Editing IPCC:AR6/WGIII/Chapter-16 (section)

== Executive Summary ==

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'''Innovation in climate mitigation technologies has seen enormous activity and significant progress in recent years. Innovation has also led to, and exacerbated, trade-offs in relation to sustainable development (''' '''''high confidence''''' ''').''' Innovation can leverage action to mitigate climate change by reinforcing other interventions. In conjunction with other enabling conditions, innovation can support system transitions to limit warming and help shift development pathways. The currently widespread implementation of solar photovoltaic (solar PV) and light-emitting diodes (LEDs), for instance, could not have happened without technological innovation ( ''high confidence'' ). Technological innovation can also bring about new and improved ways of delivering services that are essential to human well-being. At the same time as delivering benefits, innovation can result in trade-offs that undermine both progress on mitigation and progress towards other Sustainable Development Goals (SDGs). Trade-offs include negative externalities – for instance, greater environmental pollution and social inequalities – rebound effects leading to lower net emission reductions or even increases in emissions, and increased dependency on foreign knowledge and providers ( ''high confidence'' ). Effective governance and policy has the potential to avoid and minimise such misalignments ( ''medium evidence'' , ''high agreement'' ). {16.1, &lt;span class=&quot;•-Bold-condensed--dark-blue-&quot;&gt;&lt;/span&gt;16.2, 16.3, 16.4, 16.5.1, 16.6}

'''A systemic view of innovation to direct and organise the processes has grown over the last decade. This systemic view of innovation takes into account the role of actors, institutions and their interactions, and can inform how innovation systems that vary across technologies, sectors and countries, can be strengthened (''' '''''high confidence''''' ''')''' '''''.''''' Where a systemic view of innovation has been taken, it has enabled the development and implementation of indicators that are better able to provide insights into innovation processes. This, in turn, has enabled the analysis and strengthening of innovation systems. Traditional quantitative innovation indicators mainly include research and development (R&amp;D) investments and patents. Systemic indicators of innovation, however, go well beyond these approaches. They include structural innovation system elements including actors and networks, as well as indicators for how innovation systems function, such as access to finance, employment in relevant sectors, and lobbying activities. For example, in Latin America, monitoring systemic innovation indicators for the effectiveness of agroecological mitigation approaches has provided insights on the appropriateness and social alignment of new technologies and practices. Climate-energy-economy models, including integrated assessment models, generally employ a stylised and necessarily incomplete view of innovation, and have yet to incorporate a systemic representation of innovation systems. {16.2, 16.2.4, 16.3, 16.3.4, 16.5, Table 16.7, Box 16.1, Box 16.3, Box 16.10}

'''A systemic perspective on technological change can provide insights to policymakers supporting their selection of effective innovation policy instruments (''' '''''high confidence''''' ''').''' A combination of scaled-up innovation investments with demand-pull interventions can achieve faster technology unit cost reductions and more rapid scale-up than either approach in isolation ( ''high confidence'' ). These innovation policy instruments would nonetheless have to be tailored to local development priorities, to the specific context of different countries, and to the technology being supported. The timing of interventions and any trade-offs with sustainable development also need to be addressed. Public R&amp;D funding and support, as well as innovation procurement, have proven valuable for fostering innovation in small to medium cleantech firms. Innovation outcomes of policy instruments not necessarily aimed at innovation, such as feed-in tariffs, auctions, emissions trading schemes, taxes and renewable portfolio standards, vary from negligible to positive for climate change mitigation. Some specific designs of environmental taxation can also result in negative distributional outcomes. Most of the available literature and evidence on innovation systems come from industrialised countries and larger developing countries. However, there is a growing body of evidence from developing countries and Small Island Developing States (SIDS). {16.4, 16.4.4.3, 16.4.4.4, 16.5, 16.7}

'''Experience and analyses show that technological change is inhibited if technological innovation system functions are not adequately fulfilled. This inhibition occurs more often in developing countries (''' '''''high confidence''''' ''').''' Examples of such functions are knowledge development, resource mobilisation, and activities that shape the needs, requirements and expectations of actors within the innovation system (guidance of the search). Capabilities play a key role in these functions, the build-up of which can be enhanced by domestic measures, but also by international cooperation ( ''high confidence'' ). For instance, innovation cooperation on wind energy has contributed to the accelerated global spread of this technology. As another example, the policy guidance by the Indian government, which also promoted development of data, testing capabilities and knowledge within the private sector, has been a key determinant of the success of an energy-efficiency programme for air conditioners and refrigerators in India. {16.3, &lt;span class=&quot;•-Bold-condensed--dark-blue-&quot;&gt;&lt;/span&gt;16.5, 16.6, Cross-Chapter Box 12 in this chapter, Box 16.2}

'''Consistent with innovation system approaches, the sharing of knowledge and experiences between developed and developing countries can contribute to addressing global climate and SDGs. The effectiveness of such international cooperation arrangements, however, depends on the way they are developed and implemented (''' '''''high confidence''''' ''').''' The effectiveness and sustainable development benefits of technology sharing under market conditions appear to be determined primarily by the complexity of technologies, local capabilities and the policy regime. This suggests that the development of planning and innovation capabilities remains necessary, especially in least-developed countries and SIDS. International diffusion of low-emission technologies is also facilitated by knowledge spillovers from regions engaged in clean R&amp;D ( ''medium conf'' ''idence'' ). {16.6}

'''The evidence on the role of intellectual property rights (IPR) in innovation is mixed. Some literature suggests that it is a barrier, while other sources suggest that it is an enabler to the diffusion of climate-related technologies (''' '''''medium confidence''''' ''')''' '''''.''''' There is agreement that countries with well-developed institutional capacity may benefit from a strengthened IPR regime, but that countries with limited capabilities might face greater barriers to innovation as a consequence. This enhances the continued need for capacity building. Ideas to improve the alignment of the global IPR regime and address climate change include specific arrangements for least-developed countries, case-by-case decision-making and patent-pooling institutions. {16.2.3.3, 16.5, Box 16.9}

'''Although some initiatives''' '''have mobilised investments in developing countries, gaps in innovation cooperation remain, including in the Paris Agreement instruments. These gaps could be filled by enhancing financial support for international technology cooperation, by strengthening cooperative approaches, and by helping build suitable capacity in developing countries across all technological innovation system functions (''' '''''high confidence''''' ''').''' The implementation of current arrangements of international cooperation for technology development and transfer, as well as capacity building, are insufficient to meet climate objectives and contribute to sustainable development. For example, despite building a large market for mitigation technologies in developing countries, the lack of a systemic perspective in the implementation of the Clean Development Mechanism, operational since the mid-2000s, has only led to some technology transfer, especially to larger developing countries, but limited capacity building and minimal technology development ( ''medium confidence'' ). In the current climate regime, a more systemic approach to innovation cooperation could be introduced by linking technology institutions, such as the Technology Mechanism, and financial actors, such as the financial mechanism. {16.5.3}

'''Countries are exposed to sustainable development challenges in parallel with the challenges that relate to climate change. Addressing both sets of challenges simultaneously presents multiple and recurrent obstacles that systemic approaches to technological change could help resolve, provided they are well managed (''' '''''high confidence''''' ''').''' Obstacles include both entrenched power relations dominated by vested interests that control and benefit from existing technologies, and governance structures that continue to reproduce unsustainable patterns of production and consumption ( ''medium confidence'' ). Studies also highlight the potential for cultural factors to strongly influence the pace and direction of technological change. Sustainable solutions require adoption and mainstreaming of locally novel technologies that can meet local needs, and simultaneously address the SDGs. Acknowledging the systemic nature of technological innovation, which involves many levels of actors, stages of innovation and scales, can lead to new opportunities to shift development pathways towards sustainability. {16.4, 16.5, 16.6}

'''An area where sustainable development, climate change mitigation and technological change interact is digitalisation. Digital technologies can promote large increases in energy efficiency through coordination and an economic shift to services, but they can also greatly increase energy demand because of the energy used in digital devices. System-level rebound effects may also occur (''' '''''high confidence''''' ''').''' Digital devices, including servers, increase pressure on the environment due to the demand for rare metals and end-of-life disposal. The absence of adequate governance in many countries can lead to harsh working conditions and unregulated disposal of electronic waste. Digitalisation also affects firms’ competitiveness, the demand for skills, and the distribution of, and access to, resources. The existing digital divide, especially in developing countries, and the lack of appropriate governance of the digital revolution can hamper the role that digitalisation could play in supporting the achievement of stringent mitigation targets. At present, the understanding of both the direct and indirect impacts of digitalisation on energy use, carbon emissions and potential mitigation, is limited ( ''medium confidence'' ). {Cross-Chapter Box 11 in this chapter, 16.2}

'''Strategies for climate change mitigation can be most effective in accelerating transformative change when actions taken to strengthen one set of enabling conditions also reinforce and strengthen the effectiveness of other enabling conditions (''' '''''medium confidence''''' ''').''' Applying transition or system dynamics to decisions can help policymakers take advantage of such high-leverage intervention points, address the specific characteristics of technological stages, and respond to societal dynamics. Inspiration can be drawn from the global unit cost reductions of solar PV, which were accelerated by a combination of factors interacting in a mutually reinforcing way across a limited group of countries ( ''high confidence'' ). {Box 16.4, Cross-Chapter Box 12 in this chapter}

'''Better and more comprehensive data on innovation indicators can provide timely insights for policymakers and policy design locally, nationally and internationally, especially for developing countries, where such insights are missing more often.''' Data needed include those that can show the strength of technological, sectoral and national innovation systems. It is also necessary to validate current results and generate insights from theoretical frameworks and empirical studies for developing countries contexts. Innovation studies on adaptation and mitigation other than energy and ex-post assessments of the effectiveness of various innovation-related policies and interventions, including R&amp;D, would also provide benefits. Furthermore, methodological developments to improve the ability of integrated assessment models (IAMs) to capture energy innovation system dynamics, and the relevant institutions and policies (including design and implementation), would allow for more realistic assessment. {16.2, 16.3, 16.7}

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