presentation_script (8).pdf

Module 04Supporting Innovation for Green Growth

Lesson 3Policy instruments to stimulate entrepreneurship &

absorptive capacity and strengthen international collaboration

World BankInstitute

Energy Sector Strategies to

Support Green Growth

Presentation Script

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Presentation Script Module 4: Supporting Innovation for Green Growth. Lesson 3: Policy instruments

Energy Sector Strategies to Support Green Growth

About this Presentation

In the previous lesson, you learnt about policies to promote frontier innovation

and strengthen adaptive innovation. In this lesson we will explore policies to

stimulate entrepreneurship & absorptive capacity of firms as well as mechanisms

for international collaboration.

This lesson will address the following topics

More specifically, you will learn about;

• Policies to stimulate entrepreneurship and firms’ absorptive capacity

• How international collaboration mechanisms can support research,

development and adoption of green technologies, with a special focus on

south-south collaboration

• We will also provide some links to references and resources for more

information.

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Innovation policies to stimulate entrepreneurship & absorptive capacity

We start with policies that can stimulate entrepreneurship and the absorptive

capacity of firms.

Entrepreneurship and the absorption of existing technologies can be stimulated

through market transformations. This means policies that tackle constraints that

impede experimentation and at the same time encourage entrepreneurship and

innovative behavior. We will look at three cross-cutting policy areas that are vital

for creating a business environment that enhances entrepreneurs’ and firms’

capacity to commercialize, absorb, and adapt knowledge.

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The first policy goal is to encourage experimentation and quick market re-entry

following failure, the second is to facilitate collaborative learning by workers and

firms globally, and third is attracting and retaining talent to countries.


An essential step for increasing firms’ absorptive capacity is simply o let them

abandon less successful businesses when they fail and at the same time

encourage them to re-enter the market with renewed experimentation.

One of the best ways to get people to try out new ideas is to have robust

bankruptcy laws that make it easier to close ill businesses without losing too

much. Many developing countries struggle with this, taking several years to close

and recover businesses.


Next we have policies that facilitate the global connectivity of people and firms.

Governments can play a key role in encouraging firms to take part in global value

chains. This is related to trade policies but an important feature here is that

Governments can help support platforms where they can communicate and

collaborate with national firms. This can facilitate the knowledge exchange

between firms.

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Both China and India‘s rapid development of wind energy were boosted by

international mobility that was supported by Governments. For example Suzlon,

the leading Indian wind turbine manufacturer, established R&D facilities in

Germany and the Netherlands to have its workers learn from their expertise,

while Goldwind, the leading Chinese manufacturer of wind mills, sent employees

abroad for training. Fibrovent Wind, a Chilean wind turbine blade company was

created by inserting itself into a Spanish global value chain where it also

benefited from international mobility of skilled workers. In their case, there was

South-South transfer not only of equipment knowledge but of management

knowledge as the firm hired a Brazilian wind turbine expert to help set up the

company.

When it comes to how Governments can help in connecting small and medium

enterprises to global value chains, we can learn from a recent public-private

partnership program in Mexico. Click here to learn more

“Mexico‘s Green Supply Chains Program : This program initiated by the Mexican

Government, uses large multi national anchor companies (MNCs) to solicit small

and medium-size enterprises’ (SMEs) participation through education and

support. The program proves to be a promising model for diffusing eco-efficiency

techniques to SMEs. During the 2005-07 pilot phase, 14 MNCs with operations in

Mexico participated together with 146 SMEs. The average SME generated huge

environmental improvements such as reduced water and electricity usage,

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carbon dioxide emissions and waste disposal, along with significant economic

savings and improved supply chain relationships. These results show the

potential win-win opportunities of improved information dissemination,

mentoring and learning in the value chains of companies. Source: Dutz et al

2012”


A final policy area for stimulating entrepreneurship and absorptive capacity

concerns developing entrepreneurship through incentivizing talented individuals

and successful firms to remain in the country. These kind of policies do not have

to be solely directed to the energy sector. Indeed policies to tackle so called

brain drain affect many essential sectors of a country.

Brain drain can be defined as a large scale emigration of a large group of

individuals with technical skills or knowledge.

The policies to tackle this come with many social co-benefits for the countries in

terms of enhanced skills in various domains.

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In China, there are plenty of examples of how Governments attract and retain

talent to certain areas. Please take your time to read through the mix of

instruments that can be used.

Policies to promote Base of the Pyramid innovation

We are now going back to Base of the Pyramid Innovation to look at what

policies are most relevant. It is important to keep in mind that policies should

target both frontier and adaptive innovation.

A 2012 policy brief from the Brookings Institution provide the following policies

as most important.

In the early research stages, there is a need for Government-funded R&D, and

patent policies such as compulsory licensing agreements and patents pools as

well as applied research networks. Also prize funds can be used to trigger

invention. It is also highly relevant that firms get training in the needs of

populations at the base of the pyramid. Training could include demonstration

tests and supply chain development. Next, international venture capital and

other support polices for small and medium enterprises can help support

technology deployment and commercialization. Here it is important that firms

are allowed access to national, regional and global markets.”

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Policies to promote Base of the Pyramid innovation

We will now illustrate how some of these policies, prize funds and public funding

to labs and universities, have been used to promote Base of the Pyramid

innovation in the energy sector.

In 2011, The Ashden Awards for Sustainable Energy in India, managed to

generate innovation in the use of rice husks, one of India’s most common waste

products. Husk Power Systems (HPS) adapted and converted an existing biomass

gasification using diesel technology into a single fuel rice husk gasifier for rural

electrification. This helped households decrease their use of dim kerosene lamps

(with associated reductions in CO2 emissions) and facilitating evening

studying/learning and other productive activities.

Funding for labs and universities has improved the sector of indoor cooking

stoves in both China and India. The countries have invested much effort into the

research and development of indoor cooking stoves. As the table shows, China is

the leading source of patents across many types of stoves. In addition, India is

the leading source of scientific articles for 3 of the 4 stove technologies brought

up in this table. This has been driven by research from universities as well as

non-profit foundations.

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We are now going to look at mechanisms that can strengthen International

Collaboration.

Policy instruments for innovation

We are now going to look at mechanisms that can strengthen International

Collaboration.

International collaboration

We will now look at international collaboration. This slide is dedicated to four

global technology transfer programs while the next slide takes up south-south

collaboration.

In order for clean energy technologies to cross borders, technology transfer

programs are important. These programs can facilitate the transfer of

technological know how and devices across borders. It therefore helps

technologies reach target populations in developing countries as well as reduces

the transaction costs of international market access. First out is the UNFCCC

Technology Mechanism. followed by The International Energy Agency

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Implementing Agreements, The Clean Development Mechanism and The World

Bank Climate Innovation Centers.

Please take your time to read about the four different international collaborative

mechanisms, then proceed to the next slide.

South-South exchange

We will now look specifically at South-South collaboration. Several studies show

that there is very little South-South collaboration on energy innovation. The

graph shows that the occurrence of North-South collaboration on green patents

is almost identical to the occurrence of south-south green patents. Among all

green patents granted between 1995 and 2010, there is only one instance of

South-South collaboration.

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Yet, since many developing countries share similarities in the energy sectors in

terms of financing, technological capabilities, institutional arrangements, and

power sector priorities, they would benefit immensely by cooperating on

exchanging energy technologies.

Lessons learned from South-South projects suggest that:

Technologies developed and operated in other close-by developing countries are

more economical and easier to transfer than those from developed countries.

The cultural similarity between South-South countries enables better adaptation

of technologies and thus, a more sustained operation. In addition, based on the

experience gained, local capacity to further expand the delivery of technology

can be built.

Capacity building should not only include classroom training but should be

accompanied by on-the-job training to give practical experience and build

confidence.

Please proceed to the next slide to learn more about how south-south

collaboration can be improved.

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How South-South collaboration can be enhanced?

The policies needed to enhance South South collaboration can be divided into

two categories: the ones that facilitate the research and development

collaboration and the ones that facilitate exchanges of already-in-place

technologies. Even though these categories represent two different phases in

the technology cycle, they are mutually reinforcing.

On the R&D side, policies are:

• The set up of regional science foundations that can fund patent pools and

avoid research overlaps. Examples are the ICSU regional offices for Latin

America and the Caribbean, Africa and East Pacific, which bring together

scientists and scientific organizations from the respective regions and focus

on sustainable energy among others.

• Strong R&D policies to strengthen university and research networks. This will

help trigger frontier and adaptive innovation as well as stimulating

entrepreneurship and absorptive capacity. Example is ANSOLE, which is an

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African research network that focuses on the deployment of wind power in

an African context.

• The set up of scientific and entrepreneur study abroad programs. An

example is the “Knowledge for Tomorrow” which is an exchange program

between Germany and Scholars from African countries.

We then turn to the next step, which is an exchange of best practices of already

commercial technologies. For example, China, India and Brazil, all are prominent

in at least one field. These countries have good experiences of implementing

technology into their setting and could rather easily transfer this knowledge to

other developing countries.

There are many successful examples of such technological interchanges between

countries. Click on the box to learn more about the lessons learned from two.

Framework for Government innovation policies

We have now reached the end of this third and last lesson of the Module. We

will therefore summarize the policies that we have gone through in order to

identify what kind of policy mix may be needed in different country contexts.

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As a general principle, the best way to use government policies for innovation is

to create a combination policy framework applying policies as technology

maturity and deployment increases in different industries. So how would the

innovation policies that we learnt about in this module be applied? Well, let’s

start by looking at the five different stages of technology development. For every

stage in the cycle there is a range of policy instruments at the national and

international levels. For the research stage, we have at a national level, support

to R&D, through funding, tax credits, research grants and prize funds. At an

international level, they can make use of university networks, science centers,

patent collaboration and exchange programs. When we move on, we have early

stage development financing through promoting business incubators, VC funding

and risk capital as well as policies for market-re entry and experimentation. Here

it is also important to connect firms globally and on an international level,

governments can make use of the UNFCCC Technology Mechanism and the

International Energy Agency Implementing Agreements.

Later on, there is a need to stimulate the uptake of technologies, this can be

made through market pull policies such as standards and procurement. Trade

and FDI can also help with the adaption of technologies to local conditions. For

technologies that are already in a very mature stage of the market, governments

can stimulate their demand through public procurement and well tried out

technologies can internationally be implemented through the clean

development mechanism.

As you can see, less mature technologies further from economic competitiveness

need, beyond continued R&D support, very stable low-risk incentives, such as

cost incentives. Once a technology is competitive with other alternatives and

ready to be deployed on a large scale, and when appropriate incentives are in

place, these policies can be phased out altogether. At that stage, green energy

technologies will compete on a level playing field with other energy

technologies. Hydropower is an example of this.

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Key Messages

This slide is dedicated to summarizing key messages from this lesson. Please take

your time to go through them and in the next slide you will find references, in

case you wish to learn more about the subject covered in this lesson.

References and Further Reading

Here are some useful references if you wish to learn more about the subject covered in

this lesson.

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