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Sess ion 2 : I nnovat ion po l i cy, env i ronment , and growth : Comments on innovat ion po l i cy

PD Dr. Ra iner Wa lz H e a d o f C o m p e t e n c e C e n t e r “ S u s t a i n a b i l i t y a n d

I n f r a s t r u c t u r e ” Fr a u n h o f e r I n s t i t u t e S y s t e m s a n d I n n o v a t i o n R e s e a r c h

UNEP WORKSHOP “DESIGNING THE GREEN ECONOMY”

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Seite 2

Questions and content

Questions Combining public and private (market-based) mechanisms? Need for well

functioning innovation system How to affect rate and direction of technological change? Need for a

visions based innovation policy Mix of instruments and characteristics of policies: Integration of second

(or third) best policies in different policy arenas; single instruments often hindered by political economy (e.g. taxes, emissions trading)

Has technology leadership worked? Common features of success: Feedback loops and lead market factors for success of first movers

Indicators other than patents? Use more than patents, but patents have certain advantages; need for innovation policy indicators (because a lot of green innovations will be organizational)

Key challenges in medium and low income countries? Increase absorptive capacities and understand that environmental policy can also be good industrial policyno one size fits all solution, but importance of international knowledge acquisition (but IPR issues not as important as in pharmaceuticals)

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Prerequis ite for green growth: a functioning innovation system for green innovationsGeneral prerequisites

• General frame-work conditions

• Interactions between actors, networks, institutions

• Knowledge baseSpecificities of green innovations:

• Demand shaped by regulation

• Grid-based infrastructure : high path dependency

• Long time-horizon and uncertainties

Demand for sustainabilitytechnologies

Industrial policy

Environmentalregulation

Environmentalproblems

resourceavailability

Inte

rna

tion

al t

rad

e

Inte

rna

tion

ale

po

licie

s

competences insustainabilitytechnologies

research relatedto sustainability

technologies

General framework conditions for innovations

ResearchSystem

IndustrialSystem

R&D Policy

Policy-coordi-nation

Public utility regulation

Market Regulation

Context factorsfor policy design

and impacts

Rate and direction of technological change need policy mix and policy integration

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New vision based approachNeed for targeted approach

to direct enabling technologies towards green growth to foster radical approaches in addition to incremental innovations of

incumbents

Skepticism with regard to use of traditional „man to the moon“ mission approach Not only high tech sectors are involved Not one big clear technological vision, but also many small solutions Many institutional and organizational innovations, which require knowledge

of users, learning in the market, involvement of many value chains across sectors

Not only public demand, much higher role of private actors necessary

Towards a new “vision based” approach Must combine target orientation of the traditional missions approach with

the need to involve much more private actors and solutions from outside “high-tech”

=> Base R&D priorities on missions to achieve green growth

=> Develop the perspective of radical change (roadmapping of transition to system change)

=> Look into cluster management as an approach to integrate more actors

=> Use environmental and sectoral policies also as tool to integrate activities of private actors in the vision based R&D

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Characterist ics of pol ic ies to stimulate innovation

Criteria for regulation Type of regulatory

instrument (market based)

Allow diversity of (techn.) approaches

Policy style Predictability and

incentives Influence on

Transaction costs Open for newcomers Overcoming path

dependency•Don’t focus on type of instrument only; policy style, long-term vision and stability and legitimacy of policy might be more important• there is no “one size fits all” policy prescription

Results from econometric study for 12 OECD-countries (binominal panel estimation) for wind turbines Dependent variable: transnational patents in

wind energy Explanatory variables

R&D subsidies Domestic demand Exports (foreign demand) Policy indicator, reflecting type of

instrument (FIT versus quota), diversity of supported technologies, policy style)

Explanatory variables highly significant in explaining patent development and differences between countries Source: Walz et al. 2011

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Characteristics of successful technological leadership

Success if virtuous cycles are established Interplay of demand (environmental)

and supply (R&D) policies Positive feedback loops between

different functions of an innovation system which are triggered by private and public response

Conditions for success in national competitiveness: lead market factors Technology characteristics: first

mover advantage not for every technology

Technological capability advantage Complementary cluster advantage Market characteristics: Price and

demand advantage, Transfer and export advantage

Regulatory advantage

Example for positive feedbacl loop

Source: Hekkert et al. 2009

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Measurement of innovation with indicators Different innovation

indicators because of systemic nature of innovation process Input indicators, e.g. number of

scientists, R&D expenditure Intermediate indicators, e.g.

publications, patents Output indicators, e.g. share of

production with innovations, exports

Statistical databases not easy to classify green

technologies ; time series, international

comparability Surveys

Can be tailored to specific questions

Bias in response? Comparability and availability

ISI database on green innovation indicators

Green innovations in- Energy supply- Energy efficiency- Material efficiency and renewable resources- Transport and mobility- Sustainable water industry- Waste management

Detailed technology-based bottom-up analysis necessary to translate technologies into suitable classification

Database- Publications: SCOPUS, SCI- Patents: transnational patents- Trade: UN-COMTRADE (all countries)

CET-technologies

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Competit iveness and technological capabil ity

Business won‘t become active unless there is a clear opportunity:innovation policy requires strategic positioning and priority setting;

EU US JP China S. Korea0%5%

10%15%20%25%30%35%40%45%50%

publication share patent share trade shareTrade without Intra-EU Data: Fraunhofer ISI lead market database

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Competit iveness and technological capabil ity

Newly industrializing countries are increasing their capabilities, but no homogenous development between countries, and between different innovation phases

Source: Walz and Marscheider 2011

BR CN IN KR AR CL ID MY MX PH SG ZA TH VE

-2%

0%

2%

4%

6%

8%

10%

12%

literature share patent share export share

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Development of green technology related publications

Green innovation publications (SCOPUS) – strong increase in NICs

Source: Walz and Marscheider 2011

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Innovation system case study on wind energy technologies

China and India both show successful development with regard to diffusion and manufacturing

Different policy avenues…

…but similar strategies with regard to international knowledge acquisition

1980 1985 1990 1995 2000 2005 20100

5,000

10,000

15,000

20,000

25,000

30,000

35,000

25,805

10,926

19,149

35,064

25,777

GermanyUSSpainIndiaChinaDenmarkFranceItalyUK

Source: Worldwatch; CREIA; AWEA; GWEC; Demarcq; BWEA; ANEV; EWEA

Meg

awatt

s

Spain

India

Italy

UKFrance

United States

Denmark

Italy

UKFrance

GermanyChina

Accumulated installed wind energy capacity

Source Walz and Nowak Delgado 2010

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knowledge bui ld-up and IPR: example of Indian and Chinese wind turbine industry Early 1990’s: no Chinese wind turbine industry, India starts

Strategy of Suzlon (started in the 1990s) 1996: production licence for 270-750 kW turbine from Suedwind 2001: rotor blade production licence from Enron Wind 2005: joint venture for generators with Austrian ELIN Motoren 2006: acquisition of gearbox manufacturer Hansen 2007: acquisition of Repower

Strategy of Goldwind (founded 1999) 1999/2001: production license 600/750 kW turbine from Jacobs/Repower Since mid 2000s: joint development of MW size turbines with Vensys 2008: Goldwind acquires 70 % of Vensys

Strategy of Sinovel (founded 2004) Joint development of 1.5 MW turbine with Fuhrlaender Joint development of 3.0 MW turbine with Windtec Strategy of Dongfang (founded in 2005) Production license of 1.5 MW turbine from Repower Joint development of 2.5 MW turbine with Aerodyn (IPR owned by Dongfang)

1 Indian and 3 Chinese companies supply 20 % of global market

Strategy moves from licensing to joint development to M&A

Second tier European producers as key partners

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Thank you very much for your attention!

Information:Rainer.Walz@isi.fraunhofer.de

Sources: Walz, R. and Marscheider, F.: Technology specific absorptive capacities in Newly Industrialzing

Countries, in: International Journal of Technology and Globalisation, Vol. 5, 2011, Nos. 3 / 4 (Special Issue on Sustainability innovations in Newly Industrializing Countries)

Walz, R.; Schleich, J. : The economics of climate policy: macroeconomic effects, structural adjustments, and technical change, Heidelberg: Physica 2009.

Walz, R. et al. (2011): Regulation, innovation and wind power technologies: An empirical analysis of OECD countries, final.dime-eu.org/files/Walz_C5.pdf

Walz, R and Nowak Delgado, J. 2010: Innovation in sustainability technologies - Globelics 2010 conference Malaysia http://umconference.um.edu.my/upload/43-1/papers/216%20RainerWalz_JonathanNowakDelgado.pdf

Walz R. et al.: Towards modeling ead markets in environmental technologies – indicators and modeling approach, Working paper No. 5 of Fraunhofer ISI/ZEW/FFU lead market project http://kooperationen.zew.de/lead-markets/ergebnisse.html