GLOBELICS SEMINAR ON LEARNING, INNOVATION AND LOW CARBON DEVELOPMENT Diverse and uneven pathways towards low carbon development in emerging economies 4-5 April, Copenhagen Michiko Iizuka UNU-MERIT 1

Options for transition to low carbon development for emerging countries (1)Slow down economic growth; or (2)Reduce energy intensity; (3)Increasing use of renewable energy; (4)Introduce systemic change For emerging countries, viable options are the combination of (2)-(4). 2

Aim of this paper To demonstrate: Diversity –reflecting many specificities exist in each country by looking at BRICs country Uneven process of learning—different sequences of learning and adapting by looking at case of solar PV in China System and dynamics—key to success in policy towards low carbon development from above cases 3

Framework: Diffusion Diffusion is chosen instead of – Functions of innovations system(Bergek et al, 2008, Hekkert et al, 2007 among others); – Technological transition theory (kemp et al 1998, Jacobsson and Bergek, 2011 among others) Because in emerging countries: – Technology is adapted instead of created; – Driving force for transition to low carbon development may not be strong as in industrialized countries (unless there are other incentives) 4

Determining factors for diffusion process Factors influence the decision to adapt new idea/technology/product are(Rogers, 2005): Relative advantage Decision that new is better than existing one. Compatibility Understanding that new idea matches with existing system, context. Complexity It is not too difficult to do. Trialability It can be tried, not unknown, reduced risk. Observability It can be easily observed, demonstration effects. 5

Dual/uneven learning process in emerging countries Capacity to manufacture renewable energy technology (and supply for the technology): export of equipment, machines, ingredients Capacity to use renewable energy technology: generating capacity USEMANUFACTURE 6

Case of BRICS with renewable 7

RENEWABLE ELECTRICITY GENERATING CAPACITY BY SOURCE (EXCLUDING HYDROPOWER) Source: IEA,

Ranking of renewable energy generation capacity: use Source: REN 21, 2007&2011. Note: *does not include hydroenergy, **on grid only. 9

Composition of electricity generation in 2008 Source: IEA 2009 and Energy production source,

Observed influencing factors for using renewable technology Availability of – Alternative (cheaper) source of energy (coal, natural gas); – Geographical, climate conditions (Wind, Solar, Water); – Existing technological/knowledge assets (Nuclear, bio fuel) Strong path dependence observed. Without coordinated efforts, increase of renewable energy sources are less than the actual increase in energy use in these emerging courtiers. 11

Diffusion of Solar PV Technology in China as an example Diffusion of renewable technology in 3 levels: Use – Installed capacity, % of electricity generated Production – Market share by firms, production of equipment or machineries Creation of new knowledge (technological capability) – Patenting(output) 12

Composition of electricity by source in

Leading Solar PV module producers in 2010&2011: % share in the world market Source: Iizuka et al, 2012 based on REN21 report,

Production of Solar PV technology in China by segment Source: Based on de la Tour et al,

PV supply chain SiliconPC Cells Wafers Ingots PV modules System Install ation Electricity generation 16

Share of patenting application by parts for Solar PV in China Source: de la Tour et al,

Observation on diffusion of Solar PV in China: Use Use of Solar PV is still stagnant in China despite recent increase in installment. -Lack of infrastructure, pricing system, incentives, accessibility, type of technology may have affected the decision making -User supposed to play major role but still absent, Policy and Market play a role in shaping the user’s demand/preferences: however, this was somehow lacking until recently 18

Observation on diffusion of Solar PV in China: Production Production of Solar PV is rapidly increased in China in the 2000s. - Competitiveness in costs, presence of FDI, MNCs attracted by large market; however, until recently, -Development is concentrated in in less technologically sophisticated, less investment intensive segment of production. -Less development in input suppliers, deployment services-- -Market had been playing major role (price competitiveness) until recently 19

Observation on diffusion of Solar PV in China: Technological capability Technology capability in Solar PV technology still at the incipient stage but rapidly catching up -High entry barrier, High initial investment costs, low technological level, lack of human resources, still low R&D investment by private sector -Nevertheless, patent application is increasing -Policy plays an important role (incentives by government) but not necessarily aimed at low carbon development but on export promotion 20

Recent events: shifts in policy direction? US-EU vs China: Dumping accusation on Chinese Solar PV in Policy shifts observed since 2009 when several government project started to induce domestic use solar PV. The change in direction became clear in 2011 with introduction of Feed in tariff and intention to establish institutional and physical (grid) infrastructure( 12 th 5 year plan for renewable energy development). 21

Conclusion Diffusion process of renewable technology is diverse across countries dependent on – Alternative source of energy; – Geographical, climate conditions ; – Existing technological/knowledge assets Policy plays important role in building technological assets on existing specific contexts and giving incentives to promote diffusion: – Relative advantage, – Compatibility, – Complexity – Trialability and – Observability 22

Some thoughts The diffusion of use for renewable technology (Solar PV)did not take place solely neither by Globalization and market forces nor Government policy But needed both—because it required industrial capacity as well as government assurance. What is the right balance? How can the system of innovation framework serve this purpose of providing right sequence and combinations? WTO dumping accusation – Is it viable for the product that is going to increase public benefit (by distributing cheaper products)? – A bit similar argument with open source software and HIV AIDS drug. 23

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What is diffusion? “ Process by which an innovation is communicated through certain channels over time among the member of a social system.” (Rogers, 2003: 35) 25

How to achieve low-carbon development? Diffusion of renewable energy technology one way to achieve Low carbon development INSTITUTION – law, policy, regulation, incentives to facilitate the transition TECHNOLOGY – Low carbon technology use, produce and innovate CAPACITY – Education, diffusion of information to support and sustain the transition 26

Conclusion Export (and domestic market) market created an industry over the years (1990s-2000s) Until the policy to induce both physical and institutional infrastructure, use of solar PV was limited. Policy influenced various factors (relative advantage, compatibility, trialability and observability) to facilitate diffusion in use. Catching up via technology may work with right combination and sequence with policy support. 27