Driving Innovation for a Low-Carbon Society
On Thursday 26 April, the German Marshall Fund, together with the Stockholm Environment Institute (SEI) and Bruegel, hosted a roundtable discussion on transatlantic approaches to promote innovation in clean energy. This event was informed by a recently published study by SEI, with the support of 3C (Combat Climate Change), on “Driving Innovation for a Low-Carbon Society”. The speakers were Claude Turmes, member of the European Parliament; Annika Varnäs, research fellow at SEI; Georg Zachmann, research fellow at Bruegel; Giles Dickson, vice president environmental policies and global advocacy at Alstom; and Roberto Zangrandi, head of European institutional relations at Enel. James Kanter, EU correspondent for the International Herald Tribune, moderated.
The discussion focused on the tension between efforts to “push” innovation through research and development or measures directed at specific companies or sectors and to “pull” innovation by creating market demand. Georg Zachmann explained that (somewhat counter-intuitively) the EU tends to adopt “pull” measures that create the market whereas while the United States prefers “push” measures that favor specific technologies. An approach that focuses too much on creating market demand is not sustainable and a better mix is required, but this raises the tricky problem of requiring policymakers to be more selective in the technologies to promote. Annika Varnäs focused on innovation in solar photovoltaic energy and found that drivers and barriers to the development of this sector in Europe are on the “pull side”, including EU-wide targets for renewable energy and emission reductions, feed-in tariffs, and predictable subsidies. On the other side of the Atlantic, the United States is more focused on the “push” side, through research in solar PV technologies. The United States is still a net exporter of solar PV technology, despite competition from low-cost countries.
Claude Turmes argued against pessimism in policy measures to drive innovation in renewable energy. He emphasized the importance of market access, noting that even if production in solar PV shifts to China, for instance, most of the added value is still created in the EU and United States where the technologies are deployed. Giles Dickson stressed the importance of demonstration in the innovation chain (which runs from pure R&D, applied R&D, pilot projects, demonstration projects, and deployment). This approaches the most expensive part of the innovation chain. Roberto Zangrandi held out the importance of carbon capture and sequestration, which he described as an essential focus for innovation measures because of the role that fossil fuels will play in the energy mix for the coming decades.
The discussion revealed a wide menu of choices and dilemmas facing policymakers. Policymakers should frame the market – which is good at choosing technology - rather than proposing short-term policies that give specific advantage to certain clean energy technologies but distort the market. One essential component will be the development of a smart grid to allow the use an efficient mix of the sources that we have at our disposal (sun from the South, wind from the North, etc.).