International economics 11th ed robert j carbaugh

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International Economics of Resource Efficiency Raimund Bleischwitz ZhongXiang Zhang l Paul J.J Welfens l Editors International Economics of Resource Efficiency Eco-Innovation Policies for a Green Economy Editors Prof.Dr Raimund Bleischwitz Wuppertal Institute for Climate Environment and Energy Research Group Do¨ppersberg 19 42103 Wuppertal Germany raimund.bleischwitz@wupperinst.org Prof.Dr Paul J.J Welfens Bergische Universita¨t Wuppertal European Institute for International Economic Relations (EIIW) Rainer-Gruenter-Straße 21 42119 Wuppertal Germany welfens@eiiw.uni-wuppertal.de Ph.D ZhongXiang Zhang East-West Center East-West Road 1601 96848-1601 Honolulu USA zhangz@eastwestcenter.org ISBN 978-3-7908-2600-5 e-ISBN 978-3-7908-2601-2 DOI 10.1007/978-3-7908-2601-2 Springer Heidelberg Dordrecht London New York Library of Congress Control Number: 2011932214 # Springer-Verlag Berlin Heidelberg 2011 This work is subject to copyright All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer Violations are liable to prosecution under the German Copyright Law The use of general descriptive names, registered names, trademarks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use Cover design: WMXDesign GmbH, Heidelberg, Germany Printed on acid-free paper Physica-Verlag is a brand of Springer-Verlag Berlin Heidelberg Springer-Verlag is a part of Springer ScienceþBusiness Media (www.springer.com) Preface In the aftermath of the financial crisis, the challenges for international economics have not become less demanding Financing innovative business ideas and new technologies need to overcome adjusted risk portfolios While the crisis alleviated temporary concerns about a tight balance between supply and demand for energy and resources and led to a first time reduction in global CO2 emissions in 2009, rising tides of higher raw material prices are soon to sweep through all economies as they recover from the economic crisis Indeed, the Eastern Asian economies have recovered early and strongly from the economic crisis While the recoveries of the European Union and the U.S have been sluggish, they are emerging from the worst recession since the Great Depression In the post-crisis era, all countries are going to be increasingly focused on sustainable growth, most notably the emerging economies where people more than ever demand clean air, healthy sanitation systems and affordable mobility However, an Asian-led growing demand for natural resources and the related impacts cannot be underestimated Not many international forecasts exist on future supply and demand of natural resources, however a doubling of demand between 2000 and 2030 is a reasonable estimation (Lutz and Giljum 2009: 38), thus underlining the need to analyze markets in more detail as well as to establish international market intelligence on the issue There are many fundamental uncertainties involved in those forecasts for natural resources and materials on the future markets and their impacts However three latest news illustrate the need for international economics to pay full attention to this issue: l The UNEP’s International Panel for Sustainable Resource Management1 released its first report on biofuels in late 2009 that states unanimously the severe damages occurring from poor performing first-generation biofuels and calls for more attention to competing land uses between extraction, agriculture and other purposes http://www.uneptie.org/scp/rpanel/ v vi l l Preface The oil disaster in the Gulf of Mexico that occurred in early 2010 will not only have an impact on US energy strategy – strengthening the independence from oil – but also on how financial markets will assess oil companies and how those states issuing permits to oil companies will regulate their liability The European Commission (2010) released its long-awaited second report on the criticality of minerals in June 2010 naming some fourteen minerals as “critical”, i.e that the risks for supply shortage and environmental issues as well as their impacts on the economy are higher compared with most of the other raw materials Though at least some these minerals (Antimony, Beryllium, Cobalt, Fluorspar, Gallium, Germanium, Indium Graphite, Magnesium, Niobium, Platinum Group Metals, Rare earths, Tantalum, Tungsten) are not well-known outside an expert community, the fact that they are essential for steel production and many future technologies make a strong case for economic analysis In total, the issue of scarcity that has been looked at as somewhat old-fashioned needs to be reconsidered: it is an essential driver for the green economy and the low-carbon society – and it should become a centerpiece of economic analysis (Bleischwitz et al 2009) Though obviously many minerals are almost abundantly available, the aforementioned future risks call for more profound economic analysis that is international in scope and aligns innovation with environmental and resource economics – definitely an issue for the Rio+20 conference of the United Nations in 2012 This is also a strong pledge for international macroeconomics of resource management The financial crisis has demonstrated the vulnerability of economies resulting from international dependence on weakly coordinated financial institutions; in its aftermath, increasing public debt is likely to stimulate an overexploitation of natural resources in resource-extracting regions On the other hand, combating the public debts will require further cuts in expenditures Here, cutting the costs for importing commodities could become a key strategy in the majority of resource-dependent countries – if strategies of resource efficiency are promoted Indeed, these two strategies not match Hence, analyzing public policies in relation to optimal pathways for both resource-exporting countries and importing regions and industries is of paramount relevance The upcoming Rio+20 conference in 2012 – 20 years after the Earth Summit in Rio de Janeiro 1992 – will probably deal with fostering green growth and launch a program on a green economy.2 This book seeks to make a contribution to this goal It addresses the challenge of turning the aforementioned risks into opportunities and forward-looking policies The chapters included have undergone a rigorous discussion and review process during and after the Second International Wuppertal Colloquium on sustainable growth and resource productivity.3 http://www.unep.org/greeneconomy/ http://www.wupperinst.org/en/projects/proj/index.html?projekt_id¼313&bid¼138 Preface vii The basic message is simple and straightforward: Resource efficiency offers tangible economic benefits Our understanding of resource efficiency captures all efforts to enhance the sustainability of using resources along their full life cycle from extraction to transformation into materials and production, transportation, consumption on to recycling and disposal Indeed, this definition underlines all kinds of cost-saving measures that include improving operational efficiency and reducing the use of raw materials and consumables, as well as minimizing water, energy, transportation and waste.4 In addition to such evident resource efficiency benefits for business, it seeks to explore different kinds of innovation as well as efforts to internalize negative externalities Material Flow Analysis (MFA) was created a few years ago as an attempt to analyze the use of natural resources in societies It is associated with concepts such as “industrial ecology” and “socio-industrial metabolisms”5 – and may not yet have fully explored the economic dimension of material flows Integrating the stages of production, consumption and recycling, it goes beyond traditional resource economics and offers a comprehensive perspective for resource policy Since Eurostat and OECD have provided handbooks on the measurement of material flows, and in fact promote the collection of data and applying concepts, there are many opportunities for international economics and economic policy to integrate MFA in their models and empirical analysis A comprehensive perspective for how economies use materials and increase their total resource productivity – a notion that is seen as inclusive and captures indirect flows as well as ‘ecological rucksacks’ (OECD 2008; Bringezu and Bleischwitz 2009)– will however need to look at many barriers and some persisting bottlenecks of transforming currently resource-intensive patterns of production and consumption It would be naı¨ve to believe in a self-sustaining growth promoted by green technologies alone Rather, economic analysis reveals that more factors ought to be taken into account, such as l l l l l The structural change from resource-intensive industrial patterns to services as it has occurred in many OECD countries since the 1970s and will soon be on the agenda in most emerging economies A structural change within resource-intensive industries establishing new business models on e.g clean mobility and sustainable construction The setting up and maintenance of infrastructures for electricity, heating, mobility, telecommunication, water, and housing Accounting for education and knowledge, a factor emphasized by the new growth theory and e.g UNESCO Accounting for negative externalities (such as environmental damages) and for informal activities such as private households’ care systems A survey of 500 UK businesses shows that almost three-quarters of the respondents had developed a more detailed knowledge on their resource use as a result of the downturn; see: Drury (2010) See e.g the web pages of the International Society for Industrial Ecology: http://www.is4ie.org and http://www.materialflows.net on data viii Preface Thus, it is clear that the program of such international economics of resource efficiency can be labeled as “no green growth without innovation” (Aghion et al 2009) Referring to insights of Joseph Schumpeter, however, it should also become apparent that mechanisms of “creative destruction” will also be part of such an agenda (i.e., the industrial transformation of currently unsustainable patterns within a timeframe that is sufficient to (a) allow essential ecosystem services to adapt and (b) to develop and to disseminate suitable eco-innovation to replace them) Not surprisingly, the related debate on growth, well-being and environment as well as on transitions from today’s status to sustainable development has accelerated Van den Bergh (2010) spotlights a “GDP paradox”, meaning that economists and other researchers feel increasingly uneasy with GDP as a measure of social progress while politicians and many others critiquelessly support it and call for unconditional GDP growth This conflict will become politically controversial when economic models offer alternative policy packages with implications such as “lower CO2 emissions, higher resource productivity, higher employment and slightly lower GDP growth compared to business as usual” Indeed, some relaxation about GDP growth as such and more emphasis on key progress indicators will need to be backed by in-depth economic analysis supplemented with a convincing communication strategy Some circles have started to advocate a “De-Growth” – a downscaling of production and consumption – as a response to these challenges (Schneider et al 2010).6 This is in sharp contrast to business consultants advocating the merits of win-win and green market opportunities Seen from a Schumpeterian and transition management point of view, however, it may be less provocative than it seems at a first glance for a number of reasons Firstly, a decline of some industries has accompanied the history of market economies since its very beginnings Secondly, the need for industrial transformation is widely accepted Thirdly, the weak identity between GDP growth and well-being has become a standard lesson Fourthly, the opportunities of greening the progress that appear today are just the tip of the iceberg and will become more important when ecosystem services are fully incorporated into business agendas and a future accounting system Fifthly, international cooperation with emerging economies will probably be easier to strengthen if a new paradigm is closer to a “green economy” than to any “de-growth” The scope of this book follows the debate as outlined above It includes 18 chapters Lucas Bretschger provides an overview of sustainability economics and sheds light on the nexus between resource use and economic performance from both a theoretical and an empirical perspective Moreover, his chapter addresses a possible “Green New Deal” that would help boost investments in eco-innovation The international sustainability discussion has focused greatly on CO2 emission reductions, but this focus is rather narrow and not really adequate when the long-run sustainability dynamics are to be assessed The broader role of green innovativeness See therefore the website of De-Growth: http://www.degrowth.eu Preface ix has to be considered as well Aimed for a broader innovation-oriented sustainability, Welfens, Perret and Erdem have developed the Global Sustainability Indicator The new indicator set is in line with OECD recommendations for composite indicators and uses weights from factor analysis Reflecting environmental pressures, economic performance and capabilities for eco-technologies, the Global Sustainability Indicator shows a compact way of assessing global sustainability Illustrating the outcomes on a global scale, their chapter also addresses the relevance of policy Paul Ekins discusses concepts, policies and the political economy of system innovation for environmental sustainability His paper reviews a number of theories of technological transition, which make clear that such transitions have complex political, institutional and cultural, in addition to technological and economic, dimensions This is similarly true for processes of environmental and eco-innovation, the nature of which the chapter explores, together with how they can be measured His paper supports a strong role in policy and also advocates the role of the law, in a policy mix with the undoubtable success of the economic incentives The chapter concludes that such policies will need to become much more stringent if eco-innovation is to drive an adequately far-reaching technological transition to resolve pressing environmental challenges Crucial in the political economy of this change will be that eco-industries, supported by public opinion, are able to counter the resistance of established industries which will lose out from the transition, in a reformed global context where international treaties and co-operation prevent the relocation of environmentally destructive industries and encourage their transformation Raimund Bleischwitz and Stefan Bringezu analyze why concern over natural resources requires a sustainability perspective; they give evidence on some critical metals that are needed for a green economy and the resulting trade-offs The empirical part of their chapter compares resource productivity performances across countries Introducing the notion of “material flow innovation”, they discuss the innovation dynamics and issues of competitiveness In conclusion, they make a case for effective resource policies that should provide incentives for knowledge generation and to get prices right Phillip Crowson provides an overview of the economics of current metal markets and gives analytical insights from stock market experience on the issue He concludes that markets have learned to deal with rapid price increases and scarcities, but some business models need to be reconfigured and policies ought to improve regulation Rainer Walz discusses competences for green development and leapfrogging in Newly Industrializing Countries (NICs) His approach underlines necessary absorptive capacities and technological competences in the sustainability technologies The general framework conditions for innovations are analyzed for various newly industrializing countries using different data sources International patents and successes in foreign trade indicate to what extent a country is already able to “open up” internationally The resulting pattern shows various strengths and weaknesses of the analyzed NICs, and seems to support a lead market perspective 380 T Machiba Box The Development of Advanced High-Strength Steel for Automobiles The introduction of new legislative requirements for motor vehicle emissions in the USA in 1993 intensified pressures on the automotive industry to reduce the environmental impact from the use of automobiles In response, a number of steelmakers from around the world joined together to create the UltraLight Steel Auto Body (ULSAB) initiative to develop stronger and lighter auto bodies From this venture, the ULSAB Advanced Vehicles Concept (ULSAB-AVC) emerged The first proof-of-concept project for applying advanced high-strength steel (AHSS) to automobiles was conducted in 1999 By optimising the car body with AHSS at little additional cost compared to conventional steel, the overall weight saving could reach nearly 9% of the total weight of a typical five-passenger family car It is estimated that for every 10% reduction in vehicle weight, the fuel economy is improved by 1.9–8.2% (World Steel Association 2008) At the same time, the reduced weight makes it possible to downsize the vehicle’s power train without any loss in performance, thus leading to additional fuel savings Owing to their high- and ultra-high-strength steel components, such vehicles rank high in terms of crash safety and require less steel for construction The iron and steel industry’s continuing R&D efforts in this area also stem from its attempt to strengthen steel’s competitive advantage over alternatives such as aluminium The Future Steel Vehicle (FSV) is the latest in the series of automotive steel research initiatives It combines global steelmakers with a major automotive engineering partner in order to realise safe, lightweight steel bodies for vehicles and reduce GHG emissions over the lifecycle of the vehicle made possible through an international collaborative arrangement between vehicle designers and steel makers and enabled the production of stronger steel for the manufacturing of lighter and more energy-efficient automobiles (Box 2) The electronics industry has so far mostly been concerned with eco-innovation in terms of the energy consumption of its products However, as consumption of electronic equipment continues to grow, companies are also seeking more efficient ways to deal with the disposal of their products As in the other two sectors, most eco-innovations in this industry have focused on technological advances in the form of product or process modification and re-design Similarly, developments in these areas have been built upon eco-innovative organisational and institutional arrangements (see Box 3) Some of these arrangements have also been, perhaps unsurprisingly, among the most innovative and forward-looking A notable example is the use of large-scale Internet discussion groups, dubbed “innovation jams” by IBM, to harness the innovative ideas and knowledge of thousands of people Alternative business models, such as product-service solutions rather than merely selling physical products, have also been applied, as exemplified by new services in the form of energy management in data centres (IBM) and optimisation of printing and copying infrastructures (Xerox) 19 Eco-Innovation for Enabling Resource Efficiency and Green Growth 381 Box Energy-Saving Controller for Air Conditioning Water Pumps Air conditioners function by driving hot or cold water through piping to units located on each level of the building The amount of cold water varies according to the desired temperature relative to the outside temperature However, conventional air conditioners operate at the pressure required for maximum heating and cooling demands Based on research revealing that in Japan air conditioning consumes half of a building’s total energy, Yokogawa Electric, a Japanese manufacturer, sought to create a simple, inexpensive and low-risk control mechanism that would eliminate wasteful use of energy The resulting product, Econo-Pilot, can control the pumping pressure of air conditioning systems in a sophisticated way and can reduce annual pump power consumption by up to 90% It can be installed easily and inexpensively, precluding the need to buy new cooling equipment The technology has been successfully applied in equipment factories, hospitals, hotels, supermarkets and office buildings Image: Yokogawa Electric Corporation Econo-Pilot is based on the technology devised by Yokogawa jointly with Asahi Industries Co and First Energy Service Company It was developed and demonstrated through a joint research project with the New Energy and Industrial Technology Development Organization (NEDO), a public (continued) 382 T Machiba organisation established by the Japanese government to co-ordinate R&D activities of industry, academia and the government NEDO researches the development of new energy and energy-conservation technologies, and works on validation and inauguration of new technologies After the demonstration and piloting of this technology, various functions were incorporated in the final product Fig 19.4 Mapping primary focuses of eco-innovation examples Note: This map only indicates primary targets and mechanisms that facilitated the listed ecoinnovation examples Each example also involved other innovation processes with different targets and mechanisms To sum up, the primary focus of current eco-innovation in manufacturing industries tends to rely on technological advances, typically with products or processes as eco-innovation targets, and with modification or re-design as principal mechanisms (Fig 19.4) Nevertheless, even with a strong focus on technology, a number of complementary changes have functioned as key drivers for these developments In many of the examples, the changes have been either organisational or institutional in nature, such as the establishment of separate environmental divisions for improving environmental performance and directing R&D, or the setting up of inter-sectoral or multi-stakeholder collaborative research networks Some industry players have also started exploring more systemic ecoinnovation through new business models and alternative modes of provision 19 Eco-Innovation for Enabling Resource Efficiency and Green Growth 383 The heart of an eco-innovation cannot necessarily be represented adequately by a single set of target and mechanism characteristics Instead, eco-innovation seems best examined and developed using an array of characteristics ranging from modifications to creations across products, processes, organisations and institutions The characteristics of a particular eco-innovation furthermore depend on the observer’s perspective The analytical framework can be considered a first step towards more systematic analysis of eco-innovation.5 19.5 Policies for Eco-Innovation to Date Long-term policy frameworks and goals for sustainable development such as the Kyoto Protocol have led to the establishment of a wide variety of policy programmes, notably in the areas of energy, transport, building and manufacturing OECD countries have mainly used environmental policies to address ecoinnovation Generally, innovation policy in most countries has been the responsibility of ministries for trade and industry and science and technology, while environmental policy has usually been developed by environment ministries Environmental policies have traditionally focused on treatment of pollution and waste, and thus on end-of-pipe solutions, rather than on the whole production and disposal processes (UK Parliamentary Office of Science and Technology 2004) Environmental policies have therefore had a relatively limited effect on innovation, since stringent regulations and standards not give firms enough incentive to innovate beyond end-of-pipe solutions even though those policies have largely contributed to reducing environmental impacts Moreover, conventional regulations and standards typically impose great costs on firms (OECD 2009c) Recently, some market-oriented instruments, such as green taxes and tradable permits, have been introduced as measures that put a price on the “bad” However, to realise its potential, eco-innovation will require actions to ensure that the full cycle of innovation is efficient, with policies ranging from appropriate investments in research to support for commercialising existing and breakthrough technologies Innovation policy, on the other hand, has been too broad to address specific environmental concerns appropriately It has focused on spurring economic growth by developing new technologies for improving productivity and new areas of functionality As a result, eco-innovation has not been a primary objective of environmental or of innovation policy Yet both policy areas would benefit from closer integration A 2005 OECD report on the governance of innovation systems listed a number of benefits arising from the integration of innovation and environmental policies From the A combination of this eco-innovation framework with the frameworks of system transition developed by some scholars (e.g Geels 2005; Loorbach 2007; Carrillo-Hermosilla et al 2009) could further help understand the dynamic nature of radical changes created by eco-innovations 384 T Machiba environmental point of view, the benefits would include environmental effectiveness and cost effectiveness A more innovation-oriented environment policy could make improvements in environmental quality more attainable through the application of new technologies and also reduce the costs of environmental measures Closer integration could also help decouple environmental pressures from economic growth and hence achieve ambitious environmental and socio-economic goals simultaneously, while benefiting from new market opportunities in a growing eco-industry From the innovation point of view, it is increasingly recognised that “third-generation innovation policies have to become fully horizontal and support a broad range of social goals if they are to achieve their objective of increasing the overall innovation rate in societies” (OECD 2005, p 57) In order to examine the status quo of national initiatives and programmes with regard to eco-innovation, the OECD project on Green Growth and Eco-innovation conducted a questionnaire survey Ten OECD countries participated: Canada, Denmark, France, Germany, Greece, Japan, Sweden, Turkey, the UK and the USA Innovation policy initiatives and programmes collected from countries include both supply-side and demand-side measures, as initially categorised by Edler and Georghiou (2007) (see also Fig 19.5) Following provides a brief analysis of how both supply-side and demand-side policy measures are currently Supply-push Demand-pull “Getting prices right” instruments Macro approaches Eco-taxes, cap & trade schemes Removal of environmentally harmful subsidies Regulations Public R&D Technical standardisation Procurement Equity support Pricing Demonstration Labelling & certification Networks & partnerships Infrastructure provision Technology transfer Information & advice Education & training Fig 19.5 Policy instruments for eco-innovation Targeted approaches 19 Eco-Innovation for Enabling Resource Efficiency and Green Growth 385 addressing eco-innovation and the extent to which environmental considerations are integrated into innovation policies.6 19.5.1 Supply-Side Measures • Equity support: Many governments have taken measures to ease access to finance through venture capital for firms developing innovative technologies or setting up new businesses The focus is often on small and medium-sized enterprises (SMEs) and entrepreneurs However, there are few specific measures or instruments for firms developing environmental technologies or eco-friendly products and services, as most equity support measures target general business start-up and development • Research and development (R&D): R&D activities are at the heart of ecoinnovation and are necessary for the development of environmental technologies Most R&D programmes seem to be sector- or technology-specific, and few countries seem to focus on shifting R&D investments towards the environment or eco-innovation It is currently not clear what proportion of total R&D expenditures is directed towards eco-innovation Furthermore, R&D in general-purpose technologies, such as information technology, biotechnology and nanotechnology may be very relevant to eco-innovation but may not be identified as such • Pre-commercialisation: Many available environmental technologies have not been successfully introduced in the market, either because the market for them is not well developed or because existing infrastructure and production and consumption systems may be an obstacle to commercialisation Consideration of the post-R&D stages of innovation, prior to commercialisation as marketable products and services, is thus particularly important for eco-innovation Many government initiatives have been introduced to help firms bring new environmental technologies to the market, though the current focus is sometimes limited to promising energy and transport-related technologies (see Box 4) Box Funding for Successful Deployment of Eco-Technologies A number of the USAs’ R&D-related initiatives increasingly pay attention to the whole process of innovation For example, the Environment Protection Agency’s (EPA) Research and Development Continuum defines six stages in (continued) The full list of the collected policy initiatives related to eco-innovation is provided in OECD (2010) 386 T Machiba the progression of technology development from idea to diffusion in the marketplace The Department of Energy’s (DOE) Technology Commercialization Fund (TCF) complements angel investment or early-stage corporate product development (USD 14.3 million in fiscal years 2007 and 2008) The TCF brings the DOE’s national laboratories and industry together to identify promising technologies that face the “commercialization valley of death” It makes matching funds available to any private-sector partner wishing to pursue deployment of such a technology Similarly, the DOE’s Hydrogen, Fuel Cells and Infrastructure Technologies Program focuses on the development of next-generation technologies, establishment of an education campaign that communicates potential benefits and better integration of sub-programmes in hydrogen, fuel cells and distributed energy • • • • Environmental technology verification (ETV) schemes have also been introduced in some OECD countries Education and training: Education and training programmes are essential for developing the human capital needed to deliver eco-innovative solutions and create a potential labour force for “green jobs” A number of countries have taken measures to mainstream environmental education in the school curricula or vocational training A few countries have also started to focus on creating specific skills and a knowledgeable workforce for emerging environmental industries Networks and partnerships: In view of the recognised significance of networks and partnerships for innovation, many policy programmes have sought to influence the structure of innovation by requiring co-operation in research projects and by supporting network development To improve the overall sustainability performance of products and services, eco-innovation activities need to address the entire value chain Government can play a role as facilitator of networks of innovation actors, notably through public–private partnerships and networking platforms for eco-innovation To date, a few networks specifically target the development of new environmental technologies and solutions (see Boxes and 6) Information services: Governments can play an essential role in diffusing knowledge and information on environmental issues and eco-innovation For example, information centres can be designed to promote transfer of knowledge on resource efficiency and environmental technologies So far, information on environmental issues has been provided mainly through Internet websites Most advisory services for SMEs have not specifically targeted environmental issues, let alone eco-innovation Provision of infrastructure: Some types of infrastructure are essential for innovation activities In particular, transport and communication infrastructures are increasingly considered a critical factor for economic success and raising 19 Eco-Innovation for Enabling Resource Efficiency and Green Growth 387 Box Knowledge Networks for Eco-Innovation The UK Technology Strategy Board, in charge of promoting technologydriven innovation, relies heavily on networking to drive innovation within UK businesses It has set up: Innovation platforms, to pull together policy, business, government procurement, research perspectives and resources to generate innovative solutions for societal issues and harness the innovative capabilities of UK businesses Innovation platforms focus on particular areas of innovation to identify available levers and funding streams, including two innovation platforms in the environment-related areas of low-impact buildings and low-carbon vehicles The Low Carbon Vehicle Innovation Platform will provide GBP 40 million to support R&D and commercialisation of lowcarbon vehicles Knowledge Transfer Networks (KTNs), to increase the depth and breadth of transfers of technology to UK-based businesses Networks in the fields of technology and business applications include some environmental fields such as resource efficiency, environment and fuel cells KTNs bring together people from business, universities, research, finance and technology organisations to stimulate innovation through knowledge transfer The Technology Strategy Board conducted a major review of the KTNs It showed that 75% of business respondents rated KTN services as effective; 50% developed new R&D and commercial relationships with people met through these networks; and 25% made a change to their innovation activities as a result of their engagement The most highly rated functions of the KTNs are monitoring and reporting on technologies, applications and markets, high-quality network opportunities, and identifying and prioritising key innovation-related issues and challenges Given the increasingly global nature of innovation, the KTNs’ support to international activities will be increased productivity Innovation related to alternative fuel vehicles, user-friendly public transport or renewable energy relies on infrastructure for new fuelling systems, sophisticated traffic control, diffused energy distribution systems, etc However, this area has so far not been at the core of innovation policies of the countries reviewed, although a few take information and communication technology infrastructure into account as eco-innovation measures.7 Recent stimulus packages to address the late-2000s economic crisis contain a wider range of measures in this area, however 388 T Machiba Box Creating Regional Clusters for Eco-Innovation “Competitiveness clusters” have been established since 2004 in various French regions to conduct innovative projects in partnership between businesses, research institutes and training organisations with a focus on one or more identified markets Several of the 71 clusters are currently implementing common environmental technology projects with high-growth potential either in renewable energy and energy efficiency or in a specific sector Examples include decentralised energy (Languedoc-Roussillon), chemistry and the environment (Rhoˆne-Alpes), industry and agro-resources (Champagne-Ardennes), cities and sustainable mobility (Ile-de-France) and vehicles of the future (Alsace and Franche-Comte´) Such initiatives are expected to bring growth and employment opportunities in the regions and increase the attractiveness of France through enhanced international visibility Box Japan’s Top Runner Programme for Energy Efficiency The Top Runner programme, launched in 1998 by the Japan’s Ministry of Economy, Trade and Industry (METI), sets performance targets for enterprises It adopts a dynamic process of setting and revising standards by taking the current highest energy efficiency rate of a product as a benchmark instead of setting fixed targets The programme currently targets 21 product groups in the residential, commercial and transport sectors This flexible, dynamic standard setting creates positive incentives and competition among manufacturers to improve their product performance without the need for financial support or a bias towards existing or outdated technologies that may cause innovation inertia The programme is supplemented by the e-Mark voluntary labelling scheme to help consumer choices at the point of sale 19.5.2 Demand-Side Measures • Regulations and standards: Traditionally, industry has tended to view environmental regulations negatively as adding costs and creating an adverse effect on competitiveness Forward-looking instruments based on best available technologies or overall environmental performance of products or companies, however, could guide the course of innovation and accelerate the creation of eco-innovative solutions by creating a “level playing field” Flexible and welldesigned standards and regulations would also help the diffusion of advanced environmental technologies and eco-friendly products by creating demand Some regulations and standards are emerging that aim at stimulating sustainable manufacturing and eco-innovation by creating demand both within firms and among consumers (see Box 7) 19 Eco-Innovation for Enabling Resource Efficiency and Green Growth 389 • Public procurement and demand support: As the public sector is a large consumer, public procurement represents a key source of demand for firms As attention to demand-side policies increases, some governments have started to highlight procurement as a way to spur innovation Some of the countries surveyed list green public procurement as a driver of eco-innovation, but there is little evidence on the extent of such procurement initiatives and their success in creating new eco-innovative solutions or lead markets Governments may also directly support business and individual consumers with subsidies, tax incentives or other benefits for purchasing particular eco-products and services in order to stimulate demand There are a few good examples of the proactive use of demand support measures for shifting the course of technology and product developments (see Box 8) • Technology transfer: The transfer of technology and know-how in the area of environmental technologies is a way for technology-importing countries to increase resource efficiency in a relatively short term At the same time, it can offer exporting countries considerable market and innovation opportunities Some countries seem to be more strategic than others, targeting specific countries as export partners or attracting foreign investment in domestic eco-industries Results from this stocktaking exercise show that countries’ policy initiatives and programmes to promote eco-innovation are diverse, including both supply-side and Box Providing both “Carrot and Stick” for Diffusing Eco-Products In December 2007, France introduced the Bonus–Malus (reward-penalty) scheme for personal automobiles to support consumers’ purchase of greener cars, while encouraging manufacturers to develop low-emissions vehicles This scheme provides a subsidy or a penalty to any buyer of a new car depending on the amount of CO2 emissions per kilometre as below: Subsidies in 2008 Emission level (g CO2/km) Amount (EUR) 121–130 200 101–120 700 61–100 1,000 [...]... development Recently, we have experienced a triple crisis in the fields of food, fuel, and finance Prices for food traded internationally increased by 60% in the first half of 2008, oil price peaked at 150 $/barrel, and banking failures caused huge government interventions Trade and per capita income have contracted worldwide in 2009 which implies one of the major economic downturns of the last decades... paper has been previously published in International Economics and Economic Policy, Special Issue on International Economics of Resources and Resource Policy”, Volume 7, Numbers 2–3/August 2010 L Bretschger (*) CER-ETH, Centre of Economic Research, ETH Zurich, ZUE F7, CH-8092 Zurich, Switzerland e-mail: lbretschger@ethz.ch R Bleischwitz et al (eds.), International Economics of Resource Efficiency,... quantified using data from the Swedish Household Budget Survey of different goods and services split on income classes The changes in consumption patterns with increasing income are used to establish the composition of marginal consumption Combined with energy intensities derived from input–output analysis, this gives a model of how money saved on energy use in one sector may lead to increased energy... processes and institutional change at international levels In that regard, we are entering a fascinating new field Wuppertal, Germany Wuppertal, Germany Honolulu, HI, USA Raimund Bleischwitz Paul J. J Welfens ZhongXiang Zhang References Aghion P, Hemous D, Veugelers R (2009) No green growth without innovation Bruegel Policy Brief 07 Bleischwitz R, Welfens PJJ, Zhang ZX (eds) (2009) Sustainable growth and... France Jonas Na¨sse´n Department of Energy and Environment, Chalmers University of Technology, Go¨teborg, Sweden Christian Ott Institute for Industrial Ecology, St Po¨lten, Austria Nico Pastewski Fraunhofer-Institute for Industrial Engineering IAO, Stuttgart, Germany Jens K Perret Jean Monnet Professor for European Economic Integration, Macroeconomics at the Schumpeter School of Business and Economics, ... European Institute for International Economic Relations (EIIW), University of Wuppertal, Wuppertal, Germany Holger Rohn Trifolium – Beratungsgesellschaft mbH, Friedberg, Germany Ronald Schettkat Schumpeter School of Business and Economics, University of Wuppertal, Wuppertal, Germany Rainer Walz Fraunhofer Institute Systems and Innovation Research, Karlsruhe, Germany Paul J. J Welfens Jean Monnet Professor... economic impacts of reducing CO2 emissions and increasing resource productivity in the EU His analysis is based on the extensive and disaggregated global GINFORS model that contains 50 countries and two regions and their bilateral trade relations, energy balances, material, macro-economic and structural data The model is applied in the petrE project to analyze the impacts of major environmental tax... hence, policies are needed to establish recycling for consumer products at an international scale Tomoo Machiba introduces the OECD’s work on green growth and the underlying analytical approach His chapter also discusses new policy at crossroads after the financial crisis From the analysis of the underlying issues in the book, it is clear that Resource Economics, International Economics and Policy Analysis... production is characterized by a hierarchical order as follows: final output is manufactured by “produced” inputs and produced inputs are manufactured by primary inputs This enables us to express the different substitution channels in a simple yet comprehensive manner The distinctive feature of the model is that the impact of energy on output occurs indirectly, through the produced inputs It does not... goods, but in a more detailed way compared to the one-sector model Assume output Y as a function of total factor productivity A and the produced inputs capital K and intermediate input Z: YðtÞ ¼ F½AðtÞ; KðtÞ; Zðtފ (1.1) with a convenient specification reading: YðtÞ ¼ AðtÞKðtÞa ZðtÞ1Àa (1.2) where t denotes the time index and 0 < a < 1 Produced inputs K and Z are manufactured in separate sectors of
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