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than USD 10 billion are allocated to energy end use technologies and
energy efficiency.
Later in the innovation process, annual market (diffusion)
investment in the supply side plant and infrastructure total roughly
USD(2005) 0.8 trillion, compared with a conservative estimate of
some USD 1–4 trillion spent on demand side technologies. These
relative proportions are, however, insufficiently reflected in market
deployment investment incentives of technologies, which almost
exclusively focus on supply side options to the detriment of energy
end use in general, and energy efficiency in particular, foregoing also
important employment and economic growth stimuli effects from
end use investments that are critical in improving energy efficiency.
The need for investment to support the widespread diffusion of efficient
end use technologies is also clear. The demand side generally tends
to contribute more than the supply side options to realize near-term
and medium-term climate goals. This apparent mismatch suggests
the necessity of rebalancing public innovation expenditure and policy
incentives to include smaller-scale demand side technologies within
innovation portfolios.
Given persistent barriers to the adoption of energy-efficient
technologies even when they are cost competitive on a life cycle basis,
technology policies need to move toward a more integrated approach,
simultaneously stimulating the development as well as the adoption
of energy efficiency technologies and measures. R&D initiatives that
fail to incentivize consumers to adopt the outcomes of innovation
efforts (e.g., promoting energy-efficient building designs without
strengthened building codes, or carbon capture and storage (CCS)
development without a price on carbon) risk not only being ineffective
but also preclude the market feedback and learning that are critical for
continued improvements in technologies.
1.3.6 Bad Outcomes can have Substantial Spillover Effects
on Other Technologies
The experience of innovation policy related to solar water heaters
in the United States is a story of policy intermittency. A key general
finding is that bad outcomes are often not easily forgotten, and can
have substantial spill-over effects on other technologies. This presents
a challenge to the need to support experimentation and intelligent
failures. The key points of this case are: (i) A large, high-profile failure in
the early stage of the US SWH industry has proven extremely difficult
54 Low Carbon Development in China and India
energy efficiency.
Later in the innovation process, annual market (diffusion)
investment in the supply side plant and infrastructure total roughly
USD(2005) 0.8 trillion, compared with a conservative estimate of
some USD 1–4 trillion spent on demand side technologies. These
relative proportions are, however, insufficiently reflected in market
deployment investment incentives of technologies, which almost
exclusively focus on supply side options to the detriment of energy
end use in general, and energy efficiency in particular, foregoing also
important employment and economic growth stimuli effects from
end use investments that are critical in improving energy efficiency.
The need for investment to support the widespread diffusion of efficient
end use technologies is also clear. The demand side generally tends
to contribute more than the supply side options to realize near-term
and medium-term climate goals. This apparent mismatch suggests
the necessity of rebalancing public innovation expenditure and policy
incentives to include smaller-scale demand side technologies within
innovation portfolios.
Given persistent barriers to the adoption of energy-efficient
technologies even when they are cost competitive on a life cycle basis,
technology policies need to move toward a more integrated approach,
simultaneously stimulating the development as well as the adoption
of energy efficiency technologies and measures. R&D initiatives that
fail to incentivize consumers to adopt the outcomes of innovation
efforts (e.g., promoting energy-efficient building designs without
strengthened building codes, or carbon capture and storage (CCS)
development without a price on carbon) risk not only being ineffective
but also preclude the market feedback and learning that are critical for
continued improvements in technologies.
1.3.6 Bad Outcomes can have Substantial Spillover Effects
on Other Technologies
The experience of innovation policy related to solar water heaters
in the United States is a story of policy intermittency. A key general
finding is that bad outcomes are often not easily forgotten, and can
have substantial spill-over effects on other technologies. This presents
a challenge to the need to support experimentation and intelligent
failures. The key points of this case are: (i) A large, high-profile failure in
the early stage of the US SWH industry has proven extremely difficult
54 Low Carbon Development in China and India
