PATENT LAW AND CLIMATE CHANGE: INNOVATION POLICY FOR A CLIMATE IN CRISIS.

• Author: Ring, Caoimhe

TABLE OF CONTENTS I. INTRODUCTION 373 II. GREEN ENERGY INNOVATION 376 A. Technological Solutions for Energy Decarbonization 376 B. Basic Science 380 C. The Pollution Problem 381 D. Short Timescales and Path Dependency 383 E. From Breakthroughs to Mature Energy Solutions 385 III. PATENT POLICY LEVERS FOR GREEN INNOVATION 387 A. Patent Law and Climate Change 387 B. The Skeptics 389 C. The Pragmatists 393 D. What about Firms that Patent? 396 IV. PATENTS AND TECHNOLOGY COMMERCIALIZATION 397 A. Entrepreneurs 397 B. Towards the Innovation System 399 V. CONCLUSION 403 I. INTRODUCTION

Meeting the Paris Agreement target of maintaining global average temperature increases "well below 2.0[degrees]C" and "pursuing efforts to limit the temperature increase to 1.5[degrees]C" (1) requires rapid innovation (2) in climate-friendly, or green, technologies. (3) It is now unequivocal that human influences are changing the climate: there are now observed changes to weather extremes in every region of the globe, and some of these changes will be irreversible. (4) Technological solutions are needed to reduce greenhouse gas ("GHG") emissions in what may call for a "climate-technology revolution" (5) or a "Manhattan Project" for climate change that would rapidly develop new green technologies. (6) This could be the most formidable challenge for innovation policy in the twenty-first century. (7) The last-minute decision to water down commitments on phasing out coal at the 26th United Nations Climate Change Conference of the Parties only serves to highlight that emissions will be stabilized by novel technologies, not by putting an end to fossil fuels. (8) It signals to the prioritization of technological means to solve what is essentially a social problem: the need to lower GHG emissions. But there is much uncertainty about the feasibility of delivering the technological advances needed. (9) One open question for legal scholars is the role that patent law will play in the race for green innovation.

A substantial literature has mapped the relationship between patent law and green innovation. Innovation, in common use, typically refers to the entire innovative process. However, there is an important distinction between invention as a pre-market activity and innovation that refers to technology commercialization and diffusion in the marketplace. (10) Scholarly opinion is divided on how the patent system should adapt to the challenge of climate change. This Note loosely divides the literature into two camps: one characterized by skepticism and one by pragmatism. (11) Drawing on Ofer Tur-Sinai's "[s]keptic's view," the suggestion amongst patent skeptics is that patents may under-provide for, or even stymie, green innovation. (12) Even the pragmatic view, which emphasizes patent law's potential for positive impact on green innovation, acknowledges that significant patent law reform would be required. (13) When it comes to choosing between the models for patent law reform, however, it becomes clear that less is written on the specific problem the patent system confronts. What are the challenges ahead for green innovation policy, and what are its implications for patent law? To answer this question, this Note proffers a fresh perspective on the factors that promote and constrain green energy innovation. (14) Importantly, while access to technology is undoubtedly worthy of attention, this Note focuses principally on the incentive effects of patent law on green technological advance.

This Note suggests patents may be less significant for promoting green invention at early research stages but still imperative for green innovation--encouraging commercialization and diffusion in mature energy technology markets. Part II describes stylized facts (15) about green energy innovation to contextualize the policy issues beyond patent law. Part III analyzes the literature on patent law reform in response to climate change, suggesting that it disregards important aspects of the green innovation policy challenge for patent law: notably, it devotes little attention to market uptake of mature energy technologies. The main contribution of this Note, in Part IV, is the argument that patents may have a thus far under-examined role in promoting green innovation--commercialization and diffusion. While several scholars have made valuable contributions, there is insufficient examination of patentee practice from a theoretical or empirical standpoint. This is problematic as a matter of present knowledge, but also poses the risk of neglecting a key component of the patent system as it affects green innovation. It is suggested that commercialization and diffusion have escaped attention by virtue of failure to take stock of the broader innovation context. To remedy these issues, this Note touches on the benefits of an interdisciplinary approach to isolate which policy issues are best dealt with in patent law. It briefly comments on use of the innovation system as a framing device system to determine when patents are more appropriate as compared to alternative measures, such as prize or grant systems. Part V concludes with broader theoretical implications for patent law and policy.

2. GREEN ENERGY INNOVATION

   1. Technological Solutions for Energy Decarbonization

      The Paris Agreement targets have the effect of emphasizing the role that technology plays in reducing GHG emissions. The targets are to reduce GHG emissions, particularly cumulative net carbon-dioxide ("CO2") emissions. (16) Reducing cumulative emissions requires both emissions stabilization and removal of existing atmospheric CO2--a metric which places substantial reliance on new carbon-dioxide removal technologies ("CDRs") to counteract residual emissions that are not reduced by, for instance, switching to renewable energy sources. (17) Under that metric, a 1.5[degrees]C target requires CO2 emissions to decrease to near or net-zero by the second half of this century. (18) The Paris Agreement targets thus give prominence to CDR technologies, many of which are still in early development. (19)

      At the same time, technology is no silver bullet. There is no fixall for climate change, or the many changes it necessitates--for instance, to agriculture, patterns of consumption, and waste management. (20) However, green energy technologies can have determinative impacts on meeting the time-limited Paris Agreement targets. (21) On the other hand, overconfident technology forecasting poses risks. For instance, though carbon-capture-and-storage ("CCS") is projected to be an especially impactful technology, estimates on its potential emissions abatement are highly uncertain. (22) In some cases, however, the only solutions to meeting net-zero energy demand are technological. (23) What makes technological solutions attractive is that they can reduce the costs of CO2 emissions reductions. (24) Even if all current unconditional emissions pledges are met, a minimum 2.7[degrees]C temperature rise is forecasted by 2100. (25) Global economic damages resulting from a 1.5[degrees]C increase alone may cost up to 54 trillion USD. (26) Technologies provide new, cheaper means of achieving climate goals to avert political stalemates if costs prove too high. (27) Of course, green technology characteristics vary tremendously, even within the renewable energy industry. The actual implementation of energy inventions is affected by several factors including, inter alia, national energy grid characteristics which vary considerably by country. (28) In practice, the relevant costs and benefits of a particular solution will vary significantly. (29)

      The grave reality of climate change, however, means innovation is needed for novel and mature technologies. (30) For instance, in the next fifty years, if current trends continue, the proportion of renewable energy sources could rise to 60% globally. (31) Mature green technologies, or those which are at least at the early adoption stage, will make a substantial contribution to reaching net-zero targets. (32) Yet policymakers increasingly rely on novel solutions, many of which, such as CDR, are not ready for commercial deployment. (33) Rollout of renewable energy, however, hinges crucially on consumer behavior and market uptake of existing solutions at the commercialization and diffusion stages of innovation. (34) There are open questions about patents for technology commercialization and diffusion. (35)

   2. Basic Science

      Because early developments in green innovation are driven by basic scientific research, patents are generally thought to be unsuitable incentive mechanisms for this blue skies research. (36) Firms underinvest in basic scientific research due to inability to shift risk, moral hazard, and low expected returns. (37) These capital-intensive, risky projects are rife with knowledge spillovers, meaning that their returns are not fully appropriable. (38) As research projects concerning fundamental ideas of science, these spillovers reach multiple industries, carrying on downstream. (39) With uncertainty comes long time periods to arrive at solutions. (40) And as technologies mature, incremental advances take longer. (41)Yet much investment in green innovation is still led by the public sector. (42) In 2019, approximately 80% of the public energy research and development ("R&D") budget of 30 billion USD was devoted to green energy, while the total private sector energy R&D budget was 9 billion USD--a sum that includes environmentallydamaging energy projects. (43) Public financing commitments will often impose obligations to encourage private investment. (44) At this later stage of innovation, patents are paradigmatically significant, once R&D culminates into marketable goods or services. (45)

   3. The Pollution Problem

      Relatedly, private actors are disincentivized to invest in green R&D without a socially optimal price on carbon. Termed the "double externality problem" ("DEP"), green...