Accelerating Clean Energy Technology Research, Development, and Deployment is part of the World Bank Working Paper series. These papers are published to communicate the results of the Bank’s ongoing research and to stimulate public discussion.

Climate change is one of the key challenges of this century. At the same time, energy use—the primary source of climate-altering global greenhouse gas emissions— is increasing at unprecedented rates and is vital to the continued economic growth of developing countries. This poses a serious dilemma that can only be reconciled with new and improved clean energy technologies that balance climate change mitigation and increased energy needs in developing countries.

Despite a recent increase in investments, public and private research, development, and deployment (RD&D) funding rates are well below historical levels. In addition, significant barriers impede the ability to develop new technologies, such as the uncertain future value of CO2 emissions, intellectual property rights issues, limited incentives to commercialize technologies for developing countries, and challenges with technology transfer. These factors must be overcome to accelerate innovation in the energy sector.

To introduce new thinking to address these concerns, this report examines four cases from outside the energy sector where creative approaches to RD&D have successfully overcome similar barriers. The case studies review approaches to innovation by the Consultative Group on International Agricultural Research, Advanced Market Commitments for Vaccines, the Human Genome Project, and the concept of Distributed Innovation. These case studies show how creative efforts can generate valuable public goods via: (i) international partnerships between public and private actors, (ii) information sharing and intellectual property rights, and (iii) novel financing schemes.

The Energy Sector Management Assistance Program (ESMAP) is a global technical assistance program that promotes the role of energy in poverty reduction and economic growth with redistribution. ESMAP undertakes analytical work and provides policy advice on sustainable energy development to governments and other institutions in developing countries and economies in transition. ESMAP was established in 1983 under the joint sponsorship of the World Bank and the United Nations Development Programme as a partnership in response to global energy crises. Since its creation, ESMAP has operated in some 100 different countries through more than 500 activities covering a broad range of energy issues.

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Patrick Avato
Jonathan Coony
ESMAP (Energy SectorManagement Assistance Program)

ISBN-13: 978-0-8213-7481-8
eISBN: 978-0-8213-7482-5
ISSN: 1726-5878

The International Bank for Reconstruction and Development / The World Bank
1818 H Street, N.W.
Washington, D.C. 20433, U.S.A.

Contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Acronyms and Abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Climate Change and the Need for New Clean Energy Technologies . . . . . . . . . . . . 3
The Growing Global Concern about the Threat of Climate Change . . . . . . . . . . . . . 3
Clean Energy Technology Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Need for New and Improved Clean Energy Technologies . . . . . . . . . . . . . . . . . . 7
3. Trends in Energy Research and Development Spending. . . . . . . . . . . . . . . . . . . . . . 9
A Period of Reduced Energy R&D Spending from Mid-1980s to Early 2000s . . . . . 9
Renewed Public and Private RD&D Activity in Recent Years . . . . . . . . . . . . . . . . . . 10
The Increasing Role of Rapidly Growing Client Countries in Energy RD&D . . . . 11
The Limits of Renewed Energy RD&D Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. Barriers to the Development and Deployment of Clean
Energy Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Negative Externality of Carbon Emissions Is Difficult to Valuate . . . . . . . . . . . . . . 13
Climate Change Mitigation Is a Global Public Good . . . . . . . . . . . . . . . . . . . . . . . . 14
The “Valley of Death” between Public- and Private-Sector Development. . . . . . . . 14
The “Mountain of Death” of Technology Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Technology Needs of Developing Countries Are Not Adequately Served . . . . . . . . 16
Intellectual Property Right Protection is a Concern . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Network Structure of the Electricity Sector Limits Integration of
New Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
National Interests Can Impede International Collaboration . . . . . . . . . . . . . . . . . . 17
Energy RD&D Can Require Large, Sunk Capital Investments . . . . . . . . . . . . . . . . . 18
The Commodity Nature of Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
“Carbon Lock-in,” Subsidies, and Barriers to Trade . . . . . . . . . . . . . . . . . . . . . . . . . 19
Imperfect and Asymmetric Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5. Case Studies of Technical Innovation from Other Sectors . . . . . . . . . . . . . . . . . . . 21
Agriculture and the Consultative Group on International Agricultural
Research (CGIAR). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Vaccines and Advanced Market Commitments (AMCs). . . . . . . . . . . . . . . . . . . . . . 28
Biotechnology and the Human Genome Project (HGP). . . . . . . . . . . . . . . . . . . . . . 31
Open Source Software, Creation Networks, and Distributed Innovation . . . . . . . . 34
6. Lessons Learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Bridging the “Valley of Death” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Pooling Resources to Address Global Public Goods . . . . . . . . . . . . . . . . . . . . . . . . . 40
Facilitating Innovative Research Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Transferring Technology: South-South and North-South. . . . . . . . . . . . . . . . . . . . . 41
Sharing Information and Addressing Intellectual Property Rights . . . . . . . . . . . . . 41
Setting Goals without Picking Winners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Using World Bank Group Strengths to Promote Technology Development. . . . . . 42
7. Going Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
APPENDIXES

INTRODUCTION
Climate change is receiving considerable and increasing attention worldwide as one of the key challenges for the century ahead. In 2007 several reports have been published that confirm and strengthen the evidence that climate change is indeed a real and serious environmental, social, and economic threat.

These reports, including the Fourth Assessment Reports of the Intergovernmental Panel on Climate Change (IPCC 2007a–c) and the Stern Review on the Economics of Climate Change (HM Treasury 2006), underline a growing consensus that the efforts directed at mitigating climate change need a dramatic and timely increase to alleviate potentially destructive and irreversible changes in the earth’s climate.

The World Bank Group’s Clean Energy for Development Investment Framework Action Plan (World Bank 2007a) has outlined some of the key activities it intends to undertake in the area of mitigating greenhouse gas emissions and helping client countries adapt to changes in climate. ...

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