Japan, and altered to be more environmentally sustainable, for China's current and future needs. Then he re-patented it with his improvements. But like Google, Wang (middle in photo) has made his altered pattern freely available for other firms in China to use.

The main reasoning, he explains, is that when Google allowed their platform to be used and adapted by others it only made it more popular, building the brand reputation. The secondary reason is that it's better for the environment. Seventy percent of the world's timber is imported into China, primarily for use in construction of residences. Wang's pattern altered the amount of timber used, and he is converting it to steel. By 2012, he will be using steel in more than one-tenth of his building sites, and he hopes to to reach 100% by 2014. Without subsidies for training and upscaling, though it will take longer, Wang says. Steel is also more expensive than wood, and rather than charge consumers, Vanke is swallowing the extra cost, for now.

Last weekend, the SEE in conjunction with three other environmentally minded entrepreneurial groups in China issued a statement saying that they could deal with binding carbon reduction emission targets for China if it meant a binding agreement was achieved in Copenhagen.

Wang says that he was happy when China announced its target of 40-45% carbon intensity reduction commitment. A commitment that will be legislated and included in every future five year plan the country makes. But, he admitted, he is hoping for a strong agreement at Copenhagen because he feels it would cause the Chinese government to increase subsidies for green entrepreneurism in China.

In reaction to the entrepreneur's joint statement, Su Wei, China's lead negotiator at Copenhagen and NDRC's director of climate change, raised the issue of "historical responsibility" for climate change and explained the response to climate change for developing countries needs to be framed with in the context of previously agreed international agreements, UNFCCC and the Kyoto Protocol.

"Developing countries are innocent in creation of climate change and ... are in the stage of industrialization," Su said.

"China will take vigorous and active measures to reduce the greenhouse gas emissions increase in it's pursuit of economic development and reduction of poverty. China takes the climate change issue very seriously, and we fully recognize the issue of this matter we have also proposed the target of controlling our greenhouse gas emissions in our ... and social development. Our goal is both in keeping of principles of the convention as well as the basic reality and national conditions of China."

The entrepreneurs of SEE and the Chinese government clearly share similar values: poverty reduction and pragmatism. Vice Chairman He said, "China is a country that has vision, is responsible, and also pragmatic." Vanke's model of intellectual property transfer presents a pragmatic approach to dealing with intellectual property rights issues.

It is a model of transferring technology that is not uncommon, according to Dr. RM Perkins at LSE. Intellectual property rights alone, he believes, is not the decisive factor in determining whether technology is transferred — it's profit. Many major companies don't care about royalty rights if the potential market is large enough. This is the case more so in emerging markets than developing countries.

However, a downside patent owners often face is the risk of re-importation. Many technologies that are patented, explains Perkins, are incomplete. Entrepreneurs will patent a technology at a certain stage of development. If the technology at that stage is given away freely, improved upon, then it can be re-patented and the new patent owners gain. Which is fine, if the re-patent owners paid for rights to the technology in the first place.

Though what Vanke did in terms of patent shows a clever argument against that: No technology comes with perfect knowledge.

"You can't just drop a technology into a country and expect it to work," Perkins says. "Countries that are going to make most of these technologies will already have pre-existing technological capabilities in place in order to implement, improve, and operate them."

Intellectual property rights, according to Perkins, are terrible in China, though that is precisely the sort of market in which they can viably be overlooked for potential benefit, both to consumers and the ultimate patent holder, just as Feng and Wang have done.

Vice Chairman He disagrees, saying that IPRs have improved of late, both in terms of legislation and implementation.

"We welcome any dialogue in improving IPR protection in China," He said.

According to Kristin Gerber, a technologies expert for Germanwatch, any IPR agreement that appears in the final Copenhagen text will be loosely worded.

As IPRs fit into an adaptation and mitigation agreement, China and the US are on opposite sides of the aisle. The US and EU prefer using old, existing institutions where conditions are favorable to them. The larger G77 countries favor new financial and implementation institutions with a separate, specialized consultative body to disperse funding specifically allocated for technology transfer. In a G77 press conference Friday evening, Sudan's Lumumba Di-Aping characterized Bretton Woods institutions (IMF and World Bank) as being "part and parcel with problem that lead to climate disaster."

Gerber concludes: "I think at the end we meet in the middle and we have existing structures and new institutions where needed. EU knows some institutions are not working ... especially the finance institutions because of the mistrust of the World Bank and IMF."

 

See also:

Adapting and Mitigating Climate Change: A Deeply Nuanced Approach

Public Financing or Offsets? How Best to Fund Clean Tech for Developing Nations

China's Smart Grid Ambitions Could Open Door to US-China Cooperation

Made in America by China: New Turbine Factory Offers Glimpse into the Future

 

(Photos, top to bottom: James George/Envirobeat; Ann Danylkiw)

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