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    C A L I F O R N I A

    I N D E X

    2 0 0 8 I N A U G U R A L I S S U E

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    Next 10 is a nonpartisan, nonprofit organization that educates,engages and empowers Californians to improve the States future.California was founded by pioneers driven by big dreams and unafraid to face difficult challenges. Like many of us, theycame to California to create a better life for themselves and their families. While this legacy of the California dreamcontinues today, many of us are concerned that the future will not be as bright as our children deserve.

    Next 10 is focused on innovation and the intersection between the economy, the environment, and quality of life issues.We create tools and provide information that fosters a deeper understanding of the critical issues affecting our state.Through education and civic engagement, we hope Californians will become empowered to affect change.

    We call ourselves Next 10 because we are not here for the quick fix. Our sights are set on joining with others to improvethe state over the next ten years, and the ten years after that. The decisions we make together will affect Californiaseconomy, environment and quality of life for years to come. Together, we can create the brighter future we all want for ourselves and our children.

    ADVISORS TO THE CALIFORNIA GREEN INNOVATION INDEXNext 10 thanks the following expert Advisors for their generous time and guidance on this project:

    Ralph Cavanagh Natural Resources Defense Council

    Michael Hanemann California Climate Change Center, Goldman School of Public Policy, U.C. Berkeley

    Hal Harvey The William and Flora Hewlett Foundation

    Elliot Hoffman New Voice of Business

    Van Jones Ella Baker Center

    Dan Kammen Class of 1935 Distinguished Professor of EnergyDirector, Renewable & Appropriate Energy Laboratory, U.C. Berkeley

    Bruce Klafter Applied Materials Joel Makower Executive Editor, GreenBiz.com

    Walter McGuire McGuire & Co., Inc./ Flex Your Power

    Joe Nation Former State Assemblyman, District 6 Lecturer in Public Policy, Stanford University

    Manuel Pastor Professor of Geography and American Studies & Ethnicity, University of Southern California

    Fran Pavley Assemblymember (2000-2006), Author AB 32: California Global Warming Solutions Act Senior Climate Advisor, NRDC

    Wendy Pulling Pacific Gas & Electric Company

    Carol Whiteside Great Valley Center

    Tim Woodward Nth Power

    PREPARED BY SURVEY CONDUCTED BY PRODUCED BYCollaborative Economics Field Research Corporation Next 10Doug Henton Deborah Jay F. Noel Perry

    John Melville Mark DiCamillo Sarah HenryTracey Grose Marcia E. PerryGabrielle Maor Rishell JordanBridget Gibbons

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    Dear Californians,

    California has long played an international role as an incubator of innovation. From the integrated circuit to Web 2.0,recombinant DNA to genomics, world changing ideas and inventions have had their genesis in this state. Lesser known,however, is Californias role in green innovation, and the significant impact green innovation can make on the stateseconomic and environmental health.

    Next 10 is launching the California Green Innovation Index to track the states green innovation as well as economicand environmental performance within the context of the landmark California Global Warming Solutions Act (AB 32).The Index analyzes key indicators to better understand the role green innovation plays in achieving two goals criticalto Californias future: 1) reducing the absolute level of the greenhouse gas emissions that cause global warming, and2) increasing the states gross domestic product, which is the basis for our economic vitality. In coming years, we planto deepen and hone the Index as well as develop new indices. It is our hope that with your feedback we can createa strategic tool for the successful implementation of AB 32.

    This inaugural issue contains several important findings: As a result of the first wave of green innovation, which began in the 1970s, California has become a world leader

    in energy efficiency. In relative terms, California is more energy efficient and emits fewer greenhouse gas emissionsper person than the rest of the United States, Germany, the United Kingdom or Japan.

    Californias economy has grown as a result of this first wave of green innovation. California may be at an inflection point between the first and second waves of green innovation driven by factors

    similar to those that drove the first wave: policy, demand and investment. While California has made enormous progress, the states rate of population growth requires that the next wave of

    innovation be larger, faster and more powerful than the last to meet the mandate of AB 32.

    Working with leading experts, Next 10 produced the California Green Innovation Index in support of our missionto educate and engage Californians on issues important to the states future. There is no more important issue todaythan addressing global warming while growing a vibrant economy.

    Sincerely,

    F. Noel PerryFounder, Next 10

    575 High Street, Suite 310 | Palo Alto, California 94301 | tel: 650.321.5417 | www.next10.org

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    Californias PopulationPopulation Average Annual Growth Population Projections

    2006 2000-2006 2020

    37,195,240 2% 43,695,240Source: California Department of Finance

    Californias EconomyGross Domestic Product (GDP)is a way of measuring the size of an economy, and is calculated by summing the valueadded from all industr ies in the economy. This measure can be used for a country as well as a state, in which case it canalso be expressed as gross state product (GSP).

    Total GDP Average Annual Growth Per Capita GDP GDP Projections

    2006 2000-2006 2006 2020

    $ 1,727,355,000,000 2% $46,440 $ 2,604,898,000,000Inflation adjusted dollars (2006) Inflation adjusted dollars (2006) Sources: Bureau of Economic Analysis;California Department of Finance Source: Moody's Economy.com

    Assembly Bill 32, the California Global Warming Solutions Act of 2006Assembly Bill 32 (AB 32) was signed into California law in 2006, mandating the first ever statewide cap on global warmingpollution. AB 32 has put California at the forefront of the fight against global warming by requiring the state to reduceits greenhouse gas (GHG) emissions to 1990 levels by 2020.

    Californias Greenhouse Gas EmissionsGreenhouse gases include carbon dioxide, methane, nitrous oxide and various high global warming potential (GWP) gasesincluding perfluorocarbons, hydrofluorocarbons and sulfur hexafluoride (SF6).

    AB 32 TargetsTotal GHG Emissions Average Annual Growth Per Capita GHG Emissions Total GHG Emissions

    (Million Metric Tons of CO2 Equivalent) (Metric Tons of CO2 Equivalent) (Million Metric Tons of CO2

    1990 2004 2000-2004 2004 2020411 479 1% 12.9 411

    Sources: California Energy Commission, revision February 2, 2007 to "Inventory of California Greenhouse Gas Emissions and Sinks" Report (December 2006); California Department of Finance

    Californias Carbon EconomyThe ratio of GHG emissions to GDP

    Meeting AB 32 Targets1990 2004 20200.45 0.35 0.18Sources: California Energy Commission; Bureau of Economic Analysis

    California Facts

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    Table of ContentsCORE FINDINGS 4

    1 INNOVATION IS THE DRIVER OF CALIFORNIA'S ECONOMIC AND ENVIRONMENTAL PROGRESS81. California has relied on its innovative economy to provide growing economic, social,

    and environmental benefits to its people 82. California has a history of policy innovation, which has helped stimulate technological innovation,producing economic and environmental benefits 10

    3. California will need to build on its tradition of innovation if it is to reduce its absolute amountof carbon emissions and produce economic benefits in the years ahead 12

    California's Story of Recycling 14

    2 THE FIRST WAVE OF GREEN INNOVATION 161. California has one of the lowest levels per capita of greenhouse gas emissions and highest

    gross domestic products in the nation 162. California's economic growth has become less dependent on greenhouse gas emissions over time 17

    3. California demonstrates that energy efficiency can translate into economic gain 204. Californians have experienced substantial and growing energy savings as a direct result

    of efficiency programs 22

    3 TRACKING SIGNS OF THE NEXT WAVE OF GREEN INNOVATION 24 ENVIRONMENT FOR CHANGE 251. Californians recognize the urgency of the problemand believe a lot can be done about it 252. Californians believe that reducing emissions and growing the economy are both possible

    and desirableand believe that new technologies will help solve the problem 25

    ADOPTION OF GREEN PRODUCTS AND PRACTICES 261. Californians are accelerating their adoption of green products and practices to reduce electricity consumption 272. The commercial business sectorthe largest consumer of electricity in Californiahas

    become more energy efficient in recent years 303. Gasoline sales and vehicle miles traveled have leveled off 314. Water consumption and pumpingresponsible for about 20% of California's gross electricity

    useare using less electricity than in the past 345. Californians are increasing their use of cleaner energy to reduce greenhouse gas emissions

    both at home and on the road 36

    INNOVATION LIFECYCLE: CREATION OF NEW PRODUCTS AND PRACTICES 401. California is drawing increasing R&D investment for clean energy from a variety of public

    and private sources 41

    2. California is a leader in green technology innovation as measured by patents 423. California is the top state for U.S. venture capital investment in green technology 434. California is home to a growing green industry, which is creating thousands of new companies,

    jobs, and products to help reduce emissions 46

    4 THE CHALLENGE & PROSPECTS FOR THE FUTURE 50

    APPENDIX 60

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    CORE FINDINGSThe inaugural California Green Innovation Index

    produced by Next 10 provides a comprehensive

    look at the role of innovation in reducing greenhouse

    gas emissions while growing the economy. TheIndex measures progress toward green innovation

    green in the sense that it generates both

    environmental and economic benefi ts .

    California has been driven by waves of innovation

    in information technology, biotechnology and now

    energy. Building on a first wave of innovation based

    on energy efficiency, the Index identifies a next wave

    of innovation that could bring new breakthroughs

    in both energy efficiency and clean energy.

    4

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    Emissions and Gross Domestic ProductCarbon emissions per million people Inflation adjusted GDP dollars per million people; Relative Trends since 1990

    1990 2004

    90

    95

    00

    105

    110

    115

    120

    125

    Source: Energy Information Administration; Population Division, U.S. Census Bureau; Bureau of Economic Analysis; U.S. Department of Commerce

    CA per capita emissions

    CA per capita GDP

    The growing separation illustrates the declining dependence of California's economic

    growth on environmenta l degrada tion

    the first wave

    THE FIRST WAVE OF GREEN INNOVATION

    California has benefited both economically and environmentally from a first wave of green innovationas a result of increasing energy efficiency since the 1970s.

    1. California has become a world leader in addressing global warming. In relative terms, California is more energyefficient and has lower greenhouse gas emissions than the United States as a whole and leads Germany, the United Kingdomand Japan ( Chart 2 ).

    2. California has one of the lowest per capita greenhouse gas emissions and highest gross domestic products inthe nation. Californias per capita emissions are less than one-half of the rest of the nation and are lower than they were15 years ago ( Chart 1 ). Among states, California has the second lowest emissions per capita while generating the tenthhighest gross domestic product per capita in the nation.

    3. California is more energy efficient than the nation and other comparable states resulting in significant savingsto consumers. Since 1970, California has greatly reduced its total energy consumption per capita ( Chart 6 ). Averagemonthly residential bills for electr icity are lower in California than Texas, Florida and the nation ( Chart 8 ). Moreover,Californias total annual electricity bill as a fraction of GDP is lower than Texas, Florida and the nation ( Chart 7 ). Whatdoes this mean? If Californias annual statewide electricity bill was the same fraction of GDP as Texas, for example,Californians would be paying almost $25 billion more for electricity. Instead, these billions are available for investmentin other areas, generating economic benefits for California.

    4. California utility programs and efficiency standards yield billions of dollars in savings and have reduced the needto build additional power plants. California utility efficiency programs and Title 20 and Title 24 (appliance and buildingstandards) have yielded tens of billions of dollars in savings and reduced the need for 24 power plants between 1975 and2003 ( Chart 10 ). The net benefits of these programs continue to improve ( Chart 11 ). The California Energy Commissionestimates that building and appliance standards alone have saved residents and businesses $56 billion through 2003 andare projected to save another $23 billion by 2013.

    5

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    TRACKING SIGNS OF THE NEXT WAVE OF GREEN INNOVATION

    Signs that California may be beginning the next wave of green innovation include continued progress inincreasing energy efficiency and the adoption and creation of clean energy.

    5. Californians are at the forefront in recognizing that global warming is an urgent challenge that can be addressedby citizens and business as well as government. They also believe that California can reduce greenhouse gas emissionsand expand jobs and prosperity at the same time, and that new technologies can help solve the challenge ( Survey Results,

    page 25 ).

    6. Adoption of existing green products and practices is accelerating in California. Californians are adopting andplanning to adopt specific electricity-saving products and practices in homes and businesses ( Page 28 and Charts 14, 15,16, 17 on CFL bulbs, appliances and buildings). Californians are also installing solar systems ( Chart 29 ) and purchasinghybrid vehicles ( Charts 30 and 31) at an increasing rate.

    7. Creation of new green products and services is increasing in California. California is escalating its share of U.S.patents in solar energy, wind and battery technology ( Chart 34 ). Venture capital investment in California clean energytechnology is growing rapidly ( Charts 35-37 ). Green establishments and jobs are also increasing, especially in energygeneration and energy efficiency ( Charts 39-43 ).

    M i l l i o n s o f

    d o l l a r s

    i n v e s t e d

    i n C a l

    i f o r n

    i a c o m p a n i e s

    1996 2006

    900

    Source: Nth Power

    700

    $1,000

    0

    800

    600

    Venture Capital Investment in Energy TechnologyInvestment in California companies

    500

    400

    300

    200

    100

    the next wave

    6

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    THE CHALLENGE AND PROSPECTS FOR THE FUTURE

    Much more green innovation will be needed if California is to meet the goal of AB 32 (Californias GlobalWarming Solutions Act of 2006 calls for reducing greenhouse gas emissions to the 1990 level by 2020) whilealso growing the economy.

    8. California will need to rapidly increase its pace of change with breakthroughs in energy efficiency and the adoptionof clean energy alternatives. This requires significantly accelerating the adoption of clean energy by reducing coststhrough technological innovation (See solar energy cost curve, page 54 ). It means substantially reducing transportation-generated emissions, which currently make up 41% of total greenhouse gas emissions. Methods to reduce transportation-generated emissions include reducing vehicle miles traveled ( Charts 21 & 22 ) and adopting clean transportation alternatives(Charts 23, 24, 30, 31 ).

    9. California will need to continue to invest in research and commercialization that promotes the creation and adoptionof clean energy. Although federal investment is lagging, California is drawing increasing R&D investment for cleantechnology from a variety of public and private sources. The State has been investing its own resources in clean energythrough various avenues including the PIER program ( page 41 ). The United States government, however, could do much

    more to support green innovation. While Californias share of U.S. patents in clean energy has been increasing, the UnitedStates may no longer be a leader in early stage development of green innovation: since 1998, foreign inventors haveregistered for more green technology patents than U.S. inventors ( Chart 33 ).

    10. California is taking steps to achieve the goals of AB 32 and the public supports taking action to address globalwarming. The California Climate Action Team has begun to identify strategies to meet the AB 32 goals (See ClimateAction Team Strategies, page 51 ), and an increasing number of California businesses are members of the California ClimateAction Registry ( Chart 48 ). The public is very supportive of action to address global warming ( Survey Results, pages 55-57 ).

    M i l l i o n M e t r i c

    T o n s o f C O 2 E q u i v a l e n t

    Source: California Energy Commission

    500

    0

    600

    400

    History of California Emissions and Future AB 32 Target

    300

    200

    100

    20202004

    WithoutInnovation

    1990

    AB32 Emissions Limit

    WithInnovation

    the future

    7

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    N u m

    b e r o f

    t r a n s i s t o r s o n a n

    i n t e g r a t e d c i r c u i

    t

    N U M B

    E RO F

    T R A N S I S

    T O R S

    D O U B

    L I N GE

    V E R Y

    2 4M O

    N T H S

    Moores Law describes an important trend inthe history of information technology: thenumber of transistors that can be placed on anintegrated circuit increases exponentially,doubling approximately every two years.

    This observation about continuing innovationin information technology was first made byIntel co-founder Gordon E. Moore in 1965.Moores Law has been a driving force of technological and social change throughoutthe late 20th century and early 21st century

    not only in information technology, but alsoin biotechnology, nanotechnology and energytechnology.

    Intel, Excerpts from a conversation with GordonMoore: Moore's Law, Video Transcript, 2005.

    Growth of transistor counts for Intel Processors (dots) and Moore's Law

    innovation1

    California has helped ignite innovation in areasas diverse as information technology (e.g.,integrated circuits), biotechnology (e.g.,

    recombinant DNA), agriculture (e.g., water flow technology), entertainment (e.g., digitalmedia), and communications (e.g., wirelessinternet). Innovation improves efficiency inour economy and creates new sources of value. 1

    Gordon Moore, the co-founder of IntelCorporation, famously described the exponentialpower of innovation to drive efficiency in theinformation technology industry (see box).

    Innovation happens incrementally, but alsocomes in bursts, producing breakthroughs that

    rapidly increase efficiencies and value. As theillustration shows, California helped drive wavesof innovation in information technology from defense to the integrated circuit to thepersonal computer to the internet and now to

    Web 2.0. A similar series of waves is evidentwith biotechnology, from recombinant DNAto genomics and now to personalized medicine

    (i.e., translational genomics). Energy is nodifferent: California has helped drive a first waveof green innovation in energy efficiency thatbegan in the 1970s and continues to this day.

    Today, a new wave of innovation that buildson the first wave of improvement in energyefficiency may be underwayone that isbeginning to focus growing dollars and talenton clean energy. This next wave may beemerging even as the first wave of greeninnovation continues delivering benefits to

    California. What could this next wave looklike? It could bring new breakthroughs in bothenergy efficiency and clean energy, reducingthe absolute amount of greenhouse gas emissionswhile growing the States economy.

    INNOVATION IS THE DRIVER OF CALIFORNIAS ECONOMIC AND ENVIRONMENTA

    California hasrelied on itsinnovativeeconomy toprovide growingeconomic,social, andenvironmentalbenefits toits people

    MOORES LAW

    8

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    1950 2000

    PERFORMANCE

    1960 1970 1980 1990

    DEFENSE

    INTEGRATEDCIRCUIT

    PERSONALCOMPUTER

    INTERNET

    WEB 2.0

    RECOMBINANTDNA

    GENOMICS

    PERSONALIZEDMEDICINE

    ENERGY EFFICIENCY

    ENERGY EFFICIENCY &CLEAN ENERGY

    One of the most important lessons from Californias history of leadership in energy efficiencyis that innovationtechnological, economic, and politicalcan take place at levels far beyondwhat is initially forecast if a strong commitment is made to advancing the sector. 2

    Daniel Kammen, Founding Director, Renewable and Appropriate Energy Laboratory,

    University of California, Berkeley

    Properly designed environmental standards can trigger innovations that lower the total cost of a product or improve its value. Such innovations allow companies to use a range of inputs moreproductivelyfrom raw materials to energy to laborthus offsetting the costs of improvingenvironmental impact and ending the stalemate. Ultimately, this enhanced resource productivitymakes companies more competitive, not less. 3

    Michael Porter, Harvard Business School

    Rather than requiring subsidies, energy-productivity opportunities provide a positive rate of return, freeing up resources that could be consumed elsewhere or invested for faster growth. 4

    Diane Farrell, McKinsey Global Institute

    OBSERVATIONS ABOUT INNOVATION, EFFICIENCY & THE ENVIRONM

    WAVES OF INNOVATION

    First Wave Breakthroughs primarily in energy efficiency; growth

    in renewable energy

    Increasing energy efficiency and reducing emissionsper capita while growing the economy

    Most progress in electricity efficiency in homesand workplaces; little progress in transportation

    California is a leader in adoption of innovativegreen practices

    Next Wave New breakthroughs in both energy efficiency and clean energy

    alternatives, an alignment of markets, policies, and technology

    Reducing absolute amount of emissions to 1990 levels whilegrowing the economy

    Major improvements in all areas, including transportation viabroad-based adoption of alternative fuel technologies and vehicles

    California is a leader in both creation and adoption of green innovations, serving statewide and global markets

    9

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    First in United States

    For decades California has been a nationalleader in innovative environmental policy.States have long been seen as the laboratoriesfor new policies, and in the realm of environmental policy, Californias innovativeapproaches are replicated in other states and used

    as a model for federal legislation as well as for other countries. According to the CongressionalResearch Service, California has served as alaboratory for the demonstration of cutting-edge emission control technologies, which,after successfully demonstrated there, wereadopted in similar form at the national level. 5

    Since the 1970s the State has boldly set standards,designed incentives, enforced disincentives, andreadjusted major drivers of market dynamicstoward improving energy efficiency and

    protecting natural resources and public health.These policy innovations have been the productof combined efforts by public leaders, businessleaders, grassroots organizations, and the Statescutting-edge technology innovation community.

    The OPEC oil embargo in 1973 served as amajor force in spurring policy and technologyinnovation relating to energy efficiency. Thenext year, the State established the CaliforniaEnergy Commission to implement energypolicy and planning, and Lawrence Berkeley

    National Laboratory established the Center for Building Science to research means for improving energy efficiency. In an earlycontribution to the cause, the Center developeda computer program that modeled the energyperformance of buildings. This program

    established the basis for the path-breakinglegislation on energy efficiency standards for appliances and buildings (Title 20 and Title 24,see page 29). Enactment in California wasfollowed by the enactment of similar standardsacross the United States and other countries.By 1987, a uniform national standard for efficiency in appliances was in place.

    A pioneering effort led by a bold group of efficiency advocates, utilities, and enlightenedleaders led to the realignment of investor-

    owned utilities financial incentives fromexpanding consumption to investing inefficiency. This was made possible through theimplementation of a decoupling mechanism of electricity and natural gas providers in 1982.This policy innovation removes the financialdisincentive for utilities to encourage energyefficiency and conservation by making their profits independent of their sales. 6 FollowingCalifornias lead, other states and countries arepursuing similar mechanisms to unlink economicincentives from environmental degradation.

    California hasa history ofpolicy innovation,which has helpedstimulatetechnologicalinnovation,producingeconomic andenvironmentalbenefits

    innovation1

    California Policy Innovations Over Time (Regulatory, Investment, Incentives)Set in Context with U.S. Policy Innovations and Other Historical Events

    1977Clean Water Act

    1986Emergency Planning anCommunity Right-to-KAct (EPCRKA)

    1987National Appliance EConservationAct (NAECA)

    1980Comprehensive EnvironmentalResponse, Compensation, andLiability Act (CERCLA) createdthe Superfund program

    1974Lawrence Berkeley Laboratorys Centerfor Building Science Established

    1976Statistical model illustratingenergy-savings potential throughbuilding efficiency is releasedto public

    1978

    Efficiency Standardsfor new buildings(Title 24)

    1982California PUCorders removalof financial barriersto utilities andenergy efficiencyinvestments

    1977

    Efficiency Standardsfor appliances(Title 20)

    1947Los Angeles Air PollutionControl District created;first air pollution agencyin the US.

    1959California Motor VehiclePollution Control Boardcreated to test automobileemissions and set standards.

    1955National Air PollutionControl Act

    8/1973 - 9/1974OPEC Oil Embargo

    1963Clean Air Act

    1965National EmissionsStandards Act

    1967Air Quality Act

    1967

    California Air ResourcesBoard established

    1980 - 1983Efficiency Standardsfor appliances - Florida,Kansas and New York

    1986Efficiency Standarfor appliances- Massachusetts

    1974

    CA Energy Commissionis created

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    The California energy crisis in 2000 and 2001provided another major force in spurring policyand technology innovation relating to energyefficiency. A result of the failed attempt atutility market deregulation, rolling black-outscharacterized the two-year period. As in 1973,

    this crisis provided a fresh impetus for policyand technology innovation targeting improvedenergy efficiency in California. Ensuing policyinnovations include broad-based energyefficiency campaigns, incentives for renewableenergy sources, investment in technologyresearch, and standards that reduce greenhousegas emissions. Recent novel approaches includethe following:

    Flex Your Power, the statewide energy conservationcampaign, was launched in 2001, funded primarily

    by a Public Goods Charge of one percent added toinvestor-owned utility bills. This outreach effort aimsto inform residents, businesses, industry and public entitiesof methods for reducing energy use and of financial incentives that encourage adoption of such methods.

    Californias Renewable Portfolio StandardProgram was established with the goal of increasing the percentage of renewable energy in the State'selectricity mix of investor-owned utilities (IOUs) to20% by 2017. This goal has since been accelerated to be achieved by 2010.

    Californias Clean Cars Law of 2002 (AB 1493)requires carmakers to reduce global warming emissions

    from new passenger cars and light trucks beginning in 2009. First in the world to reduce global warming

    pollution from cars, this law has now been adopted by 11 other states. Affecting nearly one-third of the

    U.S. market, global warming emissions in 2020 will be reduced by more than 64 million tons of carbondioxide a year.

    The California Global Warming SolutionsAct of 2006 (AB 32)is the first law to comprehensivelylimit greenhouse gas (GHG) emissions at the state level. Five Western states (Washington, Oregon,Utah, Arizona, New Mexico) have joined Californiato combine efforts toward reducing greenhouse gasemissions with the Western Regional Climate

    Action Initiative.

    California has the creative capacity through itsample assets of innovative technology, policy,and public outreach to make meaningful progresstoward reducing greenhouse gas emissions. Ashistory shows, the investment and r isk-takingin innovation pays off beyond the States borders.

    1990Clean Air Act Amendments of 1990 set newautomobile emissions standards, low-sulfur gas,required BestAvailable Control Technology (BACT)for toxins, reduction in CFCs

    5/2000- 9/2001California Energy Crisis

    989

    California Integrated WasteManagement Act (AB939)

    1997

    California Energy Commission'sPublic Interest Energy Research(PIER) Program Established

    989Montreal Protocoln ozone-depletinghemicals implemented

    1996Electric IndustryDeregulation Law

    2003Governor's West CoastGlobal Warming Initiative(CA, OR, WA)

    2006Film release:Who killed the electric car? An Inconvenient Truth

    2007Commonwealthof Massachusetts v.EnvironmentalProtection Agency

    2/2007Utah, Manitoba &British Columbiajoin Governor'sWest Coast GlobalWarming Initiative

    2005Governor's ExecutiveOrder S-3-05 setgreenhouse gasemission reductiontargets

    2007

    Western RegionalClimate Action Initiative

    9/2007California PUCapproves incentivesfor investor-owned

    energy savings goals

    2004Governors GreenBuilding InitiativeExecutive Order(S-20-04)

    9/2000CA Climate Action Registryestablished (SB 1771)

    2006California Global WarmingSolutions Act of 2006 (AB 32)

    2006California Greenhouse GasPerformance Standards forPower Plants (SB 1368)

    8/2006California Solar Initiative

    2001

    Flex Your Powerinitiated

    2004Adopted by Idaho

    2002

    California ClimateAction Registry ismandated (SB 812)

    CA Renewable PortfolioStandard (RPS)

    California AB 1493sets standards foremissions of CO2 andother greenhouse gasesfrom automobiles andlight duty trucks

    2001Adopted by Oregon

    2007Adopted by Maryland

    utilities in meeting

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    If the past is a guide, Californias tradition of innovation could flow in both familiar andunpredictable waysfrom breakthroughs inenergy efficiency to adoption of clean energyalternatives. It will need to be greeninnovationgreen in the sense that it generates

    both environmental and economic benefits.

    Green innovation is a shared responsibility. Itis the product of government, private sector,and individual actions. There are actions thatall these parties can take that can lead to positiveresults, but it is the result of the process of interactions among these parties that creates afar greater impact on reducing greenhouse gasemissions and generating economic benefits.As this process of action and reaction progresses,patterns of adoption (e.g. purchase of upgraded

    appliance) and creation (e.g. commercializationof new technology) continue and build uponeach other thereby increasing the speed of innovation and increasing the impact onreducing emissions and stimulating the economy.

    The diagram on the next page illustrates thethree parties: People, Public Sector and PrivateSector. The curved arrows represent theinteraction between each party, and this is whereinnovation takes place. This interaction generatesthe exchange of ideas, adoption of new behaviors

    and the creation of new products and finallyresults in a larger impact on reducing emissionsby each of the parties.

    Green innovation is a two-way street.Government plays a critical role in setting thepolicy environment, and the private sector andindividuals respond to mandates and incentives.However, the private sector and individuals canprovide catalysts for green innovation as well.

    Government adopts policy innovations, whichcreates an environment that encourages bothprivate sector and individual innovation. At thsame time, government policy is influenced bthe emergence of new technologies, products,and business practices in the marketplace,which demonstrate what could be possible ona larger scale. Elected officials also pursupolicy innovations in response to growingconcerns from the publicinterests shaped bythe media, consumer experience, and personalvalues, as much as by government informationand incentives.

    Private sector businesses respond togovernment mandates and incentives, but alsoto global market forces (like the price of oil

    Businesses pursue innovations to meetemerging industry and consumer demand fornew green products and practices. Theseinnovations not only help the bottom line oCalifornia businesses, but also create jobs, helpinform policy, and change individual behavioby offering tangible applications of greeinnovation.

    The private sector also includes a diverse mixof non-profit groups that promote changes in

    government policy, business practices, andindividual behaviors. This independent sectorof organizations is an important catalyst fogreen innovation.

    Individuals not only respond to governmentincentives and availability of new products, bualso influence the direction of policy througthe political process and generate demand fornew green products in the marketplace

    California will needto build on itstradition ofinnovation if it is toreduce its absoluteamount of carbonemissions toaddress globalwarming andproduce economicbenefits in theyears ahead

    innovation1

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    I

    N N

    O V

    A T

    IO

    N I N N

    O V

    A T

    I

    O N

    I N N O V A T I ON

    GreenhouseGas Emissions

    PERFORMANCEEconomy:

    Jobs, Income

    DYNAMICS OF GREEN INNOVATION

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    A government mandate with significant coordination with businesses and consumersSpecial Analysis prepared by Howard Chong, U.C. Berkeley

    In the span of 20 years, California transformedrecycling from an industry of waste to one of efficacy. Californias story of recyclingusinginnovation to turn waste into prosperity mirrors the current challenges presented bygreenhouse gas emissions levels and meetingthe goals of AB 32.

    In 1989, the waste diversion rate in Californiawas stuck at 10%, and California was runningout of places to put its trash. Recyclingrequirements were born out of the perceptionof a landfill crisis. Within 20 years, Californiadeveloped a new recycling infrastructure andmoved from a 10% diversion rate to a 50%diversion rate. This was not just a matter of mandating reduction; success required significantcoordination with business consumers to create

    Buy Recycled markets to integrate recycledmaterials into manufacturing processes andconsumer choices. Furthermore, there was aconcurrent effort to address regulation of landfillsand the pollution that they create despite theconventional wisdom that more garbage equalseconomic prosperity.

    Recycling has similarities to, and offers potentiallessons on dealing with, the current issue of climate change. Energy use has historicallybeen linked to economic prosperity but is nowidentified as having environmental consequencesthat require public action. By combining policywith private industry and individual action,California has the opportunity to reduce theimpact of global warming, while simultaneouslystrengthening the economy.

    MORE

    CALIFORNIANSRECYCLE

    THAN VOTE

    1989 2005

    60%

    Source: California Integrated Waste Management Board

    0%

    50%

    California Statewide Diversion Rates

    40%

    30%

    20%

    10%

    1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

    C A L I F O R N I A S S T O R Y

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    Similiarities and Potential Lessons between Recycling and Climate Change

    O F R E C Y C L I N G

    Recycling

    More waste = more stuff = prosperity

    Pollution from landfills,running out of landfill space

    Generate less waste

    AB 939 in 1989:Target of 50% diversion by 2000

    Significant improvements in characterizingthe waste stream, including mandatoryreporting requirements

    Did not sacrifice economic development;evidence shows that recycling hada positive impact on job creation andeconomic growth

    Increased disposal costs;voluntary participation in sortingrecyclables from garbage

    Extremely positive attitude to recycling,evidenced by high public participation

    Climate Change

    More energy use = prosperity

    Global warming,energy shortages

    Consume less energy

    AB 32 in 2006: Target of reductionto 1990 levels by 2020(29.5% reduction from business as usual)

    Significant improvements in characterizingGHG emissions, including mandatoryreporting requirements

    Official State and private forecasts predicta net positive impact on job creation andeconomic growth, though some industriesmay suffer while others gain

    Predicted increased energy costs,possibly mitigated or offset by a shifttoward less energy-intensive consumption;voluntary action otherwise

    Concern about global warming and willingnessto make adjustments to decrease GHGemissions

    Criteria

    Conventional Wisdom

    Impending Crisis

    CorrectiveAction Needed

    Government Action

    Early Innovations

    Effect onEconomicGrowth

    Impact on Individuals

    Public Attitude

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    1990 1992 1994 1996 1998 2000 2002 20040

    5

    10

    15

    20

    25

    30

    35

    40

    1: GHG Emissions in California and Other StatesCO2 emissions from fossil fuel combustion metric tons CO2 equivalent (MTCO2E) per capita

    M e t r i c

    T o n s

    C O 2 E q u i v a

    l e n t p e r

    C a p

    i t aCalifornia

    Florida

    US w/o CATexas

    Source: Energy Information Administration; Population Division, U.S. Census Bureau; Bureau of Economic Analysis; U.S. Department of Commerce

    2004 National RankingLowest GHG Highest GDP GDP in Billions Share of Total

    Emissions Per Capita Per Capita ($2004) U.S. GDPCalifornia 2 10 $ 1,540 13%Texas 40 18 886 8%Florida 11 37 601 5%

    34.5

    21.4

    14.5

    12.2

    30.6

    21.5

    14.7

    11.0

    Source: Energy Information Administration; Population Division, U.S. Census Bureau; Bureau of Economic Analysis; U.S. Department of Commerce

    the first wave2

    California has been at the forefront of the firstwave of green innovation that began in the1970s and continues to this day. This first wave

    proved that California could increase its energyefficiency and reduce its greenhouse gas emissionsper capita, while also growing its economy.

    The first wave of green innovation was drivenby a confluence of many forcesincludingrising oil prices, supportive state policies (asoutlined earlier), shifting attitudes and behaviorsabout energy and water conservation; andtechnological innovation in green building,materials, appliances, lighting, and other areas.It produced breakthroughs in energy efficiency

    and stimulated growth in renewable energy inCalifornia. While it is difficult to discern howmuch each of the many different factorscontributed to this first wave, it is clear thatCalifornia today has one of the lowest per capitagreenhouse gas emissions and highest per capitagross domestic products in the nation.

    On a per capita basis, the States economy hasbecome less dependent on emissions and hasused less energy to produce more economic

    growth over time. Californias situation moreclosely resembles that of Germany, the UnitedKingdom, and Japan than the rest of the UnitedStatesespecially other large states with diverseeconomies like Texas and Florida.

    California has one of the lowest levelsper capita of greenhouse gas emissionsand highest gross domestic productsin the nation

    California has some of the lowest per capitaGHG emissions in the U.S. In fact, per capitaCO2 emissions in Texas are double those of California. Per capita emissions levels inCalifornia today are slightly lower than theywere 15 years ago, dropping from 12.2 to 11MTCO2E 7 (Chart 1 ).

    THE FIRST WAVE OF GREEN INNOVATION

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    GOAL

    25.0

    20.0

    15.0

    10.0

    5.0

    00 0.5 1.0 1.5 2.0 2.5 3.0 3.5

    0

    0

    0

    0

    0

    0

    OAL0 1.00.5

    Californiaseconomic growthhas becomeless dependenton greenhousegas emissionsover time

    2: Global Fossil Fuel Combustion*

    California

    France

    Japan

    U.K.

    Germany

    U.S. w/o CA

    United States

    India

    China

    California

    France

    Japan U.K. Germany

    U.S. w/o CA

    United States

    E F F I C I E N C Y

    E m i s s i o n s p e r C a p

    i t a

    ( M e t r i c

    T o n s

    C O 2 E q u i v a

    l e n t p e r P e r s o n )

    INTENSITY Emissions per GDP Dollar

    (Metric Tons CO2 Equivalent per Thousand, inflation adjusted U.S. Dollars GDP)

    *The combustion of fossil fuels accountsfor roughly 72% of total GHG emissions.

    Sources: Energy Information Administration,International Energy Annual 2004;California Energy Commission;Bureau of Economic Analysis,U.S. Department of Commerce

    Compared to other countries, California isamong the most advanced and efficient

    economies, which sets it apart from the rest of the U.S. Mainly due to structural changes inthe economy, the global economy is becomingless carbon intensive in terms of emissions per gross domestic product (GDP). Greater disparities exist in terms of efficiency, or emissions per capita. Resulting primarily fromelectricity generation and transportation, fossilfuel combustion (petroleum, natural gas & coal)makes up the largest category of carbon emissionsin the world. As economies such as China andIndia continue their rapid growth, absolute

    emissions and emissions per capita will climb.In view of both emissions per dollar of GDP

    and emissions per capita, California is comparablewith Japan. Per capita emissions in the rest of the U.S. are twice Californias ( Chart 2 ).

    California is an example of how an innovativeeconomy can thrive and grow whilesimultaneously reducing the environmentaldamage associated with growth. Breaking thelink between environmental bads andeconomic goods occurs when the growth rateof an environmental pressure is less than that of economic expansion over a period of time. 8

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    3: California Emissions and Gross Domestic ProductCarbon emissions per million people - Inflation adjusted GDP dollars per million people Relative trends since 1990

    I n d e x e

    d t o 1 9 9 0

    Californias GDP is a measurement of the Stateseconomic output. Examining the growth inGDP alongside the growth in carbon emissionsillustrates the changing relationship betweenthe two over time. (Carbon emissions accountfor roughly 72% of all greenhouse gas emissions.)

    Chart 3 depicts the growth rates per capita of GDP and emissions for California relative to

    1990. The growing distance between the trendlines of GDP rising and emissions droppingrepresent the delinking of GHG emissions fromeconomic growth. (Per capita emissions represented here are based on the California Energy CommissionsGHG Inventory and vary slightly from the federal

    GHG data represented in Chart 1 .)

    1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20 03 200

    90

    95

    100

    105

    110

    115

    120

    125

    Source: Energy Information Administration; Population Division, U.S. Census Bureau; Bureau of Economic Analysis; U.S. Department of Commerce

    CA per capita emissions

    CA per capita GDP

    The growing separation illustratesthe declining dependence of California's economic growth onenvironmental degradation

    the first wave2

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    19901992 1994 1996 1998 2000 2002

    2004

    100

    150

    200

    250

    300

    350

    400

    450

    500

    5: Total GHG Emissions in California Annual Emissions

    M i l l i o n

    M e t r i c

    T o n s

    C O 2 E q u i v a

    l e n t

    1990 1992 1994 1996 1998 2000 2002 2004Carbon Free Economy= 0

    .02

    .04

    .06

    .08

    .10

    4: The Carbon EconomyEmissions relative to GDP: California

    E m i s s i o n s /

    G D P

    Illustrated as a ratio of emissions to GDP,Chart 4 depicts Californias carbon economyand its gradually decreasing carbon character.While improvements are evident, in order tomeet the requirements of AB 32, this decreasewill need to be steeper in the future. Asrepresented in Chart 5 , the States absoluteemissions continue to rise.

    *Gross GHG emissions including electricity importsSource: California Energy Commission; Bureau of Economic Analysis; U.S. Department of Commerce

    Source: California Energy Commission

    Note: Total Baseline greenhouse gas emissionsincludes fossil fuel CO2, with electric imports andinternational fuels (carbon dioxide only) and non-carbon ghg emissions (in CO2 equivalents). Non-carbon ghg emissions are made up of Agriculture(CH4 and N2O). Soils and Forests Carbon Sinks,ODS substitutes, Semi-conductor manufacture(PFCs), Electric Utilities (SF6). Cement, OtherIndustrial Processes, Solid Waste Management,

    Landfill Gas, and Wastewater, Methane from oiland gas systems, Methane and N2O from FossilFuel Combustion.

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    6: Total Energy Consumption Relative to 1970California and the Rest of the U.S.

    I n d e x e

    d t o 1 9 7 0

    While Californias economy has grownsubstantially over the past several decades, theState has consistently improved its efficiencyin energy consumption ( See pages 22-23 ).Since 1970, California has greatly reduced itstotal energy consumption per capita ( Chart

    6); however, in absolute terms, the States totalenergy consumption continues to rise as itspopulation grows, underscoring the need for continued efforts to increase efficiency. Totalenergy consumption includes all of the following

    sources: petroleum, natural gas, electricity retailsales, nuclear, coal and coal coke, wood, waste,ethanol, hydroelectric, geothermal, solar andwind energy.

    The State has shown that it is possible to have

    lower electricity bills through greater energyefficiency than most states. This meansCalifornians have more to spend on other usesmoney that their counterparts in other states spend on energy.

    Californiademonstrates thatenergy efficiencycan translate intoeconomic gain

    1970 1975 1980 200

    100

    120

    Source: Energy Information Administration; U.S. Census

    CA Per Capita

    Rest of U.S. per Capita

    1985 1990 1995 2000

    110

    130

    140

    150

    160

    90

    80

    CA Total Consumption

    Rest of U.S. Total Consumption

    Although total energy consumption relative to 1970 levelshas increased similarly inCalifornia and the rest of theUS, trends in per capita consumption (a measure of efficiency) have taken very different paths. Since 1980,

    per capita consumption in California has continued to decrease relative to 1970 levels.

    the first wave2

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    7: Statewide Electricity Bill as a Fraction of GDP

    P e r c e n t a g e o f G D P

    8: Average Monthly Residential Gas & Electrical Bills2005

    $ 4

    9 $ 7 4

    California

    $ 4

    3

    $ 1 1 8

    Florida

    $ 5

    0

    $ 1 3 5

    Texas

    $ 8 4

    $ 8 6

    US w/o CA

    In Chart 7 , the state electricity bill is representedas a fraction of state GDP. As a fraction of thestate economy, the Texas electricity bill is almostdouble the California bill.

    Looking at the most recent year, 2005,

    Californias bill represents 1.79% of GDP about half the Texas bill which equates to 3.24%of GDP. The difference between the two statesof 1.45%, when put into terms of CaliforniasGDP, translates into $24.7 billion thatCalifornians do not spend on electricity. 9

    Though the price per Kwh is higher inCalifornia (Table 9) , the average monthlyelectricity bill is lower. In 2005, the averagemonthly residential electricity bill in Californiawas almost half that of Texas and two-thirds

    the average bill in Florida (Chart 8) . In viewof natural gas, while similar to bills in Floridaand Texas, Californias average monthlyresidential bill is roughly half as high as bills inthe rest of the country (Chart 9) .

    Recent work by researchers at U.C. Berkeleyconcludes that California's residential low energyuse is real. From 1970 to 2004, Californiadecreased its annual residential energyconsumption by 35% while other statesincreased. Alternative explanations including

    weather, income, prices and economic structureaccount for at most 15%. 10

    1990 1991 2005

    3.5%

    Source: Energy Information Agency, U.S. Department of Energy; Bureau of Economic Analysis, U.S. Department of Commerce

    2.0%

    4.0%

    4.5%

    1.0%

    0%1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

    California

    US without CA

    Texas

    Florida

    1.79%

    2.97%

    2.54%

    3.24%

    3.0%

    2.5%

    1.5%

    0

    20

    40

    60

    80

    100

    120

    $160

    140

    Natural Gas

    Electricity

    Source: Energy Information Agency, U.S. Department of Energy

    0.5%

    9: 2005 Residential ElectricityPrice Average

    (Cents per Kwh) Kwh per month

    California $ .13 570

    Florida .10 1193Texas .11 1195

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    10: Annual Energy Savings from Efficiency Programs and StandardsGigawatt-hours per year

    Investor-OwnedUtility Efficiency

    Programs

    BuildingStandards

    ApplianceStandards

    G W h / y e a r

    California has implemented efficiency programsand standards that have yielded increasingelectr icity savings. In 2003, the State saved40,000 Gigawatt-hours through utility efficiencyprograms which equated to 15% of annualelectricity use in California that year ( Chart

    10). Since 1975, this energy savings has supplantedthe need for 24 new, large-scale (500-megawatt)power plants. 11Although Chart 10 only includesprograms of investor-owned utilities, California'spublicly owned utilities have more than tripled

    their energy savings targets, which cumulativelynow total about 120 MW per year (comparedto 500 MW for the three major investor-ownedutilities).

    In addition, projected savings associated with

    recently adopted updates to Californias energyefficiency standards for buildings and appliancesare expected to avoid the need for five giantpower plants in the next 10 years. 12 (See page 29 for description of Title 20 Appliance EfficiencyStandards and Title 24 Building Efficiency Standards.)

    Californians haveexperiencedsubstantial andgrowing energysavings as a directresult of efficiencyprograms

    1975 1977 2003

    30,000

    Source: California Energy CommissionNote: This dataset is part of a demand forecast output. As of October 2007, the CEC does not have 2004 and 2005 data available yet,as data for more recent years have not been normalized to this particular set of data.

    20,000

    40,000

    50,000

    10,000

    01979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001

    ~15% of Annual Electricity Usein California in 2003

    the first wave2

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    N e t

    D o l

    l a r S a v

    i n g s

    ( B i l l i o n s o f

    I n f l a t i o n

    A d j u s

    t e d D o l

    l a r s

    )

    F i r s

    t Y e a r N e t

    A n n u a

    l S a v

    i n g s

    ( G W h )

    First Year Net AnnualEnergy Savings (GWh)Net Dollar Savings

    Source: Pacific Gas and Electric Company, Southern California Edison, and San Diego Gas & Electric, Energy Efficiency Annual Reports,May 19992005, filed at the California Public Utilities Commission.

    *Note: Net benefits & energy savings includes Electricity & Natural Gas

    1998 1999 2005

    1.0B

    .6B

    1.4B

    $1.6B

    .2B

    02000 2001 2002 2003 2004

    .8B

    .4B

    1.2B2,500

    1,500

    3,500

    500

    0

    2,000

    1,000

    3,000

    11: Net Dollar Savings and GWh Saved from Utility Efficiency ProgramsInvestor-owned utility efficiency programs

    Result of CPUC reinstating utilitymarket decoupling mechanism.

    Utility efficiency programs are now generatingmore return on investmentelectricity savingsare growing while the cost of funding theseprograms is getting lower ( Chart 11 ). In termsof dollars saved, the California EnergyCommission estimates that building and

    appliance standards alone have saved residentsand businesses $56 billion through 2003 andare to save another $23 billion by 2013. 13

    Additionally, projected savings resulting fromnew appliance efficiency standards adopted in2004 are expected to reduce consumer utilitybills by $3.3 billion during the first 15 yearsthey are in effect. 14

    During the failed electricity deregulation periodin the late 1990s, the California Public UtilitiesCommission (CPUC) did away withdecoupling, the regulatory mechanism thatenables the States investor-owned utilities(IOUs) to promote and provide energy

    efficiency programs to their customers, withoutcutting into utility profits. The elimination of decoupling accounts for the significant drop-off in energy savings from 1998-2000. Theup-tick in 2001 occurred once the CPUCreinstated decoupling.

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    California may be in the early stage of the nextwave of green innovation. A similar confluenceof forces from the first wave may be at work,

    ushering in this next waveincluding risingoil prices, state policies promoting energyefficiency and emission reductions, shiftingattitudes and behaviors regarding global warmingand new technologies such as alternative fuelvehicles, and increasing innovation in energytechnology areas.

    There are signs that in recent years the adoptionof existing green products and practices inCalifornia has accelerated. There are also signsthat much higher levels of investment are

    pouring into energy technology innovation inCalifornia, that the State is producing a growingshare of patents in areas such as solar andwind technology, and that a conservativeestimate of green jobs in California now tops20,000reflecting growth by about 50%over the last decade.

    While it is too early to tell what this new wavemight ultimately look like, the California GreenInnovation Index intends to track signs of change in three key areas.

    The environment for change.The next wave of green innovation will need asupportive environment if it is to build

    momentum. At its most basic, this means thatlarge numbers of Californians will need torecognize the nature and urgency of the problemof global warmingand be receptive toinnovation as a way to solve the problem andbring economic benefits to the State.

    The adoption of existing greenproducts and practices.Green innovation takes place when residents,businesses, and governments adopt existingproducts and practices to improve energy

    efficiency or increase energy alternatives inways that reduce greenhouse gas emissionsand generate economic benefits (e.g., financialsavings available for re-investment in moreproductive activities).

    The creation of new greenproducts and services.Green innovation also takes place whenbusinesses create new products and servicesthat improve energy efficiency or increaseenergy alternatives in ways that reduce

    greenhouse gas emissions and generateeconomic gains (e.g., new companies, newjobs, public revenues). This kind of innovationcan serve the needs not only of the Californiamarket, but also those of the globalmarketplace, generating additional economicbenefits for the State.

    the next wave3

    TRACKING SIGNS OF THE NEXT WAVE OF GREEN INNOVATION

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    RECOGNITION OF THE PROBLEM AND RECEPTIVITY TO INNOVATION

    Californians recognize the urgency of the problemand believe a lot can be done about it

    As a component of the inaugural California Green InnovationIndex, Next 10 commissioned the 2007 Field/Next 10 GlobalWarming Survey of Californians - a survey of Californiaresidents on their understanding of global warming and thesteps they are taking and are willing to take for the purposeof stemming the impacts of climate change.

    More so than Americans in general, Californians recognizethat global warming is very real, urgent, and is having or willhave serious negative impactsincluding environmentalimpacts (coastlines, snow pack), economic impacts (agriculture,the broader California economy), and social impacts (health,overall quality of life). But Californians also believe that thegeneral public, industry, and others can do a lot to successfullyaddress the problem.

    SURVEY RESULTS:Californians Views on Global Warming

    51% of Californians have heard a great deal aboutglobal warming, compared with 42% of Americans overall. 14

    70% of Californians say that the issue of global warmingis extremely or very important to them, compared with52% of Americans overall. 15

    75% of Californians agree that some action should betaken to combat global warming, compared with 61% of Americans overall. 16 Moreover, 43% of Californians agreethat global warming has been established as a serious problemand immediate action is necessary, compared with 28% of Americans overall. 17

    ENVIRONMENT FOR CHANGE

    Large percentages of Californians believe global warmingis a very serious threat to the States economy ( 41% ),

    overall quality of life ( 49% ), coastal communities ( 51% ),farmers in the Central Valley ( 53% ), the States snowpackand water supply ( 63% ), and the health of Californiansliving where air quality is poor, such as near freeways,ports and industrial sites ( 66% ).

    Large percentages of Californians believe that the followinggroups can do a lot to reduce global warming: major corporations ( 67% ), gas and electric utility companies(63% ), government (U.S. 56% , other countries 51% ,state and local 49% ), and clean energy companies ( 52% ).

    57% also believe that the general public (peoplelike you) can do a lot about reducing global warming,compared with 27 % of Americans overall. 18

    Californians believe that reducing emissionsand growing the economy is both possibleand desirableand believe that new technologieswill help solve the problem

    SURVEY RESULTS:Californians Believe We Can Reduce Emissionsand Grow the Economy at the Same Time

    85% agree that California can reduce greenhousegases that contribute to global warming and expand jobsand economic prosperity at the same time. More thanhalf (54% ) agree strongly with this statement.

    77% agree that firms and government researcherswill develop new technologies to solve the problem of global warming; 39% agree strongly with this statement.

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    12: California GHG Emissions by Source 2004Inc ludes electricity imports and excludes international bunker fuels

    Source: California Energy Commission, Inventory of California Greenhouse Gas Emissions and Sinks: 1990-2004. Staff Final Report. CEC-600-2006-013-SF. December 2006.

    the next wave3

    ADOPTION OF GREEN PRODUCTS AND PRACTICESThe combination of actions by individuals,businesses and government leaders that comprisegreen innovation in the forms of technology,

    preferences and policy, has a compoundingeffect. To measure green innovation in termsof the adoption of green products and practices,we focus on vehicles, homes, and workplaces the major users of energy and, directly or indirectly, the major drivers of greenhouse gasemissions . As illustr ated in Chart 12 ,

    transportation accounts for the highestpercentage of gross greenhouse gas emissions(41%). Businesses and residences, by virtue of

    their electricity use, also drive needs for bothin-state electricity generation and electricityimportswhich together account for 22% of gross emissions. In addition, industrial activitiesproduce 21% of gross GHG emissions. Thus,adoption of green products and practices inhomes, workplaces, and vehicles is critical tothe reduction of greenhouse gas emissions.

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    Californians areaccelerating theiradoption of green

    products andpractices to reduceelectricityconsumption

    13: Electricity Consumption in CaliforniaT rends relative to 1990

    I n d e x e d t o 1 9 9 0

    Electricity Consumption by Sector2005

    There are signs that Californians have begunto adopt a less energy-intensive lifestyle.Throughout the past 15 years, per capita

    electricity consumption has not increased inCalifornia. In fact, electricity consumption per capita has consistently been lower than 1990levels, with the exception of a spike in 2000(Chart 13 ).

    1990 1991 1992 2005

    100

    110

    Source: California Energy Commission; U.S. Census Bureau

    Total

    Per Capita

    1993 1994 1995 1996

    105

    115

    120

    125

    130

    95

    90

    1997 1998 1999 2000 2001 2002 2003 2004

    While total electricity consumptionrelative to 1990 levels continues to rise,

    per capita consumption (except for 2000) has remained below 1990 levels.

    40%

    34%

    18%

    8%Commercial

    Residential

    Industrial

    Agriculture

    Source: California Energy Commission

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    Our survey results show that the majority of homeowners in California are already adoptingor are planning to adopt specific electricitysaving products and practices. Data shows thatan increasing number of Californians arepurchasing energy efficient light bulbseven

    more so than in the rest of the country. Since2002, the share of Compact Fluorescent Lamps(CFLs) purchased in California has been steadilyon the rise. Although in 1999, the share of CFLspurchased was less than 1% in both Californiaas well as the rest of the U.S., in 2005, the shareof these energy efficient light bulbs purchasedin California was over double that of the restof the U.S. ( Chart 14 ).

    Energy Star Appliances are becomingincreasingly more pervasive in the Californiamarket. In 2005, approximately 90% of thedishwashers purchased in California were EnergyStar qualified. The adoption of green productsis helping Californians to reduce electricity

    consumption, thereby also contributing to areduction in electricity bills ( Chart 15 ).

    the next wave3

    SURVEY RESULTS:Large Percentages of Californians are adopting and planningto adopt specific electricity saving products and practices.

    Already Likely in ConsideringBehavior Doing Coming Year For Future

    Turn off computers, etc. 93% 3% 2%

    Adjust heating/AC to save energy 84% 3% 2%

    Buy/use CFL or LED bulbs 76% 10% 7%

    Buy/use Energy Star appliances* 84% 6% 9%

    Install water-saving devices* 76% 5% 12%

    Insulate home, water heater, etc.* 75% 6% 12%

    (* Share of homeowners only)

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    1999 2000 2001 2002 2003 2004 20050%

    2%

    4%

    6%

    8%

    14: Market Share of CFL Light BulbsShare of CFLs purchased as a percent of all medium screw-based lamps

    1998 2000 2001 2002 2003 2004 20050%

    20%

    40%

    60%

    100%

    15: California Market Share of Energy Star Appliances

    1999

    80%

    Title 20Appliance Efficiency StandardsIn 1980, the California Energy Commissionwas granted the right to adopt efficiencystandards for appliances. These standards, under the California Code of Regulations, cover refrigerators, freezers, washing machines, air conditioners and lighting.

    Title 24California Building StandardsThe Energy Efficiency Standards for Residentialand Nonresidential Buildings were establishedin 1978 in response to a legislative mandate toreduce California's energy consumption.Periodically updated to allow for new energyefficiency technologies and methods, thesestandards include minimum requirements for building insulation as well as heating, ventilating,air conditioning, and water heating equipment.California Energy Commission

    Source: California Measurement Advisory Council (CALMAC)

    California

    Source: California Measurement Advisory Council (CALMAC)

    Rest of US

    Dishwashers

    Refrigerators

    Clothes Washers

    29

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    1980 20030

    0.4

    0.8

    1.2

    2.4

    16: Office Building Electricity ConsumptionConsumption per Square Foot

    1.6

    2.0

    1990 2000 2001

    0

    30%

    17: Commercial Office Building Electricity Consumption By Industry

    -15%

    25%

    20%

    15%

    10%

    5%

    -10%

    -5%

    1980-1990

    1990-2003

    SURVEY RESULTS:Californians are reporting that theiremployer encourages specific behaviorsto improve energy efficiency

    25% of working Californians say their employer provides incentives to employees totake public transit, work from home, or purchasehybrid, electric, or alternative fuel vehicles.

    35% of working Californians say their employer has provided information about waysto conserve energy and reduce greenhouse gasemissions at the workplace.

    Although the electricity intensity of thecommercial business sector increased between1980 and 1990, over the course of the followingdecade it has made gradual progress in becomingmore energy efficient ( Chart 16 ). Overall,commercial electricity consumption per square

    foot declined slightly from 1990-2003 ( Chart16). Looking at commercial sector electr icity

    consumption by industry shows that specificindustries have been making considerable stridesin reducing electricity use ( Chart 17 ). Whilekey industry sectors such as retail, restaurants,food stores, and large offices experiencedsubstantial reductions in energy consumption,

    the commercial sector still has much potentialto become more energy efficient, as other keysectors continue to consume more electricity.

    The commercialbusiness sectorthe largestconsumer ofelectricity inCaliforniahas become moreenergy efficient inrecent years

    Source: California Energy Commission

    G W h p e r S q u a r e

    F o o t

    P e r c e n t

    C h a n g e

    i n E l e c

    t r i c i t y C o n s u m p t

    i o n p e r S q u a r e

    F o o t

    Source: California Energy Commission

    LargeOffices

    1,075

    All OtherBuildings

    1,052

    Retail

    948

    Warehouses

    779

    Schools

    457

    SmallOffices

    354

    Colleges

    287

    Hospitals

    285

    Hotels/ Motels

    284

    FoodStores

    247

    Restaurants

    163

    RefrigeratedWarehouses

    47TotalSq. Feet

    (millions of square feet)

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    1970100

    90

    120

    130

    18: Petroleum Consumption in CaliforniaTrends relative to 1970

    1975

    160

    80

    110

    140

    150

    20041980 1985 1990 1995 2000

    2000100

    104

    106

    19: Gas Sales in CaliforniaTrends relative to 2000

    2001

    110

    102

    108

    20062002 2003 2004 2005

    199710M

    20M

    25M

    20: Registered Vehicles and Emissions California

    1998

    30M

    15M

    20051999 2000 2001 2002 2003 2004

    600

    0

    500

    400

    300

    200

    100

    To meet the needs of a rapidly growingpopulation in California, total consumption of many resources, including petroleum, has beengrowing accordingly. While there has been anincrease in total petroleum consumption, since

    Gasoline salesand vehicle milestraveled haveleveled off

    the 1980s per capita consumption has droppedbelow 1970 levels ( Chart 18 ). Other observabletrends include the leveling off of gas sales since2004 relative to 2000 ( Chart 19 ) and thecontinued increase in total CO2 emissions andnumber of vehicles ( Chart 20 ).

    While total petroleum consumptionrelative to 1970 has continued to rise,

    per capita consumption since the 1980shas remained below levels in 1970.

    Total Consumption

    per Capita Consumption

    I n d e x e

    d t o 2 0 0 0

    Total Gas Sales

    Gas Sales per Capita

    Source: Energy Information Administration, U.S. Census Bureau

    Source: California Board of Equalization; U.S. Census Bureau

    CO2 Emissions

    CA Entire Vehicle Fleet

    Nm

    M

    Source: California Air Resources Board

    T h o u s a n d s o f

    t o n s o f

    C O 2 e m

    i s s i o n s p e r d a y

    31

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    1995 1996 1997 1998 1999 2000 200598

    102

    104

    106

    114

    21: Vehicle-Miles TraveledCalifornia & Rest of U.S., Per Capita trends relative to 1995

    108

    110112

    2001 2002 2003 2004

    100

    1995 1996 1997 1998 1999 2000 2080

    100

    110

    120

    160

    22: California VMT & Gas PricesPer Capita trends relative to 1995

    130

    140

    150

    2001 2002 2003 2004

    90

    Source: U.S. Department of Transportation, Federal Highway Administration, Highway Statistics;California Department of Transportation Califorrnia Motor Vehicle Stock, Travel and Fuel Forecast

    California

    Rest of U.S.

    I n d e x e

    d t o 1 9 9 5

    Vehicle-miles traveled (VMT) per capita havebegun to decrease since 2002, showing thatCalifornians are driving shorter distances onaverage. In the rest of the U.S., however, VMTper capita has grown much faster ( Chart 21 ).

    While there are signs that rising gas prices canimpact gas consumption, Chart 22 illustratesthe relative inelasticity of demand for gas inthe State as the rate of price increases far outpacethe drop in consumption. Gas prices alonehave not brought about change in behaviors.

    Although the share of the population usingalternative means of commute has beendecreasing in California and the rest of the U.S.alike (Chart 23 ), Californians are less likely todrive alone than other Americans. Over thepast decade, there has been a long-term trend

    of growing public transit use. Though dippingwith the economic contraction in 2002 and2003, transit ridership in 2004 was back tolevels seen in 2000 ( Chart 24 ).

    * Inflation adjusted to 2005 dollarsSource: U.S. Department of Transportation, Federal Highway Administration, Highway Statistics;

    Enegy Information Administration, Petroleum Marketing Annual; California Department of Transportation,Califorrnia Motor Vehicle Stock, Travel and Fuel Forecast

    I n d e x e

    d t o 1 9 9 5

    California VMT

    CA Gas Prices

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    T o t a l

    A n n u a l P u b l i c T r a n s i t P a s s e n g e r s

    200015%

    19%

    20%

    21%

    25%

    23: Alternative Means of CommuteShare of commuters who did NOT drive alone Means of commute: carpool, public transportation, walked, taxicab, motorcycle, bicycle, or other means

    22%23%

    24%

    18%

    17%

    16%

    2005 2000 2005 2000 2005 2000 2005

    1995 1999 2004Source: California State Controller

    2000 2001 2002 2003

    24: Public Transit Use in California Public Transit:Total Annual Passengers

    199819971996

    Source: U.S. Census Bureau, American Community SurveyCalifornia U.S. w/o CA Texas Florida

    1,250,000

    1,150,000

    1,350,000

    1,050,000

    1,000,000

    1,200,000

    1,100,000

    1,300,000

    33

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    0

    40,000

    25: Water Consumption by SectorCalifornia

    35,000

    30,000

    25,000

    20,000

    15,000

    10,000

    5,000

    T h o u s a n d

    A c r e

    F e e t

    Water Consumptionin California - 2003Share of Water Use by Sector

    Agricultural

    Residential

    Commercial 3%Landscape 3%

    Industrial 1%

    Source: California Department of Water Resources

    1998 1999 2000 2001 2002 2003Agricultural Residential Commercial Industrial Landsca

    16%

    77%

    the next wave3Californias water system accounts for approximately 20% of the States gross electricityuse. 20 Depicted in the pie chart below,agricultural water use makes up almost 80%and residential 16% of total water use inCalifornia. In 2003 (the most recent year

    available), total water consumption (Chart 25)was lower than in the three preceding years.

    Conveyance of water across the state in 2001accounted for 11% of total electricity use relatedto water. 22 Water use in California is particularly

    energy-intensive because much of the Stateswater demand is located far away from availablesources, and the process of moving the water (pumping) results in high energy costs.According to the Energy Commission, Nearly70 percent of the states total stream runoff is

    north of Sacramento, but 80 percent of thewater demand is south of Sacramento. 21

    Reducing consumption and improving theefficiency of Californias water-use system would

    yield high energy savings and thereby reducegreenhouse gas emissions.

    Water consumptionand pumpingresponsible forabout 20% ofCalifornias grosselectricity useare using lesselectricity thanin the past

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    1990 1996 1997 1998 1999 2000 20050

    2500

    3000

    4500

    3500

    4000

    2001 2002 2003 2004

    2000

    26: Energy Use Through Water PumpingCalifornia

    1500

    1000

    500

    19951994199319921991

    Source: California Energy Commission

    G i g a w a t

    t H o u r s

    Agricultural Water Pumping

    Urban Water Pumping

    Los Angeless Water Conservation SuccessPrompted by the drought of 1987-1992, the City of Los Angeles hasinvested over $100 million in conservation measures over the last decade.Even with steady population growth, these measures have slowed annualaverage demand growth from 2.1% in the pre-conservation period to1.3% projected over the next 20 years. Conservation efforts include a

    public awareness program and education campaign that have resultedin the widespread installation of low-flow hardware devices (e.g. toiletsand showerheads) and change in use habits. Additionally, the City isimplementing water recycling for non-potable uses such as landscapingand industrial uses.Los Angeles Department of Water & Power

    From 2004-2005, California reduced electricityuse attributed to water pumping, for both urbanand agricultural uses ( Chart 26 ). In addition,public sector initiatives have been establishedto improve water efficiency through fundingprojects and research for new technology, such

    as water recapture.

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    0

    50,000

    28: California Renewable Portfolio Standard Actual and Forecasted RPS Generation from Investor-Owned Utilities (IOUs)

    40,000

    20,000

    G

    W h

    10,000

    30,000

    0

    35,000

    27: Renewable Energy Generation in CaliforniaGigawatt hours by source

    30,000

    15,000

    25,000

    20,000

    G W h

    10,000

    5,000

    In recent years, many steps have been taken toincrease the generation and procurement of renewable energy. From 2002 to 2006, totalrenewable energy generation in the State grewby 8%, with growth primarily in windgeneration 23 (Chart 27 ). Over this period,

    electricity generation from renewable sourceshas accounted for 11% of Californias totalelectricity generation.

    In 2002, the Renewable Portfolio Standard(RPS) was established to ensure that Californiansuse cleaner energy. Since the RPS wasintroduced, investor-owned utilities (IOUs)have been procuring a larger share of renewableenergy ( Chart 28 ). As old contracts expire,

    the IOUs have new renewable energy contractsin the pipeline to help them attain the RPS targetof 20% renewable energy generation by 2010.

    Californians areincreasing theiruse of cleanerenergy to reducegreenhouse gasemissions bothat home andon the road

    *Note: Review of the 2007 bids is ongoing at each IOU, with sellers due to be notified in late June or early July as to whether their bids have been short-listed. The IOUs will then enter into negotiations withthose short-lived bidders who agree to post a deposit and withdraw any conflicting offers they had made to other solicitors. Negotiations will continue through 2007, and any resulting RPS contract should befilled with the CPUC for approval by the end of the year. Some of the short-listed bids may not receive contracts, but many represent viable projects that may receive contracts and contribute to the 2010 goal.Source: California Energy Commission

    2003Pre-2002 Contracts

    2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

    Target:20% of Expected IOU Retail Sales

    2002 Contracts

    2003 Contracts

    2004 Contracts

    2005 Contracts

    2006 Contracts

    Pending Approval

    Short-listed Bids

    Expired Contracts

    RPS Target

    Source: California Energy Commission

    2002

    Solar

    2003 2004 2005 2006

    Wind

    Small Hydrogen

    Biomass

    Geothermal

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    0

    225,000

    29: Energy from Solar Installations in CaliforniaGrid-Connected Solar Photovoltaics

    k i l o w a t t s a d d e d , c u m u l a t i v e

    200,000

    175,000

    150,000

    125,000

    100,000

    75,000

    50,000

    25,000

    CaliforniasRenewablePortfolio Standard(RPS) is One of theMost AmbitiousRenewable EnergyStandards inthe Country

    Since 2000, California has been experiencinga growing trend in solar installation, as depictedin Chart 29 . Programs have been establishedto encourage solar installation and make solar energy more accessible and affordable. TheCalifornia Solar Initiative provides information

    on rebates and federal tax incentives to helplower the cost of solar systems for Californians.Californians have already proven receptive to

    these programsin 2006, 58% of residentialsolar installation was added through state-sponsored incentive programs, the CaliforniaSolar Initiative and the earlier EmergingRenewables Program and Self-GenerationIncentive Program. 23 From 1981-2006,

    approximately 200 MW of grid connected solar photovoltaic was installed in California,equivalent to 40% of the capacity of a largepower plant (500MW).

    Established in 2002 under Senate Bill 1078 andaccelerated in 2006 under Senate Bill 107,Californias RPS obligates investor-ownedutilities, energy service providers andcommunity choice aggregators to procure anadditional 1% of retail sales per year fromeligible renewable sources until 20% is reached,no later than 2010. The California Public UtilitiesCommission and the California EnergyCommission are jointly responsible forimplementing the RPS program.

    California Public Utilities Commission, July 2007 Report to the Legislature

    1981 20061984 1987 1990 1993 1996 1999 2002Note: The Self-Generation Incentive Program and the Emerging Renewables Program were replaced by the California Solar Initiative in 2006.Source: California Energy Commission

    Total kW addedin California

    kW added through

    State sponsoredincentive programs

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    1800

    30: Alternative Fuel VehiclesGrowth in operational vehicles registered relative to 2000

    1 0 0 =

    2 0 0 0 V a l u e s

    1500

    1200

    900

    600

    300

    100

    0.0%

    0.6%

    31: Alternate Fuel Vehicles by Type As share of all operational vehicles in California

    0.5%

    0.4%

    0.3%

    0.2%

    0.1% S h a r e o f a l

    l o p e r a

    t i o n a

    l v e h

    i c l e s

    An increasing number of Californians arepurchasing hybrid, compressed natural gas andelectric vehicles. From 2000 to 2005, registrationsof such alternative fuel vehicles increased by 18times (Chart 30 ). In contrast, the growth of allother vehicles purchased remained relatively

    unchanged. There remains plenty of potentialfor improvement in the alternative vehiclemarket, as the share of alternative vehicles stillonly makes up less than 1% of all operationalvehicles in the State ( Chart 31 ).

    2000 2005*Note: Includes hybrid and electric vehicles as well as vehicles running on natural gas. Does not include diesel enginevehicles or vehicles running on all alcohol based and gaseous noncarbon fuels.Source: California Department of Motor Vehicles

    2001 2002 2003 2004

    Hybrid, Natural Gas& Electric Vehicles

    Total Operational Vehicles

    2000 2005*Note: Includes hybrid and electric vehicles as well as vehicles running on natural gas. Does not include diesel enginevehicles or vehicles running on all alcohol based and gaseous noncarbon fuels.Source: California Department of Motor Vehicles

    2001 2002 2003 2004

    Electric

    Natural Gas

    Hybrid

    the next wave3

    SURVEY RESULTSCalifornians reporting past or potential purchaseof a hybrid/alternative fuel vehicleAs of 2005, according to the latest state vehicle registration figureavailable, approximately3% of households in California had purchaseda hybrid, electric, or alternative fuel car. Two years later,6% ofrespondents to the 2007 Field/Next 10 Global Warming Survey Californians, said that they have purchased a vehicle of this kind. Anot10% of Californians responded that they are likely to do so in the neyear, and50% said they are considering such a purchase in the future

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    liquified petroleumbiodieselelectricliquified natural gascompressed natural gashydrogen

    dots representative of themore than 900

    alternative fuel stations

    ALTERNATIVE FUEL STATIONS

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    F e d e r a

    l R & D F u n d

    i n g , m

    i l l i o n s o f

    d o l l a r s

    ( i n f l a t i o n a d

    j u s t e d

    )

    Share of US FundingFederal R&D Funding for Renewable Energy in California

    The innovation lifecycle combines criticalresources of talent, technology, investment andinfrastructure with the dynamic processes of

    an innovation habitat to produce competitivebusinesses, quality jobs and economic vitality.The innovation process is reflected in ideageneration, technology commercialization andentrepreneurship. This dynamic innovationprocess is an essential component of acompetitive economy, because it translatesideas into high-value products and services.

    Californias capacity for technological innovationand the commercialization of new ideas hasmade it a driving force in the U.S. and global

    economies. Advances in technology create newmarkets that spur new demand throughcontinued product differentiation andtechnological development. With its developedinnovative capacity, California is exceptionallywell-positioned to advance the developmentof new green technologies and products andbolster their broad distribution.

    Californias innovative economy has a trackrecord that can be built upon to achievereductions in greenhouse gas emissions whilestimulating the economy. There are signs thatthis process is readily underway. There are signstoo of potential weaknesses in the innovationprocess for green technology.

    1993 1999 2006

    8

    Source: RaDiUS - The RAND Database for Research and Development in the US

    6

    $9

    02000 2001 20


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