Addressing Climate Neutrality Through Green Innovation: Insights from the 2023 d\carb Event
by Nils Handler (DIW Berlin)

The road to climate neutrality by 2050 is a formidable one, demanding not just the accelerated diffusion of current technologies but also significant advancements in new innovations. This critical issue was the focus of the 2023 d\carb future economy forum flagship event, which brought together experts to discuss the state of green innovation and the policies necessary to foster its growth.

Declining Innovation and Rising Deployment
One of the key insights from the forum was the alarming decline in climate-related frontier innovation since 2012, as evidenced by decreasing patent filings. This trend contrasts sharply with the increasing deployment of existing technologies, suggesting a policy emphasis on commercialization rather than research and development (R&D) support. Achieving climate neutrality will require a balanced approach that not only promotes the use of current technologies but also invests in the development of new, cost-effective, carbon-free solutions​​.

The Importance of Public Support and Policy Certainty
Antoine Dechezleprêtre from the OECD highlighted the necessity of public support for nascent technologies that are crucial for achieving carbon neutrality. He pointed out that current environmental policies lack the stringency needed to drive significant innovation. Dechezleprêtre recommended a policy package that includes clear signals on carbon pricing and a shift in public funding from commercialization to more robust R&D efforts​​.

Strategic Use of Subsidies
The discussion also emphasized the strategic use of subsidies. Dr. Eugenie Duguoa from LSE noted that subsidies should be aligned with the development stages of technologies. For early-stage technologies, R&D subsidies are more appropriate, whereas commercialization subsidies should support later-stage technologies. This approach ensures that investments are effectively targeted, fostering both innovation and market readiness​​.

Mobilizing Private Sector Investment
Despite substantial public spending, the forum underscored the need for significant private sector investment to meet the annual $1.2 trillion required for clean technologies. Dr. Tobias Lechtenfeld from 1.5°Ventures stressed the importance of creating demand for clean technology through well-designed subsidies and the careful implementation of carbon contracts for difference. Such measures can attract private investment and ensure the scalability of green innovations​​.

Policy Recommendations and Future Directions
The panelists collectively advocated for policies that provide certainty and clear market signals to encourage investment in clean technologies. They emphasized the importance of high and predictable carbon prices, which can drive innovation in energy savings and breakthrough technologies. Additionally, the panel highlighted the need for international cooperation and enforceable agreements to ensure global progress towards climate neutrality​​.

The 2023 d\carb future economy forum shed light on the critical need for a balanced approach to green innovation, combining both deployment and R&D support. The insights from the event highlight the importance of strategic public and private investments, clear policy signals, and international cooperation to drive the technological transformation required to meet our climate goals. As we move forward, these principles will be essential in guiding effective and sustainable climate policies.

A full summary of the event can be found here.

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