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Solar powered traffic light, demonstrated at Maker Faire Africa in Lagos, 2012

Information and Technology Innovation Foundation (ITIF) analyst Clifton Yin reported that a key theme of ITIF's recent Energy Innovation 2013 conference was “it’s global warming, not just ‘American’ warming.” Yin goes on:

“To fight climate change, policymakers need more than existing methods at their disposal and they must target clean technology innovations globally, according to experts,” is how E&E News summarized (subscription article) the event, with the emphasis on “globally.” It is thus unsurprising that economist Noah Smith wrote a thoughtful blog post that reaches the same conclusion.

Yin agrees in particular with Smith that

We will only save the planet if China (and other developing countries) stop burning so much coal. Any policy action we take to avert global warming will be ineffective unless it accomplishes this task.

Yin further notes that “Similar reasoning applies to India– where as many as 300 million people, or 25% of the population, do not yet have regular access to electricity – as well as the rest of the developing world seeking to rise from energy poverty.”

However Yin parts company with Smith when it comes to proposing what should be done:

“As I see it,” Smith concludes, “there is only one thing we can do: develop renewable technologies that are substantially cheaper than coal, and give these technologies to the developing countries.”

That’s where Yin sees Smith veering off “the beaten path”:

...innovating better clean technologies is clearly necessary, but giving them away is not. Natural technology diffusion through the global market should be sufficient to achieve widespread adoption, especially if clean technologies become genuinely cost and performance competitive without having to rely on subsidies – clean tech will sell itself.

There is merit to the arguments of both Yin and Smith. They are right that most existing alternative energy options cost too much, and breakthroughs are needed to create technologies that can compete commercially without subsidies.

Yet both Yin and Smith seem to be missing a couple of key points.

First, global warming is not the only global problem associated with the production and use of energy. Energy entails a multiplex of economic, social, environmental, and strategic impacts which are shared by many nations and which often spread across national borders. Some affect entire global systems in ways other than those associated with greenhouse gas emissions. Moreover, some of those other problems may provide more tangible and immediate motivation for energy technology innovation than uncertain speculations about the future impact of greenhouse gases seem to.

Next, this excerpt from Smith (not included by Yin) makes it clearer who Smith means as “we”:

Thus, the rich world should focus its efforts and money on developing renewable energy cheaper than coal. This mainly means solar; it also means better energy storage and transmission technologies. We should give these technologies away to China and other countries for free; the economic hit we take from doing so will help ease developing-country resentment over the fact that the U.S., Europe, Japan and others got rich by burning fossil fuels in the past.

There is something to be said for Smith's idea of giving clean technology to developing countries. (Whether/how China and India or Brazil should be considered ‘developing’ is another matter.) First, ‘giving’ need not be an outright grant, but could be done in terms of generous licensing, leasing, etc. arrangements. These can be adjusted according to the recipient country’s economic, environmental, and social circumstances.

Donor countries themselves would reap some benefits from the aid approach. First, the economic efficiency of energy use in countries like China and India—in terms of BTUs/dollar of income—is several times lower than in the U.S. or Japan. So just raising the energy efficiency in those emerging economies up to the existing normal level in the leading developed economies would tend to lower energy prices and enhance energy security for all.

Second, the pollution from dirtier facilities in the developing countries tends to spread beyond their borders. Satellite images show the plume of soot and toxic wastes from Chinese smokestacks, etc. drifting across the Pacific to affect North America. And to the extent greenhouse gases are a concern, it is global.

Nevertheless, decades of experience with development aid show that the donation approach has significant liabilities. Donations undermine local markets, entrepreneurs, and business development. And donated technologies from wealthy countries often are not ‘appropriate’ to the specific circumstances of developing countries: They wind up being either useless or counterproductive.

That last flaw is extremely important, and it applies to the approach suggested by ITIF as well.

An ITIF report portrays Green Mercantilism—referring to unfair practices, of China in particular—as a “threat to the clean energy economy.” In addition to the usual legal and political counterattacks, that report’s authors call for a global agreement to protect free trade in green technology and to commit national contributions to R&D. But history indicates that forging such global compacts is fiendishly difficult. The Doha Round of international trade negotiations has been dragging on for over a decade without resolution. (That is not to be confused with the arguably more futile 17th COP conference on global warming in Doha last year.)

Despite its preference for trade over aid, one senses that ITIF’s conception of innovation does not differ very much from Smith’s: Advanced energy technology created primarily in rich countries (preferably the U.S.) would be sold rather than donated to developing countries. But to achieve rapid, global diffusion of breakthrough innovations, such technological chauvinism may not be an adequate improvement over the mercantilism ITIF criticizes.

Instead, the alternative, “Plan B” approach recommended in my recent book emphasizes open innovation and collaborative international development of clean technologies. This strategy recognizes that for clean technologies to be both widely and rapidly adopted, they need to be developed, produced, and deployed in the particular environments where they are to be used.

An instructive example: The menu of new McDonald’s restaurants in India is all vegetarian; existing McDonald’s in India serve no beef or pork. Two Indian entrepreneurs have been crucial to McDonald’s ability to develop products suitable to the Indian environment. 

Also, despite its corruption-hobbled economy, Indian industry has been a leader in creating technology that fits the needs and wallets of poor people—including Tata’s $2,000 automobile and the world’s cheapest tablet computer.

A recent interview by “disruptive innovation” guru Clayton Christensen suggests why that kind of innovation, attuned to the poor/developing world, is unlikely to occur in the U.S. and other rich countries: The institutions that groups like ITIF, Brookings Institution, et al expect to lead an invigorated innovation charge—elite universities and venture capitalists, along with their models of supposed success like Apple Computers or Tesla Motors—are themselves obsolescent and ripe for disruptive overthrow. One reason, in Christensen’s view, is their “always wanting to go upmarket.”

For more on Plan B and fixing the technical fix for global innovation, see:
http://www.energyinnovation.perelman.net

image: Innovative Energy via Wikimedia Commons