Nanomaterials Innovation Systems: Their Structure, Dynamics and Regulation

A Report for the Royal Commission on Environmental Pollution (UK) Paul Nightingale, Molly Morgan, Ismael Rafols and Patrick van Zwanenberg SPRU, Science and Technology Policy Research Freeman Centre, University of Sussex, UK

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Table of Contents Executive Summary ....................................................................................................................... 4 Chapter 1 – An Introduction to Nanomaterials Systems of Innovation: Their Structure, Dynamics and Regulation ............................................................................................................. 8

................................................................................................................ 8 Introduction .................................................................... 10 The Changing Nature of Policy Making

Some disclaimers ....................................................................................................... 10 Essential Definitions ................................................................................................. 11

............................................................................................. 13 Organisation of ReportChapter 2 – Understanding Systems of Innovation: A Contextual Review ....................... 14

.............................................................................................................. 14 Introduction ............. 14 The development of the theory behind the systems of innovation approach

Complementary Assets: Appropriating Returns, Dis-appropriating Risks .................. 16 The Diversity of Patterns of Technological Change .................................................. 18 Patterns of Innovation in Nanomaterials ................................................................... 19

................................................................. 21 Chapter 3 – Innovation systems in nanomaterialsDefinition of Nanomaterials ...................................................................................... 21 Generic Characteristics of Innovation Systems in Nanomaterials .............................. 22

................................................................ 25 Main Actors in Nanomaterials Innovation ................................................. 25 Academic research: Diversity of knowledge bases

Supplier and manufacturer firms as co-ordinating actors ....................................... 26 ...................................................................... 28 User firms: diversity of applications

.............................................................................................. 30 Role of government ............................... 31 Dynamics at play in the system of innovation for nanomaterials

Understanding linkages between firms in the value chain ...................................... 31 Internal versus external knowledge sources ........................................................... 33

......................................................... 33 Relationships between firms and universitiesDirections of research ........................................................................................... 34

.................................................................................... 35 Intellectual property rights ............................................... 35 Importance of governmental promotion initiatives

................................................................ 35 Conclusions on Nanomaterials Innovation ..................................................................... 37 Chapter 4 – Trends in Nanomaterials Research

................................................................................. 37 International publication trends .............................................................................. 39 Top organisations in publications

................................................................................ 42 Trends in nanomaterials patentsSummary of international trends ............................................................................... 44

Chapter 5 – The current UK governance system for nanomaterials: a brief overview .... 45 .............................................................................................................. 45 Introduction

............................................................................................. 45 Technology promotionUK Government institutions and activities ........................................................... 45

.................................................. 47 UK non-government organisations and activitiesRegulation of nanotechnology ................................................................................... 48

UK Government institutions and activities ........................................................... 48 ................................................. 49 UK Non-government organisations and activities

Summary ................................................................................................................... 50 .................................................................................... 52 Chapter 6 – Regulating Nanomaterials

.............................................................................................................. 52 Introduction ................................................................ 53 Technology and the dilemma of control

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First-order Regulation ............................................................................................... 56 ............................................................................... 58 Precautionary forms of appraisal

Precautionary Regulatory policies .............................................................................. 59 Problems with first-order governance strategies ........................................................ 60 Second-order governance: From technology promotion to the governance of innovation ................................................................................................................. 61

Promoting nano-structured photovoltaic technologies within the energy sector .... 64 Linking first-order regulation with second-order governance strategies ..................... 65

.................................................................................................................................... 67 References ..................................................................................................................................... 72 Acronyms

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Executive Summary EX 1. The emergence of a stream of new products that exploit the novel physical, chemical and biological properties of materials at the nano-scale has raised concerns about their appropriate regulation. This is partly because of uncertainties about the environmental impact of materials with novel properties and the extent to which traditional regulatory frameworks can deal with materials with environmental and human safety properties that can potentially alter radically with only minor physical changes. But it is also a consequence of how official commitments to promote the responsible development of the sector, for example by encouraging environmentally beneficial products and applications, might be realised. EX2. This report has taken a different approach to traditional policy and regulatory analyses and explored how a system of innovation framework might help inform the future environmental regulation and broader governance of nanomaterials. The focus of this report has therefore been on finding ways in which system of innovation frameworks might inform governance arrangements and policies to encourage the development of nanomaterials and nanomaterial applications that are environmentally beneficial or benign, while discouraging those that are environmentally detrimental. EX 3. An important point emerging from this report is that nanotechnology is not necessarily the most useful category for understanding the processes and systems of innovation at play. ‘Nanotechnology’ covers a broad range of technologies, with distinct knowledge bases and wide applications in areas such as semi-conductors, nanomaterials and instrumentation. Nanomaterials, on the other hand, are a more useful analytical category because changes in surface area at the nano-scale generate new physical, chemical and biological properties. But the data shows that nanomaterials innovation processes are also very complex and diverse. Nanomaterials do not have a single scientific basis, nor do they comprise a single technology, nor do they fit into a single group of products or markets that share a single common feature. Thus, while nanomaterials might be an appealing regulatory category, the risks posed by nanomaterials are potentially very diverse, thus suggesting the need for a governance regime that takes into account both the similarities and differences between nanomaterials. EX4. We suggest that when policy-makers are thinking about innovation, rather than assuming a single nanomaterials innovation process, conforming to a traditional linear ‘value-chain analysis’, they think instead in terms of an hour-glass model, in which a broad range of inputs, from a variety of institutional sources converge on a range of technologies that share an ability to exploit nano-scale phenomena, and then are diffused to a wide range of product markets and customers. The unfortunate implication of this hour-glass structure is that the 1

1 As an analytical category defined by physical properties, the industrial sector of nanomaterials is more like an amorphous category such as “the collection of firms that uses lubricants” than a traditional functionally defined sector such as office furniture production. However, nanomaterials is unlike an entirely random physically defined category (such as “firms producing products weighing between 45g and 55g”) because the specific scale characteristics of nanomaterials innovation translate into significant overlaps between multiple innovation processes.

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regulation of this family of technologies is likely to be as non-trivial, complex, diverse and dynamic as the innovation processes themselves. EX 5. This hour-glass model is supported by the evidence gathered together in this report. It suggests that nanomaterials, and the technologies they are used in, are produced within a series of parallel innovation processes that draw on different scientific disciplines; that feed into distinct technologies with multiple customer bases; and that feed into a broad range of markets. However, there are points at which those parallel innovation processes interact with one another and share common elements, be they instrumentation, scientific knowledge, technologies, products and markets. The finding that nanomaterials have a series of parallel and distinct innovation processes that converge and diverge at different points has important governance implications because it suggests that upstream governance, for example through public engagement or research funding, will be necessary, but probably not sufficient, for directing innovation towards agreed social ends. This is because in this case, innovation is a not a simple process that can be pointed in a particular direction. More importantly, it suggests that well-designed downstream forms of governance (such as procurement, regulations and standards) might both influence the direction of innovation and build capabilities upstream in supplier firms and the science base that have broader spill-over applications. EX 6. The report suggests the types of organisations in which nanomaterials innovation and diffusion takes place are likely to be i) science-intensive, specialised-suppliers of materials, that tend to be small, often highly innovative, high-tech firms, ii) more traditional science-intensive firms, that tend to be larger and produce at scale, and iii) large firms in a variety of user sectors. For all three, but especially the second and third, the current data is very limited and as a consequence the extent of the development and use of nanomaterials in the UK is uncertain. However, the typical innovation processes in these cases would be expected involve a) close connections to the science-base, b) close connections to regulators, and c) links between suppliers and users along supply chains. The initial links between science and firms are moderately well captured by data on patents and scientific publications. However, there is limited data on the more downstream interactions and they remain poorly understood. This is unfortunate as this is a potentially useful site for policy interventions.2 EX 7. A second finding in the report is that these varied nanomaterials innovation processes are part of a global system in which the UK is a not a dominant global player. The UK science system is more specialised in biological sciences than novel-materials and even the top UK universities are not major producers of knowledge within the global system. This leads us to believe that the current small number of firms involved in nanomaterials in the UK may potentially become important niche players in the global industry, and maybe significant firms within the European market, but the UK is unlikely to play a dominant global role as a source of innovation in nanomaterials.3 Furthermore, because most technology will be coming from overseas, regulation of nanomaterials in the UK should be globally focused, rather than national, and involve supra-national bodies such as the OECD and EU. Policy-makers concerned with

2 For example, the entire value chain might be more innovative and safer if protocols for the sharing of information were implemented along the lines of chemical handling instructions that provide clear guidance about how chemicals should be used. 3 The UK is more specialised in other areas of nano-technology, but is approximately on par with France in the fields of nanomaterials and nano-chemistry.

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environmental impacts should focus on the diffusion of technology developed and/or manufactured overseas, in the same way as policy-makers concerned with lead-paint in children’s toys should not focus exclusively on the UK paint industry, but also on paints or painted toys produced outside the UK, and on the roles of UK importers and retailers. What matters is how nanomaterials are used in a potentially wide range of products that may be manufactured or used in the UK. EX 8. While the size of the UK industry and science base suggests the UK will not play a major role in the development of nanomaterials, the UK does have a highly influential role within the global regulatory system. The UK has an influence on the governance of the technology far beyond what might be expected from the size of the nanomaterials industry or science base. In some areas, such as public engagement, the UK is a world leader. Thus, within the global system of innovation in nanomaterials the UK is a niche player in innovation, but an important player in governance. As such, the UK has a potentially significant role to play in shaping the direction of technical change in nanomaterials. EX 9. In discussing governance, the report makes a distinction between first-order regulation of the health and environmental impact of novel materials themselves, and second-order governance strategies for nanomaterials innovation processes, including the broader technological systems that nanomaterials and nanomaterials applications contribute towards. In both instances there are high levels of uncertainty, diversity of actors, and dynamic interactions affecting the impacts and trajectories of nanomaterials innovation. Uncertainty and incomplete knowledge about the impacts of nanomaterials, suggests the need for precautionary first-order regulations. Here we make an important distinction between precautionary appraisal which seeks to recognise knowledge gaps and uncertainties, and attempts, where possible, to minimise them, and precautionary policies, which relate to political decisions about how far protection against possible hazards should be weighed against sometimes equally uncertain costs of restricting innovations. EX 10. A major challenge for first-order regulation is that innovation within the nanomaterials value chain is highly distributed. Not only nanomaterials, but also nanomaterials applications, and products containing those applications may require regulation. Applications and products are far more numerous and pose considerable difficulties for regulators. Yet, as is typical of the early stages of development of new technologies, there is a lack of information and clear categorisations about applications and use. In more established areas of technology such commercially confidential information may be disclosed as part of a series of regulatory requirements. However, with nanomaterials there isn’t any requirement for disclosure because their regulation is underdeveloped, and regulation is underdeveloped because of a lack of information about what is happening downstream. As a consequence, uncertainty about the industry creates uncertainties about future regulatory environments for firms, which constrains investment. There would therefore seem to be potential opportunities for mutually beneficial interactions between industry and regulators that are underexploited and could be further developed. EX 11. Our review of existing governance of nanomaterials innovation has shown a tendency to focus on the link between science and suppliers. Here governments have been active in funding research, infrastructure and capability development through research councils, Knowledge Transfer Networks (KTN), TTOs etc. However, given the

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wide variety of applications, products, and sectors that nanomaterials innovations have affected and could affect, there is also significant potential for the application of governance measures further downstream in the innovation process between suppliers and potential users of technology. This is a potentially under-exploited site for second-order interventions (for example, through procurement policy or investment). By pushing innovation towards environmentally beneficial and socially acceptable goals, downstream applications are likely to have clearer benefits, reducing uncertainty about the social distribution of risks and benefits, and increasing public acceptance. EX 12. Furthermore, given the bi-directional flows of knowledge between components of the nanomaterials innovation systems, governance measures aimed at influencing downstream applications are likely to influence upstream activities in supplier firms and the wider science base. Since the networks of innovation processes in nanomaterials criss-cross with one another, this has the potential to lead to upstream capability building which can enhance a range of downstream applications beyond the initial focus of policy. Rather than ‘picking winners’ the aim of policy should be to build capabilities and increase information flows along value chains to help direct a broad cross-section of innovation processes in particular directions. EX 13. There is potential not only for such second-order governance strategies to influence the development of downstream nanomaterials applications, but also to contribute to the development of the broader technological systems that nanomaterials could become a part of. This is important if environmentally beneficial nanomaterials-based technologies are to impact on the sustainability of particular technological sectors. The challenge is to make explicit, and to encourage, the ways in which nanomaterials and nanomaterials applications can provide solutions to problems whose saliency and urgency are given prominence by broader sustainability policy within particular technological sectors. The creation of institutions that can outline this kind of broad second-order governance strategy and co-ordinate it with first-order regulation could create the conditions for commercially successful firms to emerge in markets that are environmentally sustainable.

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Chapter 1 – An Introduction to Nanomaterials Systems of Innovation: Their Structure, Dynamics and Regulation

Introduction 1.1 The emergence of a stream of new products that exploit the novel physical, chemical and biological properties of materials at the nano-scale has raised a series of questions about their appropriate regulation. Nanomaterials give rise to particular regulatory problems because they have physical properties that might pose a threat to environmental and human safety. Furthermore, since these physical properties can change quite radically with relatively minor changes in the materials themselves, there is an array of uncertainties about their impact that could depend on the very disparate and individual uses and applications of nanomaterials, and the ways their state might change over the product life-cycle. This raises questions not only about their environmental and health safety, but about the appropriateness of regulatory policies that were designed for traditional chemicals and materials. At the same time, there is an official commitment to promoting the responsible development of nanomaterials, for example by encouraging environmentally beneficial products and applications (DEFRA 2008). 1.2 These uncertainties, concerns and ambitions have been associated in the UK, Europe and US with attempts by regulatory agencies to move from reactive to pro-active management of the risks involved. Responding in an intelligent way requires policy makers to have a nuanced understanding of where they might intervene. These points of intervention can often be found by identifying points of uncertainty in the wider system of innovation and technology development. Hence, there is now an increased interest in how Systems of Innovation approaches might help inform policy making in this area. Systems of innovation approaches cover a variety of units of analysis. Most commonly they apply to national economies (Nelson, 1993), but they have also been applied to sectoral (Malerba, 2004) and technological systems of innovation (Carlson and Stankiewicz, 1991) that transcend national boundaries and to sub-national, regional systems of innovation (Cooke et al., 1997). In reviewing the literature we have found global technological systems frameworks to be more useful than sectoral frameworks, that, in turn, are more useful than nation and regional systems frameworks. This is because nanomaterials are comprised of a range of global technological systems that transcend nation-state boundaries and are developed in particular sectoral systems of innovation. 1.3 This report explains how UK nanomaterials are situated within its technological, sectoral and national systems of innovation. The term ‘systems of innovation’ refers to “the network of institutions in the public and private sectors whose activities and interactions initiate, import and diffuse new technologies” (Freeman, 1987, p.1). Differences in these institutional arrangements generate substantial differences in the rate and direction of innovative activity across regions, nations and industrial sectors. System of innovation approaches to policy making attempt to understand the interactions between the economic, social, political, and organisational ‘rules of the game’ that influence these patterns of innovation, and use them to inform effective policy making. The core idea within systems of innovation approaches is that by understanding how institutions influence the rate and direction of technical change it should be possible for

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policy makers to more effectively intervene to influence the direction of innovation towards socially desirable goals (Lundvall, 1992; Nelson, 1993). 1.4 The shared starting point of proponents of system of innovation frameworks is a belief that analysing innovation at the firm-level only provides partial insight into how different patterns of innovation emerge and change. As a result, they believe firm-level analysis should be complemented by analysis of the interactions between firms and their institutional environments. These environments provide the initial starting points for innovating firms by structuring their interactions with suppliers and customers and determining the educational levels of their workforce. Since most law is still conducted at the national levels, nations also provide the legal and non-legal rules that shape firms’ behaviour.4 These interactions and rules may change over time, but tend to be specific to particular national contexts and are asserted to have a major influence on innovation processes. 1.5 Such systems approaches have strengths and weaknesses. By focusing on a wide variety of interactions they can sometimes cover too much and consequently say little of value. At their worst they can be little more than a flimsy intellectual covering for policy entrepreneurs, as shallow statements that “institutions matter” can justify almost any policy. On the other hand, they can generate much more specific advice when they are understood as complements, rather than alternatives, to other frameworks. This is because systems-approaches emerged out of a series of changing models of innovation that have gradually expanded the scope of their analysis in a cumulative fashion from science, to within-firm interactions, to between-firm interaction and finally to the network of interactions between firms and institutions. When the various ‘systems of innovation’ frameworks are used as complements to these older frameworks they can generate very specific implications for a variety of different sectors, nations and time periods. Thus, it is important to have a baseline understanding of how the system of innovation approach developed before attempting to use it to inform policy-making. 1.6 The particular focus of this report is on the technological systems of innovation in nanomaterials, which cover a variety of different technologies, and are global in their coverage, reflecting the extent innovation in nanomaterials draws on international knowledge and generates products that are manufactured and sold beyond the boundaries of a single nation state. It aims to assist policy makers in dealing with the highly uncertain, rapidly changing technological systems that comprise nanomaterials. In doing so three key points are highlighted: • nanomaterials do not have a single pattern of innovation, but are instead developed in

a range of parallel, but overlapping innovation processes; • there is a high degree of uncertainty surrounding the economic development, and

downstream application, of nanomaterials. There is currently a substantial mismatch between the amount of data and policy attention given to the early upstream parts of the nanomaterials innovation process and the under-explored and the potentially more fruitful downstream parts; and

• rather than thinking of system of innovation approaches as a steering wheel that can help direct a single nanomaterials innovation process, they are more usefully

4 For example, national institutions define Intellectual Property Rights (IPR) rules that influence how firms can appropriate the returns to their investments, and the social norms about employers’ support for on-the-job training that influence how firms accumulate knowledge.

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understood as frameworks for suggesting how multiple overlapping patterns of innovation might be influenced.

The report concludes by suggesting that some new areas of policy intervention that principally involve a focus on influencing downstream points in the innovation process might be considered. Influence in these downstream areas could then be used to reduce market uncertainties and induce changes further upstream (due to spillover effects) that can magnify the effects of the downstream policy interventions.

The Changing Nature of Policy Making

1.7 This report has attempted to provide a balanced assessment of the role of system of innovation approaches in environmental policy making, and has not assumed that they are the best, or even the most useful ways of approaching this issue. Indeed, there are many features of system of innovation approaches that are problematic and we point some of these out and suggest improvements or ways around them. 1.8 The assessment has also taken into account how the nature of policy making, especially environmental policy making, is changing. In the past it might have been possible to conceptualise regulation in terms of a bounded nation state, fixed technology, and robust, relatively certain information about the impact of new technology. The emphasis on economic issues such as employment and economic growth, and lack of (relative) attention to environmental and other sustainability issues, greatly simplified policy making. Today, supra-national regulation from the EU and international agreements are more prevalent, technologies are changing rapidly and are highly uncertain, and while the British public is pro-science, they are more concerned about the direction of innovation, and its impact on both the environment and society. 1.9 Compared to the 1980s when systems approaches to innovation emerged, there is more uncertainty about what technology might do, more ambiguity about what technology should do, many more institutional actors who might be involved in policy making. As a result, policy making has moved away from static, top-down solution finding, towards more process-based approaches that recognises the uncertainties, and different perspectives and values of the actors involved. Rather than providing ‘the answers’, the various ‘systems’ approaches that have been developed in recent years are designed to provide policy makers with intellectual tools that will allow them to begin to formulate policy before they have all the information (which may not exist), and adapt their policymaking as new information comes to light. 1.10 Systems of innovation frameworks therefore may help policy makers understand innovation but will not generate policy on their own. They provide guidance on what types of patterns of innovation to expect and how they might change over time, but do not provide any magic bullets to overcome a lack of data, nor do they provide guidance on normative choices.

Some disclaimers

1.11 Despite the limitations of a systems of innovation approach, this report suggests that they are potentially useful. It illustrates them in the context of the UK nanomaterials innovation system and considers how policy making might influence and guide this system towards particular desired ends more effectively in the future. In doing so, the

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report draws first and foremost on secondary data and triangulates this with a small amount of primary data from patent and scientific publications, as well as qualitative information gained from interviews with selected UK experts in nanomaterials. In reviewing the available studies and reviews we have found a considerable lack of data on downstream applications. As a result, while we can be reasonably confident that we have covered a large part of the upstream UK industry and research system, there still remains considerable uncertainty about how and where the technology is being used. Without this information it is impossible to map the innovation system in detail. In interviewing firms, we found this information is considered commercially confidential, and with a few exceptions the firms we interviewed were not prepared to discuss their customers or the users of their products. 1.12 The current situation as presented here with regard to understanding the development of nanomaterials can be considered as analogous to an imagined scenario with biotechnology. Suppose, for a moment, that if the only data available on the biotechnology sector was scientific publications and patents. While this might provide an accurate map of the medical biotechnology sector that sells biotech products, it would not provide a useful map of the use of biotechnology in sectors such as brewing or detergents or agriculture. Since regulation must be directed at areas where biotechnology is used and applied, patent and publication data only provides a modest (and potentially misleading) guide. Such is the situation we find ourselves in with nanomaterials and we are not alone in this5. With such limited data, even with the addition of some new primary data presented herein, the report cannot go beyond providing an initial analysis of the types of interactions among key actors and listing the main organisations, nationally and globally, according to publications and patents.

Essential Definitions

1.13 The report has aimed to minimise its use of specialist terms, but there are a number of terms where clarity is important. The report differentiates between invention and innovation. Invention is generally considered to be the first time a new idea for a product or process or service is thought up (OECD, 1981). As such it is an event. Innovation, on the other hand, is the more time consuming process that moves from the inventive event to the first successful commercialisation of a new product, process or service. As such, innovations can be new to the world, new to a country or new to a firm or other organisation (OECD, 1981). 1.14 The study of innovation is slightly different from most other areas of social science because innovations, by definition, are new. Consequently, the study of innovation has particular methodological problems that arise from the requirements for novelty, often in multiple dimensions, that are associated with innovation. Due to this novelty requirement, no two innovations will be the same along all their dimensions, and therefore academic studies face particular problems in defining which features are being held constant in the analysis and which features are being allowed to vary. Thus it can be potentially misleading to talk about ‘the innovation process’ on its own without having a wider understanding of the contexts, actors, and dynamics in which change is occurring. However, as we shall see, the fact things change and are different does not mean we cannot say something relevant about them. 5 The recent Euronano report (see Meyer et al., Forthcoming) which is possibly among the most comprehensive studies of the European nanotechnology industries, similarly found little availability of systematic data on downstream applications.

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1.15 Innovations can be differentiated along a continuum from radical to incremental. Radical innovations involve major changes to the operational principles by which technologies perform their function. For example, the shift from propellers to jets in aircraft propulsion was a radical change. Incremental innovations involve smaller scale adjustments that do not alter the operational principle at work. Cumulative incremental innovations over many years can contribute more to improvements in productivity than the initial radical innovation, particularly as most new technologies are introduced into wider technological systems in a rather primitive form. As a result, they often require adjustments to fit with other technologies within the system, which itself may require modifications, in order to achieve their full potential. Incremental innovations are therefore particularly important as new technologies diffuse into, and are adapted for, new environments. 1.16 As a consequence, incremental innovations are particularly important in both technologies and the systems they operate in over the lifecycle of a given technology. This is because technologies emerge in a very primitive form, often as new processes for producing existing products. During their early introduction they typically have narrow technological and sectoral applications and large (and often increasing) development costs (von Tunzelmann, 1993:5). Only after long periods of incremental mutual adaptation between the technology and its operating environment, is the technology mature enough, the potential markets large enough, and the complementary technical and organisational innovations in place, to allow the initial innovation to be broadly applied in products (ibid). 1.17 By diffusion the report means the processes by which both new and old technologies move into new national and firm based environments. The incremental adjustments to innovations as they diffuse are a major aspect of innovative activity that are often overlooked in policy making because they are rarely picked up in official statistics (such as patent counts). A country the size of the UK, for example, only develops a small proportion of the innovations it uses. Therefore, a focus only on UK innovations to the exclusion of diffusion, or a focus on radical innovations picked up in patent data to the exclusion of incremental innovations, or even worse a focus on invention alone, is likely to badly mis-specify the nature of innovation in the UK economy. As a consequence the data that we have access to is likely to under-represent the extent of innovation and should be considered as an indictor rather than an accurate measure. 1.18 By nanotechnology the report means the investigation and fabrication of devices on the molecular scale between 1 and 100 nanometres. While nanotechnology is often not precisely defined, our concern in this report is with novel materials and we differentiate between types of nanomaterials depending on the dimensions that are nano scale. 1D nanomaterials refers to materials generated by surface chemistry. For example, 1D nanotech would cover lithographic depositing of nano-scale layers of materials on silicon wafers in the development of computer chips, or surface treatments for glass that fill microscopic depressions and produce a surface that prevents dirt from sticking. 1.19 2D nanomaterials refers to materials that are between 1 and 100 nanometers in two dimensions. Nanotubes, for example, are about one nanometer in diameter and up to several thousand nanometers in length. They are created when an electrical or laser discharge occurs in a highly pressurised mixture of carbon rich gases and have a range of

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novel physical properties. In some states they can be stronger than steel, and in others they can cluster into asbestos like needles. 1.20 3D nanomaterials refers to particles, such as quantum dots, that are nano scale in all three dimensions. Thanks to there small size, quantum dots can be tuned to emit particular kinds of light, making them extremely valuable as specialised dyes. Because the report focuses on the environmental policy implication of novel materials, its focus is mainly on 2D and 3D nanomaterials, which are perceived as posing higher risks.

Organisation of Report

1.21 The report follows a simple structure. Chapter 2 explores the development and history of the various innovation-systems concepts and their relevance for policymakers. Chapter 3 describes key features and actors in UK system of innovation for nanomaterials and positions it within a wider international system of science and technology. The section highlights the variety of patterns of innovation within this system and illustrates their drivers with a series of short illustrative cases. Chapter 4 briefly lays out the current governance structures for nanomaterials in the UK and the EU and chapter 5 builds on this by exploring current academic research on the governance of complex social systems. The report concludes by providing recommendations for future policy making in this area.

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Chapter 2 – Understanding Systems of Innovation: A Contextual Review

Introduction

2.1 The various Systems of Innovation (SI) approaches that have been developed over the last two decades explore how patterns of innovation are influenced by activity beyond the boundaries of individual firms. In doing so, they highlight the role of public and private institutional actors such as governments, universities, customers and suppliers, and explore how their relationships, configurations and interactions influence technological change (Freeman, 1987). Differences in these institutional arrangements have been shown to generate substantial diversity in the rate and direction of innovative activity across regions, nations and industrial sectors and have been used to explain variations in rates of economic performance and growth (Patel and Pavitt, 1997; Nelson, 1993). 2.2 Because these approaches are addressing dynamic and often highly uncertain phenomena, they provide frameworks for understanding broad patterns of change, rather than detailed predictions of a particular technological trajectory. To help us understand how these approaches might help inform environmental policy making, we briefly review their development, show how they fit into a broader body of academic knowledge on technical change, and then use them to inform a framework for thinking about environmental policy making in the context of rapid technological change and innovation.

The development of the theory behind the systems of innovation approach 2.3 The systems of innovation approach emerged in the 1980s (Lundvall, 2007), and built on earlier ideas on the importance of innovation for economic development from the 1960s (Godin, 2004) that had historical roots in the political economy of the 18th century (Freeman, 2002). A system of innovation approach emerged as an almost natural progression for academics studying innovation, as the locus of analysis in academic thought had gradually been expanding from a narrow focus on science and R&D, to a wider firm-based view, and then to the relationships between firms. Analysing how firms interacted with other institutions was the obvious next step. 2.4 Studies of innovation in the 1950s and 1960s understood innovation in terms of a ‘science-push’ model. This had first been used by Vannevar Bush (1945) to justify the huge expansion of the U.S. Federal research system after the war. Bush, an engineer by trade, recognised that corporate innovation required R&D within firms, but felt that the bottleneck in the system was likely to be found in federally-funded research and argued that investing in knowledge production would generate innovations. 2.5 During the 1970s a new body of innovation theory emerged with Schmookler’s (1962; 1966) ‘market-pull’ theory. This argued that changes in demand, rather than science, drove innovation. His ideas were based on an historical analysis of patents and he showed that changes in demand occurred before changes in inventive activity. However, his analysis and theory, while revolutionary, did not fully support the conclusion that science played little or no role in innovation. As a result Schmookler’s views, and many of the associated theories that followed, were subjected to devastating critiques (see for example, Mowery and Rosenberg, 1979). 2.6 In the early 1980s a new body of theory emerged that addressed the earlier problems of attributing innovation activity solely to ‘science-push’ or ‘market-pull’ (Dosi,

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1982; Freeman, 1982; Nelson and Winter, 1982). These new theories highlighted how innovation drew on and generated its own body of technology-specific knowledge; knowledge that was broadly understood as practical and theoretical understanding and know-how. The argument went that since innovation is inherently uncertain and new knowledge reduces this uncertainty, the cumulative development of technical knowledge in particular areas can create differences in the rates at which different parts of the technological frontier develop. Therefore, they concluded that patterns of innovation follow cumulative paths. Stocks of technology-specific knowledge develop that influence the way firms identify the most fruitful (i.e. profitable) ways forward at the technological frontier. As a consequence, neither changes in market demand (market-pull) nor changes in science (science-push) influence innovation patterns directly. The effects of both are mediated by firms themselves and the particular bodies of knowledge they have accumulated. 2.7 This new insight tells us that changes in market demand will not generate innovations unless the requisite knowledge is also available to generate products that will address the demand. Only when this knowledge is in place do we find the patterns of innovation associated with ‘market-pull’ observed by Schmookler. When this knowledge is not in place, innovations simply do not occur, even when there is very clear demand. A good example of this can be found in our inability to create pollution free energy supplies. Similarly, advances in science may generate new technological opportunities, but unless firms can link this to markets, innovation will either fail to occur, or will simply fail. Applying this theory to the topic of this report, we can argue that though nanomaterials offer plenty of technological opportunities, this does not imply that firms will be able to successfully exploit them, let alone profit from them. 2.8 Thus, we can see how the new body of theories about innovation helped to clarify the field and enabled academics to draw real-world policy implications from their findings. For example, while market-pull frameworks were correct to draw attention to demand, and particularly to see customer requirements at the product level as vital for innovation, they were wrong to think this implied that public support for science was unnecessary. In fact, quite the opposite is true. The innovations that firms develop depend on their levels of technical expertise, which in turn, is supported by the skilled researchers coming out of the national science systems. 2.9 Similarly, science-push theories were right to emphasise the importance of research, but were wrong to think that such investments would be either necessary or sufficient for innovation. For example, the Wright brothers flew before the aerodynamics of planes was understood and the steam engine was working before thermodynamics emerged as a body of knowledge. Scientific knowledge, particularly in the form of scientific problem-solving skills, feeds into technological development in some sectors, but it has to be integrated with other kinds of knowledge within the firm to produce goods and services that match customer-requirements. 2.10 This new way of understanding innovation gradually developed into the ‘evolutionary’ tradition in economics, in which, technical change is understood in terms of processes for generating, screening, profiting from and diffusing innovations (Nelson and Winter, 1982; Dosi, 1982; Malerba and Orsenigo, 1996 and 1997). This draws our analytic attention to three key areas:

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• the technological opportunities that firms are presented with (i.e. the options that are open for developing new products and services, which can be approximately measured by indicators such as the rate of patenting);

• the extent to which firms can appropriate the benefits from their investments in technology and profit enough from their innovations to reinvest and grow; and

• the extent to which the knowledge that they use is cumulative. 2.11 Using this type of analysis, we can see that firms operating in markets that have strong appropriability conditions, for example in the pharmaceutical industry where products are protected by strong intellectual property rights, can gain substantial financial benefits from their innovations that can be reinvested in developing new technology and expanding the firm. However, when appropriability conditions are weak, for example in high-street hairdressing or farming, innovations can be readily copied by competitors and firms find it difficult to benefit from their own innovations. These issues are important to keep in mind when thinking about how a systems of innovation approach might influence particular policy making decisions. It implies firstly that firms not only need to innovate to be successful, they also need to be able to profit from their innovations. Secondly, they suggest that the ability to profit from innovations can be influenced by institutional arrangements, such as strong intellectual property rights, regulatory frameworks or collaborations with other firms. These ‘non-technical’ aspects of successful innovation are discussed next.

Complementary Assets: Appropriating Returns, Dis-appropriating Risks 2.12 A focus on the non-technical aspects of successful innovation led innovation theorists to explore the “complementary assets” (Teece, 1986) needed to profit from innovation. For example, without effective intellectual property rights competitor firms can copy innovations. Similarly, some technologies are difficult to commercialise without substantial marketing efforts to build brands, while other innovations can be protected by keeping process technologies secret. We observed all of these phenomena in our discussions with nanomaterials firms and so believe it is important to understand the ideas behind them. 2.13 Complementary assets can be used to reallocate the negative effects of innovations onto institutions better able to handle them (Hopkins and Nightingale, 2006). For example, the financial risks of innovation in small high-tech firms are often easier for VC funds to cover than entrepreneurs. As David Moss (2004) has argued, this is an area where governments can play a key role in moving non-financial risks and rewards around to ensure the negative aspects of technical change are properly covered. Where the social distribution of risks remains unclear, socially unacceptable or untrustworthy, emerging technologies can face public resistance. As a consequence, different institutional structures within different nation states are more or less conducive towards the development of particular technologies. 2.14 These non-technical and institutional features of the innovation environment provide the starting points for innovative activity, determine how risks and rewards are allocated, and support firm-based learning. Taken together, they can be used to understand how technologies and sectors producing particular technologies might develop. For example, when technological opportunities are high, and appropriability and cumulativeness are low, new entrepreneurial small firms can readily enter the market, but will find it difficult to grow and securely protect themselves from new competitors. However, when technological opportunities, appropriability and cumulativeness are all

16

high, innovation tends to be undertaken by large firms that can exploit the high barriers to entry and appropriate higher returns. These key features are illustrated in a simple schematic (Figure 1) below. Figure 2.1: Different Sectoral Systems of Innovation and their Characteristics

2.15 Applying this concept to nanomaterials, then the rate of patenting would seem to indicate that technological opportunities are fairly high. It should not come as a surprise, then, to see reasonably high rates of entry into the market by small, entrepreneurial firms, often spinning out from, or connected to, universities. It is still unclear whether such firms will grow into larger firms, following an industrial shake out, or whether the market will be characterised by rapid turnover of small firms. We would expect, from the theories discussed here, that this will depend on the extent to which the returns to investment can be appropriated, the risks disappropriated, and how cumulative knowledge is needed to innovate. If firms can find large markets for their products, appropriate a large financial benefit from their investments by protecting their products with strong Intellectual Property rights, produce at scale while keeping process technology secret, and cumulatively build up knowledge to make it harder for new firms to enter the market, then we would expect them to grow into large firms. 2.16 However, at present there is considerable uncertainty about both the extent to which knowledge is cumulative in this area and the nature of the appropriability conditions for the market. This uncertainty is compounded by lack of clear understanding about the risks involved in the technology, how they are socially distributed, and how potential changes in regulation might reallocate the risks and rewards to investments in nanomaterials. As we shall see in one of the case studies, one firm is seeking to strategically dis-appropriate the commercial risks associated with environmental uncertainty by publishing data on toxicology studies in peer reviewed academic journals that are available to the public. As peer reviewed academic journals are trusted more than company announcements, this reduces public concerns about the safety of new products.

Technological opportunities

Appropriability of innovation

benefits

Cumulative knowledge

=++ Innovation environment favours large firms; can exploit barriers to entry; appropriate high returns

Technological opportunities

Appropriability of innovation

benefits

Innovation environment favours small firms that

have easy entry, but may struggle in a highly competitive environment

=+ +

Cumulative knowledge

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The Diversity of Patterns of Technological Change 2.17 This new way of understanding innovation also helped explain the results of empirical research that had found very diverse patterns of innovation in the economy. The four main categories of innovation found in empirical studies in the 1970s and 1980s (Pavitt, 1984; Freeman, 1979) were explained in terms of a combination of the sources of innovation, firms relationships to other firms, and forms of appropriation. These categories shed light on how the nature of different firms led to different types of innovation and the technological opportunities available to them (Pavitt, 1984). The Pavitt Taxonomy, as it came to be known, is described in Box 1.1 Box 2.1 Pavitt’s Taxonomy

1. Supplier Dominated firms are found in traditional sectors of manufacturing, construction, agriculture and lumber, paper, printing and publishing and most service firms. Such firms tend to be small and get most of their technology from their suppliers. They do not innovate to any great extent and generally produce standardised products using standard process technology. As a consequence, technical change mainly involves technology transfer from suppliers with a limited amount of technical modification. The technological opportunities such firms face tend to be low, and when they are higher, their ability to appropriate financial returns tends to be low.

2. Scale Intensive firms, as their name suggests, produce at scale and innovate mainly in

process technologies. Such firms can be found in price sensitive, mass production sectors such as consumer goods, basic materials (such as metals, glass and paper) and some information intensive services like banking. In these sectors innovation is directed towards reducing the costs that customers pay for fairly standard products (i.e. glass or concrete). Because process innovations are so complex these firms tend to have their own production engineering departments to operate and improve innovative production systems and source technology from suppliers. Technical change in these sectors tends to be very process focused, and depends on interactions with firms that supply specialised machinery and technology.

3. Specialised Supplier firms exist in symbiotic relationships with their scale intensive and

supplier dominated customers. They supply them with components in the form of specialised machinery, instrumentation and services. These components address specific sub-functions defined by their larger production system. As a consequence, specialised suppliers often receive new product ideas from their customers. By exploiting their customers’ operating experience and demands for high performance products, these firms can then co-develop product innovations with their customers and appropriate more the returns to innovation by selling to a wider customer base. As a consequence, these firms are extremely important at diffusing technology in the economy. The resulting products tend to be high value but often have limited production runs, so firms can have difficulty growing to large sizes.

4. Science-intensive firms are found in chemicals, pharmaceuticals, some parts of

aerospace and defence and electronics. These firms rely on R&D for their innovations and normally have close relationships with academic research conducted in universities.1 Such firms also use innovative production processes when they are able to produce at scale. Process innovations, as with firms in the scale intensive category takes place within production engineering departments and draws on technology co-developed with specialised suppliers. Because many new products produced by science-intensive firms; have novel performance characteristics, they tend to be heavily regulated. For example, in pharmaceuticals and agrochemicals products typically have to undergo pre-market authorisation before they can be sold.

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2.18 These diverse patterns of innovation emerge because firms respond to their customers’ demands and accumulate firm-specific technological knowledge at different rates and in different areas depending on the opportunities they have to both develop technology and appropriate the returns to their investments. We will now look to some specific examples of how this diversity affects different aspects of the system of innovation, before finally turning to the specific case of nanomaterials. 2.19 When customers are only interested in low price, innovation will be biased towards process innovations that reduce costs. If the technological opportunities are there for firms to produce at scale they will be Scale Intensive and develop process improvements in their production engineering departments, often in collaboration with specialist suppliers. Because scale intensive production both reduces costs and provides a technical barrier to entry, such firms can often to appropriate a considerable proportion of the returns from their innovations and grow to be large. If firms lack either the capabilities or appropriation opportunities to innovate in scale intensive production systems they will typically fit within the un-innovative Supplier Dominated category and remain small. 2.20 If customers demand high performance then innovation will be biased towards product innovation. The first way performance is improved is through R&D in science-intensive firms. Depending on the cumulativeness of the knowledge this can either involve designing technologies to match customers’ specific requirements, or if that is not possible, to develop products and then find markets for them. The returns to innovation in such sectors are typically appropriated through patents, production at scale, and global marketing, that protect profits and science-intensive firms, in sectors like chemicals and pharmaceuticals, to grow large. 2.21 The performance of products can also be improved through design and engineering rather than science. Specialised supplier firms, for example, produce high-performance design intensive products by working closely with their customers. Because production runs are small and patents can often be innovated around, such firms rely on reputation, close commercial relationships and secrecy to protect their innovations. Even so, they often remain small.

Patterns of Innovation in Nanomaterials

2.22 The theories explored so far suggest that patterns of innovation can be differentiated in three ways: • the sources of knowledge that are drawn on (science or engineering design), • the learning processes involved, and • the requirements of users and the ability of firms to appropriate the benefits and dis-

appropriate the risks. These ideas can be used to provide an initial first cut of what we might expect the characteristics of innovation in the nanomaterials to be. We will conclude this chapter by making some predictions about what we might expect to find in the system of innovation for nanomaterials, while chapter 3 will discuss what our exploratory research for this report did, in fact, reveal about the nanomaterials system. 2.23 The initial sources of knowledge that are drawn on are scientific disciplines; the learning processes involved are uncertain; the requirements of users are for performance;

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and the ability of firms to appropriate the benefits of innovation are uncertain. Given the early stage of the technology development in nanomaterials we would expect them to be used as inputs into other products and production processes. As such, customers’ demands should focus on the performance of the technology, and innovation, therefore, will at least initially focus on product technology (rather than production at scale). We would expect to see close links between nanomaterials firms and the science base. This would be reflected in citations from patents to scientific papers and publications in the scientific literature by nanomaterials firms. Regarding production processes, we would expect them to be heavily influenced by regulation, although at such an early stage of technology development, these relationships and influences are unclear as the allocation of different types of risks and rewards between different institutions is being worked through. 2.24 The different technologies that make up nanomaterials are likely to have different appropriability regimes. For example, patent protection might work well for some technologies, while with others patents might be easy to innovate around. Similarly, the controlled production of some nanomaterials is relatively well understood, while with others such as CNT, the ability to produce consistently at scale is currently very problematic. In this case, firms that master the process technology may well be able to appropriate superior returns. 2.25 With some nanomaterials it may well prove possible to design products to match customer requirements, allowing firms to emerge as a form of specialised supplier. These firms could be expected to co-develop technology with their larger customers. With others, it may only be possible to create products and then find markets for them. In this instance, as we shall see, firms will have to rely on substantial marketing capabilities and expertise and we might expect such technologies to be commercialised by large firms. 2.26 Finally, given that we expect nanomaterials firms to be science-intensive, of one kind or another, we would expect to be able to pick them up within a global, continental or national system of innovation with patent statistics and/or scientific publications. As was noted earlier, these metrics will be far worse at picking up the downstream development and application of nanomaterials. The next section integrates previous empirical analyses of nanomaterials innovation and triangulates it with a small amount of additional primary analysis and interview data.

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Chapter 3 – Innovation systems in nanomaterials

Definition of Nanomaterials 3.1 Nanomaterials are generally agreed to be engineered structures with at least one dimension of less than 100 nanometres in length. As defined earlier in this report, nanomaterials with only one dimension in the nanoscale are referred to as 1D and are layers, for example thin films or surface coatings. Materials with two or three dimensions in the nanoscale include nano-wires and nanotubes (2D), and nanoparticles like quantum dots (3D). Here we are focussing on 2D and 3D (nanoparticles and nanotubes) because of the risks they may pose to the environment and human health. 3.2 It is important to point out that nanomaterials are only one area of the variety of technologies that fall under the umbrella term of ‘nanotechnology’. In order to avoid confusion, it has to be emphasised that the issues presented and discussed in this report in relation to health, environment and safety of nanomaterials can not and should not be generalised to other nanotechnologies with characteristics and innovation processes that are very different, such as instrumentation for nanotechnology or nanofluidics (Meyer, 2007). 3.3 Nanomaterials are of interest because of the specific physico-chemical properties that can be attributed to their small size, chemical composition, surface structure, solubility, shape and aggregation (Nel et al., 2006). These properties mean that there is a possibility for increased uptake and interaction with biological tissue and/or the environment because “as the size of a particle decreases, its surface area increases and also allows a greater proportion of its atoms or molecules to be displayed on the surface rather than the interior of the material” (Nel et al., 2006, p.622). Though this fact in itself does not necessarily mean there will be negative environmental and health risks posed by nanomaterials, there is now a distinct literature on the toxicology of nanomaterials (see Nel, et al, 2006 for an introduction) and an emerging consensus that much uncertainty remains. Some even argue that the toxic potential of each type of nanoparticle may vary and thus each has to be evaluated separately (Nel et al., 2006). 3.4 Most concerns regarding human health come from exposure routes including inhalation, dermal contact, and future medical applications (such as injection). Environmental concerns follow the standard criteria used to determine whether chemicals are of particular concern and include persistence, bioaccumulation and toxicity. Release of nanomaterials into waste streams, soils and water sources are of particular concern. 3.5 For this report we identified three nanomaterials for in-depth case studies that could illustrate some of the risk, benefits and innovation challenges firms in these areas face. Each nanomaterial is briefly described below and Table 1 illustrates the potential applications, benefits and risks associated with each. • Carbon nanotubes (CNTs) are very strong, flexible and good conductors of

electricity, which means they have a wide variety of applications, from electronics to reinforced composite materials (RS/RAE, 2004). CNTs are grown in laboratories and firms, and now are available commercially to companies who wish to incorporate them in their products or other applications. However, they are also one of the most

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commonly cited nanomaterials when it comes to concerns about the effect of nanoparticles on health and the environment. They are very similar in structure and size to asbestos fibres, leading many to question the potential long term health and safety of this nanomaterial.

• Titanium dioxide (TiO2) nanoparticles. Nanoparticles are defined as particles with a diameter of less than 100nm that exhibit new or enhanced properties and are dependent upon their particular size in comparison with particles of the same material (RS/RAE, 2004). Though nanoparticles exist widely in the natural world, deliberately manufactured nanoparticles are of particular interest for this study. We have chosen to focus on metal oxides, specifically TiO2 where possible, because of their recent uptake in applications such as sunscreens, cosmetics, textiles, paints and film coatings.

• Quantum dots are nano-crystalline structures that emit or absorb light of specific wavelenghts. Quantum dots have been around since the 1980s and can be made from a variety of different compounds (Moghimi et al., 2005). Their optical properties make them particularly useful in bionanotechnology where they are used as fluorescent biological labels. Specific applications might include multicolour optical coding in gene expression studies, high throughput imaging and in vivo imaging .

Table 3.1: Potential applications, benefits and risks of nanomaterials

Major Applications (and

possible applications) Potential benefits

Environmental risks

Health risks

Toxicity. Exposure through skin, inhalation and ingestion

Polymer and structural composites; flat panel displays; electro-magnetic shielding; super-capacitors; batteries; hydrogen storage ; drug delivery; semiconductor applications

Improved strength of products; super -conductivity;

Persistence; bio-accumulation; toxicity

Carbon nanotubes

Persistence; bio-accumulation; toxicity

Sunscreens and cosmetics; thin film coatings; textiles; anything susceptible to UV damage

Protection from free radicals; protection from UV light

Toxicity. Exposure through skin, inhalation and ingestion

Titanium dioxide (TiO2) nanoparticles

Colour change technology (displays); solar cells; security; light-emitting diodes; electronics; photonics; sensors; therapeutics; Biological tracing and nanomedicine

l

Intense source/absorber of photons with very specific wave-lengths

Persistence; bio-

Toxicity. Quantum dots Exposure through

skin, inhalation and ingestion

accumulation; toxicity

Generic Characteristics of Innovation Systems in Nanomaterials 3.6 The empirical description of an innovation system requires the identification of the main actors, their linkages and the rules or institutions that govern their behaviour (regulatory regimes, intellectual property rights, etc.). Figure 3.1 presents a generic and simplified scheme of the main actors involved in the system of innovation and governance of nanomaterials. On the left hand side we have academic research, including toxicology and testing, which is supported by a specialised infrastructure and is mainly publicly funded. Moving towards the middle, we can see that academic research interacts with small suppliers and large manufacturer firms which provide nanomaterials for the user firms in a variety of sectors. More traditional and less technology intensive nanomaterials may be provided by firms specialised in manufacturing. User firms

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incorporate nanomaterials into their products for consumers, as is seen on the right hand side. The governance of the system is shown across the bottom of the figure: national governments and the EU promote research via funding bodies, with both generic and specific funding, e.g. for infrastructure, and regulate nanomaterials via regulatory agencies. The agencies are coordinated with international regulatory initiatives and advisory groups or fora. For the sake of simplicity we have not included some actors, such as learned societies (e.g., the Royal Society) or industrial organisations (such as the Nanotechnologies Industry Association). A more detailed map, with the British actors is presented later in the chapter.

National Governments (and EU)

FundingBodies

Academicresearch

Fabr

icat

ion,

mic

rosc

opy

met

rolo

gy n

frast

ruct

ure

Largersuppliers

andmanu-

facturers

Smallsuppliers

Con

sum

ers

Int’l Regulatory Bodies

ISO, IRGC NGOsGreenpeace

ETC

Insurance

RegulatoryAgencies

Public engagementactivities

Smallmanu-

facturers

Userfirms

Finance

Toxicology &testing

Figure 3.1. Schematic representation of the actors and main linkages in nanomaterials innovation systems. This map should be interpreted as a highly simplified representation of a very plural network in which academic research has various knowledge bases, suppliers and manufacturers have various specialties and expertise, user firms belong to many different sectors and governments have different political cultures. 3.7 A prominent characteristic of nanomaterials system of innovation is that it is a very heterogeneous and distributed, or diffused, network of actors. In fact, the display of the system in one single map (as in Figure 3.1) may be misleading to the extent that it cannot fully convey the wide range of different scientific bases, sectoral applications and areas of governance jurisdictions involved. The diversity of nanomaterials means that a unified analysis is both challenging and problematic: there is no one ‘nanomaterials science’ leading to one ‘nanomaterials technology’ applied in only one nanomaterials sector. As a consequence, there is no standardised and reliable data on the ongoing activities in most of the network, in particular in relation to production-user

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6interactions (Meyer et al., Forthcoming ). More data is expected to be available soon via initiatives such as the Nanobank in the US (http://www.nanobank.org). 3.8 Due to this lack of data, the larger part of the innovation network has to be mapped via qualitative research, which is research and resource intensive and provides only a narrow window into the industrial and R&D activities (e.g. Steward et al. 2007). Therefore, in this report we can only outline some generic characteristics of the system of innovation for nanomaterials and list the main actors involved according to the limited available data obtained from our two-pronged approach: (1) a macro approach via bibliometric and patent analysis which will reveal all the main research players involved in research on nanoparticles and nanotubes; and (2) case studies for three nanomaterials: carbon nanotubes (CNTs), titanium dioxide (TiO2) nanoparticles and quantum dots (see methodology in Box 3.2). These case studies gave us an understanding of the dynamics and drivers of innovation. However, we were only able to get information on the activities of small firms, and our description may not be very accurate for large corporations. Despite its limited nature, this information can, though, help us to understand some of the diversity of actors involved, dynamic interactions, and points of uncertainty in the system of innovation. Box 3. 2 Methodology

This findings presented in this chapter are based on a patent and bibliometric analysis, on interviews with selected experts in each of three novel material areas, and on previous public literature on nanotechnology. Patent and bibliometric analyses were based on large and general nanoscience and nanotechnology database generated by Porter et al. (2007). Nanomaterial research was retrieved via the following keywords: nanopart*, nanorod*, nanowire*, nanocrystal*, nanotub*, CNT (* indicates a wild-card, i.e. any possible ending). This yielded a total of 90,441 publications between 1991 and 2006, with an exponential increase in identified publications over the period (number of papers doubling every ~3 years). Short telephone interviews with leading experts in three novel materials areas allowed us to produce case studies on three nanomaterials areas: carbon nanotubes, TiO2 and quantum dots. These experts largely spanned the entirety of the supply chain, from ‘blue sky’ research at universities to producers of novel materials and the products that contain them. They were asked questions related to five key aspects of the innovation system: 1) sources of knowledge, 2) supply and demand, 3) market position, 4) intellectual property, and 5) regulatory frameworks.

3.9 A second key feature of the system of innovation depicted above is that academic and industrial networks are fully global. Moreover, there seems to be a trend towards the globalisation of political networks (e.g., in trans-national NGOs) and of regulatory efforts. However, funding bodies and regulatory agencies are in most cases national and this poses a challenge for the international governance of the system. Further complicating the picture is that large infrastructures for nanotechnologies are often associated with local/regional clusters. This tension between global research and commercial dynamics vs. national or even regional governance frameworks has major implications on the possible points of public intervention.

6 Commercially available reports on nanotechnology have been written to fulfil specific costumer perspectives and interests, and the data they provide needs to be accordingly contextualised before it is used for public policy.

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Main Actors in Nanomaterials Innovation

Academic research: Diversity of knowledge bases 3.10 Universities and public research organisations conduct most of the basic research on nanomaterials. Here, it is important to note that research conducted in academia does not need to be viewed necessarily as “blue sky” or “pure science”. Many of the main disciplines involved in nanomaterials have an applied or engineering component that characterises and tries to understand existing materials. Furthermore, in nanomaterials even research which does not have an anticipated area of application at the outset is nevertheless aimed at exploring the synthesis of new materials with novel properties whose applications may be found ex post (Schmidt, 2007). 3.11 Nanomaterials can be produced from very different constituents and techniques, e.g. a variety of top-down and bottom up approaches (DEFRA, 2005), and for each of them different properties can be explored (optical, conducting, etc.). For example, the production of semiconductor quantum dots or protein-based nanoparticles (e.g. Abraxane®) relies on completely different research traditions. Moreover, nanomaterials are often also studied by other disciplines (e.g. carbon nanotubes are investigated in the life sciences for potential uses in drug delivery).

Pajek

Neurosciences

Computer Sci.

Geoscience

AgricultureEcology

Biological Sci.Chemistry

Physics

Engineering

Environ. Sci.

Materials Sci

Infectious Diseases

Clinical Medicine

General Medicine

Figure 3.2. Publishing activity in UK nanomaterials research on the map of science7. Each node in this diagram is a narrowly defined discipline. Nodes of the same colour correspond to a macro academic discipline, as shown by the labels. Proximity between nodes and connections represent cognitive similarity between disciplines (as measured by citing patterns). The size of nodes is proportional to the number of publications related to nanomaterials within that discipline . 8

7 Based on the backbone map by Leydesdorff and Rafols (Forthcoming). Methodology introduced in Rafols and Meyer (forthcoming). 8 The area of a node is set to represent the square root of the number of publications in a discipline.

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3.12 This diversity means that there is no ‘nanomaterials science’. Figure 3.2 represents this diversity pictorially. We can see that there are multiple inputs to the science behind nanomaterials coming from a large variety of disciplinary backgrounds – about 100 out of the 172 disciplinary fields of ISI Thomson disciplinary classification show some activity. Most of the research falls into the area of Materials Science, Physical Chemistry, Applied Physics and cognate fields such as Condensed Matter, and there are important contributions from Electronic Engineering and various biomedical sciences, in particular from Pharmacology & Pharmacy, and Biochemistry & Molecular Biology. Moreover a variety of applications are published in Clinical Medicine, Environmental Sciences and Geosciences. Since the interaction between diverse nanomaterials is of technological interest, there is ongoing research bridging some topics (e.g. how to bind carbon nanotubes and proteins). However, even if Figure 3.2 illustrates disciplinary diversity, detailed studies have found that most individual pieces of research rely on one strong disciplinary basis (Schummer, 2004). Thus, at present it does not seem likely that a coherent ‘nanomaterials’ field will emerge.

Supplier and manufacturer firms as co-ordinating actors 3.13 A key issue for understanding the system of innovation in nanomaterials is that the great majority of nanomaterials are not consumer products to be sold to the end-user, but rather ‘capital’ products to be used by other industries in order to make new products. In this sense most nanomaterials can be understood as ‘products for process innovation’. This is why supplier and manufacturer firms occupy the central position in our nanomaterials system of innovation. This intermediary role is similar to the role played by the chemical industry, which serves different sectors taking advantage of economies of scope (e.g. the pharmaceutical company Bayer started selling dyes to the textile industry and then branched out to produce products for very different sectors such as pharmaceuticals). Therefore, we believe it is more appropriate to conceptualise the system of innovation for nanomaterials as a technological system of innovation, where there are a variety of scientific disciplines supporting the development of a number of technologies for fabrication of nanomaterials which serve many different economic sectors. This system and the types of actors we might find in it is depicted in Figure 3.3. 3.14 In the intermediary role of supplier and/or manufacturer of nanomaterials, we can distinguish three types of firms: small supplier firms, specialised manufacturers and larger suppliers/manufacturers. This intermediary is particularly important in supplier-dominated sectors, such as textiles, where most innovation is carried out by the specialised suppliers. For example, innovation in textiles will be provided by the producers of fibres (e.g., Toray chemicals), and some of these will be supplied by nanoparticles producers (e.g., Nanophase9). 3.15 The first type of intermediary firms are small suppliers firms that often emerge in particular niches created by radical innovations (frequently stemming from academia). For example, the Manchester-based firm Nanoco Technologies10 is a university spin out that manufactures quantum dots (which absorb or emit light at particular frequencies under particular conditions) that can be used for a variety of applications. Such high performance products are unlikely to have large markets in the early stages, but can

9 http://www.nanophase.com/applications/textile_fibers.asp 10 http://www.nanoco-technologies.co.uk

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produce substantial improvements in the operation of other technical systems – for example in medicine or biotechnology. Firms producing them might therefore be expected to work closely with their customers to co-develop products for very specialised submarkets. Normally such firms protect their innovations through secrecy and close relationships with customers. Figure 3.3 Technological System of Innovation for Nanomaterials

Materials Science

Physical Chemistry

Applied Physics

Pharmacology

Electronic Eng.

Genetics

Mechanical Eng.

Nanomaterials

Electronics

Basic Research

Automobiles

Pharmaceuticals

Food industry

Economic Sectors

Cosmetics

Textile

Chemicals

Technology

Specialised suppliers

and producers

Figure 3.3. Schematic representation of the diversity of scientific disciplines and economic sectors of the nanomaterials innovation system. This “hourglass” structure has important implications for the governance of the system of innovation for nanomaterials. 3.16 The second type of actor is small specialised manufacturers which have an expertise in the large-scale production of certain products. In general, this large-scale production relies less on academic knowledge and more on in-house industrial know-how for process innovation. For example, the firm Tetronics11 has produced for 20 years a range of metallic, composite and ceramic nanopowders thanks to their core expertise in high temperature plasma arc technology, which they use for a variety of applications. 3.16 Finally, in the case of science-based sectors such as chemistry or electronics, the R&D and production capabilities of the large corporations allow them be active both in the development of new nanomaterials and in their production. Thus, publication and patent analysis of transnational corporations such as NEC, DuPont, Xerox or Fuji dominate the rankings (see results below, also Meyer et al., Forthcoming). In spite of this evidence of research activity, some of these large firms appear to be less eager than small supplier firms in the branding of their materials as nanotechnology –this seems particularly the case in nanoelectronics, where 1D nanostructures are now common. 3.17 Data on firms working on nanomaterials is scarce and fragmented, making it difficult to paint a complete picture about the specific nature of the interactions between firms in a more global context. Focusing on new nanomaterials, Aitken et al. (2006) report that most of manufacturing occurs in the US (49%), with the EU as a second player (30%) and the rest of the world taking the remaining 21%. They report that the UK might make one third of the European market, with 19 firms manufacturing

11 http://www.tetronics.com/

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nanomaterials and 11 firms processing nanomaterials. However, other reports looking into nanochemistry (i.e. being less specific about the type of nanomaterials), put German firms (BASF, Bayer, Degussa, and Henkel) and Japanese firms (Sony, NEC, and Mitsubishi) as leaders in the field. These divergent results suggest that the relative corporative or national strengths on nanomaterials depend on how the nanomaterials are defined. There seems to be some agreement in locating many small start-ups in the US for specialised suppliers, but a lot of activity in Germany, Japan and the US as well based on more traditional electronics and chemical industries. British nanomaterials firms do not appear in the top world patenting or market rankings, and tend to be specialty chemical firms, such a Johnson Matthey or Thomas Swan (now active in carbon nanotubes), or university spin outs (NanocoTechnologies and Oxonica). 3.22 Since many of the manufacturing firms we contacted declined to name firms using their nanomaterials, and some component manufacturers known to use them did not specify their use in their general information web pages, we believe that it is very difficult to assess the use of nanomaterials in the whole economy or in sectors. The problematic nature of this task is further underscored by the growing size of the nanomaterials markets globally. According to Loeffler (2005, 2007), the worldwide market for carbon nanotubes is $700 million, and expected to grow to $3.6 billion and $13 billion in the short and long term respectively. For TiO2 it is estimated at €200 million (5000 tons) and to grow to €300 million in the long term. Market for ZnO is estimated at €0.5 millions (18 tons). Already common nanomaterials such as carbon black ($8 billion) and nanosilica (€2 billion) will have lower growths (detailed data in Meyer et al., Forthcoming). Overall the nanomaterials market is estimated to be about $30 billion per year (Hilarius, 2006). 3.23 The fact that we have different type of firms co-existing in nanomaterials maybe due both the different patterns of firm specialisation and to the different stages and degree of radical innovation for different nanomaterials –e.g. for TiO2 nanoparticles the technology is more mature and often more incremental, than for CNTs. Looking forward to try and understand how the system of innovation for nanomaterials will develop requires us to recognise these differences in the stages of innovation. As we saw in the previous chapter, at the initial stages, customers are prepared to pay for high performance. Such innovation focuses predominantly on product rather than process innovation. Hence, for radically new nanomaterials such as carbon nanotubes, there are now many small technology start-up firms often related to academia and supplying some niche markets. It is expected that in the long run, however, due to the cumulative nature of knowledge and the need for expensive and complex negotiations with customers and regulators, only larger firms such as DuPont, BASF or Mitsubishi Chemical will be able to afford the long term investments needed to develop research, together with large scale production and commercialisation (Aitken, 2006, p. 304). Despite this foreseeable dominance of large firms, there does appear to be space for specialised nanomaterials manufacturers following established production techniques to continue producing nanomaterials that build on their previous expertise and do not require a new knowledge base or very accurate characterisation (e.g., Tetronics in nanopowders).

User firms: diversity of applications 3.19 As we have pointed out, nanomaterials are used in a large variety of industrial sectors as ‘products for process innovation’. This means they are not generally used to produce radically new commercial products, but instead are used to improve the quality of existing products thanks to their novel properties. Some key examples include

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batteries with longer life, more resistant paints, more intense markers for biomedical research, and more efficient solar cells. As a result, the impact of individual nanomaterial innovations cascades or trickles down the value-chain. 3.20 This effect can be seen in the construction and automotive sectors as shown in Tables 3.2 and 3.3, which list examples of already developed nanomaterials applications in these sectors (Meyer et al., Forthcoming). The tables illustrate that for complex consumer products such as automobiles or buildings, different applications rely on the properties of different nanomaterials. For example, various nanomaterials improve the tyres, the glasses, the mirrors, the catalytic converter, the fuel tank and the mechanical strength of automobiles. In some cases the value chain stretches from nanomaterials suppliers (e.g., rare earth nanomaterials or TiO2 nanoparticles) to component supplier (catalytic converter or tiles supplier), to the final consumer product (car or building). These value chains of nanomaterials appear to be very international. Moreover, as illustrated in Table 3.2, in the current context of globalised manufacturing, nanomaterials produced in one country are used to make a consumer product in another country which will be sold in a third one. It should be noted that some of the components suppliers listed in this table do not indicate that their products contain materials at the nano-scale in the general information provided in their webpage. This fact alone makes this point a crucial one. The distributed nature of the value chains, both in sectoral terms (as shown) and geographical terms may hinder the flow of knowledge on the performance and/or risk of nanomaterials, and has implications for regulatory regimes. Table 3.2 Examples of nanomaterials products in automotive industry. Source Meyer et al. (Forthcoming). Product Nanomaterial Function

Manufacturer (M)/ Applicant (A)

Improve abrasion wear of tyres Carbon black Carbon nanoparticles Degussa (Germany/M)

PPG Industries Inc. (USA/M); Daimler Chrysler (Germany/A)

Ceramiclear Ceramic nanoparticles Scratch resistant clear coatings

Components for fuel line and tank

Carbon Nanotubes (Composites) Antistatic Hyperion (USA/M)

CNT Polymercomposite

Allows electrostatic coating

Hyperion (USA/M) Carbon nanotubes Ford (USA/A) Nanoclay thermoplastic composite for exterior parts

Improved mechanical properties

Basell (Netherlands, M) Nano-TPO General Motors (USA, A) Schott (Germany, M) Antireflection coating

for speed indicator glazing

Audi (Germany, A) Schott Conturan Glass nanocoatings DaimlerChrysler (Germany., A)

OnStar Mirror Functional nanolayer Auto-dimming mirrors Gentex Corp. (USA/M); General Motors (USA/A) AMR Technologies (Canada/M) Catalyst materials Rare earth nanomaterials Catalytic converters

3.21 Not only do different nanomaterials have many different applications, but often the same nanomaterial has properties that make it suitable for many different applications. For example, the optical and electron transport properties of quantum dots produced by Nanoco Technologies make them suitable for applications in solar cells, LED displays and in biomarkers. Aitken et al. (2006, p. 303) list 27 possible applications across 20 categories of nanomaterials. Each category has about 10 applications, with some categories such as metals and metal oxide nanoparticles, having as many as 18. This convergence of applications – exemplified in the ‘hour glass model’ in Figure 3.3 -

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allows for the exploitation of economies of scope by suppliers. Innovations developed for a certain application (e.g. photovoltaic solar cells) may be re-applied with some modifications to very different applications and sectors (displays for consumer electronics). This factor can and should be taken into account in the governance of nanomaterials: the multiplicity of applications in various economic sectors of the same nanomaterials can facilitate spill-over effects of policies or investment that might be only targeting one sector or actor group, into other areas of the economy.. Table 3.3. Examples of nanomaterials products used by the construction industry. Source Meyer et al. (Forthcoming). Product Nanomaterial Function Company

Paints with reduced dirt pick-up Col.9 Dispersions Silicon oxide nanoparticles BASF (Germany)

Nanoparticle based sol gel chemistry Ccflex Ceramic wallpaper Degussa (Germany)

Titanium dioxide nanoparticles Erlus Lotus Self-cleaning roof tiles Erlus (Germany)

Titanium dioxide nanoparticles StoPhotosan/StoLotusan Self-cleaning facade Sto (Germany)

Deutsche Steinzeug (Germany) Hydrotect Titanium dioxide Self-cleaning tiles

Pilkington Active Titanium dioxide thin-film Self-cleaning glass Pilkington (UK) Antimicrobial and antibacterial coating/paint

Bioni Hygienic Nano silver Bioni CS (Germany)

Nanoscale laminated lath structure

High corrosion resistance MMFX High Strength MMFX Steel Corp (USA)

CentroSolar Glass (Germany) Solara Nanoporous silicon dioxide Anti-reflex coating

Infrared-reflective silver nano coatings Climaplus Heat insulation Saint Gobain Glass (France)

Nanogel Silica aerogel Heat insulation Cabot Nanogel (Germany)

Role of government 3.23 Governments play a major role in facilitating and shaping innovation systems by means of a variety of policy instruments, including research funding, regulatory regimes, tax incentives, intellectual property regimes, etc. In innovation systems such as nanomaterials, where risks are high, basic research is key, and regulatory issues are prominent, public policies are crucial to sustain innovation. However, the policy actors/agencies carrying out these functions are extremely country-specific. A full discussion of the British governance structure and suggested policy options will be developed in chapters 4 and 5; here we only outline the main characteristics. As shown in Figure 3.1 the governance structure has two main legs: a technology promotion side and a regulatory side. 3.24 Public policies currently play an important role in technology promotion, as shown on the left hand side of Figure 3.1, via three policy instruments: (1) supporting basic research on response mode via Research Councils; (2) providing fabrication, metrology and other nanotechnology-related facilities; and (3) fostering interaction between academic researchers and supplier/manufacturer firms. However, there seems to be scope for intervention on the supplier/consumer demand-side, either through procurement or facilitating supplier-firm user interactions.

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3.25 On the regulatory side, the most important actors include the Department of Environment Food and Rural Affairs (DEFRA), the Environment Agency, the Health and Safety Executive (HSE) and the EC (though REACH). Besides national government, there are a number of organisations that participate directly or indirectly in the wider governance of nanomaterials. On the one hand, international organisations such as the ISO or the OECD have created committees for cooperation in standardisation, testing and risk assessment. The British government is one of the countries leading the efforts for cooperation in regulatory matters. On the other hand industrial and trade organisations (notably the Nanotechnologies Industry Association (NIA), the European Nanotechnology Trade Alliance (ENTA), and the Institute of Nanotechnology) as well as learned societies (e.g., the Royal Society and the Royal Society of Engineering) and civic society organisations (e.g., ETC Group, Greenpeace) are playing a major role as active representatives of the interests of their respective constituencies.

AcademicResearch:Cambridge

OxfordSussexImperialBristol

Manchester*Univ Bath

*Cardiff Univ*Univ Surrey

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ElectronicEngineering

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Manufacturers:QinetiqUnilever

Johnson MattheySchlumberger

Smith & Nephew

SpecialisedSuppliers:NanocoOxonicaIntrinsiq

SpecialisedManufacturers:

Tetronics

User firms

User firms:Security

User firms:Defence

User firms:Electronics

User firms:Print, paper,

packagingUser firms:Fuel cells

User firms:Energy

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User firms:Medicine

User firms:Textiles

User firms:Paints

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End

user

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onsu

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Royal SocietyRoyal Academy

of EngineersNIA

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RegulatoryAgencies

Finance

UK nanomaterialinnovation map

ResearchCouncils

BERRHSE

workplace

DEFRA

CST

REACH

EU FP7

KTNsNanocentral

Figure 3.4. Schematic representation of the UK nanomaterials innovation map with the main actors involved.

Dynamics at play in the system of innovation for nanomaterials 3.26 Building on the review above and the description of the diverse actors and dynamic interactions in the wider system of innovation for nanomaterials, we look now to the key insights that emerged from case studies of three nanomaterials: carbon nanotubes, TiO2 nanoparticles and quantum dots. These all support the conclusions made above and throughout this report and are drawn out in more detail here.

Understanding linkages between firms in the value chain 3.27 Successful innovation in nanomaterials has resulted from an alignment of new properties of engineered nanomaterials (technology push) with the needs for improvements in certain products (market demand). However, in order to achieve this alignment materials supplier firms and product developers have had to collaborate closely (see in Box 2 the case use of Oxonica’s TiO2 nanoparticles in Boots’ sunscreens). This is likely to remain the case while there is no accurate characterisation and/or standardisation of the nanomaterials offered by providers.

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3.29 Regardless of the business model, most companies maintained close working relationships with their customers and/or end-users of the nanomaterial. One small carbon nanotube firm claimed their small size allowed them to be extremely responsive to customer demand. They worked closely with customers on integrating carbon nanotube technology into both products and manufacturing processes, mostly in the electronics and micro-chip industry. Here it seemed a clear case for market pull for using CNTs in products, and this was further reflected in the comments made by a larger CNT manufacturer about demand for their product. Applications of CNTs were reported as being ‘almost anything’ for this larger firm, from composites for material reinforcement to liquid displays and semiconductor applications. BOX 3.1: Oxonica-Boots, an example of joint supplier-consumer development

B3.1 For the titanium dioxide case study, we looked closely at the supplier/customer relationship that developed between Oxonica and Boots in the development of Boots’ sunscreen product, Soltan Once, that has recently entered the market. Oxonica is one of the leading international nanomaterials groups with products already available in several international markets. The first commercial product from Oxonica Materials was the photostable OptisolTM UV absorber, with enhanced UVA protection and applications in various skin-care and personal care products. OptisolTM works by absorbing and scattering UV radiation, allowing energy to be dissipated so it does not result in the generation of free radicals. OptisolTM is a nanoscale titanium dioxide that incorporates a small amount (0.7%) of manganese in the crystal lattice. B3.2 In the early stages, Oxonica was actively seeking a partner who would be involved in confirming Optisol’s potential and benefits and then use it in their products. Boots had become aware that Oxonica was working in the field of titanium dioxide technology because of their close monitoring of the research field. Boots was already using nanoscale titanium dioxide in their sunscreens as it was known that titanium dioxide had protective properties, but these particles needed to be coated and this led to limitations in the production of the sunscreen products. The revelation came when Oxonica’s founders discovered a way to produce an alternative nanoscale titanium dioxide that not only avoided the need for coating, but also provided enhanced performance. B3.3 Oxonica approached Boots and a partnership was quickly formed to develop a suncare product with OptisolTM as an integral part. Scientists from both companies worked closely together to develop the material and the suncare product. Oxonica’s scientists focussed on developing and providing a safe material that Boots could use in its sunscreen product with Boots focusing on usability and efficacy of the OptisolTM product, essentially making sure it could be consistently and effectively used in the sunscreen. There was a strong commercial driver for both companies: Boots would benefit from having a unique and safe suncare product and be first in the marketplace with this technology, while Oxonica would have initial market validation for the potential of Optisol and could move on to other markets. Oxonica has now done this, and OptisolTM is incorporated in a variety of anti-ageing, skin care and cosmetics products worldwide.

3.28 The importance of firm-to-firm interactions for the effective use of nanomaterials downstream is illustrated by an IP-generating company described their operating model as trying to stay “ahead of the curve”. In their case, the company went so far in responding to client demand that they changed the business structure. “We switched our focus from being solely a materials company because the demand just wasn’t there. People want solutions, they don’t just want the materials, they want to know how they can improve products and technology.”

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3.30 These interactions between supplier/manufacturers and user firm generate the alignment between “technology push” and “market pull”. As one quantum dots manufacturing firm put it, it was either them saying we do ‘x’ where you do ‘y’, are you interested?, or companies approaching them saying, we’ve heard quantum dots do ‘x’ and we do ‘y’, can you help us? They added that they work closely with their customers, especially as the product gets closer and closer to market.

Internal versus external knowledge sources 3.31 Unlike the advent of biotechnology, in which the introduction of genetic engineering represented a radical change from the previous knowledge base of the pharmaceutical or agro-chemical industries, many innovations in nanomaterials are the result of incremental advances building on the existing knowledge base of some science based industries.12 This means that although nanomaterials may lead to radically new applications, some organisations will be able to rely on their existing knowledge base. There is therefore room for nanomaterials innovation at incumbent large firms, as well as in smaller firms developing more alternative innovations or niche market products. 3.32 In this context, both large and small firms rely on a combination of external and internal sources, although in different proportions. All of the companies we spoke with reported that a significant proportion of their staff had some type of research or scientific background indicating there is a large degree of knowledge and expertise embedded within these firms. In addition, all of them had some type of ‘in-house’ R&D unit, but there was variation in the extent to which they also drew on outside sources of knowledge. This seemed to vary more by the size of the company as opposed to the type of nanomaterial. Smaller nanomaterials companies that were formed as spin-outs from a university had a close relationship with the university researchers in the early stages of the company’s development. But as the companies became more established, they seemed to rely less heavily on the technical expertise of university researchers and drew on them more for consulting work.

Relationships between firms and universities 3.33 Knowledge exchange between universities and firms appears to be very important for the innovation system. Although the majority of funding for university researchers comes primarily from Research Councils aiming at supporting “basic research”, some of the larger chemicals companies involved in producing carbon nanotubes reported that they sponsored work at universities directly related to nanomaterials of interest to the firm. The nature of this work was such that it would be of interest to the company, although the research might have been more ‘blue skies’ oriented than might otherwise be expected. A prominent catalysis researcher reported healso received funding from an automobile company and was given a large degree of freedom to conduct wide-ranging research that may or may not provide immediate benefit to the sponsoring company. 3.34 Within universities and research institutions, knowledge is embedded within the organisation and routines of research group – i.e. it involves tacit knowledge that is 12 For example, in the case of semiconductors, incremental innovations are expected to continue dominating miniaturisation until 2020, when, following Moore’s law, most analysts predict around CMOS devices will reach their physical limits and radical innovations will be needed to replace them (ENIAC, 2007).

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difficult to transfer. Collaborative links with other researchers are formed through personal contacts, with the more prominent researchers claiming they are approached for collaborative work more than they actively seek it out. The majority of PhD students go on to work in industry, with few remaining within academia to pursue a research career. This was supported by observations from all the companies we spoke with who said that the majority of employees at the company, whether involved in R&D or not, had a technical scientific background in a variety of scientific disciplines, e.g., chemical engineering, materials science, physics, etc. 3.35 Universities are not only a key source of knowledge and technical expertise, but lay the research foundation that spin-out companies are built on. One researcher explained that he took his research far enough to be ready for the application stage, at which point a spin-out company was formed to further develop the research findings into a commercialised product and manufacturing process. He described himself as doing the ‘R’ in R&D at which point the company was formed and completed the ‘D’.

Directions of research 3.36 Research on new nanomaterials seems to be conditioned by the need for alignment between science-driven results and the demands of the industrial sectors that use the nanomaterials. In order to facilitate this alignment two fundamental issues need major improvements: reproducibility and scaling-up of production. 3.37 Reproducibility and standardisation of nanomaterials are needed for various reasons: in order to guarantee performance and quality, to make possible comparison between products from different companies (not to say different batches) as well as to provide benchmarks for toxicity13. A leading CNT researcher at the University of Oxford reported much of his research involved increasing the purity of CNTs in the production process, as many manufacturers had problems with impurities in their products14. Second, the need to scale-up production and reduce costs was repeated highlighted by our interviewees. 3.38 Some comments suggest that changes in the research environment (in funding and the overall research climate) may lead to shifts in the types of technological opportunities that are being opened up. In particular, several respondents commented on the increase in environmental issues and health over the past few years as a distinct and growing area of future applications. Some linked this to growing public awareness of these issues in general, and attention turning to nanotechnology to solve them. One commented, the “applications are those where the push is to use less material, and in principle this means they will be more economically and environmentally beneficial.” Many university researchers reported a trend towards interdisciplinarity in their ‘nano-specific’ research efforts, with most of the push coming from the Research Councils.

13 The International Organization for Standardization Technical Committee 229 on Nanotechnologies (ISO TC 229) and the OECD are leading an international effort for standardisation. 14“Globally, the biggest barrier is the stability of the technology. Before putting it into a chip [or into their product], companies want to know exactly how it works…that the technology does what it says on the box.” This supports the findings of others who comment that CNTs are “more difficult to manufacture (and even more difficult to replicate from batch to batch...) and have not yet encountered [such] commercial success, though their commercial potential is enormous.”

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Intellectual property rights 3.39 Since innovation occurs both at the production of the nanomaterials –which determine their characteristics- and at the level of applications, protection of intellectual property (IP) is important in these two phases. Given the focus of this report, most intellectual property is seen as being held on processes of production of the nanomaterials where secrecy is sometimes perceived as a better option. However, most companies also reported IP held on the some aspects of the applications of their nanomaterials. No specific barriers to IP were voiced, however, many university researchers commented that securing IP can be a very slow and bureaucratic process.

Importance of governmental promotion initiatives 3.40 Those interviewed showed different opinions regarding the relative importance of public funding for nanomaterials research. Approximately half of the companies we spoke with found it very useful and actively drew on it, while one commented that it was “of little importance” to them. There is some evidence from our interviews to suggest that where this was the case, companies had very active links with local universities, and so were possibly less reliant on other sources of public sector research funding for their own company. For example, a smaller carbon nanotube manufacturing company was a direct spin-out from a university and retained very close links with that university, even utilising their research facilities and staff for research and development work. Some companies reported a reliance on public sector funding in the early stages of their development, but it was becoming less important now. A large chemicals company that produced carbon nanotubes were seeking EU Framework Programme funding, but were not dependent upon this type of funding for their research. Instead of funding public research, some firms expressed the view that government should support innovation in firms via direct grants for research in industry and providing venture capital instead of funds too much infrastructure in nanotech and not enough technology transfer. 3.41 Regarding the role of government in facilitating knowledge linkages and transfer, though all companies reported they had favourable views of Knowledge Transfer Networks and other facilitation activities, only some were active participants in these networks and industry associations. As one interviewee reported, “it is still early days in terms of the formal linkages and facilitation networks that are out there. There certainly isn’t any harm in associating with them, they are people you would want to talk to anyway and in most cases already have the contacts for.” However, it would be unfair to say this was the majority view as others reported they thought associations like the NIA and Nanocentral were of vital importance to the sector.

Conclusions on Nanomaterials Innovation

3.42 This chapter has mapped the key features of the nanomaterials system of innovation, focusing on academic and industrial dynamics. It has described the characteristics of the main actors and their interactions, identified drivers of innovation, and pointed out some of the main trends in nanomaterials research. The implications of these findings will be discussed in the context of practical recommendations for future governance in Chapter 5. We were not able to present detailed findings about the industrial activities of nanomaterials manufacturing due to limited data and there is very poor data regarding the uptake of nanomaterials by user firms. Therefore, the analysis has been based on upstream data (patents and publications) and case studies of small suppliers. Since the sample is small and the data gathering limited, some of the findings will need to be confirmed with further research.

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3.43 The main conclusions are summarised as follows: Nanotechnology is a broad, umbrella term encompassing a variety of very different technologies which include nanomaterials but also unrelated areas such as instrumentation or nanofluidics. Environmental Health and Safety issues regarding nanomaterials will not therefore be relevant, in general, for other nanotechnologies. 3.44 A crucial finding is that the design and manufacture of nanomaterials draws on a variety of disciplines and that nanomaterial products are applied on many industrial sectors. Since nanomaterials are ultimately used as constituents for end-user products (e.g. sunscreens) and components (e.g. paints) for other products (e.g. cars), their research development, production and use take place along extended and complex value chains. 3.45 We have found evidence that innovations in nanomaterials occur at different stages in the value chain and that successful innovation is supported by alignment and strategic knowledge exchange between different actors. Hence, we can be reasonably confident that innovation does not just take place at the supplier stage (where new nanomaterials are created), but also at the manufacturing stage (particularly in relation to process technologies to develop large volumes of nanomaterials cheaply and/or cleanly) at the end-user products stage (where nanomaterials are incorporated into products). This suggests that many previous upstream studies that only focused on patents or scientific papers may be under-estimating the extent of innovation being undertaken. 3.46 We have found that currently the firms active in nanomaterials innovation include incumbent large corporations in science-based sectors (such as chemistry and electronics), small specialised supplier firms (often universities spin-outs with new nanomaterials), as well as some specialised manufacturers (focusing on process innovation). In addition, there are important linkages within the system, notably between universities and firms, and between specialised suppliers and firms that use nanomaterials in their sector and/or products. Since these interactions occur at a global scale, the research, development and commercialisation of nanomaterials has a fully fledged international dynamics. 3.47 Due the multiple points and types of innovation, this is a highly dynamic set of systems with multiple points where expectations and uncertainty influence the direction of innovations. We have found that public policies currently play an important role in the supply-side of nanomaterials innovation. However, as we will argue in the next two sections, there seems to be scope for intervention in the demand-side, through procurement or facilitating supplier-firm user interactions. The next section explores the governance structures of the UK nanomaterials systems in more detail, while the final section explores how they might be better governed.

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Chapter 4 – Trends in Nanomaterials Research 4.1 In this chapter, we present the international trends and main actors in nanomaterials research as revealed from the bibliometric and patent analysis (see details in Box 3.2), with a focus on British developments. The results need to be qualified for two reasons. First, as explained, we have only looked into 2D and 3D nanoparticles because these are the nanomaterials that might pose the main environmental, health and safety risks. Second, in this part of the study all nanomaterials research is presented as aggregated – some important actors and linkages in specialised topics may be missed because that topic is small when viewed within all nanomaterials.

International publication trends

4.2 Table 4.1 presents the number of publications in nanomaterials by regional or national entities. Although the EU and the US top the ranking with 29% and 26% of the share, both have significantly smaller shares than in the whole ISI Thomson database of scientific publications (about 37% and 30% respectively in 2006, according to Leydesdorff and Wagner, 2009). The UK, with 4.1% of the publications, is also below its world share in overall publications, which is around 7% (7.8% according to ISI Thomson (Leydesdorff and Wagner, 2009), or 6.6% according to Scopus (Scimago, 2007)). This difference reflects the focus of British research on biomedical sciences. On the contrary China doubles its average 9% share. We will see later that Chinese productivity is not matched by the impact of their publications. Figure 4.1 shows that China productivity has grown very quickly almost reaching EU and US levels–whereas the EU lost in the last years the lead that had over the US in the late 1990s. Overall, as a result of the emergence of China and other developing countries, the industrialised nations have seen their share of nanomaterials publications reduced. These trends for nanomaterials are similar to those obtained by Kostoff et al. (2007a, 2007b) looking into all nanotechnology fields. According to Kostoff’s, the UK share decrease from 6.9% in 1998, to 5.9% in 2001 and less than 4.5% in 2005. Glänzel et al. (2003, p. 26) had already found this relative decrease of British share in nanotechnology since the mid 1990s: from 7.4% in 1992-95 to 6.3% in 1998-2001. Table 4.1. International Trends in Nanomaterials Research Publications Regions # Records % of Total EU27 26,163 28.9% USA 23,595 26.1% China 16,648 18.4% Japan 9,903 10.9% BRI 7,758 8.6% Asian Tigers 7,425 8.2% UK 3,670 4.1% Sum (*) 95,162 (*) 105.2%

Total 90,441 100.0% * The sums are larger than the total number of files due to double counting for collaborative papers.

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Figure 4.1 Publication Trends for the Regional Entities in Nanomaterials. Note: Data for 2006 are estimated. 4.3 Figure 4.2 shows the patterns of collaboration among the 20 most active nations. As could be expected, the US occupies the central position in the collaboration map, with collaborators both in Europe and Asia. Although China has many publications, it is ‘still’ a more peripheral actor within the network. Among European countries, Germany is both the leader in number of publications (8.5%) and in intensity of collaborations. The UK is well positioned in the network, in the sense that it has many collaborators in Europe as well as in China and Japan.

Figure 4.2. Relative strength of international collaboration in nanomaterials publications. Area of circles is proportional to number of publications. The thickness and grey level of lines represents intensity of collaborations relative to the total number of publications of the two countries (normalisation with geometric mean; collaboration linkages below 2% not shown).

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Top organisations in publications

4.4 Although the EU has the highest share of publications, the ranking of most the 20 organisations that publish the most in nanomaterials is dominated by Chinese organisations (7 out of 20). It includes as well other Asian universities (2 from Japan, 1 Korea, 1 India, 1 Singapore). Five US universities, led by UC Berkeley, Georgia Institute of Technology and MIT, show both very high activity and very high impact (as measured from citations). Cambridge is the only British university among the most prolific. However, if we look at the total number of citations received by institution, as shown in Table 4.2, the ranking is dominated by American universities and only 3 Chinese organisations remain in the top 20 list. The only European organisations in this ranking are the CNRS and the University of Paris 6. A similar pattern is found in industrial publications in table 4.3. 4.5 Figure 4.3 illustrates the patterns of collaboration according to citations between the leading world universities, the leading world non-academic organisations and the top British universities. The map shows that many American universities occupy a central position, unlike the Chinese which appear in the periphery of the network. The map illustrates that large corporation in electronics or materials sectors publish much less than universities, but when they do, they often do it collaborating with universities. Top UK universities appear to be well embedded in nanomaterials international networks. Table 4.2. Most cited world organisations (1991-2006)

Average Times Cited/Paper

Top World Organisations Times cited # Publications

36971 882 41.9 University of California at Berkeley 26892 4532 5.9 Chinese Academy of Sciences 24295 820 29.6 MIT 24189 528 45.8 Rice University 21036 436 48.2 Harvard University 20269 757 26.8 Georgia Institute of Technology 14801 565 26.2 Northwestern University 13609 418 32.6 IBM Corp 11232 1093 10.3 CNRS 10019 314 31.9 Stanford University 9322 1358 6.9 Univ Sci & Tech China 9313 609 15.3 Pennsylvania State University 9028 307 29.4 University of Pennsylvania 8830 311 28.4 University of Kentucky 8691 336 25.9 University of North Carolina 8576 1112 7.7 Tsing Hua University 8550 1894 4.5 Russian Academy of Sciences 8190 1081 7.6 Tohoku University 8148 677 12.0 University of Illinois 7903 593 13.3 P&M. Curie University (Paris 06) 7564 638 11.9 University of Texas

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Table 4.3. Most cited firms publishing in nanomaterials (1991-2006) Average Times

Cited/Paper Top World Firms Times cited # Publications

IBM Corp 13609 418 32.6NEC Corp Ltd 4676 203 23.0DuPont Co Inc 2976 123 24.2Samsung Adv Inst Technol 2598 238 10.9Philips Res Labs 2300 137 16.8Motorola Labs 1656 83 20.0Bell Labs 1602 47 34.1Hitachi Ltd 1372 181 7.6Hewlett Packard Labs 1275 76 16.8Toyota Cent Res & Dev Labs Inc 859 120 7.2Sony Corp 762 95 8.0Nippon Telegraph & Tel (NTT) 710 67 10.6Xerox Corp 671 48 14.0ALPS Elect Co Ltd 420 59 7.1Corning Inc 374 72 5.2Eastman Kodak Co 374 37 10.1Intel Corp 353 42 8.4Seagate 324 55 5.9Nomad Inc 307 45 6.8

Figure 4.3. Map of main collaborations between leading world organisations. Selected top world academic centres (black), top 10 UK universities (grey), top non-academic organisations (red). Size of circles is proportional to number of publications. Size of line is proportional to number of collaborations relative to total collaborations. The map is a simplification of a much denser network. Threshold for visualisation is set to about 2% of joint publications. 4.6 Tables 4.4 and 4.5 show the top publishing organisations for the UK for public and private organisations. The rankings are dominated by Cambridge, Oxford and Sussex, but various other universities make also important contributions, both in number of publications and citations. The map provided in Figures 4.3 is more illustrative of the

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diverse nature of nanomaterials research. By examining the relative intensity of collaborations with firms (nodes in red in bottom map), one realises that there are different industrial sectors involved in nanomaterials: different universities are engaged with electronics, pharmaceuticals, biotechnology, catalysis chemicals and defence.. 4.7 Although firms publish much less than universities, large corporations from various science-based sectors have been significantly active in ‘basic research’, almost always in collaboration with academic partners. This suggests that knowledge from academic research is very valuable for firms in this field –a finding supported from interviews. Table 4.4. Top publishing UK organisations (1991-2006)

% Publication Since 2004

Average Times Cited/Paper

Top UK Organizations Times cited # Publications

7546 576 47% 13.1 Univ of Cambridge 5778 368 42% 15.7 Univ Oxford 4848 240 20% 20.2 Univ Sussex 3403 221 47% 15.4 Univ London Imperial Coll 2846 134 38% 21.2 Univ Liverpool 2720 160 41% 17 Univ Bristol 2103 88 45% 23.9 Univ Bath 1474 117 33% 12.6 Univ Birmingham 1472 135 53% 10.9 Univ Nottingham 1203 126 38% 9.6 Univ Coll London 1142 112 44% 10.2 Univ Sheffield 1026 135 61% 7.6 Univ Manchester 975 78 36% 12.5 Univ Reading 968 82 45% 11.8 Univ St Andrews 933 57 37% 16.4 Royal Inst Great Britain 737 91 55% 8.1 Univ Leeds 556 103 60% 5.4 Univ Surrey 529 88 65% 6.0 Univ Southampton 496 64 39% 7.8 Univ Kent. 452 53 68% 8.5 Univ Glasgow 333 62 65% 5.4 Univ Strathclyde 281 52 58% 5.4 Univ Durham

Note: The number of citations received by paper needs to be contrasted with % or recent publications since recent papers have less citations. Table 4.5. Top corporations based in the UK or co-authoring with British organisations (1991-2006) Firm # Publications Thales 22 Johnson Matthey 20 Hitachi 17 Philips 15 IBM Corp 11 Schlumberger Cambridge Res Ltd 10 QinetiQ Ltd 9 Smith & Nephew 7 AstraZeneca 7 Oxonica Ltd 6 Unilever 6 BAE SYST 6 Millenium Inorgan Chem 5 Syngenta 5 Dow Corning Corp 5

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Figure 4.4. Map of relative collaboration intensity among UK organisations. Thickness of linkages represents the proportion of collaborations to total number of publications15 among top UK academic organisation (black), top world academic organisations (only grey) and top industrial organisation (red). Size of nodes increases with of the total number of publications. The fact that some firms have various linkages while having few publications indicates a higher propensity to collaborate. The map is a simplification of a much denser network. Threshold for visualisation is set to about 6% of joint publications.

Trends in nanomaterials patents

4.8 The information presented in these profiles is based on a database of global nanopatents. The underlying data were obtained from searches in the MicroPatent16 and INPADOC 17 databases.. Figure 4.5 shows the number of patents from 1990-2006 containing in the title any of the following: nanopart*, nanorod*, nanowire*, nanocrystal*, nanotub*, or CNT. The acceleration in patenting is remarkable – more than a doubling in number of patents every 2 years. Table 4.6. Trends of patents on nanomaterials (1990-2006)

# Records Top International Patent Classification Classes (4-digit) 954 C01B-Non-Metallic Elements; Compounds Thereof 479 A61K-Preparations For Medical, Dental, Or Toilet Purposes 472 H01L-Semiconductor Devices; Electric Solid State Devices Not Otherwise Provided 349 B01J-Chemical Or Physical Processes, E.G. Catalysis, Colloid Chemistry; Apparatus 312 B82B-Nano-Structures; Manufacture Or Treatment Thereof Chemistry

15 The strength of a linkage is #Joint Pubs of A and B divided by the square root of #Pubs A * # Pubs B. 16 http://www.micropat.com/ 17 www.epo.org/patents/patent-information

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Figure 4.5. Trends of patents on nanomaterials (1990-2006) Note: We only have data for the first 5 months of 2006. The number presented here is an annualized estimate. 4.9 As remarked for publications, the knowledge bases of the patents are very diverse. The top technological classes (see Table 4.6) include: chemistry of non -metallic elements, of catalysis, of nanostructures, medical/dental preparations and semi-conductor devices. 4.10 A large variety is found again in the list of top nanomaterials patentees. The list shows a combination of patents from either public research institutes or programmes (Japan), or universities, with firms from electronics (LG, Hitachi), semiconductors (Nantero), pharmaceuticals (Elan) or chemicals (Toray). In the case of the UK, the number of patents is very low and topped by the leading universities. This probably reflects both the lack of large British corporations in the ‘traditional’ sectors developing nanomaterials (chemicals and semiconductors), as well as the relative lack of specialisation of the UK research base in materials science and chemistry in comparison to leading Asian and EU countries (King, 2004, p.314). The low patenting activity of UK based organisations has also been found in reports covering all nanotechnology fields. Glänzel et al. (2003, p. 46) found 2.4% of British patents in nanotechnology in 1992-2001, and Li et al. (2007) report 1.2%. Table 4.7 Top UK Assignees

Assignee / Applicant # Records 4 Cambridg University Technical Services Limited 4 Isis Innovation Limited (Oxford University commercialization) 4 Oxonica Limited (Nanoparticles for cosmetics and catalysis) 3 Johnson Matthey Public Limited Company (Catalysis) 3 Midatech Limited (Nanoparticles for Drug Delivery) 2 Imperial College Of Science, Technology & Medicine

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Table 4.8. Top World Assignees/Applicants

# Records Assignee / Applicant

Samsung 96 Japan Science & Technology Agency (JST) 77 National Institute for Materials Science (NIMS, Japan) 71 University of California 65 National Institute of Advanced Industrial & Technology (AIST, Japan) 61 Rice University 61 NEC 48 Elan 46 Iljin Nano 34 IBM 31 Tsinghua University 29 Industrial Technology Research Institute (ITRI, Taiwan) 27 Hitachi 24 Nantero 23 Eastman Kodak 22 Fuji 22 Sony 22 Toray 21 Fuji Xerox 18 LG 18

Summary of international trends

4.11 The analysis of international publication and patent trends suggests that nanomaterials is not an area of special UK strength, in accordance with the focus of British research in biomedical sciences. However, British science and organisations are well embedded in international research networks and may play a leading role in some niche areas. 4.12 Research on nanomaterials is fully international, with a large and increasing contribution from Asian countries, possibly building on their previous expertise on semiconductors and materials. 4.13 The finding that top nanomaterials patentees include a variety of large incumbent corporations from a variety of sectors, supports the view that nanomaterials is a very heterogeneous field. It also suggests that an important share of innovation in nanomaterials is incremental and incumbent firms may be in a better position to exploit it.

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Chapter 5 – The current UK governance system for nanomaterials: a brief overview

Introduction

5.1 We have made the point that governments play a major role in facilitating and shaping innovation systems through a variety of policy instruments. In innovation systems such as nanomaterials, where risks are high, basic research is key, and regulatory issues are prominent, public policies are particularly crucial for sustaining innovation. However, the policy actors/agencies carrying out these functions are generally country-specific. 5.2 There are two key elements of the current UK governance system for nanomaterials, these fall into the categories of ‘hard’ and ‘soft’ governance activities. ‘Hard’ governance activities are formal technology promotion and regulatory activities. These activities involve flows of funding, backed by legislative sanctions and are led principally by government departments and agencies. They are not solely the responsibility of the state and are typically conducted within broader networks that include non-government bodies, such as professional and industrial associations. 5.3 ‘Soft’ governance refers to a wider range of activities that do not involve significant flows of funding or legally-backed controls, but instead include lobbying, the production of reports and speeches, and other PR or campaigning initiatives. These activities help shape debates and ideas that then circulate within systems of innovation. 5.4 This short chapter will review the current governance system for nanomaterials. Here we focus the discussion around the two elements of ‘hard’ governance, namely technology promotion and regulatory activities. Each is discussed in terms of the UK government institutions and activities, in addition to the ‘softer’ governance activities that might occur in UK non-government organisations. Finally, it is worth mentioning that the descriptions that follow tend to refer to nanotechnology in general rather than nanomaterials, specifically. This is largely because little nanomaterial-specific regulations or activities exist. However, where nanomaterials promotion or regulation are discussed we make that explicit in the text.

Technology promotion

UK Government institutions and activities 5.5 Beginning with ‘technology promotion activities’ – i.e. support for development of the skills base, infrastructure and R&D in the field of nanomaterials - it is notable that the UK does not have a single nanotechnology support programme with ring-fenced funding of the kind represented by the US National Nanotechnology Initiative (NNI)18. Instead most of the research councils provide support within the broader field of nanotechnology, spending in the order of £50 million a year on nanotechnology. 80% of this is spent by the Engineering and Physical Sciences Research Council (EPSRC). (UK Government, 2008) 5.6 Most of the funding of nanotechnology by the EPSRC and the other research councils is provided in responsive mode whereby researchers bid for a pot of funding.

18 However, it is also to be notice that NNI budget is spent by many departments and agencies.

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There are two notable exceptions to this, the implications of which will be drawn out below. The first exception includes the designation of priority areas for building research capacity by some of the research councils. This can be found in the area of ecotoxicology and the environmental fate and behaviour of nanomaterials by the NERC and on the potential health implications of nanotechnologies (by the MRC). 5.7 The second recent exception can be found in the ‘Grand Challenges’ initiative of the Government. Nanoscience and engineering has been designated as a Grand Challenge area which will be coordinated by the EPSRC. Research and efforts will focus on areas considered to be of societal importance and will include support from basic research through to application. In late 2007 there was a call for proposals in the first in this series in the area of exploiting nanotechnology to enable cheap, efficient and scalable ways to harvest solar energy. Up to £5 million is available for this call, expected to support 3 to 5 projects. (UK Government, 2008) 5.8 Government Departments and Agencies do fund research in order to address specific policy questions, but the fact that we still know very little about the impacts of nanomaterials raises questions as to how effective this targeted policy research has been. In 2007, the Council on Science and Technology (CST) estimated that £3m was spent on toxicology and the health and environmental impacts of nanomaterials between 2003 and 2007 (CST, 2007). The following year the Government claimed that between 2005 and 2008, DEFRA, the Health and Safety Executive, the Environment Agency and other departments spent in the order of £10 million on nanotechnology related health, safety and environmental research (UK Government, 2008). However, despite these sums, we still know relatively little about the environmental and health impacts of nanomaterials. 5.9 The Technology Strategy Board funds some nanotechnology initiatives, including the Nanotechnology Knowledge Transfer Network (Nano KTN), a programme administered through the Collaborative Research and Development programme, and infrastructure development through the sponsorship of Micro/Nanotechnology Centres. The Nano KTN brings together people from businesses, universities, research, finance and technology organisations to stimulate business innovation through knowledge exchange. Many respondents to our interview questions responded positively to the existence of such fora for interaction. The Collaborative Research and Development programme is an initiative meant to foster joint working relationships between business and industry. Of the £1 billion (about half of which is from government and half from business) of funding under this programme, some £40 million has been spent on nanotechnology (UK Government, 2008). There is no breakdown of the figures for nanomaterials. £54 million has been spent to establish a network of 24 Micro and Nanotechnology Centres. 19 The Centres are grouped into four main themes: nanometrology, nanomaterials, nanomedicine, and nanofabrication.

19 The decision to establish the 24 Micro and Nanotechnology Centres was the main part of the government’s response to the ‘Taylor Report’ – a review produced by the Advisory Group on Nanotechnology Applications, under the chairmanship of Dr John Taylor, Director General of Research Councils (UK Government, 2002). The Taylor Report recommended that companies needed to be convinced of the benefits of using nanotechnology and that steps had to be taken to guarantee both industry and academia access to appropriate facilities and to well trained staff. It recommended the establishment of at least two National Nanotechnology Fabrication Facilities where individuals and firms could fabricate and test potential products. In practice the government decided to distribute funds more widely, developing a larger number of existing small micro and nanotechnology facilities.

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5.10 A number of institutions and organisations are involved in the coordination of government support for nanotechnology in general. The Department of Innovation, Universities and Skills is the key government department and chairs the Ministerial Group on Nanotechnologies described below. It agrees overall strategy with the Research Councils and sponsors the Technology Strategy Board. Other institutions involved in co-ordination include:

• the Ministerial Group on Nanotechnologies, which comprises the Ministers for the Environment, Public Health, Competitiveness, and Health and Safety and gives strategic direction to the Government’s activities on nanotechnologies,

• the Nanotechnology Issues Dialogue Group which reports to the Ministerial group and comprises officials from Government departments and agencies, the Technology Strategy Board and the Research Councils. It coordinates the delivery of the Government’s commitments on nanotechnologies.

• the Nanotechnology Research Coordination Group which reports to Dialogue Group and also comprises officials from Government departments, agencies, the Technology Strategy Board and the Research Councils, along with attendance from academia and industry. It coordinates publicly funded research into the potential health, safety, environmental, social and environmental implications by the products and applications of nanotechnologies.

• the Nanotechnologies Stakeholder Forum, which comprises stakeholders from industry, civil society and academia and has a remit across all policy activities.

5.11 In summary, the bulk of technology promotion activities for nanotechnology (of which nanomaterials is a key part) from the UK Government is oriented towards ensuring that: • generic research and industrial capacity exists to exploit nanotechnologies, • intellectually promising areas of basic research are supported, • there is specific UK research capacity to support the effective regulation of

nanotechnologies, and • knowledge generated by fundamental research is translated into new products and

services in those areas which offer the greatest scope for boosting UK growth and productivity.

This aligns quite clearly with the left-hand side of our ‘hourglass’ diagram presented in Chapter 3 and our assertion that so far, the UK governance system has focused on the ‘upstream’ end of the system of innovation, to the neglect of the ‘downstream’ end.

UK non-government organisations and activities 5.12 A number of other non-government institutions form part of the governance networks in decisions about how to promote nanomaterials. These institutions are involved in both the ‘hard’ and ‘soft’ governance aspects. For the former they are involved in working with government departments and agencies in decision-making processes as to how promotional activities ought to be designed and funds allocated. For the latter they are involved in a range of ‘soft governance’ activities concerned with putting forward views as to desirable forms of technology promotion that seek to influence the climate of opinion about what areas to fund or prioritise.

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5.13 The non-government organisations and actors include individual firms and industrial and trade organisations, notably the Nanotechnologies Industry Association (NIA), the European Nanotechnology Trade Alliance (ENTA), and the Institute of Nanotechnology. Some key features of each are discussed in turn. 5.14 The NIA was created in 2005 to coordinate the views of the industrial groupings which are actively commercialising nanotechnology. It represents some 65 industrial members and its main function is to provide cross-industry input to government. Its activities include not only participation in government decision-making processes but also a range of other activities such as industry-led technology foresight exercises. 5.15 Several professional and academic organisations, such as the Royal Society, the Royal Academy of Engineering, and the Royal Society of Chemistry, are important actors in governance networks concerned with the promotion of nanomaterials innovation 5.16 In addition to these bodies, various public engagement exercises and experiments on nanotechnology provide a route for broader public views about nanomaterials promotion to be at least made explicit to the actors and institutions formally involved in policy decision-making processes. This is a clear case of soft governance activities influencing some of the more ‘hard’ governance activities. Views of the public that are explicit through this process may not be voiced in technology promotion networks, but they may have an impact on policymaking. 5.17 Finally, a few consumer and environmental NGOs, such as the Consumers Association, the Soil Association, and Greenpeace have been active in the area of nanotechnologies. However, most of their activities have been directed at regulatory issues rather than technology promotion (e.g. CA, 2007). We now turn to this aspect of ‘hard’ governance activities.

Regulation of nanotechnology

UK Government institutions and activities 5.18 In the UK (as in the rest of the EU), the manufacture, use and disposal of nanomaterials and their applications are not regulated under technology-specific regulations. Instead, nanomaterials are covered, at least in principle, by existing regulations and statutes, covering areas such as occupational safety, environmental protection, and the safety of food, medicines, cosmetics and consumer products. Having said this, several government departments and agencies do have potential regulatory responsibilities for nanomaterials, the most important of which include DEFRA, the Environment Agency, and the HSE. The role of each of these is reviewed below. 5.19 Although a wide range of existing regulatory legislation potentially covers the control of environmental and human health risks from nanomaterials, there are numerous ‘gaps’ in existing regulatory controls. This has occurred for two primary reasons. The first reason for this gap is due to the fact that many pieces of legislation either set thresholds or exemptions that would not necessarily cover nanomaterials. For example, under both the UK’s Notification of New Substances (NONS) regulations, and the European REACH programme that will soon replace it, industry is required to provide information on toxicity and ecotoxicity for new chemical substances. Nanomaterials are treated as variations of the existing formulation or material because it is only changes in chemical structure that are currently recognised as constituting a new

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substance, rather than changes in physical form. The toxicity of a nanosized form of a substance may however be dramatically and uniquely different from its parent form (Oberdorster et al. 2005). (We take this point up in further detail in the next chapter.) 5.20 This blanket treatment of nanomaterials under existing regulatory schemes has implications for judgements about equivalence and the need for pre-market testing. It means these decisions are likely to be exercised by the producer or supplier (Frater et al., 2006). This is likely to lead to a lack of scrutiny of products that are apparently similar to existing products but which contain nanomaterials with different properties. Since there are no standardised risk-assessment techniques designed to explore the novel kinds of hazard that a nanomaterial, with new and unique properties, might give rise to, default assumptions of equivalence are likely to be confirmed. As a 2006 DEFRA report for the UK government noted: “...under the current framework it is possible for [manufactured nanomaterials] to move from the R&D stage to commercial production without full assessment of their properties and hazard potential.” (Chaudhry et al., 2005, p. 6) 5.21 The second reason why there are gaps in existing regulatory controls is that many pieces of legislation are based on toxicological or ecotoxicological classifications in order to decide whether a substance or product requires control, and if it does, how that control should be exercised. (Chaudhry et al., 2005) In the absence of such information, and any incentives or requirements on firms to produce such information, environmental and health regulation will remain inapplicable, or at least difficult to apply, to nanomaterials. 5.22 DEFRA recognised this absence of nanomaterials-specific controls and launched a voluntary scheme for nanomaterials regulation in 2006. This was intended to generate information on the types of nanoscale materials that were likely to be manufactured, handled, and marketed in the UK, and to help provide information on potential risks associated with those materials. DEFRA hoped it would be able to use this information to introduce appropriate controls at some point in the future (DEFRA, 2008). 5.23 The scheme covered engineered nanoscale materials that are free at any stage of a product’s life-cycle and asked for information on material characterisation, hazard, use and exposure potential, and risk management practices. The intention was to encourage the submission of existing data; companies and organisations were not being asked to generate additional data. 5.24 Even with such a relatively non-onerous requirement, by the end of 2007, 16 months after its was first launched, only nine submissions had been received by DEFRA. Of these, seven were from industry and two from academia (DEFRA, 2008). However, it is estimated that there are at least 60 firms that manufacture or use engineered nanoparticles (Anon 2008a). Thus the majority of firms using nanomaterials have ignored the voluntary code. DEFRA is disappointed with these figures, and has warned firms that reporting could become mandatory if more submissions are not received (DEFRA 2008).

UK Non-government organisations and activities 5.25 As with technology promotion, many non-government institutions form part of the governance networks in decisions about how to regulate nanomaterials. They include the same trade organisations discussed earlier, the Nanotechnologies Industry Association, the European Nanotechnology Trade Alliance, and the Institute of

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Nanotechnology, as well as individual firms. Again, these institutions are involved in both the ‘hard governance’ aspects of working with regulatory agencies over the scope and nature of regulatory proposals and initiatives, plus a range of ‘soft governance’ activities concerned, for example, with putting forward its members’ views as to desirable forms of regulation in the public domain. For example, Oxonica, a nanomaterials supply firm has published a ‘Proposed Ideal Regulatory System’ for nanoscale materials, essentially a hazard-based screening approach, 20 whilst the Nanotechnologies Industry Association has been active in developing a Code of Conduct, in conjunction with the Royal Society, for organisations involved in the development and exploitation of nanotechnologies.21 5.26 Non-government institutions involved in regulatory governance networks again include several professional and academic organisations. In 2004, the Royal Society and Royal Academy of Engineering jointly published a report commissioned by the UK government entitled ‘Nanoscience and Nanotechnologies: Opportunities and Uncertainties’. (RS/RAE, 2004) The report has been especially influential, both in the UK and overseas, and led to the UK being seen as a world leader in public engagement with nanotechnologies. It argued that that public debate was needed about the development of nanotechnologies, that there was an immediate need for research to address uncertainties about the health and environmental effects of nanoparticles, and it made recommendations about regulation to control exposure to nanoparticles. 5.27 To take another example, the Institute of Occupational Medicine runs SAFENANO, an information service funded by the Technology Strategy Board.22 The initiative is designed to help industrial and academic communities to quantify and control risks to their workforce, and to public and environmental health more generally. The Institute of Occupational Medicine also advises government agencies such as DEFRA on the potential risks of nanotechnology and on risk management issues. 5.28 A few consumer and environmental NGOs, notably, the Consumers Association, the Soil Association have been formally involved in regulatory activities – at least in so far as they sit on the Nanotechnology Stakeholders Forum Group, chaired by DEFRA, and are involved in consultation processes. Those NGOs and others are involved in various soft governance activities, for example some NGOs have begun to get actively involved in campaigning on regulatory issues (CA, 2007). 5.29 Finally, the various public engagement exercises on nanotechnology, again provide a route for broader public views about nanomaterials regulation to be at least made explicit to the actors and institutions formally involved in regulatory decision-making processes (Doubleday, 2007).

Summary

5.30 Two important points fall out of this analysis of the governance networks for nanomaterials in the UK. The first is that if we consider the entire innovation system for nanomaterials (as described in Chapter 3), then we can say that the overall focus of the UK government’s technology promotion activities has been on improving research infrastructure and capacity-building. They have done a good job linking 20http://www.nanotechia.co.uk/lib/tmp/cmsfiles/File/OXONICA_NanosafebasedriskassessmentBarryParkJune2006.pdf 21 http://www.responsiblenanocode.org/index.html 22 http://www.safenano.org/

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science with potential suppliers or manufacturers of nanomaterials (i.e. the left hand side of the hour glass shaped depiction of the UK nanomaterials innovation system in figure 3.1), but have done far less about the right hand side. There appears to be little focus on linking suppliers and manufacturers of nanomaterials with user firms. Given the wide variety of applications, products, and sectors that nanomaterials innovations have affected and could affect, there is significant potential for the application of governance measures further downstream in the innovation process, between suppliers and potential users of technology. Furthermore, it is at this downstream stage where the scope for directing innovation processes in both environmentally beneficial and economically profitable ways may be greatest. 5.31 The second point is that, with the exception of the Grand Challenges programme led by the EPSRC, there is little attempt to support specific kinds of nanomaterials or nanomaterials applications. Instead, government support of the science base is either aimed at raising research competencies across the board, or is in responsive mode, and is thus relatively agnostic as to the kinds of nanotechnology research to fund. This means the objective is one that increases the overall rate of innovation, rather than particular directions of innovation. Where government support has focused on technology development, it has done so in areas that are considered to be of potential competitive advantage. 5.32 Both these points imply that while various components of, and linkages within, the UK systems of innovation for nanomaterials are being supported, there is scope for the government to take a more pro-active role in attempting to influencing nanomaterials innovation trajectories, options for which are discussed in the final chapter.

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Chapter 6 – Regulating Nanomaterials Introduction

6.1 As the previous chapter has shown, existing forms of government intervention in technology innovation typically take two distinct, and usually institutionally separated, forms: One of these consists of various, ‘front-end’ promotional activities, concerned, for example, with generating the skills base, funding the research infrastructure, and providing support for research and development. Insofar as those activities are directed at particular areas of science and technology the rationale for support is typically that of promoting those areas of activity that offer the greatest scope for boosting growth, productivity, and competitiveness. 6.2 The second form of policy intervention consists of ‘back-end’ technology regulation. This is concerned with managing the health and environmental impacts of individual technological artefacts. Regulatory concerns relate typically to human and ecological toxicity, and the purpose of regulation is usually to discourage the development and/or control the use, or more typically the particular uses, of products that are considered to pose an unacceptable environmental or health burden. 6.3 We suggest there is considerable scope and opportunity to both broaden out and link these two traditionally distinct sets of activities in approaching the governance of systems of innovation for nanomaterials in a way that encourage the development of novel materials and nanomaterials applications that are environmentally benign or beneficial as well as economically profitable. 6.4 Our discussion about nanomaterials governance in this section is informed conceptually by two bodies of work that SPRU has been prominently involved in creating: 1) on policy responses in cases of ‘incomplete knowledge’, and 2) on the purposeful social and policy shaping of innovation processes and pathways. Based on these, and assuming the evolutionary view of technology development and use of nanomaterials as highlighted in Chapters 2 and 3 of this report, we discuss two different approaches to governing and directing the innovation system for nanomaterials. Each invokes a different set of regulatory and policy tools, but at the most basic level there is a simple distinction between ‘first-order regulatory policies’ and ‘second-order governance strategies’. 6.5 First-order regulatory policies essentially concern traditional back-end regulation. We argue that in response to the uncertainty and incomplete knowledge that currently exists for nanomaterials as a sector, these policy activities can usefully be broadened out in several ways, especially within regulatory appraisal. In doing so, much greater effort and attention can be given to recognising various forms of uncertainty, or to an extension of the scope of appraisal to include a broader range of risks, overt attention to benefits, and a consideration of the merits of competing technological options. 6.6 Second-order governance strategies include traditional technology promotion activities, albeit with greater attention paid to the range of influences, interests and objectives that bear on technology promotion. These types of strategies also involve greater attention to cross cutting system-level innovations. This latter shift of focus involves an expansion of policy attention to the broader technological systems that nanomaterials become a part of, and how nanomaterials can contribute to the

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development of those systems. This effectively opens up a wider range of potential policy activities that may influence innovation trajectories for nanomaterials. 6.7 This section is structured as follows: We first outline a central dilemma for policies concerned with technology governance. The discussion then turns to existing regulatory policies for nanomaterials and the ways in which they might be broadened out to cope with extremely high levels of uncertainty. It then turns to examine potential second-order governance strategies and the ways that these might be used to influence innovation in a dynamic and diverse system such as nanomaterials.

Technology and the dilemma of control 6.8 Attempts to influence the direction of innovation in novel materials are beset by a pivotal dilemma (Collin ridge, 1992): We cannot control technologies once they are well developed because they become entrenched, thereby making them susceptible to various forms of ‘lock-in’ and developmental momentum in a particular direction. Once material investments, infrastructures, institutional commitments, routines, and habits develop around one particular technology, the development trajectory for the whole technological system becomes established and it becomes extremely difficult and costly to reverse or change direction. A classic example is the QWERTY keyboard which was designed to be suboptimal to slow down mechanical typewriters, but has remained in the age of computers (David, 1985). 6.9 This ‘lock-in’ phenomenon is juxtaposed by the observation that even when attempts to direct and control a technology early in its development are made, they often fail because both the technology’s final form and its effects are unpredictable. Thus, prior to technology lock-in, a state we arguably find ourselves in with nanomaterials, it is difficult to anticipate how a technology might transform industrial or other systems and with what consequences. This poses a clear challenge to policymakers and governments that might have an interest in directing technologies and innovation systems towards particular ‘ends’. 6.10 It is extremely difficult to foresee how the nanomaterials field might evolve at this stage and in what directions. As discussed in the previous Chapters, the breadth of actors, the complexities of the links between them, and the uncertainty associated with the multiple and diverse trajectories any one nanomaterial might take, means we have little idea about the nature of any new classes of product and market that may emerge. However, this state of ignorance should not be seen as a negative; in fact it is one of the reasons why engaging in R&D is worthwhile on the part of firms. Yet it also means that it is difficult to anticipate what kinds of impacts, both positive and negative, might be associated with innovation, particularly at the level of a broader technological system.

Risk assessment and the problem of incomplete knowledge 6.11 Putting problems about technology development and lock-in aside temporarily, we might think about the types of trajectories we want to ensure do not develop because of their possible negative environmental and health effects. However, here we face problems of incomplete knowledge in a very significant way. There are reasons to suspect that at least some nanomaterials, such as nanoparticles or nanotubes, may pose potential health and environmental risks. In fact, it is the very properties of nanoparticles that make them so interesting and exploitable, such as high surface reactivity and the ability to cross cell membranes, which raises questions about their potential impacts on both humans and ecosystems (EC, 2004). But our underlying

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understanding of how nanomaterials might impact on health and environment is very poor. It is not just that the relevant studies have not been conducted, it is that many do not know where and how to start measuring toxicity and other impact levels. The problem is so great that some commentators argue that governmental regulation is not possible at present given the lack of necessary information on which to base such regulations (Oberdorster et al., 2005). 6.12 Usually, when new substances are introduced commercially into products and processes, established risk assessment tools are used to try and understand and predict human and environmental health impacts. Ideally these assessments enable regulators to produce probabilistic estimates of risk for any particular human or biological population and establish standards or guidelines for safe or acceptable levels of exposure. Conventional quantitative and/or expert-based risk-assessment techniques, involving various forms of scientific experimentation and modelling, and probability and statistical theory are often assumed to provide a comprehensive and rigorous basis for characterising risks and informing regulatory decision-making. 6.13 However, when we have high levels of incomplete knowledge, as we do for nanomaterials, this poses a fundamental challenge to quantitative and expert-based risk assessment techniques. These are based on two forms of incomplete knowledge: uncertainty and ignorance. Uncertainty is a condition under which there exists an insufficient empirical or theoretical basis for the assigning of probabilities to reflect likelihoods of particular outcomes. Uncertainty is a particular problem in nanomaterials risk assessment because there is almost no data on exposure and exposure-response relationships for engineered nanoparticles (EC, 2004). Little is known about the fate and transport of nanomaterials in the environment, how nanomaterials enter the body, the mechanisms of translocation to different parts of the body, or how they are metabolised. (Oberdorster et al., 2005; RS/RAE, 2004) Under such circumstances, reliable estimates of the risks posed by nanomaterials are extremely difficult to provide. 6.14 Second, and arguably more problematic for nanomaterials risk assessment and regulation, is the condition of ignorance. Here, the issue is not of insufficient empirical data, but of possible outcomes that defy probabilistic characterisation and lie outside the frame of reference of conventional risk-based regulation. For example, not only do we have a poor understanding of the various routes of exposure to nanomaterials, but even the fundamental mechanisms of toxicity are largely unknown. Even simple screening assessments are difficult due to the novelty of the materials and the lack of basic toxicity data (Kidlike et al., 2007). Attempts to apply risk assessment to the regulatory appraisal of nanomaterials mean that there may be a host of possible outcomes which are not only uncertain, but which may also be entirely unforeseen. 6.15 The majority of expert groups and regulatory agencies in the nanomaterials field clearly recognise the inapplicability of existing probabilistic and expert-based risk assessment methods to the appraisal of nanomaterials. For example, in 2006 the HSE concluded that “[c]urrent knowledge is inadequate for risk assessment”, (HSE, 2006, p. 21)23 and the Royal Society/Royal Academy of Engineering argued two years before that

23 HSE (2006) Review of the adequacy of current regulatory regimes to secure effective regulation of nanoparticles created by nanotechnology, HSE, London, p. 21

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that “...it is not possible to evaluate the potential environmental impact of nanoparticles and their behaviour in environmental media.” (RS/RAE, 2004, p. 50)24. Box 6.1. Nanoparticle risks – what do we know and what don’t we know?

Current knowledge about nanoparticle risks does not go much beyond the identification of some human health hazards, but even this is very limited. We know far less about human exposure to nanoparticles or about the relationship between exposure levels and human responses. Our knowledge about the behaviour and impact of nanoparticles on the broader environment is poorer still.

Most of our knowledge about the hazards posed by nanoparticles is derived from studies on unintentionally produced and released nanosize particles, e.g. from fossil fuel combustion. Collectively these studies show that:

• when inhaled, nanoparticles are highly likely to deposit in all regions of the respiratory tract

• when in contact with skin, there is evidence of penetration to the dermis followed by translocation via lymph to regional lymph nodes

• nanoparticles evade specific defence mechanisms • their small size facilitates uptake into cells and translocation into the blood and

lymph circulation to reach potentially sensitive target sites such as bone marrow, lymph nodes, spleen, and heart.

• unlike larger particles, nanoparticles may pass along nerve axons and into the brain • they have a greater inflammatory and oxidative stress potential than larger particles • particles without specific toxicity such as carbon black and titanium dioxide are

known to cause fibrosis, neoplastic lesions and lung tumours in laboratory animals • parameters such as chemistry, biopersistence, surface priorities, agglomeration state

and shape appear to modify effects and translocation The biggest problem is that there are no appropriate methodologies for testing the

toxicity of nanoparticles in the context of both the environment and human health. Furthermore, nanoparticles and nanotubes are too small to be measured by most standard instruments used in workplaces or elsewhere. It is also unclear which parameters are the relevant ones to measure from the standpoint of toxicity. Significant efforts will need to be made in this area before regulations on specific nanomaterials can even begin.

6.16 Despite these statements, when faced with new situations and technologies, there is a tendency for regulators and firms to turn to assessment frameworks that were developed for previous technologies. It is assumed that risk assessment techniques could encompass any potential consequence. (Kearnes et al., 2006) For example, a survey of German and Swiss firms found that of those companies that had actually conducted risk assessment on their nanomaterials, most considered their assessments ‘‘sufficient to evaluate nanoparticles’ risk” even though no standardized methods exist (Anon 2008b)25. 6.17 There are three key messages to take away from this discussion of the problems of risk assessments and incomplete knowledge. First is the necessity of regulation in the nanomaterials area. As has been widely recognised by UK and European regulatory and professional institutions (FSA, 2006; HSE, 2006; DEFRA, 2005; RS/RAE, 2004) the very extensive uncertainties about whether and how nanomaterials might affect human and environmental health mean that such materials do need to be subject to regulation, 24 Royal Society/Royal Academcy of Engineering (2004) Naoscience and nonaotechnologies: opportuntiies and uncertainties, London, Royal Society/Royal Academcy of Engineering, p. 50. 25 also nanomaterials although there are major gaps in information for hazard identification.”FSA (2006) A review of potential implications of nanotechnologies for regulations and risk assessment in relation to food. FSA, London, p. 16

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even though there is not yet reliable evidence that they can or will cause actual human or environmental harm. 6.18 Second, is the crucial importance of research in gaining a better understanding of the potential toxicity and ecotoxicity of nanomaterials. It is worth sounding a note of caution, however, that more research will not always reduce the uncertainty, but in fact may raise new questions and areas for exploration. For example, in 2000, the EC’s Scientific Committee on Cosmetic and Non-Food Products (SCCNFP) concluded that the use of nanoparticles of titanium dioxide as a UV filter were safe at any size, uncoated or coated (SCCNFP, 2000). In 2007, however, the committee’s successor, the Scientific Committee on Consumer products concluded that several key uncertainties meant that it was not able to properly assess the potential risk of nanomaterials, such as titanium oxide nanoparticles. 6.19 Third, as it is not possible to reliably characterise the intrinsic hazards of a material, the nature of exposure, or the probability of harm occurring under particular exposure scenarios, then conventional risk assessment methods will not be suitable for properly informing decision-making in this area. Forms of appraisal beyond conventional risk assessment will be required. We must enable regulators to learn about and respond to the difficulties of incomplete knowledge so that regulatory intervention compensates for the absence of comprehensive knowledge about nanomaterials, but does not allow it to continue unaddressed.

First-order Regulation 6.20 As described in the review of the current national governance system for nanomaterials in the previous Chapter, there are no specific regulations for nanomaterials. Instead, their manufacture and use are covered, at least in principle, by existing regulations. But because those existing regulations were not designed specifically for nanomaterials, there are many ‘gaps’ in the existing regulatory apparatus and many nanomaterials products and applications are not effectively covered by regulatory controls. 6.21 One important regulatory issue, then, concerns whether current regulations can be modified to address the kinds of gaps that DTI and DEFRA have detailed at length (Chaudhry et al., 2006; Frater et al., 2006). Even if modifications were made, the question still remains as to whether they would be adequate to manage potential risks from nanomaterials, or whether a regime specific to nanomaterials, or nanotechnologies more broadly, needs to be conceived.26 6.22 On this issue the European Commission has adopted an “incremental approach’’ which intends to adapt existing laws to the regulation of nanotechnologies in Europe. It regards specific regulation on nanomaterials as unfeasible in the European context, due to what it calls the difficulty of establishing links between very different pieces of legislation and the need to negotiate internationally to establish a regulatory process (EC,

26 For example, although it might be possible to amend existing legislation, it might be easier to ensure that particular gaps are dealt with - and that new ones do not open up - under a single regime rather than trying to modify numerous different kinds of legislation. For example, emissions to air, water and land from the 50 or so organisations in the UK undertaking R&D on nanomaterials are currently uncontrolled because R&D is exempt under the Integrated Pollution Prevention and Control directive. As with Directive 90/219 on releases to the environment of Genetically Modified Organisms it might be easier to include the R&D phase under new specific rather than modifying existing general legislation.

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2004). The UK’s position is less clear, given that it has acknowledged that it is still necessary to gather evidence to inform policy decisions on whether new or amended legislation will be needed to cover, at the very least free engineered nano-scale materials. (UK Government, 2008). 6.23 There are likely to be different advantages and disadvantages of both a technology specific and a general regulatory approach for nanomaterials. One important advantage of a technology specific approach is the fact that it would then be possible for a single regulator to keep track of all uses of nanomaterials, thereby enabling information, patterns and trends in commercial use to be established and research priorities to be determined. It would also help to create and maintain the required expertise for appraisal. 6.24 It may be worthwhile to consider intermediate options, such as a compulsory notification and/or screening scheme for nanomaterials and nanomaterials applications, with at least some aspects of regulation covered by existing statutes. This would maintain the specific advantage of keeping track of all uses of nanomaterials. DEFRA runs a voluntary scheme of this type, but compliance is very poor. Voluntary programmes contain no incentive for firms to provide the information requested. The costs of generating and/or providing the information, the potential liability exposure, and the lack of any tangible benefits of providing the information generate strong disincentives. Having said that, social responsibility initiatives at a sectoral level, if organised through trade associations, may provide the needed incentives if firms were required to comply as a condition of membership of the trade association. This would require a single peak trade association, though, and it is not clear that the nanomaterials field is sufficiently homogenous to make this possible. 6.25 Regardless of whether existing regulatory regimes or a new regulatory regime are deemed necessary for regulatory purposes, any such regime will have to cope with two kinds of challenges. The first of these concerns the issue of what exactly requires regulation. There is an important distinction between nanomaterials and their, potentially far more numerous, applications. As we have pointed out earlier, the situation is not entirely dissimilar to chemical regulation where there is specific regulation of, and regulatory obligations on, the manufacturer of a chemical (for example to generate toxicological and ecotoxicological data) as well as on the downstream firms that operate processes and manufacture products using those chemicals. 6.26 The situation is more complicated for nanomaterials, though, because for any one type of nanomaterial there are likely to be different toxicological properties depending on the particular form of the material: its size, shape, charge, coatings, and surface characteristics. These may be critical in determining toxicity, but we do not yet know how and why. If there are hundreds of different applications, the problem is not just that in some products nanoparticles may present more of an exposure risk than in others, but also that in each application the same nanomaterial will be slightly different and possess distinct toxicological properties. Given the problems experienced in the past with conducting substance-by-substance risk assessment of the bulk chemicals in the EU, alternative options are worth considering. For example, instead of requiring that a risk assessment be conducted for each application, regulators may wish to limit exposure to freely available nano-particles by ensuring that mandatory design requirements avoid or minimise the possibility of human or environmental exposure, in case it should later turn out that some nanomaterials entail some risks.

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6.27 The second, and more problematic challenge, concerns the uncertainties and gaps in our knowledge summarised earlier in this section. If conventional probabilistic risk assessment methods are not suitable for properly informing regulatory decision-making, then how should we assess and respond to nanomaterials innovation? We now turn to some literature on how both appraisal of risk and the policy responses to that appraisal can be designed in ways that best cope with the reality of chronically incomplete and equivocal knowledge about potential harm.

Precautionary forms of appraisal 6.28 One way in which regulators might better cope with incomplete knowledge can be found in precautionary appraisal. Often policy makers interpret a precautionary approach to mean a specific decision ‘rule’. Yet it is clear that the precautionary principle, as expressed in the 1992 Rio Declaration, refers to the reasons for action (lack of scientific certainty and a potential for irreversible harm), not to the substance or stringency of the possible actions themselves. Understood in this way, precaution requires explicit attention to the process by which risk is assessed so that the issues of scientific uncertainty are more thoroughly addressed than under conventional appraisal processes. 6.29 There are a variety of approaches to appraisal that essentially help address a lack of scientific certainty by expending more effort in social learning, and exploring a wider range of relevant knowledge. This is an important point, because much of the support provided to the precautionary principle by governmental bodies such as the European Commission, is explicitly predicated on the qualification that precaution is a risk ‘management’ (rather than ‘assessment’) measure. 6.30 It is also worth noting that broad, precautionary approaches to appraisal do not and cannot proscribe a particular regulatory outcome. That decision remains, as always, a political one, subject to well-established procedures of democratic decision-making. The key distinction, when compared to conventional risk regulation, is that such decisions might be better informed. Key features of precautionary appraisal processes are listed below in Box 6.2. Further details of each are provided in the sources listed at the bottom of the box. 6.31 The justification for employing those broader (and more onerous and resource intensive) approaches is the inapplicability of probabilistic risk assessment methods as discussed earlier. One way of identifying when probabilistic risk assessment methods are, and are not, applicable is to ask a series of filtering questions prior to undertaking formal appraisal. Four candidate examples, explored in a recent EU research project, (Renn et al., 2003) is as follows:

1. Are there scientifically founded doubts about the theoretical basis of our understanding of the hazard or phenomena in question?

2. Are there scientific doubts about the quality or applicability of the (potentially) available empirical data sets?

3. Are there scientific doubts about the applicability or sufficiency of the available models for interpreting the data?

4. Are there features of the technology that are novel, unprecedented, or uninsurable?27

27 These questions are intended not only to identify the existence of uncertainty, but also issues where we might expect ignorance to be manifest and problematic. Thus, for example, questions 1 addresses the pedigree of the knowledge underpinning theoretical understanding of the threat in question, an issue that

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Box 6. 2: Key features of a precautionary appraisal process:

Sources: Gee et al. (2001); Stirling (2006) 6.32 Positive answers to any of these four questions implies that probabilistic risk assessment methods are not applicable and a broader approach to appraisal is warranted. Asking these four questions about the appraisal of freely available nanomaterials suggests that precautionary methods of appraisal are required.

Precautionary Regulatory policies 6.33 Although the ways to which policy responses balance caution and rapid commercialisation are political decisions, there are a number of distinct policy approaches that are designed to respond to an absence of reliable knowledge of risk. 6.34 One approach is to use hazard-based or exposure based triggers for regulatory action. In the past, regulatory delays have occurred from a desire to understand mechanisms of toxicity and levels of exposure before regulatory action is taken. To avoid delay, some regulatory agencies acknowledge that regulatory intervention can be justified on the grounds of hazard or exposure information, rather than on attempts to model associated probabilities or exposure frequencies. 6.35 Howard and de Jong have suggested that hazard triggers can be used to rank nanomaterials and products that incorporate nanomaterials. From these rankings, appraisal and regulatory responses can be prioritised (Howard & de Jong, 2004). They suggest that toxicity hazard attributes of nanomaterials, such as whether the substance in might be equivocal even though it may be possible to perform a quantitative risk assessment on the product or technology under scrutiny. Similarly question 4 is intended to identify those areas where we might expect ignorance to be manifest by consideration of the proxy notions of novelty and uninsurability.

• consideration of indirect effects, like decomposition, additivity, synergy and accumulation

• inclusion of industrial trends, institutional behaviour, strategic issues and non-compliance

• contemplation of full life cycles and resource chains as they occur in the real world

• a shift from reliance on theoretical modeling towards systematic monitoring and surveillance

• greater priority, clear responsibilities for targeted research, to address unresolved questions

• deliberate search for ‘blind spots’, gaps in knowledge and divergent scientific views

• examination of a greater range of uncertainties, sensitivities and possible scenarios.

• drawing on relevant knowledge and experience arising beyond specialist disciplines

• general citizen participation in order to provide independent validation of chosen framings

• deliberation over social justifications and possible wider benefits as well as risks and costs

• independence from vested institutional, disciplinary, economic and political interests

• examination of strategic qualities like

reversibility, flexibility, diversity, resilience, robustness

• attention to proxies for possible harm (eg: ubiquity, mobility, bioaccumulation, persistence)

• explicit discussion of appropriate levels and burdens of proof, persuasion, evidence, analysis

• comparison of a series of technology and policy options and potentially favourable substitutes

• initiation of process at earliest stages ‘upstream’ in an innovation, strategy or policy process

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question is capable of reaching the brain or foetus, is mutagenic or carcinogenic, is an oxidative stressor, is persistent, or biomagnifies, could be used as part of a screening and prioritisation process. Ecotoxicological hazard attributes (persistence, bioaccumulation, etc) could also be used. These do not in themselves indicate toxicity, but they do indicate that levels of a substance are likely to build up in the environment and it may be difficult to return concentrations to background levels if a toxicity problem is eventually identified. 6.36 The use of hazard-based or exposure based triggers, or proxies, are not necessarily confined to prioritising substances for further analysis or testing. They might also be used as a means of triggering a shift in the burden of demonstration from the regulator to the manufacturer; or as a trigger for certain kinds of regulatory restriction. For example, hazard-based triggers could be the basis upon which regulators insist that products are designed in a way to eliminate, or significantly reduce the probability of, potential exposure. They could also be the basis upon which recycling of a product by a manufacturer is a condition of granting a licence, or they could be the basis for requiring that certain uses of a product or applications of a nanomaterials are prohibited.

Problems with first-order governance strategies 6.37 Although there are many ways in which policy makers can broaden the regulatory appraisal of, and regulatory response to, innovations in nanomaterials and applications of nanomaterials, such first-order approaches suffer from two critical shortcomings. 6.38 First, although one of the arguments contained in the precaution literature is that the social benefits of innovations should feature explicitly in appraisal and decision-making processes, ‘back-end’ regulation is rather late in the technology development process to encourage applications that are socially or environmentally beneficial. Although regulatory policies will send important signals ‘upstream’ to the R&D process within firms, there are more imaginative ways in which policy might impact and influence innovation processes early on. This requires focussing governance efforts on the innovation or technological system as a whole, particularly the elements of the system further downstream (i.e. between suppliers and manufacturers of nanomaterials and user industries and final consumers). 6.39 Second, even if policies themselves were to encourage the development of nanomaterials applications with beneficial environmental impacts, they alone may not be able to impact the established developmental trajectory of the technological systems to which those individual applications contribute. For example, cleaner, more efficient or more environmentally beneficial nanomaterials based technologies may not diffuse rapidly within a particular sector because of a range of constraints operating at the sector level itself. Such constraints might include the nature of existing infrastructures, consumer attitudes, the structure of existing markets, and prevailing institutions in the sector. 6.40 It is also important to note that, even where apparently cleaner, more efficient or environmentally beneficial technologies do diffuse rapidly, the overall environmental impact of their uptake may not be beneficial because of linked changes in markets and consumer behaviour. For example, nanomaterials could be used to reduce aircraft weight which might be environmentally beneficial if less fuel was used or a greater number of

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28passengers carried per flight. That assumption, however, would need to be examined carefully, partly because the full life cycle effects would have to be taken into account (e.g. end-of-life disposal of nanomaterials may have an adverse environmental impact) but also because of rebound effects. For example, using lighter materials might stimulate additional passenger movements if there were corresponding reductions in fares. In other words, we might see an increase in flight consumption, thus undermining the original efficiency gain. 6.41 The implications of the two shortcomings identified above are that ambitions to promote environmentally beneficial nanomaterials and applications of nanomaterials will require a) a shift from thinking about regulation of nanomaterials to thinking about governance of innovation in nanomaterials more generally, and b) greater attention to how policies aimed at encouraging particular applications of nanomaterials might link up to a broader range of policy initiatives that operate at the level of the technological systems to which those applications are aimed. This involves policy-makers considering how they might best influence the contexts of operation of the sorts of technology systems outlined in this report, into which environmentally beneficial nanomaterials could be introduced. 6.42 Below, we discuss these issues briefly and we provide an example in Box 6.3 to illustrate the kinds of policy measures involved in promoting environmentally beneficial, and profitable, nanomaterials innovation.

Second-order governance: From technology promotion to the governance of innovation 6.43 If policies to promote and support innovation aim to guide patterns of innovation in particular directions and discourage others then traditional technology promotion policies will need to be broadened in at least three ways. 6.44 Firstly, the inputs to and interests involved within technology promotion institutions and processes of decision-making need to be broadened. Doing so would provide more room to identify and negotiate as to what might constitute environmentally beneficial trajectories of innovation. This is not necessarily a straightforward task. There are competing understandings and perspectives as to what counts as a sustainable solution to a problem or even over what constitutes sustainability. For example, both nuclear energy and renewable energy can be and have been argued to represent a means of reducing carbon emissions, but clearly there are entrenched interests opposed to each. 6.45 Secondly, conventional technology promotion policies and institutions should also be broadened by shifting the policy focus to the linkages further downstream in the innovation process; namely the links between suppliers and manufacturers of nanomaterials, on the one hand, and potential users of those technologies on the other. This has been the main argument of this report and is based on the current mismatch between the considerable policy attention given to the upstream (left-hand side of the hour-glass model, see Figures 3.3. and 3.4) aspects of nanomaterials innovation, and the downstream (right-hand side of the hour-glass) of the technology system. Not only do our empirical findings support this, but theoretically a system of innovation

28 This is the example discussed by in the Royal Society/Royal Academy of Engineering report (RA/RAE 2004, p. 32).

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framework suggests that this might be a useful point of policy intervention as it has the potential to leverage the effects of policy by promoting capability development upstream. 6.46 As described in the previous Chapter, the current focus of UK policy is on improving research infrastructure, capacity-building and on linking science with potential suppliers or manufacturers of nanomaterials. But at this stage in the innovation cycle, it is largely an open question as to which will be the potential early adopters and carrier firms and industries. Given the wide variety of applications, products, and sectors that nanomaterials innovations could affect, there is significant potential for the application of governance measures between suppliers and potential users of technology which are aimed at influencing the unfolding trajectories of nanomaterials innovation. 6.47 It may even be easier to promote particular, environmentally beneficial and economically profitable technological trajectories here, at this downstream stage where manufacturers, suppliers and users interact, than further upstream at the science base. This is because it is harder to see how specific kinds of applications might be developed further upstream, and because the focus is more on building competences in general terms, rather than building competences in specific areas. 6.48 Furthermore, as was noted in Chapters 2 and 3, governance measures that are aimed at influencing downstream applications (for example by supporting links between suppliers and manufacturers of nanomaterials and potential users of those technologies in particular technological sectors) are likely to influence upstream activities in supplier firms too. Since the networks of innovation processes in nanomaterials criss-cross with one another, this has the potential to lead to upstream capability building which can enhance a range of downstream applications beyond the initial focus of policy. 6.49 The third way in which conventional technology promotion policies and institutions might be broadened is to align innovation policies with the broader sustainability policies and pressures within each economic or technological sector. Governance efforts should in this case support a move towards an alignment of nanomaterials development with the sustainability pressures faced in diverse technology sectors. The challenge is to make explicit how nanomaterials can provide solutions to problems whose saliency and urgency is given prominence by broader sustainability policy. 6.50 In seeking to both promote environmentally beneficial nanomaterials applications for a particular technological sector, and influence innovation trajectories within that sector based on those applications, we can make a useful distinction between governance strategies that are aimed at influencing the ‘adaptive capacity’ of particular technological sectors, and those that are aimed at influencing the ‘selection environment’ for that sector (Smith et al., 2006). 6.51 ‘Adaptive capacity’ refers to the resources and the means to co-ordinate those resources that are available to firms and other actors, both within and outside a particular technological sector. When co-ordinated properly, these resources should facilitate technological transformation within that technological sector. A variety of state-centred activities, many of which are part of traditional technology promotion policies, might

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influence adaptive capacity. These include public R&D, foresight exercises, secondment of expertise, public underwriting of risks, the creation of favourable regulatory environments, and fiscal policies. Box 6.3 Using niche-managed schemes to promote downstream and upstream capabilities

1 One example of the spill-over of nanomaterials between applications is the research by Dr. Saif Haque at Imperial College. Haque’s research studies charge transfer dynamics in nanostructured molecular materials with a focus on developing solar cells. A better understanding of the properties of nanocrystalline TiO2 prompted Haque to branch his research into other applications of the same material, namely chemical sensors, and light-emitting displays...

Imagine one were to introduce a niche management scheme that provided a clear market for photo-voltaics for UK schools in 2020. Such a move would introduce a clear market opportunity with well-defined risks and rewards. This, one might expect, would be more attractive to firms and their investors, than the current more uncertain commercial environment in which they are being asked to take a highly uncertain commercial ‘punt’ on largely unknown future markets. By providing a more stable market for investment, these sorts of niche management schemes do not “pick winners” but instead help stabilise the conditions within a sectoral system of innovation in which winners can emerge. With more predictable market opportunities, we might expect firms to build capabilities, and invest in R&D. This sort of investment would in turn have implications for capability development further upstream in the research and science system. We might then see spill-over effects1 into other areas of nanomaterial innovation, such as the exploitation of the novel optical properties of nanomaterials. Finally, it does not take a great leap of imagination to picture the scenario described here serving as an an instance where a national regulatory system might influence a global technology system.

6.52 ‘Selection environment’ refers to the conditions favouring the development and adoption of particular kinds of innovation from a basket of potential alternatives. Again, a variety of state-centred activities might influence the selection environment. These include fiscal incentives and policies, regulations, public procurement, the creation of physical infrastructure, and measures that support technological niches. They also include various ‘soft’ measures that contribute to a climate of opinion within the relevant industrial sectors and in the broader public debate. 6.53 Of course a wide range of non-state activities will influence both selection environments and adaptive capacities. These include price and competition pressures bearing on individual firms, the entry of particular investors or firms to a sector, the activities of both industrial lobbies and civil society organisations, and broader influences such as shifting consumer cultures. It is important to note that in the absence of any co-ordinated state-led strategy to govern novel material innovation, or even where state activity is minimal, the sector is nonetheless governed, and that as a consequence technological innovation already is proceeding in particular directions. A key policy challenge is whether the variety of factors affecting selection environments and adaptive capacity can be influenced by the state and its policy networks in ways that help steer technological innovation in particular directions. 6.54 Given the challenge of accomplishing this, it might be useful to work through an example of how public policy might influence selection environments and adaptive capacity in seeking to promote particular innovations within a particular technological sector.

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Promoting nano-structured photovoltaic technologies within the energy sector 6.55 Nanostructured photovoltaic devices, such as those using quantum dots, have the potential to increase the efficiency of photovoltaic technologies by allowing light to be collected from a broader range of wavelengths than is the case for conventional cells. Other kinds of nanostructured photovoltaic devices could also substantially reduce manufacturing costs. Thus far, however, the fundamental science of nanotechnology-enabled photovoltaics remains unproven. Research into commercial photovoltaic technology has not been undertaken to any great extent by the photovoltaics industry, and the capital investment required by the photovoltaics industry is prohibitively high given the commercial uncertainties involved. Instead, nanotechnology-enabled photovoltaics are instead being developed by specialist nanotechnology firms and universities (Oakdene and Hollins, 2007). 6.56 In order to strengthen the adaptive capacity of firms within and outside the energy sector interested in nanostructured photovoltaic devices, the activities listed below could be considered. Referring back to Figure 3.1, note that these span both the left hand side of the nanomaterials innovation system, corresponding more closely to what are usually seen as more traditional technology promotion activities, and the right hand side of the innovation system, where links between suppliers and firms within a technological sector, as well as policies for that sector, are emphasised:

• Targeted research support for universities and other research institutions to stimulate fundamental understanding underlying nano-structured photovoltaic technologies

• Conduct of extended foresight exercises on the topic of renewable energy provision/photovoltaics to influence the direction of search processes among potential users and suppliers of nano-structured photovoltaic technologies.

• Underwriting of some commercial risks, or grants, to the photovoltaic industry to invest in the production capacity required to produce nanomaterials photovoltaics, thus ensuring that capital, competencies and other inputs can be brought together

• Favourable regulatory environments to encourage investors/large firms to move into the relatively niche activity of photovoltaic technology. This can have the effect of improving the attractiveness of the area among financiers, and creating interest from other firms.

• Public procurement of nanomaterials based photovoltaic systems (e.g. street lighting or in government and local authority buildings) to encourage the formation of markets. Photovoltaic technology has developed through a series of niche markets, such as satellites, remote power supply, calculators, and, more recently, household systems, and the creation of these niche markets can allow the learning and product development necessary to enter sucessfully into broader-based markets

• Regulations, such as a requirement for the incorporation of nano-enabled photovoltaics into certain kinds of future housing stock, could also help create markets for the technology. Initially this would be small scale, and would expand as the technology becomes more commercially viable.

• Fiscal policies can also have the same market creating effect. These might for example, be designed just to provide the same incentives to individual households wishing to invest in a photovoltaic system as currently exist for large scale energy generators (namely the ability to reclaim VAT on the purchase price),

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or they might even tilt in favour of households wishing to install photovoltaic-based distributed renewable energy generation systems.

6.57 In terms of influencing or modifying the selection environment of the energy sector in favour of photovoltaic solutions, the following activities located within the technological sector could be considered:

• Requirements to install micro-renewables in new buildings. • Incentives to support a balanced portfolio of energy technologies and systems,

and the spur to innovation felt through competition from different electricity technological regimes: coal; gas; oil; nuclear; and renewables

• Policies to promote the internalisation of carbon emissions in the strategic decisions of business, such as through emissions quotas, carbon prices, but also corporate reputation measures like public reporting.

Linking first-order regulation with second-order governance strategies 6.61 Many of the policy activities listed above are not particular to nanomaterials. Rather, the goal is to articulate policies that encourage the development of technologies in particular directions, in this case sustainability, rather than introduce burdensome regulations that might damage an emerging industry. One particular way that general sustainability goals can be addressed through specific nanomaterials governance is through use of frameworks such as Constructive Technology Assessment (CTA). 6.62 CTA aims to transcend the institutional separation between the promotion and control of technology. A key theme within CTA is that the anticipation of future effects should be integrated into the promotional aspects of technology development. It aims to open up the social and institutional networks typically associated with innovation and technology development. Proponents argue that the design of technological development should be a broader, interactive process including a variety of societal actors in addition to technical experts. The effect of broadening the design process is that the designers’, users’, citizens’ and policy makers’ ideas and values are articulated quite early, and can make valuable contributions to the design process, even opening up new areas of innovation. 6.63 One way in which CTA-like ambitions could be realised is through a proposal for a pilot Nanomaterials Commission operating within a wider overarching Innovation Strategy Forum.29 The Innovation Strategy Forum would be responsible for catalysing an explicitly integrated, pro-active and accountable system of innovation governance. Its remit would be to monitor and press for implementation of that system within the relevant parts of the UK innovation system and address some of the considerable uncertainties highlighted in this report. 6.64 The purpose of an institution like a pilot Nanomaterials Commission would be to outline and co-ordinate first-order regulatory policies and second-order governance strategies for nanomaterials. It could thus oversee strategy and development in relation to:

• public research funding - from funding of the research base, to funding of research and demonstration projects linking the research base with

29 The proposal for a pilot Innovation Strategy Forum, and New Materials Commission was put forward by Andy Stirling in response to questions from the RCEP in connection with the nanomaterials study.

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suppliers/manufacturers of nanomaterials and suppliers/manufacturers of nanomaterials with users in particular technological sectors.

• incentives - the creation of incentives for industry to develop and apply nanomaterials and nanomaterials applications

• alignment - the alignment of specific nanomaterials innovation policies with broader sustainability policy at the UK and supranational levels.

• appraisal - regulatory appraisal and decision-making • uncertainty - the provision of scientific and technical advice under conditions of

uncertainty • public engagement - broader public engagement in regulation and innovation

governance 6.65 This sort of institutional set up, or something similar, would be very different from an older ‘command and control’ policy model as its focus would be on creating conditions for commercially successful firms to emerge in markets that are environmentally sustainable. It would provide a means of integrating commercial regulatory policy with environmental policy, thereby addressing the concerns that were expressed to us about the current focus of UK policy only on the negative aspects of nanomaterials. It would also help reduce regulatory uncertainties and in doing so, potentially help induce further investment by reducing investment risks. Finally, by exploiting downstream policy tools it might help address the considerable policy difficulties of governing multiple global technology systems within a national regulatory system.

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Acronyms BERR Department for Business, Enterprise and Regulatory Reform CNT Carbon Nanotubes CST Council on Science and Technology CTA Constructive Technology Assessment DEFRA Department of Environment, Food and Rural Affairs EC European Commission ENTA European Nanotechnology Trade Alliance FP7 Framework Programme 7 (EC) HSE Health and Safety Executive IP Intellectual Property KTN Knowledge Transfer Network NIA Nanotechnologies Industry Association NNI National Nanotechnology Initiative (US) NONS Notification of New Substances REACH Registration, Evaluation, Authorisation and Restriction of Chemical

substances (EC) RS Royal Society RAE Royal Academy of Engineering SCCNFP Scientific Committee on Cosmetic and Non-Food Products TiO2 Titanium dioxide