Achieving net zero: How to accelerate innovation
By Nick Molho, Executive Director of the Aldersgate Group
The Intergovernmental Panel on Climate Change (IPCC), the UN’s leading scientific authority on climate change, recently called for a significant step change in global action to cut emissions. It concluded that preventing warming in excess of 1.5°C would deliver important environmental, social and economic benefits compared to a warming of 2°C. This would require the world economy to achieve net zero carbon emissions by mid-century and a significant dent in emissions of other greenhouse gases over the same period.
Achieving net zero emissions: Rapid innovation has a key role to play
Taking on this challenge is going to require deep cuts in emissions in all economic sectors, including those where decarbonisation is very complex, such as heating, transport, cement, steel, aviation and food. This in turn calls for accelerated innovation compared to the 40+ years cycles usually delivered by markets.
Against this backdrop, the Aldersgate Group commissioned research from Vivid Economics and the UK Energy Research Centre (UKERC) to identify key lessons to accelerate innovation, based on a review of successful examples of rapid innovation. These included the global roll-out of ATM networks, the creation of the steel industry in South Korea, the development of wind turbines in the UK and Denmark, and the introduction of a gas network and central heating network in the UK. Given that the vast majority of technologies required to achieve net zero emissions already exist in varying degrees of maturity, innovation in this context refers more to the fast deployment of existing and emerging technologies rather than the invention of brand-new ideas.
This review shows that a common barrier to innovation—and especially rapid innovation—is a lack of knowledge-sharing between businesses unwilling to hand over the benefits of their investment, having taken on the risk. History however provides key lessons for how this barrier can be overcome and how innovation can be accelerated.
Six key lessons for a bold innovation policy
First, clear policy direction will be essential to guide investment decisions in the high capital cost infrastructure and new business models required to achieve net zero emissions. In keeping with the Paris Agreement, governments around the world should adopt net zero emissions targets as soon as possible to provide policy clarity to business. This is something the UK government will be actively considering once the Committee on Climate Change delivers its advice on such a target in early May.
Second, urgently trialling new technologies such as hydrogen and carbon capture and storage (CCS) at scale is essential to deliver fast innovation. However, in many countries, government-backed innovation funding and programmes tend to be too small, too fragmented and regularly subject to change. This is mainly driven by a “fear of failure”, namely that unsuccessful trials will be seen as a waste of public money. However, this fails to recognise that successful and unsuccessful trials hold equally important lessons for good policymaking, something which governments and the ecosystem that surrounds them (business, NGOs, media) must appreciate. The bold approach taken by the South Korean government to create a world-leading steel industry from scratch in the 1970s provides a good precedent to follow here in terms of scale and ambition.
Third, history shows that co-ordinating institutions have a critical role to play to roll out complex infrastructure and accelerate consumer take-up. In the late 1960s and early 1970s, the Gas Council in the UK played a critical role in co-ordinating new bulk gas supplies from the North Sea, the development of a new nationwide gas network and the conversion of over 1m households a year to gas boilers and central heating. In the UK and Denmark government institutions encouraged knowledge-sharing between businesses, which accelerated the development of more efficient wind turbines. Looking ahead, coordinating institutions will be essential to drive the deployment of the complex infrastructure required for hydrogen, CCS and a zero emissions transport system.
Fourth, accelerating innovation requires linking up green and digital innovation. One of the reasons ATMs and cash cards went from early-stage development to full global commercialisation within 22 years was that the invention of first-generation cash dispensers coincided with the development of computerised systems. This enabled customers to access their accounts from multiple locations rather than at a single bank branch, dramatically increasing convenience. Public innovation policy should aim to better link innovation in areas such as energy efficiency, low-carbon heating and clean transport with new digital services such as mobile phone applications and connected devices to help improve consumer convenience and access to these technologies.
Fifth, a successful innovation policy can’t work in isolation. It needs to work hand in hand with policies to accelerate the commercialisation of new technologies once they move beyond the early development stage. For example, research and development support combined with feed-in tariff policies guaranteeing a stable revenue for electricity have been instrumental in accelerating innovation in the renewable energy sector and cutting the cost of technologies such as on- and offshore wind and solar power. Similar incentives need to be put in place to create a market for CCS (such as through incentives to capture and store carbon emissions) and ultra-low carbon building materials (such as through market standards).
Last but not least, innovation is just as much about developing new technologies as it is about industrial strategy. Targeted innovation policies should focus on technologies that have the greatest potential to slash carbon emissions, maximise knowledge-sharing between businesses and sectors and build on existing areas of industrial strength. In the case of the UK for example, this means focusing efforts on technologies such as hydrogen, CCS, biofuels, wind, batteries and Direct Air Capture.
Achieving net zero emissions by mid-century is a significant endeavour. However, the vast majority of technologies and business models exist already, even if some are at an early stage of development. A comprehensive innovation policy—stretching from early-stage development to full commercialisation—will be essential to take on this challenge.
This blog first appeared on the Economist Intelligence Unit perspectives site, and is reproduced with permission.