Setting Priorities in Energy Innovation Policy: Lessons for the UK

The views expressed within this paper are the author's and do not necessarily reflect those of the The overarching objective of the Energy Technology Innovation Policy (ETIP) research group is to determine and then seek to promote adoption of effective strategies for developing and deploying cleaner and more efficient energy technologies, primarily in three of the biggest energy-consuming nations in the world: the United States, China, and India. These three countries have enormous influence on local, regional, and global environmental conditions through their energy production and consumption. ETIP researchers seek to identify and promote strategies that these countries can pursue, separately and collaboratively, for accelerating the development and deployment of advanced energy options that can reduce conventional air pollution, minimize future greenhouse-gas emissions, reduce dependence on oil, facilitate poverty alleviation, and promote economic development. ETIP's focus on three crucial countries rather than only one not only multiplies directly our leverage on the world scale and facilitates the pursuit of cooperative efforts, but also allows for the development of new insights from comparisons and contrasts among conditions and strategies in the three cases. Executive Summary The transition towards more sustainable, low carbon societies will require the development and deployment of a range of new and existing energy technologies. These include centralised supply side options such as carbon capture and storage, infrastructure technologies such as decentralised energy networks, and technologies adopted by consumers such as LED lighting, cleaner vehicles and micro-generation. This paper analyses the role of governments in supporting this process and draws on experience from Europe, the USA and Japan. The paper's starting point is the common assertion that governments should avoid providing targeted support to particular technologies. Instead, they should set general frameworks to encourage more sustainable innovation, for example by creating carbon markets. The practice of 'picking winners' should therefore be avoided because governments are not best placed to decide which technologies to fund. 3 The paper challenges this argument on a number of grounds. First, the resources that governments can devote to sustainable energy innovation are limited. If there is no attempt to prioritise how these resources are used, there is a risk that they will be spread too thinly. Second, the urgency of climate change means that innovation and deployment may be too slow if there is an excessive reliance on the carbon market. Carbon markets such as the EU emissions trading scheme are in their …