Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection Presentation of Dr. Stephan Wimmers Director Research and Technology Policy, Science Policy, Innovation Policy European Clusters and Regions for Eco-innovation and Eco- investments Network – Assembly of the Regions June 1st 2007, Stuttgart

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection Content 1. Introduction - what is meant by Eco-Innovation? 2. Investment Data for the Regions 3. Success in Reduction Environmental Burdens 4. Remarks on Regional State Aid and Eco-Innovation 5. Policy Recommendations

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - what is meant by Eco-Innovation? BundeslandTotal Investment – millions of Euro in 2005 Investment into Environmental Protection – millions of Euro in 2005 Baden-Württemberg7.992,5167,1 Bayern9.095,0224,8 Berlin836,111,0 Brandenburg872,429,8 Bremen514,23,9 Hamburg1.040,845,0 Hessen2.442,956,8 Mecklenburg-Vorpommern403,67,1 Niedersachsen4.154,6100,5 Nordrhein-Westfalen9.020,7294,8 Rheinland-Pfalz2.036,786,0 Saarland813,423,5 Sachsen3.062,438,7 Sachsen-Anhalt1.458,257,3 Schleswig-Holstein807,738,0 Thüringen1.061,920,3 Deutschland45.613,11.204,4 Source:

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - what is meant by Eco-Innovation? Do these numbers really reflect the effort of enterprises in environmental protection and sustainable development? Assumptions for the presentation It is a basic intention of Enterprises to produce with low costs in order to maximise profits or to be competitive. Enterprises fell a strong incentive to minimise the use of input factors in production. This incentive is stronger the higher input prices are. Enterprises Innovation effort often aims to minimise the use of input factors. Enterprises have an in-built environmental protection incentive.

Dr. Stephan Wimmers, June 1st, 2007 What does Innovation mean? According to the definition of Joseph Schumpeter innovation is – introduction of a new good or of a new quality of a good. – introduction of a new method of production. – opening of a new market. – conquest of a new source of supply of raw materials or half- manufactured goods. – carrying out of a new organization of any industry. The Contribution of Innovation to Environmental Protection - what is meant by Eco-Innovation?

Dr. Stephan Wimmers, June 1st, 2007 Which innovations contribute to Environmental Protection? Environmental Technology Goods – Impact: User firms reduce environmental burdens Environmental Protection in Production Processes – Impact: Reduction of environmental damages/use of resources within companies Product-integrated Environmental Protection – Impact: Products with less environmental burdens Environmental Protection Service Companies – Impact: Higher Efficiency and Quality in Customer Firms processes concerning environmental Protection Supporting Environmental Protection Industries – Impact: Environmental Technology firms get access to Environmental Technology and Products The Contribution of Innovation to Environmental Protection

Dr. Stephan Wimmers, June 1st, 2007 Which innovations contribute to Environmental Protection? Environmental Technology Goods – Impact: User firms reduce environmental burdens Environmental Protection in Production Processes – Impact: Reduction of environmental damages/use of resources within companies Product-integrated Environmental Protection – Impact: Products with less environmental burdens Environmental Protection Service Companies – Impact: Higher Efficiency and Quality in Customer Firms processes concerning environmental Protection Supporting Environmental Protection Industries – Impact: Environmental Technology firms get access to Environmental Technology and Products The Contribution of Innovation to Environmental Protection - what is meant by Eco-Innovation?

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions Data sources used: Annual Data from the Business Cycle Analyses of the 81 Chambers of Industry and Commerce among Enterprises. 2. Data from the National Statistical Office 3. Data from Hamburg Institute for Economic Research (HWWA) 4. Data from the Deutsche Bundesbank

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions Source: DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions Source: DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions Source: DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions Source: DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions Source: DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions Source: DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions BundeslandCorrelation CoefficientCoefficient of determination Baden-Württemberg0, , Bayern0, , Berlin0, , Brandenburg0, , Bremen0, , Hamburg0, , Hessen0, , Mecklenburg-Vorpommern-0, , Niedersachsen0, , Nordrhein-Westfalen0, , Rheiland-Pfalz0, , Saarland-0, , Sachsen0, , Sachsenanhalt-0, , Schleswig-Holstein0, , Thüringen0, , The correlation of the price index for Energy-related raw materials and investment into environmental protection between 2001 and 2006 Source: DIHK/Deutsche Bundesbank, calculation by DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions The correlation of the price index for non Energy-related raw materials and investment into environmental protection between 2001 and BundeslandCorrelation CoefficientCoefficient of determination Baden-Württemberg0, , Bayern0, , Berlin0, , Brandenburg0, , Bremen0, , Hamburg0, , Hessen0, , Mecklenburg-Vorpommern-0, , Niedersachsen0, , Nordrhein-Westfalen0, , Rheiland-Pfalz0, , Saarland-0, , Sachsen0, , Sachsenanhalt-0, , Schleswig-Holstein0, , Thüringen0, , Source: DIHK/Deutsche Bundesbank, calculation by DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions The Correlation of the price index for Energy-related raw materials and investment into innovation between 2001 and 2006 BundeslandCorrelation CoefficientCoefficient of determination Baden-Württemberg-0, , Bayern0, , Berlin0, , Brandenburg0, , Bremen0, , Hamburg0, , Hessen0, , Mecklenburg-Vorpommern0, , Niedersachsen0, , Nordrhein-Westfalen0, , Rheiland-Pfalz0, , Saarland-0, , Sachsen0, , Sachsenanhalt-0, , Schleswig-Holstein0, , Thüringen0, , Source: DIHK/Deutsche Bundesbank, calculation by DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions The Correlation between the price index for non Energy-related raw materials and investment into innovation 2001 to BundeslandCorrelation CoefficientCoefficient of determination Baden-Württemberg-0, , Bayern0, , Berlin0, , Brandenburg0, , Bremen0, , Hamburg0, , Hessen0, , Mecklenburg-Vorpommern0, , Niedersachsen0, , Nordrhein-Westfalen0, , Rheinland-Pfalz0, , Saarland-0, , Sachsen0, , Sachsen-Anhalt-0, , Schleswig-Holstein0, , Thüringen0, , Source: DIHK/Deutsche Bundesbank, calculation by DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions The Correlation between the price index for non Energy-related raw materials and rationalisation investment 2001 to BundeslandCorrelation CoefficientCoefficient of determination Baden-Württemberg-0, , Bayern0, , Berlin0, , Brandenburg0, , Bremen0, , Hamburg0, , Hessen0, , Mecklenburg-Vorpommern0, , Niedersachsen0, , Nordrhein-Westfalen0, , Rheiland-Pfalz0, , Saarland-0, , Sachsen-0, , Sachsenanhalt-0, , Schleswig-Holstein0, , Thüringen0, , Source: DIHK/Deutsche Bundesbank, calculation by DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions The Correlation between the price index for non Energy-related raw materials and rationalisation investment 2001 to BundeslandCorrelation CoefficientCoefficient of determination Baden-Württemberg-0, , Bayern0, , Berlin0, , Brandenburg0, , Bremen0, , Hamburg0, , Hessen0, , Mecklenburg-Vorpommern0, , Niedersachsen0, , Nordrhein-Westfalen0, , Rheiland-Pfalz0, , Saarland-0, , Sachsen-0, , Sachsenanhalt-0, , Schleswig-Holstein0, , Thüringen0, , Source: DIHK/Deutsche Bundesbank, calculation by DIHK

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Investment Data for the Regions BundeslandNumber of Enterprises listed in UMFIS Baden-Württemberg1168 Bayern1960 Berlin453 Brandenburg317 Bremen105 Hamburg159 Hessen747 Mecklenburg-Vorpommern239 Niedersachsen556 Nordrhein-Westfalen1617 Rheinland-Pfalz334 Saarland102 Sachsen833 Sachsen-Anhalt622 Schleswig-Holstein385 Thüringen430 Deutschland10027 Database of German companies involved in environmental technologies and services – Information System of the German Chambers of Industry and Commerce -

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Success in Reduction of Environmental Burdens Source: Statistisches Bundesamt, Umweltökonomische Gesamtrechnungen 2006

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Success in Reduction of Environmental Burdens Source: Legler, H., Gehrke, B. u.a. (2005): Zur technologischen Leistungsfähigkeit Deutschlands, Hg.: Bundesministerium für Bildung und Forschung, Berlin

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Remarks on Regional State Aid and Eco-Innovation Can regional state aid improve the willingness of firms to invest into eco-innovation? Compared to total investment into environmental protection regional state aid funds seem to be at very low level in West German Bundesländer. The share of state aid funds that is dedicated for eco-innovation in business firms seems to be very low.  Some Chambers of Commerce confirm that there are some state aid funded projects which lead to higher eco-innovation.  The impact of regional state aid on eco-innovation is limited.

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection - Remarks on Regional State Aid and Eco-Innovation Will the new state aid regulations of the EU increase the willingness of firms to invest into eco-innovations? Market introduction costs for SMEs are usually high. The Risk of Failure in introducing eco-innovations is high for SMEs.  It is much to early to assess the impact of the changes of the new state aid regulations.

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Protection – Policy Recommendations Policy Recommendations 1 Increase Knowledge about Risks of Economic Activities for People and Environment before regulation is adopted. Promote Self-Regulation of Firms and Market-Based Policy Instruments. Existing Policy Instruments (Eco-Tax, Regulations, Subsidies for Re- newables etc.) should be coordinated. Check all Environmental Protection Regulations concerning the Impact on the International Competitiveness of Enterprises. Support SMEs in increasing Energy Efficiency. Extend Energy Research

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental - Protection Policy Recommendations Policy Recommendations 2 The strongest Impact on Eco-Innovation is the Demand of the Consumers. If Consumers demand for Eco-Efficient Products the Firms will produce them. Due to higher costs Eco-Efficient Products are usually expensive compared to other Products. A Price Increase has always to effects: a substitution and an income effect. Will Consumers buy Eco-Efficient Products when they can buy cheaper alternatives?  In a world of globalization with open access to markets German enterprises that produce eco-efficient products have to compensate higher costs for eco-innovation by other competitive advantages.  Competitive advantages can be for example: advanced production technologies, advanced R&D, high skilled employees, perfect infrastructures, perfect business locations, low tax burdens, low red tape burdens.

Dr. Stephan Wimmers, June 1st, 2007 The Contribution of Innovation to Environmental Thank you very much!