Squo tech innovation solves.

While the study of technological innovation historically has been motivated by a focus on economic development and competitiveness in a market economy, the links between innovation and the attainment of environmental quality goals has become a subject of growing interest. This paper has discussed the critical role of technology innovation in addressing the problem of global climate change—arguably the most pressing environmental challenge we presently face.

As elaborated in this paper, technological change on a massive scale will be needed over the coming decades to achieve the international goal of stabilizing atmospheric levels of greenhouse gases (GHGs) at levels that avoid dangerous impacts. This will require replacing current GHG-intensive technologies—especially energy technologies based on fossil fuels (oil, gas and coal)—with newer technologies that emit fewer or no greenhouse gases. In many cases this will require advanced technologies that have not yet been developed or adopted on a significant commercial scale, or which have not yet been invented.

Studies of technological change show that it is a complex process involving interactions among all stages of the process (invention, innovation, adoption, and diffusion of new technology into the marketplace). In general, gains from new technologies are realized only with their widespread adoption, a process that usually takes considerable time.

Government policies influence outcomes at each stage of this process. The stage of technological innovation—which leads to the development of new processes and technologies—is especially uncertain because development pathways and the likelihood of success cannot be predicted with confidence. Nor does the development of a new technology guarantee its commercial viability.

The role of government policies is especially critical in fostering innovations that address the problem of climate change. In the absence of government mandates or incentives to mitigate the problem, there are few if any markets for new technologies whose sole purpose is to reduce emissions to the environment (air, water or land). Thus, to achieve the large reductions in greenhouse gas emissions needed to reduce the risks of climate change, a broad portfolio of policies is required—not only to foster technological innovation, but also the subsequent adoption of new technologies by a large range of actors including individuals, governments, and firms of all size.

The policy portfolio to foster innovation should include a combination of “sticks” in the form of regulatory policies that directly or indirectly set limits on GHG emissions (such as through market-based mechanisms, technology performance standards, or a combination of measures), together with “carrots” in the form of technology policies that provide voluntary incentives to encourage technology innovation and deployment (such as through support for R&D, tax credits, loan guarantees, government procurement programs and other measures). To realize the full benefits of technological innovation, the policy portfolio also should support diffusion of knowledge, such as through financial support for education and training, along with other measures.

Although R&D alone is not sufficient to achieve widespread technological change, it is nonetheless a critical element of the policy portfolio needed to foster innovations that reduce GHG emissions. As discussed in this paper, substantial increases in government support for energy-related R&D are required to address the challenges of climate change. Large increases are also needed in private-sector support for R&D, especially in energy-related industries. Government policies again play a vital role by establishing the requirements and market signals needed by the private sector to justify R&D investments.

Finally, reducing GHG emissions through innovations in technology and institutions will require increased numbers of skilled workers, especially engineers and scientists across a wide variety of disciplines, including the social sciences. At the end of the day, it is people who innovate. Both government and the private sector have critical roles to play in attracting and retaining the best and brightest people worldwide to address the challenges and invent the opportunities for mitigating global climate change.