Energy Policy, Intellectual Property, and Technology Transfer to Address Climate Change

AuthorElizabeth Burleson
PositionLL.M. from the London School of Economics and Political Science
Pages04

Professor Elizabeth Burleson has a LL.M. from the London School of Economics and Political Science and a J.D. from the University of Connecticut School of Law. She has written reports for UNICEF and UNESCO and is a professor at the University of South Dakota School of Law.

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I Introduction

An energy revolution capable of addressing climate change impacts a wide array of stakeholders that have disparate influences over energy policy. Global population is expected to reach seven billion by 2012, intensifying the struggle for natural resources.1 The energy market is worth 6 trillion USD.2 Page 70 A weather-beaten economy has become a wake-up call. Investors are requiring corporate disclosure of climate risks and insisting upon climate change resolutions on company proxy statements.3 Ceres President Mindy Lubber notes that "[c]limate is one of the most underestimated risks out there."4 Pointing out that the subprime mortgage lending meltdown occurred because risk was underestimated, Lubber recommends that all sectors of the economy increase assessment of the risks presented by climate change.5

The International Energy Agency predicts that carbon emissions will rise 130 percent and that oil demand will rise 70 percent by 2050.6 Reducing global emissions by half by 2050 likely will cost 1.1 percent of the average annual global gross domestic product between 2008 and 2050. 7 International Energy Agency Executive Director Nobuo Tanaka notes that, "[t]he most scarce resource on earth is not natural resources, nor the capital investment or money, but time. And now is the time for action."8

This Article considers how multilateral cooperation can lead to environmentally sound technology transfer to address climate change within an appropriate timeframe. Part II addresses the challenge to transform energy policy and provides context for examining the role that insurance companies and other sectors of the economy play in policy outcomes. Part III discusses mechanisms that enable environmentally sound technology transfer. This Article concludes that a sound energy policy that addresses climate change relies upon responsible, widespread transfer and implementation of environmentally sound technology. Page 71

II Transitioning to a Sound Energy Policy

The U.S. Congress first mandated international climate negotiations in 1987 when it enacted the Global Climate Protection Act.9 In 1992, President George H.W. Bush signed, and the Senate approved, the United Nations Framework Convention on Climate Change that brought together a coalition of countries in a coordinated approach to climate change.10 At the 2007 United Nations Climate Change Conference in Bali, global consensus was reached to adopt deep reductions of greenhouse gas emissions in line with the Intergovernmental Panel on Climate Change's (IPCC) initial target of 25 to 40 percent reductions below 1990 levels by the year 2020, and a peak and decline within the next ten to fifteen years. 11 Representing the global reductions required to avert the most catastrophic effects of climate change, this scientific time frame is not flexible.12 An effective and equitable response to climate change must address mitigation, adaptation, technology, and finance.

NASA Goddard Institute Director Dr. James Hansen notes that the United States

must define a course next year in which the United States exerts leadership commensurate with our responsibility for the present dangerous situation. . . . [i]f emissions follow a business-as-usual scenario, sea level rise of at least two meters is likely this century. Hundreds of millions of people would become refugees. . . . Polar and alpine species will be pushed off the planet, if warming continues. other species attempt to migrate, but as some are extinguished their interdependencies can cause ecosystem collapse[,] . . . [t]he safe level of atmospheric carbon dioxide is no more than 350 ppm (parts per million) and it may be less. Carbon dioxide Page 72 amount is already 385 ppm and rising about 2 ppm per year.13

Lord Stern notes that his 2006 Stern Review prediction of a global temperature rise of two to three degrees Celsius over the next 50 years and a 20 percent cut in global per capita consumption underestimated the risk of climate change in light of new scientific evidence.14 The Stern Review compared the threat of climate change to the Great Depression of the 1930s. 15Since its publication, Stern has explained that "[e]missions are growing much faster than we'd thought, the absorptive capacity of the planet is less than we'd thought, the risks of greenhouse gases are potentially bigger than more cautious estimates, and the speed of climate change seems to be faster."16Previous calculations must be considered in light of evidence that ocean saturation reduces the ability to absorb CO2.17 Warmer oceans absorb less carbon.18 Furthermore, thawing permafrost rapidly increases methane emissions into the atmosphere.19 Stern calls for strong and urgent collective action to address climate change.20 He explains that world carbon emissions must peak within fifteen years, then be reduced by half from the 1990 levels Page 73 to 20 billion tons annually by 2050, and finally be capped at 10 billion tons each year.21

A The Insurance Industry and Energy Policy

Insurance companies can spur energy policy reform since the insurance industry has a larger stake in climate mitigation than many other sectors of the U.S. economy. The U.S. government's National Science and Technology Council states that "[i]t is possible that regions exposed to risks from climate change will see movement of population and economic activity to other locations. One reason is public perceptions of risk, but a more powerful driving force may be the availability of insurance."22 After reviewing their exposure to climate risks, insurance companies have been capping paid losses, thus shifting a greater share of risk to consumers, and refusing to insure high-risk regions. 23 Page 74

In 1997, the United Nations Environment Program (UNEP) Executive Director Elizabeth Dowdeswell pointed out that " [t]he insurance industry has become a powerful and credible lobby for action[,] ... an important counterweight to those who are working to slow progress."24 Insurance companies have pressed for increased public investment in storm and flood-defense systems and for an increased governmental role as an insurer of last resort.25 "[C]limate change has implications for the fiscal health of the Federal Government,"26 according to the U.S. Government Accountability Office. The Human Development Report notes that the U.S. National Flood Insurance Program exposure approaches 1 trillion USD while the Federal Crop Insurance Program exposure is roughly 44 billion USD.27

The insurance industry's viability depends on its ability to assess uncertainty. Insurance companies can play an influential role in changing the business community's incentives regarding climate change mitigation. While whole cities have developed in flood plains, insurers play a role in curbing further development in vulnerable areas by not insuring new construction based upon climate change calculations. Strong economic forces work against such policy changes as efficiency standards, removal of subsidies, and funding technology transfer. Insurers can be a powerful lobbying force for the implementation of these measures or for such "no-regret" policies as reforestation. Even if insurance agencies choose not to enter into the arena of information gathering and coalition building, conventional incentive measures can change business behavior. Higher insurance premiums can offset price distortions like agricultural, fuel, and transportation entitlements. This would provide economic incentives to transition to more sustainable practices. For example, insurance companies could adopt policies to encourage efficient replacement investments at the end of the economic life of equipment or an entire plant. Incentive altering can also be accomplished by lowering premiums for firms that participate in tradable markets that mitigate greenhouse gas emissions.

B Local, State, National, and International Energy Policy

California seeks to cut greenhouse emissions by 25 percent by 2020. 28California's Global Warming Solutions Act of 2006 seeks to jumpstart the Page 75 reduction of emissions.29 At the local level, the Bay Area Air Quality Management District has established the first set of rules in the United States that require businesses to pay for the carbon that they emit.30 Each company that is permitted by the district will have to measure and report their carbon emissions, then pay 4.4 cents per ton of carbon.31 While it may be easier for San Francisco as a single city, or California as a single state, to build energy policy consensus, companies will encounter administrative difficulties when confronting a patchwork of different policies on climate change rather than a single national approach. 32 Low local-district air policies in some regions may make it harder to enact sufficiently tough emissions standards to achieve climate stabilization. 33 Yet, regional greenhouse gas reduction agreements have led to progressive energy policies capable of mitigating greenhouse gas emissions.

Almost half of the people in the United States will be living in areas...

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