# document

id: 8292afa44d336c2a8ba94e4e4cddca48
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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"Progress on the alignment of financial flows with low GHG \r\nemissions pathways remains slow. There is a climate financing \r\ngap which reflects a persistent misallocation of global capital \r\n(high confidence). Persistently high levels of both public and private "


id: bd8648d79111845fe8efcb5c34cfb286
created_at: 2023-03-16 14:01:49
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"lock-ins, stranded assets, and other additional costs. This will \r\nparticularly impact urban infrastructure and the energy and transport \r\nsectors (high confidence). A  common understanding of debt \r\nsustainability and debt transparency, including negative implications \r\nof deferred climate investments on future GDP, and how stranded \r\nassets and resources may be compensated, has not yet been \r\ndeveloped (medium confidence). {15.6}"


id: 844633663a3c1ede5e1b328eff7478cb
created_at: 2023-03-16 14:01:49
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"The greater the urgency of action to remain on a  1.5degC pathway \r\nthe greater need for parallel investment decisions in upstream and \r\ndownstream parts of the value chain. Greater urgency also reduces \r\nthe lead times to build trust in regulatory frameworks. Consequently, \r\nmany investment decisions will need to be made based on the long\u0002term global goals. This highlights the importance of trust in political \r\nleadership which, in turn, affects risk perception and ultimately \r\nfinancing costs (high confidence). {15.6.1, 15.6.2}"


id: 45d212f854e3ba998e2b66fe5e8d349f
created_at: 2023-03-16 14:01:49
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"There is a  mismatch between capital availability in the developed \r\nworld and the future emissions expected in developing countries. \r\nThis emphasises the need to recognise the explicit and positive social \r\nvalue of global cross-border mitigation financing. A significant push \r\nfor international climate finance access for vulnerable and poor \r\ncountries is particularly important given these countries' high costs \r\nof financing, debt stress and the impacts of ongoing climate change \r\n(high confidence). {15.2, 15.3.2.3, 15.5.2, 15.6.1, 15.6.7}"


id: 9048ac9f02c7ff05bb4d4f4fd800a061
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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"The mutual benefits of coordinated support for climate mitigation \r\nand adaptation in the next decade for both developed and developing \r\nregions could potentially be very high in the post-COVID-19 era. \r\nClimate compatible stimulus packages could significantly reduce the \r\nmacro-financial uncertainty generated by the pandemic and increase \r\nthe sustainability of the world economic recovery. {15.2, 15.3.2.3, \r\n15.5.2, 15.6.1, 15.6.7}"


id: f7db0064e3413e74e5ffd2787d0fb774
created_at: 2023-03-16 14:01:49
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"Political leadership and intervention remain central to addressing \r\nuncertainty as a  fundamental barrier for a  redirection of financial \r\nflows. Existing policy misalignments  - for example in fossil fuel \r\nsubsidies - undermine the credibility of public commitments, reduce \r\nperceived transition risks and limit financial sector action (high \r\nconfidence). {15.2, 15.3.3, 15.6.1, 15.6.2, 15.6.3}"


id: 6432d4b48a8e9a071b301ccd9393f964
created_at: 2023-03-16 14:01:49
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"finance for nature-based solutions, including mitigation in the \r\nforest sector (REDD+), and climate-responsive social protection; \r\n(vi) improved financing instruments for loss and damage events, \r\nincluding risk-pooling-transfer-sharing for climate risk insurance; \r\n(vii)  economic instruments, such as phasing in carbon pricing and \r\nphasing out fossil fuel subsidies in a  way that addresses equity \r\nand access; and (viii) gender-responsive and women-empowered \r\nprogrammes. {15.2.3, 15.2.4, 15.3.1, 15.3.2.2, 15.3.3, 15.4.1, 15.4.2, \r\n15.4.3, 15.5.2, 15.6, 15.6.2, 15.6.4, 15.6.5, 15.6.6, 15.6.7, 15.6.8.2}"


id: 85bfa0efce0fdb230ae53350bd15a1d
created_at: 2023-03-16 14:01:49
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"significant room for interpretation and context-specific considerations \r\nremains. Further, such definition needs to be put in perspective with the \r\nexpectations of investors and financiers (see Box 15.2)."


id: fa9f971877d9afc4db2fab3549fed676
created_at: 2023-03-16 14:01:49
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"Finance for climate action (or climate finance), environmental finance \r\n(which also covers other environmental priorities such as water, air \r\npollution and biodiversity), and sustainable finance (which encompasses \r\nissues relating to socio-economic impacts, poverty alleviation and \r\nempowerment) are interrelated rather than mutually exclusive concepts \r\n(UNEP Inquiry 2016a; ICMA 2020a). Their combination is needed to \r\nalign mitigation investments with multiple SDGs, and at a minimum, \r\nminimise the conflicts between climate targets and SDGs not being \r\ntargeted. From a climate policy perspective, climate finance refers to \r\nfinance 'whose expected effect is to reduce net GHG emissions and/or \r\nenhance resilience to the impacts of climate variability and projected \r\nclimate change' (UNFCCC 2018a). However, as pinpointed in the AR5, "


id: 1cfd161ed25dccc8b15d22b5afb9f07a
created_at: 2023-03-16 14:01:49
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"Specifying the scope of climate finance requires defining two terms: \r\nwhat qualifies as 'finance' and as 'climate' respectively. In terms \r\nof what type of finance to consider, options include considering \r\ninvestments or total costs (Box 15.1), stocks or flows, gross or net \r\n(the latter taking into account reflows and/or depreciation), and \r\ndomestic or cross-border, public or private (Box  15.2). In terms of \r\nwhat may be considered as 'climate', a  key difference relates to \r\nmeasuring climate-specific finance (only accounts for the portion \r\nof finance resulting in climate benefits) or climate-related finance \r\n(captures total project costs and aims to measure the mainstreaming \r\nof climate considerations). One should even consider the investments "


id: d026873782f7398beced88a83370e732
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"This box defines some core terms used in this chapter as well as in other chapters addressing finance issues: cost, investment, \r\nfinancing, public and private. The chapter makes broad use of the term finance to refer to all types of transactions involving monetary \r\namounts. It avoids the use of the terms funds and funding to the extent possible, which should otherwise be understood as synonyms \r\nfor money and money provided."


id: 6882b8403b783e1fd235501f7195c798
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"Cost, investment and financing: different but intertwined concepts. Cost encompasses capital expenditures (CAPEX or upfront \r\ninvestment value leveraged over the lifetime of a project) operating and maintenance expenditures (OPEX), as well as financing costs. \r\nNote that some projects e.g., related to technical assistance may only involve OPEX (e.g., staff costs) but no CAPEX, or may not incur \r\ndirect financing costs (e.g., if fully financed via own funds and grants)."


id: 2d03d0a446c65c38849877b5fe2a1129
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"Investment, in an economic sense, is the purchase of (or CAPEX for) a physical asset (notably infrastructure or equipment) or intangible \r\nasset (e.g., patents, IT solutions) not consumed immediately but used over time. For financial investors, physical and intangible assets \r\ntake the form of financial assets such as bonds or stocks which are expected to provide income or be sold at a higher price later. In \r\npractice, investment decisions are motivated by a calculation of risk-weighted expected returns that takes into account all expected \r\ncosts, as well as the different types of risks, discussed in Section 15.6.1, that may impact the returns of the investment and even turn \r\nthem into losses."


id: 65e0e4412534ed462812cfc8b34f50db
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"Incremental cost (or investment) accounts for the difference between the cost (or investment value) of a climate project compared to \r\nthe cost (or investment value) of a counterfactual reference project (or investment). In cases where climate projects and investments \r\nare more cost effective than the counterfactual, the incremental cost will be negative."


id: beeaef0dd144a21915abfa17e91ce76b
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"Financing refers to the process of securing the money needed to cover an investment or project cost. Financing can rely on debt \r\n(e.g., through bond issuance or loan subscription), equity issuances (listed or unlisted shares), own funds (typically savings or auto\u0002financing through retained earnings), as well as on grants and subsidies"


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"Public and private: statistical standard and grey zones. International statistics classify economic actors as pertaining to the \r\npublic or private sectors. Households always qualify as private and governmental bodies and agencies as public. Criteria are needed \r\nfor other types of actors such as enterprises and financial institutions. Most statistics rely on the majority ownership and control \r\nprinciple. This is the case for the Balance of Payment, which records transactions between residents of a country and the rest of the \r\nworld (IMF 2009)."


id: c49223a895a6e5bccdfc2849e2442905
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"Such a strict boundary between public and private sectors may not always be suitable for mapping and assessing investment and \r\nfinancing activities. On the one hand, some publicly owned entities may have a mandate to operate on a fully- or semi-commercial \r\nbasis, for example state-owned enterprises, commercial banks, and pension funds, as well as sovereign wealth funds. On the other \r\nhand, some privately owned or controlled entities can pursue not-for-profit objectives, e.g., philanthropies and charities. The present \r\nchapter considers these nuances to the extent made possible by available data and information."


id: e627fca36626f7753ceb68b6e817ca62
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"decided for reasons unrelated with climate objectives but which \r\ncontribute to these objectives (hydroelectricity, rail transportation)."


id: 2e0f9a95dc64cd7e4b833d4a10db4a6d
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"Assessing climate consistency or alignment implies looking at all \r\ninvestment and financing activities, whether they target, contribute \r\nto, undermine or have no particular impact on climate objectives. This \r\nall-encompassing scope notably includes remaining investments and \r\nfinancing for high-GHG emission activities that may be incompatible \r\nwith remaining carbon budgets, but also activities that may play \r\na  transition role in climate mitigation pathways and scenarios \r\n(Section 15.3.2.3). As a result, any meaningful assessment of progress \r\nrequires the use of different shades to assess activities based on \r\ntheir negative, neutral ('do no harm') or positive contributions, \r\n(e.g.,  CICERO 2015; Cochran and Pauthier 2019; Natixis 2019). \r\nDoing so in practice requires the development of robust definitions, \r\nassessment methods and metrics, an area of work and research \r\nthat remained under development at the time of writing. A  range "


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"Beyond the need to scale up levels of climate finance, the Paris \r\nAgreement provides a  broad policy environment and momentum \r\nfor a more systemic and transformational change in investment and \r\nfinancing strategies and patterns. Article 2.1c, which calls for 'making \r\nfinance flows consistent with a  pathway towards low greenhouse "


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"International climate finance can flow through different bilateral, multilateral, and other channels, involving a range of different types \r\nof institutions both public (official) and private (commercial) with different mandates and focuses. In practice, the architecture of \r\ninternational public climate finance is rapidly evolving, with the creation by traditional donors of new public sources and channels \r\nover the years (Watson and Schalatek 2019), as well as emergence of new providers of development co-operation, both bilateral \r\n(Benn and Luijkx 2017) and multilateral (e.g., Asian Infrastructure Investment Bank), as well as of non-governmental actors such as \r\nphilanthropies (OECD 2018a)."


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"The operationalisation of the Green Climate Fund (GCF), which channels the majority of its funds via accredited entities, has notably \r\nattracted particular attention since AR5. Section 14.3.2 (in Chapter 14) provides a further assessment of progress and challenges of \r\nfinancial mechanisms under the United Nations Framework Convention on Climate Change (UNFCCC), such as the GCF, the Global \r\nEnvironment Facility (GEF) and the Adaptation Fund (AF)."


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"financing needs cannot be entirely separated because of structural \r\nrelationships, synergies, trade-offs and policy coherence requirements \r\nbetween these sub-categories of climate finance (Box 15.1)."


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"of financial sector coalitions and civil society organisations as well \r\nas commercial services providers to the financial industry have \r\ndeveloped frameworks, approaches and metrics, mainly focusing \r\non investment portfolios (Institut Louis Bachelier et al.. 2020; IIGCC \r\n2021; TCFD Portfolio Alignment Team 2021; UN-Convened Net-Zero \r\nAsset Owner Alliance 2021), and, to a lesser extent for real economy \r\ninvestments (Micale et al. 2020; Jachnik and Dobrinevski 2021)."


id: a310303bb85ef4318ad581b809c1aa82
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"More recent published data from the Biennial Assessments \r\n(UNFCCC 2018a) and the Special Report on Global Warming of 1.5degC \r\n(IPCC 2018) have revised upwards the needs of financing between \r\n2020 and 2030 to 2035 to contain global temperature rise to below "


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"Adaptation financing needs, meanwhile, were rising rapidly. \r\nThe Adaption Gap Report 2020 (UNEP 2021) reported that the \r\ncurrent efforts are insufficient to narrow the adaptation finance \r\ngap, and additional adaptation finance is necessary, particularly \r\nin developing countries. The gap is expected to be aggravated by \r\nCOVID-19 (high confidence). It reaffirmed earlier assessments that \r\nby 2030 (2050) the estimated costs of adaptation ranges between \r\nUSD140 and 300 billion yr-1 (USD280 and 500 billion yr-1). Against \r\nthis, the reported actual global public finance flows for adaptation \r\nin 2019/2020 were estimated at 46 billion (Naran et al. 2021). The \r\ncosts of climate disasters meanwhile continued to rise, affecting low\u0002income developing countries the most. Climate natural disasters - \r\nnot all necessarily attributable to climate change  - caused some \r\nUSD300 billion yr-1 economic losses and well-being losses of about \r\nUSD520 billion yr-1 (Hallegatte et al. 2017)."


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"Financial investors have started to account for climate risk in some \r\ncontexts but they do so only to a limited extent (Monasterolo and \r\nde Angelis 2020; Alessi et  al. 2021; Bolton and Kacperczyk 2021) \r\nand the reasons for these remain unclear. Two aspects are relevant \r\nhere. The first is the endogenous nature of climate financial risk \r\nand opportunities (with the term 'risk' meaning here the potential \r\nfor adverse financial impact, whether or not the distribution of \r\nlosses is known). Academics and practitioners in finance are aware \r\nthat financial risk can in certain contexts be endogenous, that is, "


id: c2bcd4568f4d3037983cf2a03121e39a
created_at: 2023-03-16 14:01:49
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"the materialisation of losses is affected by the action of financial \r\nplayers themselves. However, the standard treatment of risk both in \r\nfinancial valuation models and in asset pricing assumes that risk is \r\nexogenous. In contrast, endogeneity is a  key feature of climate risk \r\nbecause today's perception of climate risk affects climate investment, \r\nwhich in turn affects directly the future risk. This endogeneity leads \r\nto the fact that multiple and rather different mitigation scenarios are \r\npossible (Chapter 3). Moreover, the likelihood of occurrence of each \r\nalternative scenario is very hard to estimate. Further, the assessment of \r\nclimate-related financial risk requires to combine information related \r\nto mitigation scenarios as well as climate impact scenarios, leaving \r\nopen an important knowledge gap for the next years (Section 15.6.1)."


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"The second aspect is that the multiplicity of equilibria results in \r\na  coordination problem whereby the majority of investors wait to \r\nmove and reallocate their investments until they can follow a clear \r\nsignal. Despite the initial momentum of the Paris Agreement, for \r\nmany investors, both public and private, the policy signal seems not \r\nstrong enough to induce them to align their investment portfolios to \r\nclimate goals."


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created_at: 2023-03-16 14:01:49
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"Analyses of the dynamics of the low-carbon transition suggest that \r\nit does not occur by itself and that it requires a policy signal credible \r\nenough in the perception of market players and investors (Battiston \r\net al. 2021b). Credibility could require a policy commitment device \r\n(Brunner et al. 2012). The commitment would also need to be large \r\nenough (analogous to the 'whatever it takes' statement by the \r\nEuropean Central Bank during the 2011-2012 European sovereign \r\ncrisis (Kalinowski and Chenet 2020)). In principle, public investments \r\nin low-carbon infrastructures (or private-public partnerships) as well \r\nas regulation could provide credible signals if their magnitude and \r\ntime horizon are appropriate (past experiences with feed-in-tariffs \r\n(FiTs) models across countries provide useful lessons)."


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"Entering 2020, the world already faced large macroeconomic \r\nheadwinds to meeting the climate finance gap in the near term - \r\nbarring some globally coordinated action. While an understanding of \r\nthe disaggregated country-by-country, sector-by-sector, project-by\u0002project, and instrument-by-instrument approach to raising climate \r\nfinances analysed in the later parts of this chapter remains important, \r\nmacroeconomic drivers of finance remain crucial in the near term."


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"Near-term finance financial flows in aggregate often show strong \r\nempirically observed cycles over time, especially in terms of \r\nmacroeconomic and financial cycles. By near-term, we mean here the \r\nlikely cycle over the next five to ten years (2020-2025 and 2020-2030), \r\nas influenced by global macroeconomic real business cycles (output, \r\ninvestment and consumption), with periodic asymmetric downside \r\nimpacts and crises (Gertler and Kiyotaki 2010; Borio 2014; Jorda \r\net al. 2017; Borio et al. 2018). Financial cycles typically have strong \r\nco-movements (asset prices, credit growth, interest rates, leverage, \r\nrisk factors, market fear, macro-prudential and central bank policies) \r\n(Coeurdacier and Rey 2013), they have large consequences for all "


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"future, the large-scale financing of new fossil fuel projects by large \r\nglobal financial institutions rose significantly since 2016, because \r\nof perceived lower private risks and higher private returns in these \r\ninvestments and other factors than in alternative but perceived more \r\nrisky low-carbon investments."


id: 162e880d8b65f6536b11f28da2091062
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"Global growth. The fourth headwind entering 2020 was the sharply \r\nslowing global macroeconomic growth, and prospects for near\u0002term recession (which occurred in the pandemic). During global real \r\nand financial cycle downturns (Jorda et  al. 2019), the perception \r\nof general financial risk rises, causing financial institutions and \r\nsavers to reallocate their financing to risk-free global assets (high \r\nconfidence). This 'flight to safety' was evident even before the recent \r\npandemic, marked by an extraordinary tripling of financial assets to \r\nabout USD16.5 trillion in negative-interest earning 'safer' assets in \r\n2019 in world debt markets - enough to have nearly closed the total \r\nfinancing gap in climate finance over a decade."


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"The larger and still open public policy choice question that COVID-19 \r\nnow raises is whether there is room for public policy globally and \r\nin respect of their individual economies to integrate climate more \r\ncentrally to their growth, jobs and sustainable development strategies \r\nworldwide for ecological and economic survival. The outcomes will \r\ndepend on the robustness of recovery from the pandemic, and the \r\nstill evolving public policy responses to the climate agenda in the \r\nrecovery process. Private equity and asset markets have recovered "


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"Credit risks. The third headwind is rising financial and insurance \r\nsector risks and stresses (distinct from real 'physical' climate \r\nrisks above) arising from the impacts of climate change, and \r\nsystematically affecting both national and international financial \r\ninstitutions and raising their credit risks (high confidence) (Dafermos \r\net al. 2018; Rudebusch 2019; Battiston et al. 2021a). Central banks \r\nare beginning to take notice (Carney 2019; NGFS 2019). It is also \r\nthe case that, even if at greater risk from stranded assets in the "


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"policy (Mercure et  al. 2019). The argument for a  green recovery \r\nalso draws on the experience from the post-global financial crisis \r\nin 2008-2009 recovery, in which large economies such as China, \r\nSouth Korea, the USA and the EU observed that green investments \r\npropelled the development of new industrial sectors. Noticeably, \r\nthis had a  positive net effect on job creation when compared to \r\nthe investment in traditional infrastructure (UKERC 2014; Vona \r\net al. 2018; Jaeger et al. 2020). For a more in-depth discussion on \r\nmacroeconomic-finance possible response see Section  15.6.3. \r\nHere, we conclude with the options for reviving a  better globally \r\ncoordinated macroeconomic climate action. The options are some \r\ncombinations of five possible elements:"


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"surprisingly rapidly during the pandemic (in response to the massive \r\nfiscal and central bank actions generating large excess savings \r\nwith very low or negative yields boosting stock markets). On public \r\nspending, some early studies suggest that the immediate economic \r\nrecovery packages were falling well short of being sufficiently \r\nclimate sustainable (Gosens and Jotzo 2020; Kuzemko et al. 2020; \r\nO'Callaghan 2021) but several governments have also announced \r\nintentions to spend more on a green recovery, 'build back better' and \r\nJust Transition efforts (Section  15.2.4), although outcomes remain \r\nhighly uncertain (Lehmann et al. 2021; Markandya et al. 2021)."


id: aea7a982ccd1761695073730a5d73eaf
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"A new consensus and compact towards such a structural change and \r\neconomic stimulus instruments may therefore need to be redrawn \r\nworldwide, where an accelerated low-carbon transition is a priority; \r\nand accelerated climate finance to spur these investments may gain \r\nby becoming fully and rapidly integrated with near-term economic \r\nstimulus, growth and macroeconomic strategies for governments, \r\ncentral banks, and private financial systems alike. If that were \r\nto happen, COVID-19 may well be a  turning point for sustainable \r\nclimate policy and financing. Absent that, a return to 'business-as\u0002usual' modes will mean a likely down-cycle in climate financing and \r\ninvestments in the near term."


id: 463ba8dfc5858384bca146a25ca90c3
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"Such a redrawing of a social compact has happened significantly in \r\nthe past, for example, after the 1860s 'gilded age of capital' with \r\nthe enlargement of the franchise in democratisation waves in Europe \r\nand the Americas (Dasgupta and Ziblatt 2015, 2016). Not only was \r\nsocial conflict avoided but growth outcomes became more equitable \r\nand faster. Similarly, comprehensive modern social safety nets and \r\nprogressive taxation, which started in the Great Depression and was \r\nextended in the post-war period, had both a positive pro-growth and \r\nlower inequality effects (Brida et al. 2020)."


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"There are three levels at which policy attention on climate financing \r\nnow may need to be focused. The first is the need to address the \r\nglobal equity issues in climate finance in a more carefully constructed \r\nglobally cooperative public policy approach. The second is to address \r\nissues appropriately with enhanced support, at the national level. \r\nThe third is to work it down further, to addressing needs at local \r\ncommunity levels. Because private investors and financing mostly \r\ndeal with allocation to climate finance at a  global portfolio level, \r\nthen to allocation by countries, and finally to individual projects, the \r\nchallenge for them is to refocus attention to Just Transition issues at \r\nthe country level, but also globally as well as locally (in other words, \r\nat all three levels)."


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"Climate finance will likely face greater challenges in the post\u0002pandemic context (Hanna et al. 2020; Henry et al. 2020). Evidence \r\nfrom the COVID-19 pandemic suggests that those in greatest \r\nvulnerability often had the least access to human, physical, and \r\nfinancial resources (Ruger and Horton 2020). It has also left in in \r\nits wake divergent prospects for economic recovery, with rising \r\nconstraints on credit ratings and costly debt burden in many \r\ndeveloping countries contrasted with the exceptionally low interest \r\nrate settings in developed economies driving the limited fiscal space \r\nin the former groups (Benmelech and Tzur-Ilan 2020). Similarly, \r\nmonetary policies are likely to be much tighter in developing countries \r\nin part structurally because of the absence of 'exceptional privilege' \r\nof global reserve currencies in developed economies."


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"countries (IMF 2020b). In these circumstances, a  coordinated and \r\ncooperative approach, instead of unilateralism, might work better \r\n(McKibbin and Vines 2020). In the case of climate, simulations clearly \r\nsuggest the need and advantages of better coordinated climate action \r\nwith stepped-up Paris Agreement envisaged transfers (IMF 2020b). \r\nSeveral options in international climate finance arrangements to \r\nsupport a Just Transition are both available and urgent."


id: 7f35a8e068109ce2ddfc4fd896bd1312
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"As a  first priority, measures might need to accelerate a  mix of \r\nequitable financial grants, low-interest loans, guarantees and \r\nworkable business models access across countries and borders, \r\nfrom developed countries to low-income countries. A  big push on \r\nlow-carbon energy access globally, especially in large low-income \r\nregions such as Africa, with accelerated financial transfers, makes \r\nsense (Boamah 2020). For about one billion people globally at the \r\nbase of the pyramid without access to modern low-carbon energy \r\naccess, such an action, with enormous immediate leap-frogging \r\npotential, would be a key pathway to achieve the SDGs, ensure that \r\nhigh-carbon energy use is avoided, such as the burning of biomass \r\nand forests for charcoal, and improve air quality and public health, \r\nespecially women's health (van der Zwaan et al. 2018; Nathwani and \r\nKammen 2019; Dalla Longa and van der Zwaan 2021; Michaelowa \r\net al. 2021; Osabuohien et al. 2021)."


id: 22b6660b0a0a05dade4f0122c7b5d59f
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"It makes sense to expedite these operational procedures (Khan et al. \r\n2020) which cannot be otherwise explained except in terms of avoiding \r\nresponsibilities, even where the benefits would be high (Klock et al. \r\n2018). It also causes (unnecessary) fragmentation and complexity \r\nand often 'strategic' ambiguity by many actors (Pickering et al. 2017), \r\nwhich worsens the possibilities for international cooperation, a critical \r\nrequirement to achieve the Paris goals (IPCC 2018). The world would \r\ngain collectively if these issues were to be decided soon. The absence \r\nof such a collective decision continues to be exceptionally costly for \r\nthe implementation of the Paris Agreement because of the fractious \r\nand seemingly insoluble negotiating climate and a breakdown of trust \r\nthat this has created (Roberts and Weikmans 2017)."


id: fd5fdba7f74250ce9d6a5554c3ef863
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"A third related and increasingly crucial priority is to expedite the \r\noperational definition of blended finance and promote the use of \r\npublic guarantee instruments. Private flows to accelerate the low\u0002carbon transition in developing countries would benefit enormously, \r\nby gaining clearer access to public international funds and support \r\ndefined on a grant equivalent basis, provided development and climate \r\nfinance operational definitions and procedures were improved on an \r\nurgent basis (Blended Finance Taskforce 2018a; OECD-DAC 2021). \r\nWhen blended and supported by public finance and policy, the grant "


id: a840ee1fd5e0eb67bbbea9dbe3127b24
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"the richest households, which have been sharply falling (Scheuer and \r\nSlemrod 2021) even as global income and wealth have risen, with \r\nregressive and falling overall taxes (Alvaredo et al. 2020; Saez and \r\nZucman 2020), could effectively generate significant revenues (over \r\n1% of GDP yr-1), about the same size as the proposed global USD50 \r\npertonne carbon price proposed and estimated by the IMF/OECD \r\n2021 report to the G20 (IMF and OECD 2021) to cover expected net \r\ninterest costs on overall decarbonisation initiatives and financing of \r\ngreen new deals (Schroeder 2021)."


id: 3f53dc5981bd91ff869696b363a5d49
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"Private institutional investors equally might equally wish to pay \r\ngreater attention to the Just Transition finance issues. It would be \r\nuseful for investors to identify ways to support to such initiatives, \r\nand more clearly identify the benefits of such transition measures \r\nenvisaged by both countries and investment financing proposals, \r\nincluding incorporating Just Transition consideration in their support \r\nto broader ESG and green financing initiatives."


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"Numerous options exist (Broeks et al. 2020; Nyfors et al. 2020) for such \r\ncarbon consumption reduction measures, while potentially improving \r\nsocietal well-being, for example: (i) inner-city zoning restrictions \r\non private cars and promoting walking/bicycle use and improved \r\nshared low-carbon transport infrastructure; (ii) advertising regulation \r\nand carbon taxes and fees on high-carbon luxury status goods and \r\nservices; (iii) subsidies and exemptions for low-carbon options, higher \r\nvalue-added taxes on specific high-carbon products and services, \r\nsubsidies for public low-carbon options such as commuter transport, \r\nand other behavioural nudges (Reisch et al. 2021); and (iv) framing \r\noptions (emphasising total cost of car over lifetimes), mandatory \r\nsmart metering, collective goods and services (leasing, renting, \r\nsharing options) and others. Finally, reducing subsidies on fossil fuels, \r\nraising the progressivity of taxes and raising overall wealth taxes on "


id: 3a2d888fcf9983e0d433946584b3e112
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"in their climate policies and investments. For example, the EU Green \r\nDeal plans (Nae and Panie 2021) include several initiatives (focusing \r\non industries, regions and workers adversely affected, with explicit \r\nprogrammes to address them)."


id: 348e43d06a8e3d5ceac9d160863be199
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"financing (Sections  15.3.2.3 and 15.3.2.4 respectively), as well \r\nas estimates of investment and financing needed to meet climate \r\nobjectives (Section 15.4)."


id: 1af4929f7fa3a22088ee0297019c7445
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"The third level of argument is for a shift in focus from an exclusive \r\nattention to financing of mitigation and low-carbon new \r\ninvestments projects to also better understanding and addressing \r\nthe local adverse impacts of climate change on communities and \r\npeople, who are vulnerable and increasingly dispossessed due to \r\nlosses and damages from climate change or even those who are \r\nimpacted by decarbonisation measures in the fossil fuel sectors and \r\ntransportation, as well as those who are harmed by polluting sectors: \r\nindigenous men and women, minorities and generally the poor. It is \r\nevident that very few resources are available to countries, investors, \r\ncivil society, and smaller development institutions seeking to achieve \r\na just transition (Robins and Rydge 2020)."


id: d5590028fe988ae8022444cd61977514
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"Finally, greater support is warranted for smaller towns and cities, local \r\nnetworks, small and medium-sized enterprises (SMEs), communities, \r\nlocal authorities and universities for projects, research ideas and \r\nproposals (Lubell and Morrison 2021; Moftakhari et al. 2021; Stehle \r\n2021; Vedeld et al. 2021)."


id: e33d021d5d6ee7509a40be365490cb1a
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"Gross-fixed capital formation (GFCF), another SNA standard that \r\ncovers tangible assets (notably infrastructure and equipment) and \r\nintangible assets, is a good proxy for investment flows in the real \r\neconomy. In 2019, global GFCF reached around 20 trillion USD2015\r\ncompared to around 14 trillion USD2015 in 2010, a more than 40% \r\nincrease (Figure  15.2). Global GFCF represents about a  quarter of \r\nglobal GDP, a relatively stable ratio since 2008. This share is, however, \r\nmuch higher for emerging economies, notably in Asia, which are \r\nbuilding new infrastructure at scale. As analysed in  Sections  15.4 \r\nand 15.5, infrastructure investment needs and gaps in developing \r\ncountries are significant. How these are met over the next \r\ndecade will critically influence the likelihood of reaching the Paris \r\nAgreement goals."


id: d2e6cfede4f98ee1c78605d64350f6ab
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"Assessments of finance for climate action need to be placed within \r\nthe broader perspective of all investments and financing flows and \r\nstocks. This section provides aggregate level reference points of \r\nrelevance to the remainder of this chapter, notably when assessing \r\ncurrent levels of climate and fossil fuel-related investments and "


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"Figure 15.1 | Financial flows - GDP (trillion USD2015) by type of economy (left) and region (right). Note: Regional breakdown based on official UN country \r\nclassification. GDP in trillion USD2015. Source: World Bank Data (2020a). Numbers represent aggregated country data. Last updated data on 15 September 2021. CC BY-4.0."


id: efc25856ac9ba846be95fde8dd14f880
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"From the perspective of climate change action, these orders of \r\nmagnitude make it possible to highlight the relatively small size \r\nof current climate finance flows and relatively larger size of remaining \r\nfossil fuel-related finance flows (discussed in the following two sub\u0002sections), as well as, more generally, the significant overall scale \r\nof financial flows and stocks that have to be made consistent with \r\nclimate goals. These orders of magnitude further make it possible to \r\nput in perspective climate-related investment needs (Section 15.4) \r\nand gaps (Section 15.5)."


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"The measurement of climate finance flows continues to face similar \r\ndefinitional, coverage and reliability issues as at the time of AR5 and \r\nthe Special Report on Global Warming of 1.5degC, despite progress \r\nmade (more sources, greater frequency, and some definitional \r\nimprovements) by a  range of data providers and collators. Based \r\non available estimates (Table 15.1 and Figure 15.3), flows of annual "


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"Note: CPI: Climate Policy Initiative; SCF: Standing Committee on Finance. Numbers in current billion USD. Deflated to USD2015 in italic. Given the variations in numbers reported \r\nby different entities, changes in data, definitions and methodologies over time, there is low confidence attached to the aggregate numbers presented here. The higher bound \r\nreported in the SCF's Biennial Assessment reports includes estimates from the International Energy Agency on energy efficiency investments, which are excludes from the lower \r\nbound and CPI's estimates. Sources: UNFCCC (2018a); Buchner et al. (2019); Naran et al. (2021)."


id: 13d806b10643608162cea6bf7ca11f15
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"However, private investments in climate projects and activities often \r\nbenefit from public support in the form of co-financing, guarantees \r\nor fiscal measures. In terms of financial instruments and mechanisms, \r\ndebt as well as balance sheet financing (which can rely on both \r\nown resources and further debt) and project financing (combining \r\na large debt portion and smaller equity portion) represent the lion's \r\nshare. In this context, the rapid rise of climate-related bond issuances \r\nsince AR5 (Giorgi and Michetti 2021) represents an opportunity \r\nfor scaling up climate finance but also poses underlying issues of \r\nintegrity (Nicol et al. 2018a; Shishlov et al. 2018) and additionality \r\n(Schneeweiss 2019), as further discussed in Section  15.6.5, and \r\nneeds to be considered in the context of overall indebtedness and \r\ndebt sustainability (Sections 15.6.1 and 15.6.3)."


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"global climate finance are on an upward trend since AR5, reaching \r\na high-bound estimate of USD681 billion in 2016 (UNFCCC 2018a), \r\nrepresenting USD674 billion 2015. Latest available estimates indicate \r\na  drop in 2018 (Buchner et  al. 2019) and a  rebound in 2019 and \r\n2020 (medium confidence) (Naran et al. 2021). Although not directly \r\ncomparable in terms of scope, current climate finance flows remain \r\nsmall (approx. 3%) compared to the GFCF reference point introduced \r\nin Section 15.3.1, and need to be put in perspective with remaining \r\nfossil fuel financing (medium confidence) (Section 15.3.2.3)."


id: da662abc3e60a779bbf173712348e25e
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"At an aggregate level, in both developed and developing countries, \r\nthe vast majority of tracked climate finance is sourced from domestic \r\nor national markets rather than cross-border financing (Buchner et al. \r\n2019). This reinforces the point that national policies and settings \r\nremain crucial (Section 15.6.2), along with the development of local \r\ncapital markets (Section 15.6.7)."


id: e7b56b482c8c5353023ea46243ff6c2
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"Mitigation continues to represent the lion's share of global climate \r\nfinance (consistently above 90% between 2017 and 2020), and in \r\nparticular renewable energy, followed by energy efficiency and \r\ntransport (high confidence) (UNFCCC 2018a; Buchner et  al. 2019). \r\nWhile capacity additions on the ground kept rising, falling technology \r\ncosts in certain sectors (e.g., solar energy) has had a negative impact \r\non the year-on-year trend that can be observed in terms of volumes \r\nof climate finance (BNEF 2019; IRENA 2019a). However, such cost \r\nreduction could free up investment and financing capacities for \r\npotential use in other climate-related activities."


id: d462f800c92cd62075d7dbe7f275df36
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"Climate finance in developing countries remains heavily concentrated \r\nin a few large economies (high confidence), with Brazil, India, China \r\nand South Africa accounting for around one-quarter to more than \r\na third depending on the year, a share similar to that represented \r\nby developed countries. Least-developed countries (LDCs), on \r\nthe other hand, continue to represent less than 5% year-on-year \r\n(medium confidence) (BNEF 2019; Buchner et al. 2019). Further, the \r\nrelatively modest growth of climate finance in developed countries is \r\na matter of concern given that economic circumstances are, in most \r\ncases, relatively more amenable to greater financing, savings and \r\naffordability than in developing countries."


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"Tracking adaptation finance continues to pose significant challenges \r\nin terms of data and methods. Notably, the mainstreaming of \r\nresilience into investments and business decisions makes it difficult \r\nto identify relevant activities within financial datasets (Agrawala \r\net  al. 2011; Brown et  al. 2015; Averchenkova et  al. 2016). Despite \r\nthese limitations, evidence shows that finance for adaptation \r\nremains fragmented and significantly below rapidly rising needs \r\n(Section  15.4 and Cross-Chapter Box FINANCE: Finance for \r\nAdaptation and Resilience in Chapter  17 of AR6 WGII report). "


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"At a global level, the majority of tracked climate finance is assessed \r\nas coming from private actors (Buchner et al. 2019), although, the \r\nboundaries between private and public finance include significant \r\ngrey zones (Box 15.2), which implies that different definitions could \r\nlead to different conclusions (Yeo 2019; Weikmans and Roberts 2019). "


id: 172ea74451609970acbd0c5955a749e2
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"In 2009, at COP15, Parties to the UNFCCC agreed the following: 'In the context of meaningful mitigation actions and transparency \r\non implementation, developed countries commit to a goal of mobilising jointly USD100 billion a year by 2020 to address the needs \r\nof developing countries. This funding will come from a wide variety of sources, public and private, bilateral and multilateral, including \r\nalternative sources of finance' (UNFCCC 2009)."


id: 70cd9888567bbf7a231ad145ef88b707
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"This goal is further embedded as a target under SDG 13 Climate Action. While the parameters for what and how to count were not \r\ndefined when the goal was set, progress in this area has been achieved under the UNFCCC (UNFCCC 2019b) and via a UN-driven \r\nindependent expert review (Bhattacharya et al. 2020)."


id: b02664e1856e826458c1dfe0b9a3e22
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"Reports by Oxfam provide a complementary view on public climate finance, building on OECD figures and underlying data sources \r\nto translate gross flows of bilateral and multilateral public climate finance in grant equivalent terms, while also, for some activities, \r\napplying discounts to the proportion considered as climate finance (Carty et al. 2016; Carty and Le Comte 2018; Carty et al 2020). \r\nThe resulting annual averages for 2015-2016 and 2017-2018 range between 32% (low bound) and 44% (high bound) of gross \r\npublic climate finance. The difference with OECD figures stems from the high share represented by loans, both concessional and non\u0002concessional, in public climate finance, that is, 74% in 2018 (OECD 2020b)."


id: 55fbf9965b435ab40088874f8e896f08
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"A point of method that attracts much attention relates to how to account for private finance mobilised. The OECD, through its \r\nDevelopment Assistance Committee, established an international standard to measure private finance mobilised by official \r\ndevelopment finance, which consists in methods tailored to different financial mechanisms. These methods take into account the role \r\nof, risk taken, and/or amount provided by all official actors involved in a given project, including recipient country institutions, thereby \r\nalso avoiding risks of double counting (OECD 2019b). MDBs apply a different method (World Bank 2018a) in their joint climate finance \r\nreporting (AfDB et al. 2020), which neither correspond to the geographical scope of the USD100 billion goal, nor address the issue of \r\nattribution to the extent required in that context."


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"Notwithstanding methodological discussions under the UNFCCC, there is still some distance from the USD100 billion a  year \r\ncommitment being achieved, including in terms of further prioritising adaptation. While the scope of the commitment corresponds to \r\nonly a fraction of the larger sums needed (Section 15.4), its fulfilment can both contribute to climate action in developing countries \r\nas well as to trust building in international climate negotiations. Combined with further clarity on geographical and sectoral gaps, \r\nthis can, in turn, facilitate the implementation of better coordinated and cooperative arrangements for mobilising funds (Peake and \r\nEkins 2017)."


id: 8b67246fdbc9c1b8f15e535e9bab4e3e
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"may have more incentive to support mitigation over adaptation as \r\nmitigation benefits are global while the benefits of adaptation are \r\nlocal or regional (Abadie et al. 2013)."


id: ff1f9fcfa4d120a7fba91df028230d82
created_at: 2023-03-16 14:01:49
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"Further, there is increasing awareness about the need to better \r\nunderstand and address the interlinkages between climate change \r\nadaptation and disaster risk reduction (DRR) towards achieving \r\nresilience (OECD 2020a). Watson et  al. (2015) however, note that \r\nbetween 2003 and 2014, of the USD2 billion that flowed through \r\ndedicated climate change adaptation funds, only USD369 million \r\nexplicitly went to DRR activities (Climate Funds Update 2014; \r\nNakhooda et al. 2014a; Nakhooda et al. 2014b; Watson et al. 2015). \r\nFor the private sector, insurance and reinsurance remain the dominant \r\nway to transfer risk as discussed in Section 15.6.4)."


id: afbfa138aed515502a06c2da70a2e74d
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"In modelled pathways that limit warming to 1.5degC (>50%) with no or \r\nlimited overshoot, however, make it clear that the share of fossil fuels \r\nin energy supply has to decrease (see Chapter 3). For instance, the \r\nInternational Energy Agency (IEA) Net Zero by 2050 scenario relies \r\non halting sales of new internal combustion engine passenger cars \r\nby 2035, rapid and steady decrease of the production of coal (minus \r\n90%), oil (minus 75%) and natural gas (minus 55%) by 2050, and \r\nphasing out all unabated coal and oil power plants by 2040 (IEA \r\n2021b). To avoid locking GHG emissions incompatible with remaining \r\ncarbon budgets, this implies a rapid scaling down of new fossil fuel\u0002related investments, combined with a scaling up of financing to allow \r\nenergy and infrastructure systems to transition (high confidence)."


id: 71cbbbeb0ddf184517a2cc995e6c824f
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"Data on private and commercial finance remain very patchy, \r\nparticularly for corporate financing (including debt financing \r\nprovided by commercial banks), for which it is difficult to establish \r\na link with activities and projects on the ground (high confidence). \r\nFurther, as individual sources of aggregate reporting (UNFCCC \r\n2018a; Buchner et al. 2019; FS-UNEP Centre and BNEF 2020) tend to \r\nrely on the same main data sources (notably the BNEF commercial \r\ndatabase for renewable energy investments) as well as to cross\u0002check numbers against similar other sources, there is a potential for \r\n'group-think' and bias."


id: 8aebf176695cffd9043bc93e28384dc0
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"Such data gaps as well as varying definitions of what qualifies as \r\n'climate' (or more broadly as 'green' and 'sustainable') not only pose \r\na  measurement challenge. They also result in a  lack of clarity for \r\ninvestors and financiers seeking climate-related opportunities. Such \r\nuncertainty can lead both to reduced climate finance as well as to \r\na lack of transparency in climate-related reporting (further discussed \r\nin Section 15.6.1), which in turn further hinders reliable measurement."


id: 7ac396dfa79f566c40a14fa4cdcdc3e2
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"In terms of finance provided and mobilised by developed countries for \r\nclimate action in developing countries, while accounting scope and \r\nmethodologies continue to be debated (Box 15.4), progress has been \r\nachieved on these matters in the context of the UNFCCC (UNFCCC \r\n2019b). A consensus, however, exists, on a need to further scale up \r\npublic finance and improve its effectiveness in mobilising private \r\nfinance (OECD 2020b), as well as to further prioritise adaptation \r\nfinancing, in particular towards the most vulnerable countries (Carty \r\net al. 2020). The relatively low share of adaptation in international \r\nclimate finance to date may in part be due to a low level of obligation \r\nand precision in global adaptation rules and commitments (Hall and \r\nPersson 2018). Further, providers of international climate finance "


id: 7119c2d0e5d3d709b832ae33e53c32e3
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"conducive public policies, attractive investment opportunities, as well \r\nas the availability of financing to finance such a transition."


id: 6b5975ccd9b0ff149e785debca5df276
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"well as policy areas, for example, from a trade policy perspective, in \r\nmost countries, import tariffs and non-tariff barriers are substantially \r\nlower on relatively more CO2 intensive industries (Shapiro 2020). \r\nAvailable inventories of fossil fuel subsidies (in the form of direct \r\nbudgetary transfers, revenue forgone, risk transfers, or induced \r\ntransfers), covering 76 economies, indicate a rise to USD340 billion \r\nin 2017, a  5% increase compared to 2016. Such trend is due to \r\nslowed down progress in reducing support among OECD and G20 \r\neconomies in 2017 (OECD 2018b) and to a rise in fossil fuel subsidies \r\nfor consumption in several developing economies (Matsumura \r\nand Adam 2019), which, in turn, reduces the efficiency of public \r\ninstruments and incentives aimed at redirecting investments and \r\nfinancing towards low-GHG activities."


id: c5e2bd347a41ce887bf177a4d01ed0f3
created_at: 2023-03-16 14:01:49
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"As a  result, the demand for fossil fuels, especially in the energy \r\nproduction, transport and buildings sectors, remain high, and the \r\nrisk-return profile of fossil fuel-related investments is still positive \r\nin many instance (Hanif et al. 2019). Political economy constraints of \r\nfossil fuel subsidy reform continue to be a major hurdle for climate \r\naction (Schwanitz et  al. 2014; Rottgers and Anderson 2018), as \r\nfurther discussed in Section 15.5.2. and Chapter 13."


id: 87b8d6cb89e6ab7df76819ff358310a1
created_at: 2023-03-16 14:01:49
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content:
"As developed in Section  15.6.3, the insufficient level of ambition \r\nand coherence of public policies at national and international \r\nlevels remains the root cause of the still significant misalignment \r\nof investment and financing compared to pathways compatible \r\nwith the Paris Agreement temperature goal (UNEP 2018). Such lack \r\nof coherence includes low pricing of carbon and of environmental \r\nexternalities more generally, as well as misaligned policies in non\u0002climate policy areas such as fiscal, trade, industrial and investment \r\npolicy, and financial regulation (OECD 2015b), as further specified in \r\nthe sectoral Chapters 6 to 12."


id: 9326af9fb1d94745185d614da95af8d9
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"The most documented policy misalignment relates to the remaining \r\nvery large scale of public direct and indirect financial support for \r\nfossil fuel-related production and consumption in many parts of \r\nthe world (Bast et al. 2015; Coady et al. 2017; Climate Transparency \r\n2020). Fossil fuel subsidies are embedded across economic sectors as "


id: 993ccb4a743cc2bae6d2c6cffa2bced2
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"Economic viability of investments - ideally not relying on the pricing \r\nof positive externalities  - has been a  critical driver of momentum \r\nin the past. The falling technology costs and the competitiveness \r\nof renewable technologies, especially solar PV and wind, have \r\naccelerated the deployment of renewable technologies over the past \r\nyears. Renewable energy technologies are now often competitive, \r\nand have even become the cheapest, in many countries, even without \r\nfinancial support (FS-UNEP Centre and BNEF 2015, 2016, 2017, \r\n2018, 2019; IEA 2020c; IRENA 2020a) and without pricing of the \r\navoided carbon emissions. In contrast, the dependency on regulatory \r\ninterventions and public financial support to create financial viability \r\nhas provided a source of volatile investor appetite. The annual volume \r\nof renewable investment by country is often volatile, reflecting ending \r\nand new regulations and policies (IEA 2019a)."


id: db5ae02e366a285e6a8a141b6ee1121e
created_at: 2023-03-16 14:01:49
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"A significant share of investment needs in heavily regulated sectors, \r\nsuch as electricity, public transport, and telecom, emphasises the \r\nimportance of regulatory intervention, such as ownership and market \r\naccess (OECD 2017b). For instance, energy-system developments \r\nrequire effective and credible commitments and action by \r\npolicymakers to ensure an efficient capital allocation aligned with \r\nclimate targets (Bertram et al. 2021)."


id: 3293a5e61f30567b861ed7956d3e302b
created_at: 2023-03-16 14:01:49
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"There is a  lot of discussion about the regulated ownership of the \r\nprivate sector (European Commission 2017) and the restructuring of \r\nelectricity market contributed to low level of investment in baseline \r\nelectricity capacity and in investment research and innovation. These \r\nchanges create uncertainty of investment, and barriers to market \r\nentry and exit also potentially limit the competition in the market \r\nand restrict the entrance of new investment (Finon 2006; Joskow \r\n2007; Grubb and Newbery 2018). This is also the case in developing \r\ncountries (Foster and Rana 2020)."


id: 4eaa50c5016b97c5c86e9ac2b2a0b11f
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"The positive development in the energy sector has benefitted from \r\nthe evident stand-alone character of renewable energy generation \r\nprojects. First movers realised these projects with investors and \r\ndevelopers acting from conviction (Steffen et al. 2018). Such action is \r\nnot possible to this extent in energy efficiency with related investment "


id: 389fa40d6623455f80acec1087f3695a
created_at: 2023-03-16 14:01:49
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"scenarios likely to limit warming to 2degC or lower. The differences \r\nrelate to the scope of the assessments regarding sectors, regions and \r\nperiods, top-down versus bottom-up approaches, and methodological \r\nissues around boundaries of climate-related investment needs, \r\nparticularly full vs incremental costs and the exclusion or inclusion \r\nof consumer-level investments. Information on investment needs \r\nand financing options in NDCs mirrors this challenge and is heavily \r\nheterogeneous (Zhang and Pan 2016)."


id: 2b481235c6d3661af738444083247aaa
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"In particular, for global approaches, modelling assumptions are often \r\nheavily standardised, focusing on technology costs. Only limited \r\nglobal analysis is available on incremental costs and investments, \r\nreflecting the reality of developing countries, also considering the \r\ninterplay with significant infrastructure finance gaps, and can hardly \r\nserve as a robust basis for negotiations about international public \r\nclimate finance. The focus on investment irrespective of uncertainty \r\nas well as other qualitative aspects of needs does not allow for \r\na straightforward analysis of the need for public finance to leverage \r\nprivate sector financing and of the country heterogeneity in terms of \r\ninvestment risks and access to capital (Clark et al. 2018)."


id: d8019092aa123397bf408f71add37f87
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"Another source of uncertainty about the financing needs is the \r\ninterplays between (i) the baseline economic growth rates, (ii) the link \r\nbetween economic growth and energy demand, including rebound \r\neffects of energy efficiency gains, (iii) the evolution of microeconomic \r\nparameters such as fossil fuel prices, interest rates, currency \r\nexchange rates (iv) the level of integration between climate policies \r\nand sectoral policies and their efficacy, and (v) the impact of climate \r\npolicies on growth and the capacity of fiscal and financial policies \r\nto offset their adverse effect (IPCC 2014; IPCC 2018). Integrated \r\nassessment models (IAMs) try to capture some of these interplays \r\neven though they typically do not capture the financial constraints \r\nand the structural causes of the infrastructure investment gap. Many \r\nof them rely on growth models with full exploitation of the means \r\nof production (labour and capital). They nevertheless provide useful "


id: fbe0f286d4bf4e08b1177ea31cc4d5d5
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"Multiple stakeholders prepare and present quantitative financing \r\nneeds assessments with methodologies applied to vary significantly \r\nrepresenting a major challenge for aggregation of needs (e.g., Osama \r\net  al. (2021) for African countries), most of them with a  focus on "


id: b1c4a114de36441131fcc29ff165bc96
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"indications of the orders of magnitude at play over the long run, and \r\nthe determinants of their uncertainty. Global yearly average low\u0002carbon investment needs until 2030 for electricity, transportation, \r\nAFOLU and energy efficiency measures including industry and \r\nbuildings are estimated between 3% and 6% of the world's GDP \r\naccording to the analysis in Section 15.5. The incremental costs of \r\nlow-carbon options are less than that and their funding could be \r\nachieved without reducing global consumption by reallocating \r\n1.4% to 3.9% of global savings. 2.4% on average (see Box 4.8 of \r\nSR1.5 (IPCC 2018)) currently flow towards real estate, land and liquid \r\nfinancial vehicles. For the short-term decisions, the major information \r\nthey give is the uncertainty range because this is an indicator of the \r\nrisks decision-makers need."


id: 8058858a69afdc09c464864955461b00
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"While the AR6 Scenarios Database provides good transparency with \r\nregard to technology costs for electricity generation, assumptions \r\ndriving in particular investments in energy efficiency are rarely made \r\navailable in both IAM-based assessments and also other studies. \r\nTaking into account the much broader range of tested and untested \r\ntechnologies the confidence levels, in particular for 2050 estimates, \r\nremain low but can provide an initial indication. Also, the ranges \r\nallow for a rough indication on possible 'green' investment volumes \r\nand respective asset allocation for financial sector stakeholders."


id: b933f55e6b64574f231d23b8ce85cac5
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"Note: Global average yearly investments from 2023-2032 (in USD2015). Electricity subcomponents are not exhaustive. Hydro, geothermal, biomass and others are not shown, as these \r\nare shown to be of smaller magnitude (Chapter 3). Difference between non-biomass renewables and solar/wind represents hydro and in some scenarios geothermal, tidal, and ocean. \r\nScenarios are grouped into common AR6 categories (vertical axis, C1-C3). The numbers represent medians across all scenarios within one category, and rounded brackets indicate \r\ninter-quartile ranges, while the numbers in squared brackets indicate number of scenarios. C6, C7, and C8 are not shown in Table 15.2. Reference C5 category for Transmission and \r\nDistribution (T&D) is 364bn (294bn to 445bn) [111] used for calculation of incremental needs in Figure 15.4. Data source: AR6 Scenarios Database."


id: 3959cf3714950957178ac1aea55e6c95
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"Table 15.3 | Regional average yearly investments from 2023-2032 for electricity supply in billion USD2015."


id: a5a856213f1031162fe173dc08ff194e
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"Note: Average yearly investments from 2023-2032 for electricity generation capacity, by aggregate regions (in billion USD2015). Further notes see Table 15.2. Reference C5 \r\ncategory for Transmission and Distribution shown in Table 15.2 as it is used for calculation of incremental needs for Figure 15.4. Vertical axis, C4-C8 except Transmission and \r\nDistribution not shown. Data source: AR6 Scenarios Database."


id: d1f3f7d36e1d1735a0febc7fa16361d
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"What is apparent is that the bulk of investment requirements \r\ncorresponds to medium- and low-income countries in Asia, Latin \r\nAmerica, the Middle East and Africa, as these still have growing \r\nenergy demand, and it is still considerably lower than the global \r\naverage. This illustrates a vital opportunity to ensure the build-up of \r\nsustainable energy infrastructures in these regions and constitutes \r\na  risk of additional carbon lock-in if investments into fossil "


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"infrastructures, especially coal-fired power plants, and uncontrolled \r\nurban expansion, continue."


id: 5b9ee9a79a35a3f17d658c44a7617303
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content:
"Investment needs in electrification derived from IAMs do not \r\ninclude systematically investments in end-use equipment and \r\ndistribution (Box 4.8 in SR1.5 (IPCC 2018)). Model-based estimates \r\nof investment needs don't have the regional granularity to single out "


id: 1e34a2c8b799ac9fe82d268ef7678a7d
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"supply like hydrogen and synthetic fuels, and for direct electrification \r\nequipment (heat pumps, electric vehicles (EV), etc.) scale up from \r\nmuch lower levels and will likely continue to grow as a share of GDP \r\nuntil mid-century, though uncertainties and accounting is still much \r\nmore uncertain. (Bertram et al. 2021)."


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"LDCs, as model regions typically are defined based on geographic \r\nproximity and therefore aggregate LDCs and other countries. With \r\nthe average electricity consumption per capita in Africa increasing \r\nto 0.68-0.87 (1.43-2.92) MWh in 2030 (2050) yr-1 and remaining \r\nat the very low end of the global range [0.46 in Africa compared \r\nto the upper end of 12.02 in North America, MWh per capita and \r\nyear in 2020], the targeted full electrification until 2030 appears \r\nunrealistic across all scenarios. SEforAll and IEA estimate assumed \r\ninvestment needs to decentralised end-user electrification to come \r\nin around USD40 billion on average until 2030 (SEforALL and CPI \r\n2020; IEA 2021d)."


id: 8d7a8430a10bc2c858047c9f45527a2a
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"Quantitative analysis of investment needs in other sectors.\r\nAs described above, investment needs in non-energy sectors tend to \r\nbe ignored in many integrated assessment models with studies for \r\nindividual countries or regions providing a more fragmented picture \r\nonly. However, the quality of estimates is likely not to be less robust \r\ngiven the drawbacks of integrated assessment models."


id: cfd6d39b9600f77b66785f3ede9539a8
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"Chapter  7  stresses the importance of opportunity costs for AFOLU \r\nmitigation options, in particular for afforestation and avoided \r\ndeforestation projects, and derives net annual costs of around \r\nUSD278 billion yr-1 in the next several decades, mostly opportunity \r\ncosts. Net costs of delivering 5-6 Gt CO2 yr-1 of forest related carbon \r\nsequestration and emission reduction around 2050 as assessed with \r\nsectoral models are estimated to reach to ~ USD400 billion yr-1 by \r\n2050, excluding externality costs (Chapter 7.4)."


id: e45ab0fa880c97de6aa43b02e3373f2a
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"Quantitative analysis of investment needs in energy \r\ngeneration based on IRENA and IEA data and comparison \r\nto AR6 scenario database output."


id: 1e7929739160e626a8608b16bb1c3aa1
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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"According to IRENA, the government plans in place today call \r\nfor investing at least USD95 trillion in energy systems over the \r\ncoming three decades (2016-2050) (IRENA 2020c). Redirecting and \r\nincreasing investments to ensure a climate-safe future (Transforming \r\nEnergy Scenario, TES) would require reaching on average around \r\n1 trillion USD2015 yr-1 (average until 2030) for electricity generation \r\nas well as grids and storage, increasing to above 2 trillion USD2015 yr-1\r\n(average until 2030) in the 1.5 scenario (IRENA 2021). IEA's respective \r\nSDS and NZE scenarios come in at average annual investments \r\nbetween USD1.0  trillion yr-1 and USD1.6 trillion yr-1 (average until \r\n2030) (IEA 2021b). These additional data points for the C1 and C3 \r\ncategory underpin the range presented in the AR6 Scenarios Database \r\nfor needs until 2032 despite the slightly varying periods."


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updated_at: 2023-03-16 14:01:49
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content:
"Energy efficiency. Estimates on energy investment needs vary \r\nsignificantly with a low level of transparency with regard to underlying \r\ntechnology cost assumptions burdening the confidence levels."


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"IRENA only selectively reports financing needs for energy \r\nefficiency in buildings and industry as separate categories. For the \r\n1.5-S average yr-1 needs until 2050 come in at 963 billion USD2015\r\nfor buildings, 102 billion USD2015 for heat pumps, and 354 billion \r\nUSD2015 for industry. Applying the relative share of these categories \r\non higher total needs until 2030, around 1.8 trillion USD2015  yr-1\r\nin buildings and industry are needed in the 1.5-S.  For the TES \r\ncumulative energy efficiency investment needs until 2030 are stated \r\nat 29 trillion USD2015 translating into an yearly average of around \r\n1.7  trillion USD2015 yr-1, excluding transportation. IEA estimates \r\ncome in at a much lower level at 0.6 and 0.8 billion USD2015 yr-1 on \r\naverage between 2026-2030 for their SDS and NZE scenarios."


id: d0672fae4a781455321c1f3a8de43774
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"In contrast to the IAMs, IRENA and IEA assessments do not allow \r\nfor an analysis of mitigation-driven investment needs in transmission \r\nand distribution, which likely results in an overestimation of the \r\nmitigation-driven investment needs in their analysis."


id: fb14c557a177f7ecdf114f4194cbe5cd
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"Transportation. For the transportation sector, OECD has presented \r\nthe most comprehensive assessment of financing needs in the AR6 \r\ndatabase based on IEA data with the annual average coming in at \r\nUSD2.7 trillion between 2015 and 2035 i In modelled global pathways \r\nthat limit warming to 2degC (>67%). The assessment comprises road, \r\nrail and airports/ports infrastructure, with only rail infrastructure \r\nbeing considered in this analysis."


id: a3c7e740a75c05f54a96e35952e2f12b
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"On a regional level, Oxford Economics (2017) shows that annual \r\ninfrastructure investments between 2016 and 2040 vary widely. \r\nFor all available countries (n=50) estimates count close to \r\n0.4 trillion USD2015 yr-1, including 0.217 trillion USD2015 yr-1 for China. \r\nBased on available data for nine African countries, investments in rail \r\ninfrastructure range from USD0.1 billion in Senegal to USD1.6 billion \r\nin Nigeria. Osama et al. (2021) highlight a USD4.7 billion financing gap \r\nfor African countries in the transport sector. In Latin America Oxford \r\nEconomics (2017) identifies Brazil as frontrunner of required rail \r\ninvestments with USD8.3 billion, followed by Peru with USD2.3 billion. "


id: 89e2c0dc4aa1c43ae7ceac3b60cd8bfd
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"Chapter  7  stresses the importance of opportunity costs for AFOLU \r\nmitigation options, in particular for afforestation projects, and derives \r\naverage yearly investment needs of around 278 billion USD2015 yr-1\r\nuntil 2030 rising to 431 billion USD2015 yr-1 over the next several \r\ndecades, including opportunity costs. The estimate is based on \r\nan assumption of emission reductions consistent with pathways \r\nC1-C4, leading to average abatement of 9.1 GtCO2 yr-1 (median \r\nrange 6.7-12.3 GtCO2 yr-1) from 2020-2050 and marginal costs \r\nof USD100 per tonne CO2, excluding investments in bioenergy with \r\ncarbon capture and storage and changes in food consumption and \r\nfood waste (Section  7.4). The largest investments are projected to \r\noccur in Latin America, South-East Asia, and Africa, constituting 61% \r\nof total expenditure. The implied change of land use might trigger \r\nnegative effects on other SDGs which need to be addressed to offer \r\nrobust safeguards and labelling for investors."


id: f0c828fd6489a250c80edcdca63003ee
created_at: 2023-03-16 14:01:49
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content:
"In total, developed countries' financing needs mount up to almost \r\nUSD120 billion yr-1 (n=15, mean=7.97bn USD) for rail infrastructure. \r\nFinancing needs in developing countries (excluding LDCs and excluding \r\nChina) mount up to almost USD50 billion yr-1 (n=27, mean=1.78bn USD, \r\nexcluding China). Oxford Economics (2017) reports rail infrastructure \r\nfinancing needs for China of more than USD200 billion yr-1 between \r\n2016 and 2040."


id: eeb36b79c41caeee66bd90ad6b746f9d
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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vector_id: 35031
content:
"Fisch-Romito and Guivarch (2019) show, by endogenising the impact \r\nof urban infrastructure policies on mobility needs and modal choices \r\nthat transportation investment needs globally might be lower in low\u0002carbon pathways compared with baselines, with lower investments in \r\nroad and air infrastructure. This does mean that higher investments \r\nare not needed over the following two decades; this is confirmed by \r\nRozenberg and Fay (2019) that strong policy integration between urban, \r\ntransportation and energy policies reduce the total investment gap."


id: 33d816e47169efbd6539c41c5207f98f
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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vector_id: 5570
content:
"IRENA as well as IEA have presented estimates for energy efficiency \r\ninvestments in the transport sector. For the 1.5-S scenario, IRENA \r\nindicates average investment needs of USD2015 0.2 trillion yr-1 for EV \r\ninfrastructure, USD2015 0.2 trillion yr-1 for transport energy efficiency \r\nand USD2015 0.3 trillion yr-1 for EV batteries (average until 2030) (IRENA \r\n2020d). IEA indicates a total of around 0.6 and 0.7 trillion USD2015 yr-1\r\nfor transport energy efficiency in the SDS and IEA scenarios for the \r\n2026-2030 period (IEA 2021c). Many investment categories relating to \r\nmitigation options, in particular with regard to behavioural change and \r\ntransport mode changes (Chapter 10, Figure SPM.8), are neglected in \r\nthese analyses despite their significant mitigation potential."


id: 1dda852fe3fe8aea723366d538468d6
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"AFOLU.  The Food and Land Use Coalition estimates additional \r\ninvestment needs for ten critical transitions for the global food and \r\nland use systems to achieve the long-term global goal (LTGG) \r\nand  SDGs. Additional annual investment needs until 2030 add up \r\nto USD300-350 billion. Considering the change in global diets \r\nas well as the land-based nature-based solutions only, annual \r\ninvestment needs would come in between USD110-135 billion. "


id: f25fb9915bb49bd30cf016b72b8a7a88
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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vector_id: 35661
content:
"Adaptation financing needs. Financing needs for adaptation \r\nare even more difficult to define than those of mitigation because \r\nmobilising specific adaptation investments is only part of the challenge \r\nsince ultimately improving societies' adaptive capacities depends on "


id: ae6170652c705971d446e958ba72e12d
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"the SDGs' fulfilment (Hallegatte et al. 2016). Bridging the investment \r\ngap on irrigation, water supply, health care, energy access, and quality \r\nbuildings is an essential enabling condition for adapting to climate \r\nchange. The scenario analysis conducted by Rozenberg and Fay (2019) \r\nshow that fulfilling the SDGs to improve the adaptive capacity of low\u0002and middle-income countries would require investments in water \r\nsupply, sanitation, irrigation and flood protection that would account \r\nfor about 0.5% of developing countries' GDP in a baseline scenario \r\nto 1.85% and 1% with a strong and anticipatory policy integration \r\n(USD664 billion and 351 billion on average by 2030)."


id: 60c2e0bf86699f6d378def6acb7b710d
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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vector_id: 12794
content:
"initiatives. These barriers are 'friction that prevents socially optimal \r\ninvestments from being commercially attractive' (Druce et al. 2016). \r\nThey are at the root of the 'microeconomic paradox' of a deficit of \r\ninfrastructure investments despite a  real return between 4% and \r\n8% (Bhattacharya et  al. 2016), of the low share of carbon-saving \r\npotentials tapped by dedicated policies such as energy renovation \r\nprogrammes (Urge-Vorsatz et  al. 2018), and, more generally of \r\na demand for climate finance lower than the volume of economically \r\nviable projects (de Gouvello and Zelenko 2010; Timilsina et al. 2010)."


id: 263b333e569cf761a0953a3982ca367c
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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vector_id: 3433
content:
"There is increasing recognition of rising adaptation challenges and \r\nassociated costs within and across developed countries. Undoubtedly \r\nmany developed countries are spending more on a  wide range of \r\nadaptation issues, both as preventive measures and building \r\nresilience (greening infrastructure, climate-proofing major projects \r\nand managing climate-related risks) against the impacts of climate \r\nchange extreme weather events (US GCRP 2018a). Developed \r\ncountries' climate change adaptation spending covers areas such as \r\nfederal insurance programmes, federal, state and local property and \r\ninfrastructure, supply chains, and water systems."


id: 8995d446856d6ea48c7b361baf31e40c
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"The interpretation of the quantitative analysis thus needs to be \r\nperformed, taking into account the qualitative needs assessment in \r\nSection 15.4.1 and the evolution of parameters that determine the risk\u0002weighted relative attractiveness of low-carbon and climate-resilient \r\ninvestments compared to other investment opportunities. With some "


id: c268ca50ea36bb8fbe817bfc0d7f754d
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"The analysis of financing gaps in climate action, which is used to \r\nmeasure implementation action and mitigation impact (FS-UNEP \r\nCentre and BNEF 2019) cannot be carried out as a  pure demand\u0002side challenge, in isolation from the analysis of barriers to deploy \r\nfunds (e.g.,  Ramlee and Berma 2013) and to take investment "


id: 47c9d24c7c1c2e90dd06f3f21097f26c
created_at: 2023-03-16 14:01:49
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vector_id: 8670
content:
"institutions having announced climate finance commitments and/or \r\ntargets (see also Box 15.4), the actual asset allocation of commercial \r\nfinancial sector players including sectoral and regional focus will \r\nrespond to tangible and financially viable investment opportunities \r\navailable in the short term. Robust long-term pathways to create \r\nsuch conditions for a  significant private sector involvement rarely \r\nexist and expectations on private sector involvement in some critical \r\nsectors/regions might be too high (Clark et al. 2018)."


id: 4a37b09582d765c18c8e00486589727c
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"The following section compares recent climate finance flows as \r\nreported by CPI and IEA to needs derived in Section 15.4, ignoring the \r\nslight mismatch in time horizons. The analysis ignores interlinked gaps, \r\nin particular infrastructure investment gaps and other SDG-related \r\ninvestment gaps, which need to be addressed in parallel to reach the \r\nLTGG but also at least partially to facilitate green investments."


id: 822dd03b636f301b5eca6e3c4fb3e877
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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vector_id: 18008
content:
"Total investments in mitigation need to increase by around three and \r\nsix times with significant gaps existing across sectors and regions8\r\n(high confidence). The findings on still significant gaps and limited \r\nprogress over the past few years to some extent seem to contradict \r\nthe massive increase in commitments by financial institutions. As \r\ndiscussed in Section 15.6, the investment gap is not due to global \r\nscarcity of funds."


id: b6debf786e1894ee2ecce6a2462024ac
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"energy sources. Reasonable auction results based on a substantial \r\nprivate-sector competition for investments have also been achieved \r\nin selected developing countries driven by rather standardised \r\ncontract structures and the increased availability of risk mitigation \r\ninstruments addressing political and regulatory risks and home \r\nbias constraints (FS-UNEP Centre and BNEF 2019; IRENA 2020a). \r\nDevelopment finance institution (DFI) climate portfolios tend to be \r\ndriven by concessional loans for renewable energy generation assets \r\nwith equity often being provided by (semi-) commercial investors \r\n(Section  15.3) which will have to change to accelerate renewable \r\nenergy investment activity."


id: 14d5a41990ddec9d1eedbae13abe1815
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"However, these investment gaps have little explanatory power \r\nin terms of the magnitude of the challenge to mobilise funding. \r\nIn addition to measurement challenges from different definitions \r\nand data gaps, sectors and regions offer highly divergent financial \r\nrisk-return profiles, in particular due to missing or weak regulatory \r\nenvironments consistent with ambitions levels, and economic costs \r\nas well as limited local capital markets, limited institutional capacity \r\nto ensure safeguard, standardisation, scalability and replicability of \r\ninvestment opportunities and financing models, and a pipeline ready \r\nfor commercial investments. Moreover, soft costs and institutional \r\ncapacity for enabling environment that can be prerequisite \r\nfor addressing financing gaps are ignored when focusing on \r\ninvestment cost needs."


id: 2659f247dbed994a7477c408e712597e
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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vector_id: 3450
content:
"Given the wide range of estimates on current investment flows into \r\nenergy efficiency, substantial uncertainty exists with regard to the \r\nmagnitude of the investment gaps. While CPI publishes investment \r\nlevels of 41 billion USD2015 in 2019 and 24 billion USD2015 in 2020 for \r\nenergy efficiency, counting majorly international flows, IEA results \r\ncome in at a much higher level of around 250 billion USD2015 annually \r\nbetween 2017 and 2020 (IEA 2021c) and IRENA (2020c) estimates \r\nenergy efficiency investments in buildings between 2017-2019 at an \r\naverage of USD139 billion yr-1."


id: 1e74691fc631a2ccd550c85b34cc268a
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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vector_id: 2233
content:
"Sectoral considerations. The renewable energy sector attracted the \r\nhighest level of financing in absolute and relative terms with business \r\nmodels in generation being proven and rapidly falling technology \r\ncosts driving the competitiveness of solar photovoltaic and onshore \r\nwind, even without taking account of the mitigation component \r\n(FS-UNEP Centre and BNEF 2019; IRENA 2020a). This investment \r\nactivity comes in line with the first generation of NDCs and their \r\nheavy focus on mitigation opportunities in the renewable energy \r\nsector (Pauw et al. 2016; Schletz et al. 2017). Still, the investment gap \r\ntends to remain stable with flows over the past years not showing \r\nan upward trend."


id: e4af48018dbb798f709f2a5e2bd4c3b4
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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vector_id: 33455
content:
"Public sector investments in the transport sector have increased \r\nsignificantly in the past years reflecting the increased interest \r\nof capital markets in renewable energy and the efficient and \r\ncorresponding reallocation of public funding. Provision of funding \r\nby capital markets for public transport infrastructure among others \r\nheavily depends on suitable financing vehicles and increased funding \r\nfor development of projects with a  low level of standardisation \r\n(OECD 2015a)."


id: 26926bdc62a6de5b79fe570f8bd36bc6
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"Both IRENA and IEA include only incremental costs of EVs in their \r\nestimates on needs while CPI, when measuring actual flows, includes \r\nthose at full costs. Total private flows for EVs included in CPI numbers \r\namount to USD41 billion in 2018 (Buchner et al. 2019), representing \r\nmore than 80% of private sector finance into the transport sector, \r\naround one third of total public and private funding to the transport \r\nsector in 2018. This likely results in an underestimation of the \r\nfinancing gap - in addition to the fact that estimates for investment \r\nneeds for rail infrastructure are only available for selected countries."


id: f06e19d6671170d93fc08f9a16315cb9
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"Comparing annual average total investments in global fuel supply \r\nand the power sector of approximately USD1.5 trillion9\r\n yr-1 in \r\n2019 (IEA 2020a) to the investment in the Stated Policies Scenario \r\n(approximately 1.7 trillion USD2015 yr-1) and the Sustainable \r\nDevelopment Scenario (approximately 1.8 trillion USD2015 yr-1) in \r\n2030 underlines the required shift of existing capital investment \r\nfrom fossil to renewables even more than the need to increase sector \r\nallocations (Granoff et al. 2016; McCollum et al. 2018)."


id: 533065f6a94221bb3736903627d61d5d
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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index: climate_gpt_only_giec
vector_id: 10556
content:
"Current financing of land-based mitigation options is less than \r\nUSD1 billion yr-1 representing only 2.5% of climate mitigation funding, \r\nsignificantly below the potential proportional contribution (Buchner \r\net  al. 2019). A  stronger focus on deforestation-free value chain, \r\nincluding a  stronger reflection in taxonomies and financial sector \r\ninvestment decision processes are necessary to ensure an alignment \r\nof financial flows with the LTGG. Taking into account the specifics of \r\nland-based mitigation (in particular long investment horizons, strong \r\ndependency on the monetisation of mitigation effects, strong public \r\nsector involvement) a significant scale-up of commercial financing to \r\nthe sector can hardly be expected in the absence of strong climate "


id: 6af34732de23f8d1094b14b801426257
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"Ensuring access to the heavily regulated electricity markets is a key \r\ndriver for an accelerated private sector engagement (IFC 2016; \r\nFS-UNEP Centre and BNEF 2018; REN21 2019), with phasing out of \r\nsupport schemes and regulatory uncertainty being a major driver for \r\nreduced investment volumes in various regional markets in the past \r\nyears (FS-UNEP Centre and BNEF 2015, 2016, 2017, 2018, 2020). \r\nStrategic investors and corporate investments by utilities dominate \r\nthe investment activity in developed countries and countries in \r\ntransition (BNEF 2019) based on the competitiveness of renewable "


id: 69503cafad1286377afc490670cb230
created_at: 2023-03-16 14:01:49
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content:
"policies (Clark et  al. 2018). Agriculture is likely to develop more \r\npotential to mobilise private finance than the forest sector given its \r\nstrong linkage to food security and hunger and shorter payback periods. \r\nThe significant gap in land-based mitigation finance also indicates the \r\ncrucial lack of finance to the bottom of the pyramid."


id: cbb87637d0aaade217eb9ad65757d2e7
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
content_type: text
index: climate_gpt_only_giec
vector_id: 29591
content:
"Finance for adaptation and resilience. As explained early, the \r\nreduction of the infrastructure gap to increase societies' resilience \r\nand the implementation of the NAPs will require more and higher \r\nlevels of sustained financing. Activities mobilised for adaptation and \r\nresilience are often not marketable and their financing will continue \r\ncoming from the public sector (Murphy and Parry 2020) and, at the \r\ninternational level, from grants-based technical assistance or through \r\nbudgetary support or basket finance for large projects/programmes \r\nor sector-wide approaches or multilateral finance under (Non-)\r\nUNFCCC10 that also anticipate supporting NAP implementation  - \r\nparticularly those involving incremental costs and co-benefits, "


id: 634c102be6e86a4bedb2bc585ea296cd
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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index: climate_gpt_only_giec
vector_id: 13194
content:
"Near-term actions to shift the financial system over the next decade \r\nare critically important and possible with globally coordinated \r\nefforts. Taking into account the inertia of the financial system as \r\nwell as the magnitude of the challenge to align financial flows with \r\nthe long-term global goals, fast action is required to ensure the \r\nreadiness of the financial sector as an enabler of the transition (high \r\nconfidence). The following subsections elaborate on key areas which \r\ncan have a catalytic effect in terms of addressing existing barriers - \r\nbesides political leadership and interventions discussed in other \r\nChapters of AR6."


id: 24a515256f6664b063cf0a96fb90e716
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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index: climate_gpt_only_giec
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content:
"Financing for resilience is limited, unpredictable, fragmented and \r\nfocused on few projects or sectors and short term as opposed to \r\nprogrammatic and long term (10-15 years) finacing to build resilience \r\n(ISDR 2009, 2011; Kellett and Peters 2014; Watson et al. 2015). Market\u0002based mechanisms are available but not equally accessible to all \r\ndeveloping countries, particularly SIDS and LDCs, and such mechanisms \r\ncan undermine debt sustainability (OECD and World Bank 2016). While \r\nresilience financing is mainly grant funding, concessional loans are \r\nincreasing substantially and are key sources of financing for disaster \r\nand resilience, particularly for upper-middle-income countries (OECD \r\nand World Bank 2016). The combination of these trends can contribute \r\nto greater levels of indebtedness among many developing countries, \r\nmany of which are already at or approaching debt distress."


id: 584ef62650991de701316ad1953f8a30
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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content:
"Social protection systems can be linked with a  number of the \r\ninstruments already considered: reserve funds, insurance and \r\ncatastrophe bonds, regional risk-sharing facilities, contingent credit, \r\nin addition to traditional international aid and disaster response. \r\nHallegatte et  al. (2017) recommend combining adaptive social "


id: f3ddac6a712965064a9f206f5844f8af
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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vector_id: 35886
content:
"and financing approaches can help to overcome barriers related \r\nto transactions costs by aggregating and/or transferring financing \r\nneeds and establishing a supply of finance for needs of stakeholder \r\ngroups lacking financial inclusion (Section 15.6.8)."


id: c818f557223704967dc6ed579fd6baea
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
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index: climate_gpt_only_giec
vector_id: 29065
content:
"Achieving climate mitigation and adaptation objectives requires \r\nambitious climate finance flows in the near-term, that is, 5-10 years \r\nahead. However, knowledge gaps in the assessment of climate\u0002related financial risk are a  key barrier to such climate finance \r\nflows. Therefore, this section discusses the main knowledge gaps \r\nthat are currently being addressed in the literature and those that \r\nremain outstanding."


id: fa85a5d50c2b95c02f4f6fec902d8348
created_at: 2023-03-16 14:01:49
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vector_id: 36935
content:
"Climate-related financial risk is meant here as the potential adverse \r\nimpact of climate change on the value of financial assets. A recent \r\nbut remarkable development since AR5 is that climate change has \r\nbeen explicitly recognised by financial supervisors as a  source of \r\nfinancial risk that matters both for financial institutions and citizens' \r\nsavings (Bolton et al. 2020). Previously, climate change was mostly "


id: f4ac8b0aae30bc1d9f6699dc78af165c
created_at: 2023-03-16 14:01:49
updated_at: 2023-03-16 14:01:49
content_type: text
index: climate_gpt_only_giec
vector_id: 36003
content:
"Physical risk. On the one hand, unmitigated climate change implies \r\nan increased potential for adverse socio-economic impacts especially \r\nin more exposed economic activities and areas (high confidence). \r\nAccordingly, physical risk refers to the component of financial risk "


id: 51a1c4c84cb432acb7c6e2f7bf481bd1
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"associated with the adverse physical impact of hazards related to \r\nclimate change (e.g., extreme weather events or sea level rise) on the \r\nfinancial value of assets such as industrial plants or real estate. In turn, \r\nthese losses can translate into losses on the values of financial assets \r\nissued by exposed companies (e.g., equity/bonds) and or sovereign \r\nentities as well as losses for insurance companies. The assessment \r\nof climate financial physical risks poses challenges in terms of data, \r\nmethods and scenarios. It requires cross-match scenarios of climate\u0002related hazards at granular geographical scale, with the geolocation \r\nand financial value of physical assets. The relationship between \r\nthe value of physical assets (such as plants or real estate) and the \r\nfinancial value of securities issued by the owners of those assets \r\nis not straightforward. Further, the repercussion of climate-related \r\nhazards on sovereign risk should also be accounted for."


id: e14e84279736fd3f382d0c5e2089c526
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"Transition risks and opportunities. On the other hand, the \r\nmitigation of climate change, by means of a  transition to a  low\u0002carbon economy, requires a  transformation of the energy and \r\nproduction system at a pace and scale that implies adverse impacts \r\non a range of economic activities, but also opportunities for some \r\nother activities (high confidence). If these impacts are factored in by \r\nfinancial markets, they are reflected in the value of financial assets. \r\nThus, transition risks and opportunities refers to the component of \r\nfinancial risk (opportunities) associated with negative (positive) \r\nadjustments in assets' values resulting directly or indirectly from the \r\nlow-carbon transition."


id: 583d5bf3e468078ef447975afcb53900
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"Assets directly and indirectly exposed to transition risk. \r\nIn terms of types of assets and economic activities, the focus \r\nof estimates of carbon stranded assets tends to be on physical \r\nreserves of fossil fuel (e.g.,  oil fields) and sometimes financial \r\nassets of fossil fuel companies (van der Ploeg and Rezai 2020). \r\nHowever, a precondition for a broader analysis of transition risks and \r\nopportunities is to go beyond the narrative of stranded assets and \r\nto consider a classification of sectors of all the economic activities "


id: 558d243c26371a153c5f2fd666fe7343
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"Given the magnitude of the assets that are potentially exposed, \r\nreported in the previously cited studies, a delayed or uncoordinated \r\ntransition risk can have implications for financial stability not only \r\nat the level of individual financial institutions, but also at the macro \r\nlevel. The possible systemic nature of climate financial risk has been \r\nhighlighted on the basis of general equilibrium economic analysis \r\n(Stern and Stiglitz 2021)."


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"the possible reinforcing feedbacks and transmission channels to \r\nthe economy and to finance. Moreover, models need to account \r\nfor compound risk, that is, the interaction of climate physical and/\r\nor transition risk with other sources of risk such as pandemics, \r\nsuch as COVID-19."


id: 27a5031e526d43009b55cdadd08454b
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"These considerations are part of an ongoing discussion on whether \r\nthe current financial frameworks, including Basel III, should \r\nincorporate explicitly climate risk as a  systemic risk. In particular, \r\nthe challenges in quantifying the extent of climate risk, reviewed in \r\nthis section, especially if risk is systemic, raise the question whether \r\na combination of quantitative and qualitative restrictions on banks' \r\nportfolios could be put in place to limit the build-up of climate risks \r\n(Baranovic et al. 2021)."


id: 7b3d3fd5914a84ee052b5b1daadc60e7
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"Second, IAM do not contain a description of the financial system in \r\nterms of actors and instruments and make assumptions on agents' \r\nexpectations that could be inconsistent with the nature of a disorderly \r\ntransition (Espagne 2018; Pollitt and Mercure 2018a; Battiston \r\net al. 2020b). In particular, IAMs solve for least cost pathways to an \r\nemissions target in 2100 (AR4 WGIII SPM Box 3), while the financial \r\nsector's time horizon is much shorter and risk is an important factor \r\nin investment decisions."


id: 262fbe71ad31d1be4b90a1da5677e585
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"In this context, probabilities of occurrence of scenarios are difficult \r\nto assess and this is important because risks vary widely across \r\nthe different scenarios. In this context a major challenge is the fat\u0002tail nature of physical risk. One the one hand, forecasts of climate \r\nchange and its impact on humans and ecosystems imply tail events \r\n(Weitzman 2014) and tipping points which cannot be overcome by \r\nmodel consensus (Knutti 2010). On the other hand, everything else \r\nthe same, costs and benefits vary substantially with assumptions on \r\nagents' utility, productivity, and intertemporal discount rate, which \r\nultimately depend on philosophical and ethical considerations \r\n(Nordhaus 2007; Stern 2008; Pindyck 2013). Thus, more knowledge \r\nis needed on the interaction of climate physical and transition risks, "


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"Third, the current modelling frameworks used to develop climate \r\nmitigation scenarios, which are based on large-scale IAM, assume that \r\nthe financial system acts always as an enabler and do not account for \r\nthe fact that, under some condition (i.e., if there is underestimation \r\nof climate transition risk) can also act as a barrier to the transition "


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"Although disclosure has increased since the TCFD recommendations \r\nwere published, the information is still insufficient for investors \r\nand more clarity is needed on potential financial impacts and \r\nhow resilient corporate strategies are under different scenarios \r\n(TCFD 2019). Several efforts to provide guidance and tools for the \r\napplication of the TCFD recommendations have been made (using \r\nSustainability Accounting Standards Board (SASB) Standards and the \r\nClimate Disclosure Standards Board (CDSB) Framework to Enhance \r\nClimate-Related Financial Disclosures in Mainstream Reporting TCFD \r\nImplementation Guide (UNEP FI 2018; CDSB and SASB 2019). Results \r\nof voluntary reporting have been mixed, with one study pointing \r\nto unreliable and incomparable results reported by the US utilities \r\nsector to the CDP (Stanny 2018)."


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"(Battiston et al. 2020a) because it invests disproportionately more in \r\nhigh-carbon activities."


id: 260a6682f33a73413b27cd98e9b3a3b5
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"There have been also similar initiatives at the national level (DNB \r\n2017; UK Government 2017; US GCRP 2018b). In particular, France \r\nwas the first country to mandate climate risk disclosure from financial \r\ninstitutions (via Article 173 of the law on energy transition). However, \r\ndisclosure responses have been so far mixed in scope and detail, with \r\nthe majority of insurance companies not reporting on physical risk \r\n(Evain et al. 2018). In the UK, mandatory GHG emissions reporting for \r\nUK-listed companies has not led to substantial emissions reductions \r\nto date but could be laying the foundation for future mitigation (Tang \r\nand Demeritt 2018)."


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"A key recent development is the EU Taxonomy for Sustainable Finance \r\n(TEG 2019), which provides a classification of economic activities that \r\n(among other dimensions) contribute to climate mitigation or can be \r\nenabling for the low-carbon transition. Indirectly, such classification \r\nprovides useful information on investors' exposure to transition risk \r\n(Alessi et  al. 2019; ESMA 2020). Finally, many consultancies have \r\nstepped forward offering services related to climate risk. However, \r\nthe methods are typically proprietary, non-transparent, or based \r\nprimarily on carbon footprinting, which is a necessary but insufficient \r\nmeasure of climate risk. Further, ESG (environmental, social and \r\ngovernance) metrics can be useful but are, alone, inadequate to \r\nassess climate risk."


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"Decision-makers in financial risk management make increasing use \r\nof climate policy scenarios, in line with the TCFD guidelines and \r\nthe recommendations of the NGFS. In order to reduce the number \r\nof scenarios to consider, Illustrative Mitigation Pathways (IMPs, \r\nChapter  3), have been elaborated to illustrate key features that \r\ncharacterise the possible climate (policy) futures. The following \r\nconsiderations can be useful for scenario end-users who carry out \r\nrisk analyses on the basis of the scenarios described in Chapter 3. It is \r\npossible to associate climate policy scenarios with levels of physical \r\nand/or transition risk, but these are not provided with the scenario \r\ndata themselves."


id: 204c21da67c3a00f191ad2386c8f258d
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"Main regulatory developments and voluntary responses to \r\nclimate risk. Framing climate risk as a  financial risk (not just as \r\nan ethical issue) is key for it to become an actionable criterion for \r\ninvestment decision among mainstream investors (high confidence)\r\n(TCFD 2019). Since 2015 financial supervisors and central banks \r\n(e.g.,  the Financial Stability Board, the G20 Green Finance Study \r\nGroup, and the Network for Greening the Financial System (NGFS)) \r\nhave played a  central role in raising awareness and increasing \r\ntransparency of the potential material financial impacts of climate \r\nchange within the financial sector (Bank of England 2015, 2018; \r\nTCFD 2019). The NGFS initiative has engaged, in particular, in the \r\nelaboration of climate financial risk scenarios."


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"On the one hand, each scenario is associated with a warming path, \r\nwhich in turn, on the basis of the results from WGII, implies certain \r\nlevels of physical risk (AR6 WGII Chapter 16). However, climate impacts \r\nare not accounted for in the scenarios. Moreover, levels of risk may vary "


id: 9d743a3f9c2856543bd1e6913cebcb62
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"pathways with higher emissions. The warming levels reached along \r\nthese two scenarios imply physical risk levels that are 'Moderate' until \r\n2050 and 'Very High' in 2050-2100 (with low levels of adaptation). \r\nNoting, that 'Moderate' physical risk can mean for some countries \r\n(i.e.,  SIDS) significant and even hardly absorbable consequences \r\n(i.e., reaching hard adaptation limits). Transition risk is not relevant \r\nfor these scenarios, since a transition is not pursued."


id: 72d6a34870adb7cb06c93697e0f31c38
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"with the reason for concern and with the speed of the implementation \r\nof adaptation. On the other hand, while mitigation can come with \r\ntransition risk, in the case of lack of coordination among the actors, \r\nas discussed earlier in this section, this is not modelled explicitly in the \r\ntrajectories, since the financial sector is not represented in underlying \r\nmodels. The scientific state of the art in climate-related financial risk \r\noffers an analysis that is not yet comprehensive of both the physical \r\nand transition risk dimensions in the same quantitative framework. \r\nHowever, decision-makers can follow a mixed approach where they \r\ncan combine quantitative risk assessment for transition risk with more \r\nqualitative risk analysis related to physical risk."


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"Figure 15.6 represents sequences of events following along a scenario \r\nboth in terms of physical risk (left) and transition risk (right). Four \r\ngroups of IMPs (more are considered based on the warming level \r\nthey lead to in 2100. Current Policies (CurPol) considers climate \r\npolicies implemented in 2020 with only a  gradual strengthening \r\nafterwards, leading to above 4degC warming (with respect to pre\u0002industrial levels). Moderate Action (ModAct) explores the impact of \r\nimplementing the NDCs (pledged mitigation targets) as formulated \r\nin 2020 and some further strengthening afterwards, thereby limiting \r\nwarming to less than 4degC (>50%), but above 3degC (>50%). In these \r\ntwo scenarios, there is no stabilisation of temperature, meaning \r\nthat further warming occurs after 2100 (and higher risk) even if \r\nstabilisation could be eventually achieved. They are referred to as "


id: 91a38eed63c264ffcad6522fc5c90225
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"Figure 15.6 | Schematic representation of climate scenarios in terms of both physical and transition risk. While the figure does not cover all possible events, \r\nit maps out how the combination of stated targets can lead to different paths in terms of risk, depending on implementation progress and policy credibility. IMP 1.5degC and \r\nIMP <2degC are representative for IMP-GS (Sens. Neg; Ren), IMP-Neg, IMP-LD; IMP-Ren; IMP-SP. Note that the figure defines 'High' progress as higher, but it is important that the \r\nphysical risk varies by region and country. This means, that 'Moderate' physical risk can be significant and even hardly absorbable for some countries."


id: 3bcf886e9a9edaec21b9d0de7d09f126
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"of fiscal operations, particularly in a  post-COVID-19 world (high \r\nconfidence). Instruments and institutional arrangements for better \r\ninternational monetary policy coordination will likely be necessary in \r\nthe context of growing external debt stress and negative credit rating \r\npressures facing both emerging and low-income countries. Central \r\nbankers have started examining the implications of disruptive risks \r\nof climate change, as part of their core mandate of managing the \r\nstability of the financial system (Chenet et al. 2021). Climate-related \r\nrisk assessments and disclosure, including central banks' stress \r\ntesting of climate change risks, can be considered as a  first step \r\n(Rudebusch 2019), although such risk assessments and disclosure \r\nmay not be enough by themselves to spur increased institutional \r\nlow-carbon climate finance (Ameli et al. 2020)."


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"Additional monetary policies and macroprudential financial \r\nregulation may facilitate the expected role of carbon pricing on \r\nboosting low-carbon investments (medium confidence) (D'Orazio \r\nand Popoyan 2019). Commercial banks may not respond to the price \r\nsignal and allocate credits to low-carbon investments due to the \r\nexistence of market failure (Campiglio 2016). This could support the \r\nproductivity of green capital goods and encourage green investments \r\nin the short term, but might cause financial instability by raising \r\nnon-performing loans ratio of dirty investments and creating green \r\nbubbles (Dunz et al. 2021). Financial supervisors needs to implement \r\nstricter guidelines to overcome the greenwashing challenges \r\n(Caldecott 2020)."


id: b30643008ec7ba123e6bfe5f90ef6b14
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"Transparency: Policy de-risking measures, such as robust policy \r\ndesign and better transparency, as well as financial de-risking \r\nmeasures, such as green bonds and guarantees, at both domestic \r\nand international levels, enhance the attractiveness of clean \r\nenergy investments (high confidence) (Steckel and Jakob 2018). \r\nOrganisations such as the Task Force on Climate-related Financial \r\nDisclosures (TCFD) can help increase capital markets' climate \r\nfinancing, including private sector, by providing financial markets \r\nwith information to price climate-related risks and opportunities \r\n(TCFD 2020). However, risk disclosures alone would likely be \r\ninsufficient as long as market failures that inhibit the emergence of \r\nlow-carbon investment initiatives with positive risk-weighted returns \r\n(high confidence) (Christophers 2017; Ameli et al. 2020)."


id: df216522a4d6aa02c308dfcc11b7e7d8
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"Efficient financial markets and financial regulation. An \r\ninfluential efficient financial markets hypothesis (Fama 1970, 1991, \r\n1997) proceeds from the assumption that in well-developed financial \r\nmarkets, available information at any point of time is already well \r\ncaptured in capital markets with many participants. Despite increasing \r\nchallenges to the theory (Sewell 2011), especially by repeated \r\nepisodes of global financial crashes and crises, and other widely \r\nnoted anomalies, a weaker form of the efficient markets hypothesis \r\nmay still apply (medium confidence). It is arguable that accumulating "


id: 88f3b88a990a7dc2b570c76c53c5d5ac
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"Central banks and climate change. Central banks in all economies \r\nwill likely have to play a  critical role in supporting the financing "


id: c94c34c8921434277971caa0769011b4
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"to trade was important, capacity expansion had positive effects on \r\nlearning-by-doing on innovation over time, and that feed-in-tariffs \r\n(FiTs), in particular, had positive impacts on technology diffusion \r\n(Grafstrom and Lindman 2017) (Box 16.4). The FiTs programme has \r\nbeen associated with rapid increase in early renewables capacity \r\nexpansion across the world by reducing market risks in financing and \r\nstability in project revenues (Menanteau et al. 2003; Jacobsson et al. \r\n2009) (Section 9.9.5). Competitive auctions where the bidder with \r\nthe lowest price or other criteria is selected for government's call for \r\ntender are increasingly being utilised as an alternative to FITs due to \r\ntheir strengths of flexibility, potential for real price discovery, ability \r\nto ensure greater certainty in price and quantity, and capability to \r\nguarantee commitments and transparency (IRENA and CEM 2015)."


id: 5b7ca9f805cdca1752089ed9ec231605
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"Outside of renewable energy, scattered but numerous examples are \r\navailable on the role of innovative public policy to spur and create \r\nnew markets and technologies (Arent et al. 2017): (i) proactive role \r\nof the state in energy transitions (e.g., the retirement of all coal-fired \r\npower plants in Ontario, Canada, between 2007 and 2014 (Kern \r\nand Rogge 2016; Sovacool 2016)); (ii) too early exit and design \r\nproblems not considering the market acceptability and financing \r\nissues (e.g., energy-efficient retrofitting in housing in UK (Rosenow \r\nand Eyre 2016), low or negative returns in reality versus engineering \r\nestimates in weatherisation programmes in US (Fowlie et al. 2018)); \r\nand (iii) energy performance contracting for sharing the business \r\nrisks and profits and improving energy efficiency (energy service \r\ncompanies (Bertoldi and Boza-Kiss 2017; Qin et al. 2017) and utility \r\nenergy service contracts in the USA (Clark 2018))."


id: 25840ce1c219e62f6052c04f0fd6a34f
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"Crowding out. Literature has discussed the risks of low effectiveness \r\nof public interventions and of a  crowding out effect of climate\u0002targeted public support to other innovation sectors (Buchner et al. \r\n2013). However, much academic literature suggests no strong \r\nevidence of crowding out. (Deleidi et al. 2020). Examining the effect \r\nof public investment on private investment into renewables in \r\n17 countries over 2004-2014, showed that the concept of crowding \r\nout or in does not apply well to sectoral studies and found that public \r\ninvestments positively support private investments in general."


id: 4effdffea363f895b7d9a505ffcf3ad1
created_at: 2023-03-16 14:01:50
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content:
"Support climate action via carbon pricing, taxes, and emission \r\ntrading systems. Literature and evidence suggest that futures \r\nmarkets regarding climate are incomplete because they do not price \r\nin externalities (Scholtens 2017). As a result, low-carbon investments \r\ndo not take place to socially and economically optimal levels, and \r\nthe correct market signals would involve setting carbon prices \r\nhigh enough or equivalent trading in reduced carbon emissions \r\nby regulatory action to induce sufficient and faster shift towards \r\nlow-carbon investments (high confidence) (Aghion et  al. 2016). \r\nNonetheless, durable carbon pricing in economic and political \r\nsystems must be implemented and approached combining related \r\nelements to both price and quantity (Grubb 2014)."


id: 3879bae69a031cdcc3ba9ad444931890
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"Non-carbon price instruments, such as market-oriented regulation \r\nand public programmes involving low-carbon infrastructure, may \r\nbe preferable in developing countries where market and regulatory \r\nfailure and political economy constraints are more prevalent (Finon \r\n2019). While carbon pricing was suggested by many economists \r\nand researchers (Nordhaus 2015; Pahle et al. 2018), overcoming the \r\npolitical and regulatory barriers would be necessary for the further \r\nimplementation of an effective carbon pricing scheme nationally and \r\ninternationally. Without strong political support, the effectiveness \r\nof carbon pricing would be limited to least-cost movements \r\n(Meckling et al. 2015)."


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"Role of domestic financing sources. Efforts to address climate \r\nchange can be scaled up through the mobilisation of domestic \r\nfunds (Fonta et  al. 2018). Publicly organised and supported low\u0002carbon infrastructures through resurrected national development \r\nbanks may be justified (Mazzucato and Penna 2016). It is important "


id: d424b73b5ab84f2fa5e87d5322d7cfba
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"The GET FiT concept argued that the mitigation of political and regulatory risk by sovereign and international guarantees is cost\u0002efficient in developing countries, illustrating the estimated impact of such risk-mitigation instruments on equity and debt financing \r\ncosts, and consequently required feed-in tariff levels (Deutsche Bank Climate Change Advisors 2011). The impact of financing costs on \r\ncost of renewable energy generation is well researched with significant differences across countries and technologies being observed, \r\nwith major drivers being the regulatory framework as well as the availability and type of public support instruments (Geddes et al. \r\n2018; Steffen 2019). With a focus on developing countries and based on a case study in Thailand Huenteler et al. (2016) demonstrate \r\nthe significant effect of regulatory environments but also local learning and skilled workforce on cost of renewables. The effect of \r\nthose exceeds the one of global technology learning curves."


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"Egli et al. (2018) identify macroeconomic conditions (general interest rate) and experience effects within the renewable energy finance \r\nindustry as key drivers in developed countries with a stable regulatory environment, contributing 5% (PV) and 24% (wind) to the \r\nobserved reductions in LCOEs in the German market with a relatively stable regulatory environment. They conclude that 'extant studies \r\nmay overestimate technological learning and that increases in the general interest rate may increase renewable energies' LCOEs, \r\ncasting doubt on the efficacy of plans to phase out policy support' (Egli et al. 2018). A rising general interest rate level could heavily \r\nimpact LCOEs - for Germany, a rise of interest rates to pre-financial crisis levels in five years could increase LCOEs of solar and wind \r\nby 11-25% respectively (Schmidt et al. 2019)."


id: adcde06fae758ef011bd1144a4fccd90
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"countries and allow for expanding developing countries' access to \r\ncapital markets at a lower cost and longer maturities, overcome the \r\nBasel III's liquidity impediment and the EU's Solvency II directive \r\non liquidity (Blended Finance Taskforce 2018b), and accelerate the \r\nrecognition of climate assets by investors seeking safe investment \r\nhavens (Hourcade et  al. 2021b). They would also strengthen the \r\nefficacy of climate disclosure through high grades climate assets \r\nand minimise the risks of 'greening' of the portfolios by investing \r\nin 'carbon neutral' activities and not in low-carbon infrastructures. \r\nFinally, they would free up grant capacities for SDGs and adaptation \r\nthat mostly involve non-marketable activities by crowding in private \r\ninvestments for marketable mitigation activities."


id: 3bd926d6261f48f04677ca5233680ee4
created_at: 2023-03-16 14:01:50
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"Financing by development finance institutions and development \r\nbanks aims to address market failures and barriers related to limited \r\naccess to capital as well as provide direct and indirect subsidisation \r\nby accepting higher risk, longer loan tenors and/or lower pricing. \r\nMany development and climate projects in developing and emerging \r\ncountries have traditionally been supported with concessional loans "


id: a3cb7113c4a05cb201099b283e8e4932
created_at: 2023-03-16 14:01:50
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content:
"Limited research is available on the efficiency of mobilisation of \r\nthe private sector at the various levels and/or the theory of change \r\nattached to the different approaches as applied in classical public\u0002private partnerships. Also, transparency on current flows and private \r\ninvolvement at the various levels is limited with no differentiation "


id: ced446a5deb656071c7e487186ea4c0
created_at: 2023-03-16 14:01:50
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"being made in reporting (e.g., GCF co-financing reporting). Limited \r\nprioritisation and agreement on prioritisation of sectors and/or \r\nproject categories being ready and/or preferred for direct private \r\nsector involvement might become a challenge in the coming years \r\n(high confidence) (Sudmant et al. 2017a; Sudmant et al. 2017b)."


id: 49a4e421d8cbf1ec8b44688dbd5e5515
created_at: 2023-03-16 14:01:50
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content:
"The steep decrease in renewable electricity costs since 2010 also \r\nrepresents a relevant driver for a low-carbon recovery (Jaeger et al. \r\n2020). Many more sectors are starting to show similar opportunities \r\nfor rapid growth with supportive public spending such as low-carbon \r\ntransport and buildings (IEA 2020d). Expectations that the package \r\nwill increase economic activity rely on the assumption that increased \r\ncredit will have a positive effect on demand, the so-called demand\u0002led policy (Mercure et al. 2019). Boosting investment should propel \r\njob creation, increasing household income and therefore demand \r\nacross economic sectors (high confidence). A similar plan has also \r\nbeen proposed by the US administration and the European Union \r\nthrough the Next Generation EU (European Council 2020)."


id: 91210ecb8bdcc937f974e7a4321642f5
created_at: 2023-03-16 14:01:50
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content:
"The gap analysis as well as other considerations presented in this \r\nchapter illustrate the critical role of increased volumes and efficient \r\nallocation of public finance to reach the long-term global goals, both \r\nnationally and internationally."


id: 71870649980dcfd1bbee148f088ae143
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content:
"Second, a strong assumption is that voters will be politically supportive \r\nof extended and increased fiscal deficit spending on climate on \r\ntop of COVID-19-related emergency spending and governments \r\nwill overcome treasury biases towards fiscal conservatism (to \r\npreserve credit ratings). However, evidence strongly suggests that \r\nvoters (and credit rating agencies) tend to be fiscally conservative \r\n(Peltzman 1992; Lowry et al. 1998; Alesina et al. 2011; Borge and \r\nHopland 2020), especially where expenditures involve higher taxes \r\nin the future and do not identifiably flow back to their local bases \r\n(the 'public good' problem) (high confidence). Such mistrust has "


id: 5cbf5338d189614ac72ea64c4992341d
created_at: 2023-03-16 14:01:50
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content:
"been a reason for abortive return to fiscal austerity often in the past \r\n(most recently during global financial crisis) and may benefit for \r\npolitical support by consistently reframing the climate expenditures \r\nin terms of job creation benefits (Bougrine 2012), effectiveness of \r\nleast-cost fiscal spending on climate for reviving private activity, \r\nand the avoidance of catastrophic losses (Huebscher et, al. 2020) \r\nfrom higher carbon emissions.  A new understanding of debt \r\nsustainability including negative implications of deferred climate \r\ninvestments on future GDP has not yet been mainstreamed (see "


id: 9c6afa35602b220f8323e8c5d257c172
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content:
"more on the debt sustainability discussion below (e.g., Buhr et al. \r\n2018; Fresnillo 2020a). In addition, implications on the availability \r\nof international public finance flows are not yet clear since current \r\nadditional funding prioritises urgent health care support rather than \r\nan increase in predictable mid-/long-term financial support. Heavy \r\ninvestment needs for recovery packages in developed countries on \r\nthe one hand and their international climate finance commitments \r\non the other might be perceived to compete for available 'perceived \r\nas appropriate' budgets."


id: db9519a8ed1fc8d9c384af43706bc813
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"Post-Keynesian demand-side macroeconomic models, with financial sectors and supply-side effects, in contrast, allow for the reality \r\nof non-equilibrium situations: persistent short- to medium-term underemployed economy-wide resources and excess savings over \r\ninvestment because of unexpected shocks, such as COVID-19. In these settings, economic stimulus packages allow a faster recovery "


id: 138bc1e64b25b6a2a4e8478ca5e95f4e
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"with demand-led effects: 'Economic multipliers are near zero when the economy operates near capacity. In contrast, during crises such \r\nas the GFC, economic multipliers can be high' (Blanchard and Leigh 2013; Hepburn et al. 2020b). The expected results are opposite \r\nto the standard supply-led equilibrium models as a response to investment stimulus (the green-shaded part of Box 15.6, Figure 1), as \r\nintended by 'green-stimulus' packages such as proposed by the EU (Balint et al. 2016; Mercure et al. 2019)."


id: 5b4cbfa54f27b61b5065170abe799270
created_at: 2023-03-16 14:01:50
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content:
"Robust studies on the economic costs and benefits in the \r\nshort- to long-term of reaching the LTGG exist for only few \r\ncountries and/or regions, primarily in the developed world (high \r\nconfidence) (e.g. BCG 2018; McKinsey 2020a). With many studies \r\nunderpinning the strong economic rationale for high investments \r\nin the short-term(e.g.,  McKinsey 2020a), regional differences are \r\nsignificant highlighting the need for extensive cooperation and \r\nsolidarity initiatives."


id: 9056b855ae53dc8b13f2db225defc4f8
created_at: 2023-03-16 14:01:50
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"For many developing countries, the focus of debt sustainability \r\ndiscussions is on the negative effect of climate change on the future \r\nGDP and the uncertainty with regard to short-term effects of climate \r\nchange and their economic implications (high confidence). With long\u0002term economic impacts of climate change being in the focus of the \r\nmodelling community, the volatility of GDP in the short term driven "


id: b99fc3b00061680fb8e1b20eba6e2419
created_at: 2023-03-16 14:01:50
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content:
"The use of debt-for-nature and debt-for-climate-swaps is still very \r\nlimited and not mainstreamed but offers significant potential if used \r\ncorrectly (high confidence)."


id: dea88b7cc016c748f27c312b3b9f6782
created_at: 2023-03-16 14:01:50
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content:
"An increasing number of debt-for-climate/nature swaps have been \r\nseen in recent years applied primarily in international climate \r\ncooperation and in bilateral contexts, however, not (yet) to an extent \r\naddressing severe and acute debt crises (Essers et al. 2021; Volz et al. \r\n2021) offering significant potential if used correctly (Warland and \r\nMichaelowa 2015). Significant lead times, needs-based structuring, \r\ntransparency with regard to the additionality of financed climate \r\naction, uncertainty with regard to own resource constraints and ODA \r\naccountability remain as barriers for a massive scale-up needed to \r\nmake transactions relevant (Mitchell 2015; Fuller et al. 2018; Essers \r\net al. 2021). At the same time, the limitation of the use of debt-based \r\ninstruments as a response to climate-related disasters and counter\u0002cyclical loans might be necessary (Griffith-Jones and Tyson 2010)."


id: 63252cd72c5d8731454035aeae4497cc
created_at: 2023-03-16 14:01:50
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content:
"Debt levels globally but particularly in developing and vulnerable \r\ncountries have significantly increased over the past years with \r\ncurrent and expected climate change impacts further burdening \r\ndebt sustainability (high confidence). For low- and middle-income \r\ncountries, 2018 marked a  new peak of debt levels amounting to \r\n51% of GDP; between 2010 and 2018, external debt payments as \r\na percentage of government budget grew by 83% in low- and middle\u0002income countries, from an average of 6.71% in 2010 to an average \r\nof 12.56% in 2018 (Fresnillo 2020b). COVID-19 has further reduced \r\nthe fiscal space of many developing governments and/or increased \r\nthe likelihood of debt stress. With many vulnerable countries \r\nalready being burdened with higher financing costs, this limited \r\nfiscal space further shrinks their ability to actively steer the required \r\ntransformation (Buhr et al. 2018). Limited progress in increasing debt \r\ntransparency remains another burden (Section 15.6.7)."


id: 284655c7f4443ded9c35c8fcebb1fd4e
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"Ensuring efficient debt restructuring and debt relief in events of \r\nextreme shocks and imminent over-indebtedness and sovereign \r\ndebt default are further crucial elements with a joint responsibility of \r\ndebtors and creditors (UN 2015a). In this context, the Commonwealth \r\nSecretariat flagged that the diversification of the lender portfolio \r\nmade debt restructuring more difficult with more and more \r\nheterogeneous stakeholders being involved (Mitchell 2015) and the \r\nUN AAAA raising concerns about non-cooperative creditors and \r\ndisruption of timely completion of debt restructuring (UN 2015a). \r\nThis is a side effect of a stronger use of capital markets, which needs \r\nto be carefully considered in the context of sovereign bond issuances \r\n(Section 15.6.7)."


id: cccfe0e133524e230d7509803cc8e7cc
created_at: 2023-03-16 14:01:50
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content:
"Recent phase-out deals tend to aim for (partial or full) compensation \r\nrather than no relief for losses. In contrast to the line of argument in \r\nthe tobacco industry, the backward-looking approach and a resulting \r\nobligation of compensation by investors in polluting assets can be \r\nobserved rarely with the forward-looking approach of compensations \r\nby future winners for current losers dominating - despite the high \r\nlevel of awareness about carbon externalities and resulting climate \r\nchange impacts among polluters for many years (van der Ploeg and "


id: 3ee4c1a7d0d3174b9939e8b80d7eb0eb
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"Cyclone Idai, had devastating economic impacts for Mozambique, \r\nZimbabwe and Malawi (WMO 2019). According to Munich Re, loss \r\nfrom about 100 significant events in 2018 for Africa are estimated at \r\nUSD1.4 billion (Munich Re 2019)."


id: d98e80df21663371bcf05cd731126804
created_at: 2023-03-16 14:01:50
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content:
"Rezai 2020). In particular, transactions in the energy sector show \r\na high level of investor protection also against much needed climate \r\naction which is also well illustrated by the share of claims settled \r\nin favour of foreign investors under the Energy Charter Treaty and \r\ninvestor-state dispute settlement (Bos and Gupta 2019)."


id: 21a7d0322572f17b57911bf5e78c1f89
created_at: 2023-03-16 14:01:50
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content:
"Late government action can delay action and consequently strengthen \r\nthe magnitude of action needed at a  later point in time with \r\nimplications for employment and economic development in impacted \r\nregions requiring higher level of fiscal burden (high confidence). This \r\nhas also been considered in the context of global climate cooperation \r\nwith prolonged support for polluting infrastructure resulting in heavy \r\nlock-in effects and higher economic costs in the long run (Bos and \r\nGupta 2019). Despite a  significant share of fossil resources which \r\nneed to become stranded in developing countries to reach the \r\nLTGG, REDD+ remains a singular example for international financial \r\ncooperation in the context of compensation for stranded resources."


id: 8875db66f76e7e9725be1bc2373ee085
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"actors in the G20 countries. No G20 members are yet party to any \r\nclimate risk pooling initiative (Kreft and Schafer 2017). However, \r\ninternational bilateral donors such as the USAID and the UK \r\nForeign, Commonwealth and Development Office (FCDO, formerly \r\nDFID), and the multilateral development banks are all, to different \r\nextent, supporters of the various climate risk pooling initiatives now \r\noperational in developing countries."


id: d10152f57cbec14d16c8a1b23b91fa13
created_at: 2023-03-16 14:01:50
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content:
"Increasingly, climate risk insurance schemes are being blended \r\ninto disaster risk management as part of a  comprehensive risk \r\nmanagement approach (high confidence). The best-known example \r\nis the Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC \r\n2018), which involves cooperation among Caribbean states, Japan, \r\nCanada, UK and France and international organisations such as \r\nthe World Bank (UNESCAP 2017). But there are growing platforms \r\nof such an approach mainly under the umbrella of the G7's \r\nInsuResilience Initative (Deutsche Klimafinanzierung 2020), including, \r\nthe Pacific Catastrophe Risk Assessment and Financing Initiative for "


id: 75ab70f82b0cc1c285013e6875e654d0
created_at: 2023-03-16 14:01:50
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content:
"Other gaps and challenges flagged by Kreft and Schafer (2017) \r\ninclude limited coverage of the full spectrum of contingency risks \r\nexperienced by countries, inadequate role of risk management as \r\na standard for all regional pools, though there are some emerging \r\nbest practices in terms of data provision on weather-related risks, \r\nand incentivisation of risk reduction (high confidence). Here, they \r\nrecognise the work of Africa Risk Capacity for not only providing the \r\ninfrastructure to trigger disbursement but for also promoting national \r\nrisk analysis. Another important gap in the landscape of climate risk \r\npooling is lack of attention to financial institutions' lending portfolios \r\nthat are vulnerable to weather shocks. In this regard subsidies as part \r\nof innovative financing schemes facilitated by the donor community \r\ncan encourage the uptake of meso-level climate risk insurance \r\nsolutions (Kreft and Schafer 2017)."


id: 643dfe22ef80ff8940ff14df5c9101e9
created_at: 2023-03-16 14:01:50
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"There is an urgency and demand to meet the financial needs of the \r\nclimate change actions not only at the national level but also at \r\nthe  subnational level, to achieve low-carbon and climate-resilient \r\ncities and communities (high confidence) (Barnard 2015; Moro \r\net al. 2018). Scaling up subnational climate finance and investment \r\nis a necessary condition to achieve climate change mitigation and \r\nadaptation action (Ahmad et al. 2019)."


id: c50bc8562a41640c6205932b2ca7be69
created_at: 2023-03-16 14:01:50
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content:
"In the literature, there are two attempts at systematic evaluation \r\nor comprehensive assessment of regional climate risk pools: \r\na  comprehensive study by Scherer (2017) and FCDO's ten-year \r\nevaluation (2015-2024). Overall, neither of these studies draw \r\nadverse conclusions about regional climate risk pooling initiatives/\r\nmechanisms. According to Scherer, 'it appears that insurances work \r\nin principle and there is certainly success' and 'initial experiences \r\ndemonstrate regional climate risk insurances works'. The author \r\ncited the 28 pay-outs to 16 countries of USD106 million arguing that \r\nit provides cash-starved countries with much needed cash (Scherer \r\n2017, p. 4). The FCDO study (Scott 2017) examines the uptake of "


id: 417122ef6864b78206a2883c7d1b4fc8
created_at: 2023-03-16 14:01:50
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content:
"The importance of exploring effective subnational climate \r\nfinance. Stronger subnational climate action is indispensable to \r\nadapt cities to build more sustainable, climate-positive communities \r\n(Kuramochi et  al. 2020). It has transformative potential as a  key \r\nenabler of inclusive urban economic development through the \r\nbuilding of resilient communities (high confidence) (Floater et  al. \r\n2017a; Colenbrander et  al. 2018b; Ahmad et  al. 2019). Yet the \r\nsignificant potential of subnational climate finance mechanisms \r\nremains unfulfilled. Policy frameworks, governance, and choices at "


id: e830e0e08661080f9ee0cb3efe860cd3
created_at: 2023-03-16 14:01:50
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content:
"along with regulation and standards on negative externalities, such \r\nas pollution, to steer investment towards climate financing (World \r\nBank Group 2019)."


id: b51575441f843881343177567d691fa3
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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content:
"higher levels underpin subnational climate investments (Colenbrander \r\net al. 2018b; Hadfield and Cook 2019). To scale climate investment, \r\na systematicunderstanding of the preconditions to mobilising high\u0002potential financing instruments at the national and subnational \r\nlevels is necessary."


id: a4a00b1c515dc7f3d78512ef165a904c
created_at: 2023-03-16 14:01:50
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content:
"Debt financing via subnational bonds and borrowing, including \r\nmunicipal bonds, is another potential tool for raising upfront capital, \r\nespecially for rich cities (high confidence). The share of subnational, \r\nsub-sovereign, and sovereign bonds could grow over time, given \r\nefforts to expand the creditworthiness and ensure a  sufficient \r\nsupply of own-source revenue to reduce the default risk. As of now, \r\nsubnational and sub-sovereign bonds are constrained by public \r\nfinance limits and the fiscal capacities of governments. However, \r\nwhile green bonds have potential for growth at the subnational level \r\nand may result in a lower cost of capital in some cases, the market \r\nfaces challenges related to scaling up and has been associated with \r\nlimited measurable environmental impact to date (Section 15.6.8). \r\nFurther, bonds with lower credit ratings drive higher issuance costs \r\nfor climate risk cities, for example, costs related to disclosure and \r\nreporting (Painter 2020)."


id: eeb07867cfa4173ae8a1f985b4889cd0
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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content:
"Subnational climate finance needs and flows. Subnational \r\nclimate finance covers financing mechanisms reaching or utilising \r\nsubnational actors to develop climate positive investment in urban \r\nareas. The fragility of interconnected national and subnational \r\nfinances affects subnational finance flows, including the impact \r\nof the social-economic crisis (Canuto and Liu 2010; Ahrend et  al. \r\n2013). The effect of deficit in investment for global infrastructure \r\ntowards the growing subnational-level debt also creates pressure on \r\nsubnational finances and constrains future access to financing (high \r\nconfidence) (Smoke 2019)."


id: b0acc0cdc1034f6eb639659fd9876042
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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index: climate_gpt_only_giec
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content:
"The International Finance Corporation estimates a  cumulative \r\nclimate investment opportunity of USD29.4 trillion across six urban \r\nsectors (waste, renewable energy, public transportation, water, EVs, \r\nand green buildings) in emerging market cities, cities in developing \r\ncountries with more than 500,000 population, to 2030 (IFC 2018). \r\nHowever, the State of Cities Climate Finance report estimated that \r\nan average of USD384 billion was invested in urban climate finance \r\nannually in 2017-2018 (Negreiros et  al. 2021). The International \r\nInstitute for Environment and Development estimates that out of the \r\nUSD17.4 billion total investments in climate finance, less than 10% \r\n(USD1.5 billion) was approved for locally-focused climate change \r\nprojects between 2003 and 2016 (Soanes et al. 2017)."


id: abc9a986e737486b829d6833bb95fbd0
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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content:
"Key challenges of subnational climate finance. Across all types \r\nof cities, five key challenges constrain the flow of subnational climate \r\nfinance (high confidence): (i) difficulties in mobilising and scaling\u0002up private financing (Granoff et  al. 2016); (ii) deficient existing \r\narchitecture in providing investment on the scale and with the \r\ncharacteristics needed (Anguelovski and Carmin 2011; Brugmann \r\n2012); (iii) political-economic uncertainties, primarily related to \r\ninnovation and lock-in barriers that increase investment risks (Unruh \r\n2002; Cook and Chu 2018; White and Wahba 2019); (iv) the deficit in \r\ninvestment for global infrastructure affects the growing subnational\u0002level debt (Canuto and Liu 2010); and (v) insufficient positive value \r\ncapture (Foxon et al. 2015)."


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"Subnational climate public and private finance. Urban climate \r\nfinance and investment are prominent in the subnational \r\nclimate  finance landscape (CCFLA 2015; Buchner et  al. 2019). \r\nFinance mechanisms that can support climate investment for the \r\nurban sector include public-private partnerships (PPPs); international \r\nfinance; national investment vehicles; pricing, regulation, standards; \r\nland value capture; debt finance; and fiscal decentralisation (Granoff \r\net al. 2016; Floater et al. 2017b; Gorelick 2018; White and Wahba \r\n2019). Among these mechanisms, PPPs, debt finance, and land value \r\ncapture have the potential to mobilise private finance (Ahmad et al. \r\n2019). Better standardisation in processes is needed, including those \r\nbearing on contracts and regulatory arrangement, to reflect local \r\nspecificities (Bayliss and Van Waeyenberge 2018) (Section 15.6.1.1)."


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"PPPs are particularly important in cities with mature financial systems \r\nas the effectiveness of PPPs depends on appropriate investment \r\narchitecture at scale and government capacity (high confidence). Such \r\ncities can enable infrastructure such as renewable energy production \r\nand distribution, water networks, and building developments to \r\ngenerate consumer revenue streams that incentivise private investors \r\nto purchase equity as a long-term investment (Floater et al. 2017b)."


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created_at: 2023-03-16 14:01:50
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"National-level investment vehicles can provide leadership for \r\nsubnational climate financing and crowd in private finance by \r\nproviding early-stage market support to technologies or evidence \r\nrelated to asset performance and costs-benefits (high confidence). \r\nThe use of carbon pricing is increasing at the subnational level "


id: 6673f5e436e8175a89b6cb70aa0da8dc
created_at: 2023-03-16 14:01:50
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"The depth and character of the local capital market also affect \r\ncities differently in generating bonds (high confidence). Challenges "


id: 30cf51b5239931ab16780e579f18cae8
created_at: 2023-03-16 14:01:50
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"facing cities in developing countries include insufficient appropriate \r\ninstitutional arrangements, the issues of minimum size, and high \r\ntransaction costs associated with green bonds (Banga 2019). \r\nGreen projects and project pipelines are generally smaller in scale \r\nfeasible for a bond market transaction (Saha and D'Almeida 2017; \r\nDFID 2020). De-risking in the different phases of long-term project \r\nfinancing can be promoted to improve the appetite of capital markets \r\n(Section in 15.6.7)."


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"are not necessarily 'new' in terms of financial design but are \r\npackaged or labelled in an innovative way to attract responsible and \r\nimpact-oriented institutional investors."


id: 540460d5892d46110ea75c1d09dc0660
created_at: 2023-03-16 14:01:50
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"The growth and diversity of the green bond market illustrates how \r\ninnovative financial products can attract both public and private \r\ninvestors (high confidence). Demand for green financial products \r\ninitially stemmed from public sector pension funds. Pension funds and \r\ninsurance companies in OECD countries have traditionally favoured \r\nbonds as an asset class with lower risk (OECD and Bloomberg 2015)."


id: e2bc11ef0070d2a1e30663fd6496103d
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"Since AR5, labelled green bonds have grown significantly, exceeding \r\nUSD290 billion issued in 2020 with a  total of USD1.1 trillion in \r\noutstanding bonds (CBI 2021a) (Section 15.6.7). Corporates, financial \r\ninstitutions and government-backed entities (for example in real \r\nestate, retail, manufacturing, energy utilities) issued the largest \r\nvolumes, with use of proceeds focused primarily on GHG mitigation \r\nin energy, buildings and transport projects (CBI 2021a). Given \r\ntheir focus on GHG mitigation, green bonds are also sometimes \r\nreferred to as climate bonds, but the common market terminology \r\nis 'green'. Municipal green bond issuance has also been growing \r\n(Section  15.6.7). Beyond green bonds, additional products such as \r\ngreen loans, green commercial paper, green initial public offerings \r\n(IPOs), green commodities, and sustainability-linked bonds and loans \r\nhave also been introduced in the market (CBI 2019a) (Section 15.6.7)."


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"Investor demand for green bonds is evidenced by over-subscription \r\nof deals. Recent studies indicate an over-subscription for green\u0002labelled bonds by an average of between three and five times, as \r\ncompared to non-labelled bonds (Gore and Berrospi 2019; Nauman \r\n2020). Results of a  survey of global treasurers showed a  higher \r\ndemand for green bonds than non-labelled bonds for 70% of the \r\nrespondents (CBI 2020a)."


id: bcadb616012598d9225dcd41a84602a5
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content:
"Implications for the transformation pathway. Cities often have \r\ncapacity constraints on planning and preparing capital investment \r\nplans. Integrated urban capital investment planning is an option \r\nto develop cross-sectoral solutions that reduce investment needs, \r\nboost coordination capacity, and increase climate-smart impacts \r\n(high confidence) (Negreiros et  al. 2021). In countries with weak \r\nand poorly functioning intergovernmental systems, alliances and \r\nnetworks may influence their organisational ability to translate \r\nadaptive capacity for transformation into actions (Leck and Roberts \r\n2015; Colenbrander et  al. 2018a). Deepening understanding of \r\ncountry-specific enabling environment for mobilising urban climate \r\nfinance among and within cities and communities, design of policy, \r\ninstitutional practices and intergovernmental systems are needed to \r\nreduce negative implications of transformation (Steele et al. 2015)."


id: 285f297254a580a4a62a7abceb110c92
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"The financial crisis associated with COVID-19 has put increased \r\npressure on debt issuers, and the extent to which the increase in \r\nindebtedness for sovereigns and corporates has been financed via \r\nclimate-related-labelled debt products is not known. Further, at this \r\ntime there is no identified literature assessing the degree to which \r\ninternational versus domestic investors are financing sovereign \r\ngreen debt in developing countries (Section 15.6.7) However, since \r\nthe onset of the COVID-19 crisis, continued steady growth in issuance \r\nhas been observed broadly across sustainable bonds (including \r\ngreen, social and sustainability bonds), with more significant growth \r\nin social bonds to support the COVID-19 recovery (Maltais and \r\nNykvist 2020; CBI 2021a)."


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"Innovative financial products with increased transparency on \r\nclimate risk have attracted investor demand, and can facilitate \r\ninvestor identification of low-carbon investments (high confidence). \r\nInnovative products may not necessarily increase financial flows \r\nfor climate solutions in the near term, however they can help build \r\ncapacity on climate risk and opportunities within institutions and \r\ncompanies to pave the way for increased flows over time."


id: a1cd2a1e00c9021bdbbf16ba87419beb
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"Index providers and exchanges can also play a  supporting role in \r\ntransparency for identification of benchmarks and innovative financial \r\nproducts for climate action. Low-carbon indices have proliferated in \r\nrecent years, with varying approaches including reduced exposure \r\nto fossil, best-in-class performers within a sector, and fossil-free (UN \r\nPRI 2018) (see discussion on ESG index performance that follows \r\nin this section). Indices can provide transparency on low-carbon \r\nopportunities, making it simpler for funds and investors to identify \r\ngreen investment options. Exchanges can also play a  supporting \r\nrole to the uptake of green financial products through transparent "


id: a1f4244fcdbfab8ad01a449d0a8f1b4f
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"Investor demand is driving developments in innovative \r\nfinancial products (high confidence). Since AR5, innovative \r\nfinancial products such as sustainability and green-labelled financial \r\nproducts have proliferated (Section 15.3). These financial products "


id: c93d0fea84b3c4d0d526b03ae4cb8e8d
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"for example with respect to transition activities (Pfaff et  al. 2021) \r\n(Section 15.6.7). While standardisation can help reduce uncertainty \r\nin markets with imperfect knowledge, the green bond market is \r\ncurrently developing and is expected to continue to reflect regional \r\ndifferences in economic governance approaches (Nedopil et al. 2021). \r\nRegulations may also have trade-offs in terms of transaction costs for \r\ngreen financial product issuers. Classification approaches can also \r\nface challenges, depending on how they are designed, in their ability \r\nto capture new technologies and social impacts (Section 15.4)."


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"listings and requirements to improve credibility of green labelling. \r\nThe number of green or sustainability bond listing segments tripled \r\nfrom five in 2016 to 15 in 2018 (SSE 2018). Green security listings \r\ncan also be used to enhance local capital markets (Section 15.6.7)."


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"Significant potential exists for continued growth in innovative \r\nfinancial products, though some challenges remain (high \r\nconfidence). Despite recent growth and diversification, green bonds \r\nface several challenges in scaling up. Issuance of green-labelled \r\nbonds constitutes approximately 1% of the global bond market \r\nissuance (ICMA 2020b; CBI 2021a) Potential exists to increase \r\nissuance amongst corporates, for instance, and across a  broader \r\nregional scope (although subject to limitations of local capital \r\nmarkets). Yet there remain several challenges to growing the green \r\nbond market, including inter alia concerns about greenwashing and \r\nlimitations in application to developing countries (Shishlov et  al. \r\n2018; Banga 2019)."


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"Green bonds have been primarily targeting climate mitigation projects, \r\nwith far fewer projects identified as adaptation. Green bonds mainly \r\nfinance projects in the energy, buildings and transportation sectors, \r\nwhich constituted 85% of the use of proceeds of green bonds in \r\n2020 (CBI 2020b, 2021a). Agriculture and forestry projects, including \r\nadaptation projects, have been less suited to be financed in a bond \r\nstructure, which could be in part due to the more dispersed and \r\nsmaller nature of the projects and in part due to project 'bankability' \r\nor ability to contribute steady streams of financing to pay back the \r\nterms of a bond. However, adaptation projects may not be identified \r\nas such as resiliency becomes more mainstreamed into infrastructure \r\nplanning (Section 15.3.2)."


id: 157755c1cfa26c0cb5534391ceb4fda5
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"There is no globally accepted definition of green bonds, and varied \r\ndefinitions of eligible green activities are evolving across regional \r\nbond markets. Beyond the most commonly used green label, other \r\nrelated labels such as blue, sustainable, transition, sustainable \r\ndevelopment goal (SDG), social and environmental, social and \r\ngovernance (ESG) have some overlapping applications (Schumacher \r\n2020). The degree to which these labels represent climate-relevant \r\ninvestments depends on underlying criteria and how they are applied \r\n(Section 15.6.4)."


id: 7f350a487ad67ffc23ec98e729734729
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"While green bonds have the potential to further support financial \r\nflows to developing countries, local capital markets can be at varying \r\nstages of development (Banga 2019) (Sections 15.6.2 and 15.6.7). \r\nWhile multilateral and bilateral development finance institutions \r\nhave been active in the green bond market, global issuance in \r\n2020 in the top 10 countries included only one developing country \r\n(CBI 2021a). Targeting international investors can be enhanced via \r\nde-risking activities (15.6.4)."


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"Identifying green financial products can increase uptake and \r\nmay result in a lower cost of capital in certain parts of the \r\nmarket (high confidence). Investors face a systematic underpricing \r\nof climate risk in financial markets (Krogstrup and Oman 2019; \r\nKumar et al. 2019). Transparent identification of financial products \r\ncan make it easier for investors to include low-carbon products in \r\ntheir portfolios. Investors with mandates that include or are focused \r\non climate change are showing an interest in green-labelled financial \r\nproducts. Investors that identify themselves as green constitute \r\napproximately 53% of the investor base for green bonds in the first \r\nhalf of 2019 (CBI 2019b)."


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"There is some evidence of a  premium, or an acceptance of lower \r\nyields by the investor, for green bonds (medium confidence). A survey \r\nof recent literature finds some consensus of the existence of a green \r\npremium in 56% of the studies on the primary markets (with \r\na  wide variance of premium amount), and 70% of the studies on \r\nthe secondary market (with an average premium of -1 to -9 basis \r\npoints), particularly for government issued, investment grade and \r\ngreen bonds that follow defined governance and reporting practices \r\n(MacAskill et al. 2021). In the US municipal bond market, as credit \r\nquality for green-labelled bonds has increased in the past few years, \r\nsome studies show a  positive premium for green bonds is arising \r\n(Baker et  al. 2018; Karpf and Mandel 2018), or appearing only in \r\nthe secondary market (Partridge and Medda 2020), while others "


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"Financial disclosure regulatory developments can help further \r\nalign and specify definitions of green in the financial sector but are \r\nnot a  substitute for climate policy (high confidence). Developing \r\na common basis for understanding a green label could further reduce \r\nuncertainty or concerns of greenwashing. Regulatory developments in \r\nsome regions seek to further guard against greenwashing with more \r\nspecific definitions. The EU sustainable finance package, including \r\nthe EU Taxonomy and EU Green Bond Standard draft regulations, is \r\nthe broadest reaching, but not the only, regional initiative focused on \r\ndisclosure of climate risk (Section 15.6.3). Taxonomies across regions \r\nare not always aligned on what can constitute a  green project, "


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content:
"find no evidence of a premium (Hyun et al. 2019; Larcker and Watts \r\n2020). Several studies also show a recent emergence of a premium \r\nand oversubscription for some green-labelled bonds denominated in \r\nEUR (CBI 2019b), in some cases for both USD or EUR green bonds \r\n(Ehlers and Packer 2017), with a wide variation in the range of the \r\nobserved difference in basis points focusing on the secondary market \r\n(Gianfrate and Peri 2019; Nanayakkara and Colombage 2019; Zerbib \r\n2019), with financial institution and corporate green bonds exhibiting \r\na  marginal premium compared with their non-green comparisons \r\n(Hachenberg and Schiereck 2018; Kempa et al. 2021)."


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"Spillover effects of green bonds may also impact equity markets and \r\nother financing conditions. Stock prices have been shown to positively \r\nrespond to green bond issuance (Tang and Zhang 2020). One study \r\nlinked enhanced credit quality induced by issuing green-labelled \r\nbonds to a lower cost of capital for corporate issuers (Agliardi and \r\nAgliardi 2019). Issuers' reputation and use of third-party verification \r\ncan also improve financing conditions for green bonds (Bachelet \r\net al. 2019). Green bonds are strongly dependent on fixed income \r\nmarket movements and are impacted by significant price spillover \r\nfrom the corporate and treasury bond markets (Reboredo 2018). \r\nA simulation of future green sovereign bond issuances shows that \r\nthis can promote green finance via firm's expectations and the credit \r\nmarket (Monasterolo and Raberto 2018)."


id: 5ecb6c2e79666852b0a9e8d14852cb05
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"Green-labelled products may not necessarily result in increased \r\nfinancial flows to climate projects, although there can be benefits \r\nfrom capacity building with issuing institutions. Green bonds \r\ncan be used  to finance new climate projects or refinance existing \r\nclimate  projects, and thus do not necessarily result in finance \r\nfor new  climate projects constituting additional GHG reductions \r\n(a framing used in the Clean Development Mechanism). The labelling \r\nprocess itself may not necessarily lead to additional financing (Dupre \r\net al. 2018; Nicol et al. 2018b). However, the labelling process has \r\nmerit in contributing to building capacity within issuing institutions \r\non climate change (Schneeweiss 2019), which could support \r\nidentification of new green projects in the pipeline."


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"Financial flows via these instruments have limited measurable \r\nenvironmental impact to date, however they can support \r\ncapacity building on climate risk and opportunities within \r\ninstitutions to realise future impacts (high confidence). There \r\nis a  lack of evidence to date that green and sustainable financial \r\nproducts have significant impacts in terms of climate change \r\nmitigation and adaptation Box 15.7). Further, new products must be \r\ncoupled with tightened climate policy and a reduction in investments \r\nassociated with GHG-emitting activities to make a difference on the \r\nclimate (Section 15.3.3.2)."


id: 6ea92b76baadcef272f3698e7d1f5aa7
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"Climate risk disclosure initiatives, some of which are voluntary in nature, \r\nmay have a limited direct climate impact. Transparency on climate risk \r\nmay not change investor decisions nor result in divestment, especially \r\nin the emerging economies, as support and clear direction from \r\nregulatory and policy mechanisms are required to drive institutional \r\ninvestors at large (Ameli et  al. 2021b). On the other hand, there is \r\nevidence of reduced fossil fuel investments following mandatory \r\nclimate risk disclosure requirements, indicating a  broader signalling \r\neffect of transparency (Mesonnier and Nguyen 2021)."


id: b751fcd2ff9f01a30574bd324b831e7a
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"It is challenging to link specific emission reductions with specific \r\ninstruments that mainly target climate activities such as green bonds. "


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"On the other hand, there is growing evidence for a sustainable investment lens having a broader positive impact on creating an \r\nenabling environment and strengthening the case for such investments. For instance, corporate social responsibility (CSR) activities \r\nand investments on the environment dimension, specifically in the areas of emission and resource reduction, were found to be \r\nprofitable and a predictor of future abnormal returns in the longer term, from additional cash flow and additional demand (Dorfleitner \r\net al. 2018). These factors could be contributing to the increasing trend of sustainable and green investments, and can be said to be \r\nfurther reiterated by the spate of investor-led collaborative initiatives and recent announcements by leading finance institutes in the \r\ndeveloped economies, which is well recorded in a range of recent grey literature, including new climate-aligned investment strategies \r\nand ambition towards net zero targets."


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"Yet there is also a risk of companies announcing projected sustainability or net zero targets and claiming the associated positive \r\nreputational impact, while having no clear action plan in place to achieve these. The lack of mandatory reporting frameworks, which \r\nresults in an over-reliance on self-reported carbon data by companies for ESG assessments, can be a primary contributor (In and \r\nSchumacher 2021)."


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"Challenges remain with regards to overlapping definitions of sustainable and ESG investment opportunities, which also vary \r\ndepending on social norms and pathways. There is also a general need for more extensive ESG disclosure at a corporate level, against \r\nthe background of emerging mandatory impact reporting for asset managers in some regions. A  movement is building towards \r\nsustainable investment strategies and increased sustainable development awareness in the financial sector (Muhmad and Muhamad \r\n2020; Maiti 2021), which points to the ability of civil society movements, such as divestment campaigns, to have some influence on \r\ninvestor behaviour, although there are other influences such as climate risk disclosure initiatives and regulations."


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"De-risking tools to lower capital costs and mobilise diverse \r\ninvestors. Paris-aligned NDCs that integrate policies on COVID-19 \r\npandemic recovery, climate action, sustainable development, just \r\ntransition and equity can harness co-benefits including contribution \r\nto Invisible UN SDG 7  energy poverty sectors (high confidence).\r\nDeveloping countries require access to affordable finance for projects \r\nranging from clean cooking solutions (Accenture 2018; World Bank \r\net  al. 2021); decentralised energy systems, intra-country power \r\nstations and regionally shared power pools with their associated \r\nenergy distribution networks (IEA 2020d; IRENA 2020c). Close \r\nto 3 billion people in Africa and developing Asia have no access to \r\nclean cooking. For sub-Saharan Africa, the acute lack of electricity \r\naccess lags behind all regions on SDG 7 indicators, impacting mostly "


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"Options to mobilise institutional investors currently remain small \r\npilots, relative to Paris and SDG ambitions (high confidence). In terms "


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"Combining approaches: (i) developed countries meeting \r\nUNFCCC USD100 billion commitment on a  grant-equivalent \r\nbasis, (ii) stepped up technical assistance, (iii) infrastructure \r\ncoordination, (iv) knowledge sharing by project preparation \r\nentities, and (iv) harnessing project risk facilities such as \r\nguarantees could be instrumental for scaling climate finance \r\nfor Paris-SDGs (high confidence). Figure 15.7 illustrates the interplay \r\nbetween infrastructure project financing phases, bond refinancing \r\nand opportunities for developing bond yield curve benchmarks in \r\nnurturing local capital markets and mobilising diverse investors. \r\nThese project financing phases have varying risk-return profiles \r\nand different benchmarks to track performance are often required \r\nby investors for different securities that might be created (Ketterer \r\nand Powell 2018)."


id: 73bdd61b56e6026c3009f6dc63820240
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content:
"An ODI (2018) survey of private and public project preparation facilities \r\ninternationally showed high failure rates in early project preparation \r\nphases with recommendations on 'one-stop-shops' and knowledge \r\nsharing on effective approaches. During the very high-risk concept \r\nphase (Figure  15.7) - grants and technical assistance de-risk with \r\ndesign concepts, project proposals and feasibility studies completed \r\nto 'kick-start' the right projects. The early-stage developmental phase \r\nis characterised by short-term debt in the two to five years phase to "


id: 1b63154580d10ee0320448a120253179
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
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content:
"Technical assistance options would benefit from coordination. \r\nLabelled bond costs remain high. Developing countries \r\nare using fiscal incentives, grants, and guarantees to \r\nsupport nascent bond markets with most taxonomies under \r\ndevelopment (high confidence). Technical assistance requirements \r\nto improve the investment climate and bond market development \r\nwill vary across national capacities. These would benefit from \r\nthe USD100 billion UNFCCC grant equivalent basis to develop \r\n(i) regulatory and policy frameworks; (ii) UN national statistical \r\nsystems (Singh et al. 2016; MacFeely and Barnat 2017; Paris21 2018; \r\nBleeker and Abdulkadri 2020); (iii) credible NDC and SDG investment \r\nplans; (iv) project assessment certification and taxonomies; (v) bond \r\nmarket guidelines; and (vi) public finance management (US DoJ \r\n2009; US DoJ 2019). Other technical assistance channels include \r\ndiaspora entities, universities and learned societies (ICEAW 2012; "


id: e8fa72f634e2e762678d15ba2da0eb23
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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index: climate_gpt_only_giec
vector_id: 34173
content:
"Payment method: Pay-as-you-go (PayGo). PayGo business \r\nmodels emerged to address the energy access challenge and \r\nprovide chiefly solar energy at affordable prices, using mobile \r\ntelecommunication to facilitate payment through instalments; Yadav \r\net al. 2019). However, PayGo has the technology and product risk, \r\nrequires a  financially viable and large customer base, and the \r\nsystem supplier must provide a significant portion of the finance \r\nand requires substantial equity and working capital (C40 Cities \r\nClimate Leadership Group 2018)."


id: 425b8b33b86f89a53e7e9c123c948848
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 7841
content:
"New and innovative business models and financing approaches have \r\nemerged to help overcome barriers related to transactions costs by \r\naggregating and/or transferring financing needs and establishing \r\nsupply of finance for stakeholder groups lacking financial inclusion\r\n(high confidence)."


id: 6b177016458b175c87e877c17f9d50d2
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 14467
content:
"Transport sector business models. Analog to EaaS, mobility as \r\na service (MaaS) offers a business model whereby customers pay for \r\na  mobility service without making any upfront capital investment \r\n(e.g., buying a car). MaaS tends to deliver significant urban benefits \r\n(e.g., cleaner air) and brings in efficiency gains in the use of resources \r\n(high confidence). However, the switch to MaaS hardly improves the \r\ncarbon footprint and further tempted on-demand mobility is likely \r\nto nurture carbon emissions (Suatmadi et  al. 2019). Therefore, to \r\nsupport climate change mitigation, MaaS must be integrated with \r\nthe deployment of smart charging of electric (autonomous) vehicles \r\ncoupled to renewable energy sources (IRENA 2019d; Jones and \r\nLeibowicz 2019)."


id: ffb066d145f4cf2a14092e9a2f94a8ac
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 37771
content:
"Energy as a service (EaaS) is a business model whereby customers \r\npay for an energy service without having to make any upfront capital \r\ninvestment (PwC 2014; Hamwi and Lizarralde 2017; Cleary and \r\nPalmer 2019). EaaS performance-based contracts can also be a form \r\nof 'creative financing; for capital improvement that makes it possible \r\nto fund energy upgrades from cost reductions and deployment \r\nof decentralised renewable energy (KPMG 2015; Moles-Grueso \r\net al. 2021). Innovation in EaaS has started at the household level, \r\nwhere smart meters using real-time data are used to predict peak \r\ndemand levels and optimise electricity dispatch (Chasin et al. 2020; \r\nGovernment of UK 2016; Smart Energy International 2018)."


id: e4eca3d3ea39b6b196ba56137cfe9780
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 33498
content:
"Aggregators. An aggregator is a  grouping of agents in a  power \r\nsystem to act as a  single entity when engaging in power system \r\nmarkets (MIT 2016). Aggregators can use operation optimisation \r\nplatforms to provide real-time operating reserve capacity and \r\na range of balancing services to integrate higher shares of variable \r\nrenewable energy (Zancanella et  al. 2016; Ma et  al. 2017; Enbala \r\n2018; Research and Markets 2017; IRENA 2019b). This makes \r\na  business case for deferred investments in grid infrastructure \r\n(medium confidence). Aggregating and managing demand-response \r\nof heat systems (micro CHP and heat pumps) has shown reduction in \r\npeak demand (TNO 2016)."


id: 79508f75c68cc52578b4d01e23ae2294
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 16652
content:
"Peer-to-peer (P2P) electricity trading. Producers and consumers \r\ncan directly trade electricity with other consumers in an online \r\nmarketplace to avoid the relatively high tariffs and the relatively \r\nlow buy-back rates of traditional utilities (Liu et  al. 2019; IRENA \r\n2020f). P2P models trading with distributed energy resources reduce \r\ntransmission losses and congestion (Mengelkamp et al. 2018; SEDA \r\n2020; Lumenaza 2020; Sonnen 2020; UNFCCC 2020)."


id: 16e7780b20b0e707fda69a9d5999241f
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 1128
content:
"Community ownership models. Community ownership models \r\nrefer to the collective ownership and management of energy-related \r\nassets with lower levels of investment, usually distributed renewable \r\nenergy resources but also recently in heating systems and energy \r\nservices (e.g., storage and charging) (Gall 2018; IRENA 2018; Kelly \r\nand Hanna 2019; Singh et al. 2019; Bisello et al. 2021; Maclurcan and \r\nHinton 2021). Community ownership projects may need significant \r\nupfront investments, and the ability of communities to raise the \r\nrequired financing might prove insufficient, which can be supported \r\nby microcredits in the initial stages of the projects (Aitken 2013; \r\nFederici 2014; REN21 2016; Rescoop 2020)."


id: f3416d5ae2ff7ef209235d619d372474
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 35783
content:
"Nature-based solutions are 'actions to protect, sustainably manage \r\nand restore natural or modified ecosystems that address societal \r\nchallenges effectively and adaptively, simultaneously providing \r\nhuman well-being and biodiversity benefits' (Cohen-Shacham et al. \r\n2016). Nature-based solutions consist of a wide range of measures \r\nincluding ecosystem-based mitigation and adaptation."


id: bb06d2463cc7d571557ac4c5d9582309
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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index: climate_gpt_only_giec
vector_id: 26967
content:
"The studies on investment and finance for nature-based solutions \r\nis still limited. However, frameworks and schemes to incentivise \r\nthe implementation of nature-based solutions, such as reducing \r\nemissions from deforestation and forest degradation and the role of \r\nconservation, sustainable management of forests and enhancement \r\nof forest carbon stocks in developing countries (REDD+), which \r\ncontributes to climate change mitigation, has been actively \r\ndiscussed under the UNFCCC, with lessons from finance for REDD+ \r\nbeing available."


id: 92b8ba977b63861328762511ab593ff2
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 20598
content:
"If effectively implemented, nature-based solutions can be cost\u0002effective measures and able to provide multiple benefits, such as \r\nenhanced climate resilience, enhanced climate change mitigation, \r\nbiodiversity habitat, water filtration, soil health, and amenity values \r\n(high confidence) (Griscom et al. 2017; Keesstra et al. 2018; OECD \r\n2019d; Griscom et al. 2020; Dasgupta 2021)."


id: 7151aa48bbd72e5aca77e2a5abcb4417
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 15466
content:
"Nature-based solutions have large potential to address climate \r\nchange and other sustainable development issues (high confidence). \r\nNature-based solutions are undercapitalised and the limited \r\ninvestment and finance, especially limited private capital, is widely \r\nrecognised as one of the main barriers to the implementation and \r\nmonitoring of the nature-based solutions (Seddon et  al. 2020; \r\nToxopeus and Polzin 2021; UNEP et al. 2021) Finance and investment \r\nmodels that generate their own revenues or consistently save costs \r\nare necessary to reduce dependency on grants (Schafer et al. 2019; \r\nWamsler et al. 2020)."


id: 67d5267feeb53a7925a80cbd4523dc5e
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 13921
content:
"bonds, and insurance), and creating standard metrics, baselines and \r\ncommon characteristics for nature-based solutions to promote the \r\ncreation of a new asset class (Thiele et al. 2021; UNEP et al. 2021)."


id: f5669ad6c82b081168dea8e04e1ce50f
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 36131
content:
"included some gender dimensions'. And, 'gender is not integrated into \r\nthe operations of the Clean Technology Fund (CTF), which finances \r\nlarge-scale mitigation in large economies and accounts for 70% of \r\nthe CIFs' pledged funding portfolio of 8.2 billion USD' (Schalatek \r\n2018). However, both the Forest Investment Program (FIP) and the \r\nScaling-Up Renewable Energy in Low-Income Countries Program \r\n(SREP) have integrated gender equality as either a co-benefit or core \r\ncriteria of these programmes (Schalatek 2018)."


id: 44e0b02fdbef7c26ddfece554cf09c9d
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 8261
content:
"climate strategies that can contribute to the global goals of the Paris \r\nAgreement (Minniti and Naude 2010; Bird et al. 2013; Barrett 2014; \r\nEastin 2018). This is particularly, so in the case of female-owned "


id: 933c4a16de998bb9c7b34b5730b2ee38
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 20676
content:
"MSMEs, who, the literature increasingly shows, are key to promoting \r\nresilience at micro and macro scale in many developing countries \r\n(Omolo et al. 2017; Atela et al. 2018; Crick, F. et al. 2018)."


id: 4ad70e0bd8e54c0a553982ccf832ca0a
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 9191
content:
"There is no agreed definition of climate finance. The term 'climate finance' is applied to the financial resources devoted to addressing \r\nclimate change by all public and private actors from global to local scales, including international financial flows to developing \r\ncountries to assist them in addressing climate change. Total climate finance includes all financial flows whose expected effect aims \r\nto reduce net greenhouse gas (GHG) emissions and/or to enhance resilience to the impacts of current and projected climate change. \r\nThis includes private and public funds, domestic and international flows and expenditures. Tracking of climate finance flows faces \r\nlimitations, in particular for national climate finance flows."


id: c81416e1d0b34813ee3bc14b9642a585
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 29058
content:
"A financing gap is defined as the difference between current flows and average needs to meet the long-term goals of the Paris \r\nAgreement. Gaps are driven by various barriers inside (short-termism, information gaps, home bias, limited visibility of future \r\npipelines) and outside (e.g., missing pricing of externalities, missing regulatory frameworks) of the financial sector. Current mitigation \r\nfinancing flows come in significantly below average needs across all regions and sectors despite the availability of sufficient capital \r\non a global basis. Globally, yearly climate finance flows have to increase by a factor between three and six to meet average annual \r\nneeds between 2020 and 2030."


id: addf6d008884bad7580ac3217ee3d950
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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index: climate_gpt_only_giec
vector_id: 24892
content:
"Gaps are in particular concerning for many developing countries, with COVID-19 exacerbating the macroeconomic outlook and \r\nfiscal space for governments. Also, limited institutional capacity represents a key barrier for many developing countries, burdening \r\nrisk perceptions and access to appropriately priced financing as well as limiting their ability to actively manage the transformation. \r\nExisting fundamental inequities in access to finance, as well as its terms and conditions, and countries' exposure to physical impacts \r\nof climate change, overall result in a worsening outlook for a global just transition."


id: 80974f7615dc56836481088aa4e1b9f0
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 17758
content:
"IEA, 2019a: World Energy Investment 2019. Flagship Report, May 2019. \r\nOECD, Paris, France 176 pp."


id: 1053f0d0d6d144f0f7d2c695d1ea0b62
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 54
content:
"IEA, 2019c: Africa Energy Outlook 2019. 288 pp. https://www.iea.org/reports/\r\nafrica-energy-outlook-2019 (Accessed November 1, 2021).\r\nIEA, 2020a: World Energy Investment 2020. OECD Publishing, Paris, France, \r\n176 pp.\r\nIEA, 2020b: The Oil and Gas Industry in Energy Transitions: Insights from IEA "


id: 4247a814cd9f0edf92cbe81e2d0f4478
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 7828
content:
"Zhang, Y., 2021: Accelerating Access to Clean Cooking Will Require a Heart\u0002Head-and-Hands Approach. Development, 65, 59-62, doi:10.1057/\r\ns41301-021-00297-x."


id: ed2a9d994a5e0802c5de6dcca2424558
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 34789
content:
"en/311561624871430872/pdf/Understanding-Market-Based-Solutions\u0002and-Access-to-Finance-Options-for-Clean-Cooking-Technologies-in\u0002Bangladesh.pdf (Accessed September 21, 2021)."


id: 45ee67ebb59812bae8eef2c15428b443
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 8388
content:
"Lawrence Agbemabiese (Ghana/the United States of America), El Hadji Mbaye Diagne (Senegal), \r\nLaura Diaz Anadon (Spain/United Kingdom), Yun Seng Lim (Malaysia), Walter Alberto Pengue \r\n(Argentina), Ambuj D. Sagar (India), Taishi Sugiyama (Japan), Kenji Tanaka (Japan), Elena Verdolini \r\n(Italy), Jan Witajewski-Baltvilks (Poland)"


id: ecb0f5c54a7fb5ba4baaf505e9ea7f41
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 34711
content:
"Blanco, G., H. de Coninck, L. Agbemabiese, E. H. Mbaye Diagne, L. Diaz Anadon, Y. S. Lim, W.A. Pengue, A.D. Sagar, \r\nT. Sugiyama, K. Tanaka, E. Verdolini, J. Witajewski-Baltvilks, 2022: Innovation, technology development and transfer. \r\nIn IPCC, 2022: Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth \r\nAssessment Report of the Intergovernmental Panel on Climate Change [P.R. Shukla, J. Skea, R. Slade, A. Al Khourdajie, \r\nR. van Diemen, D. McCollum, M. Pathak, S. Some, P. Vyas, R. Fradera, M. Belkacemi, A. Hasija, G. Lisboa, S. Luz, J. Malley, \r\n(eds.)]. Cambridge University Press, Cambridge, UK and New York, NY, USA. doi: 10.1017/9781009157926.018"


id: 72b1645f387df4198f70a3605c762815
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 15662
content:
"Consistent with innovation system approaches, the sharing \r\nof knowledge and experiences between developed and \r\ndeveloping countries can contribute to addressing global \r\nclimate and SDGs. The effectiveness of such international \r\ncooperation arrangements, however, depends on the way \r\nthey are developed and implemented (high confidence). The \r\neffectiveness and sustainable development benefits of technology \r\nsharing under market conditions appear to be determined primarily \r\nby the complexity of technologies, local capabilities and the \r\npolicy regime. This suggests that the development of planning \r\nand innovation capabilities remains necessary, especially in least\u0002developed countries and SIDS. International diffusion of low-emission \r\ntechnologies is also facilitated by knowledge spillovers from regions \r\nengaged in clean R&D (medium confidence). {16.6}"


id: 70df6244a48f79d7d412c1ecda964d94
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 15391
content:
"The evidence on the role of intellectual property rights (IPR) \r\nin innovation is mixed. Some literature suggests that it is \r\na  barrier, while other sources suggest that it is an enabler \r\nto the diffusion of climate-related technologies (medium \r\nconfidence). There is agreement that countries with well-developed \r\ninstitutional capacity may benefit from a strengthened IPR regime, "


id: 7065b3375a12c41c706410b8a5997614
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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index: climate_gpt_only_giec
vector_id: 15301
content:
"A systemic perspective on technological change can provide \r\ninsights to policymakers supporting their selection of effective \r\ninnovation policy instruments (high confidence). A combination \r\nof scaled-up innovation investments with demand-pull interventions \r\ncan achieve faster technology unit cost reductions and more rapid \r\nscale-up than either approach in isolation (high confidence). These "


id: ce4af768411e1d5549abfc0ee2021c8f
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 29982
content:
"of adequate governance in many countries can lead to harsh \r\nworking conditions and unregulated disposal of electronic waste. \r\nDigitalisation also affects firms' competitiveness, the demand for \r\nskills, and the distribution of, and access to, resources. The existing \r\ndigital divide, especially in developing countries, and the lack of \r\nappropriate governance of the digital revolution can hamper the \r\nrole that digitalisation could play in supporting the achievement of \r\nstringent mitigation targets. At present, the understanding of both \r\nthe direct and indirect impacts of digitalisation on energy use, carbon \r\nemissions and potential mitigation, is limited (medium confidence). \r\n{Cross-Chapter Box 11 in this chapter, 16.2}"


id: 635b2373a784654d882c7bcf33270ed4
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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index: climate_gpt_only_giec
vector_id: 13205
content:
"but that countries with limited capabilities might face greater barriers \r\nto innovation as a consequence. This enhances the continued need for \r\ncapacity building. Ideas to improve the alignment of the global IPR \r\nregime and address climate change include specific arrangements for \r\nleast-developed countries, case-by-case decision-making and patent\u0002pooling institutions. {16.2.3.3, 16.5, Box 16.9}"


id: 14b086a017be3d44d66317974bf4fdfa
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 762
content:
"Strategies for climate change mitigation can be most effective \r\nin accelerating transformative change when actions taken to \r\nstrengthen one set of enabling conditions also reinforce and \r\nstrengthen the effectiveness of other enabling conditions \r\n(medium confidence). Applying transition or system dynamics \r\nto decisions can help policymakers take advantage of such high\u0002leverage intervention points, address the specific characteristics of \r\ntechnological stages, and respond to societal dynamics. Inspiration \r\ncan be drawn from the global unit cost reductions of solar PV, which \r\nwere accelerated by a combination of factors interacting in a mutually \r\nreinforcing way across a limited group of countries (high confidence). \r\n{Box 16.4, Cross-Chapter Box 12 in this chapter}"


id: a2da2107c7064f03466bf4ccf5314b67
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 23189
content:
"An area where sustainable development, climate change \r\nmitigation and technological change interact is digitalisation. \r\nDigital technologies can promote large increases in energy \r\nefficiency through coordination and an economic shift to \r\nservices, but they can also greatly increase energy demand \r\nbecause of the energy used in digital devices. System-level \r\nrebound effects may also occur (high confidence). Digital \r\ndevices, including servers, increase pressure on the environment due \r\nto the demand for rare metals and end-of-life disposal. The absence "


id: cce558a1fef9cd8ff565adab35f93a78
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 29776
content:
"Technological change is not exogenous to social and economic \r\nsystems; technologies are not conceived, selected, and applied \r\nautonomously (Grubler et al. 2018). Underlying driving forces of \r\nthe problem, such as more resource-intensive lifestyles and larger \r\npopulations (Hertwich and Peters 2009; UNEP 2014), remain largely \r\nunchallenged. Comprehensive knowledge of the direct and indirect \r\neffects of technological changes on physical and social systems \r\ncould improve decision-making, including in those cases where \r\ntechnological change mitigates environmental impacts."


id: 9fcc88c476066100fbc391e6867f9074
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
content_type: text
index: climate_gpt_only_giec
vector_id: 22681
content:
"Technological change and innovation are considered key drivers of \r\neconomic growth and social progress (Brandao Santana et al. 2015; \r\nHeeks and Stanforth 2015). Increased production and consumption \r\nof goods and services creates economic benefits through higher \r\ndemands for improved technologies (Gossart 2015). Since the \r\nIndustrial Revolution, however, and notwithstanding the benefits, this \r\nproduction and consumption trend and the technological changes \r\nassociated with it have also come at the cost of long-term damage \r\nto the life support systems of our planet (Alarcon and Vos 2015; \r\nSteffen et al. 2015). The significance of such impacts depends on the \r\ntechnology, but also on the intrinsic characteristics of the country or \r\nregion analysed (Brandao Santana et al. 2015)."


id: 6ae3b1ea1f4ba1989dcc69498f16e199
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content:
"A sustainable global future for people and nature requires rapid and \r\ntransformative societal change by integrating technical, governance \r\n(including participation), financial and societal aspects of the solutions \r\nto be implemented (Sachs et al. 2019; Portner et al. 2021). A growing \r\nbody of interdisciplinary research from around the world can inform \r\nimplementation of adaptive solutions that address the benefits and \r\ndrawbacks of linkages in social-ecological complexity, including \r\nexternalities and rebound effects from innovation and technological \r\ntransformation (Balvanera et al. 2017; Portner et al. 2021)."


id: 55d86cdef9638e804603791ab4f0fa1c
created_at: 2023-03-16 14:01:50
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content:
"Other chapters in this volume have discussed technological change in \r\nvarious ways, including as a framing issue (Chapter 1), in the context \r\nof specific sectors (Chapters 6-11), for specific purposes (Chapter 12) \r\nand as a  matter of policy, international cooperation and finance \r\n(Chapters  13-15). Chapter  2  discusses past trends in technological \r\nchange and chapters 3 and 4 discuss it in the context of future modelling. \r\nIn general, implicitly or explicitly, technological change is assigned an \r\nimportant role in climate change mitigation and achieving sustainable \r\ndevelopment (Thacker et al. 2019), as also discussed in past IPCC reports \r\n(IPCC 2014, 2018a). Chapter  16 describes how a  well-established \r\ninnovation system at a national level, guided by well-designed policies, \r\ncan contribute to achieving mitigation and adaptation targets along \r\nwith broader Sustainable Development Goals (SDGs), while avoiding \r\nundesired consequences of technological change."


id: 19d89eb39214c607a1e069a9b58a320b
created_at: 2023-03-16 14:01:50
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content:
"Technological change and transitional knowledge can reinforce \r\neach other. The value of traditional wisdom and its technological \r\npractices provide examples of sustainable and adaptive systems \r\nthat could potentially adapt to and mitigate climate change (Kuoljok \r\n2019; Singh et al. 2020). Peasants and traditional farmers have been \r\nable to respond well to climate changes through their wisdom and \r\ntraditional  practices (Nicholls and Alteri 2013). The integration of \r\nthe traditional wisdom with new technologies can offer new and \r\neffective solutions (Galloway McLean 2010)."


id: a0b2b2046bd13d42ca242c810d5fe8f9
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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content:
"The environmental impacts of social and economic activities, \r\nincluding emissions of greenhouse gases (GHGs), are greatly \r\ninfluenced by the rate and direction of technological changes (Jaffe \r\net al. 2000). Technological changes usually designed and used to \r\nincrease productivity and reduce the use of natural resources can \r\nlead to increased production and consumption of goods and services \r\nthrough different rebound effects that diminish the potential benefits \r\nof reducing the pressure on the environment (Kemp and Soete 1990; \r\nGrubler 1998; Sorrell 2007; Barker et al. 2009; Gossart 2015)."


id: d3fdf78a5dcd6334a2bf7e08fdadb5eb
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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content:
"Achieving climate change mitigation and other SDGs thus also \r\nrequires rapid diffusion of knowledge and technological innovations. \r\nHowever, these are hampered by various barriers, some of which are \r\nillustrated in Table 16.1 (Markard et al. 2020)."


id: d4bc54d6d830980a1fd4cc06d39dafaa
created_at: 2023-03-16 14:01:50
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"The literature has been growing rapidly over the past decades on \r\nhow, in a systemic way, the barriers to sustainability transition can be \r\novercome in various circumstances. A central element is that national \r\nsystems of innovation can help achieve both climate change goals and \r\nSDGs, by integrating new ideas, devices, resources, new and traditional \r\nknowledge, and technological changes for more effective and adaptive \r\nsolutions (Lundvall 1992). At the organisational level, innovation is seen "


id: 5af85f263ec18dfcdc806d2444822bd4
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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content:
"Those environmental impacts depend not only on which technologies \r\nare used, but also on how they are used (Grubler et al. 1999a). "


id: f5aa87ac9e93d31b8555709d03bba7c
created_at: 2023-03-16 14:01:50
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content:
"Section  16.3 discusses innovation as a  systemic process based on \r\nrecent literature. While the innovation process is often stylised as \r\na linear process, innovation is now predominantly seen as a systemic \r\nprocess in that it is a result of actions by, and interactions among, \r\na  large set of actors, whose activities are shaped by, and shape, \r\nthe context in which they operate and the user group with which \r\nthey are engaging."


id: 49c198e6a2367d9afede960a72e05265
created_at: 2023-03-16 14:01:50
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content:
"as a process that can bring value by means of creating more effective \r\nproducts, services, processes, technologies, policies and business \r\nmodels that are applicable to commercial, business, financial and even \r\nsocietal or political organisations (Brooks 1980; Arthur 2009)."


id: a1fbd171cfe9772ce4a34f3a908f1486
created_at: 2023-03-16 14:01:50
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content:
"Section  16.4 presents innovation and technology policy, including \r\ntechnology push (e.g.,  publicly funded R&D) and demand-pull \r\n(e.g.,  governmental procurement programmes) instruments \r\nthat address potential market failures related to innovation and \r\ntechnology diffusion. The section also assesses the cost-effectiveness \r\nof innovation policies as well as other policy assessment criteria \r\nintroduced in Chapter 13."


id: c620d0863029f0255e86cb5738846fd5
created_at: 2023-03-16 14:01:50
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content:
"Section  16.5 assesses the role of international cooperation in \r\ntechnology development and transfer, in particular the mechanisms \r\nestablished under the UN Framework Convention on Climate Change \r\n(UNFCCC), but also other international initiatives for technology \r\ncooperation. The discussion on international cooperation includes \r\ninformation exchange, research, development and demonstration \r\ncooperation, access to financial instruments, intellectual \r\nproperty rights, as well as promotion of domestic capacities and \r\ncapacity building."


id: 7cde9d2fbbbc86c0e8ef592c47f85efd
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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content:
"Section  16.6 describes the role of technology in sustainable \r\ndevelopment, including unintended effects of technological changes, \r\nand synthesises the chapter."


id: 1008f3a539bdc8b5b734a55fff0c554
created_at: 2023-03-16 14:01:50
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content:
"Models of the innovation process, its drivers and incentives \r\nprovide a  tool for technology assessment, constructing projections \r\nof technological change and identifying which macro conditions \r\nfacilitate development of low-carbon technologies. The distinction \r\nbetween stages of the innovation process allows for assessment of \r\ntechnology readiness (Section 16.2.1). Qualitative and quantitative \r\nanalysis of the main elements underpinning innovation  - research \r\nand development (R&D), learning by doing, and spillovers - allows \r\nfor an explanation of past and projected future technological changes \r\n(Section 16.2.2). In addition, general purpose technologies can play \r\na role in climate change mitigation."


id: 77d5ab8d2d6fd6a07bab4014efe55cc0
created_at: 2023-03-16 14:01:50
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content:
"Coupling technological innovation with sustainable development \r\nand the SDGs would need to address overall social, environmental, and \r\neconomic consequences, given that public policy is intertwined with \r\ninnovation, technological changes and other factors in a  complex \r\nmanner. Chapter 16 is organised in the following manner to provide \r\nan overview of innovation and technology development and transfer \r\nfor climate change and sustainable development."


id: 5f0935aa3cfe7421e171ce1cdadf070
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"Section  16.2 discusses drivers of innovation process, including \r\nmacro factors that can redirect technological change towards low\u0002carbon options. Representations of these drivers in mathematical \r\nand statistical models allow for explaining the past and constructing \r\nprojections of future technological change. They also integrate the \r\nanalysis of drivers and consequences of technological change within \r\neconomic-energy-economy (or integrated assessment) models \r\n(Chapter  3). The section also describes the different phases of \r\ninnovation and metrics, such as the widely used but also criticised \r\ntechnology readiness levels (TRLs)."


id: 7ae972f58664a71ec8bb684f4fcf04a4
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"In the context of mitigation pathways, the feasibility of any emission \r\nreduction targets depends on the ability to promote innovation \r\nin low- and zero-carbon technologies, as opposed to any other \r\ntechnology. For this reason, Section 16.2.3 reviews the literature of \r\nthe levers influencing the direction of technological change in favour \r\nof low- and zero-carbon technologies. Moreover, representation of \r\ndrivers in mathematical and statistical models from Section 16.2.2 \r\nallows integration of its analysis with economic and climate effects "


id: e23988f350b9041569ab8e80be226ed9
created_at: 2023-03-16 14:01:50
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content:
"within integrated assessment models (IAMs), hence permitting more \r\nprecise modelling of decarbonisation pathways (Section 16.2.4)."


id: 3d58b01fb143f950f6fce3a4844ecc73
created_at: 2023-03-16 14:01:50
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content:
"(Skea et al. 2019). Successfully passing from each stage to the next \r\none in the innovation cycle requires overcoming 'valleys of deaths' \r\n(Auerswald and Branscomb 2003; UNFCCC 2017), most notably the \r\ndemonstration phase (Frank et al. 1996; Weyant 2011; Nemet et al. \r\n2018). Over time, new and improved technologies are discovered; \r\nthis often makes the dominant technology obsolete, but this is not \r\ndiscussed in this report."


id: 1b0d17c6567369b992e528342f13cb35
created_at: 2023-03-16 14:01:50
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content:
"In addition to technological innovation, other innovation approaches \r\nare relevant in the context of climate mitigation and more broadly \r\nsustainable development (Section  16.6). Frugal innovations, that \r\nis, 'good enough' innovations that fulfil the needs of non-affluent \r\nconsumers mostly in developing countries (Hossain 2018), are \r\ncharacterised by low costs, concentration on core functionalities, and \r\noptimised performance level (Weyrauch and Herstatt 2016) and are \r\nhence often associated with (ecological and social) sustainability \r\n(Albert 2019). Grassroots innovations are products, services \r\nand  processes developed to address specific local challenges and \r\nopportunities, and which can generate novel, bottom-up solutions \r\nresponding to local situations, interests and values. (Pellicer-Sifres \r\net al. 2018; Dana et al. 2021)."


id: 7d40f2db086700740cc535156e0a9da8
created_at: 2023-03-16 14:01:50
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content:
"Table  16.2 summarises the different innovation stages and main \r\nfunding actors, and maps phases into the technology readiness levels \r\n(TRLs) discussed in Section 16.2.1.4."


id: 2b65917e50bcf59ed12e469c647b791a
created_at: 2023-03-16 14:01:50
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content:
"The innovation cycle is commonly thought of as having three \r\ndistinct innovation phases on the path between basic research \r\nand commercial application: Research and development (R&D); \r\ndemonstration; and deployment and diffusion (IPCC 2007). Each \r\nof these phases differs with respect to the kind of activity carried \r\nout, the type of actors involved and their roles, financing needs, and \r\nthe associated risks and uncertainties. All phases involve a process \r\nof trial and error, and failure is common; the share of innovation \r\nthat successfully reaches the deployment phase is small. The path \r\noccurring between basic research and commercialisation is not linear \r\n(Section 16.3); it often requires a long time and is characterised by \r\nsignificant bottlenecks and roadblocks. Furthermore, technologies \r\nmay regress in the innovation cycle, rather than move forward "


id: 979a3d7ec6efd05cc9b4b5875c57ce57
created_at: 2023-03-16 14:01:50
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content:
"to indicate that technologies needs to be co-developed and adapted \r\nto local contexts (Pandey et al. 2021). Innovation cooperation is an \r\nimportant component of stringent mitigation strategies as well as \r\ninternational agreements (Section 16.5)."


id: 1ad8b90af7816ff41338ae1f030f361a
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content:
"of technological innovation are referred to as the 'formative phase', \r\nduring which the conditions are shaped for a technology to emerge \r\nand become established in the market (Wilson and Grubler 2013) and \r\nthe constitutive elements of the innovation system emerging around \r\na  particular technology are set up (Bento and Wilson 2016; Bento \r\net al. 2018) (Section 16.3)."


id: 3d31e9da98b01848d5da1833cc9c7d77
created_at: 2023-03-16 14:01:50
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content:
"Diffusion is often sluggish due to lock-in of dominant technologies \r\n(Liebowitz and Margolis 1995; Unruh 2000; Ivanova et al. 2018), as \r\nwell as the time needed to diffuse information about the technologies, \r\nheterogeneity among adopters, the incentive to wait until costs fall \r\neven further, the presence of behavioural and institutional barriers, \r\nand the uncertainty surrounding mitigation policies and long\u0002term commitments to climate targets (Gillingham and Sweeney \r\n2012; Corey 2014; Jaffe 2015; Haelg et al. 2018). In addition, novel \r\ntechnology has been hindered by the actions of powerful incumbents \r\nwho accrue economic and political advantages over time, as in the \r\ncase of renewable energy generation (Unruh 2002; Supran and \r\nOreskes 2017; Hoppmann et al. 2019)."


id: 48490efcfefa8916c80044478035ad08
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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content:
"Technologies have been shown to penetrate the market with a gradual \r\nnon-linear process in a  characteristic logistic (S-shaped) curve \r\n(Grubler 1996; Rogers 2003). The time needed to reach widespread \r\nadoption varies greatly across technologies relevant for adaptation \r\nand mitigation (Gross et al. 2018); in the case of energy technologies, \r\nthe time needed for technologies to get from a  10-90%  market \r\nshare of saturation ranges between 5 to over 70 years (Wilson 2012). \r\nInvestment in commercialisation of low-emission technology is largely \r\nprovided by private financiers; however, governments play a key role \r\nin ensuring incentives through supportive policies, including R&D \r\nexpenditures providing signals to private investors (Haelg et al. 2018), \r\npricing carbon dioxide emissions, public procurement, technology \r\nstandards, information diffusion and the regulation for end-lifecycle \r\ntreatment of products (Cross and Murray 2018) (Section 16.4)."


id: cd4140035511466dc75ba0a3aaed84c2
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content:
"Deployment entails producing a technology at large scale and scaling \r\nup its adoption and use across individual firms or households in a given \r\nmarket, and across different markets (Jaffe 2015). In the context of \r\nclimate change mitigation and adaptation technologies, the purposeful \r\ndiffusion to developing countries, is referred to as 'technology transfer'. \r\nMost recently, the term 'innovation cooperation' has been proposed "


id: aa0c1ebc27f8806a365b1dee5c434147
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"The purpose of TRLs is to support decision-making. They are applied \r\nto avoid the premature application of technologies, which would lead "


id: 47989e7dbe65c11b9cfcaad4324dea5a
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content:
"to increased costs and project schedule extensions (US Department \r\nof Energy 2011). They are used for risk management, and can also be \r\nused to make decisions regarding technology funding, and to support \r\nthe management of the R&D process within a given organisation or \r\ncountry (De Rose et al. 2017)."


id: 7f7147a722a61be6e6a151baa3ae42ef
created_at: 2023-03-16 14:01:50
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content:
"Learning by doing and R&D are interdependent. Young (1993) \r\npostulates that learning by doing cannot continue forever without \r\nR&D because it is bounded by an upper physical productivity limit of \r\nan existing technology. R&D can shift this limit because it allows for \r\nreplacing the existing technology with a new one. On the other hand, \r\nincentives to invest in R&D depend on the future cost of manufacturing, \r\nwhich in turn depends on the scale of learning by doing. The empirical \r\nevidence for virtuous circle between cost reduction, market growth and \r\nR&D were found in the case of the photovoltaic (PV) market (Watanabe \r\net al. 2000) (Box 16.4), but could also lead to path dependency and \r\nlock-in (Erickson et al. 2015). Sections 16.4.4 and 13.7.3.1 discuss how \r\nsimultaneous use of technology push and pull policies could amplify \r\nthe effects of research and learning."


id: 8c7dece0d288c56584927aacd3756fe5
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"In practice, the usefulness of TRLs is limited by several factors. These \r\ninclude limited applicability in complex technologies or systems, \r\nthe fact that they do not define obsolescence, nor account for \r\nmanufacturability, commercialisation or the readiness of organisations \r\nto implement innovations (European Association of Research \r\nTechnology Organisations 2014) and do not consider any type of \r\ntechnology-system mismatch or the relevance of the products' operation \r\nenvironment to the system under consideration (Mankins 2009). Many \r\nof these limitations can be eased by using TRLs in combination with \r\nother indicators such as system readiness levels and other economic \r\nindicators on, for example, investments and returns (IEA 2020b)."


id: 5b8a0dfd63ba264e9f2404bcc9e51870
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"The speed of technological change could be explained with the \r\nkey drivers of innovations process: R&D effort; learning by doing; \r\nand spillover effects. In addition, new innovations are sometimes \r\nenabled by the development of general purpose technologies, such \r\nas digitalisation."


id: 1126693450cab230cb1a80548325887
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"Learning by doing and R&D efforts are two factors commonly \r\nused by the literature to explain past and projected future speed \r\nof technological change (Klaassen et al. 2005; Mayer et al. 2012; \r\nBettencourt et al. 2013). Learning by doing is the interaction \r\nof workers with new machines or processes that allows more \r\nefficient use (Arrow 1962b). R&D effort is dedicated to looking for \r\nnew solutions (e.g.,  blueprints) that could increase the efficiency \r\nof existing production methods or result in entirely new methods, \r\nproducts or services (Section 16.2.1.1)."


id: 3baeaaffe5e37207080df7856d738cb5
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updated_at: 2023-03-16 14:01:50
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content:
"The failure of markets to deliver the size of R&D investment and \r\nlearning by doing that would be socially optimal is one of the \r\njustifications of government intervention. Policies to address these \r\nmarket failures can be categorised as technology-push and demand\u0002pull policies. The role of these policies is explained in Table 16.3."


id: 579d03e175652cabccd786feed8b566f
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"Table  16.3 |  Categories of policies and interventions accelerating technological changes, the factors promoting them and slowing them down, \r\nillustrated with examples."


id: 4676a156cfc5f52dbce33470549bd242
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"gives an opportunity for others to create new innovations and \r\nincrease the knowledge stock even further. The constant growth of \r\nknowledge stock through spillovers translates into constant growth \r\nof productivity and cost reduction."


id: 6edcab53e737265bb31c73589196a121
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"The size of the learning-by-doing effect is quantified in literature \r\nusing learning rates, that is estimates of negative correlation between \r\ncosts and size of deployment of technologies. The results from this \r\nliterature include estimates for energy technologies (McDonald \r\nand Schrattenholzer 2001), electricity generation technologies \r\n(Rubin et al. 2015; Samadi 2018), for storage (Schmidt 2017), for \r\nend-of-pipe control (Kang et al. 2020) and for energy demand and \r\nenergy supply technologies (Weiss et al. 2010). Meta-analyses find \r\nthat learning rates vary across technologies, within technologies, \r\nand over time (Nemet 2009a; Rubin et al. 2015; Wei et al. 2017). \r\nMoreover, different components of one technology have different \r\nlearning rates (Elshurafa et al. 2018). Central tendencies are around \r\n20% cost reduction for each doubling of deployment (McDonald and \r\nSchrattenholzer 2001)."


id: 84d8f7062cee57e98f86898197a6c8d9
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content:
"Studies of correlation between cumulative deployment of \r\ntechnologies and costs are not sufficiently precise to disentangle \r\nthe causal effect of increase in deployment from the causal effects \r\nof R&D and other factors (Nemet 2006). Numerous subsequent \r\nstudies attempted to, among others issues, separate the effect \r\nof learning by doing and R&D (Klaassen et al. 2005; Mayer et al. \r\n2012; Bettencourt et al. 2013), economies of scale (Arce 2014), and \r\nknowledge spillovers (Nemet 2012). Once those other factors are \r\naccounted for, some empirical studies find that the role of learning \r\nby doing in driving down the costs becomes minor (Nemet 2006; \r\nKavlak et al. 2018). In addition, the relation could reflect reverse \r\ncausality: increase in deployment could be an effect (and not \r\na  cause) of a  drop in price (Nordhaus 2014; Witajewski-Baltvilks \r\net al. 2015). Nevertheless, in some applications, learning curves can \r\nbe a useful proxy and heuristic (Nagy et al. 2013)."


id: bb451a531e02ca029dbab537c51f8e41
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content:
"The spillover effect associated with innovation in carbon-intensive \r\ntechnologies may lead to lock-in of fossil-fuel technologies. \r\nContinuous technological change of carbon-intensive industry raises \r\nthe bar for clean technologies: a larger drop in clean technologies' \r\ncost is necessary to become competitive (Acemoglu et al. 2012; \r\nAghion et al. 2016). The implication is that delaying climate policy \r\nincreases the cost of that policy (Aghion 2019)."


id: 427a6d0f8a120622c8db27d6ff52247d
created_at: 2023-03-16 14:01:50
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"On the other hand, the spillover effect associated with innovation \r\nin low-emission technologies increases the potency of climate policy \r\n(Aghion 2019). For instance, a policy that encourages clean innovation \r\nleads to accumulation of knowledge in clean industry which, through \r\nspillover effects, encourages further innovation in clean industries. \r\nOnce the stock of knowledge is sufficiently large, the value of clean \r\nindustries will be so high that technology firms will invest there, \r\neven without policy incentives. Once this point is reached, the policy \r\nintervention can be discontinued (Acemoglu et al. 2012)."


id: e8ad644a5a7f7d380f47c43b1ce6b21c
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"In addition, the presence of spillovers implies that a  unilateral \r\neffort to reduce emissions in one region could reduce emissions \r\nin other regions (medium confidence) (Golombek and Hoel 2004; \r\nGerlagh and Kuik 2014). For instance, in the presence of spillovers, \r\na carbon tax that incentivises clean technological change increases \r\nthe competitiveness of clean technologies not only locally, but also \r\nabroad. The size of this effect depends on the size of the spillovers. \r\nIf they are sufficiently strong, the reduction of emissions abroad due \r\nto clean technological change could be larger than the increase of \r\nemissions due to carbon leakage (Gerlagh and Kuik 2014). Different \r\ntypes of carbon leakage are discussed in Chapter 13, Section 13.7.1, \r\nand other consequences of spillovers for the design of policy are \r\ndiscussed in Chapter 13, Section 13.7.3."


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"Knowledge spillovers drive continuous technological change (Romer \r\n1990; Rivera-Batiz and Romer 1991) and are for that reason relevant \r\nto climate technologies as well as incumbent, carbon-intensive \r\ntechnologies. Knowledge embedded in innovations by one innovator "


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"digital worlds are converging increases the relevance of disruptive \r\ndigitalisation in the context of climate mitigation and sustainability \r\nchallenges (European Commission 2020) (Cross-Chapter Box  11 in \r\nthis chapter and Chapter 4, Section 4.4.1)."


id: 9881105b2bd561a2dd8aa3e63f140574
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"General-purpose technologies (GPTs) provide solutions that could \r\nbe applied across sectors and industries (Goldfarb 2011) by creating \r\ntechnological platforms for a  growing number of interrelated \r\ninnovations. Examples of GPTs relevant to climate change mitigation \r\nare hydrogen and fuel cell technology, which may find applications \r\nin transport, industry and distributed generation (Hanley et al. 2018), \r\nand nanotechnology which played a significant role in advancement \r\nof all the different types of renewable energy options (Hussein 2015). \r\nAssessing the environmental, social and economic implications of \r\nsuch technologies, including increased emissions through energy \r\nuse, is challenging (Section  5.3.4.1 and Cross-Chapter Box  11 in \r\nthis chapter)."


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"Several GPTs relevant for climate mitigation and adaptation emerged \r\nas a  result of digitalisation, namely the adoption or increase in \r\nthe use of information and communication technologies (ICTs) by \r\ncitizens, organisations, industries or countries, and the associated \r\nrestructuring of several domains of social life and of the economy \r\naround digital technologies and infrastructures (Brennen and \r\nKreiss 2016; IEA 2017b). The digital revolution is underpinned by \r\ninnovation in key technologies, for example, ubiquitous connected \r\nconsumer devices such as mobile phones (Grubler et al. 2018), rapid \r\nexpansions of global internet infrastructure and access (World Bank \r\n2014), and steep cost reductions and performance improvements in \r\ncomputing devices, sensors, and digital communication technologies \r\n(Verma et al. 2020). The increasing pace at which the physical and "


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"Yet, increased digitalisation could increase energy demand, thus \r\nwiping away potential efficiency benefits, unless appropriately \r\ngoverned (IPCC 2018a). Moreover, digital technologies could \r\nnegatively impact labour demand and increase inequality (Cross\u0002Chapter Box 11 in this chapter)."


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"Authors: Felix Creutzig (Germany), Elena Verdolini (Italy), Paolo Bertoldi (Italy), Luisa F. Cabeza (Spain), Maria Josefina Figueroa \r\nMeza (Venezuela/Denmark), Kirsten Halsnaes (Denmark), Joni Jupesta (Indonesia/Japan), Siir Kilkis (Turkey), Michael Konig \r\n(Germany), Eric Masanet (the United States of America), Nikola Milojevic-Dupont (France), Joyashree Roy (India/Thailand), Ayyoob \r\nSharifi (Iran/Japan)"


id: 3893a8a882cf3992627411fdb17731ac
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"Digital technologies impact positively and negatively on GHG emissions through: their own carbon footprint; technology \r\napplication for mitigation; and induced larger social change. Digital technologies also raise broader sustainability \r\nconcerns due to their use of rare materials and associated waste, and their potential negative impact on inequalities \r\nand labour demand."


id: ea24b7c6e243165c83b129b0ab3703fa
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"and smart charging (Cross-Chapter Box 11, Table 1). Data centres can also play a role in energy system management, for example, \r\nby increasing renewable energy generation through predictive control (Dabbagh et al. 2019), and by helping to drive the market for \r\nbattery storage and fuel cells (Riekstin et al. 2014). Temporal and spatial scheduling of electricity demand can provide about 10 GW \r\nin demand response in the European electricity system in 2030 (Wahlroos et al. 2017, 2018; Koronen et al. 2020; Laine et al. 2020)."


id: 66150df0a36b5494660ab5678fec7b38
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"Cross-Chapter Box  11, Table  1  | Selected sector approaches for reducing GHG emissions that are supported by new digital technologies. \r\nContributions of digitalisation include a) supporting role (+), b) necessary role in mix of tools (++), c) necessary unique contribution (+++), but digitalisation may \r\nalso increase emissions (-). (Chapters 5, 8, 9 and 11)."


id: d9c8e2b468289be5e8f13dbe317a907a
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"integrated holistically within policy design (Kunkel and Matthess 2020), but they are difficult to quantify and investigate (Bieser and \r\nHilty 2018). Policies and adequate infrastructures and choice architectures can help manage and contain the negative repercussions \r\nof systemic effects (Sections 5.4, 5.6 and 9.9)."


id: 5daa10164afee897387dccb8e5f80374
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"Closing the digital gap in developing countries and rural communities enables an opportunity for leapfrogging (medium \r\nevidence, medium agreement). Communication technologies (such as mobile phones) enable the participation of rural communities, \r\nespecially in developing countries, and promote technological leapfrogging, for example, decentralised renewable energies and smart \r\nfarming (Ugur and Mitra 2017; Foster and Azmeh 2020; Arfanuzzaman 2021). Digital technologies have sector-specific potentials and \r\nbarriers, and may benefit certain regions/areas/socio-economic groups more than others. For example, integrated mobility services \r\nbenefit cities more than rural and peripheral areas (OECD 2017)."


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"efficiency of the dirty resource relative to the efficiency of other \r\ninputs (Hassler et al. 2012; Andre and Smulders 2014; Witajewski\u0002Baltvilks et al. 2017). For instance, energy efficiency improvement \r\nleads to a drop in relative demand for energy (Hassler et al. 2012; \r\nWitajewski-Baltvilks et al. 2017)."


id: 9767ecb904ff665df5b2f0a1bc15bc1
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"Researchers and policymakers alike are interested in using observed \r\nempirical patterns of learning to project future reductions in costs \r\nof technologies. Studies cutting across a  wide range of industrial \r\nsectors (not just energy) have tried to relate cost reductions to \r\ndifferent functional forms, including cost reductions as a function of \r\ntime (Moore's law) and cost reductions as a  function of production \r\nor deployment (Wright's law, also known as Henderson's law), finding \r\nthat those two forms perform better than alternatives combining \r\ndifferent factors, with costs as a function of production (Wright's law) \r\nperforming marginally better (Nagy et al. 2013). A comparison of expert \r\nelicitation and model-based forecasts of the future cost of technologies \r\nfor the energy transition indicates that model-based forecast medians \r\nwere closer to the average realised values in 2019 (Meng et al. 2021)."


id: ade667b5b507c445fe967a6b271b8fcb
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"Firms change their choice of technology upon change in prices: when \r\none input (e.g.,  energy) becomes relatively expensive, firms pick \r\ntechnologies that allow them to economise on that input, according \r\nto price-induced technological change theory (Reder and Hicks \r\n1965; Samuelson 1965; Sue Wing 2006). For example, an increase \r\nin oil price will lead to a  choice of fuel-saving technologies. Such \r\na response of technological change was evident during the oil-price \r\nshocks in the 1970s (Hassler et al. 2012). Technological change that \r\nis induced by an increase in price of a resource can never lead to \r\nan increase in use of that resource. In other words, rebound effects \r\nassociated with induced technological change can never offset \r\nthe saving effect of that technological change (Antosiewicz and \r\nWitajewski-Baltvilks 2021)."


id: ba299557e34c2417e8edde9d92e54ef5
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"Technological change is characterised not only by its speed, but also \r\nits direction. The early works that considered the role of technology \r\nin economic and productivity growth (Solow 1957; Nelson and Phelps \r\n1966) assumed that technology can move forward along only one \r\ndimension - every improvement led to an increase in efficiency and \r\nincreased demand for all factors of production. This view, however, \r\nignores the potency of technological change to alter the otherwise \r\nfixed relation between economic growth and the use of resources."


id: 66c351d0cd57c80dcc3a39c041161f57
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"The direction of technological change depends also on the market size \r\nfor dirty technologies relative to the size of other markets (Acemoglu \r\net al. 2014). Due to this dependence, climate and trade policy choices \r\nin a single region can alter the direction of technological change at \r\nthe global level (Section 16.2.3.3)."


id: 85cf03611b2f00aa35d8761f8e62fe4c
created_at: 2023-03-16 14:01:50
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"The value of the market for clean technologies is determined not only \r\nby current profit, but also by a  firm's expectation of future profits \r\n(Alkemade and Suurs 2012; Greaker et al. 2018; Aghion 2019). \r\nOne implication is that bolstering the credibility and durability of \r\npolicies related to low-carbon technology is crucial to accelerating \r\ntechnological change and inducing the private sector investment \r\nrequired (Helm et al. 2003), especially in the rapidly growing \r\neconomies of Asia and Africa which are on the brink of making major \r\ndecisions about the type of infrastructure they build as they grow, \r\ndevelop, and industrialise (Nemet et al. 2017)."


id: 535c6b8401d2a050591e59ff0db0463
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"Technological change that saves fossil fuels could decouple economic \r\ngrowth and CO2 emissions (Acemoglu et al. 2012, 2014; Hemous \r\n2016; Greaker et al. 2018). Saving of fossils could be obtained with \r\nincreasing efficiency of producing alternatives to fossils (Acemoglu \r\net al. 2012, 2014). This is the case of oil consumption by combustion \r\nengine cars which could be substituted with electric cars (Aghion \r\net al. 2016). If there is no close substitute for a 'dirty resource', then \r\nits intensity in production could still be reduced by increasing the "


id: 5fd8eb57c53fe8a05b349ac794410786
created_at: 2023-03-16 14:01:50
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"If governments commit to climate policies, firms expect that the future \r\nsize of markets for clean technologies will be large and they are eager \r\nto redirect research effort towards development of these technologies \r\ntoday. The commitment would also incentivise acquiring skills that \r\ncould further reduce the costs of those technologies (Aghion 2019). \r\nHowever, historical evidence shows that policies related to energy \r\nand climate over the long term have tended to change (Taylor 2012; \r\nNemet et al. 2013; Koch et al. 2016). Still, where enhancing policy \r\ndurability has proven infeasible, multiple uncorrelated potentially \r\noverlapping policies can provide sufficient incentives (Nemet 2010)."


id: 387406487f441eb9bffa73747aae4da9
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"The challenges of investing in innovation in energy when compared \r\nto other important areas, such as ICT and medicine are also reflected \r\nin the trends in venture capital funding. Research found that early\u0002stage investments in cleantech companies were more likely to fail \r\nand returned less capital than comparable investments in software \r\nand medical technology (Gaddy et al. 2017). This led to investors \r\nretreating from hardware technologies required for renewable energy \r\ngeneration and storage, and moving to software-based technologies \r\nand demand-side solutions (Bumpus and Comello 2017)."


id: 61477bc3d26339ba94c2c38d7cd83034
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"However, this chain breaks if the regions that are behind the \r\ntechnological frontier (i.e., technological followers) are not able \r\nto absorb the solutions developed by regions at the frontier. New \r\ntechnologies might fail due to deficiencies of political, commercial, \r\nindustrial, and financial institutions, which we list in Table  16.4. \r\nFor instance, countries might not benefit fully from international \r\nknowledge spillovers due to insufficient domestic R&D investment, \r\nsince local knowledge is needed to determine the appropriateness \r\nof technologies for the local market, adapting them, installing and \r\nusing effectively (Gruebler et al. 2012). From the policy perspective, \r\nthis implies that simple transfer of technologies could be insufficient \r\nto guarantee adoption of new technologies (Gruebler et al. 2012)."


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"The preference for particular types of investments in renewable \r\nenergy technologies depends on investors attitude to risk (Mazzucato \r\nand Semieniuk 2018). Some investors invest in only one technology, \r\nothers may spread their investments, or invest predominantly in high\u0002risk technologies. The distribution of different types of investors will \r\naffect whether finance goes to support deployment of new high-risk \r\ntechnologies, or diffusion of more mature, less-risky technologies \r\ncharacterised by incremental innovations. The role of finance in \r\ndirecting investment is further discussed in Chapter 15, Section 15.6.2."


id: d39474b5530ea3d8f0a658db5158c9a
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"Research relying on patent citations has indicated that Foreign \r\nDirect Investment (FDI) is a  mechanism for firms to contribute to \r\nthe recipient country's innovation output as well as benefit from the \r\nrecipient country in industrialised countries (Branstetter 2006) and \r\nin developing countries (Newman et al. 2015). However, insights \r\nspecific for energy or climate change mitigation areas are not \r\navailable, nor is there much information about how other innovation \r\nmetrics may react to FDI."


id: 5536ee5c9dfd86232690f4117ef754bc
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"A unilateral effort to reduce emissions (via a combination of climate, \r\nindustrial and trade policies) in a  coalition of regions that are \r\ntechnology leaders will reduce the cost of clean technologies, and \r\ninduce emissions reduction in the countries outside the coalition \r\n(Golombek and Hoel 2004; Di Maria and Smulders 2005; Di Maria \r\nand van der Werf 2008; Hemous 2016; van den Bijgaart 2017). \r\nThe literature suggests various mechanisms leading to this result. \r\nDi Maria and van der Werf (2008) argue that the effort to reduce \r\nemissions in one region reduces global demand for 'dirty goods'. This \r\nwill redirect global innovation towards clean technologies, leading to \r\na drop in the cost of clean production in every region."


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"Finally, technologies could be not efficient in developing countries, \r\neven if they are efficient in countries at the technological frontier. For \r\ninstance, technologies that are highly capital intensive and labour \r\nsaving will be efficient only in countries where costs of capital are \r\nlow and costs of labour are high. Similarly, technologies which \r\nrequire a large number of skilled labour will be more competitive in \r\na country where skilled labour is abundant (and hence cheap) than \r\nwhere it is scarce (Basu and Weil 1998; Caselli and Coleman 2006)."


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"Table 16.4 | Examples of institutional deficiencies preventing deployment of new technologies in countries behind the technological frontier."


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"macroeconomic effects of a  transition (Karkatsoulis et al. 2016). \r\nThe influence of cost and diffusion assumptions may be evaluated \r\nthrough sensitivity analysis. In the second case, costs are a function \r\nof a  choice variable within the model. For instance, technology \r\ncosts decrease as a function of either cumulative installed capacity \r\n(learning by doing) (Seebregts et al. 1998; Kypreos and Bahn 2003) \r\nor R&D investments or spillovers from other sectors and countries."


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"A variety of models are used to generate climate mitigation \r\npathways, compatible with 2degC and well below 2degC targets. \r\nThese  include integrated assessment models (IAMs), energy \r\nsystem models, computable general equilibrium models, and agent \r\nbased models. They range from global (Chapter 3) to national models \r\nand include both top-down and bottom-up approaches (Chapter 4). \r\nInnovation in energy technologies, which comprises the development \r\nand diffusion of low-, zero- and negative-carbon energy options, \r\nbut also investments to increase energy efficiency, is a key driver of \r\nemissions reductions in model-based scenarios."


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"Assumptions on energy technology cost developments is one of the \r\nfactors that determine the speed and magnitude of the deployment \r\nin climate-energy-economy models. The modelling is informed by the \r\nempirical literature that estimates the rates of cost reduction for energy \r\ntechnologies. A first strand of literature relies on the extrapolation of \r\nhistorical data, assuming that costs decrease either as a power law \r\nof cumulative production, exponentially with time (Nagy et al. 2013) \r\nor as a function of technical performance metrics (Koh and Magee \r\n2008). Another approach relies on expert estimates of how future \r\ncosts will evolve, including expert elicitations (Verdolini et al. 2018)."


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"In these models, technology costs may evolve exogenously or \r\nendogenously (Mercure et al. 2016; Krey et al. 2019). In the first case, \r\ntechnology costs are assumed to vary over time at some predefined \r\nrate, generally extrapolated from past observed patterns or based \r\non expert estimates. This formulation of cost dynamics generally \r\nunderestimates future costs (Meng et al. 2021) as, among other things, \r\nit does not capture any policy-induced carbon-saving technological \r\nchange or any spillover arising from the accumulation of national \r\nand international knowledge (Sections 16.2.2 and 16.2.3) or positive "


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"To simulate possible paths of energy technology diffusion for different \r\ndecarbonisation targets, models rely on assumptions about the cost of \r\na given technology relative to the costs of other technologies, and its \r\nability to supply the energy demand under the relevant energy system \r\nand physical constraints. These assumptions include, for example, \r\nconsiderations regarding renewable intermittency, inertia on technology \r\nlifetime (for instance, under less stringent temperature scenarios, early \r\nretirement of fossil plants does not take place), distribution, capacity "


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"Another key aspect of decarbonisation regards issues of acceptability \r\nand social inclusion in decision-making. Participatory processes \r\ninvolving stakeholders can be implemented using several methods to \r\nincorporate qualitative elements in model-based scenarios on future \r\nchange (van Vliet et al. 2010; Nikas et al. 2017, 2018; Doukas and \r\nNikas 2020; van der Voorn et al. 2020)."


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"and market growth constraints, as well as the presence of policies. \r\nThese factors change the relative price of technologies. Furthermore, \r\ntechnological diffusion in one country is also influenced by technology \r\nadvancements in other regions (Kriegler et al. 2015)."


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"Although the debate is still ongoing, preliminary conclusions indicate \r\nthat integrated assessment models tend to underestimate innovation \r\non energy supply but overestimate the contributions by energy \r\nefficiency (IPCC 2018b). Scenarios emerging from cost-optimal \r\nclimate-energy-economy models are too pessimistic, especially in the \r\ncase of rapidly changing technologies such as wind and batteries in \r\nthe past decade. Conversely, they tend to be too optimistic regarding \r\nthe timing of action, or the availability of a  given technology and \r\nits speed of diffusion (Shiraki and Sugiyama 2020). Furthermore, \r\nsome technological and economic transformations may emerge as \r\ntechnically feasible from IAMs, but are not realistic if taking into \r\naccount political economy, international politics, human behaviours, \r\nand cultural factors (Bosetti 2021)."


id: 83031218b025deb3ea2497439c558942
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"There is a range of projected energy technology supply costs included \r\nin the IPCC's Sixth Assessment Report (AR6) Scenario Database \r\n(Box  16.1). Variations of costs over time and across scenarios \r\nare within ranges comparable to those observed in recent years. \r\nConversely, model results show that limiting warming to 2degC or \r\n1.5degC will require faster diffusion of installed capacity of low-carbon \r\nenergy options and a  rapid phase-out of fossil-based options. This \r\npoints to the importance of focusing on overcoming real-life barriers \r\nto technology deployment."


id: 7e8dd64e0df900edf75155dcaadf7db7
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"Box 16.1 | Comparing Observed Energy Technology Costs and Deployment Rates with \r\nProjections from AR6 Global Modelled Pathways"


id: d0a6b1e0f5690accd2d4efec1d898111
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"Currently observed costs and deployment for electricity supply technologies from a variety of sources are compared with projections \r\nfrom two different sets of scenarios contained in the AR6 Scenario database: (i) scenarios that limit warming to 3degC (>50%) and \r\nscenarios that limit warming to 4degC (>50%), and (ii) scenarios that limit warming to 2degC (>67%) or lower (AR6 Scenarios Database). \r\nGlobal aggregate costs are shown for the following technologies: coal with carbon dioxide capture and storage (CCS), gas with CCS, \r\nnuclear, solar PV, onshore and offshore wind."


id: 5999a573b016c5f2c5ff1a8dc3c1c141
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"The decrease in forecasted capital costs is not large compared to current capital costs for most technologies, and does not differ much \r\nbetween the two sets of scenarios (Box 16.1, Figure 1a). For offshore wind some of the models are more optimistic than the current \r\nreality (Timilsina 2020). Several sources of current solar PV costs report values that are at the low end of the AR6 Scenario Database. \r\nBy 2050, the median technology cost forecasts decrease by between 5% for nuclear and 45-52% for solar (Box 16.1, Figure 1c)."


id: 72f6481c0a61ba8e7a66b09d49454510
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"The higher deployment in scenarios that limit warming to 2degC (>67%) or lower cannot be explained solely as a result of technology \r\ncost dynamics. In IAMs, technology deployment is also governed by system constraints that characterise both 3degC (>50%) and \r\n4degC (>50%) scenarios, for example, the flexibility of the energy system, the availability of storage technologies. From a modelling point \r\nof view, implementing more stringent climate policies to meet the 2degC limit forces models to find solutions, even if costly, to meet \r\nthose intermittency and flexibility constraints and temperature target constraints."


id: 47eedeb544b954d7f6b568a7d9b8e6dd
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"institutions that determine the innovative performance of national \r\nfirms as a  way to understand differences across countries, while \r\nLundvall (1992) focuses on the 'elements and relationships which \r\ninteract in the production, diffusion and use of new, and economically \r\nuseful, knowledge' - that is, notions of interactive learning, in which \r\nuser-producer relationships are particularly important (Lundvall \r\n1988). Building on this, various other applications of the 'innovation \r\nsystem' framework have emerged in the literature."


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"The innovation process, which consists of a set of sequential phases \r\n(Section 16.2.1), is often simplified to a linear process. Yet, it is now well \r\nunderstood that it is also characterised by numerous kinds of interactions \r\nand feedbacks between the domains of knowledge  generation, \r\nknowledge translation and application, and knowledge use (Kline \r\nand Rosenberg 1986). Furthermore, it is not just invention that leads \r\nto technological change; the cumulative contribution of incremental \r\ninnovations over time can be very significant (Kline and Rosenberg \r\n1986). Innovations can come, not just from formal research and \r\ndevelopment (R&D) but also sources such as production engineers \r\nand the shop floor (Kline and Rosenberg 1986; Freeman 1995)."


id: e92796fa88e69155ec327d206b3eb52b
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"Technological innovation systems (TIS), with a technology or a set of \r\ntechnologies (more narrowly or broadly defined in different cases) as \r\nthe unit of analysis, focus on explaining what accelerates or hinders \r\ntheir development and diffusion. Carlsson and Stankiewicz (1991) \r\ndefine a  technological system as 'a dynamic network of agents \r\ninteracting in a specific economic/industrial area under a particular \r\ninstitutional infrastructure and involved in the generation, diffusion, \r\nand utilisation of technology'. More recent work takes a 'functional \r\napproach' to TIS (Hekkert et al. 2007; Bergek et al. 2008), which \r\nwas later expanded with explanations of how some of the sectoral, \r\ngeographical and political dimensions intersect with technology \r\ninnovation systems (Bergek et al. 2015; Quitzow 2015)."


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"This section reviews the literature focusing on innovation as a systemic \r\nprocess. This now predominant view enriches the understanding of \r\ninnovation as presented in Section 16.2; it conceptualises innovation \r\nas the result of actions by, and interactions among, a large set of \r\nactors, whose activities are shaped by, and shape, the context in \r\nwhich they operate and the user group with which they are engaging. \r\nThis section aligns with the discussion of socio-technical transitions \r\n(Section 1.7.3, Chapter 5 Supplementary Material, and Cross-Chapter \r\nBox 12 in this chapter)."


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"Sectoral innovation systems (SIS) are based on the understanding \r\nthat the constellation of relevant actors and institutions will vary \r\nacross industrial sectors, with each sector operating under a different \r\ntechnological regime and under different competitive or market \r\nconditions. A sectoral innovation, thus, can be defined as 'that system \r\n(group) of firms active in developing and making a sector's products \r\nand in generating and utilising a sector's technologies' (Breschi and \r\nMalerba 1997)."


id: f33581f6105c50ac7efafde6dce14802
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"The resulting overarching framework that is commonly used in the \r\ninnovation scholarship and in policy analyses is termed an 'innovation \r\nsystem', where the key constituents of the systems are actors, their \r\ninteractions, and the institutional landscape, including formal rules, \r\nsuch as laws, and informal restraints, such as culture and codes of \r\nconduct, that govern the behaviour of the actors (North 1991)."


id: cefdc4bf823f6231e0b71d1e0495ddb7
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"Regional innovation systems (RIS) and global innovation systems \r\n(GIS), recognise that the many innovation processes have a spatial \r\ndimension, where the development of system resources such as \r\nknowledge, market access, financial investment, and technology \r\nlegitimacy may well draw on actors, networks, and institutions within \r\na region (Cooke et al. 1997). In other cases, the distribution of many \r\ninnovation processes are highly internationalised and therefore \r\noutside specific territorial boundaries (Binz and Truffer 2017). \r\nImportantly, Binz and Truffer (2017) note that the GIS framework \r\n'differentiates between an industry's dominant innovation mode... "


id: ad1aa8b43858b6cb89be60ff457487cd
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"One application of this framework, national innovation systems \r\n(NIS), highlight the importance of national and regional relationships \r\nfor determining the technological and industrial capabilities and \r\ndevelopment of a  country (Lundvall 1992; Nelson 1993; Freeman \r\n1995). Nelson (1993) and Freeman (1995) highlight the role of "


id: 61323472ed8fdcd2b45ac234b4e8e482
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"Table 16.5 | Functions that the literature identified as key for well-performing technological innovation systems. Source: based on Hekkert et al. (2007) and \r\nBergek et al. (2008)."


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"The relevance of mission-oriented innovation systems (MIS), comes \r\ninto focus with the move towards mission-oriented programmes as \r\npart of the increasing innovation policy efforts to address societal \r\nchallenges. Accordingly, an MIS is seen as consisting of 'networks of \r\nagents and sets of institutions that contribute to the development \r\nand diffusion of innovative solutions with the aim to define, pursue \r\nand complete a societal mission' (Hekkert et al. 2020)."


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"Notably the innovation systems approach has been used in a number of \r\nclimate-relevant areas such as agriculture (Echeverria 1998; Horton and \r\nMackay 2003; Brooks and Loevinsohn 2011; Klerkx et al. 2012), energy \r\n(Sagar and Holdren 2002; OECD 2006; Gallagher et al. 2012; Wieczorek \r\net al. 2013; Darmani et al. 2014; Mignon and Bergek 2016), industry \r\n(Koasidis et al. 2020b) and transport (Koasidis et al. 2020a), and \r\nsustainable development (Anadon et al. 2016b; Clark et al. 2016; \r\nBryden and Gezelius 2017; Nikas et al. 2020)."


id: d3eb4c8f394e7529718360057f195ad1
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"A number of functions can be used to understand and characterise \r\nthe performance of technological innovation systems (Hekkert et al. \r\n2007; Bergek et al. 2008). The most common functions are listed in \r\nTable 16.5."


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"Evidence from empirical case studies indicates that all the above \r\nfunctions are important and that they interact with one another \r\n(Hekkert and Negro 2009). The approach therefore serves as both \r\na rationale for and a guide to innovation policy (Bergek et al. 2010)."


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"Systemic failures include: infrastructural failures; hard (e.g.,  laws, \r\nregulation) and soft (e.g., culture, social norms) institutional failures; \r\ninteraction failures (strong and weak network failures); capability \r\nfailures relating to firms and other actors; lock-in; and directional, \r\nreflexivity, and coordination failures (Klein Woolthuis et  al. 2005; \r\nChaminade and Esquist 2010; Negro et  al. 2012; Weber and \r\nRohracher 2012; Wieczorek and Hekkert 2012). Most of the literature \r\nthat unpacks such failures and explores ways to overcome them is on \r\nenergy-related innovation policy. For example, Table 16.6 summarises \r\na meta-study (Negro et al. 2012) that examined cases of renewable \r\nenergy technologies trying to disrupt incumbents across a range of \r\ncountries to understand the roles, and relative importance, of the \r\n'systemic problems' highlighted in Section 16.3.1."


id: fd9fea6cd3faf181511f02d1857092db
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"Depending on the sector, specific technology characteristics, and \r\nnational and regional context, the relevance of these systemic \r\nproblems varies (Trianni et al. 2013; Bauer et al. 2017; Wesseling and \r\nVan der Vooren 2017; Koasidis et al. 2020a, b), suggesting that the \r\ninnovation policy mix has to be tailor-made to respond to the diversity "


id: 3da9e4f8e1d4628f2e1d79abc4a358cf
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"of systemic failures (Rogge et al. 2017). An illustration of how such \r\nsystemic failures have been addressed is given in Box  16.2, which \r\nshows how the Indian government designed its standards and labelling \r\nprogramme for energy-efficient air conditioners and refrigerators. \r\nThe success of this programme resulted from the careful attention to \r\nbring on board and coordinate the relevant actors and resources, the \r\ndesign of the standards, and ensuring effective administration and \r\nenforcement of the standards (Malhotra et al. 2021)."


id: b3d53d6c54f93251ddc74d8332f7a052
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"Table 16.6 | Examination of systemic problems preventing renewable energy technologies from reaching their potential, including number of case \r\nstudies in which the particular 'systemic problem' was identified. Source: Negro et al. (2012)."


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"Energy efficiency is often characterised as a 'low-hanging fruit' for reducing energy use. However, systemic failures such as lack \r\nof access to capital, hidden costs of implementation, and imperfect information can result in low investments into adoption and \r\ninnovation in energy efficiency measures (Sorrell et al. 2004). To address such barriers, India's governmental Bureau of Energy \r\nEfficiency (BEE) introduced the Standards and Labelling (S&L) programme to promote innovation in energy efficient appliances in \r\n2006 (Sundaramoorthy and Walia 2017). While context-dependent, the programme's design, policies and scale-up contain lessons for \r\naddressing systemic failures elsewhere too."


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"Programme design and addressing of early systemic barriers\r\nTo design the S&L programme, BEE drew on the international experiences and technical expertise of the Collaborative Labelling \r\nand Appliance Standards Program (CLASP) - a non-profit organisation that provides technical and policy support to governments in \r\nimplementing S&L programmes. For example, since there was no data on the efficiency of appliances in the Indian market, CLASP \r\nassisted with early data collection efforts, resulting in a focus on refrigerators and air conditioners (McNeil et al. 2008)."


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"Besides drawing from international knowledge, the involvement of manufacturers, testing laboratories, and customers was crucial for \r\nthe functioning of the innovation system."


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"To involve manufacturers, BEE employed three strategies to set the standards at an ambitious yet acceptable level. First, BEE enlisted \r\nthe Indian Institute of Technology (IIT) Delhi (a public technical university) to engage with manufacturers and to demonstrate \r\ncost-effective designs of energy-efficient appliances. Second, BEE agreed to make the standards voluntary from 2006 to 2010. In \r\nreturn, the manufacturers agreed to mandatory and progressively more stringent standards starting in 2010. Third, BEE established \r\na  multistakeholder committee with representation from BEE, the Bureau of Indian Standards, appliance manufacturers, test \r\nlaboratories, independent experts, and consumer groups (Jairaj et al. 2016) to ensure that adequately stringent standards are \r\nnegotiated every two years."


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"At this time, India had virtually no capacity for independent testing of appliances. Here, too, BEE used multiple approaches towards \r\ncreating the actors and resources needed for the innovation system to function. First, BEE funded the Central Power Research Institute \r\n(CPRI) - a national laboratory for applied research, testing and certification of electrical equipment - to set up refrigerator and AC \r\ntesting facilities. Second, they invited bids from private laboratories, thus creating a demand for testing facilities. Third, BEE developed \r\ntesting protocols in partnership with universities. Australian standards for testing frost-free refrigerators were adopted until local \r\nstandards were developed. Thus, once the testing laboratories, protocols and benchmark prices for testing were in place, the appliance \r\nmanufacturers could employ their services."


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"Finally, a customer outreach programme was conducted from 2006 to 2008 to inform customers about energy-efficient appliances, to \r\nenable them to interpret the labels correctly, and to understand their purchase decisions and information sources (Jain et al. 2018; Joshi \r\net al. 2019). BEE initiated a capacity-building programme for retailers to be an information source for customers. A comprehensive \r\ndocument with details of different models and labels was provided to retailers, together with a condensed booklet to be shared \r\nwith customers."


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"Adapting policies to technologies and local context\r\nWhile many of India's standards and testing protocols were based on international standards, they needed to be adapted to the \r\nIndian context. For example, because of higher temperatures in India, the reference outside temperature of 32degC for refrigerators was \r\nchanged to 36degC."


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"AC testing protocols also had to be adapted because of the emergence of inverter-based ACs. Existing testing done only at a single \r\ntemperature did not value inverter-based ACs' better average performance as compared to fixed-speed ACs over a range of temperatures. \r\nThus, the Indian Seasonal Energy Efficiency Ratio (ISEER) was developed for Indian temperature conditions in 2015 by studying \r\nInternational Organization for Standardization (ISO) standards and through consultations with manufacturers (Mukherjee et al. 2020)."


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"These measures had multiple effects on technological change. As a result of stringent standards, India has some of the most efficient \r\nrefrigerators globally. In the case of ACs, the ISEER accelerated technological change by favouring inverter-based ACs over fixed-speed \r\nACs, driving down their costs and increasing their market shares (BEE 2020)."


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"As the S&L programme was expanded, BEE took measures to standardise, codify and automate it. For example, to process a high \r\nvolume of applications for labels efficiently, an online application portal with objective and transparent certification criteria was \r\ncreated. This gave certainty to the manufacturers, enabling diversity and faster diffusion of energy-efficient appliances. Thus by 2019, \r\nthe programme expanded to cover thousands of products across 23 appliance types (BEE 2020)."


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"Besides issuing labels, the enforcement of standards also needed to be scaled up efficiently. BEE developed protocols for randomly \r\nsampling appliances for testing. Manufacturers were given a fixed period to rectify products that did not meet the standards, failing \r\nwhich they would be penalised and the test results would be made public."


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"can (relatively) easily be obtained and compared. In the realm of \r\nenergy-related innovation, RD&D investments remain the single \r\nmost-used indicator to measure inputs into the innovation process \r\n(Box 16.3). Patent counts are a widely used indicator of the outputs \r\nof the innovation process, especially because they are detailed \r\nenough to provide information on specific adaptation and mitigation \r\ntechnologies. Mitigation and adaptation technologies have their own \r\nclassification (Y02) with the European Patent Office (EPO) (Veefkind \r\net al. 2012; Angelucci et al. 2018), which can be complemented with \r\nkeyword search and manual inspection (Persoon et al. 2020; Surana \r\net al. 2020b). However, using energy-related patents as an indicator of \r\ninnovative activities is complicated by several issues (de Rassenfosse "


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"Assessing the state of technological innovation helps in understanding \r\nthe progress of current efforts and policies in meeting stated \r\nobjectives, and how we might design policies to do better."


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"Traditionally, input measures such as research, development and \r\ndemonstration (RD&D) investments, and output measures such \r\nas scientific publication and patents were used to characterise \r\ninnovation activities (Freeman and Soete 2009). This is partly because \r\nof the successes of specialised R&D efforts (Freeman 1995), the \r\npredominant linear model of innovation, and because such measures "


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"Public energy R&D investments are a  crucial driver of energy technology innovation (Sections  16.2.1.1 and 16.4.1). Box  16.3, \r\nFigure 1 shows the time profile of energy-related RD&D budgets in OECD countries as well as some key events which coincided with \r\ndevelopments of spending (IEA 2019). Such data on other countries, in particular developing countries, are not available, although \r\nrecent evidence suggests that expenditures are increasing there (IEA 2020c). The IEA collected partial data from China and India in the \r\ncontext of Mission Innovation, but this is only available starting from 2014 and thus not included in Figure 1."


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"The figure illustrates two points. First, energy-related RD&D has risen slowly in the last 20 years, and is now reaching levels comparable \r\nwith the peak of energy RD&D investments following the two oil crises. Second, over time there has been a reorientation of the \r\nportfolio of funded energy technologies away from nuclear energy. In 2019, around 80% of all public energy RD&D spending was \r\non low-emission technologies - energy efficiency, carbon dioxide capture, use and storage, renewables, nuclear, hydrogen, energy \r\nstorage and cross-cutting issues such as smart grids. A more detailed discussion of the time profile of RD&D spending in IEA countries, \r\nincluding as a share of GDP, is available in IEA (2020b).\r\nFiiTS26"


id: 1f75297bfeb81dfad178a0224dc702d0
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"may have contributed to a reduction in private equity and venture \r\ncapital finance for renewable energy technologies after the boom of \r\nthe late 2000s (Frankfurt School-UNEP Centre/BNEF 2019)."


id: b4dbc3c3c65ace5e367018bff17e9393
created_at: 2023-03-16 14:01:50
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content:
"et al. 2013; Hascic and Migotto 2015; Jaffe and de Rassenfosse 2017), \r\nincluding the fact that the scope of what are considered climate \r\nmitigation inventions is not always clear or straightforward."


id: 3336ea87a9151254aaa70f2b73d4c7d0
created_at: 2023-03-16 14:01:50
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content:
"Quantitative indicators such as energy-related RD&D spending are \r\ninsufficient for the assessment of innovation systems (David and \r\nForay 1995): they only provide a partial view into innovation activities, \r\nand one that is potentially misleading (Freeman and Soete 2009). \r\nQualitative indicators measuring the more intangible aspects of \r\nthe innovation process and system are crucial to fully understand the \r\ninnovation dynamics in a climate or energy technologies or sectors \r\n(Gallagher et al. 2006), including in relation to adopting an adaptive \r\nlearning strategy and supporting learning through demonstration \r\nprojects (Chan et al. 2017)."


id: 4bbec03c0077a1338321660244ad3d10
created_at: 2023-03-16 14:01:50
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content:
"Conversely, private energy R&D investments and investments by \r\nfinancing firms cannot be precisely assessed for a number of reasons, \r\nincluding limited reporting and the difficulty of singling out energy\u0002related investments. This inability to precisely quantify private \r\ninvestments in energy R&D leads to a patchy understanding of the \r\nenergy innovation system, and how private energy R&D investments \r\nresponds to public energy R&D investments. Overall, evidence shows \r\nthat some of the industrial sectors that are important for meeting \r\nclimate goals (electricity, agriculture and forestry, mining, oil and gas, \r\nand other energy-intensive industrial sectors) are investing relatively \r\nsmall fractions of sales on R&D (medium evidence, high agreement) \r\n(Jasmab and Pollitt 2005; Jamasb and Pollitt 2008; Sanyal and Cohen \r\n2009; European Commission 2015; American Energy Innovation \r\nCouncil 2017; Gaddy et al. 2017; National Science Board 2018)."


id: b1dace18b744d6c707b0b59068112c09
created_at: 2023-03-16 14:01:50
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content:
"Financing firms also play an important role in the energy innovation \r\nprocess, but data availability is limited. The venture capital (VC) \r\nfinancing model, used to overcome the 'valley of death' in the biotech \r\nand IT space (Frank et al. 1996), has not been as suitable for hardware \r\nstart-ups in the energy space: for example, the percentage of exit \r\noutcomes in cleantech start-ups was almost half of that in medical \r\nstart-ups, and less than a  third of software investments (Gaddy \r\net al. 2017). The current VC model and other private finance do \r\nnot sufficiently cover the need to demonstrate energy technologies \r\nat scale (Anadon 2012; Mazzucato 2013; Nemet et al. 2018). This \r\ngreater difficulty in reaching the market compared to other sectors "


id: cd83f5c680577e69f73a2270242f7d18
created_at: 2023-03-16 14:01:50
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content:
"Table 16.7 | Commonly used quantitative innovation metrics, organised by inputs, outputs and outcomes. Sources: based on Sagar and Holdren (2002); \r\nGallagher et al. (2006, 2011, 2012); Hekkert et al. (2007); Gruebler et al. (2012); Hu et al. (2018); Miremadi et al. (2018); Avelino et al. (2019)."


id: 83e4746f5e98be7d390cf8ec1311019
created_at: 2023-03-16 14:01:50
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content:
"No single country persisted in developing solar photovoltaic (PV): five countries each made a  distinct contribution, \r\nwith each leader relinquishing its lead. The free flow of ideas, people, machines, finance, and products across countries \r\nexplains the success of solar PVs. Barriers to knowledge flow delay innovation."


id: 2805e057397386a4de8643e5b9780572
created_at: 2023-03-16 14:01:50
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content:
"Solar PV has attracted interest for decades, and until recently was seen as an intriguing novelty, serving a niche, but widely dismissed \r\nas a serious answer to climate change and other social problems associated with energy use. Since the IPCC's Fifth Assessment \r\nReport (AR5), PV has become a substantial global industry - a truly disruptive technology that has generated trade disputes among \r\nsuperpowers, threatened the solvency of large energy companies, and prompted reconsideration of electric utility regulation rooted in \r\nthe 1930s. More favourably, its continually falling costs and rapid adoption are improving air quality and facilitating climate change \r\nmitigation. PV is now so inexpensive that it is important in an expanding set of countries. In 2020, 41 countries, in six continents, had \r\neach installed at least 1GW of solar (IRENA 2020a)."


id: 529d7f8f54ba2fba23d58ac533eb5d33
created_at: 2023-03-16 14:01:50
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content:
"The cost of generating electricity from solar PV is now lower in sunny locations than running existing fossil fuel power plants (IEA \r\n2020c) (Chapter 6). Prices in 2020 were below where even the most optimistic experts expected they would be in 2030."


id: 9ddd9e1c2761a1b181ce9cf03ff2c8a
created_at: 2023-03-16 14:01:50
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content:
"The costs of solar PV modules have fallen by more than a factor of 10,000 since they were first commercialised in 1957. This four \r\norders of magnitude cost reduction from the first commercial application in 1958 until 2018 can be summarised as the result of \r\ndistinct contributions by the USA, Japan, Germany, Australia, and China - in that sequence (Green 2019; Nemet 2019). As shown in \r\nBox 16.4, Figure 1, PV improved as the result of:"


id: 1eb295afb9366eebfa58d273e1b92bbe
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content:
"Box 16.4, Figure 1 | Milestones in the development of low-cost solar photovoltaics. Source: Nemet (2019)"


id: 75695552e0dd9f09b9511ab310ecde28
created_at: 2023-03-16 14:01:50
updated_at: 2023-03-16 14:01:50
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content:
"vii. a cohort of adopters with high willingness to pay, accessing information from neighbours, and installer firms that learnt from their \r\ninstallation experience as well as that of their competitors, to lower soft costs (Ardani and Margolis 2015; Gillingham et al. 2016)."


id: 5411dfa3c80afb7be13966a525a6b47e
created_at: 2023-03-16 14:01:50
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"While many technologies do not fit into the solar model, some - including micro nuclear reactors and direct air capture - also have modular \r\ncharacteristics that make them suitable for following solar's path and benefit from solar's drivers. However, it took solar PV 60 years to \r\nbecome cheap, which is too slow for addressing climate change if a technology is now still at the lab scale. A challenge in learning from \r\nthe solar model is therefore how to use public policy to speed up innovation over much shorter time frames, for example, 15 or fewer years."


id: 7e9c28975acaa336832d726ea474117c
created_at: 2023-03-16 14:01:50
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"This section focuses on innovation policies and institutions which are \r\nimplemented at the national level. Whenever relevant, this section \r\nhighlights examples of policies or initiatives that delve more deeply \r\ninto the main high-level sectors: power, transport, industry, buildings, \r\nand agriculture, forestry and other land-use (AFOLU). Whenever \r\npossible, this section also discusses issues in policy selection, design, \r\nand implementation that have been identified as more relevant in \r\ndeveloping countries and emerging economies."


id: 3202b30065ae6b84a3edf2f106da05b0
created_at: 2023-03-16 14:01:50
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"Learning from the innovation systems literature, some of the \r\nrecent policy focus is not only directed on innovation policies \r\nthat can optimise the innovation system to improve economic \r\ncompetitiveness and growth, but also policies that can induce \r\nstrategic directionality and guide processes of transformative \r\nchanges towards desired societal objectives (Mitcham 2003; Steneck \r\n2006). Therefore, the aim is to connect innovation policy with societal \r\nchallenges and transformative changes through engagement with \r\na  variety of actors and ideas and incorporating equity, nowadays \r\noften referred to as a 'just transition' (Newell and Mulvaney 2013; \r\nSwilling et al. 2016; Heffron and McCauley 2018; Jasanoff 2018) \r\n(Chapters 1 and 17). This new policy paradigm is opening up a new \r\ndiscursive space, shaping policy outcomes, and giving rise to the \r\nemerging idea of transformative innovation policy (Fagerberg 2018; \r\nDiercks et al. 2019)."


id: abb464dd667104df4c5c9f487f31e675
created_at: 2023-03-16 14:01:50
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"Overall, this section shows that national and subnational policies \r\nand institutions are one of the main factors determining the \r\nredirection and acceleration of technological innovation and low\u0002emission technological change (Anadon et al. 2016b; Rogge and \r\nReichardt 2016; Ahman et al. 2017; Anadon et al. 2017; Roberts \r\net al. 2018) (robust evidence, high agreement). Both technology \r\npush (e.g., scientific training, research and development (R&D)) and \r\ndemand pull (e.g., economic and fiscal support and regulatory policy \r\ninstruments), as well as instruments promoting knowledge flows and \r\nespecially research-firm technology transfer, can be part of the mix \r\n(robust evidence, medium agreement) (Sections 16.2 and 16.3)."


id: 1f25d2053ac377000344d10493dee14e
created_at: 2023-03-16 14:01:50
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"Transformative innovation policy has a  broader coverage of the \r\ninnovation process with a  much wider participation of actors, \r\nactivities and modes of innovation. It is often expressed as socio\u0002technical transitions (Elzen et al. 2004; Turnheim and Sovacool \r\n2020) or societal transformations (Scoones 2015; Roberts et al. \r\n2018). Transformative innovation policy encompasses different \r\nideas and concepts that aim to address the societal challenges \r\ninvolving a  variety of discussions, including social innovation \r\n(Mulgan 2012), complex adaptive systems (Gunderson and \r\nHolling 2002), eco-innovation (Kemp 2011) and a framework for \r\nresponsible innovation (Stilgoe et al. 2013), value-sensitive design \r\n(Friedman and Hendry 2019) and social-technical integration \r\n(Fisher et al. 2006)."


id: 622bf3c6ca8a24239f61cf2be4da33b
created_at: 2023-03-16 14:01:50
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"Public R&D investments in energy and climate-related technologies \r\nhave a positive impact on innovation outcomes (medium evidence,\r\nhigh agreement). The evidence on procurement is generally positive, \r\nbut limited. The economic policy instruments that can be classified \r\nas market pull instruments when it comes to the competitiveness \r\noutcome (at least in the short term) is more mixed. The review of the \r\nliterature in this section shows that market pull policy instruments \r\nhad positive but also some negative impacts on outcomes in some \r\ninstances on some aspects of competitiveness and distributional \r\noutcomes (medium evidence, medium agreement) (Penasco et al. \r\n2021). For several of them - such as carbon taxes or feed-in tariffs - \r\nthe evidence of a positive impact on innovation is more consistent \r\nthan the others. Evidence suggests that complementary policies \r\nor improved policy design can mitigate such short-term negative \r\ndistributional impacts."


id: 116b82a301d07cc99258d6ea6776cbff
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content:
"Government policies can influence changes in technologies, as well \r\nas changes to the systems they support (Somanathan et al. 2014) \r\n(Chapter 13 and Sections 16.2 and 16.3)."


id: 1b4ae4dd42e3ccb8cce6ae36b074fdfa
created_at: 2023-03-16 14:01:50
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"Technology-push policy instruments stimulate innovation by increasing \r\nthe supply of new knowledge through funding  and  performing \r\nresearch; increasing the supply of trained scientists and engineers \r\nwhich contribute to knowledge-generation and provide technological \r\nopportunities, which private firms can decide to commercialise \r\n(Mowery and Rosenberg 1979; Anadon and Holdren 2009; Nemet \r\n2009b; Mazzucato 2013)."


id: d788d549778ff8aa9f16209b7762f712
created_at: 2023-03-16 14:01:50
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"Governments can also stimulate technological change through \r\ndemand-pull (or market-pull) instruments which support market \r\ncreation or expansion and technology transfer, and thus promote \r\nlearning by doing, economies of scale, and automation (Section 16.2). \r\nDemand-pull policy instruments include regulation, carbon prices, \r\nsubsidies that reduce the cost of adoption, public procurement, \r\nand intellectual property regulation. Typically, technology push is \r\nespecially important for early-stage technologies, characterised \r\nby higher uncertainty and lower appropriability (Section  16.2); \r\ndemand-pull instruments become more relevant in the later stages \r\nof the innovation process (Mowery and Rosenberg 1979; Anadon and \r\nHoldren 2009; Nemet 2009b) (Section 16.2)."


id: 999763f6342d93a41017a65bcfc21139
created_at: 2023-03-16 14:01:50
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content:
"Section  16.3 characterised technological innovation as a  systemic, \r\nnon-linear and dynamic process. Figure 16.1 below presents a stylised \r\n(and necessarily incomplete) view connecting the innovation process \r\nstages presented in Section  16.2, some of the key mechanisms in \r\ntechnology innovation systems, and some of the decarbonisation \r\npolicy instruments that have been assessed in terms of their impact \r\non technological innovation outcomes in Section  16.4.4. As noted \r\nin the caption and discussed in Section  16.4.4, regulatory policy \r\ninstruments also shape the early stages of technology development."


id: d6a0a96394d3ebf1d86ed822bd5df3f2
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content:
"Table 16.8 | Overview of policy instrument types covered in Chapter 13 and their correspondence to the subset of policy instrument types reviewed in \r\nChapter 16 with a focus on innovation outcomes."


id: 89383b18103eeebc077d7fb341ce837a
created_at: 2023-03-16 14:01:50
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content:
"Figure 16.1 | Technology innovation process and the (illustrative) and role of different public policy instruments (on the right-hand side). Source: adapted \r\nfrom IEA (2020a). Note that, as shown in Section 16.4.4, demand-pull instruments in the regulatory instrument category, for instance, can also shape the early stages of the \r\ninnovation process. Their position on the latter stages is highlighted in this figure because typically these instruments have been introduced in latter stages of the development \r\nof the technology."


id: 856653d6086e9c6b67c13322bfcff1c7
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content:
"As novel technologies become cost-competitive, opposition of \r\nincumbents usually grows, as well as the dangers of lock-in that can \r\nbe posed by the new winner. Addressing this involves adapting policy \r\n(robust evidence, high agreement)."


id: aa044c8755303ed61dbd251acde7ced9
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"The emergence of industries and support groups can lead \r\nto more sustained support for innovation policies (Meckling \r\net al. 2015; Schmidt and Sewerin 2017 Stokes and Breetz 2018; \r\nMeckling 2019; Meckling and Nahm 2019; Schmid et al. 2020). \r\nConversely, policies shaping technology innovation contribute to \r\nthe creation and evolution of different stakeholder groups (robust \r\nevidence, high agreement). Most of the literature on the role of \r\nthe politics and interest groups has focused on renewable energy "


id: fc61362265993379ddf9850b98b257e4
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"While it is very difficult to attribute a causal relationship between \r\na  particular policy instrument implementation and different \r\ninnovation indicators, given the complexity of the innovation system \r\n(Section 16.3), there is a large volume of quantitative and qualitative \r\nliterature aiming to identify such an impact."


id: a3a96ad069503682a4cd241fca48c703
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"Overall, public procurement has high potential to incentivise \r\ninnovation in climate technologies, but the evidence is mixed, \r\nparticularly in developing countries (limited evidence, medium \r\nagreement). Public procurement accounted for 13% of gross \r\ndomestic product (GDP) in OECD in 2013 and much more in some "


id: e6279472acdd6af7e08fe02e9686739a
created_at: 2023-03-16 14:01:50
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"Table 16.9 | Outcomes (first row) and indicators (second row) to evaluate the impact of policies shaping innovation to foster carbon neutral economies.\r\nSources: innovation outcomes indicators are sourced from Del Rio and Cerda (2014), Grubb et al. (2021) and Penasco et al. (2021); the indicators under the competitiveness \r\nand distributional effects criteria are sourced from Penasco et al. (2021)."


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"In 2005, the Dutch national government acknowledged a move in the House of Representatives to utilise their annual spending power \r\nto promote the market for sustainable goods and services, as well as to act as a role model. Hence, a policy for environmentally-friendly \r\nprocurement was developed and implemented across the national, local and provincial governments. Subsequently, sustainable public \r\nprocurement has expanded into a multidimensional policy in The Netherlands, accommodating policies on green public procurement, \r\nbio-based public procurement, international social criteria, social return on investment, innovation-oriented public procurement and \r\ncircular economy."


id: b5affe06161158f91a50931af1910e9f
created_at: 2023-03-16 14:01:50
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"Public R&D investments in the energy, renewables, and environment \r\nspace are generally associated with positive impacts on industrial \r\ndevelopment or 'competitiveness outcome' (robust evidence, medium \r\nagreement). In a  number of cases, negligible or negative impacts \r\nemerge (Doblinger et al. 2019; Goldstein et al. 2020; Penasco et al. 2021).\r\nThe majority of the 15 analyses rely on ex post quantitative methods, \r\nwhile only four use ex ante modelling approaches. Also, in this case, \r\nthe vast majority of the evidence is from industrialised countries."


id: cd2dc67940ccbd70fe6ebed0d3c72c06
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"There is limited and mixed evidence regarding the (positive or \r\nnegative) impact of public procurement for low-carbon or climate \r\ntechnologies in developed countries (limited evidence, low \r\nagreement), and none from developing countries. All of the four \r\nevaluations identified in the Penasco et al. (2021) review relied \r\non qualitative methods. One found  a  positive impact, another \r\na negative impact and two others found no impact. All of the studies \r\ncovered European country experiences."


id: a705100d79b9ba9783ad87a76340458d
created_at: 2023-03-16 14:01:50
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content:
"R&D and procurement policies have a positive impact on distributional \r\noutcomes (limited evidence, high agreement). Penasco et al. (2021) \r\nidentify three evaluations of the impact of RD&D funding on \r\ndistributional outcomes (two using quantitative methods and one ex \r\nante theoretical methods) and one of procurement on distributional \r\noutcomes (relying on qualitative analysis)."


id: 5542516ffe39ea9f84f8be10abaf95e8
created_at: 2023-03-16 14:01:50
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"Block funding, which tends to be more flexible, can lead to research \r\nthat is more productive or novel, but there are other factors that can \r\naffect the extent to which block funding can lead to more or less \r\nnovel outcomes (limited evidence, medium agreement). Research \r\non national research laboratories, which conduct at least 30%  of \r\nall research in 68 countries around the world (Anadon et al. 2016a), \r\nare a widespread mechanism to carry out public R&D and allocate \r\nfunds, but assessments of their performance is limited to developed \r\ncountries. R&D priorities are also guided by institutions, and \r\nresearch focused on general technology innovation policy finds that \r\ninstitutions often do not embody the goals of the poor or marginalised \r\n(Anadon et al. 2016b)."


id: 1449583ec63a670f466029e4b2887f44
created_at: 2023-03-16 14:01:50
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"The ability of a given R&D policy instrument to impact innovation and \r\ncompetitiveness depends to some extent on policy design features \r\n(limited evidence, high agreement). As discussed in Section 16.4.4.4, \r\nthis is not unique to R&D funding. Most of these assessments use \r\na  limited number of indicators (e.g.,  patents and publications and \r\nfollow-on private financing, firm growth and survival, respectively), \r\nand are focused on the energy sector, and on the USA and other \r\nindustrialised countries. Extrapolating to emerging economies and \r\nlow-income countries is difficult. There is no evidence on the impact \r\nof different ways of allocating public energy R&D investments in the \r\ncontext of developing countries."


id: 7df028e3426cffdad67c14af9b896e8b
created_at: 2023-03-16 14:01:50
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content:
"In the case of the US Department of Energy, block funding that can be \r\nquickly allocated to novel projects (such as that allocated to National \r\nLabs as part of the Laboratory Directed Research and Development \r\nfunding) has been found to be associated with improved innovation \r\nindicators (Anadon et al. 2016a). Research in Japan on R&D funding \r\nin general (not for climate-related technologies) however, indicates \r\nthat R&D funds allocated competitively result in higher novelty for \r\n'high status' (the term used in the paper to refer to senior male \r\nresearchers), while block funding was associated with research \r\nof higher novelty for 'lower status' researchers (e.g., junior female \r\nresearchers) (Wang et al. 2018)."


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"As for DARPA, ARPA-E programme managers use an active management approach that involves empowering programme manages to \r\nmake decisions about funding allocation, milestones and goals. ARPA-E managers also differ from other R&D allocation mechanisms \r\nin that ARPA-E staff retain some control on the funded projects after the allocation of funds. As argued by Azoulay et al. (2019), \r\neven though this relative control over the project can result in a reduction in the flexibility of funded researchers, some 'exploration' \r\nhappens at the programme manager level."


id: dfb0014a14697f931ae1a15e1b15c38c
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"Research on ARPA-E also sheds light on the process of project selection, or how programme managers decide what projects to fund. \r\nProgramme managers do not just follow the rankings of peer reviewers (sometimes projects with very disparate rankings were funded) \r\nand in many cases programme managers reported using information from review comments instead of the rankings (Goldstein and \r\nKearney 2020). Azoulay et al. (2019) suggest that, if expert disagreement is a useful proxy for uncertainty in research, then the use of \r\nindividual discretion in ARPA-E would result in a portfolio of projects with a higher level of uncertainty, as defined by disagreement \r\namong reviewers. Moreover, under the premise that uncertainty is a corollary to novelty, individual discretion is an antidote to novelty \r\nbias in peer review."


id: 44f4a75643939481b2d8b9d4ca8eb1e
created_at: 2023-03-16 14:01:50
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"Narayanamurti 2018). In addition, research analysing the first cohort of cleantech start-ups has found that start-ups supported by \r\nARPA-E had more innovative outcomes when compared to those that had applied but not received funding, with others that had not \r\nreceived any government support, and with others that had received other types of government R&D support (Goldstein et al. 2020). \r\nOverall, the mission-oriented ARPA-E approach has been successful in the USA when it comes to innovation outcomes. The extent to \r\nwhich it can yield the same outcomes in other geographies with different innovation and financing environments remains unknown. \r\n(limited evidence, high agreement)."


id: ded6835eb51de8adec9cbf3fa84a9889
created_at: 2023-03-16 14:01:50
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"Historical analyses of the relative importance of demand pull and \r\ntechnology push are clear: both are needed to provide robust \r\nincentives for investment in innovation. Interactions between them \r\nare central as their combination enables innovators to connect \r\na technical opportunity with a market opportunity (Freeman 1995; \r\nJacobsson et al. 2004; Grubler and Wilson 2013). It is important to \r\nnote that these market pull policies are often put in place primarily \r\nto  meet security and/or environmental goals, although innovation \r\nand competitiveness are sometimes also pursued explicitly."


id: 2d9fb2d37ede916a3a7aa4da84bd7a69
created_at: 2023-03-16 14:01:50
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"Public financing for R&D and research collaboration in the energy \r\nsector is important for small firms, at least in industrialised countries, \r\nand it does not seem to crowd out private investment in R&D (medium \r\nevidence, high agreement). Small US and UK firms accrue more \r\npatents and financing when provided with cash incentives for R&D \r\nin the form of grants (Howell 2017; Pless 2019). US cleantech start\u0002ups which partner with government partners for joint technology \r\ndevelopment or licensing partnerships accrue more patents and \r\nfollow-on financing (Doblinger et al. 2019)."


id: 26802d6ca18c517f384bd70ab719d473
created_at: 2023-03-16 14:01:50
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content:
"Overall, the body of literature on public R&D funding design in \r\nenergy- and climate-related technologies provides some high-level \r\nguidance on how to make the most of these direct RD&D investments \r\nin energy technologies in the climate change mitigation space, \r\nincluding: giving researchers and technical experts autonomy and \r\ninfluence over funding decisions; incorporating technology transfer in \r\nresearch organisations; focusing demonstration projects on learning; \r\nincentivising international collaboration in energy research; adopting \r\nan adaptive learning strategy; and making funding stable and \r\npredictable (Narayanamurti et al. 2009; Narayanamurti and Odumosu \r\n2016; Chan et al. 2017) (medium evidence, high agreement)."


id: 428d0e58cf19220f8924cb3fa640337a
created_at: 2023-03-16 14:01:50
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"Overall evidence suggests that the emissions trading schemes, as \r\ncurrently designed, have not significantly contributed to innovation \r\noutcomes (medium evidence, medium/high agreement)."


id: b9070ec8b7ad71c7fc3dc530904bdb71
created_at: 2023-03-16 14:01:50
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content:
"Without carefully designed public funding for demonstration efforts, \r\noften in a  cost-shared manner with industry, the experimentation \r\nat larger scales needed for more novel technologies needed for \r\nclimate change mitigation may not take place. (medium evidence,\r\nhigh agreement). Government funding, specifically for technology \r\ndemonstration projects, for RD&D in energy technologies, plays \r\na crucial supporting role (Section 16.2.1). Governments can facilitate \r\nknowledge spillovers between firms, between countries, and \r\nbetween technologies (Cohen et al. 2002; Baudry and Bonnet 2019) \r\n(Section 16.2)."


id: a9ce15dafe4113973285a20882ad705
created_at: 2023-03-16 14:01:50
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content:
"Demand-pull policies such as tradeable green certificates, taxes, \r\nor auctions, are essential to support scaling-up efforts (Remer and \r\nMattos 2003; Wilson 2012; Nahm and Steinfeld 2014). Just as for \r\nR&D investments, research has indicated that effective demand \r\npull needs to be credible, durable, and aligned with other policies \r\n(Nemet et al. 2017) and that the effectiveness of different demand\u0002pull instruments depends on policy design (del Rio and Kiefer 2021). "


id: 6944e9bb6d92086970975f44a2bfddbc
created_at: 2023-03-16 14:01:50
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content:
"The impact of carbon taxes on innovation outcomes is more positive \r\nthan that for emissions trading schemes, but the evidence is more \r\nlimited (limited evidence, medium agreement). Assessments of their \r\nimpact on innovation metrics have been very limited, with only four \r\nstudies (three quantitative and one ex ante). Three of the studies \r\nfound a positive impact of carbon taxes on innovation outcomes, and \r\none found no impact (Penasco et al. 2021)."


id: 49a194cfbdc961380ffa249451f501bb
created_at: 2023-03-16 14:01:50
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"There is no explicit literature on the ability of green public banks, and \r\ntargeted loans, and loan guarantees to lead to upstream innovation \r\ninvestments and activities, although there is evidence on their role \r\nin deployment (Geddes et al. 2018). This notwithstanding, the key \r\nrole of these institutions is in the innovation system (OECD 2015b; \r\nGeddes et al. 2018) (Sections 16.2.1 and 16.3) and the belief that \r\nthey can de-risk scale-up and the testing of business models (Geddes \r\net al. 2018; Probst et al. 2021) (Chapter 17)."


id: 17dc53025253d99e53dd8c5f29858ab7
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"There is evidence of the impact of building codes on innovation \r\noutcomes (Penasco et al. 2021). Only two studies assessed \r\ncompetitiveness impacts (one identified positive impacts and \r\none negligible ones) and three studies identified distributional \r\nimpacts, all positive."


id: 3f01f855a3d909304b7af84e609103fd
created_at: 2023-03-16 14:01:51
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"There is mixed evidence of the impact of tradeable green certificates \r\n(TGCs) on innovation (limited evidence, low agreement) and \r\ncompetitiveness (limited evidence, low agreement). Out of the \r\n11 evaluations in Penasco et al. (2021), six found no impact, \r\ntwo  a  positive impact, and three a  negative impact. All of them \r\nused a qualitative research approach. Of the six studies focusing on \r\ncompetitiveness outcomes, three conclude that TGCs have had no \r\nimpact on competitiveness, while two indicate a negative impact and\r\none a  positive impact. Only one of the studies was quantitative, \r\nand did not identify an impact on competitiveness."


id: c3608a0aecb768739f51817fc9328bd8
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"Overall, the evidence on the impact of the market pull policy \r\ninstruments covered in Section  16.4.4.4 when it comes to the \r\ncompetitiveness outcome (at least in the short term) is more mixed. \r\nFor some of them, the evidence of a positive impact on innovation \r\nis more consistent than the others (for carbon taxes or FITs, for \r\nexample). Penasco et al. (2021) found that the disagreements in the \r\nevidence regarding the positive, negative or no impact of a policy on \r\ncompetitiveness or distributional outcomes can often be explained by \r\ndifferences in policy design, differences in geographical or temporal \r\ncontext (since the review included evidence from countries from all \r\nover the world), or on how policy mixes may have affected the ability \r\nof the research design of the underlying papers to separate the \r\nimpact of the policy under consideration from the others."


id: b3ac5fe4c53add5792b936d0be39c7b1
created_at: 2023-03-16 14:01:51
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"TGCs are associated with the existence of negative distributional \r\nimpacts in most applications (medium evidence, high agreement). \r\nTen out of 12 studies identify the existence of some negative impacts. \r\nAll but one of these studies (which focused on India) are based on \r\nanalysis of policies implemented in industrialised countries."


id: fffcf13247328fa8501a0dcf786013d6
created_at: 2023-03-16 14:01:51
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content:
"There is medium evidence that the introduction of flexible, \r\nperformance-based environmental regulation on energy efficiency in \r\ngeneral (e.g., efficiency standards) can stimulate innovative responses \r\nin firms (Ambec et al. 2013; Popp 2019) (medium evidence, high \r\nagreement). Evidence comes from both observational studies that \r\nexamine patenting, R&D or technological responses to regulatory \r\ninterventions, and from surveys and qualitative case studies in \r\nwhich firms report regulatory compliance as a driving force for the \r\nintroduction of environmentally-beneficial innovations (Grubb et al. \r\n2021). While the literature examining the impact of environmental \r\nregulation on innovation is large, there have been fewer studies on \r\nthe innovation effects of minimum energy or emissions performance \r\nregulations specifically relating to climate mitigation. We discuss in \r\nturn two types of efficiency regulations: on vehicles, and on appliances."


id: 8fa914644e44241ffd48f33283162d80
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"The impact of tradeable white certificates in innovation is largely \r\npositive, but the evidence is limited (limited evidence, medium/\r\nhigh agreement). Out of four evaluations, only one of which was \r\nquantitative, three report a  positive impact and one reports no \r\nimpact (Penasco et al. 2021). The impact of white certificates on \r\ncompetitiveness is positive (limited evidence, high agreement) \r\nwhile the impact on distributional outcomes is very mixed (limited \r\nevidence, low agreement). Two theoretical studies report positive \r\ncompetitiveness impacts. Out of 11 evaluations of distributional \r\noutcomes, eight rely on theoretical ex ante approaches. Of \r\nthe 11 evaluations: seven reported positive impacts (four of \r\nthem  using theoretical methods); three indicated negative impacts \r\n(using theoretical methods); and one reported no impact."


id: a48c6fe89633a6988e0c3058d51adbaa
created_at: 2023-03-16 14:01:51
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content:
"The announcement, introduction and tightening of vehicle fleet \r\nefficiency or greenhouse gas (GHG) emission standards either at \r\nthe national or sub-national level positively impacts innovation as \r\nmeasured by patents (Barbieri 2015) or vehicle characteristics (Knittel \r\n2011; Kiso 2019) as summarised in a review by Grubb et al. (2021). \r\nDetailed studies on the innovation effects of national pollutant \r\n(rather than energy) regulations on automotive innovation also \r\nindicate that introducing or tightening performance standards has \r\ndriven technological change (Lee et al. 2010). Some studies in the \r\nUSA that examine periods in which little regulatory change took \r\nplace have found that the effects of performance standards on fuel \r\neconomy have been small (Knittel 2011) or not significant relative "


id: ef7e65a4bfb29d90aca90c304d719b10
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"to the innovation effects of prices (Crabb and Johnson 2010). This \r\nis at least in part because ongoing efficiency improvements during \r\nthis period were offset by increases in other product attributes. For \r\nexample, a  study by Knittel (2011) observed that size and power \r\nincreased without a  corresponding increase in fuel consumption. \r\nIt has also been observed that regulatory design may introduce \r\ndistortions that affect automotive innovation choices: in particular, \r\nfuel economy standards based on weight classes have been observed \r\nto distort light-weighting strategies for fuel efficiency in both China \r\n(Hao et al. 2016) and Japan (Ito and Sallee 2018)."


id: 5818d5bccae4bdf0503af74cc13a707b
created_at: 2023-03-16 14:01:51
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"on the USA have highlighted that minimum energy performance \r\nstandards for vehicles tend to be regressive, with poorer households \r\ndisproportionately affected (Jacobsen 2013; Levinson 2019), \r\nparticularly when second-hand vehicles are taken into account (Davis \r\nand Knittel 2019). Similar arguments, though with less evidence, have \r\nbeen made for appliance standards (Sutherland 2006)."


id: 41020eac030bfa2fb7872daf27edb71f
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"Overall, the extent to which regulations in energy efficiency \r\nresult in positive or negative competitiveness impacts in firms is \r\nmixed (limited evidence, high disagreement). A  meta-analysis of \r\n107 studies, of which 13 focused on regulations relating to energy \r\nconsumption or GHG emissions, found that around half showed that \r\nregulations resulted in competitiveness impacts, while half did not \r\n(Cohen and Tubb 2018). Cohen and Tubb (2018) also found that \r\nstudies examining performance-based regulations were less likely \r\nto find positive competitiveness impacts than those that examined \r\nmarket-based instruments."


id: 968d720054e74e19f953db204b49f99b
created_at: 2023-03-16 14:01:51
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content:
"A number of studies have focused on the impacts of a sub-national \r\ntechnology-forcing policy: the California Zero Emission Vehicle (ZEV) \r\nmandate. When it was introduced in 1990, this policy required \r\nautomotive firms to ensure that 2% of the vehicles they sold in 1998 \r\nwould be zero-emission. In the years immediately after introduction \r\nof the policy, automotive firms reported that it was a  significant \r\nstimulus to their R&D activity in electric vehicles (Brown et al. \r\n1995). Quantitative evidence examining patents and prototypes has \r\nindicated that the stringency of the policy was a significant factor in \r\nstimulating innovation, though this was, in part, dependent on firm \r\nstrategy (Sierzchula and Nemet 2015). As for the previous instruments, \r\nmost of the evidence comes from industrialised countries, and \r\nadditional research on other countries would be beneficial."


id: 2bb0d384b2434104f76fc2c1b1e21f77
created_at: 2023-03-16 14:01:51
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"While most of the literature addresses the extent to which regulation \r\ncan induce innovation, a  number of case studies highlight that \r\ninnovation can also influence regulation, as the costs of imposing \r\nregulation are reduced and political interests emerge that seek to \r\nexploit competitive advantages conferred by successfully developing \r\nenergy-efficient or low-carbon technologies (medium evidence,\r\nhigh agreement). Case studies map the causal mechanisms relating \r\nregulations and innovation responses in specific firms or industries \r\n(Gann et al. 1998; Kemp 2005; Ruby 2015; Wesseling et al. 2015)."


id: 9c0c552abc85a0b7eff5a6b1af43943
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"Regulation-driven deployment of existing technologies can generate \r\ninnovation in those technologies through learning by- doing, induced \r\nR&D and other mechanisms, although not in all cases (medium \r\nevidence, medium agreement) (Grubb et al. 2021). The introduction or \r\ntightening of minimum energy performance standards for appliances \r\n(and for buildings, in Noailly (2012)) have driven innovation \r\nresponses, using direct measures of product attributes (Newell et al. \r\n1999) and patents (Noailly 2012; Kim and Brown 2019), though not \r\nall studies have found a significant relationship (Girod et al. 2017). \r\nThere is also evidence of a  correlation between regulation-driven \r\ndeployment of energy-efficient products with accelerated learning in \r\nthose technologies (Van Buskirk et al. 2014; Wei et al. 2017)."


id: 1b2f22e6aa917ec3f7948743fb92f3d9
created_at: 2023-03-16 14:01:51
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content:
"In addition to observational studies, evidence on the relationship \r\nbetween innovation and regulation comes from surveys in which \r\nrespondents are asked whether they have engaged in innovation \r\nleading to energy saving or reduced GHG emissions, and what the \r\nmotivations were for such innovation. Survey evidence has found \r\nthat expected or current regulation can drive both R&D investment \r\nand decisions to adopt or introduce innovations that reduce energy \r\nconsumption or CO2 emissions (Horbach et  al. 2012; Grubb et  al. \r\n2021). Survey-based studies, however, tend not to specify the type \r\nof regulation."


id: badc478cfc076467104c228bed83b267
created_at: 2023-03-16 14:01:51
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content:
"Minimum energy performance standards and appliance standards \r\nhave been known to result in negative distributional impacts \r\n(limited evidence, medium/high agreement). Several studies focused "


id: bfd82ab18408493c66f479c5e98f2a5e
created_at: 2023-03-16 14:01:51
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content:
"From 1970 to 2001, China was able to significantly limit energy demand growth through energy-efficiency programmes. Energy use \r\nper unit of gross domestic product (GDP) declined by approximately 5% yr-1 during this period. However, between 2002 and 2005, \r\nenergy demand per unit of GDP increased on average by 3.8% yr-1. To curb this energy growth, in 2005, the Chinese government \r\nannounced a mandatory goal of 20% reduction of energy intensity between 2006 and 2010 (Zhou et al. 2010; Lo 2014)."


id: 550ea1312183401dad35c77dd0354989
created_at: 2023-03-16 14:01:51
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content:
"An energy labelling system was passed in 2004. It requires manufacturers to provide information about the efficiency of their electrical \r\nappliances to consumers. From 2004 to 2010, 23 electrical appliances (including refrigerators, air conditioners and flat-screen TVs) \r\nbeing labelled as energy efficient with five different grades - grade 1 being the most energy efficient and grade 5 the least efficient. \r\nAny appliances with an efficiency grade higher than 5 cannot be sold in the market."


id: f9a0e3be9fb1568aada8ca875cc252e0
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content:
"In addition to providing information to consumers, the National Development and Reform Commission, (which was in charge of \r\ndesigning the policies), and the Ministry of Finance launched in 2009 the 'energy-saving products and civilian-benefiting project' \r\n(Zhan et al. 2011). It covered air conditioners, refrigerators, flat panel televisions, washing machines, electrical efficient lighting, energy \r\nsaving and new energy vehicles with the energy grades at 1 or 2. The project also included financial subsidies for the enterprises \r\nproducing these products. The standard design of these financial subsidies involved the government paying for the price difference \r\nof energy-efficient products and general products. The manufacturers that produce the energy-efficient products receive financial \r\nsubsidies directly from the government (Z. Wang et al. 2017)."


id: 365c9e22749428bdded1188cb81eb8eb
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"Before 2008, the market share of grade 1 and grade 2 air conditioners was about 5%, and about 70% of all air conditioners were grade \r\n5 (the most inefficient). Driven by the financial subsidies, the selling price of the highly efficient air conditioners became competitive \r\nwith that of the general air conditioners. Hence, the sales of energy-efficient air conditioners increased substantially, making the \r\nmarket share of grade 1 and 2 air conditioners about 80% in 2010 (Z. Wang et al. 2017). According to the information from China's \r\nNational Institute of Standardization, the energy label system saved more than 1.5 hundred billion kWh power between 2005 and \r\nMarch 2010, equivalent to more than 60 million tonnes of standard coal, 1.4 billion tonnes of carbon dioxide emissions, and 60 tonnes \r\nof sulphur dioxide emissions (Zhan et al. 2011), which significantly contributed to energy saving goals of China's 11th Five-Year Plan."


id: fd57d23d5e58fcb9f25c46ba407a64e7
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content:
"The outcomes for performance or endorsement labels have been \r\nassociated with positive competitiveness outcomes (medium evidence,\r\nmedium agreement). Out of 19 studies, 89% report positive impact and \r\n11% negligible impact. Although there are several studies analysing \r\ncompetitiveness-related metrics, evidence on most individual metrics \r\nis sporadic, except for housing premiums. A large number of studies \r\nquantitatively assessing competitiveness find that green labels in \r\nbuildings are associated with housing price premiums in multiple \r\ncountries and regions (Fuerst and McAllister 2011; Kahn and Kok 2014; \r\nZhang et al. 2017). Of those studies, 32% were qualitative, associating \r\nappliance labelling programmes with employment and industry \r\ndevelopment (European Commission 2018). There is a research gap in \r\nanalyses of developing countries, and also in quantitatively assessing \r\noutcomes beyond housing price premiums."


id: ceb6d22dbb71eb2b28773b7c506dccfe
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"A few studies on the distributional outcomes of voluntary labelling \r\nprogrammes point to positive impacts (limited evidence, high \r\nagreement). All four studies that focus on benefits for consumers \r\nand tenants report positive impacts (Devine and Kok 2015). Although \r\nthere are benefits for utility companies and other stakeholders, more \r\nresearch is needed to specifically attribute these benefits to voluntary \r\nlabels rather than energy efficiency programmes in general."


id: a165fab465d183e2229420cb3f11b6ad
created_at: 2023-03-16 14:01:51
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"Voluntary agreements are associated with positive competitiveness \r\noutcomes (medium evidence, medium agreement): 14 out of 19 \r\nevaluations identified were associated with positive outcomes, \r\nwhile three were associated with negligible outcomes, and \r\ntwo with negative outcomes. Research found an increase in \r\nperceived firm financial performance (de Jong et al. 2014; Moon \r\net al. 2014). Studies also show an association with higher exports \r\nas more environmentally-conscious trade partners increasingly value \r\nenvironmental certifications (Bellesi et al. 2005). More research is \r\nneeded to develop evidence on metrics of competitiveness besides \r\nfirms' financial performance, and especially in developing countries."


id: 69cf72c2b18591df599c3d875c88753e
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"Positive impacts have been identified more frequently in some \r\npolicies than in others. There is also a lot of variation in the density \r\nof the literature. Developing countries are severely underrepresented \r\nin the decarbonisation policy instrument evaluation literature \r\naiming to understand the impact on innovation. (high evidence, \r\nhigh agreement)."


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"Figure 16.2 below indicates the extent to which some decarbonisation \r\npolicy instruments have been more or less investigated in terms of \r\ntheir impact on innovation outcomes (as described in Table 16.9). For \r\nexample, it indicates the extent to which there has been a greater \r\nfocus of evaluations of the impact of R&D investments, emissions \r\ntrading schemes and voluntary approaches on innovation. It also \r\nshows a  limited amount of evidence on procurement, efficiency \r\nobligations with tradeable green certificates (TGCs), building \r\ncodes and auctions."


id: 2bc841184ea8b27effd32de3a50642aa
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content:
"Voluntary agreements are associated with a  positive impact on \r\ndistributional outcomes (limited evidence, high agreement). Five \r\nstudies, mainly using qualitative approaches, report a  positive \r\nassociation between a firm adopting an environmental management \r\nsystem and impacts on its supply chains. There is a need for more \r\nstudies with quantitative assessments and geographical diversity."


id: edde7846895227f05c421ed0c970394f
created_at: 2023-03-16 14:01:51
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content:
"Figure  16.2 |  Number of evaluations available for each policy instrument type covered regarding their impact on innovation and direction of the \r\nassessment. The vertical axis displays the number of evaluations claiming to isolate the impact of each policy instrument type on innovation outcomes as listed in Table 16.9. \r\nThe colour indicates whether each evaluation identified a positive impact on the innovation outcome (blue), the existence of a negative impact (in red), and no impact (in grey). \r\nIt builds on Grubb et al. (2021), Lilliestam et al. (2021) and Penasco et al. (2021), and additional studies identified as part of these reviews. TGC stands for tradeable green \r\ncertificates. TWC stands for tradeable white certificates."


id: 6104f62f3acc5022e982691447b7d1d4
created_at: 2023-03-16 14:01:51
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content:
"There has been long-standing interest on the impact of Foreign Direct \r\nInvestment (FDI) on domestic capacity, innovation and environmental \r\noutcomes. While this section looks at the impact of trade instruments \r\non innovation, it does not cover the much larger body of evidence on \r\nthe relationship between FDI and economic development and growth."


id: c5134414638d6f0eb283bc2b1295e487
created_at: 2023-03-16 14:01:51
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content:
"Other emerging work investigates the role of local content \r\nrequirements on innovation outcomes and suggests that it can lead to \r\nincreased power costs (negative distributional impacts). The benefits \r\nto the domestic innovation system, measured by patents or exports, \r\nare unclear if the policies are not part of a holistic and longer-lasting \r\npolicy framework (Probst et al. 2020)."


id: 751735f7c8166a9775ead1f3934fdedd
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"Virtually all countries around the world have instituted systems for \r\nthe protection of creations and inventions, known as intellectual \r\nproperty rights (IPR) systems (WIPO 2021). While several types \r\nof intellectual property exist  - patents, copyright, design rights, \r\ntrademarks, and more - this section will focus on patents, as the most \r\nrelevant property right for technological innovations (WIPO 2008), \r\nand hence the most relevant for policy instruments in this context."


id: f36e47b2f5a51f33c902163ca0341c87
created_at: 2023-03-16 14:01:51
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content:
"Patent systems aim to promote innovation and economic growth, \r\nby stimulating both the creation of new knowledge and diffusion of \r\nthat knowledge (high evidence, high agreement). National patent \r\nsystems, as institutions, play a  central role in theories on national \r\ninnovation systems (high evidence, strong agreement). Patent \r\nsystems are usually instituted to promote innovation and economic \r\ngrowth (Machlup and Penrose 1950; Nelson and Mazzoleni 1996; \r\nEncaoua et al. 2006). Some countries explicitly refer to this purpose \r\nin their law or legislation - for instance, the US Constitution states \r\nthe purpose of the US IP rights system to 'promote the progress of "


id: 8669a54f914c499bd5c70c885b824af2
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"In general, IP protection and enforcement may have different \r\nimpacts on economic growth in different types of countries (limited \r\nevidence, high agreement). There has been a  significant degree of \r\nharmonisation and cooperation between national IP systems over \r\ntime. The most recent milestone is the World Trade Organization \r\n(WTO) 1994 Trade-Related Aspects of Intellectual Property Rights \r\n(TRIPS) Agreement, entered into by all WTO members, which "


id: ca8fabcac84592eb51181965c33fdd67
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content:
"have policies to include patented inventions in their standards only \r\nif the patent holder is willing to commit FRAND licensing conditions \r\nfor those patents (Contreras 2015). While a patent holder can choose \r\nnot to make such a commitment, by doing so, its patent is no longer \r\na candidate for inclusion in the standard. In the (many) fields where \r\nstandards are of key importance, it is very unusual for patent holders \r\nnot to be willing to enter into FRAND commitments (Bekkers 2017). \r\nThird, when a patent holder files at the patent office and opts for the \r\n'licence of right' regime, in return for reduced patent fees, they enter \r\ninto a contractual agreement that obliges them to license the patent \r\nto those who request it. While not all national patent systems feature \r\nthis regime, it is a feature present in the new European Community \r\npatent (EPO 2017), and may therefore increase in importance."


id: a31deff1610ab28fc274d1d7fd5a81e3
created_at: 2023-03-16 14:01:51
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content:
"For a discussion on the impact of intellectual property rights (IPR) on \r\ninternational technology diffusion, see Box 16.9 in Section 16.5."


id: c7d6e6e423e60653017daa582c60e73b
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"Sub-national deployment policies have been associated with different \r\nimpacts on competitiveness metrics (limited evidence, medium \r\nagreement). Research on green jobs shows positive association \r\nbetween sub-national policies and green jobs or green firms at the \r\nmetropolitan level as well as the state of provincial level, in both \r\nChina and the USA (Yi 2013; Yi and Liu 2015; Lee 2017), while others \r\nfind no impact of renewable portfolio standards on green job growth \r\nin the state (Bowen et al. 2013). Other examples of competitiveness \r\nare in the impact of regional green industrial policy in Brazil's Rio \r\nGrande do Sul region in attracting auctioned contracts for wind \r\nenergy (Adami et al. 2017) or in the changes in net positive state \r\nrevenues associated with removing tax incentives for wind producers \r\nin Idaho in the USA (Black et al. 2014)."


id: 7ed69e32d7a3cb01f175cad072d10364
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"Sub-national policies also directly support innovation and \r\ncompetitiveness through green incubators and direct grants or R&D \r\nfunding for local companies working on clean energy, intending to \r\npromote local economic development (limited evidence, medium \r\nagreement). The literature on the impacts of such policies on innovation "


id: 1f5118c377bab666594c84d7b85f68c1
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"and competitiveness is sparse. Some case studies and programme \r\nevaluation reports, primarily in the USA, have identified the impacts \r\nof sub-national policies on competitiveness --  for example, job \r\ncreation from direct R&D funding in North Carolina (Hall and Link \r\n2015), perceptions for local industry development and support for \r\nfollow-on financing for companies receiving state-funded grants in \r\nColorado (Surana et al. 2020b), and return on investments for the \r\nstate in research and innovation spending from the New York state's \r\nenergy agency (NYSERDA 2020). There is a general paucity of metrics \r\non innovation and competitiveness for systematic assessments of \r\nsuch programmes in developed countries, and even more so in India \r\nand other developing countries where such programmes have been \r\nincreasing (Gonsalves and Rogerson 2019; Surana et al. 2020a)."


id: ec16619154e4dfb043126c2cc6d3aeb7
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"This section covers international transfer and cooperation in relation \r\nto climate-related technologies, 'the flows of know-how, experience \r\nand equipment for mitigating and adapting to climate change \r\namongst different stakeholders' (IPCC 2000) as well as innovation \r\nto support transformative change compared to AR5 (IPCC 2014) \r\nand the IPCC Special Report on Global Warming of 1.5degC (SR1.5) \r\n(IPCC 2018a). This complements the discussion on international \r\ncooperation on science and technology in Chapter 14."


id: bc30e9f9bf916b9a4a577a2425c1d93e
created_at: 2023-03-16 14:01:51
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content:
"This section first outlines the needs and opportunities for \r\ninternational transfer and cooperation on low-emission technologies. \r\nIt then describes the main objectives and roles of these activities, \r\nand then reviews recent institutional approaches within and outside \r\nthe UN Framework Convention on Climate Change (UNFCCC) to \r\nsupport international technology transfer and cooperation. Finally, it \r\ndiscusses emerging ideas for international technology transfer and \r\ncooperation, and possible modifications to support the achievement \r\nof climate change and Sustainable Development Goals (SDGs), \r\nbuilding up to Section 16.6."


id: 3b662e14b6f9f4d0d2ede0e9aaaf557
created_at: 2023-03-16 14:01:51
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content:
"Although states and local governments increasingly support clean \r\nenergy deployment as well as directly support innovation, given its \r\nlink with economic development goals, there is a lack of systematic \r\nresearch on the impacts of these policies at the subnational level. \r\nMore research  - qualitative and quantitative, and in developed \r\nand developing countries  - is needed to systematically develop \r\nevidence on these impacts and to understand the reasons behind \r\nregional differences in terms of the type of policy as well as the \r\ncapabilities in the region."


id: 566f9009650e2522300cf20b91e8882d
created_at: 2023-03-16 14:01:51
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"A growing body of research aims to understand how different \r\npolicies interact and how to characterise policy mixes (del Rio 2010; \r\nHowlett and del Rio 2015; Rogge and Reichardt 2016; del Rio and \r\nCerda 2017). The empirical impact on the innovation outcomes \r\nis not yet discussed. A more detailed discussion of this literature is \r\nlocated in Chapter 13."


id: 1a0162e030dabe4ef08f7e36d514e829
created_at: 2023-03-16 14:01:51
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content:
"The climate technology transition can also yield other development \r\nbenefits, for instance better health, increased energy access, \r\npoverty alleviation and economic competitiveness (Deng et al. \r\n2018), including industrial development, job creation and economic \r\ngrowth (Porter and Van der Linde 1995; Altenburg and Rodrik \r\n2017; Lema et al. 2020; Pegels and Altenburg 2020) (Section 16.6). \r\nThe growing complexity of technologies and global competition \r\nhave made technology development a globalised process involving \r\nthe flow of knowledge and products across borders (Lehoux et al. \r\n2014; Koengkan et al. 2020). For instance, in electronics production, \r\nAsian economies have captured co-location synergies and dominate "


id: 224aecf6b221f06f6c6486612d670b07
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"An emerging stream of research in complex systems suggests that \r\nrelatively small changes in policy near a  possible tipping point in \r\nclimate impacts in areas, including changing strategies related \r\nto investments in innovation, could trigger large positive societal \r\nfeedbacks in the long term (Farmer et al. 2019; Otto et al. 2020)."


id: 7006a08873fb61d31e9729dad2adc9e9
created_at: 2023-03-16 14:01:51
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"production and assembly of product components, whereas American \r\nfirms have adopted 'design-only' strategies (Tassey 2014). In the \r\ncontext of renewable energy technologies, 'green global division of \r\nlabour' has been observed, with countries specialising in investments \r\nin research and development (R&D), manufacturing or deployment of \r\nrenewables (Lachapelle et al. 2017). In the case of solar photovoltaic \r\n(PV), for example, while many technical innovations emerged from \r\nthe USA, Japan and China emphasised the manufacture of physical \r\nmodules (Deutch and Steinfeld 2013) (Box 16.4)."


id: 5db800da5adb5f9a194cd6af92451101
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content:
"International efforts involving technology transfer can have different \r\nobjectives and roles. These include access to knowledge and \r\nfinancial resources as well as promotion of new industries in both \r\nthe developed and recipient country (Huh and Kim 2018). Based \r\non an econometric analysis of international technology transfer \r\nfactors and characteristics of Clean Development Mechanism (CDM) \r\nprojects, Gandenberger et al. (2016) find that complexity and novelty \r\nof technologies explain whether a CDM project includes hardware \r\ntechnology transfer, and that factors like project size and absorptive \r\ncapacity of the host country do not seem to be drivers. Halleck Vega \r\nand Mandel (2018) argue that 'long-term economic relations', for \r\ninstance being part of a customs union, affect technological diffusion \r\nbetween countries in the case of wind energy, and indicate that this \r\nhas resulted in low-income countries being largely overlooked."


id: cf9e9a10c74f487333a8db9ca4a5d4e2
created_at: 2023-03-16 14:01:51
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content:
"There is some literature studying whether technology cooperation \r\ncould complement or replace international cooperation based on \r\nemission reductions, such as in the Kyoto Protocol, and whether \r\nthat would have positive impacts on climate change mitigation and \r\ncompliance. A handful of papers conducted game-theoretic analysis on \r\ntechnology cooperation, sometimes as an alternative for cooperation \r\non emission reductions, and found partially positive effects (Bosetti \r\net al. 2017; Narita and Wagner 2017; Rubio 2017; Verdolini and \r\nBosetti 2017). However, Sarr and Swanson (2017) model that, due to \r\nthe rebound effect, technology development and transfer of resource\u0002saving technologies may not lead to envisioned emission reductions."


id: c0eb08d283ea57066cd6780b8e2d1484
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content:
"While technology cooperation can be aimed at emission reduction \r\nthrough mitigation projects, as indicated above, not all cooperative \r\nactions directly result in mitigation outcomes. Overall, technology \r\ntransfer broadly has focused on: (i) enhanced climate technology \r\nabsorption and deployment in developing countries; and \r\n(ii)  enhanced research, development and demonstration (RD&D) \r\nthrough cooperation and knowledge spillovers."


id: 146321ab60caf48fd1424deafeecfc10
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"This is consistent with literature that suggests that greenhouse \r\ngas (GHG) mitigation in developing countries can be enhanced by: \r\n(i) technology development and transfer collaboration and a 'needs\u0002driven' approach; (ii) development of the specific types of capacity \r\nrequired across the entire innovation chain; and (iii) strengthening of \r\nthe coordination and agendas across and between governance levels \r\n(including domestic and international levels) (Khosla et al. 2017; \r\nZhou 2019; Upadhyaya et al. 2020)."


id: cc3ed200420732d55e2510597a1dc3db
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"imported climate technologies; lack of domestic capacities to \r\ndeploy and maintain imported technologies; the weak regulatory \r\nenvironment to stimulate clean technology entrepreneurship; the \r\nabsence or inadequacy of climate change laws; and weak legal \r\nprotection for imported technologies. Moreover, Ziervogel et al. \r\n(2021) indicate that, for transformative adaptation, transdisciplinary \r\napproaches and capacity-building shifting, 'the co-creation of \r\ncontextual understandings' instead of top-down transfer of existing \r\nknowledge would deliver better results. Despite the understanding of \r\nthe importance of the capacity issue, significant gaps still remain on \r\nthis front (TEC 2019) (Section 16.5.4)."


id: 257ed9958aebc54219df28570355f643
created_at: 2023-03-16 14:01:51
updated_at: 2023-03-16 14:01:51
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content:
"The sections below discuss the literature on various categories of \r\ninternational technology cooperation and transfer."


id: 9d95d9f90426f005f5b842847fd5d434
created_at: 2023-03-16 14:01:51
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"There are multiple studies drawing on empirical work that also \r\nsupport this conclusion. For South-South technology transfer between \r\nIndia and Kenya, not just technical characteristics, but also mutual \r\nlearning on how to address common problems of electricity access \r\nand poverty, was suggested as an important condition for success \r\n(Ulsrud et al. 2018). Olawuyi (2018) discusses the specific capability \r\ngap in Africa, despite decades of technology transfer efforts under \r\nvarious mechanisms and programmes of the UNFCCC.  The study \r\nsuggests that barriers need to be resolved by African countries \r\nthemselves, in particular: inadequate access to information about "


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"Technology development and transfer have been a part of UNFCCC \r\ndiscussions and developments in the context of the international \r\nclimate negotiations ever since its agreement in 1992, as assessed in \r\nAR5 (Stavins et al. 2014). Support on 'Technology Needs Assessment' \r\nto developing countries was the first major action undertaken by \r\nthe UNFCCC, and this has undergone different cycles of learning "


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"Box 16.8 | Capacity Building and Innovation for Early Warning Systems in Small Island \r\nDeveloping States"


id: cb43317e399931dbda9f4d581b987256
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"One of the areas of international cooperation on capacity building is adaptation, which has been highlighted by both the Technology \r\nExecutive Committee (TEC) (Ockwell et al. 2015; TEC 2015) and the Paris Committee on Capacity-building (UNFCCC 2020b) as an area \r\nwhere capacity gaps remain, especially in Small Island Developing States (SIDS)."


id: 46ddc29d5c5bc54c498b1040971fdb83
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"While adaptation was initially conceived primarily in terms of infrastructural adjustments to long-term changes in average conditions \r\n(e.g., rising sea levels), a key innovation in recent years has been to couple such long-term risk management to existing efforts to \r\nmanage disaster risk, specifically including early warning systems, enabling early action in the face of climate- and weather-risk at \r\nmuch shorter timescales (IPCC 2012), with potentially significant rates of return (Rogers and Tsirkunov 2010; Hallegatte 2012; Global \r\nCommission on Adaptation 2019)."


id: 1790a312f4dd387c582a1d70fe5be2bc
created_at: 2023-03-16 14:01:51
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"One of several helpful innovations in these efforts is impact-based forecasting (Harrowsmith et al. 2020), which provides forecasts \r\ntargeted at the impact of the hazard rather than simply the meteorological variable. This enables a much easier coupling to early \r\naction in response to the information, and a more appropriate response afterwards. Automatic responses to warnings have also \r\nbeen adopted in the humanitarian field for anticipatory action ahead of (rather than simply in response to) disasters triggered by \r\nnatural hazards (Coughlan de Perez et al. 2015). This has resulted in a rapid scale-up of such anticipatory financing mechanisms to \r\ntens of countries over the past few years, and emerging evidence of its effectiveness. Still, the response is lacking in coherence and \r\ncomprehensiveness, resulting in calls for a more systematic evidence agenda for anticipatory action (Weingartner et al. 2020)."


id: 755ed874a4f7a7aa65627b93bdb7be74
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content:
"establish the Climate Innovation Facility to support and accelerate \r\nearly-stage innovations and climate technologies through the \r\nestablishment of regional innovation hubs and climate accelerators \r\nas well as a climate growth fund (Green Climate Fund 2020)."


id: 61b8c47c09b213a75b91e441c2675ae9
created_at: 2023-03-16 14:01:51
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content:
"The 'technology' discussion has been further strengthened by the \r\nParis Agreement, in which Article 10 is fully devoted to technology \r\ndevelopment and transfer (UNFCCC 2015). However, the political \r\ndiscussions around technology continue to be characterised by \r\nviewing technology mostly as hardware (Haselip et al. 2015), and \r\nrelatively limited in scope (de Coninck and Sagar 2017). The workplans \r\nof the TEC and the CTCN do, however, indicate a broadening of the \r\nperspective on technology (CTCN 2019; TEC 2019)."


id: 3e6053eb7bc2607d963f6cdc71ed9fd4
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"Since the Kyoto Protocol's CDM has been operational, studies have \r\nassessed its hypothesised contribution to technology transfer, \r\nincluding transfer of knowledge. Though not an explicit objective \r\nof the CDM, numerous papers have investigated whether CDM \r\nprojects contribute to technology transfer (Michaelowa et al. 2019). \r\nThe literature varies in its assessment. Some find extensive use \r\nof domestic technology and hence lower levels of international \r\ntechnology transfer (Doranova et al. 2010), while others indicate "


id: c12dd3b047a45a432bf9f3b8dda6dd5f
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content:
"An example of how innovative technologies combined with capacity \r\ndevelopment, and how institutional innovation is combined in the \r\ncontext of adaptation to extreme weather in SIDS can be found in \r\nBox 16.8."


id: a165c6a4a80f1abfcee0bf3e1f513522
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"Besides the UNFCCC mechanisms, there are numerous other initiatives \r\nthat promote international cooperation on RD&D as well as capacity \r\nbuilding. Some of them are based on the notion of 'mission-oriented \r\ninnovation policy' (Mazzucato and Semieniuk 2017; Mazzucato 2018), \r\nwhich shapes markets rather than merely corrects market failures."


id: 43b4d6e0800a00e570766dacb0191e19
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content:
"For instance, Mission Innovation is a global initiative consisting of 23 \r\nmember countries and the European Commission working together \r\nto reinvigorate and accelerate global clean energy innovation \r\nwith the objective to make clean energy widely affordable with \r\nimproved reliability and secured supply of energy. The goal is to \r\naccelerate clean energy innovation in order to limit the rise in \r\nthe global temperature to well below 2degC. The members seek to \r\nfoster international collaboration among its members and increase \r\npublic investments in clean energy R&D with the engagement \r\nof the private sector. A  recent assessment shows that, although "


id: f4166466d4d83fa68be9fd74a8aba53c
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"In the global context of climate mitigation technologies, it has been noted that technologies have been developed primarily in \r\nindustrialised countries but are urgently required in fast-growing emerging economies (Dechezlepretre et al. 2011). International \r\ntechnology transfers can take place via three primary channels: (i) trade in goods, where technology is embedded in products; \r\n(ii) Foreign Direct Investment (FDI), where enterprises transfer firm-specific technology to foreign affiliates; and (iii) patent licences, \r\nwhere third parties obtain the right to use technologies. IPRs are relevant for all these three channels."


id: 9224a881d3410c7961e616c5957ad4
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"Not surprisingly, the role of IPRs in international transfer of climate mitigation technologies has been much discussed but also \r\ndescribed as particularly controversial (Abdel-Latif 2015). The relationships between IPR, innovation, international technology transfer \r\nand local mitigation and adaptation are complex (Maskus 2010; Abdel-Latif 2015; Li et al. 2020) and there is no clear consensus on \r\nwhat kind of an IPR regime will be most beneficial for promoting technology transfer."


id: 6260687a565c1cbe6e2c3b0c12710029
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"Several studies argue that, particularly in developing nations, the global IPR regime has resulted in delayed access, reduced competition \r\nand higher prices (Littleton 2008; Zhuang 2017) and that climate-change-related technology transfer is insufficiently stimulated under \r\nthe current IPR regime. Compulsory licensing (as already used in medicine) is one of the routes proposed to repair this (Littleton 2008; \r\nAbdel-Latif 2015)."


id: 2cdf2de4f5d0b6a7a424239427be1850
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"There is little systematic evidence that patents and other IPRs restrict access to environmentally-sound technologies, since these \r\ntechnologies are mostly in sectors based on mature technologies where numerous substitutes among global competitors are available \r\n(Maskus 2010). This might, however, change in the future - for instance, with new technologies based on plants, via biotechnologies \r\nand synthetic fuels (Maskus 2010), for which Correa et al. (2020) already find some evidence."


id: 8c9014fa8e709b7d31655510f2dd5621
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"In terms of ways forward to meet the challenge of climate change, different suggestions are made in the context of IPR that can help \r\nto further improve international technology transfer of climate mitigation technologies, including through the Trade-Related Aspects of \r\nIntellectual Property Rights (TRIPS) Agreement, by making decisions on IPR to developing countries on a case-by-case basis, by developing \r\ncountries experimenting more with policies on IPR protection, or through brokering or patent-pooling institutions (Littleton 2009; Maskus \r\nand Reichman 2017; Dussaux et al. 2018). Others also suggest that distinctions among country groups be made on the basis of levels \r\nof technological and economic development, with least-developed countries getting particular attention (Zhuang 2017; Abbott 2018)."


id: faa87f36d6f8de9dc64d3860f7bd89be
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"expenditures are rising, the aims were not met by 2020 (Myslikova \r\nand Gallagher 2020). Gross et al. (2018) caution against too much \r\nfocus on R&D efforts for energy technologies to address climate \r\nchange, including for Mission Innovation. They argue that, given the \r\ntimescales of commercialisation, developing new technologies now \r\nwould mean they would be commercially too late for addressing \r\nclimate change. Huh and Kim (2018) discuss two 'knowledge and \r\ntechnology transfer' projects that were eventually not pursued \r\nbeyond the feasibility study phase due to cooperation and \r\ncommitment problems between national and local governments, \r\nand they highlight the need for ownership and engagement of local \r\nresidents and recipient governments."


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"developing countries with the climate technology transition (TEC \r\n2015; Ockwell and Byrne 2016). This has given rise to several \r\nproposals, discussed here and summarised in Figure 16.3."


id: 985d19a4294497f69fcb751b3d82e4cd
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"Enhancing deployment and diffusion of climate technologies in \r\ndeveloping countries would require a variety of actors with sufficient \r\ncapabilities (robust evidence, medium agreement) (Kumar et al. 1999; \r\nSagar et al. 2009; Ockwell et al. 2018). This may include strengthening \r\nexisting actors (Malhotra et al. 2021), supporting science, technology, \r\nand innovation-based start-ups to meet social goals (Surana et al. \r\n2020b), and developing entities and programmes that are intended \r\nto address specific gaps relating to technology development and \r\ndeployment (Sagar et al. 2009; Ockwell et al. 2018)."


id: 2fc425f81458e500c98cebeb1ac6e4bc
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"Intellectual property rights (IPR) regimes (Box 16.9) can be an enabler \r\nor a barrier to energy transition. For more background on IPR and \r\nimpact on innovation, see Section 16.4.6."


id: 931c88ccf8b77d0dc2bc46ef0fc4b5dd
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"There is also an increasing emphasis on the relevance of \r\nparticipative social innovation, local grounding and policy learning \r\nas a replacement of the expert-led technological change (Chaudhary \r\net al. 2012; Disterheft et al. 2015; Kowarsch et al. 2016). Others have \r\nsuggested a shift to international innovation cooperation rather than \r\ntechnology transfer, which implies a donor-recipient relationship. The \r\nnotion of innovation cooperation also makes more explicit the focus \r\non innovation processes and systems (Pandey et al. 2021). A broad \r\ntransformative agenda therefore proposes that contemporary societal \r\nchallenges are complex and multivariegated in scope and will require \r\nthe actions of a diverse set of actors to formulate and address the "


id: 84f5b72107cb5961be3298bd44ca408c
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"As with the broader innovation literature (Section 16.3), and drawing \r\non such literature, there has been an emergence of a  greater \r\nunderstanding of, and emphasis on, the role of innovation systems \r\n(at national, sectoral, and technological levels) as a  way to help "


id: 98a40618bc50fa4750d2202ba47cfb15
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"policy, implying that social, institutional and behavioural changes \r\nnext to technological innovations are the possible solutions (Geels \r\n2004) (see also Cross-Chapter Box 12 in this chapter)."


id: 7bdb7088524389638a1e9d9423c69f4e
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"Building on an earlier discussion of technology-oriented and \r\nsectoral agreements (Meckling and Chung 2009) and the potential \r\nfor international cooperation in energy-intensive industry (Ahman \r\net al. 2017), where deep emission reduction measures require \r\ntransformative changes (Chapter 11), Oberthur et al. (2021) propose \r\nthat that a  way forward for the global governance for energy\u0002intensive industry could be through sub-sector 'clubs' that include \r\ngovernmental, private and societal actors (Oberthur et al. 2021)."


id: 5a97f93e553f9cbd2cdf8bfd06efe2e1
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"Several authors have proposed new mechanisms for international \r\ncooperation on technology. Ockwell and Byrne (2016) argue that \r\na role for the UNFCCC Technology Mechanism could be to support \r\nClimate Relevant Innovation-system Builders (CRIBs) in developing \r\ncountries, institutions locally that develop capabilities that 'form \r\nthe bedrock of transformative, climate-compatible, technological \r\nchange and development'. Khan et al. (2020) propose a  specific \r\nvariant with universities in developing countries serving as 'central \r\nhubs' for capacity building to implement the NDCs as well as other \r\nclimate policy and planning instruments; they also suggest that \r\ndeveloping countries outline their capacity-building needs more \r\nclearly in their NDCs."


id: ef522851741b04a4f9add771449fb7cb
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"Figure 16.3 summarises examples of emerging ideas for international \r\ncooperation on climate technology, their relation to the objectives \r\nand existing efforts, and the level of development of the innovation \r\nsystem around a technology (Hekkert et al. 2007; Bergek et al. 2008) \r\nor in nations (Lundvall et al. 2009)."


id: 220bd1c6b3678067ae04a861f3148675
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"Also, the concentration of technology in few hands has boosted \r\nconsumption of goods and services which are not necessarily aligned \r\nwith the Sustainable Development Goals (SDGs) (Walsh et al. 2020). It \r\nhas been suggested that, in order to address sustainable development \r\nchallenges, science and technology actors would have to change their \r\nrelation to policymakers (Ravetz and Funtowicz 1999) as well as the \r\npublic (Jasanoff 2003). This has been further elaborated for the SDGs. \r\nThe scale and ambition of the SDGs call for a change in development \r\npatterns that require a  fundamental shift in: current best practices; \r\nguidelines for technological and investment decisions; and the wider \r\nsocio-institutional systems (UNCTAD 2019; Pegels and Altenburg \r\n2020). This is needed as not all innovation will lead to sustainable \r\ndevelopment patterns (Altenburg and Pegels 2012; Lema et al. 2015)."


id: 203bbd30913b4b43b0864725bf4f83cc
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"This section considers technological innovation in the broader \r\ncontext of sustainable development, recognising that technological \r\nchange happens within social and economic systems, and therefore \r\ntechnologies are conceived and applied in relation to those systems \r\n(Grubler 1998). Simplifications of complex interactions between \r\nphysical and social systems and incomplete knowledge of the \r\nindirect effects of technological innovation may systematically lead \r\nto underestimation of environmental impacts and overestimation of \r\nour ability to mitigate climate change (Hertwich and Peters 2009; \r\nArvesen et al. 2011)."


id: ae23723127a3bfc5192728c7f492ae3b
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"Current SDG implementation gaps reflect, to some extent, \r\ninadequate understanding of the complex relationships among the \r\ngoals (Waiswa et al. 2019; Skene 2020), as well as their synergies and \r\ntrade-offs, including how they limit the range of responses available \r\nto communities and governments, and potential injustices (Thornton \r\nand Comberti 2017). These relationships have been approached by \r\nfocusing primarily on synergies and trade-offs while lacking the \r\nholistic perspective necessary to achieve all the goals (Nilsson et al. \r\n2016; Roy et al. 2018)."


id: d32afa4a553c2ef6da583fd31b0eaa12
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"Previous sections of the chapter discussed how a systemic approach, \r\nappropriate public policies and international cooperation on \r\ninnovation can enhance technological innovation. This section \r\nprovides more details on how innovation and technological change, \r\nsustainable development and climate change mitigation intertwine."


id: e86995088533fca787f2136509043e71
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"Sustainable development and technological change are deeply \r\nrelated (UNCTAD 2019). Technology has been critical for increasing \r\nproductivity as the dominant driving force for economic growth. "


id: 4a86beade3ae8bde851890c551487d25
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"Figure 16.4 | Considerations and typology of innovations for sustainable development. Source: Silvestre and Tirca (2019)."


id: 4d1c33272d83755fa92cb2c2ae787a71
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"environmental aims is not possible, but that sustainable innovations \r\ninclude satisfactory solutions for social, environmental and economic \r\npillars (Figure 16.4)."


id: 3947b4b5f5aa215810974270abdbbb1
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"There is evidence that technological changes can catalyse \r\nimplementation of the reforms needed to the manner in which goods \r\nand services are distributed among people (Fu et al. 2019). A recently \r\ndeveloped theoretical framework based on a  capability approach \r\n(CA) has been used to evaluate the quality of human life and the \r\nprocess of development (Haenssgen and Ariana 2018). Variations of \r\nthe CA have been applied to exploratory studies of the link between \r\ntechnological change, human development, and economic growth \r\n(Mayer 2001; Mormina 2019). This suggests that the transformative \r\npotential of technology as an enabling condition is not intrinsic, \r\nbut is assigned to it by people within a given technological context. \r\nA failure to recognise and account for this property of technology is \r\na  root cause of many failed attempts at techno-fixing sustainable \r\ndevelopment projects (Stilgoe et al. 2013; Fazey et al. 2020)."


id: 5af09914a3390d59712bb5fd37069550
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"The basic rationale for governance of technological change is the \r\ncreation and maintenance of an enabling environment for climate \r\nand SDG-oriented technological change (Avelino et al. 2019). Such \r\nan environment poses high demands on governance and policy to \r\ncoordinate with actors and provide a  direction for innovation and \r\ntechnological change. Cross-Chapter Box  12 illustrates how the \r\ndynamics of socio-technical transitions and shifting development \r\npathways towards sustainable development offer options for \r\npolicymakers and other actors to accelerate the system transitions \r\nneeded for both climate change mitigation and sustainable \r\ndevelopment. Governance interventions to implement the SDGs will \r\nneed to be operationalised at sub-national, national and global levels \r\nand support integration of resource concerns in policy, planning and \r\nimplementation (UNEP 2015; Williams et al. 2020)."


id: 649972a2fe0a555cf7f2d2f3354e7980
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"Authors: Anthony Patt (Switzerland), Heleen de Coninck (the Netherlands), Xuemei Bai (Australia), Paolo Bertoldi (Italy), Sarah Burch \r\n(Canada), Clara Caiafa (Brazil/the Netherlands), Felix Creutzig (Germany), Renee van Diemen (the Netherlands/United Kingdom), \r\nFrank Geels (United Kingdom/the Netherlands), Michael Grubb (United Kingdom), Maria Josefina Figueroa Meza (Venezuela/Denmark), \r\nSiir Kilkis (Turkey), Jonathan Kohler (Germany), Catherine Mitchell (United Kingdom), Lars J. Nilsson (Sweden), Patricia Perkins (Canada), \r\nYamina Saheb (France/Algeria), Harald Winkler (South Africa)"


id: 8145547b3bc1fa2316e1d63d6a18fdee
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"Numerous studies suggest that transformational changes would be required in many areas of society if climate change is to be limited \r\nto 2degC warming or less. Many of these involve shifts to low-carbon technologies, such as renewable energy, which typically involve \r\nchanges in associated regulatory and social systems; others more explicitly concern behavioural shifts, such as towards plant-based \r\ndiets or cleaner cooking fuels, or, at the broadest level, a shift in development pathways. Chapter 1 establishes an analytic framework \r\nfocusing on transitions, which chapters 5, 13, 14, 15 and 16 further develop. In this Cross-Chapter Box, we provide a complementary \r\noverview of the dynamics of different kinds of transformational changes for climate mitigation and sustainable development. We first \r\nfocus on insights from socio-technical transitions approaches, and then expand to broader system transitions."


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"A large volume of literature documents the processes associated with transformational changes in technology and the social systems \r\nassociated with their production and use (Geels 2019; Kohler et al. 2019). Transformational technological change typically goes hand \r\nin hand with shifts in knowledge, behaviour, institutions, and markets (Geels and Schot 2010; Markard et al. 2012); stickiness in these "


id: 274e9a641569e25b8b3c8514b91252c2
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"The emergence stage is marked by experimentation, innovation in the laboratory, and demonstration in the field, to produce \r\ntechnologies and system architectures (Geels 2005). By its very nature, experimentation includes both successes and failures, and \r\nimplies high risks. Because of these risks, especially in the case of fundamentally new technologies, government funding for research, \r\ndevelopment and demonstration (RD&D) projects is crucial to sustaining development (Mazzucato 2015b)."


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"The second stage is early adoption, during which successful technologies jump from the laboratory to limited commercial application \r\n(Pearson and Foxon 2012). Reaching this stage is often described as crossing the 'Valley of Death', because the cost/performance ratio "


id: 5d4c25dff5b434a2936630a3e82fd431
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"The fourth stage is stabilisation, in which the new technologies, systems, and behaviours are both standardised and insulated from \r\nrebound effects and backsliding (Andersen and Gulbrandsen 2020). Sectoral bans on further investment in high-carbon technologies \r\nmay become politically feasible at this point (Breetz et al. 2018; Economidou et al. 2020). The decline of previously dominant products \r\nor industries can lead to calls for policymakers to help those negatively affected, enabling a just transition (McCauley and Heffron \r\n2018; Newell and Simms 2020). Political opposition to the system reconfiguration that comes with integration and stabilisation can \r\nalso be overcome by offering incumbent actors an attractive exit strategy (de Gooyert et al. 2016)."


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"Dynamics between enabling conditions for system transitions\r\nAbson et al. (2017) argue that it is possible to make use of 'leverage points' inherent in system dynamics in order to accelerate \r\nsustainability transitions. Otto et al. (2020) argue that interventions geared towards the social factors driving change can 'activate "


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"contagious processes' leading to the transformative changes required for climate mitigation. These self-reinforcing dynamics involve \r\nthe interaction of enabling conditions, including public policy and governance, institutional and technological innovation capacity, \r\nbehaviour change, and finance. For example, Mercure et al. (2018) simulated financial flows into fossil-fuel extraction, and showed \r\nhow investors taking into account transition risk in combination with technological innovation would lead to the enhancement of \r\ninvestments in low-carbon assets and further enhanced innovation. As another example, behaviour, lifestyle, and policy can also \r\ninitiate demand-side transitions (Tziva et al. 2020) (Chapter 5), such as with food systems (Rust et al. 2020) (Section 7.4.5), and can \r\ncontribute to both resilience and carbon storage (Sendzimir et al. 2011) (Box 16.5)."


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"Policies shifting innovation in climate-compatible directions can also reinforce other development benefits, for instance better health, \r\nincreased energy access, poverty alleviation and economic competitiveness (Deng et al. 2018; IPCC 2018a; Karlsson et al. 2020). \r\nDevelopment benefits, in turn, can create feedback effects that sustain public support for subsequent policies, and hence help to \r\nsecure effective long-term climate mitigation (Geels 2014; Meckling et al. 2015; Schmidt and Sewerin 2017; Breetz et al. 2018), \r\nincreasing legitimacy of environmental sustainability actions (Hansen et al. 2018; Herslund et al. 2018; van Welie and Romijn 2018) \r\nand addressing negative socio-economic impacts (Deng et al. 2018; McCauley and Heffron 2018; Eisenberg 2019; Henry et al. 2020)."


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"Strategies to accelerate climate mitigation can be most effective at accelerating and achieving transformative change when they are \r\nsynchronised with transition processes in systems. They address technological stage characteristics, take advantage of high-leverage \r\nintervention points, and respond to societal dynamics (Abson et al. 2017; Geels et al. 2017; Kohler et al. 2019). Gaps in knowledge \r\nremain on how to tailor policy mixes, the interaction of enabling conditions, the generalisability of socio-technical transition insights \r\nto other types of systems, and how to harness these insights to better shift development pathways."


id: 38ca914fbf95bda9174ed8835742c7a6
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"Taeihagh 2020), and gaps between expected and actual performance \r\nof building-integrated photovoltaic (BIPV) technology (Boyd and \r\nSchweber 2018; Gram-Hanssen and Georg 2018). In the agricultural \r\nsector, new technologies and associated practices that target the \r\nfitness of crop pests have been found to favour resistant variants. \r\nUnintended consequences of digitalisation are reported as well \r\n(Lynch et al. 2019) (Cross-Chapter Box 11 in this chapter)."


id: 9429992664cd93bb309f3679ff3f9722
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"Therefore, even though science, technology and innovation is an \r\nexplicit focus of SDG 9, it is an enabler of most SDGs (UNCTAD 2019). \r\nStriving for synergies between innovation and technological change \r\nfor climate change mitigation with other SDGs can help to secure \r\neffective long-term climate mitigation, as development benefits can \r\ncreate feedback effects that sustain public and political support for \r\nsubsequent climate mitigation policies (Geels 2014; Meckling et al. \r\n2015; Cross-Chapter Box 12 in this chapter). However, innovation is \r\nnot always geared to sustainable development - for instance, firms \r\ntend to know how to innovate when value chains are left intact (Hall \r\nand Martin 2005), which is usually not the case in systemic transitions."


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vector_id: 15310
content:
"The opportunities and challenges of technological change can \r\nalso differ within country regions and between countries (Garcia\u0002Casals et al. 2019). Within countries, Vasconcellos and Caiado \r\nCouto (2021) show that, in the absence of policies and capacity\u0002building activities which promote local recruiting, a significant part \r\nof total benefits of wind projects, especially high-income jobs and \r\nhigh value-added activities, is captured by already higher-income \r\nregions. Between countries, developing countries usually have lower \r\ninnovation capabilities, which means they need to import low\u0002emission technology from abroad and are also less able to adapt \r\nthese technologies to local conditions and create new markets and \r\nbusiness models. This can lead to external dependencies and limit \r\nopportunities to leverage economic benefits from technology transfer \r\n(Section 16.5.1)."


