Green technology and innovation

Rationale and objectives

Reducing global greenhouse gas (GHG) emissions and protecting environmental assets will require innovation and the large-scale adoption of green technologies. Without innovation, it will be very difficult and very costly to sustain current growth trajectories while addressing major environmental issues such as climate change. Consequently, OECD governments and emerging economies are giving priority to R&D activities and incentives for the diffusion and adoption of green technologies.

Major aspects

The building blocks of any effective Green Growth Strategy are clear and stable price signals on environmental emissions, e.g. carbon pricing or other market instruments such as taxation and regulation that reduce the environmental externalities caused by economic growth. However, better pricing will not be enough to decouple growth from environmental degradation. There is thus a clear role for government to ensure that framework conditions and policies towards firms and entrepreneurs provide incentives for private investment in green innovation. Government also has a role in supporting public R&D for green innovation. Evidence from government budget appropriations or outlays for R&D (GBAORD) by socio-economic objectives indicate that OECD countries such as Canada, Estonia, Finland, Italy, Japan, Mexico and New Zealand are devoting relatively high shares of public R&D budgets to energy and the environment (Figure 9.1).

Figure 9.1 Government R&D budgets for energy and the environment, 2011
As a percentage of total government R&D budget

Source: OECD Research and Development Statistics (RDS) Database, February 2012.

Recent policy trends

Green innovation goals are increasingly part of national innovation strategies (Brazil, Canada, People's Republic of China, Finland, Germany, Japan); energy strategies (Austria, Australia, Norway, Portugal, Switzerland); water and transport strategies (Israel); strategies for small and medium-sized enterprises (SMEs) (France); or green growth strategies or action plans (Belgium, Denmark, Hungary, Ireland, Korea, Luxembourg, South Africa, Sweden).
Beyond the EU, Australia and New Zealand, economy-wide carbon trading systems have had less priority. From July 2012, Australia introduced a fixed price on carbon emissions, starting at USD 14.5 (AUD 23) a tonne of CO2 emissions with obligations placed on around 500 of the largest emitters.
The patent system is also being adapted to encourage green inventions. This includes the accelerated examination of patent applications directed to green technologies by national intellectual property (IP) offices in Australia (from 1 year to 4-8 weeks), Brazil (announced), Canada (within 2 months), Israel (within 3 months), Japan (from 2 years to 3 months), Korea (from 18 months to 1 month), the United Kingdom (from 2-3 years to 9 months) and the United States (terminated in February 2012).
Public support to green innovation mainly takes the form of direct R&D grants to SMEs, even if specific sectors (water, transport, energy) and general purpose technologies (information and communication technologies [ICTs], biotechnology and nanotechnologies) are being targeted. Governments are also expanding the supply of risk capital for green technology through equity and debt finance (e.g. the United Kingdom's Green Investment Bank, capitalised with USD 4.5 billion – GBP 3 billion). The US and UK governments as well as foundations and large companies are also using prizes to induce green technological innovations. In countries such as Norway, support for late-stage development (such as pilot plants) has increased strongly for green technologies generally and for energy technologies in particular.
For skills development, the focus in many OECD countries has been mainly on supporting on-the-job training and adapting tertiary and vocational training to meet new occupational needs. Germany's Green Talents programme intends to foster international exchanges among young researchers in the field of environmental and sustainability research.
Historically regulations, together with subsidies and feed-in tariffs, have been the main policy tools for fostering market uptake of greener technologies. Recently, many countries have started to use targeted demand-side innovation policies such as public procurement, standard-setting, and consumer policy to encourage demand for green technologies. Examples include green public procurement legislation in Finland, Italy, Japan, Korea, the Netherlands, Norway, Poland and Spain. Germany has modified its feed-in tariffs for renewable energy technologies by granting an additional premium for innovations.
Because greening the economy requires scientific discovery and inventions in areas other than energy or the environment, OECD countries continue to support public R&D in a broad range of scientific fields as well as targeted research programmes for climate change and biodiversity. Examples include the Finnish research programmes on climate change (USD 12.5 million – EUR 12 million) and on aquatic resources (USD 11.5 million – EUR 11 million).
OECD countries are establishing institutions and agencies to co-ordinate and manage the diverse array of green growth strategies, programmes and initiatives. Australia's Renewable Energy Agency and Multi-Party Climate Change Committee, Chile's Renewable Energy Centre, Korea's Presidential Committee on Green Growth, New Zealand's Green Growth Advisory Group, the Slovak Republic's Innovation and Energy Agency, South Africa's Energy Finance Subsidy Office, Switzerland's Federal Energy Research Commission, the United Kingdom's Technology Strategy Board and Low Carbon innovation Group are just a few of the institutions created to improve vertical and horizontal policy governance for green innovation (see Chapter 2).


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