Conventional wisdom suggests that crises—such as high oil prices and economic recessions—drive governments to prioritize energy innovation.
Historically, governments have invested more in new energy technologies when oil prices were high. The price spikes of the 1970s oil crises, for example, led to the first public push for energy innovation. But oil prices alone do not explain the growth in public funding for clean energy development in recent decades.
Like high oil prices, economic crises could also be responsible for the increase. For example, the Recovery Act of 2009 poured what was then an unprecedented $90 billion into clean energy technologies in the United States in the wake of the Great Recession.
But in a recent study, my collaborators and I found the recession did not bolster public funding for the research, development and demonstration (RD&D) of new clean energy technologies in major economies in statistically significant ways. Instead, the crisis led governments to boost investment in incumbent energy technologies like fossil fuels and nuclear (despite the unprecedented cleantech funding I just mentioned).
In our research, we conclude an interplay of global cooperation and technology competition—dubbed “coopetition”—was the driving factor propelling governments to fund RD&D of new clean energy technologies over the last decade.
Coopetition will be crucial to spurring future public investments in energy innovation to meet climate goals going forward. But keeping cooperation and competition in balance will be a challenge in the current geopolitical climate.
Mission Innovation, an international initiative created in 2015 at the United Nations Climate Change Conference in Paris, introduced a new model for global collaboration: setting goals for RD&D funding as opposed to setting goals for emissions cuts. Major economies that participated in Mission Innovation, including China, France, Germany, India, Japan, South Korea, the United Kingdom, and the United States, succeeded collectively in increasing their funding significantly.
Overall, however, members fell short of their goal to double clean energy RD&D funding by 2020. (Smaller economies did not significantly grow their funding, foreshadowing a growing energy innovation gap.)
Global competition around clean energy technologies such as solar photovoltaics, wind and electric vehicles has also been spurring new investments. In the U.S., for example, the Chinese competitive challenge mobilized bipartisan support for clean energy RD&D spending. Look no further than the Bipartisan Infrastructure Law, the CHIPS and Science Act and the Inflation Reduction Act.
Competition taken too far can undermine public RD&D spending. In the 2000s, China’s dominance in solar manufacturing and the bankruptcy of similar companies in Europe and the U.S. led to less photovoltaic production in those regions and those economies invested less in solar RD&D for several years.
Public investment in decarbonization, including energy investment, is on the rise. Public RD&D funding of new clean energy technologies rose by 84% between 2002 and 2018 in seven major economies including China. More still needs to be done.
The International Energy Agency estimates 35% of cumulative emissions reductions necessary to achieve the climate goals from the Paris Agreement depend on technologies currently at the prototype or demonstration phase. Another 40% rely on technologies that have not yet reached mass-market deployment.
Today, geopolitics is challenging global clean energy coopetition. The intensifying U.S.-China power competition has already disrupted climate cooperation—China walked away from bilateral talks with the U.S. in August.
The potential of more green trade wars and overly aggressive efforts to decouple from China’s clean energy industries are looming. Overly aggressive protectionism and techno-nationalism would disrupt the global innovation system in clean energy.
Ensuring effective cleantech coopetition going forward will require strengthening national competitive strategies while reinvesting in international cooperation.
On the competition side, governments need to tie clean energy RD&D efforts into commercialization strategies to more effectively bring new technologies to global markets. Technology—or sector-focused public-private projects such as the Offshore Wind Accelerator in the United Kingdom or the Joint Center for Energy Storage Research in the U.S.—offer models of how to bridge the lab-to-market gap.
At the same time, global cooperative efforts such as Mission Innovation need to be expanded, strengthened and complemented with enhanced coordination around international trade in clean energy technologies. A trade club for such technologies should be a priority, which could be tied to public RD&D commitments to further incentivize investment.
Editor’s note: Breakthrough Energy, which supports Cipher, is a partner of Mission Innovation.