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UNEP workshop “Designing the Green Economy” . Session 2: Innovation policy, environment, and growth: Comments on innovation policy PD Dr. Rainer Walz Head of Competence Center “Sustainability and Infrastructure” Fraunhofer Institute Systems and Innovation Research. Questions

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unep workshop designing the green economy
UNEP workshop “Designing the Green Economy”
  • Session 2: Innovation policy, environment, and growth: Comments on innovation policy
  • PD Dr. Rainer Walz Head of Competence Center “Sustainability and Infrastructure” Fraunhofer Institute Systems and Innovation Research
questions and content

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)

Questions and content
prerequisite for green growth a functioning innovation system for green innovations
General prerequisites

General frame-work conditions

Interactions between actors, networks, institutions

Knowledge base

Specificities of green innovations:

Demand shaped by regulation

Grid-based infrastructure : high path dependency

Long time-horizon and uncertainties

Prerequisite for green growth: a functioning innovation system for green innovations

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

new vision based approach
Need 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

New vision based approach
characteristics of policies to stimulate innovation
Characteristics of policies to stimulate innovation
  • Results from econometric study for 12 OECD-countries (binominalpanel 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

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
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

Characteristics of successful technological leadership

Examplefor positive feedbaclloop

Source: Hekkert et al. 2009

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


Can be tailored to specific questions

Bias in response? Comparability and availability

Measurement of innovation with indicators
  • 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)


competitiveness and technological capability
Competitiveness and technological capability

Trade without Intra-EU

Data: Fraunhofer ISI leadmarketdatabase

  • Business won‘t become active unless there is a clear opportunity:
  • innovation policy requires strategic positioning and priority setting;
competitiveness and technological capability1
Competitiveness and technological capability

Source: Walz and Marscheider 2011

  • Newly industrializing countries are increasing their capabilities, but no homogenous development between countries, and between different innovation phases
development of green technology related publications
Development of green technology related publications

Green innovation publications (SCOPUS) – strong increase in NICs

Source: Walz and Marscheider 2011

innovation system case study on wind energy technologies
Innovation systemcasestudy on wind energytechnologies
  • 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

Accumulatedinstalled wind energycapacity

Source Walz and Nowak Delgado 2010

knowledge build up and ipr example of indian and chinese wind turbine industry
knowledge build-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


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, innovationand wind power technologies: An empiricalanalysis of OECD countries, final.dime-eu.org/files/Walz_C5.pdf
    • Walz, R and Nowak Delgado, J. 2010: Innovation in sustainabilitytechnologies - Globelics 2010 conference Malaysia http://umconference.um.edu.my/upload/43-1/papers/216%20RainerWalz_JonathanNowakDelgado.pdf
    • Walz R. et al.: Towardsmodelingeadmarkets in environmental technologies – indicatorsandmodelingapproach, Working paperNo. 5 of Fraunhofer ISI/ZEW/FFU leadmarketprojecthttp://kooperationen.zew.de/lead-markets/ergebnisse.html