Technology Innovation for Technology Innovation for Climate Mitigation and Its Climate Mitigation and Its

Relation to Government PoliciesRelation to Government Policies

Edward S. RubinCarnegie Mellon University

Pittsburgh, Pennsylvania

Presentation to the

UNFCCC Workshop on Climate Change MitigationBonn, Germany

June 19, 2004

E.S. Rubin, Carnegie Mellon

Motivating Questions Motivating Questions

• What kinds of technology innovations are needed to mitigate greenhouse gas emissions linked to global climate change?

• What do we know about the process of technology innovation?

• How do government actions influence the pace and direction of technology innovation?

• What types of policies are needed to stimulate innovations that mitigate GHG emissions?

• How does consideration of technology innovation affect climate policy analysis?

What technology innovations What technology innovations

are needed to mitigateare needed to mitigate

greenhouse gas emissions ?greenhouse gas emissions ?

E.S. Rubin, Carnegie Mellon

Technology Innovations NeededTechnology Innovations Neededto Mitigate COto Mitigate CO2 2 Emissions Emissions

• More efficient technologies for energy conversion and utilization in all end-use sectors (transportation, industry, buildings, agriculture; power generation)

• New or improved technologies for utilizing alternative energy sources with lower or no GHG emissions (such as natural gas and renewables)

• Technologies for CO2 capture and storage (for large-scale industrial processes like electric power generation and fuels production)

E.S. Rubin, Carnegie Mellon

Scale of Deployment NeededScale of Deployment Needed

• To achieve significant CO2 emission reductions, the U.S. alone will have to retrofit or replace: Hundreds of power plants Tens of millions of automobiles per year Hundreds of millions of other end-use devices

• Other industrialized and developing countries will have comparable requirements

Requires deployment of new technology on a massive scale . . . This will not happen overnight!

What do we know about What do we know about

the process of the process of

technology innovation?technology innovation?

E.S. Rubin, Carnegie Mellon

Elements of Technological ChangeElements of Technological Change

• Invention - discovery; creation of knowledge; new prototypes

• Innovation - creation of a commercial product or process

• Adoption - deployment and use of the new technology

• Diffusion - increasing adoption and use of the technology

E.S. Rubin, Carnegie Mellon

The Linear Model of The Linear Model of Technological ChangeTechnological Change

Invention Adoption Diffusion Innovation

E.S. Rubin, Carnegie Mellon

A More Realistic ModelA More Realistic Model

InventionAdoption

(initialdesign)

Diffusion(improved

technology)

Innovation (new or better

product)

LearningBy Doing

LearningBy Using

R&D

How do government actions How do government actions

influence technology innovation?influence technology innovation?

E.S. Rubin, Carnegie Mellon

U.S. “Technology Policy” Tools U.S. “Technology Policy” Tools

Support for Learning and Diffusion of Knowledge and Technology

Education and training

Codification and transfer of knowledge

Technical standard-setting (non-regulatory)

Technology and/or industrial extension services

Publicity and consumer information

Direct or Indirect Support for Commercialization and Production; Indirect Support for Development

Patent protection R&D tax credits Production subsidies or tax

credits to firms bringing new technologies to market

Tax credits or rebates for new technology buyers

Government procurement Demonstration projects

Direct Government Funding of Research and Development (R&D)

R&D contracts with private firms

R&D grants and contracts with universities

Intramural R&D conducted at gov’t laboratories

R&D contracts with consortia (2 or more of the actors above)

• These policies influence different phases of the innovation process• Provide “carrots” to incentivize technological change & innovation

E.S. Rubin, Carnegie Mellon

Detailed report available at:

www.pewclimate.org

E.S. Rubin, Carnegie Mellon

Technology Policies Have Reduced theTechnology Policies Have Reduced theCost of GHG-Friendly Energy SystemsCost of GHG-Friendly Energy Systems

20000

10000

5000

1000

10010 100 1000 10000 100000

1982

1987

1963

1980

Windmills (USA)

RD&D Commercialization

USAJapan

Cumulative MW installed

19811983

500

Photovoltaics

Gas turbines (USA)

US

(199

0)$

/kW 1995

1992

200

2000

Source: IIASA, 1996

E.S. Rubin, Carnegie Mellon

Lessons Learned from Study ofLessons Learned from Study ofU.S. Technology PoliciesU.S. Technology Policies

• To realize the benefits of technology innovation, a balanced policy portfolio must support not only R&D, but also promote technology deployment and diffusion of knowledge

• Technology innovations cannot be planned or programmed; because outcomes are uncertain, policies should support a suite of options and approaches rather than a specific technology or design

• Gov’t support for education and training, as well as research, enhances the infrastructure necessary to support innovation

• Competition among gov’t programs (as well as R&D performers) contributes to innovation by encouraging diverse approaches

• Effective policies and programs require insulation from short-term political pressures that impede steady progress that is critical to long-term innovations

What types of policies are What types of policies are needed to foster innovations needed to foster innovations

for COfor CO2 2 mitigation?mitigation?

E.S. Rubin, Carnegie Mellon

Innovation Policies forInnovation Policies forGHG MitigationGHG Mitigation

• A combination of technology policies that provide incentives for R&D and deployment, together with environmental policies limiting GHG emissions, can foster most effectively innovations that mitigate GHG emissions

E.S. Rubin, Carnegie Mellon

Importance of Environmental Importance of Environmental Policy for Technology InnovationPolicy for Technology Innovation

• Well-designed environmental policies help create markets for the technologies needed to achieve environmental goals; this, in turn, spurs technology innovation

• Especially critical for environmental technologies like CO2 capture and storage systems, that have no “natural” markets in the absence of environmental policies

• Retrospective case studies offer useful insights about the government role in environmental technology innovation; at Carnegie Mellon we have recently been studying: Control of coal-fired power plants emission (SO2 and NOx)

Control of automotive emissions (CO, HC, NOx)

Implications for CO2 capture and storage technologies

E.S. Rubin, Carnegie Mellon

U.S. Patenting Activity in U.S. Patenting Activity in SOSO22 Control Technology Control Technology

CAA Regs + R&DNo Federal R&D Some FederalR&D

(U.S. Patents, Class-based dataset)

U.S. Clean AirU.S. Clean AirAct of 1970Act of 1970

E.S. Rubin, Carnegie Mellon

10%

100%

1 10 100 1000

Cumulative World Capacity of Wet FGD Systems (GWe)

FG

D C

apit

al C

ost

(% o

f b

ase

valu

e) y = 1.45x-0.168

R 2 = 0.79

19761980

19821990

1995

Historical “Learning Curve” for Historical “Learning Curve” for Flue Gas DeSOx TechnologyFlue Gas DeSOx Technology

Cost reduction = 11%per doubling of

installed capacity;50% reductionover 20 years

(Based on 90% SO(Based on 90% SO22 removal, 500 MW plant, 3.5%S coal) removal, 500 MW plant, 3.5%S coal)

E.S. Rubin, Carnegie Mellon

Patenting Activity Index for Patenting Activity Index for Flue Gas DeNOx Technology Flue Gas DeNOx Technology

0123456789

101112

1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998

Year Patent Filed

Pat

ent

Act

ivit

y In

dex

Japan

Germany

Strict NOx regsin Germany

First NOx regs in Japan

E.S. Rubin, Carnegie Mellon

Historical “Learning Curve” Historical “Learning Curve” forforFlue Gas DeNOx TechnologyFlue Gas DeNOx Technology

10%

100%

1 10 100

Cumulative World Capacity of SCR at Coal-Fired Plants (GWe)

SC

R C

apit

al c

ost

(% o

f b

ase

valu

e)

y = 1.28x-0.18

R 2 = 0.75

1983 1989

1996

19951993

Cost reduction = 12%per doubling of

installed capacity

(Based on 80% NO(Based on 80% NOxx removal, 500 MW plant, medium S coal) removal, 500 MW plant, medium S coal)

E.S. Rubin, Carnegie Mellon

Conclusions from Case StudiesConclusions from Case Studies

• The cost of environmental controls at coal-fired power The cost of environmental controls at coal-fired power plants declined significantly with increased plants declined significantly with increased technology deployment, accompanied by sustained technology deployment, accompanied by sustained R&D and “learning by doing” in a global marketplaceR&D and “learning by doing” in a global marketplace

• The The stringencystringency of emission reduction requirements of emission reduction requirements was the major factor in both was the major factor in both stimulatingstimulating and and directingdirecting inventive activities and the deployment of cleaner inventive activities and the deployment of cleaner technologiestechnologies

How does technology innovation How does technology innovation for COfor CO22 abatement affect abatement affect

climate policy analysis? climate policy analysis?

E.S. Rubin, Carnegie Mellon

Conclusions from Modeling StudiesConclusions from Modeling Studies

• Consideration of technological innovation in climate policy analysis can have a significant influence on the projected economic and environmental impacts, and on the outlook for alternative technologies

• The magnitude and timing of these influences depend strongly on the reference case assumptions and the policy scenario considered

• Much more work is needed to better understand and model the key factors that influence technology innovation, especially for environmental technologies