+ innovation policies to support low-emissions development prof. nathan hultman university of...
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Innovation Policies to Support Low-Emissions Development
Prof. Nathan HultmanUniversity of Maryland School of Public Policy
World Bank InstituteSeptember 26, 2012
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Why green innovation?
3+Rio+20: “Green economy in the context of sustainable development and poverty eradication”Sustainable development emphasizes a holistic, equitable and far-sighted approach to decision-making at all levels. It emphasizes not just strong economic performance but intragenerational and intergenerational equity. It rests on integration and a balanced consideration of social, economic and environmental goals and objectives in both public and private decision-making. The concept of green economy focuses primarily on the intersection between environment and economy. This recalls the 1992 Rio Conference: the United Nations Conference on Environment and Development.
+Green Growth Goals: Decoupling Environmental Impacts andGrowing the Economy
5+Innovation and the development / environment agenda
New, cheap applications of existing technology
Resurrections of old ideas in a new context
Integration of several existing technologies to serve an under-tapped market
Utilizing new business models to provide services
6+Solar LED flashlight
+ 7
Which will push battery technology forward?
Tesla Roadster in California Electric Scooters in Asian city
High tech, high cost, small market Low tech, low cost, large demand
Both!
+ 8
Which will provide broader benefits now?
Tesla Roadster in California Electric Scooters in Asian city
High tech, high cost, small market Low tech, low cost, large demand
+The Role of Government
Market Failures provide the rationale for public policies• Examples:
• Environmental externalities• Insufficient investments in clean energy
R&D• Market power (monopolies etc.)• Lack of information
Implication: Green technologies can benefit from policy
10+An Example:Four Energy Challenges
Energy Security
Economic Growth
Energy Access
Climate Change
+ Is it possible to achieve the four energy goals? Yes.
Energy Innovation• New and less expensive
technologies• New markets
Energy Implementation• Clear, credible, and long-
term policy
Energy Integration• New models of
production, consumption, behavior, & business
Energy Transformation• Access to clean energy
services• Development and
economic well-being
Green Growth
+Benefits arise in many development contexts
Less Developed Countries
Middle Income Countries
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Less Developed Countries
Middle Income Countries
Middle income countries’ economies are expanding quickly. At this stage, a green growth strategy can bring essential elements for development, such as support for energy efficiency, enhanced access to renewables, efficient mass transport systems, development of clean technology and others.
Benefits arise in many development contexts
+Benefits arise in many development contexts
Less Developed Countries
Middle Income Countries
One of the priorities for many less developed countries is energy access (insert textbox link with graphic).
Problem: How can low income countries in the Sub-Sahara bring electricity to remote, isolated communities?
Solution: The Lighting Africa program is developing commercial off-grid lighting markets in Sub-Saharan Africa to provide off-grid lighting to 2.5 million Africans by 2012 and to 250 million Africans by 2030
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End-Use Energy Efficiency
Power Generation Efficiency and Fuel Switching
Renewables
End-Use Fuel Switching
Advanced Technologies under Development
Key Technology Areas
Example: Green growth and innovation in the energy sector
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End-Use Energy Efficiency
Power Generation Efficiency and Fuel Switching
Renewables
End-Use Fuel Switching
Advanced Technologies under Development
Based on the simple concept of using less energy to provide the same level of output or perform the same task
Key Technology Areas
Credit: Karen Doherty, Ohio Department of Development
Example: Green growth and innovation in the energy sector
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End-Use Energy Efficiency
Power Generation Efficiency and Fuel Switching
Renewables
End-Use Fuel Switching
Advanced Technologies under Development
Key Technology AreasIncludes a variety of technologies including solar, wind, biomass, hydro, and geothermal
© Dana Smillie / World Bank
Example: Place of green innovation in the energy sector
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End-Use Energy Efficiency
Power Generation Efficiency and Fuel Switching
Renewables
End-Use Fuel Switching
Advanced Technologies under Development
Key Technology Areas Choosing the most appropriate energy carrier to supply a given end use while minimizing primary energy consumption
Example: Green growth and innovation in the energy sector
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End-Use Energy Efficiency
Power Generation Efficiency and Fuel
Switching
Renewables
End-Use Fuel Switching
Advanced Technologies under Development
Key Technology AreasIncreasing efficiency of power plants and switching to cleaner fuels
Example: Green growth and innovation in the energy sector
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End-Use Energy Efficiency
Power Generation Efficiency and Fuel Switching
Renewables
End-Use Fuel Switching
New Technologies – Advanced and
“Mundane”
Key Technology Areas
Brazil Pres. Lula driving VW Gol, first production gas/ethanol vehicle, Brazil
2003
Example: Green growth and innovation in the energy sector
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+Policies to Support Green Innovations
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Policy Option
s
Innovation
Regulations and
Standards
Price Instruments
Quantity Instruments
International
Cooperation
Green growth benefits from complementary policies
Source: Sierra, Hultman, & Shapiro
+
Policy Option
s
Innovation
Regulations and
Standards
Price Instruments
Quantity Instruments
International
Cooperation
Green growth benefits from complementary policies
Source: Sierra, Hultman, & Shapiro
+Policy instruments for
innovation
Innovation policies
Promote frontier
innovation
Strengthen adaptive innovation
Improve absorptive capacity
Strengthen internation
al collaboratio
n
Innovation policies for promoting frontier innovation
+Supply side “technology
push”
Strengthen national research systems
Provide Research Grants
Tax credits for energy research
Public funding to labs and universities
Early stage development finance
The traditional supply-push mechanism:• More influence over research• Select participants to projects
IEA estimates: $1 trillion per year until 2050 in 17 key technologies
Demand side “market pull”
Innovation policies for promoting frontier innovation
+Supply side “technology
push”
Strengthen national research systems
Provide Research Grants
Tax credits for energy research
Public funding to labs and universities
Early stage development finance
Government donations to universities or individuals to undertake research in the energy field.
Benefits: easy to target specific sectors of the energy field and also include requirements of social co-benefits.
Weakness: does not ensure commercialization, as it only affects early stages in the technology cycle.
Demand side “market pull”
Innovation policies for promoting frontier innovation
+Supply side “technology
push”
Strengthen national research systems
Provide Research Grants
Tax credits for energy research
Public funding to labs and universities
Early stage development finance
Tax reductions to entities that undertake desirable research and innovation activities.
• Helps stimulating corporate investment in energy projects
• Allows firms to choose the most profitable research opportunities
But: may promote distorting tax avoidance rather than productive investment in countries with a weak tax enforcement system.
Demand side “market pull”
Innovation policies for promoting frontier innovation
+Supply side “technology
push”
Strengthen national research infrastructure
Provide Research Grants
Tax credits for energy research
Public funding to labs and universities
Early stage development finance
Objective assessment of the national research system in order to improve it, including:
• Develop a national research and innovation strategy for the energy sector and national priority setting
• Work with industrial partners and international donors
• increase access to scientific information
• Establish centers of excellence for clean energy research
• Create programs for entrepreneurship and innovation
• Improve remuneration• of researchers
Demand side “market pull”
+Supply side “technology
push” Demand side “market pull”
Strengthen national research systems
Provide Research Grants
Tax credits for energy research
Public funding to labs and universities
Early stage development finance
Angels and
Venture Capital firms
Policies to support business incubators
Innovation policies for promoting frontier innovation
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Dedicated international VC funding and risk capital for
developing country start-ups,
Training for developed country firms in
understanding BOP needs, conducting demonstration
tests
Government-funded R&D, compulsory licensing, patent pools bilateral and multilateral market access agreements, applied research networks
Allowing firms to access national, regional and global supply chains
Prize funds
Market
Deployment
Special support to small and medium enterprises
Promoting BOP innovation for LED
+ 31
Role for both domestic and international policy
Applied research networks
Advanced Market Commitments
Patent Commons
Patent pools / cross-licensing
agreements
Challenge / prize programs
Business acceleration centers
Joint R&D partnerships
R&D
Procurement / Price support
Basic research networks
Business education at technical universities
Country green growth rankings
International standard setting agreements
Global or regional science foundations
International Green Growth Challenge
Corporation*
Enterprise worker discovery programs
Scholarships, fellowships
Idea marketplaces
Direct Support Indirect Support
Source: Sierra, Hultman, & Shapiro
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Research DemonstrationDevelopment Market formation
Diffusion
Innovation climate
New energy technologies and
processes
Skills and capabilities
Macroeconomic environment Natural
capital
Policies Institutional structures
International Technological collaboration
Source Modified from WESS 2010
National Innovation Ecosystem
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Facilitate access
Stimulate uptake
Adaptive innovation requires policies that
Strengthening Innovation
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Improve financial infrastructure
Public Procurement
Standards
Regulations• Guaranteed feed-in tariffs for renewables• Taxes and tradable permits for emissions pollution• Tax credits for new technologies (e.g. for compact fluorescent light bulbs)• Government rules (e.g. limits to polluting emissions from industrial plants)
Strengthening Innovation
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Improve financial infrastructure
Public Procurement
Standards
Regulations
Stimulate the uptake of technologies
• Improve quality of the business environment and governance conditions• Improve the bureaucratic climate and the formal/informal regulations regarding economic transactions• Shorten official licensing procedures for entrepreneurial activity
Strengthening Innovation
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Improve financial infrastructure
Public Procurement
Standards
Regulations
Stimulate the uptake of technologies
• Help firms to reduce the early stage production costs • Motivate new companies to enter the clean energy market• Raises awareness among consumers• Lead to economic competitiveness in the energy sector
Strengthening Innovation
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Improve financial infrastructure
Public Procurement
Standards
Regulations
Stimulate the uptake of technologies
•Guarantees to foster markets of green energy
• Generate green jobs in the energy sector
Strengthening Innovation
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+Policy Strategies to support Green “Innovation Ecosystems”
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Source: OECD/IEA 2008
Prototype & demonstratio
n stage
High cost-gap
technologies (PV)
Low-cost gap
technologies (Wind onshore)
Research Development Market formation
Demonstration Diffusion
National
International
Support R&D through funding, tax credits, grants, sticky city policies, global connectivity of firms
Early stage development finance, promote business incubators, VC funding and risk capital, Policies for market re-entry and experimentation, global connectivity of firms
Stimulate market pull through standards, procurement, sticky city policies
Mature technologie
s (Hydropowe
r)
University networks, Science centers, patent collaboration
Mark
et
Deplo
ym
ent
The Kyoto Technology Mechanism
CDM projectsTrade and FDI
Procurement
Framework for National Innovation Policies
40Regional Science Foundations
Regional Science Foundations
National Business Incubators
National Business Incubators
Investment De-risking Funds
Investment De-risking Funds
Academic Institutes
Academic Institutes
Fund 1:Risk capital
Fund 1:Risk capital
Fund 2: IPSharing
Fund 2: IPSharingStart-upsStart-upsEntre-
preneurs Entre-
preneurs
UniversitiesUniversities
PublicLabs
PublicLabs
PrivateLabs
PrivateLabs
NGOs, thinktanks
NGOs, thinktanks
Project developers
Project developers
IP developers
IP developers
Non-profitIP buyers Non-profitIP buyers
Services provided:
• Regional priority setting • Research funding • Cooperative / Extension programs• Scholarship / Fellowship funding• Curriculum design support • International scientific and entrepreneurial “study abroad”
• Business plan assistance• Market intelligence • Access international venture capital • Fundraising & pitch training • IP training & policy advisory • Office space • Networking facilitation• Tech transfer assistance
• Equity and debt instruments to de-risk capital investment in developing countries • Funding to purchase IP from developers• Funding to subsidize patent licensing to non-profit or socially-oriented technology deployment groups
Research Development Demonstration DeploymentSource: Sierra, Hultman, & Shapiro
41+Conclusions: Innovation for Low-Emissions Development
Transformative innovations may not happen in predictable places
Refocus on supporting the diversity of innovation
Domestic: Regulatory and business environment IP Standards National priorities
International: Regional Science Foundations National Business Incubators De-risking funds
+Hultman, Sierra, Shapiro, and Eis, Green Growth Innovation, The Brookings Institution 2012
World Bank (2012) Dutz, Mark and Sharma, Siddarth, Green Growth, Technology & Innovation. Policy Research Working Paper 5932
World Bank (2012) Inclusive Green Growth The Pathway to Sustainable Development. Washington: The World Bank
World Economic and Social Survey 2011, The Great Green Technological Transformation, The United Nations: New York
Tomlinson, Shane, Zorlu, Pelin and Langley, Claire (2008) E3G report launch: Innovation and Technology Transfer: Framework for a Global Climate Deal.
Xiaomei Tan and Zhao Gang. “An Emerging Revolution: Clean Technology Research, Development and Innovation in China.” WRI Working Paper. World Resources Institute, Washington DC.
Sauter, Raphael and Jim Watson, (2008) Technology Leapfrogging: A Review of the Evidence, Sussex Energy Group, University of Sussex, 2008.
IEA (2010) Energy Technology Roadmaps: a guide to implementation, IEA: Paris
Dechezleprêtre, Antoine, Matthieu Glachant, Ivan Hascic, Nick Johnstone, and Yann Ménière. (2011) Invention and transfer of climate mitigation technologies on a global scale: a study drawing on patent data.
Further Readings
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Acknowledgments
• Kathy Sierra and Allison Shapiro (Brookings Institution)
• Pablo Benitez, Alex Bozmoski, and Amanda Jerneck (World Bank)
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Dr. Nathan E. HultmanAssoc. Professor & Director, Environmental Policy ProgramSchool of Public Policy, University of MarylandNonresident Fellow, The Brookings Institutionhultman@umd.edu
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