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developed countries, without benefiting economically from the transition to a low-carbon economy, and at risk of ‘premature deindustrialization’ (Rodrik, 2016). Overcoming these differences touches on some of the most controversial aspects of the global political economy, but may be critical for effective innovation policies around the world.
7.5 Conclusion: opportunities and challenges
Creating markets and shaping innovation policy is crucial to bringing about the technologies needed to close the emissions gap. Public sector institutions can take the lead thanks to their unique ability to take risk and be patient and strategic from a societal rather than strictly financial point of view. Equal attention must be given to the supply and demand sides, with feedback loops key to allowing diffusion patterns to feed into innovation patterns. Common success factors include specialist organizations coordinating activities across the innovation chain, patient and strategic finance that leverages other actors, and setting directions while sustaining a portfolio of innovation processes in that direction. A mission-oriented approach to policy can open the innovation process up to a large number of participants.
International collaboration has the potential to unlock additional innovation capacity through leveraging greater pools of money and talent and providing an avenue for international best-practice-sharing. Mission Innovation and its sister organization, the Clean Energy Ministerial, which exists to accelerate technology diffusion, have the potential to play such a role. Other international initiatives have also set ambitious targets, such as the pledge by tropical nations under the International Solar Alliance to help each other mobilize US$1 trillion for solar energy deployment. They can be even more effective when they join with powerful private international initiatives, such as the Breakthrough Energy Coalition, which is committed to funding clean-energy innovation.
Challenges remain, however. Sustaining portfolios of technologies is expensive and identifying which investments to prioritize is challenging, as the innovation landscape alters so quickly during this unprecedented and rapid transition. Innovation organizations must also constantly innovate themselves in order to match realities with policies, while competing for talent with private sector employers. Developing countries face an uphill battle in competing with better-funded competitors from developed countries; furthermore, finding niches that are both emissions-mitigating and revenue-generating is as uncertain as innovation itself. The new international initiatives have great potential but they also face problems inherent in international cooperation. Governments are inclined to cooperate but less willing to send funds across borders, and the same is true of private actors sharing data and insights when they participate in these initiatives (Cherry et al., 2018). Even if innovation is successfully accelerated, the world must still grapple with unintended consequences like the rebound effect where, in the case of energy- saving innovations, part of energy saved per unit of the innovative product is brought back through an increased consumption of the now more efficient, and hence cheaper product or consumption of other energy-intensive products with the money saved on the innovative product (Sorrell 2008; Gillingham et al., 2016).
Public institutions carry a large responsibility for innovation, but in an era of tight budgets, committing the necessary finance is difficult. Organizations leveraging private initiatives need to continue learning and improving. Meanwhile, other issues such as financial market regulation favouring low-carbon portfolios would be a useful complement (Campiglio et al., 2018). Ultimately, however, the policies rely on confident and stable enough public institutions with good governance that can survive short-term economic and funding fluctuations. If they are willing to learn from mistakes while staying confident of their key contribution, they could help dramatically lower GHG emissions over and above current policies.
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