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Innovation Policies to Support
Low-Emissions Development
Prof. Nathan Hultman
University of Maryland School of Public Policy
World Bank Institute
September 26, 2012
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Why green innovation?
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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:
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Decoupling Environmental Impacts and
Growing the Economy
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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
services
new business models to provide
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Solar LED flashlight
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Which will push battery
technology forward?
Both!
Tesla Roadster in California
Electric Scooters in Asian city
High tech, high cost, small market
Low tech, low cost, large demand
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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
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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
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An Example:
Four Energy Challenges
Climate
Change
Energy
Access
Economic
Growth
Energy
Security
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Is it possible to achieve the four
energy goals? Yes.
Energy Innovation
Energy Implementation
• New and less expensive
technologies
• New markets
• Clear, credible, and longterm policy
Green
Growth
Energy Integration
Energy Transformation
• New models of production,
consumption, behavior, &
business
• Access to clean energy
services
• Development and economic
well-being
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Benefits arise in many
development contexts
Middle Income Countries
Less Developed Countries
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Benefits arise in many
development contexts
Middle Income Countries
Less Developed 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.
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Benefits arise in many
development contexts
One of the priorities for many less
developed countries is energy
access (insert textbox link with
graphic).
Middle Income Countries
Less Developed Countries
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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Example: Green growth and innovation
in the energy sector
Key Technology Areas
End-Use Energy Efficiency
Renewables
End-Use Fuel Switching
Power Generation Efficiency
and Fuel Switching
Advanced Technologies under
Development
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Example: Green growth and innovation
in the energy sector
Key Technology Areas
End-Use Energy Efficiency
Based on the simple concept of using less
energy to provide the same level of output
or perform the same task
Renewables
End-Use Fuel Switching
Power Generation Efficiency
and Fuel Switching
Advanced Technologies under
Development
Credit: Karen Doherty, Ohio Department of
Development
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Example: Place of green innovation in
the energy sector
Key Technology Areas
End-Use Energy Efficiency
Includes a variety of technologies
including solar, wind, biomass, hydro, and
geothermal
Renewables
End-Use Fuel Switching
Power Generation Efficiency
and Fuel Switching
Advanced Technologies under
Development
© Dana Smillie / World Bank
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Example: Green growth and innovation
in the energy sector
Key Technology Areas
End-Use Energy Efficiency
Renewables
End-Use Fuel Switching
Power Generation Efficiency
and Fuel Switching
Advanced Technologies under
Development
Choosing the most appropriate energy
carrier to supply a given end use while
minimizing primary energy consumption
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Example: Green growth and innovation
in the energy sector
Key Technology Areas
End-Use Energy Efficiency
Renewables
End-Use Fuel Switching
Power Generation Efficiency
and Fuel Switching
Advanced Technologies under
Development
Increasing efficiency of power plants and
switching to cleaner fuels
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Example: Green growth and innovation
in the energy sector
Key Technology Areas
End-Use Energy Efficiency
Renewables
End-Use Fuel Switching
Power Generation Efficiency
and Fuel Switching
New Technologies –
Advanced and “Mundane”
Brazil Pres. Lula driving VW Gol, first
production gas/ethanol vehicle, Brazil 2003
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Policies to Support Green
Innovations
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+ Green growth benefits from
complementary policies
Innovation
Regulations
and
Standards
International
Cooperation
Policy
Options
Quantity
Instruments
Price
Instruments
Source: Sierra, Hultman, & Shapiro
+ Green growth benefits from
complementary policies
Innovation
Regulations
and
Standards
International
Cooperation
Policy
Options
Quantity
Instruments
Price
Instruments
Source: Sierra, Hultman, & Shapiro
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Innovation policies for promoting frontier innovation
Policy instruments for
innovation
Innovation policies
Promote
frontier
innovation
Strengthen
adaptive
innovation
Improve
absorptive
capacity
Strengthen
international
collaboration
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Innovation policies for promoting frontier innovation
Supply side “technology push”
Demand side “market pull”
Public funding to labs
and universities
Provide Research
Grants
Tax credits for energy
research
Strengthen national
research systems
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
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Innovation policies for promoting frontier innovation
Supply side “technology push”
Demand side “market pull”
Public funding to labs
and universities
Provide Research
Grants
Tax credits for energy
research
Strengthen national
research systems
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.
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Innovation policies for promoting frontier innovation
Supply side “technology push”
Public funding to labs
and universities
Provide Research
Grants
Tax credits for energy
research
Strengthen national
research systems
Early stage
development finance
Demand side “market pull”
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
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But: may promote distorting tax
avoidance rather than productive
investment in countries with a weak
tax enforcement system.
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Supply side “technology push”
Demand side “market pull”
Public funding to labs
and universities
Provide Research
Grants
Tax credits for energy
research
Strengthen national
research infrastructure
Early stage
development finance
Objective assessment of the national research system
in order to improve it, including:
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Develop a national research and innovation
strategy for the energy sector and national priority
setting
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Work with industrial partners and international
donors
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increase access to scientific information
• Establish centers of excellence for clean energy
research
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Create programs for entrepreneurship and
innovation
• Improve remuneration
• of researchers
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Innovation policies for promoting frontier innovation
Supply side “technology push”
Public funding to labs
and universities
Provide Research
Grants
Tax credits for energy
research
Strengthen national
research systems
Early stage
development finance
Policies to support business incubators
Demand side “market pull”
Angels and
Venture
Capital
firms
+ Promoting BOP innovation for LED
Dedicated international VC
funding and risk capital for
developing country start-ups,
Training for developed country
firms in understanding BOP
needs, conducting
demonstration tests
Prize funds
Special support to
small and medium
enterprises
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
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Role for both domestic and
international policy
Direct Support
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Indirect Support
Applied research networks
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Basic research networks
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Advanced Market Commitments
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Business education at technical universities
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Patent Commons
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Country green growth rankings
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Patent pools / cross-licensing
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International standard setting agreements
agreements
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Global or regional science foundations
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Challenge / prize programs
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International Green Growth Challenge
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Business acceleration centers
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Joint R&D partnerships
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Enterprise worker discovery programs
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R&D
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Scholarships, fellowships
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Procurement / Price support
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Idea marketplaces
Corporation*
Source: Sierra, Hultman, & Shapiro
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National Innovation Ecosystem
Innovation climate
Macroeconomic
environment
Research
Natural capital
Development
Demonstration
Policies
Market
formation
Diffusion
Institutional structures
Skills and capabilities
International
Technological
collaboration
New energy
technologies and
processes
Source Modified from WESS 2010
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Strengthening Innovation
Adaptive innovation
requires policies that
Facilitate access
Stimulate uptake
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Strengthening Innovation
Regulations
Improve financial
infrastructure
Public
Procurement
Standards
• 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)
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Strengthening Innovation
Stimulate the uptake of
technologies
Regulations
Improve financial
infrastructure
Public
Procurement
Standards
• 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
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Strengthening Innovation
Stimulate the uptake of
technologies
Regulations
Improve financial
infrastructure
Public
Procurement
Standards
• 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
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Strengthening Innovation
Regulations
Improve financial
infrastructure
Public
Procurement
Standards
•Guarantees to foster markets of green energy
• Generate green jobs in the energy sector
Stimulate the uptake of
technologies
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Policy Strategies to support
Green “Innovation Ecosystems”
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Market Deployment
Framework
for
National
Innovation
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Policies
National
Research
Development
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
International
Low-cost
gap
technologie
s (Wind
onshore)
High costgap
technologies
(PV)
Prototype &
demonstration
stage
University
networks, Science
centers, patent
collaboration
Demonstration
The Kyoto Technology
Mechanism
Mature
technologies
(Hydropower
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Market formation Diffusion
Stimulate market pull
through standards,
procurement, sticky city
policies
Trade and FDI
Procurement
CDM projects
Source: OECD/IEA 2008
Regional Science
Foundations
Academic
Institutes
NGOs, think
tanks
Public
Labs
National Business
Incubators
Private
Labs
Entrepreneurs
Fund 1:
Risk capital
Start-ups
Project
developers
Universities
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Investment
De-risking Funds
Fund 2: IP
Sharing
IP
developers
Non-profit
IP buyers
Services provided:
• Regional priority setting
• Research funding
• Cooperative / Extension
programs
• Scholarship / Fellowship
funding
• Curriculum design support
• International scientific and
entrepreneurial “study abroad”
Research
• Business plan assistance
• Market intelligence
• Access international venture
capital
• Fundraising & pitch training
• IP training & policy advisory
• Office space
• Networking facilitation
• Tech transfer assistance
Development
Demonstration
• 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
Deployment
Source: Sierra, Hultman, & Shapiro
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Conclusions: Innovation for LowEmissions Development
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Transformative innovations may not happen in predictable places
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Refocus on supporting the diversity of innovation
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Domestic:
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Regulatory and business environment
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IP
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Standards
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National priorities
International:
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Regional Science Foundations
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National Business Incubators
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De-risking funds
+ Further Readings
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.
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Acknowledgments
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Kathy Sierra and Allison Shapiro
(Brookings Institution)
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Pablo Benitez, Alex Bozmoski, and
Amanda Jerneck (World Bank)
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Contact
Dr. Nathan E. Hultman
Assoc. Professor & Director, Environmental Policy Program
School of Public Policy, University of Maryland
Nonresident Fellow, The Brookings Institution
hultman@umd.edu