Addressing both the challenge of climate change and the growing energy needs of the world will only be possible if we can achieve a breakthrough in clean technologies so as to deliver safe, clean and sustainable energy to future generations.

As part of their ongoing collaboration accord, the Graduate Institute, through its Centre for International Environmental Studies (CIES) and the World Intellectual Property Organization (WIPO), organised a panel discussion on 29 October on “Innovating for the Future of Energy” to mark the launch of the Global Innovation Index (GII) 2018 report on the special theme of energy innovation. Introducing the discussion were Philippe Burrin, Director of the Graduate Institute, and Francis Gurry, Director General of WIPO.  Dr Joëlle Noailly, Head of Research of the CIES and Lecturer in International Economics, discussed the importance of the policy framework in incentivising innovation in the energy sector.

Technological change has been accelerating rapidly in the field of energy. According to the analysis done by WIPO for the GII 2018, the total number of patent families in green energy technologies almost doubled between 2005 and 2012, although this period of growth has been followed by a period of deceleration in more recent years.  Realising the clean energy transition also implies that we make sustained efforts to move away from dirty innovation in conventional fossil fuels, as the energy innovation landscape has long been dominated by large firms predominantly innovating in fossil-fuels.

Optimal policies for the clean energy transition require two types of instruments that are best used in tandem: (i) a carbon price (either via a carbon tax or via cap-and-trade policy) on dirty technologies and (ii) targeted research subsidies to redirect the technological path towards clean technologies. Above all, a stable and predictable policy framework is key to attracting investors into clean energy technologies. Given the long-term and irreversible nature of R&D investments, firms typically want to know which policy framework will be valid for their projects over the next 15 to 25 years. In this regard, the withdrawal of Donald Trump from the Paris climate agreement sends the wrong signal to cleantech investors. Measuring how uncertainty about the policy environment impacts cleantech investment is one the main objectives of the research project “Financing cleantech investments”, co-led by Joëlle Noailly and Gaétan de Rassenfosse (EPFL). The project that started last January will use novel indicators of climate and environmental policy uncertainty using text data mining techniques to investigate how such policy risks are perceived by investors. The results will provide practical recommendations on how to design a strong credible and committed policy framework to achieve the clean energy transition.