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

=== 16.4.4 Assessment of Innovation and Other Impacts of Innovation Policy Instruments ===

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While it is very difficult to attribute a causal relationship between a particular policy instrument implementation and different innovation indicators, given the complexity of the innovation system ( [[#16.3|Section 16.3]] ), there is a large volume of quantitative and qualitative literature aiming to identify such an impact.

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==== 16.4.4.1 Assessment of the Impact on Innovation of Technology Push Policy Instruments: Public RD&amp;D Investments, Other R&amp;D Incentives and Public Procurement ====

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Economic and direct investment policy instrument types are typically associated with a direct focus on technological innovation: research and development (R&amp;D) grants, R&amp;D tax credits, prizes, national laboratories, technology incubators (including support for business development, plans), novel direct funding instruments (e.g., Advanced Research Projects Agency–Energy (ARPA-E)), and innovation procurement.

Public research, development and demonstration (RD&amp;D) investments have been found to have a positive impact on different innovation in energy- and climate-related technologies ( ''robust evidence'' , ''high agreement'' ), but the assessment relies almost entirely on evidence from industrialised countries. Out of 17 publications focusing on this assessment, only three found no relationship between R&amp;D funding and innovation metrics ( [[#Doblinger--2019|Doblinger et al. 2019]] ; [[#Goldstein--2020|Goldstein et al. 2020]] ; [[#Peñasco--2021|Peñasco et al. 2021]] ). Sixteen of them used ''ex post'' quantitative methods, and one relied on theoretical ''ex ante'' assessment; only two of them included some non-industrialised countries, with one being the theoretical analysis. The evidence available does not point to public R&amp;D funding for climate-related technologies crowding out private R&amp;D (an important driver of innovation) but instead crowding it in. Box 16.6 summarises the evidence available of the impact of ARPA-E (a public institution created in the USA in 2009 to allocate public R&amp;D funding in energy) on innovation and competitiveness outcomes. Another institution supporting energy R&amp;D that is the subject of much interest is the institutions of the Fraunhofer Society.

No evidence has been found regarding the specific impact of R&amp;D tax credits on climate mitigation or adaptation technologies, but it is worth noting that, generally speaking, R&amp;D tax credits are found to incentivise innovation in firms, with a greater impact on small and medium firms ( [[#OECD--2020|]] [[#OECD--2020|OECD 2020]] ). This is consistent with the fact that most of the evidence on the positive impact of public R&amp;D support schemes covers small and medium firms ( [[#Howell--2017|Howell 2017]] ; [[#Doblinger--2019|Doblinger et al. 2019]] ; [[#Goldstein--2020|Goldstein et al. 2020]] ). Although there is a high level of agreement in the literature regarding the impact of R&amp;D investments on innovation outcomes in climate-related technologies, it is important to note that this evidence comes from industrialised countries. This does not mean that public R&amp;D investments in energy have been found to have no impact on developing countries innovation or competitiveness outcomes, but rather that we were not able to find such studies focussing on developing countries.

Overall, public procurement has high potential to incentivise innovation in climate technologies, but the evidence is mixed, particularly in developing countries ( ''limited evidence'' , ''medium agreement'' ). Public procurement accounted for 13% of gross domestic product (GDP) in OECD in 2013 and much more in some emerging and developing economies ( [[#Baron--2016|Baron 2016]] ). Its main goal is to acquire products or services to improve public services, infrastructures and facilities and, in some cases, to also incentivise innovation. It is important to implement several steps in the public procurement procedure to improve transparency, minimise waste, fraud and corruption of public fund. These steps range from the assessment of a need, issuance of a tender, to the monitoring of delivery of the good or service. Box 16.5 outlines a public procurement programme that was implemented in The Netherlands in 2005 with a focus on green technologies. In spite of the fact that green procurement policies have been implemented, the literature assessing the innovation impact of public procurement programmes is relatively limited, and suggests either a positive impact or no impact ( [[#Alvarez--2015|Alvarez and Rubio 2015]] ; [[#Baron--2016|Baron 2016]] ; [[#Fernández-Sastre--2019|Fernández-Sastre and Montalvo-Quizhpi 2019]] ; [[#Peñasco--2021|Peñasco et al. 2021]] ). The majority of cases where the impact is positive are analyses of industrialised countries, while no impact emerges in the case of a developing country (Ecuador). More empirical research in both developing and developed countries is needed to understand the impact of public procurement, which has the potential to support the achievement of other societal challenges ( [[#Edler--2007|Edler and Georghiou 2007]] ; [[#Henderson--2011|Henderson and Newell 2011]] ; [[#Baron--2016|Baron 2016]] ; [[#ICLEI--2018|ICLEI 2018]] ).

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==== 16.4.4.2 Assessment of the Impact on Competitiveness of Technology Push Policy Instruments: Public RD&amp;D Investments, Other R&amp;D Incentives and Public Procurement ====

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Public R&amp;D investments in the energy, renewables, and environment space are generally associated with positive impacts on industrial development or ‘competitiveness outcome’ ( ''robust evidence'' , ''medium agreement'' ). In a number of cases, negligible or negative impacts emerge ( [[#Doblinger--2019|Doblinger et al. 2019]] ; [[#Goldstein--2020|Goldstein et al. 2020]] ; [[#Peñasco--2021|Peñasco et al. 2021]] ). The majority of the 15 analyses rely on ''ex post'' quantitative methods, while only four use ''ex ante'' modelling approaches. Also, in this case, the vast majority of the evidence is from industrialised countries.

There is limited and mixed evidence regarding the (positive or negative) impact of public procurement for low-carbon or climate technologies in developed countries ( ''limited evidence'' , ''low agreement'' ), and none from developing countries. All of the four evaluations identified in the [[#Peñasco--2021|Peñasco et al. (2021)]] review relied on qualitative methods. One found a positive impact, another a negative impact and two others found no impact. All of the studies covered European country experiences.

R&amp;D and procurement policies have a positive impact on distributional outcomes ( ''limited evidence'' , ''high agreement'' ). [[#Peñasco--2021|Peñasco et al. (2021)]] identify three evaluations of the impact of RD&amp;D funding on distributional outcomes (two using quantitative methods and one ''ex ante'' theoretical methods) and one of procurement on distributional outcomes (relying on qualitative analysis).

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==== 16.4.4.3 Emerging Insights on Different Public R&amp;D and Demonstration Funding Schemes ====

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The ability of a given R&amp;D policy instrument to impact innovation and competitiveness depends to some extent on policy design features ( ''limited evidence'' , ''high agreement'' ). As discussed in [[#16.4.4.4|Section 16.4.4.4]] , this is not unique to R&amp;D funding. Most of these assessments use a limited number of indicators (e.g., patents and publications and follow-on private financing, firm growth and survival, respectively), and are focused on the energy sector, and on the USA and other industrialised countries. Extrapolating to emerging economies and low-income countries is difficult. There is no evidence on the impact of different ways of allocating public energy R&amp;D investments in the context of developing countries.

Block funding, which tends to be more flexible, can lead to research that is more productive or novel, but there are other factors that can affect the extent to which block funding can lead to more or less novel outcomes ( ''limited evidence'' , ''medium agreement'' ). Research on national research laboratories, which conduct at least 30% of all research in 68 countries around the world ( [[#Anadon--2016a|Anadon et al. 2016a]] ), are a widespread mechanism to carry out public R&amp;D and allocate funds, but assessments of their performance is limited to developed countries. R&amp;D priorities are also guided by institutions, and research focused on general technology innovation policy finds that institutions often do not embody the goals of the poor or marginalised ( [[#Anadon--2016b|Anadon et al. 2016b]] ).

In the case of the US Department of Energy, block funding that can be quickly allocated to novel projects (such as that allocated to National Labs as part of the Laboratory Directed Research and Development funding) has been found to be associated with improved innovation indicators ( [[#Anadon--2016a|Anadon et al. 2016a]] ). Research in Japan on R&amp;D funding in general (not for climate-related technologies) however, indicates that R&amp;D funds allocated competitively result in higher novelty for ‘high status’ (the term used in the paper to refer to senior male researchers), while block funding was associated with research of higher novelty for ‘lower status’ researchers (e.g., junior female researchers) ( [[#Wang--2018|Wang et al. 2018]] ).

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