XXIII
Innovation in solar photovoltaic (PV) technology illustrates both the nonlinear nature of innovation and how the various innovation policies reviewed drive and shape it. PV was deployed with a compound annual growth rate of about 38 percent from 1998 to 2015, continually defying forecasts. PV diffusion spurred cost reductions through ‘learning by doing’, scale economies and R&D, and also lower profit margins through increasing competition, which in turn stimulated further deployment of ever- cheaper systems. From 1975 to 2016, PV module prices fell by about 99.5 percent, and every doubling of installed capacity coincided with a 20 percent drop in costs. Public innovation policies were, and continue to be, crucial for this process across the innovation chain.
3. Green policies must set a direction for the whole economy, not for each sector separately.
4. Mission-oriented innovation is useful for stimulating investment and innovation across different parts of the economy to reach concrete, target-specific goals, such as X percent cost reduction in a specific low- carbon technology, by a specific date.
5. Policy instruments need to be structured to mobilize actors through bottom-up exploration and participation. All these policies benefit from a long- term design horizon that creates certainty for private finance to be crowded in.
While these principles apply to countries at any stage of economic development, a country’s financial resources and technological capacity determine what types of concrete policies are most appropriate.
Several key issues need to be considered when introducing carbon pricing and phasing out fossil energy subsidies with the aim of reducing carbon emissions. These issues, along with possible ways of addressing them, are illustrated in figure ES.6 below. Embedding carbon pricing in fiscal reform packages that are progressive, equitable and socially acceptable, and incentivizing investment in new and job-creating industries is essential. It is instructive for policymakers to reflect on experience with other environmental fiscal reforms, where positively worded narratives, transparent communication, engagement with stakeholders and appropriate compensation have often helped overcome political and popular resistance to policies that increase fossil energy prices.
7. Accelerating innovation is a key component of any attempt to bridge the emissions gap, but it will not happen by itself. Combining innovation in the use of existing technologies and in behaviour with the promotion of investment in new technologies and market creation has the potential to radically transform societies and reduce their GHG emissions.
Based on an assessment of existing studies of what works, there are five key principles or ‘success factors’ that policymakers should consider when designing policies and programmes to accelerate low-carbon innovation:
1. Public organizations must be willing to take on the high, early-stage risk that private organizations shy away from.
2. At the mid-stage of the innovation chain, public organizations must be able to nurture feedback effects among different parts of the innovation landscape and help de-risk private investment in commercial-scale projects.
In addition to assessing the emissions gap, the Emissions Gap Reports cover opportunities for bridging the gap. Previous reports have demonstrated how proven policies and measures, if scaled up across countries and regions in terms of ambition, stringency and geographical reach can contribute to bridging the emissions gap, while supporting broader development goals. A summary of key areas and sectors covered in previous reports is provided at the back of this report.
In order to illustrate these rather abstract concepts, the global solar photovoltaic (PV) technology development is presented as a case example of how application of the various innovation policy components has been driving and shaping PV technology and market development, with different countries in the lead during different periods.
The PV experience cannot be applied as a universal model, but it illustrates the various innovation success factors and the vision, patience and long-term thinking often required. Indeed, it is useful to reflect on how commercially viable, low-carbon technologies, such as PV and on-shore wind turbines, achieved their present status, when thinking about what is needed to reach new goals. For example, how can we deliver on the need for commercially viable and sustainable batteries and other power-storage technologies to rapidly reduce global transport-sector emissions by 2030? What kind of political vision and combination of public and private resources, at what scale, should be agreed upon and committed to in order to make this happen?
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