Perfecting innovation policy

The example of the Netherlands

René Kemp

Presentation at opening of CIRUSApril 18, 2007

UNU-MERIT, ICIS, DRIFT

Innovation is many things

Innovation is created in distributed systems of knowledge and its

success depends on economic frame conditions and many other factors

not under the control of the innovator

Rationale for innovation policy: market failure

private markets provide too little incentive for innovation because of knowledge spillovers (danger of imitation) This is the traditional economic argument which is used by policy makersIt is not wrong but as a guide to policy it is poor

System failure as a rationale for innovation policy

Infrastructure problems regarding the physical infrastructure (transport, etc), the scientific infrastructure (high-quality universities and research labs, technical institutes, etc) and the network infrastructure (IT, telecom).Transition problems: difficulties that arise when firms and other actors encounter technological problems or face changes in the prevailing technological paradigms that exceed their current capabilities.Lock-in problems derived from the socio-technological inertiaHard and soft institutional problems linked to formal rules (regulations, laws) as well as more informal and tacit ones (social and political culture for instance).

Source: Smith (2000)

System failures refer to inappropriate infrastructure of knowledge, poor capabilities to adapt, institutional barriers and lock-in

Here it is not so much the divergence between private benefits and social benefits but the (national) innovation system itself that is a hindering factor

The innovation system comprises many things: the infrastructure of knowledge and access thereto, the knowledge transfers taking place, the platforms and networks for interaction, and the regulations and customs that inhibit (environmental) innovation

Source: OECD (1998)

Because of the many factors keeping back innovation

Countries have multiple policies for innovation:

- Support of R&D

- Knowledge transfer

- Investment support

- Green taxes

- Science and technology programmes

- Skills and educational policies

- Competition policy

- Regulations for the uptake of clean technologies

Government policy for sustainable innovation in the Netherlands

Energypolicy

Environment policy

Innovation policy

1980 1990 20001970 2006

WVO Wet Milieubeheer

MVT

StiMT ProMT

PBTS Env Tech

WBSO InStir

M&T

BTS TSISEET

Science policy IOP

STW

Twinning

BioPartnerDreamstart

Techno-Partner

LTI-programme

Transition policy

BSE EOSVarious specificEnergy programmes

Integrated Innovation

Policy

Knowledge in Action

Economy and environment

Environmental technology policy note

NOH/EWAB

Innovation policy note

Green Investment Funds

VAMIL

EIA/MIA

DTO

Courtesy of Geert van der Veen

There has been a shift towards more integrated approaches

Which combine push and pullhaving a long-term focusInvolving platforms of interactionBringing together different knowledge holdersWith government as a facilitator (asking the platforms to define programmes and offer suggestions to policy)

Integrated approaches

Energypolicy

Environment policy

Innovation policy

1980 1990 20001970 2006

WVO Wet Milieubeheer

MVT

StiMT ProMT

PBTS Env Tech

WBSO InStir

M&T

BTS TSISEET

Science policy IOP

STW

Twinning

BioPartnerDreamstart

Techno-Partner

LTI-programme

Transition policy

BSE EOSVarious specificEnergy programmes

Integrated InnovationPolicy

Knowledge in Action

Economy and environment

Environmental technology policy note

NOH/EWAB

Innovation policy note

Green Investment Funds

VAMIL

EIA/MIA

DTO

Courtesy of Geert van der Veen

DTO-programme (Sustainable Technology Development) in the NL

Scope: 2040Factor 8-thinkingApproach towards either functions in society (living, food, transport) or sectors (chemical sector)BackcastingStake holder involvement in idea generationTechnological focus

Courtesy of Geert van der Veen

The Dutch transition approacha journey to the south

Transition management… is a deliberate effort to work towards a transition in a flexible,

stepwise manner, utilising dynamics and multiple visions

… involves a wide range of policies with their choice and timing gauged to the particular circumstances of a transition

Top-down elements26 Transition paths6 Platforms

new gassustainable mobilitygreen resourceschain efficiencySustainable electricitySustainable building

Interdepartmental programme directorate energy transition (IPE) and Taskforce

The journey to the south

Led by the Ministry of Economic AffairsGoal: to achieve a transition to a low-carbon economy in 40-50 years timeIn a bottom-up, top-down manner, using adaptive programmes (portfolio approach)With an important role for special platformsGovernment-business partnership

Bottom-up elements

Business alliancesExperiments by business with real usersIdentification of barriers and synergies informing private action and policy (using a desk for policy complaints)

Selected transition paths

Platform for “green resources”One of official 6 platforms5 transition paths for green resources Biomass production in NL Biomass import chains Coproduction of chemicals (C1-6),

transport fuels, electricity and heat SNG Green chemistry

60 million euro for biofuelsIn 2007 2% blending requirement for gasoline and diesel (fiscal support in 2006)Certification system for sustainable biofuelsGoal: substitution of 30% of fossil fuels by 2030

Why is NL interested in biomass?

Because NL is a gas country Because agriculture business

and the logistic sector (Rotterdam harbour) are interested in it

Because the chemical industry thinks it may obtain an competitive edge from knowledge-intensive, green materials

Because ECN is a world leader in biomass gassification

Instruments for use

Revolving fund of risk capital (from institutional investors)Support for transition coalitions and experiments (35 mln euro)Subsidies for energy transition technologies (added to lists of technologies eligible for fiscal support)Temporary support for eco-productsInnovation waivers: temporary relief from permitsEnergy service companies offering advice to companies and households

TM: not an instrument but a new framework for policy, in which

Research and innovation policies are oriented towards transition goals and transition pathsDifferent coalitions are formed of private-public actors and NGOsRegulatory relief is offeredSpecial desk is created for frontrunners (koplopersloket) to hear about problems and needsIn which Director-generals from 6 ministries meet to discuss energy transition issuesSpecial attention is given to outsiders offering innovative solutions (new business goal)

Role for science

InventionForesight analysis together with businessSustainability assessment of alternative systemsStudy of past transitionsEvaluate transition policies and transition experiments

Government-science interactions

Big research programme about system innovation and transitions with about 100 researchers (www.ksinetwork.org)Involvement of scientists in sustainable mobility programme where project managers to answer “transition questions”Discussions between policymakers and scientists

Transition management as Perspektivischer Inkrementalismus

Using multiple visions (because visions create better world together rather than apart)Reliance upon experimental learningAdaptive portfolios: each option has to prove its worthPolicy as a facilitator of change (with government as partner of business)

1) Because of the barriers to system innovation -- which have to with uncertainty, the need for change at various levels and vested interests

2) Because public policy is highly fragmented and oriented towards short term goals

3) Because of the need for societal support for transition policies and for legitimising policies towards structural change

4) Because a gradual approach of small steps is economically not disruptive and politically and socially do-able

Why we need transition management

Transition management

Something for Switzerland?