Role of Regulation, Incentives and Barriers to Eco-Innovation (Low Carbon Innovation) Dominic Scullard

Regulation, Incentives and Barriers to Greater Eco-Innovation Environmental Policy – Benefit or Harm to the Economy Tackling Climate Change will: - Have Costs to the Economy + Provide Opportunities for Business

Regulation, Incentives and Barriers to Greater Eco-Innovation Some of the Costs to the Economy Projected cost to the UK economy of the indicative EU renewables energy target is estimated at £5/6bn a year (about €7bn 20-25bn Zloty) Existing environmental policies to tackle climate change in the UK (Renewables Obligation / ETS / Carbon Emission Reduction Target) form around 21% of medium sized industrial electricity bills and around 4% of Gas Bills But avoiding tackling climate change is not cost free either, as the Stern Review showed failure to take early action will have bigger costs later on, even as high, or higher as 20% of global GDP But there are opportunities too from this investment

Regulation, Incentives and Barriers to Greater Eco-Innovation Opportunities for the Economy On-shore Wind generation market has been expanding by 30% year on year driven by US and China. EU Targets will add to this. In order to meet CO2 reduction targets the IEA estimates that CCS will need to be installed on 630 coal-fired power plants by This could represent €40bn a year spend on CCS. (From November 2007 G8 Workshop in Calgary) Investment in Renewables in the UK to meet the indicative EU target is projected to be around £100bn by 2020 Increased Energy Efficiency could save UK Industry £7.3bn (€9.3bn / 30.6bn Zloty) a year Waste currently costs UK Industry about 4% of turnover Growing low carbon markets in areas of Power, Buildings, Transport and Manufacturing Industry

Regulation, Incentives and Barriers to Greater Eco-Innovation Developing Low Carbon (Eco) Industries Markets for Low Carbon and wider environmental goods and services are expanding – but in order to make the most of the opportunities the UK Government has and is increasingly taking a strategic approach Started with the Commission for Environmental Markets and Economic Performance This enabled the UK Government to conclude that in order to best develop eco-industries we should concentrate on: - The Long-Term Policy Framework - Support for Supply Chains - Creating the Conditions for Innovation - Developing Skills - Information and Advice

Regulation, Incentives and Barriers to Greater Eco-Innovation Regulation Driving Innovation There are different views on whether regulation can drive innovation and boost competitiveness. Some evidence suggests however: Automotive Industry - European Manufacturers have benefited from tight environmental regulations driving energy efficiency and emissions. USA automotive manufacturers are behind the curve The EU 2020 Energy and Climate Package should help to drive R&D and investment in low carbon technologies and deployment An UN Post Kyoto Agreement would also help to drive market demand Emissions Trading drives the market demand for carbon abatement technologies In the UK The Climate Change Bill, once passed, will commit the UK to making carbon reductions to 2050 – providing long-term regulatory certainty

Regulation, Incentives and Barriers to Greater Eco-Innovation Incentives for Low Carbon Innovation Long-Term Policy Framework is key to ensure that the private sector has the certainty required to make long-term investment decisions, both in purchasing low carbon technology and in developing it. Direct Public Support for Low Carbon Supply of technology –Environmental Transformation Fund: To assist the development of new low carbon energy and energy efficiency technologies in the UK. It has a budget of £400m for html html –Carbon Trust: Main aim to accelerate the move to a low carbon economy by working with organisations to reduce carbon emissions and develop commercial low carbon technologies –Technology Strategy Board: Chief role to stimulate technology- enabled innovation in areas that offer the greatest scope for boosting UK growth and productivity. The TSB promotes, supports and invests in technology research, development and commercialisation. A proportion of this is on low carbon or eco technologies, specifically around vehicles, buildings and lighting –Energy Technology Institute: The Energy Technologies Institute is a public/private partnership created to accelerate the development and commercial deployment of a focused portfolio of energy technologies which will increase energy efficiency, reduce greenhouse gas emissions and help to achieve energy and climate change goals −Regional Development Agencies: RDAs help a sustainable economic development of their regions and prepare for a low carbon future

Regulation, Incentives and Barriers to Greater Eco-Innovation Barriers to Low Carbon (eco) Innovation Lack of Regulatory Certainty – deterring investment in new products or services or reducing demand Lack of Awareness or Information on the Growth of Low Carbon Markets / Opportunities Product Standards – ease of exporting goods Evidence of a reliable track record – difficulties for new companies to prove merits of their products Lack of Business Clusters, or hubs for spin out industries from universities Access to Investment Capital, especially for more risky projects Skills

Regulation, Incentives and Barriers to Greater Eco-Innovation Current Action – Government revised its Manufacturing Strategy to include Low Carbon Manufacturing. A number of specific actions: –Establishment of an Office of Nuclear Development (OND) work with supply chain companies to create a globally competitive industry. Provide clarity and knowledge about the needs of the industry and information on new and existing programmes and future technology needs. –Establishment of an Office for Renewable Energy Deployment (ORED) similar to nuclear, it will address barriers in the supply chain and raise the profile of manufacturers to the renewables industry and communicate the opportunities available. –Support for a Pilot Project for Electric Cars, exploring the role of electric cars in a sustainable transport system and the anticipated market capacity. –UK Government working with the Confederation of British Industry to showcase British Low Carbon Technologies to a global marketplace –Produce in 2009 a full Low Carbon Industrial Strategy which analyses: + Size of the Low Carbon Market + Potential Growth of the Low Carbon Market + Future Role of Government

Regulation, Incentives and Barriers to Greater Eco-Innovation Current Action – Current steps have helped to address - The Long-Term Policy Framework √ - Support for Supply Chains √ - Creating the Conditions for Innovation √ - Information and Advice √

Regulation, Incentives and Barriers to Greater Eco-Innovation Example Pelamis - founded in 1998 Raised almost £40million (including from the Carbon Trust) Headquartered in Edinburgh. Employs over 70 people Recently commissioned to install worlds first multi-unit wave farm Market potential for wave energy >2,000 TWh/year World Energy Council

Regulation, Incentives and Barriers to Greater Eco-Innovation Example Kentish Flats Offshore Wind Farm 8-13 km off the coast 30 wind-powered turbines (3 MW ea) Capital cost £105m Grant£10m Since 2000 UK Capacity in offshore wind has been growing by 86% a year. UK revenues from offshore wind could hit £2bn a year by The Kentish Flats alone will displace an estimated 4.4 million tonnes of carbon dioxide over its 20-years, compared to conventional fossil fuel generation.

Regulation, Incentives and Barriers to Greater Eco-Innovation