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Module 04
Supporting Innovation for Green Growth
Lesson 2
Policies for Frontier Innovation and Adaptive Innovation
World Bank
Institute
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Several developing countries have advanced their public funding in research and
development of green technologies. Please click on the examples to learn more
about Chinas and South Koreas supply side investments in Research and
Development.
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social co-benefits in the grants. Yet, of course, grants for basic research do not
ensure commercialization as they only address early stages of the technology cycle.
An example of research grants comes from Malaysia, please read through the
example to learn more.
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As the figure shows, this can come from both public and private resources. Public
support in the form of matching grants and soft loans can be important. The private
sources at this early stage typically come from own sources (home equity loans,
retained earnings), friends and family, and so-called angel investors. Venture Capital
or VC investors and Private equity firms and Private corporations usually come in a
little bit later in the process. As an example Venture Capitalist firms typically look for
3-5 years to pay out.
VC Investors and Angel Capital investors are the best suited to finance clean energy
investments that are risky and fairly small. Although they will not provide more than
a fraction of the resources needed, they can fill a key niche for driving green energy
projects.
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Since VC firms have shown to be a dynamic force to bridge the gap between
research and commercialization, it can be useful to have policies that help create a
supportive environment for such firms, including an adequate legal, regulatory and
tax environment on the supply side, and a sufficient flow of bankable deals on the
demand side. Policies to help nurture and support bankable deals include business
incubators. Business incubators can be defined as programs that are designed to
support the successful development of companies through several business support
resources and services. Please click on the box to learn more about examples of VC
firms in the energy sector and how the Brazilian government has implemented
policies to support VC investors.
Two useful mechanisms are Prize funds and advanced market commitments.
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Prize funds are pre-announced prizes that are given to whoever comes up with an
innovation that meets defined objectives. They are most appropriate when
objectives can be well defined but the technologies are unknown.
The benefits are that the financial reward stimulates competition and the prize can
attract large organizations as well as individuals and small organizations. On the
other hand, prize funds might set requirements which are too easily met, which
unfortunately will lead to a missed opportunity for pushing the innovation frontier
out further, as well as resulting in a disappointing outcome for the funders. Please
read through the examples of prize funds; when you are done, proceed to the next
slide.
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In Malaysia, palm oil cultivation takes approximately 95 per cent of the total
agricultural land. The oil extraction process generates a large amount of biomass. In
fact, only about 10 per cent of oil is generated from an oil palm tree, and the rest is
yielded as waste. The challenge for Malaysian palm oil industry is therefore to
effectively utilize the increasing amount of oil palm waste, as the waste and residue
from oil mills and processing plants always pose threats to the environment. If
managed well, these wastes could be turned into new sources of energy, thereby
contributing to the national economy of Malaysia. The Malaysian government has
taken important policy measures to capitalize on the opportunities. First step was to
establish the National Biomass Strategy 2020: New wealth creation for Malaysias
palm oil industry. The document specifically focuses on the development of the
high-value downstream linkage, e.g. bio-energy, bio-fuel, bio-chemicals, using oil
palm biomass. By doing so, it envisions to generate high value jobs and to foster local
technologies for the benefit of the national economy.
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We will look at four patent policies in the next few slides. Before moving on, it is
however important to remember that these policies do not need to be exclusive to
one another but rather there can be an advantage to pursue several of these patent
policies simultaneously.
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An example of how patent pools can work is the World Intellectual Property
Organizations initiative called WIPO Green.
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An example of how patent buy-outs could work has been proposed during
Conference of the parties negotiations under the UNFCCC.
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The benefits of Patent commons are that it promotes sharing of patent information
and may reduce deployment costs
Yet, due to the lack of implementation know how to complement the patent info,
deployment potential might be reduced. It might also discourage popular, so called
blockbuster patents, because of the loss of monopoly marketing ability for the
patent holder.
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In addition, peer research has shown that across a range of low-income countries, an
increase in financial intermediation and long-term loans has a significant effect on
the adaptation of non-hydro renewable energy generation.
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An example from South Africa, shows have Governments can make green-friendly
use of Public Procurement.
Key Messages
This last slide is dedicated to summarizing key messages from this lesson. Please take
your time to go through them. In the next slide you will find references, if you wish
to learn more about the subject covered in this lesson.
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