European Commission unveils plans but no new money for low-carbon technology

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This month, the European Commission published development roadmaps for seven key low carbon technologies. Thy relate to wind, solar, bioenergy, CCS, nuclear technologies, as well as smart grids and energy efficiency, for the period 2010 and 2020

In 2007, the EU adopted a Strategic Energy Technology Plan. It set out a vision for Europe to become a global leader in a range of low-carbon technologies. The roadmaps have been developed by the Commission in consultation with the relevant industries, and attempt to describe, step by step, how each technology should develop over the next decade in order to fulfil the vision of the SET Plan. Development in each technology area is backed by a a public-private partnership known as a European Industrial Initiative.

There is a long-standing policy debate over how best to spur innovation in low-carbon technologies. One option is to let markets ‘pull’ technology development along. According to this reasoning, if governments ensure there is a credible price for CO2 and other greenhouse gases, then companies will start to develop new technologies with lower emissions in response to this market signal. The other possibility is for governments to use a policy ‘push’ and pay directly for early-stage R&D into new and promising technologies.

In practice, governments usually opt for a combination of the two. The SET Plan was the EU’s policy push for low technologies, accompanying the market pull of the carbon and renewable energy targets included in the Climate and Energy Package it unveiled in the same year.

While the Climate and Energy Package and its 20/20/20 targets have successfully made it into EU law, the SET Plan has arguably been somewhat neglected by comparison. The Commission’s new communication implicitly acknowledges this by speaking of the need for the SET Plan now to be ‘taken forward to implementation’.

But implementation costs money and, critically, the Commission’s new roadmaps don’t come with any new funding plans attached. The Commission calls on Member States to dig deeper into their own pockets to fund energy R&D – a recommendation that is unlikely to receive a warm welcome from treasuries across Europe as they seek to recover their battered public finances – and proposes to use the European Investment Bank’s lending power to fund research in promising areas.

The communication also refers to the role of other countries in developing low-carbon technologies. As with other areas of international climate negotiations, there are large inequalities in the distribution of low-carbon innovation. While the EU can justifiably point to its global climate leadership committing early to substantial emission reductions (at least, compared to other developed countries), the US is leading the pack in terms of its expenditure on developing low-carbon technologies, from biofuels to smart grids. A number of international negotiations are in progress to improve coordination between developed countries and sure that they all pull their weight when it comes to energy R&D; another set of negotiations again are discussing how developing countries can access these new technologies.

It is not only global cooperation that lies behind the SET Plan: there is something of a technology race occurring between different developed countries, with potentially large future gains available to countries who lead the development of new low-carbon technologies. The IEA this week released its technology road map for CCS that envisages an investment of US$6 trillion by 2050. Companies who are successful in developing CCS technologies now will be able to profit from this economic activity in future. Similar arguments apply to other low-carbon technologies like renewable generation and low-emissions vehicles.

There is no question that low-carbon technologies will be vital during the twnty-first century: without them mitigating climate change will be intolerably expensive. How many of those technologies will be European in origin depends in no small part on whether the Commission succeeds in finding R&D funding at a scale that matches its R&D vision.

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