Climate change mitigation technologies

Climate mitigation requires innovation

Every modelled pathway for limiting global warming to 1.5 or even 2 degrees Celsius relies on making rapid and deep GHG reductions this decade.^[1] Although we may have the solutions needed to halve emissions by 2030, reaching net zero by 2050 continues to require significant and rapid technological innovation.

Almost half of the emission reductions in net-zero scenarios produced by the International Energy Agency (IEA) are projected to come from technologies currently at the demonstration or prototype stage.^[2] Furthermore, only 26 pathways of the 1,200 scenarios assessed by the IPCC limit warming to 1.5 degrees Celsius using proven technologies.^[3]

It takes time for innovation to mature into market-ready solutions. Technologies such as solar panels, wind turbines, light-emitting diode (LED) bulbs and lithium-ion batteries have played a significant role in reducing emissions. But their path to massive deployment took decades to achieve^[4]. For new clean energy technologies there is a lag-time of up to 10 years between initial funding and their appearance within an academic article, and a further decade or more between the publication of such an article and the filing of a technology patent.^[5] Furthermore, new technologies often face challenges related to first-of-kind costs, higher operation and investment costs and insufficient or uncertain carbon prices.^[6]

Although we may have the solutions needed to halve emissions by 2030, reaching net zero by 2050 continues to require significant and rapid technological innovation

Proven technologies must first be scaled

The challenge is that time is short and we cannot wait around for technological breakthroughs to arrive. According to most projections, carbon-capture and storage (CCS) will not see a significant scale-up this decade.^[7][8] Only one of the 30 commercial CCS facilities in operation globally has been developed at an iron and steel plant, and none at a cement plant.^[9] Large-scale green hydrogen production is still a long way off, especially in those countries dominating hard-to-abate sectors. In 2022, low-emission hydrogen production was under 1 percent of total global hydrogen production, the rest predominantly produced from natural gas, a fossil fuel.^[10]

We must therefore invest significantly in the vast range of solutions already at hand. Simply relying on emerging and breakthrough technologies to enter the market risks missing the window to act. And regardless of this, technologies such as CCS must not become an enabler of business as usual. The science is clear – there is no room for new fossil fuel developments, if we are to avoid dramatic climate change impacts. Beyond enabling cleaner energy sources, there are already proven technologies available that can transform how we build, eat, live and travel.

Climate technology adoption in most developing countries is slow, especially in the least developed.^[11] Rapidly growing cities and economies have a massive potential for scaling existing solutions, which would bring with it economic development opportunities and green jobs creation. The International Finance Corporation estimates there is a climate investment opportunity in emerging market cities amounting to USD 29.4 trillion by 2030.^[12] This relates to six main sectors, many of which are covered in the Green Technology Book, namely: waste, climate-smart water, renewable energy, electric vehicles, public transport and green buildings.

Technologies such as CCS must not become an enabler of business as usual. The science is clear – there is no room for new fossil fuel developments

Several studies have chosen to focus on the barriers to scaling climate technologies. These include cost and risk, as well as institutional, regulatory and human resource constraints. The Green Technology Book chooses instead to highlight the opportunities by showcasing a variety of climate technologies and innovations that could well shape the future of cities, food systems and industry. The most appropriate technology may differ immensely depending upon region, income level and the availability of local resources. The Green Technology Book therefore reflects a broad and inclusive range of technology solutions.

Climate mitigation requires circular thinking and good design

Not all climate technologies are equal. In fact, certain options can create a lock-in effect in suboptimal solutions. For example, market penetration of a refrigerant that does not deplete the ozone layer but still contributes to climate change. Similarly, an incinerator might address plastic pollution, but emit harmful emissions, reduce the incentive to recycle and, in some cases, rely on imported waste from around the world. Yet another example is retrofitting conventional steel furnaces rather than exploring electrified alternatives.

The world has a clear mandate to scale ambition. Incremental efficiencies are unlikely to bring about the transformation required.

This means rethinking the design of our cities, understanding the limits of recycling, valuing soil and acknowledging the important role of technology  and innovation in managing humanity’s collective demand for Earth’s resources

Circular approaches have a massive climate mitigation potential. In the European Union, such approaches could reduce CO2 emissions from material production by 56 percent by 2050.^[13] Roughly 70 to 80 percent of the municipal solid waste generated in Africa is recyclable; yet, only 4 percent is currently recycled.^[14] Placing material efficiency and circular economy at the center of decarbonization can reduce the risk of an over-reliance on breakthrough technologies that may or may not come to fruition in time. It also requires significantly lower up-front costs. Yet, this is an often-overlooked mitigation action.^[15] Countries’ national climate plans and strategies have largely ignored this perspective.^[16] And when material efficiency is discussed, it is mainly in the context of waste management and not GHG emissions.^[17]

The Green Technology Book presents new perspectives on what can be termed climate mitigation technology. This means rethinking the design of our cities, understanding the limits of recycling, valuing soil and acknowledging the important role of technology and innovation in managing humanity’s collective demand for Earth’s resources.
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International climate finance and cooperation

The cost of climate change is growing

Managing emissions is expensive. However, not managing them will cost us more – both in terms of assets and lives lost. The cost of averting the most severe consequences of climate change on a global scale is likely to be approximately USD 4 trillion a year by 2030.^[18] We are currently far off-track. The global climate finance flow is estimated to have been between USD 850 and USD 940 billion in 2021, met equally by the public and private sectors.^[19]

Investments into climate mitigation are dominated by renewable energy, followed by low-carbon transport and energy efficiency (figure 1.1). Private finance mobilization is crucial for achieving climate targets. But private finance is growing at a slower annual rate than public finance.^[20] At the same time, there is a growing recognition of the financial gains that come from investing in climate technologies. Venture capital investments into climate technologies represented over a quarter of every venture dollar invested in 2022, with the vast majority spent on mobility followed by energy.^[21]

Sometimes overlooked in conversations on climate finance, consumer spending plays an especially important role in the adoption of technologies such as solar panels, water heaters and electric cars. Global spending on electric cars in 2022 was up 50 percent on the previous year, exceeding USD 425 billion.^[22]

Given the gravity of climate change and its impacts, there is the question of whether certain climate technologies, such as early warning systems and climate datasets, ought to be considered a public good.^[23][24] Viewing climate technologies as a public good whose outcomes benefit everyone means setting aside market principles to some extent, or finding innovative measures to reward innovators, for instance, through an international mechanism.

International collaboration is essential, if developing countries are to have an equal opportunity to adopt climate technologies. Accepting responsibility for historical GHG emissions, developed countries have committed to providing USD 100 billion a year of climate finance to developing countries by 2025. The failure to provide this funding is clearly recognized. Meanwhile, the cost of climate change is rising. The external climate finance needs of developing countries and emerging markets (excluding China) have been estimated at USD 1 trillion a year from now until 2030.^[25]

Countries are currently negotiating a New Collective Quantified Goal to replace the USD 100 billion commitment goal expiring in 2025. However, the conversation around international climate finance has expanded beyond discussions about how many billions are required. The questions now are who should be paying these billions and how new financial mechanisms and systems can be built that are fit for purpose.

Over 70 percent of global climate finance continues to be paid out as loans rather than grants, potentially adding to countries’ debt burden

Climate finance, fossil fuels and public debt: balancing the scales

The flow of climate finance must be seen in relation to other relevant finance flows in order to get the bigger picture. Most notably this includes global fossil fuel funding and the annual debt repayments by developing countries (figure 1.2). Such a viewpoint is important in our understanding the full extent of the financial effort required to fund the climate transition, which goes beyond just positive climate finance flows. It also highlights what resources are available to dramatically scale and redirect funds toward global climate action. The COVID-19 pandemic recently demonstrated that a financial scaling of equivalent magnitude toward a global challenge is entirely possible. The investments in clean energy currently projected are a mere fraction of the amount committed to COVID-19 recovery.^[26]

Global public debt has increased more than fivefold since 2000, with developing countries owing almost 30 percent of the total debt. In Africa, more is spent in interest payments than on either education or health.^[27] Over 70 percent of global climate finance continues to be paid out as loans rather than grants,^[28] potentially adding to countries’ debt burden. Civil society, developing countries, the United Nations and other actors have all called for a reform of international financial institutions, debt cancellations or new repayment policies, possibly as an alternative way of financing climate action.^[29][30]

In recent years, major institutions have shown some response to such calls. The World Bank recently announced an offer to developing countries hit by climate disaster to pause debt repayments on new loans. Furthermore, a new wave of debt-for-climate swaps is making it possible for countries to swap debt repayments for investments into climate projects. For example, the Seychelles is the first country to have shifted its loans repayments toward investment into marine protected areas.

Meanwhile, subsidies for global fossil fuel consumption continue to grow. Indeed, 2022 marked a record-breaking year for fossil fuel subsidies.^[31] In 2023, 60 percent of global energy investment is expected to go into clean technologies, including into renewables, electric vehicles and heat pumps. The rest is expected to be invested into fossil fuel supply and power.^[32] The World Trade Organization (WTO), led by New Zealand, is exploring fossil fuel subsidy reform. But global calls for fossil fuel subsidies and fossil fuel project loans to be cancelled have had very little impact to date.

De-risking climate technology innovation and deployment

Governments continue to lag behind on international collaboration for climate finance. Meanwhile, they have an equally important role to play in developing and deploying climate technologies. Technology-push and demand-pull drivers are both important when it comes to fostering technological innovation.

Regarding low-carbon technologies, markets are not always able to provide the right type of incentives. This justifies government intervention and spending. Governments stimulate technological innovation by sharing the risks and rewards between public and private actors.^[33] They are also critical to the creation of new markets and for improving the innovation-cost balance. Carbon taxes, in particular, have been shown to positively impact innovation in mitigation technologies.^[34]

Once developed, climate technologies face a further challenge – deployment. Lack of data and risk perception are important barriers to technology transfer, uptake efficiency and financial viability, especially in developing countries. The role of international institutions in providing project transparency and de-risking investments is widely recognized. The importance of de-risking becomes apparent in light of the tremendous variation in required rate of return on investment, which is often linked to a project’s location and the country's credit rating. 

For instance, the required financial return on a solar project can range from 7 percent in Germany to a staggering 52 percent in Argentina, regardless of identical solar arrays being deployed(table 1.1).^[35] Such assessments are linked to a country’s credit rating issued by organizations such as S&P Global. There can therefore be a demand for developing mechanisms and support structures which can de-risk such climate technology deployment.

Table 1.1            Required return on investment from solar projects in various countries

 
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The role of innovation and IP for the diffusion of low-emission technologies

Strengthening national systems of innovation  

Innovation often builds on existing inventions.  OECD countries usually have the most efficient national systems of innovation (NSIs). A great many factors and drivers determine a healthy NSI. They include education spending, small business and market support, institutional and infrastructural stability and well-managed intellectual property (IP) rights. These and more are described in the first edition of the Green Technology Book.

Pressing global challenges and climate change make it imperative that innovation and technology address real-world needs on the ground. A better understanding of how various actors and different parts of the innovation ecosystem interact makes it possible for innovation systems to be strengthened across sectors and countries. This can in turn lead to insights into the appropriateness and social alignment of new technologies and practices. Partly, this requires going beyond traditional ways of measuring innovation, such as R&D investments and patents, to include the monitoring of systemic indicators, such as resource mobilization, entrepreneurial activity and market formation.^[36][37]

Strengthening innovation ecosystems requires a systemic approach enabled by supportive policies. The IPCC^[38] highlights how important policies addressing innovation systems are in helping overcome the distributional, environmental and social barriers associated with low-emitting technologies. Increasingly, regulatory frameworks for addressing global challenges must consider the important role of scientific and technical knowledge, and the provision of secure IP rights and ownership.^[39]

Technological adaptation and endogenous technologies

A majority of climate technology patents are filed at IP offices within developed countries (see next section). And there is a striking mismatch between the technology needed by developing countries and its availability. This has come to mean that a majority of climate technologies are a response to the needs and conditions of developed nations. More locally appropriate climate technologies can be promoted in a variety of ways. They include 1) adaptation of transferred technologies to local contexts, 2) innovation co-development and 3) the support and recognition of locally-invented, endogenous or indigenous peoples’ technologies.

Successful technology uptake and adaptation requires effective participation by domestic labor and national skillsets building. The choice of technology is important. Consideration needs to be given to a technology’s maturity, its complexity and its potential for scaling to a meaningful level. But perhaps even more importantly, successful uptake depends on understanding user needs. This warrants a broad-based, participatory approach, with the inclusion of a broad range of stakeholders including farmers, youth, indigenous peoples, women and other groups, when deploying innovative climate technologies.

There is a growing debate around shifting the “technology transfer” paradigm to one of “co-development of technology” to highlight the importance of collaborative interventions in bringing climate innovations to market. Examples of such initiatives can already be seen, but are not widespread. Joint ventures, collaborative R&D, and technology collaboration programs have the potential to support localization in favor of imported technologies. Scaling this approach further could mean building on modalities such as IP rights co-ownership, pooled financial resources and shared responsibility for risk, liability and transparency.^[40] However, while more support is undeniably needed for local technology development, climate targets are unlikely to be met without a transfer of technology and the sharing of know-how and skills at a global level.

In the process of identifying climate technologies for the Green Technology Book, the challenge of finding solutions from certain parts of the world has become clear. The reasons for this are manifold. Weaker national systems of innovation lead to fewer patents and a consequential absence from patent databases. Language barriers and a lack of documentation means negligible global online presence and a missed opportunity for attracting funding for locally appropriate technology dissemination and uptake. There is therefore a pressing need for greater recognition, visibility and support for technology solutions emerging from developing countries which may help increase the diversity of solutions available for a wider range of local conditions and contexts.

Climate technology patent trends

Patent trends can with due caution be used as a proxy for innovation activity and technology trends. Inventions in climate change mitigation technologies increased fivefold between 1995 and 2011.^[41] But there was subsequently a notable slowdown in the total number of patent applications filed between 2014 and 2017 (figure 1.3).^[42][43]

One study shows that the climate mitigation technologies growth rate fell by 6 percent a year between 2013 and 2017, after having grown by 10 percent a year the decade before.^[44] The drop in overall patent activity – mainly affecting the energy, buildings, manufacturing and CCS sectors – is likely to have been due to declining fossil fuel prices, low carbon prices and the “maturity” of certain climate mitigation technologies.

But, while growth is no longer at the level it was in the first decade of this century, the trend appears once again to be upward. Low-carbon energy technologies patenting has grown in the three years following 2017 mainly driven by fuel switching and energy efficiency, as well as by cross-cutting technologies such as hydrogen and batteries for transport.^[45]

The transport sector has maintained slow and steady growth over time, but activity has recently accelerated. There is a clear correlation between electric vehicle patent activity and the price of fossil fuels. Europe saw a drop in electric vehicle patent applications following the 2014 oil price plunge. Subsequently, 2017–2021 saw a significant increase in electric and hybrid vehicle technologies, while innovations related to conventional fossil-based engines declined markedly during the same period (figure 1.4).^[46]

Not all climate mitigation technologies are sensitive to oil price fluctuations. Digital technologies are increasingly considered important climate enablers and their rate of penetration in climate technologies is extremely high. In fact, 60 percent of climate-related trademarks are information and communication technology (ICT)-related.^[47] Almost 40 percent of climate mitigation innovation within the energy and building sectors can be considered digital. Indeed, as patent activity within these two sectors slowed down, digital climate mitigation technologies related to energy and buildings grew markedly.^[48]

What has not changed over the past decade is that inventions are concentrated in certain countries and among a few R&D investors.

Five countries alone represent nearly 76 percent of high-value climate mitigation innovation, namely China, Germany, Japan, the Republic of Korea and the United States, with China dominating a growing number of patent filings. The data refers to inventions developed between 2010 and 2015,^[49] but the distribution is unlikely to have changed substantially since then. The top 10 countries in turn accounted for almost 90 percent of high-value climate innovation. These consist exclusively of high-income countries, with the sole exception of China. And the trend is toward increasing concentration on innovation. This underlines the need for greater technology transfer and innovation at the national level.^[50] What is more, there is data to suggest that it is often inventors and young firms beyond the top few who develop the more radical innovations likely to spearhead much needed breakthrough discoveries.^[51]
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