Enhancing Global Climate Technology RD

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Enhancing Global Climate Technology RDD

• Annelène Decaux
• Global Climate Change Research
• EPRI
• Climate Talk Series
• Climate Change Kiosk
• UNFCCC COP 9, Milan
• December 5, 2003

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Enhancing Global Climate Technology RDD

• The climate change challenge and current energy
  RDD trends
• Some key elements for implementing an energy
  technology RDD regime

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The time scale of the climate problem
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The climate technology RDD challenge

• Climate change is a problem of unprecedented
  scope century-scale, massive risks, public
  good nature, global
• Technology is the answer
• Responding to the climate change challenge means
  widespread deployment of low- and non-carbon
  energy systems
• These systems do not currently exist on a
  commercial scale
• Higher levels of RDD investment than today are
  needed
• Why act now?
• Energy RD takes time typically, decades (e.g.
  carbon sequestration project 10-20 years)
• Energy capital stock is long-lived typically,
  50 years
• It is not just the technology, it is the
  infrastructure (e.g. hydrogen)
• Overall, it takes approximately 50 years for
  energy technologies to become dominant in the
  economy (e.g. automobile)

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Current investment in energy RD that could
reduce the cost of stabilization are inadequate

• Total public energy RD, OECD countries

Source IEA, 2001
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and inconsistent

• Total public energy RD, OECD countries

Source IEA, 2001
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Energy RD decline continues

• Most industrialized countries are cutting public
  sector energy RD budgets in real terms as well
  as in of overall RD
• Total world energy RD expenditure 7.4B (US
  3.75B), vs
• Daimler/Chrysler 8.4B (3.8) Microsoft 3.8B
  (16.4)
• Cisco Systems 4.7B (21.5) Pfizer Corp 2.9B
  (10.1)
• Intel Corp 3.95B (11.9)
• No sustained commitment to non- or low-carbon
  technologies
• Nuclear RD declining across the industrialized
  world
• Solar, wind and efficiency program funding
  declining in the US, Germany and Canada
• Investment has grown in some key climate
  technology areas, but remains relatively small
  (10s of millions)
• Energy efficiency most of the growth
• Hydrogen and fuel cell research from nothing to
  some
• Carbon capture and sequestration growing but
  still less than 5 of total public energy RD
  budget

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Trends in private RDD are no different

• Private sector is also cutting funding, due in
  large part to deregulation, liberalization, and
  consolidation of energy industries
• Lowest RD / Sales ratio of any industry
• 0.3 for energy sector (0.1 for electricity
  sector)
• vs 3.9 for industry on average (source NSF)
• Long term research time frames contracting
• Most investment decisions down to business unit
  level
• Initiation of advanced power generation RD
  programs (e.g. fuel cells) not feasible under
  these conditions
• Concentration
• E.g. in US, 69 of all industrial energy RDD is
  conducted by the 12 largest companies (gt 25,000
  employees)
• and 97 by 37 large companies (gt 1,000 employees)

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US example
Energy RD in the US, 1990-2000

• Since 1990
• Federal energy RD fell by 25
• Private energy RD by 63
• Since 1996
• Hydrogen research program has grown 83 (to
  28M)
• Superconductor and electricity storage program
  has doubled (to 68M)
• Biomass program has grown 30 (to 116M)
• Nuclear fission RD has fallen 30 (to 78M)

Source Battelle GTSP, 2003
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What about international climate change RDD
cooperation?

• Very little cooperation so far, and mostly
  review/coordination role only, e.g IPCC
  (reviewing role only), OECD Global Science Forum,
  IEA GHG project
• Energy RD is uncoordinated across countries
• Duplication of efforts, missed opportunities,
  diseconomies of scale
• Why? Competitive concerns cooperation only
  justified for very large, capital-intensive, not
  commercializable research topic (e.g. ITER
  nuclear fusion)
• Kyoto Protocol has not provided impetus for more
  or coordinated energy RD in fact, the issue is
  not addressed
• 96 of the worlds public (i.e. long term) energy
  RD in only 9 countries
• UN may not the right forum for implementing an
  energy RDD regime what forum?

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Enhancing Global Climate Technology RDD

• The climate change challenge and current energy
  RDD trends
• Some key elements for implementing an energy
  technology RDD regime

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1. Use the right combination of policy
instruments market pull vs technology push

• Innovation failure Emissions mitigation
  measures are not enough to promote private and
  public sector investment in emerging technologies
  
• especially if they do not provide long-term
  objectives
• Pushing technology RDD is not enough either
• Better / cheaper approach combination of
  market pull and technology push measures
• Technology push measures provide automatic
  incentives for participation and compliance
• while emissions mitigation strategy is often
  criticized for not providing such incentives,
  e.g. concerns over Kyoto leakage effects

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A few examples of technology push measures

• Raise carbon tax or equivalent to fund public
  RDD
• Increase IP protection (patents)
• Encourage industry research consortia (EPRI, GRI)
• Incentivize private sector RD through direct
  funding, subsidies, government/industry
  consortia, private sector matching funding
• Focus on RDD that stimulates strong private
  sector participation
• Focus on technologies that bring broader public
  benefits
• E.g. air quality, cheaper electricity,
  sustainable development
• Communicate effectively on RDD investment choices

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2. Understand what is in the RDD black box3.
Identify financing mechanisms

• Get broad understanding of what is in the RDD
  black box, i.e. for each technology,
  investigate and communicate its
• Technical potential chance of success, time
  frame, environmental performance, ancillary costs
  and benefits
• Market potential chance of being funded and
  deployed (involves analysis of market trends and
  psychology)
• Cost
• Barriers to commercial deployment, often a cause
  for failure for deploying large-scale systems
  (environmental acceptability, security,
  infrastructure, complexity)
• Draw RDD roadmaps
• Identify mechanisms to finance long-term key
  technology RDD and enable public and/or private
  funding

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4. Re-define Public / Private roles

• Public / Private sector traditional roles

Public sector Private sector
Enhance environment Promote economic growth and efficient use of resources Comply with regulations Maximize profits
Medium to long term focus Short-term focus
Basic and pre-competitive applied research e.g. nuclear fusion Market-oriented applications e.g. fuel cells

• Re-defined leadership roles in Public / Private
  partnerships

Public leadership role Private leadership role
- Provide a supportive and stable environment for innovation, consistent with economic development and public policy objectives - Promote broad-based technology roadmap development - Rationalize funding to key technology areas, set priorities - Fund long-term fundamental research for breakthrough technologies stop incremental, unsustained work - Support multi-disciplinary collaboration among industries, academia and national labs while protecting commercial interests - Fund early demonstration of critical projects prior to economic availability - Ensure its policies are coordinated and consistent and that unintended regulatory, policy and tax impediments to innovation are remedied - Contribute knowledge and experience to the development of technology roadmaps - Collaborate in joint industry / academia / national lab research to achieve critical mass of knowledge and expertise on focused objectives - Provide real-world settings for, and operate, projects to demonstrate technology
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5. Facilitate international cooperation and
enable technology transfer

• Put in place new institutional arrangements what
  is the right forum?
• Identify good candidates for international RDD
  programs
• E.g. carbon sequestration international
  cooperation most welcome
• Hydrogen production US EU have announced
  cooperation
• Carbon capture (IGCC etc), biotechnologies and
  fuel cells not so good candidates (very
  competitive, IP concerns)
• Enabling technology transfer
• CDM / JI (indirect) mechanisms
• Develop effective institutions to directly
  incentivize transfer of new energy technologies?
• Private companies, not governments, own
  commercial technologies

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Effective technology transfer will make the
difference in the success of a UN agreement
FirstCommitment Period
Zero Spillover Scenario
14,000
12,000
Developing Country Emissions
10,000
Intermediate Spillover Scenario
8,000
Carbon Emissions (MTCpa)
6,000
Maximum Spillover Scenario
4,000
2,000
Industrialised Country Emissions (Kyoto -1 pa)
Source Grubb, Hope and Fouquet, in Climatic
Change, 2003
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Key points

• Energy RD expenditures are small by most metrics
  and still declining
• Especially, climate gap technologies are
  languishing
• Investment choices reflect current incentive
  structure and policies
• Indirect incentives alone (e.g. creation of a
  carbon market) are likely to fail to stimulate
  critically needed technology development
• Kyoto Protocol is silent on energy technology
  development
• UN may not be the right forum for implementing an
  energy RDD regime, given energy RDD
  concentration among industrialized countries and
  large firms
• Elements that could speed implementation of an
  energy technology RDD regime include
• Right combination of push and pull policy levers
• Understand what is in the RDD black box
• Identify mechanisms to finance long-term key
  technology RDD
• Emphasize public/private partnerships and
  re-define public/private roles
• Put in place new institutional arrangements to
  facilitate international cooperation and address
  technology transfer