EIO Country profiles 2010

April 2011

Eco-innovation in

Germany

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Eco-Innovation Observatory

The Eco-Innovation Observatory functions as a platform for the structured collection and

analysis of an extensive range of eco-innovation information, gathered from across the European

Union and key economic regions around the globe, providing a much-needed integrated

information source on eco-innovation for companies and innovation service providers, as well as

providing a solid decision-making basis for policy development.

The Observatory approaches eco-innovation as a persuasive phenomenon present in all

economic sectors and therefore relevant for all types of innovation, defining eco-innovation as:

“Eco-innovation is any innovation that reduces the use of natural resources and decreases the

release of harmful substances across the whole life-cycle”.

To find out more, visit www.eco-innovation.eu

Any views or opinions expressed in this report are solely those of the authors and do not necessarily reflect

the position of the European Commission.

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Eco-Innovation Observatory

EIO country brief 2010: Germany

Author: Bettina Bahn-Walkowiak

Coordinator of the work package: Technopolis Group Belgium

Part 1. Introduction: innovation and environment in Germany Germany has a population of more than 82 million inhabitants and belongs to the most densely

populated countries of the world (230 inhabitants per sq km). Almost 74% of the Germans live in

urban agglomerations (World data Bank). The country is relatively poor in natural resources: apart

from lignite (brown coal), there is potash salt, a few industrial minerals and construction minerals

(sand, gravel, and crushed natural stone), whereas oil, natural gas and other resources are mainly

being imported from other countries: Germany relies to more than 60% upon energy imports; all

metals are imported. The major environmental issues related to resource use are the increasing

dependency on imported raw material, waste management and the land use at a steady high level by

settlement and traffic areas and increasing traffic. Environmental issues not directly linked to resource

issues are nuclear issues, climate change, flooding, the decreasing biodiversity, and the share of

nitrogen in water and soil, to name but a few.

Germany‟s major economic sectors in terms of their contribution to GDP are services (69.0%)

including the information & communication sector and the waste management industry and the

manufacturing industry (30.1%), in particular iron, steel, coal, cement, chemicals, machinery, vehicles,

machine tools, electronics, food and beverages, shipbuilding, textiles. Agriculture and forestry only

amount to 0.9% (Statistisches Bundesamt 2008). In comparison, Germany holds a strong industrial

base, many services are related to industrial activities.

The materials-based industries in Germany, such as the automotive industry, mechanical

engineering, the chemical industry, energy technology, electrical engineering industry, electronics

industry and the metal production and processing are the “backbone” of the economy. They generate

annual turnover of nearly €1 trillion and employ approximately five million workers (of a total of about

40 million labour force; i.e. 38.7 million persons in employment, 3.2 million unemployed) (Federal

Statistics Office, 2009). The German economy is strongly export oriented and therefore highly

dependent on exports. In 2009, Germany exported commodities to the value of €808.2 billion and

imported goods worth €674.0 billion. The foreign trade balance usually reaches a trade surplus; in

2009 it was €134.2 billion. The export of goods covers, inter alia, machinery (15%) and vehicles and

automotive parts (15%). The import of goods covers data processing equipment and electrical and

optical products (10%), vehicles and automotive parts (9%) and crude oil and natural gas (8%).

The country is strong in the production of environmental goods (technologies, machinery and

equipment). With a global market share of 16.1% it was the largest exporter of environmental

technologies in 2006. Measured against its competitors U.S. (14.9%), Japan (9.2%), Italy (6.1%),

United Kingdom (5.1%) and France (4.6%) the German environmental protection industry has a very

high level of competitiveness. In 2008, the share of environmental protection goods of the German

industrial goods exports was nearly 7%. Since the contribution of environmental technologies within

the German export has always been exceptionally high, the environmental technology industry kept

this position at a steady high level (BMU/UBA 2009, Reid and Miedzinski, 2008, 27). However a

recent innovation survey reveals that strong competitors such as China and the USA are likely to

catch up and improve their market position (DIW et al. 2009, 218); thus, Germany will have an

incentive to further improve on its environmental industries.

Research and development spending makes up some 2.5% of gross domestic product (GDP).

About two-thirds of R&D expenditure is financed by industry. In 2008, the overall innovation

expenditures of the German economy achieved €128.1 billion, the highest record since beginning of

the survey in 1992. Nearly one in four applications to the European Patent Office, and almost a fifth of

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the world selling technologies in this industry comes from Germany. In 2007, the European Patent

Office granted about 23% of all new in environmental technology patents to German firms, followed

by companies from the United States (22%) and Japan (19%) (Presse- und Informationsamt der

Bundesregierung 2010).

The level of innovativeness varies considerably between sectors. The chemical and pharmaceutical

industry was the industry with the highest share of innovators in 2008 (83%), followed by electrical

engineering (79%), IT / telecommunications (78%), transport equipment (75%) and machinery and

equipment (68%) (ZEW 2010). Innovations are most important in these sectors to stay competitive. It

is the supply industries (energy, mining, water, waste disposal, and recycling) that currently show

rather low innovation rates (between 34 and 37%) as well as other services such as wholesale,

transport services and business services (between 31 and 36%) (ZEW 2010).

Part 2. Eco-innovation performance

The analysis in this section is largely based on the EU 27 Eco-innovation scoreboard (Eco-IS). Eco-

IS via its composite Eco-innovation index demonstrates the eco-innovation performance of EU27

countries compared with the EU average and with the EU top performers. Eco-IS is based on 13

indicators, which are aggregated into five components: eco-innovation inputs, eco-innovation activities

and eco-innovation outputs as well as environmental outcomes and socio-economic outcomes.

Figure 2.1 EU27 Eco-innovation scoreboard, composite index

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Germany scores third with its eco-innovation performance in comparison with the EU27 Member

States (see figure 2.1). The country performs especially well in relation to eco-innovation activities and

eco-innovation outputs, above average in socio-economic outcomes and environmental outcomes

(see figure 2.2). The following sections provide an overview of performance in individual components.

Figure 2.1 Eco-innovation composite index components, Germany

Eco-innovation inputs

As regards the eco-innovation inputs, measured based on R&D human resources, R&D expenditures

in energy and environmental areas and cleantech venture capital investment, Germany shows above

EU27 average performance, but featured sevenths best performance in overall ranking. The

composite eco-innovation input index for Germany values at 115 with the EU average being 100.

This measurement is based on rather generic measurements. The Government‟s environmental and

energy R&D appropriations and outlays in Germany were 0.5% of the GDP in 2008 (without changes

since 2004), being above the EU average of 0.4%. The number of graduates from the tertiary

education (such as university level, academic, vocational education, and university level studies

leading to doctoral qualifications) were about 400,000 in 2008. However, the total R&D personnel and

researchers were 1.73% of the total labour force in 2007 (R&D personnel index 120.8) whereas the

overall employment in knowledge-intensive service sectors was 35% of the total employment

(Eurostat).

During 2007-2009 the German cleantech projects attracted €724,12m. This is a largest cumulative

amount in the EU, but the per capita estimates for scoreboard (8.8 eur/cap) show that other countries

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have rather higher performance (e.g. 64.5 eur/cap in Ireland, and 40 eur/cap in Finland, etc.).

Nonetheless it is important to highlight the recent emergence of the venture capital practices in

Germany and their positive effect on the eco-innovative projects (Cleantech, 2010). German SMEs

(Mittelstand), have historically had little access to equity capital (in contrast to the Anglo-Saxon

finance style) and relied mostly on the bank finance. Relatively new cleantech venture capital firms,

such as Mountain Cleantech, Zouk Ventures, Munich Venture Partners and Pinvoa Capital are

currently focusing on the German market. Germany has become a cleantech powerhouse with more

than 300,000 people employed in cleantech industries and it is the top exporting country with a 16%

share in global cleantech trade (Cleantech, 2010). It is necessary to mention that the Cleantech

figures largely captures renewable energy technologies in which Germany is known to be a world

leader.

Eco-innovation activities

Eco-IS results demonstrate that Germany is excellently performing in its activities for eco-innovation

(the measurement is based on the activities of companies reducing material use though innovation,

and EMAS certification of organisations). In this indicators Germany is third in the rank after Spain

and Denmark, and it indicator‟s value is almost two times higher than the EU average.

According to the community innovation survey (2008), during 2006-2008 38% of the innovative

enterprises interviewed indicated to have implemented material reduction measures, 39% have

implemented CO2 reduction measures, and even 46% energy reducing measures (CIS 2008); this is

an improvement compared to earlier years. However, the impacts of the financial crisis have not yet

shown up in this survey. The share of innovative companies with measures leading to an increased

recycling of waste, water or materials were 41% in 2008, the leading sectors by nature „waste

collection, treatment and disposal activities, materials recovery‟, „remediation activities and other

waste management services‟, „sewerage‟ but also „services to buildings and landscape activities‟ and

„printing and reproduction of recorded media‟ (Eurostat). Furthermore, according to the Mountain

Cleantech analyst there are about 2,000 cleantech companies in Germany, which have between €10

million and €50 million revenues (Cleantech, 2010), larger portion however are active in renewable

energy field.

With 1,464 EMAS-registered organisations Germany ranks highest in absolute terms in 2007. This

number corresponds to 17.8% of EMAS-registered organisations per million population. In this aspect,

the performance of Germany is 2.1 times higher than the EU average. This statistics helps to argue

that the German enterprises by acquiring environmental management certificates have higher

propensity to introduce eco-innovative activities, processes, services and products. At the same, time

per capita number of organisations holding ISO14001 certificate in 2008 is around half of what is the

EU average (142). This might be explained by the growing popularity of the EMAS certification over

ISO14001 in Germany.

Eco-innovation output

As regards the eco-innovation output, measured through patent filing performance, Germany also

shows a high ranking (OECD patent data, 2010). 447 patents in energy efficiency and pollution

management, defined as eco-patents were filed in 2007. This corresponds to around 5,400 patents

per million inhabitants and Germany ranks fourth after Austria, the Netherlands and Denmark. Overall,

this performance is 2.5 times better than the EU average and declares Germany as one of the leaders

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in eco-innovative R&D. High eco-patenting outputs point at the fact that there are generally well

allocated expenditures related to eco-innovation R&D in Germany, however few precise empirical

data is available on these.

Furthermore, in terms of aggregate numbers of eco-patents (as well as in overall environmental and

renewable energy technologies) Germany has been a long-term leader not only in the EU, but also in

the worldwide context, followed by USA and Japan (OECD, 2010b).

Environmental outcomes

Concerning the environmental outcomes that reflect the overall performance Germany is performing

in the middle field. The material productivity of Germany has grown in the years 2000 to 2007 from a

rate of 1.27 to a rate of 1.8 whereas in 2000 it was about 1.3 €/kg material. Worth to mention, the

target of the national Sustainability Strategy of doubling „raw material productivity‟ as measured by the

German Federal Statistical Office by the year 2020 based on 1994 is likely not to be achieved.

In the period from 1995 to 2008, the energy productivity rose by about 53% from 4.53 to 6.92 €/tonne

of oil equivalents which is exactly average in the EU (EP index 100). The import dependency of

Germany as share of imports in energy supply is 61%, which is average compared to other European

countries.

The total greenhouse gas emissions (measured in tonnes of CO2 equivalents) continuously

decreased. In the period from 1990 to 2008 by approx. 22% to 958 million tonnes. This is slightly

below average in the year 2008.

The water footprint of Germany was 1,545 m³ per capita per year (2001) which puts the country into

the group of the most intensive water consumer nations in the world (Water Footprint Network, 2007).

In the EU perspective the Germany‟s water footprint ranked after the top consumers including Spain,

Portugal, Italy, Greece and France. At the same time, the Eco-IS data show that the water

productivity, or the value of gross domestic products produced using one cubic meter of water was

14.96 €/m3 in 2001 which is 20% above the EU average indicator. This demonstrates the relatively

high efficiency in water consumption in country‟s industry and services and implies that this are the

outcomes of using advanced innovative technologies and measures

Socio-economic outcomes

The turnover of the eco-industries was €66,114 million in 2004, which is a share of 2.79% of the total

GDP. 0.79% of the total workforce were employed in the eco-industries in 2008 (employment index

53). The exports of the eco-industry amounted to €4,779 million in 2004. It is only a 0.1% share of the

total amount of exported goods and services and Germany ranks six in EU in this indicator.

Part 3. Leading eco-innovation areas In 2007, the environmental technologies generated about 8% of the German GDP. The strength and

importance of environmental technologies is based on a traditionally strong investment goods

industry. More than half of the potential environmental goods are machinery and equipment, followed

by measurement and control systems and electrical engineering (Presse- und Informationsamt der

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Bundesregierung 2010). Energy efficiency, environment-friendly energy sources and energy storage,

resource and material efficiency, recycling, sustainable water management, and sustainable mobility

are the lead markets that characterise the environmental sector (Roland Berger, 2007). In terms of

volumes, energy efficiency and water management are the largest, accounting with €1,400 billion (in

2007) for almost two thirds of the world market (Presse- und Informationsamt der Bundesregierung

2010).

In some important market segments, German companies are already well positioned internationally.

This is a consequence of the the Recycling and Waste Management Act established in 1994, which

provides incentives for recycling and resource-efficient developments. The regulations for the take-

back system of packaging, batteries, end-of-life vehicles and wood in Germany were later established

at European level. According to information of Germany Environment Ministry, however, Germany has

a middle field position in the resource and material efficiency future markets, and it is less strong than

in other fields of innovation activities (BMU/UBA 2009).

In 2005, the world market share of technologies of Germany was 65% for automatic separation

processes, 40% for decentralised water treatment and rain water management, 30% for solar thermal

power plants and low-CO2 power plants (carbon capture and storage technologies), 5% for

bioplastics and biopolymers, 5% for membrane technology in water management (Roland Berger,

Wachstumsmärkte, 2007, 216). In particular, Germany is in a leading position in the following

technologies: decentralised water management (GEP, Huber AG), storage of compressed air (KBB,

EON), CO2-low power plants – CCS (RWE); solar thermal power plants (Schott, Solar Millenium),

Solar cooling (Conergy, Citrin Solar, EAW, Phönix), Energy storage by H2 (GeombH, Planet, EON),

synthetic biofuels (CHOREN, Lurgi), Automatic separation processes. These areas are all considered

growing markets (Roland Berger, 2007, 216).

An evaluation of the European environmental industry and the analysis of the selected technology

lines has shown that Europe is considered to have occupied a good to very good position in the global

market in all technologies with the exception of hybrid technology (Roland Berger, 2007). This

assessment also applies to Germany. It has an important position in Europe and is considered to

have occupied a good to very good position in the global market in all technologies with the exception

of hybrid technology (Roland Berger, 2007, 216).

Good practice examples _________________________________________________________________________________________________ Example 1: Service eco-innovation - Services to optimise production processes in terms of resource efficiency - production integrated environmental protection (e.g. PIUS-Check®)

Description:

The PIUS-Check is a process-oriented material flow analysis of the efficiency agency (EFA) North

Rhine-Westphalia for the determination and use of economic and ecological potential in production.

The EFA has a team of 10-20 engineers who conduct the initial audit in order to identify material and

resource efficiency potentials. External process experts are used to conduct the technical audits and

make suggestions for potential changes. The total costs of an audit are EUR 10-15,000. Up to two-

thirds of these costs can be covered by the national clean production programme Verbesserung der

Materialeffizienz (VerMat) organised by Demea (Deutsche Materialeffizienz Agentur) under the

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Federal Ministry of Economics and Technology. Since the PIUS-Check was initiated in year 2000,

more than 500 PIUS-Checks have been conducted. 216 of the companies involved have implemented

measures (which corresponds to more than 40%).

Determinants:

Barriers:

○ funding procedures are complex

○ total time spent on the PIUS-Check from the initial meetings to planning of potential measures

requires at least six to nine months

Drivers:

○ The EFA assists SMEs in applying for funding

○ The EFA presents the potential of the programme and further information in the Internet

○ The EFA approaches companies that may benefit from the PIUS-Check

Sustainability effects:

Services and technological approaches aim to optimise the different manufacturing processes (such

as forming, forming, cutting, drying, degreasing, bonding, joining, surface treatment, etc.). They

include the reduction of scrap, yield loss and waste, in-house recycling of raw materials, operating

and auxiliary materials, the substitution of polluting or harmful substances, minimising the need for

downstream environmental protection technologies that increase energy efficiency and the reduction

of expenses for transport and storage (logistics). At the same time, the measure contributes to the

dissemination of the material- and resource efficiency approaches and material flow analyses.

Promising topics for future services are resource cost accounting, operational LCA or zero-loss

methods enlarged by new components, e.g. software solutions for the chemical industry for the

prediction of processes and material properties. Services in combination with technological solutions

that are tailored to specific requirements in the target countries are considered to have great export

opportunities.

_________________________________________________________________________________________________

Example 2: Materials eco-innovation - Liquid wood - ARBOFORM ® by TECNARO

Description:

Lignin is solid substance in wood emerging as by-product in the

pulp and paper production. There are many sources of lignin.

The paper industry produces around 60 million tonnes a year. It

is usually burned or processed into animal feed and cement. In

combination with resins, flax or other natural fibres, lignin can

form a mass that can be processed like any other thermoplastic

material.

In 2009, TECNARO produced 275 tonnes of Arboform and a host

of other biodegradable and renewable polymers. The company has also succeeded in setting an

attractive price point. Regular plastics cost between €1 and €5 per kilogramme, while the price for

Arboform starts at €2.50 per kilogramme, a figure that is expected to drop as sales increase

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(European Patent Office, 2010, http://www.epo.org/topics/innovation-and-economy/european-

inventor/inventions/2010/bio-plastics_de.html).

Determinants:

Barriers:

● price: regular plastics cost between €1 and €5 per kilogramme, while the price for Arboform

starts at €2.50 per kilogramme

Drivers:

● increasing demand from automotive sector: applications with Porsche, Daimler and Fischer

● increasing demand for applications in in children's toys, furniture, castings for watches,

designer loudspeakers, degradable golf tees and even coffins

Sustainability effects:

The resulting bioplastic Arboform can be formed into different very precise shapes and is extremely

stable. Just like wood, it eventually decomposes in landfills, instead of lingering around for thousands

of years like "normal" plastic.

________________________________________________________________________________________________________

Example 3: Technological eco-innovation

Decentralised water management - eco-efficient recycling

of gray water (e.g. AquaCycle 2500, Pontos GmbH)

Description:

The shower and bath water is recycled in a patented bio-

mechanical process without chemical additives. The result is

hygienically clean process water. The gray water is purified in

a multistep process, and sterilised by ultraviolet irradiation - a

gentle, energy-saving manner. A fully automatised, closed

recycling system with a patented cleaning process that works with low maintenance and operating

costs and is weather-independent. The system AquaCycle 2500 can also be combined with a rain

water system.

Determinants:

Barriers:

In Germany, the water supply is so large that water is generally not regarded as being scarce

- there is no immediate pressure to act

There are no legislative incentives; on the contrary, it is practiced in many municipalities to

force the connection to and the use of the public water supply and management, so there is a

massive incentive not to invest in decentralised wastewater treatment (UBA/BMU 2008)

Drivers:

Climate change will lead to greater fluctuations in rainfall and the increase of heavy rainfalls

will lead to a reduction in the effectiveness of the central wastewater treatment

central water and wastewater infrastructures need more flexibility due to demographic and

migration changes

cost-effective synergies between wastewater treatment and heating is possible (UBA/BMU

2008)

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Sustainability effects:

Shower and bath water that is consumed in residential buildings, hotels, swimming pools, or fitness

centers can be recycled with a decentralised water management system so that it can be used for

toilet flushing, cleaning or for irrigation of green spaces. To save even more heat energy, the system

allows for recovering the residual heat of the gray water (such as from showering or bathing). By the

end of 2010, a newly developed optional heat exchanger module will be provided. The resulting heat

generated in the order of 10-15 kWh per cubic meter resulting gray water is supplied to the heat

storage of the hot water heating or heating.

Part 4. New trends: areas on the rise In 2006, Germany launched a comprehensive national strategy, known as the High-Tech Strategy

(HTS), aiming to put Germany at the forefront of innovation and new markets. The German Hightech

strategy declares the following technologies as future key technologies for Germany: biotechnology

and nanotechnology, micro- and nano-electronics, optical technologies, microsystems, materials and

production technology, the service research, space technology and information and communication

technology (Hightech Strategie, 2010, 9). Today, the German government is investing more than ever

in research and development. Targeted funding for the 17 selected cutting-edge fields has the aim of

giving new impetus to the transfer of ideas into practice. Every eighteen months, the Federal Ministry

of Education and Research (BMBF) selects one of the 17 cutting-edge research sectors as the core

campaign of the High-Tech Strategy‟s internationalisation initiative. From May 2008 until October

2009 it was the German Initiative for Partnership in Green Technologies.

The following topics are in the focus of the HTS: production technologies, environmental technologies

and nanotechnologies. Within the field environmental technologies there are water, renewable

energies, brownfield management, cleaner production and resource efficiency in the focus. Within the

topic resource efficiency there are three major research projects running: “High-Performance Building

Materials made from Renewable Resources”, “Innovative lightweight components and Saving Raw

Materials” and “Reducing Pollution in the Production of Steel”.

The Masterplan Umwelttechnologien (masterplan environmental technologies) of 2008 mainly

refers to two lead markets, one for technologies to increase the resource productivity and one for the

circular economy (BMU 2008). According to the Federal Ministry of the Environment (2010) the

highlights of the research support programmes all address renewable energies, such as

photovoltaic, low-temperature solar thermal, solarthermal plants, wind energy (more than 21,164 wind

turbines, world top position), geothermal energy, (currently 15 geothermal projects running) and the

optimisation of the energy supply system (BMU 2010).

A survey of the Forschungszentrum Karlsuhe (on behalf of the German Environment Ministry) among

440 experts from different backgrounds shows that solutions for the resource issue rank second after

the climate protection issue (Forschungszentrum Karlsruhe 2009). Given the increasing scarcity and

insecurities of supply of primary raw materials, the improvement of separation processes, optimisation

of material features of secondary raw materials recovered from waste, the preparation for higher-

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value uses and product design for recycling are especially considered as important fields for future

technological development (Roadmap Umwelttechnologien 2020).

______________________________________________________________________________________________ Example 1: Materials eco-innovation - High-Performance Building Materials made from

Renewable Resources (laboratory stage)

Description:

Researchers of the Dresden University of Technology, in cooperation

with HESS Wohnwerk. The Institute for Applied Science in Civil

Engineering (IaFB) and the GWT Dresden, set out to investigate,

develop and construct high-performance composite wood structures

(HHT). Such materials could become a sustainable alternative to

similar steel and reinforced concrete-based products, which are

currently predominant.

Sustainability effects:

Wood combined with plastics and textiles - The idea is to improve

the performance of wood constructions by combining compressed wood with fiber-reinforced plastics

and technical textiles. This improves the wood structures in terms of stiffness, strength, ductility and

durability. The researchers hope to introduce these composite wood structures in real-world

applications and pave the way for a new image of wood in the construction industry.

______________________________________________________________________________________________ Example 2: Product eco-innovation - Functional integration: the resource-efficient building

envelope

Office building, Erfurt, Refurbishment

(Photo: gap-solar GmbH)

Description:

The building envelope, i.e. facade and roof, is of particular

importance: It serves as interface between the internal and

external environment and thus has major impact on

material and thermal flows. Current research aims at

integrating various functions constructionally and

architecturally into the building envelope without using

more material due to increasing thickness. Both the energetic and material optimisation of the building

envelope as a functional and creative element is an ambitious aim.

Determinants:

Barriers:

high investments for building owners required

skills and know-how in the executing trade is not widespread yet

split incentives (user-investor dilemma)

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Drivers:

mandatory Energy performance certificate (EPC) for building owners

passive house will be standard for buildings in future according to the energy concept of the

Federal Government

Sustainability effects:

Buildings are resource-intensive. Up to 40% of the total final energy consumption are caused by the

operation of buildings in Germany. New technologies can help to realise energy savings of up to 80%.

The functional and aesthetic building integration will play a major role in the future.

Future building materials and facade systems could be multi-functional: innovative glazing and

thermal insulation systems protect from heat and cold, absorb sound, produce and save solar energy

and control supply of daylight and fresh air - all at the same time. New technologies like adaptive

facades, vacuum insulated panels (VIP), phase change materials (PCM) and building-integrated

photovoltaics (BIPV) save costs, preserve resources and open up innovative fields in architectural

design (Association for Transparent Insulation - FVTWD e.V.).

Part 5. Public policy in support of eco-innovation In the following section the key national strategies promoting eco-innovations and the most relevant national measures supporting eco-innovation are displayed. It may be noted that there is no uniform definition of eco-innovation in the various programmes and measures. In this respect, the literature is mixed and refers to the contexts that are described, frequently divided in different fields of innovation activities, such as energy efficiency, resource efficiency, sustainable mobility, etc. However, the EIO definition of eco-innovation is met in the measures mentioned below. (a) Key national strategies promoting eco-innovations, including ETAP roadmaps The German National Sustainable Development Strategy of 2002 frames the overarching vision of

sustainable development and sets up a wide range of indicators, quantitative targets and timetables. It

looks at innovation as a driving force for sustainability and sustainability as a driving force for

innovation. It also introduces the research and development programmes PROINNO

(http://www.forschungskoop.de/10_proinno/10_start.htm) , industrial joint research including ZUTECH

and InnoNet http://www.vdivde-it.de/innonet).

The indicators report from the German Federal Statistical Office complements the progress reports

from the Federal Government to the German sustainable development strategy (2005, 2008). First

published in 2006, it shows the changes in the environmental indicators every two years. The

National High-Tech Strategy was released in 2006 in order to support the developments of

innovative environmental technologies and products and to support the development of lead markets.

It was set up as an strategy on innovation policy to promote systematic research in various fields,

such as health, climate change, use of natural resources and energy, mobility, and cross-cutting

technologies like nano- and bio-technology (Loewe and Schepelmann, 2010). For the first time the

High-Tech Strategy introduced new instruments such as the so-called innovation alliances - strategic

long-term cooperation between industry and public research in key technology areas that require

strong funding.

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Table: Examples of innovation alliances

Innovation alliance Funding volume

EENOVA innovation alliance for automotive

electronics

100 million euro Federal Government, 500 million euro industrial funding

OLED initiative for energy-efficient lighting 100 million euro Federal Government, 500 million euro industrial funding

Organic Photovoltaics for the use of renewable energy

60 million euro Federal Government, 300 million euro million industrial funding

Lithium-ion Battery for the storage of energy 60 million euro Federal Government, 360 million euro industrial funding, 15 million euro from the Helmholtz Association

Molecular Imaging for medical engineering 150 million euro Federal Government, 750 million euro industrial funding

European Initiative 100 GET for network technologies

30 million euro Federal Government, 225 million euro industrial funding

Source: European Commission 2009; http://www.research-in-germany.de, 2010-11-09

Another instrument is the cluster competitions where clusters are constituted by companies,

scientific institutions and policy-makers. The Leading Edge Cluster Competition was launched by the

Federal Ministry of Education and Research (BMBF) in 2007, as part of the High-Tech Strategy. Eco-

innovation examples are the Solarvalley Mitteldeutschland which is one of Europe‟s leading centres of

photovoltaic research and development or the EffizienzCluster LogistikRuhr. The funding for the High-

Tech Strategy in the years 2006 to 2009 within the 17 High-tech sectors were in total 11,940 millions

of euros out of which 420 for environmental technologies and 420 for materials technologies.

The Integrated Energy and Climate Package (2007) sees eco-innovation as playing an important

role in the integrated energy and climate protection to achieve the goal of 40% CO2 reduction by

2020. 29 fields of specific policy measures are addressed, such as market incentive programmes on

renewable energy and energy efficiency in buildings, CCS technologies, the reform of the vehicle

taxes, energy research and innovation, etc. The package is complemented by the Climate Protection

Initiative, the National Energy Efficiency Plan (2008) and the Energy Policy Roadmap (2009). Last but

not least, the Masterplan on Environmental Technology (2008) was set up to bundle different

policy measures in the field of research and innovation policy and environmental policy, such as

ecodesign, technology procurement, and market diffusion programmes for eco-innovation (Loewe and

Schepelmann, 2010). The target technologies of the Masterplan are water technologies (e.g.,

Integrated Water Resources Management - IWRM, German Water Partnership - GWP, Water

Strategy Initiative Office - IBWS), resource efficiency technologies (see table below) and climate

protection technologies.

The German ETAP roadmap is a compilation of the main programmes and initiatives concerning

environmental technologies (see, for example, programmes above) and, as such, it does not

introduce any special or new programmes as regards eco-innovation (BMBF, Roadmap, 3).

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(b) Most relevant national measures supporting eco-innovations including regulatory and market

based instruments promoting eco-innovation and application

The institutional public support provided in Germany does not only finance individual research

projects, but also long term, all funded research institutions. There are three major associations, the

Helmholtz Association (16 research centres and an annual budget of around €3 billion), the Max-

Planck-Gesellschaft (80 research institutions and approx. €1.3 billion), Leibnitz-Gemeinschaft (86

institutions and ca. €1.3 billion) and the Fraunhofer Institutes (one of those called the Fraunhofer Institute

for Systems and Innovation Research ISI) which cover a large spectrum of basic and applied research.

This sort of public funding does not target specific technology tracks but it aims at capacity building in

the various research fields (FFU 2010). In addition, further public cross-institutional and cross-

research field are granted. As regards eco-innovation the Ministry of Environment does not have a

very strong role in the strategic programming of institutional research support (FFU 2010, 14);

however it supports large-scale projects on R&D, especially on climate and energy as a result of the

ETS revenues (see below) and it has supported collaborative research on material efficiency. The

German Federal Environmental Foundation – comparatively very strong – supports the

development and use of new environmentally friendly technologies and products especially at the

level of companies (SMEs) in order to push a preventive integrated environmental protection and

strengthen the environmental awareness of people through measures of environmental education

aiming at behavioural change, especially by taking into account small and medium enterprises. The

focus is the promotion of environmental pioneers with innovative ideas.

The Environmental Innovation Programme, first introduced in 1979 by the Federal Ministry of

Environment, calls for innovative plants, process technologies and products which significantly reduce

environmental pollution such as emissions, wastes, waste water and noise and contribute to the

advancement of technologies and technical environmental specifications. Projects like those are

eligible for funding when the innovation is also transferable to comparable companies in order to have

a multiplier effect. The programme mainly supports small and medium enterprises. Over 700 pilot

projects have been carried out. The Programme now has been upscaled due to revenues from the

Emissions Trading System.

The Central Innovation Program (ZIM) of the Federal Ministry of Economics and Technology has

supported SMEs in their innovation activities. Since 2008, over 9,500 innovative projects have been

supported with some 1.2 billion Euro funding. Another programme, Research for Sustainable

Development - International partnerships for sustainable climate protection and environmental

technologies and services (CLIENT) supports international collaborative projects to develop and

implement specific applications of appropriate environmental technologies, including prototypes or

pilots to partner countries. Main focus is on technologies and service innovations for sustainable

development in the areas of climate, resource use, land and water management. Co-operations with

partners in Brazil, Russia, India, China, South-Africa and Vietnam are favoured.

More specific in terms of resource efficiency programmes, the German Material Efficiency Agency

was established in 2007 (see best practice example). The German material efficiency prize is

annually awarded by the Federal Ministry of Economics and Technology (BMWi) for best practice

solutions to increase the material efficiency, and finally the German material efficiency program of

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the the Federal Government provides market incentives by financial support for manufacturing firms to

increase their material efficiency.

Box: Organisational eco-innovation - Demea - German Material Efficiency Agency

Description:

Increased material efficiency shall be achieved by reducing the use of materials, such as reduced

output, waste, additives or by optimising the product design. The German Material Efficiency Agency -

demea - was created at the initiative of the Federal Ministry of Economics and Technology.

Two federal programmes are managed by the demea:

VerMAT is a programme for advising small and medium-sized companies to improve their

material efficiency. The consultancy in the programme VerMat (potential analysis and in-

depth and implementation consulting services) will only be carried out by consultants who are

registered by the demea or authorized. This is to ensure that the consultants have the

necessary skills and successfully support the enterprises. A total of 242 demea consultants

were accredited by 2007. Some 681 analyses have been supported since 2006.

NeMat is the programme for the formation of networks to improve the material efficiency, be it

at regional level, based on industry or along the value chain.

The consultancy in the programme VerMat (potential analysis and in-depth and implementation

consulting services) will only be carried out by consultants who are registered by the demea or

authorised. This is to ensure that the consultants have the necessary skills and successfully support

the enterprises.

Determinants:

Barriers:

material efficiency still a side issue in public compared to personnel costs discussions

upgrading of production processes is time-consuming and needs long-term planning

qualifications as regards innovation and eco-innovation trends (risk of sunk investments)

Drivers:

public awareness about the importance of materials efficiency by providing information on the

issue will increase

companies that have been encouraged to develop material efficiency potentials can act as

multipliers

providing support in the detection and exploitation of efficiency potentials by offering a pool of

material efficiency consultants and assistance with the development programmes VerMat and

NeMat will initiate follow-up activities

Sustainability effects:

VerMat: 681 completed analysis of potentials

NeMat: 21 networks were operating by end of Sept 2007

The average savings is calculated at € 200,000 per company per year. This means that companies

can save costs of an average of 2.4% of their turnover. With other words: companies can increase

their return on sales by 2.4%.

17

After the completion of consulting projects the demea inquires the resonance and satisfaction of

entrepreneurs through a questionnaire and presents it in the form of a quality barometer. It shows that

the majority of the interviewees are content or highly content with the organisation of the projects, the

accompanying communication, the gains in competence, and the overall success of the project.

r² - Innovative technologies for resource efficiency - resource efficient production processes

(Innovative Technologien für Ressourceneffizienz - rohstoffintensive Produktionsprozesse) is a

support programme that was first announced in 2008 focusing on resource intensive sectors with a

high input of primary materials such as minerals and metals or the production of chemicals. The

funding programme supports science and industry to jointly develop and test innovative technologies

and practices. The optimisation along the whole process chain is regarded as a future solution.

Currently 17 collaborative projects between industry and science are being funded with around 30

million euros. In addition to the projects for technology development a transfer and integration project

to support the networking and implementation research was started, led by the Fraunhofer Institute for

Systems and Innovation Research ISI. The Federal Ministry for Education and Research has an

additional support strategy for SMEs (KMU-innovativ - Ressourcen- und Energieeffizienz). As part

of the SME innovative programme research projects in the technology fields that have special priority

for Germany biotechnology, nanotechnology, information and communication technology, production

technology, technologies for resource and energy efficiency, and optical technologies are funded.

The project WING (Materials innovation for industry and society) of the Federal Ministry of

Education and Research aims to strengthen technologies for sustainable development. The ten fields

of the program address the important materials-based sectors of German industry (i.e. automotive,

mechanical engineering, energy technology, chemical products, plastics and rubber products, metal

production and processing, electrical, electronic products, aerospace, life sciences / medical

technology). A great leverage effect within the material relevant industry sectors is intended. In 2008,

the program WING encouraged 222 collaborative projects (consisting of 971 individual permits) with a

total grant of € 428 million.

Another focus is the cooperation with emerging economies: Inter alia, research and development

agreements in the areas of sustainable resource use and climate change are being promoted under

the funding measure CLIENT.

Table: Funding priorities of applied research in the field of resource efficiency (2008)

Funding priority Funding in million Euro

Measures for resource efficiency

Resource efficiency in production (2008) 50

Innovative technologies for resource efficiency - resource-intensive production processes (2007)

30

SME-innovative resource and energy efficiency (2007) 75

18

ERA-Net SUSPRISE „Sustainable Enterprise“ (2007) 1.5

Function integrating light construction (2006) 25

Materials for products and processes with high resource efficiency (2005) 25

Measures with substantial contributions to resource efficiency

High performance materials (2007) 25

NanoTextiles (2007) 20

Nanotechnology in construction – NanoTecture (2007) 20

BIONA – Bionic innovations for sustainable products and technologies (2006) 20

Bioindustry 2021 (2006) 60

Sustainable bio production (2000-2004) 30

Sustainable Forestry (2004) 25

Innovation as key to sustainability in business (2004) 100

TOTAL 506.5

Source: BMBF, Masterplan Umwelttechnologien, 2008, 38

Part 6. Main barriers and drivers of eco-innovation The most important driver for the development of renewable energies in the electricity sector was the

Renewable Energies Act (EEG) of 2000. Here, Germany registered an unequalled national growth of

the renewables energies share and an amazing international diffusion of the instrument. Although

there is no comparable regulation concerning resource or material efficiency today, the success of the

energy efficiency issue and the implementation of the raw materials productivity target of the

National Sustainability Strategy (2002/2004) could be regarded as the starting signal for the following

activities of different actors around the issue.

Germany is an export-oriented and resource-poor country at the same time. Due to increasing or at

least permanently fluctuating commodity prices, the material-intensive industries have an incentive to

be innovative and eco-innovative in order to stay competitive and cost-efficient. Enterprises aim to

secure existing markets and increase their market share, they try to capture new markets and improve

their image. Hence, the strong position of Germany in the field of environmental technologies is a

result of how the key players have assessed the future development and their business prospects as

promising in the past.

Against this background, the institutional foundation of the demea (German Material Efficiency

Agency) in 2006 has served as a starting point and a driving force for the resource efficiency issue

becoming important in many R&D and the SME support programmes. Yet, this is a relatively weak

19

capacity compared to e.g. the German Energy Agency. Two market and innovation analyses of

2007 (Roland Berger consultants commissioned by the Federal Environment Agency) confirmed the

assessment that future growth markets are green. Further start-ups such as the VDI

Technologiezentrum on resource efficiency of the Association of German Engineers and the

establishment of the German Resources Agency in 2010 expand the infrastructure to explore the

knowledge base more systematically and move it closer to markets. It is however not yet clear

whether e.g. data on urban mining, hidden flows, and ecological rucksacks from imports will be

gathered systematically.

The main barriers in the eco-innovation context are the awareness gaps and information deficits

at all action levels, e.g. political actors, subsidy institutions, economic actors, such as manufacturers,

enterprises using intermediate products, industrial associations, etc. Eco-innovation and resource

efficiency requires a medium to long-term orientation frequently conflicting the legislative periods.

Changing coalition governments slow down the process because time and again questions of

legitimacy are raised whether policy should intervene in the market for environmental purposes. The

consensus on the question if environmental innovation needs support – however strong it is

compared to other EU member states – is not yet fully established. A strategic approach with long-

term targets, comprehensive incentives and roadmaps is by and large missing.

The information deficit argument is also true for the demand side. Despite many eco labels there is

widespread market opacity for consumers, especially regarding upstream foreign suppliers and the

corresponding environmental and social standards. The range of products is large, the competition is

severe and many prices are low, i.e. they do not internalise external costs. Relatively established

instruments like the fuel tax are constantly questioned at all actor levels. In addition, the green public

procurement in Germany is extremely weak, it ranks last compared to the other European countries.

Given a relative market power of public procurement, the low rates of the green public procurement in

2008 (1.19% of GDP and only 7.1% of total public procurement) and the years before do not support

the overall eco-innovation performance.

It can be concluded that a despite moderate outcomes, informational and demand-side barriers,

Germany can be counted among the eco-innovation leaders with a good performance above the

EU27 average. The economic capital and technical and technological capital is high, whereas the

nature capital is low. While the regulatory and policy framework (legal system, standards and norms,

IPR law, fiscal policies, public procurement, etc.) and infrastructures can be assessed as medium to

high, the lack of enduring policy integration hampers the pace of progress. Moreover, a long-term

strategy with binding targets, incentives and roadmaps that mobilise actors along key areas will have

to move upwards on the agenda for eco-innovation. While the position on climate and energy related

eco-innovation seems far advanced, the new agenda of resource efficiency will deserve more

attention, and more will probably need to be done to maintain the success on international markets.

20

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