Perfecting innovation policy The example of the Netherlands

1. Perfecting innovation policy The example of the Netherlands René Kemp Presentation at opening of CIRUS April 18, 2007 UNU-MERIT, ICIS, DRIFT

2. Innovation is many things

3. Innovation is created in distributed systems of knowledge and its success depends on economic frame conditions and many other factors not under the control of the innovator

5. Rationale for innovation policy: market failure • private markets provide too little incentive for innovation because of knowledge spillovers (danger of imitation) • This is the traditional economic argument which is used by policy makers • It is not wrong but as a guide to policy it is poor

6. System failure as a rationale for innovation policy • Infrastructure problems regarding the physical infrastructure (transport, etc), the scientific infrastructure (high-quality universities and research labs, technical institutes, etc) and the network infrastructure (IT, telecom). • Transition problems: difficulties that arise when firms and other actors encounter technological problems or face changes in the prevailing technological paradigms that exceed their current capabilities. • Lock-in problemsderived from the socio-technological inertia • Hard and soft institutional problemslinked to formal rules (regulations, laws) as well as more informal and tacit ones (social and political culture for instance). Source: Smith (2000)

7. System failures refer to inappropriate infrastructure of knowledge, poor capabilities to adapt, institutional barriers and lock-in • Here it is not so much the divergence between private benefits and social benefits but the (national) innovation systemitself that is a hindering factor • The innovation system comprises many things: the infrastructure of knowledge and access thereto, the knowledge transfers taking place, the platforms and networks for interaction, and the regulations and customs that inhibit (environmental) innovation

8. Source: OECD (1998)

9. Because of the many factors keeping back innovation Countries have multiple policies for innovation: • Support of R&D • Knowledge transfer • Investment support • Green taxes • Science and technology programmes • Skills and educational policies • Competition policy • Regulations for the uptake of clean technologies

10. Government policy for sustainable innovation in the Netherlands Courtesy of Geert van der Veen

11. There has been a shift towards more integrated approaches • Which combine push and pull • having a long-term focus • Involving platforms of interaction • Bringing together different knowledge holders • With government as a facilitator (asking the platforms to define programmes and offer suggestions to policy)

12. Integrated approaches Courtesy of Geert van der Veen

13. DTO-programme (Sustainable Technology Development) in the NL • Scope: 2040 • Factor 8-thinking • Approach towards either functions in society (living, food, transport) or sectors (chemical sector) • Backcasting • Stake holder involvement in idea generation • Technological focus Courtesy of Geert van der Veen

14. The Dutch transition approacha journey to the south

15. Transition management … is a deliberate effort to work towards a transition in a flexible, stepwise manner, utilising dynamics and multiple visions … involves a wide range of policies with their choice and timing gauged to the particular circumstances of a transition

16. Top-down elements • 26 Transition paths • 6 Platforms • new gas • sustainable mobility • green resources • chain efficiency • Sustainable electricity • Sustainable building • Interdepartmental programme directorate energy transition (IPE) and Taskforce

17. The journey to the south • Led by the Ministry of Economic Affairs • Goal: to achieve a transition to a low-carbon economy in 40-50 years time • In a bottom-up, top-down manner, using adaptive programmes (portfolio approach) • With an important role for special platforms • Government-business partnership

18. Bottom-up elements • Business alliances • Experiments by business with real users • Identification of barriers and synergies informing private action and policy (using a desk for policy complaints)

19. Selected transition paths

20. Platform for “green resources” • One of official 6 platforms • 5 transition paths for green resources • Biomass production in NL • Biomass import chains • Coproduction of chemicals (C1-6), transport fuels, electricity and heat • SNG • Green chemistry • 60 million euro for biofuels • In 2007 2% blending requirement for gasoline and diesel (fiscal support in 2006) • Certification system for sustainable biofuels • Goal: substitution of 30% of fossil fuels by 2030

21. Why is NL interested in biomass? • Because NL is a gas country • Because agriculture business and the logistic sector (Rotterdam harbour) are interested in it • Because the chemical industry thinks it may obtain an competitive edge from knowledge-intensive, green materials • Because ECN is a world leader in biomass gassification

22. Instruments for use • Revolving fund of risk capital (from institutional investors) • Support for transition coalitions and experiments (35 mln euro) • Subsidies for energy transition technologies (added to lists of technologies eligible for fiscal support) • Temporary support for eco-products • Innovation waivers: temporary relief from permits • Energy service companies offering advice to companies and households

23. TM: not an instrument but a new framework for policy, in which • Research and innovation policies are oriented towards transition goals and transition paths • Different coalitions are formed of private-public actors and NGOs • Regulatory relief is offered • Special desk is created for frontrunners (koplopersloket) to hear about problems and needs • In which Director-generals from 6 ministries meet to discuss energy transition issues • Special attention is given to outsiders offering innovative solutions (new business goal)

24. Role for science • Invention • Foresight analysis together with business • Sustainability assessment of alternative systems • Study of past transitions • Evaluate transition policies and transition experiments

25. Government-science interactions • Big research programme about system innovation and transitions with about 100 researchers (www.ksinetwork.org) • Involvement of scientists in sustainable mobility programme where project managers to answer “transition questions” • Discussions between policymakers and scientists

26. Transition management as Perspektivischer Inkrementalismus • Using multiple visions (because visions create better world together rather than apart) • Reliance upon experimental learning • Adaptive portfolios: each option has to prove its worth • Policy as a facilitator of change (with government as partner of business)

27. Why we need transition management Because of the barriers to system innovation -- which have to with uncertainty, the need for change at various levels and vested interests Because public policy is highly fragmented and oriented towards short term goals Because of the need for societal support for transition policies and for legitimising policies towards structural change Because a gradual approach of small steps is economically not disruptive and politically and socially do-able

28. Transition management Something for Switzerland?