E NERGY R&D 1 Source: World Bank (2009) World Development Report 2010

E NERGY R&D 2 Source: World Bank (2009) World Development Report 2010

E NERGY R&D 3 Source: World Bank (2009) World Development Report 2010

A CCELERATING D IFFUSION AND I NNOVATION OF C LIMATE C HANGE S YSTEMS IN E ASTERN E UROPE AND C ENTRAL A SIA Jean-Louis Racine, The World Bank May 7, 2010 Knowledge Economy Forum IX - Berlin

W HAT IS CLIMATE - SMART INNOVATION ? 5 SectorMitigationAdaptationExamples Transport √ Electric vehicles Industry √ Energy efficiency Energy supply √ Renewable energy Waste management √ Recovering/reducing methane from waste Building √√ Storm-resistant buildings, energy efficiency Agriculture √√ Drought resistant crops Forestry √√ Processing and use of forest products Human health √ Health monitoring and surveillance systems Coastal adaptation √ Geographical planning systems for coastal zones Water √ Non-water based sanitation

Water availability is expected to decrease everywhere but Russia W HY BOTHER WITH CLIMATE - SMART INNOVATION IN ECA? -> R EASON 1: A DAPTATION RELIES ON LOCAL INNOVATION 6 Decrease in yields Yield gap is already 4.5 times larger than yield increase from climate change Source: World Bank (2009) World Development Report 2010 ECA’s poor transport, power and housing infrastructure is expected to be under significant stress

W HY BOTHER WITH CLIMATE - SMART INNOVATION IN ECA? -> R EASON 2: T HERE ARE WIN - WIN OPPORTUNITIES Energy technology can promote business competitiveness 7 Source: World Bank (2010) Lights Out? The Outlook for Energy in Eastern Europe and the Former Soviet Union

W HY BOTHER WITH CLIMATE - SMART INNOVATION IN ECA? -> R EASON 2: T HERE ARE WIN - WIN OPPORTUNITIES Many climate change technologies are already financial viable 8 Source: World Bank (2009) World Development Report 2010

W HY BOTHER WITH CLIMATE - SMART INNOVATION IN ECA? -> R EASON 3: DON ’ T BE THE LAST ONE IN THE GAME Clean technology investments are experiencing phenomenal growth 9 Global cumulative wind capacity Source: World Bank (2009) World Development Report 2010

W HY BOTHER WITH CLIMATE - SMART INNOVATION IN ECA? -> R EASON 3: DON ’ T BE THE LAST ONE IN THE GAME But where is ECA? 10 Source: World Bank (2009) World Development Report 2010 Location of investments of top 5 global wind equipment firms in 2009

W HY BOTHER WITH CLIMATE - SMART INNOVATION IN ECA? -> R EASON 3: DON ’ T BE THE LAST ONE IN THE GAME ECA has the world’s highest carbon intensity 11 Total primary energy supply in kiloton oil equivalent per GDP Source: World Bank (2010) Lights Out? The Outlook for Energy in Eastern Europe and the Former Soviet Union

H OW CAN YOU STIMULATE C LIMATE -S MART I NNOVATION IN ECA? Command and control: Regulations and mandatory performance standards...but careful, this is a double-edged sword 12

H OW CAN YOU STIMULATE C LIMATE -S MART I NNOVATION IN ECA? Price signals Remove subsidies to high-carbon technologies Remove tariffs on climate-smart technologies Tax carbon Introduce feed-in tariffs for renewable energy 13

Number of electric bicycles produced in China: = 40, = 21,000,000 ($11 billion industry) Source: World Bank (2009) World Development Report 2010 H OW CAN YOU STIMULATE C LIMATE -S MART I NNOVATION IN ECA? Regulation and price signals in action in China

H OW CAN YOU STIMULATE C LIMATE -S MART I NNOVATION IN ECA? But regulations and price signals alone can’t solve the market and system failures associated with innovation Improve the business environment Facilitate climate-smart FDI and create conditions for local production of climate-smart technologies Introduce climate-smart innovation policy Public R&D on climate-smart innovation Research-industry linkages Climate-smart industry standards Climate-smart technology extension programs in industry and agriculture In countries with a critical mass of innovation such as Russia, Poland and Turkey, introduce climate-smart innovation support promotion instruments in the private sector: matching grants, innovation prizes, etc. 15

climatechange/ climatechange 16