An integrated policy for innovation for the environment

1. An integrated policy for innovation for the environment Paper for 6 Countries Programme conference “Innovation Policy and Sustainable development: How can innovation policy incentives make a difference? Brussels, febr 28 and march 1, 2002. René Kemp

2. Findings from evaluation research show that • Innovation policy is poorly aligned to societal goals • The additionality of subsidies policies is small: they encourage companies to do research in a more elaborated way, or to do it earlier, but a great deal of projects would be done anyhow (free rider effect) • environmental policy hardly pulls innovation

3. The limited additionallity of innovation support for environmental technology (figures from Germany)

4. Ways to foster innovation for the environment Through the use of programmes of system innovation offering sustainability benefits in areas where system innovation is needed The setting of long-term goals and targets To make sure that there is a constant pressure for innovation To phase out support for existing technologies

5. The need for system innovation Public policy should be more oriented towards system innovation offering sustainability benefits giving the constraints and barriers for this type of change: the costs of changeover, uncertainty and the need to break old ties and do away with old practices Regime actors are unlikely to be working to system innovationwork. For regime actors system innovation is disruptive, which causes them to look for other solutions. We need to widen the search process and engage in experimentation and the real use with alternative solutions The programmes should be time-limited and flexible in order not to create “white elephants” These programmes are not a substitute for policies to internalise external costs

6. Examples of system innovation industrial ecology nanotechnology hydrogen economy integrated mobility (or chain mobility) Integrated water management

7. Market failure and system failure The cumulative and embedded nature of technical change means that we are locked into systems and products that may be suboptimal from a social welfare point of view. Environmental problems are not simply market failure problems that can be rectified by introducing “the right incentives” but rather problems of coordination, i.e.,the result of coordination failure The coordination failure may have to do with the pool of knowledge, infrastructure, and the institutional matrix which may be inadequate

9. Role of government The role of government in stimulating innovation for the environmentis pluralistic: facilitator, aligner, mediator, controller, and ‘director’ Governments should do many things: facilitate change through incentives, enhance companies’ capability to innovate environmentally, remove institutional rigidities, align interests to public goals, mediate between conflicts of interest, make sure that policies are not dominated by vested interests, control the side effects of old and new technology, and give direction to processes of change by setting goals and instituting transition policies. Policies should fit the context in which they are used and deal with the pertaining market or system failure. Policies should not be based on general arguments of market failure

10. An integrated approach to innovation for the environment: three suggestions • There is a need for a more integrated approach to problems of sustainability • Ways to achieve this are: • 1. By aligning environmental policy to innovation policy through • Options analysis to inform environmental goals and investment • Strategic niche management to jump start markets for sustainable solutions • Cross-functional agencies and task forces around well-defined problems • 2. Programmes for system innovation • 3. Contradition monitoring, to identify conflicting policies

11. Is system coordination possible? Possibilities for system coordination are limited. All what government agencies can aspire to achieve is “increased coherence”. Sociotechnical systems defy control because they are collective outcomes, not collective choices. Innovations are part of trajectories and shaped by social, organizational and techno-economic factors. Historically however public policy is found to be important to radical innovation through its science and technology policy and by creating a first market (often military) for radical innovation, which suggests the use of technological missions but missions may create ‘monsters’ or suboptimal solutions.

12. Transition management … is a collective, cooperative effort to work towards a transition in a flexible, stepwise manner, utilising dynamics and visions … involves a wide range of policies with their choice and timing gauged to the particular circumstances of a transition … involves system innovation and system improvement Source Kemp and Rotmans (2001)

13. Transition management continued Transition management consists of a deliberate attempt to work towards a transition in a stepwise, adaptive manner, using dynamics in technology, markets and governance, exploiting, windows of opportunity. It relies on a process-based steering philosophy of modulation. It does not operate on the basis of a blueprint (greenprint) but uses a set of goals and quality images. The goals are not fixed and the policies to further the goals are constantly assessed and periodically adjusted in development rounds. This creates some flexibility but maintains a sense of direction. Transition management offers an integrative framework for policy deliberation and the choice of instruments and individual and collective action. Transition management is not so much about instruments but more about different ways of interacting, the mode of governance, and goal seeking. Innovation and learning are important aims for transition management. This requires a greater orientation towards outsiders, a commitment to change and clear stakes for regime actors. Through transition management the transition endeavour to more sustainable systems is institutionalised. There is no guarantee of success. It helps to increase the chance of a transition

14. Why we need transition management • Because of the interests of incumbent actors in the status quo and myopia of markets • Because public policy is highly fragmented and oriented towards short term goals—transitions require the coordination of various policy fields: S&T policy, economic policy, innovation policy, environmental policy, transport policy and agriculture policy • Because of the need for societal support for transition endeavours and for legitimising policies towards structural change • Because a gradual approach is economically not disruptive and politically (socially) do-able • Because it is an approach that works towards societal goals in a flexible way: paths get created in the process, not by choice but throughthe variation-selection mechanism

15. Current policy and transition management 2000 2030 Current policy: short-term emission targets 2000 2030 Transition management: long-term targets and short-term targets Source: Rotmans, Kemp and van Asselt (2000)

16. Dynamic multilevel perspective on transitions Source Geels and Kemp (2000)

17. Role of government in different phases Stabilisation phase: consolidation and control of new technology system/regime Take off phase: align policies to goals and new possibilities Acceleration phase: evaluation and full costing of technology systems to promote the best choice • Predevelopment phase: • Engage in experimentation - Societal discussion, development of quality images - Strategisch niche management, Evaluation and exploitation of windows of opportunity Internalisation of external costs

18. Misunderstandings about transition management Transition management is based on the realization of technological blueprints Not true: it is based on a set of goals and quality images (visions). The goals are not fixed and the policies to further the goals are re-evaluated and periodically adjusted. This creates some flexibility but maintains a sense of direction. Transition management is the enemy of control policies Not true: it adds something to such policies: a framework and a commitment to change. One important element of transition management is the transition agenda and the political commitment to change. Transition management is something consensual Not true: the existing corporatist arrangement is broken up, and it does not rely on the good behaviour efforts of incumbent actors. There are stakes and ultimately winners and losers. Transition management will succeed where other policies will fail Not true: it helps to achieve greater coherence in policy and increases diversity

19. Some statements • Conventional innovation is an important source of environmental benefit. • Innovation policy is less needed for normal innovation than for environmental innovation • Innovation policy should be more oriented to system innovation offering sustainability benefits • Generic, incentive-based policiesare wasteful • There is a need for transition programmes