Public Support for the Financing of RD&D Activities in New Clean Energy Technologies

Abstract

Substantial investments in RD&D in new low-carbon technologies are required to reach the EU climate objectives. Given existing market failures affecting clean innovation, developing a balanced portfolio of existing and new clean technologies will require both demand pull support measures – namely carbon pricing and the Renewables Directive, and direct public support to innovation. Innovation activities should comprise research, development and demonstration and be aimed at both (i) accelerating the decarbonization of energy systems to reach mid-term 2020 objectives by pushing especially more mature technologies and (ii) developing a diversified technology mix enabling the achievement of long-term 2050 objectives by supporting also still immature technologies. Cooperation and coordination among Member State and EU support policies have to be improved. The initiation of European Energy Research Alliances is a step into the right direction; their successful implementation should be fostered and progress monitored. The form of direct public support needs to be tailored to the features of each innovation project – depending on both the technology targeted and its level of maturity – and to the type of entity best placed to undertake the respective RD&D. Financing instruments need to be implemented in a way that encourages efficiency while not discouraging participation by the private sector. Competition for funds should be used and public funding should be output-driven whenever possible; the institutions set up to allocate funds should be flexible enough to avoid institutional inertia and lock-in.