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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.

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Presentation on theme: "+ Innovation Policies to Support Low-Emissions Development Prof. Nathan Hultman University of Maryland School of Public Policy World Bank Institute September."— Presentation transcript:

1 + Innovation Policies to Support Low-Emissions Development Prof. Nathan Hultman University of Maryland School of Public Policy World Bank Institute September 26, 2012

2 + Why green innovation? 2

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. 3

4 + Green Growth Goals: Decoupling Environmental Impacts and Growing 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 5

6 + Solar LED flashlight 6

7 + Which will push battery technology forward? 7 Tesla Roadster in CaliforniaElectric Scooters in Asian city High tech, high cost, small marketLow tech, low cost, large demand Both!

8 + Which will provide broader benefits now? 8 Tesla Roadster in CaliforniaElectric Scooters in Asian city High tech, high cost, small marketLow tech, low cost, large demand

9 + 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 10 Energy Security Economic Growth Energy Access Climate Change

11 + 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

12 + Benefits arise in many development contexts Less Developed Countries Middle Income Countries

13 + 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

14 + 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 2030Lighting Africa 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 2030Lighting Africa

15 + 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

16 + 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

17 + End-Use Energy Efficiency Power Generation Efficiency and Fuel Switching Renewables End-Use Fuel Switching Advanced Technologies under Development Key Technology Areas Includes a variety of technologies including solar, wind, biomass, hydro, and geothermal © Dana Smillie / World Bank Example: Place of green innovation in the energy sector

18 + 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

19 + End-Use Energy Efficiency Power Generation Efficiency and Fuel Switching Renewables End-Use Fuel Switching Advanced Technologies under Development Key Technology Areas Increasing efficiency of power plants and switching to cleaner fuels Example: Green growth and innovation in the energy sector

20 + 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

21 + Policies to Support Green Innovations 21

22 + Policy Options Innovation Regulations and Standards Price Instruments Quantity Instruments International Cooperation Green growth benefits from complementary policies Source: Sierra, Hultman, & Shapiro

23 + Policy Options Innovation Regulations and Standards Price Instruments Quantity Instruments International Cooperation Green growth benefits from complementary policies Source: Sierra, Hultman, & Shapiro

24 + Policy instruments for innovation Innovation policies Promote frontier innovation Strengthen adaptive innovation Improve absorptive capacity Strengthen international collaboration Innovation policies for promoting frontier innovation

25 + 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

26 + 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

27 + 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

28 + 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”

29 + 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

30 + 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 31 Direct SupportIndirect Support Source: Sierra, Hultman, & Shapiro

32 + Research Demonstration Development 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

33 + Facilitate accessStimulate uptake Adaptive innovation requires policies that Strengthening Innovation

34 + 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

35 + 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

36 + 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

37 + 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

38 + Policy Strategies to support Green “Innovation Ecosystems” 38

39 + Source: OECD/IEA 2008 Prototype & demonstration stage High cost- gap technologies (PV) Low-cost gap technologie s (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 technologies (Hydropower ) University networks, Science centers, patent collaboration Market Deployment The Kyoto Technology Mechanism CDM projectsTrade and FDI Procurement Framework for National Innovation Policies

40 40 Regional 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: IP Sharing Fund 2: IP Sharing Start-ups Entre- preneurs Entre- preneurs Universities Public Labs Public Labs Private Labs Private Labs NGOs, think tanks NGOs, think tanks Project developers Project developers IP developers IP developers Non-profit IP buyers 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” 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 Deployment Source: 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 41

42 + 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, 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

43 + 43

44 + Acknowledgments Kathy Sierra and Allison Shapiro (Brookings Institution) Pablo Benitez, Alex Bozmoski, and Amanda Jerneck (World Bank) 44

45 + Dr. Nathan E. Hultman Assoc. Professor & Director, Environmental Policy Program School of Public Policy, University of Maryland Nonresident Fellow, The Brookings Institution Contact


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