Fh session1

Lecture Series

Monday, 29.10.2012

Eco-Innovation for Greening Growth The Water-Energy-Food
Security Nexus
Winter Semester 2012 / 2013
Prof. Dr. Harald Sander
Cologne University of Applied Sciences

Lecture
series

The
Water
Energy
Food
Security
Nexus

Cologne,
winter
term
2012/2013

Joint
eﬀort
between

DIE,
Universität
zu
Köln,
Cologne
University
of
Applied
Sciences

3

Introduc)on
to
the
lecture
series

Prof.
Dr.
Lars
Ribbe

Director
of
InsPtute
for
Technology
and
Resources
Management

in
the
Tropics
and
Subtropics
(ITT)

Cologne
University
of
Applied
Sciences

Betzdorfer
Straße
2

50679
Cologne,
Germany

4

Content

1. Why
„Nexus“?

2. The
research
cluster
„NEXUS“
at
CUAS

3. Other
Nexus
acPviPes
and
agenda
for
the
winter

term

5

Nexus
lecture
series:
the
partners

Universität
zu
Köln
DIE
ITT

Prof.
Dr.
Karl
Schneider,
Dr.
WalEna
Scheumann,
DIE-‐ Prof.
Dr.
Lars
Ribbe,

InsEtute
of
Geography
GDI
ITT

Why
WEF
Nexus?

• Water,
Food
and
Energy
Security:
Three
pillars
of

economic
development
+
socio-‐poliPcal
stability

• Higher
security
levels
in
one
sector
may
impact
the
other

„security
areas“

Today

(2012:
7
bn
populaPon)

No
access
to
safe
water
(0.9
bn)
,
electricity
(1.5
bn),
suﬃcient

food
(1bn)

Tomorrow

(2030:
8.5
bn
populaPon)

if
we
want
to
combat
poverty
+
supply
a
growing

populaPon:
Roughly
40
%
more
water,
energy
and

food
demands!
7

Global
AcceleraEon
in
the
Anthropocene

(source:
planet
under
pressure,
policy
briefs

Why
WEF
Nexus?

Water
–
Food
–
Energy
Security

Water
demand
of
food
producPon

Water
Food

Reservoir
construcPon
and

operaPon

Hydropower
development
Energy
demand
of
food
producPon

and
processing

Water
for
Energy

Energy
demands
of
water
Biofuels

distribuPon
and
treatment

Energy

9

Why
WEF
Nexus?

W
F
W
F

E
E

2000
2030

10

Current
R
&
E
AcEviEes:

Role
of
research
and
educaPon?

 Example:
The
Research
Cluster
„Water,
Food
and

Energy
NEXUS“
at
Cologne
University
of
Applied

Sciences
(CUAS)

 Funded
by
Ministry
of
InnovaPon,
Science
and

Research,
state
of
NRW
and
CUAS
(2013
–
2016)

13

The research Cluster „Water Food and Energy Security
at Cologne University of Applied Sciences (Funded by MIWF, NRW 2013-1015)

Ingo Stadler
Eberhard Waﬀenschmidt
Ulf Blieske

Energy Security

Human
Development Harald Sander

Johannes Hamhaber
Food Security Water Security

Lars Ribbe
Sabine Schlüter
Michael Sturm
Till Meinel
Jackson Roehrig
Wolfgang Kath-Petersen

N E X U S

Food
Work
Group
1
:
Food-‐
Energy

Energy

NEXUS-‐

Forum
Work
Group
3:

Work
Group
2:

Food-‐Water
Energy-‐Water

Nexus
of
disciplines:

• Natural
Sciences

• Social
Sciences

• Engineering

Water
• …

Current
R
&
E
AcEviEes:

InsPtuPonal
NEXUS:
cooperaPon

Higher
Education
+
Research Cooperative
Programmes and
Public projects
Sector
+  Applied Research
(I)NGOs
 Capacity
Development
Private  Implementation
Sector

KIC
Knowledge and Innovation Community

Centre
for
Natural
Resources

and
Development
-‐
CNRD

Geograﬁsches

InsPtut
der
University
of

Universität
zu
Köln
North
Florida

(USA)

TÜV

DIP
GmbH

Rheinland

ZEF/Uni
Bonn

Sunpower

University
of

Warsaw

Saint-‐Gobain
(Poland),

Solar

Food
German

Deutsches
AHK
Energy
Water

InsPtut
für
Sao

Paulo
RheinEnergie
Partner-‐
Entwicklungs AG
ship

poliPk
–
DIE
(GWP)

SEBA

Hydrometrie

GmbH
Water
GREENPEACE

Energy
Dongbei

University
of

Finance
and

Ribeka
Sorware
Economics

GmbH
DHI-‐WASY
(China)

GmbH

Universität
Kassel

Deutsche
Vereinigung
für
Wasserwirtschar,
Abwasser

und
Abfall
e.
V.
(DWA)

Technische

Universität

Eindhoven

Private
Sector,
NGOs

UNEP
Hochschulnetzwerk

AssociaPons
and
Networks

Research
and
EducaPon

Current
R
&
E
AcEviEes:

Major
acPviPes
of
the
research
cluster

1. Establish
a
knowledge
base
on
the
Nexus
issues

2. Develop
common
research
projects,
involve

students

3. Develop
teaching
materials
and
case
study
material

4. Outreach
and
communicaPon
with
other

stakeholders

5. Establish
partnerships
and
networks

Further
acPviPes
of
ITT:

ScienEﬁc
Conferences

Amman-‐Cologne
School
of
IWRM:

• Amman
2011:
„Water-‐Energy
Nexus“

• Amman
2012
„Green
Growth
and
Water
Resources
Management

in
the
MENA
region“

• Amman
2013
„Nexus
topics
within
the
Arab
Water
Week

Centre
for
Natural
Resources
and
Development

• ITT,
Cologne
2012:
„Research
for
the
Water
Energy
Food
Security

Nexus“

19

Further
acPviPes
of
ITT:

University
Partnership

“Enquiry-‐based
Learning
in
the
Curricula
of

Master-‐Level
Courses
in
the
Water
and
Land

Nexus”
(Funded
by
DAAD
2013-‐
2016)

Partners:

• Khartoum
University,
Sudan;

• Addis
Abbaba
University,
Ethiopia;

• Jordan
University

20

The
EBL-‐NEXUS
project:

21

Last
but
not
least….

I
whish
us
interesPng

expert
inputs
and
a
vivid

debate!

Thank
you!

ECO-INNOVATION FOR
GREENING GROWTH
AND THE WATER-ENERGY-FOOD SECURITY NEXUS
Harald Sander
Director Institute of Global Business and Society
and Professor of International Economics at
Cologne University of Applied Sciences

Lecture held on October 29, 2012

Four Core Messages
• Greening the economy requires green innovation.
(the same holds for addressing the synergies and trade-offs
in the Water-Food-Energy NEXUS)
• To unleash eco-innovations a green technology policy
must complement traditional environmental policies
(double externality problem).
• Technology policy in developing countries should focus on
technology transfer and building absorptive and
adaptive R&D capacities for “environmental leapfrogging”.
• Setting the policy agenda is a process that is highly
country-specific and requires tailor-made solutions
involving all stakeholders.

Agenda
I. The Quest for a Green Economy
II. The Concept of Eco-Innovation
III. How to trigger Eco-Innovation?
IV. Eco-Innovation and Developing Countries
V. How to Set the Policy Agenda?
VI. Summary and Conclusions

I. The Quest for a Green Economy
• What is a “green economy”?

“…one that results in improved human well‐being and
social equity, while significantly reducing environmental
risks and ecological scarcities. It is low carbon, resource
efficient, and socially inclusive”.

UNEP, Towards a Green Economy: Pathways to
Sustainable Development and Poverty Eradication, 2011

The Quest for a Green Economy
• What is a “green economy”?

“a resilient economy that provides a better quality of life
for all within the ecological limits of the planet.

Green Economy Coalition 2011 (a group of NGOs, trade
union groups etc.)

The Quest for a Green Economy
• Many definitions, but most include
• social dimensions
• human well-being, social inclusive, reduced inequality,...

• economic dimensions
• high income, high employment,…
• environmental dimensions
• resource efficient, low(-er) environmental risks, sustainability, …

• Green Growth as a means to achieve a Green Economy?

“[G]reen growth means fostering economic growth and
development while ensuring that natural assets continue to
provide the resources and environmental services on which
our well-being relies.
OECD, Towards Green Growth, Paris 2011.

Greening growth requires decoupling
• Traditional economic growth usually uses more scarce resources
• Green growth requires decoupling
• absolute decoupling: economic growth and/or higher per capita income
with less use of resources
• relative decoupling: reduction of resource use relative to per capita income
• Mixed evidence on decoupling depending on type of pollutant
(Environmental Kuznets Curve – EKC)

Environmental Kuznets Curve (EKC)
pollution

EKC

relative absolute per capita income
decoupling decoupling

Greening growth requires decoupling
• Traditional economic growth usually uses more scarce resources
• Green growth requires decoupling
• absolute decoupling: economic growth and/or higher per capita income
with less use of resources
• relative decoupling: reduction of resource use relative to per capita income
• Mixed evidence on decoupling depending on type of pollutant
(Environmental Kuznets Curve - EKC)
• Relative and absolute decoupling for NOX, SO2 in high income countries
• No decoupling (yet) for CO2

• Decoupling depends on
• Spatial closeness of negative effects
• Time distance to the effect & time preferences
• Cost of avoiding negative effects (e.g. abatement costs)

..but policies matter too (see Annex I Kyoto Parties)
CO2 Emissions 1971-2009

Own Diagram. Data Source: International Energy Agency 2011

Innovation for greening growth
“Existing production technology and consumer behaviour
can only be expected to produce positive outcomes up to a
point; a frontier, beyond which depleting natural capital has
negative consequences for overall growth. By pushing the
frontier outward, innovation can help to decouple growth
from natural capital depletion. …
Innovation is therefore the key in enabling green and growth
to go hand in hand.”

OECD, Fostering Innovation for Green Growth, Paris 2011,
p. 9

The EKC after eco-innovation: (absolute?)
decoupling in high-income countries
pollution

EKC before eco-innovation

EKC after eco-innovation

per capita income

Eco-innovation and green growth in
developing countries
• Old approach
• grow first, clean up later
• movement along the EKC viewed as a “normal” development
process
• High social and environmental costs
• immediate costs (intra-generational) – direct benefits from greening
growth (example: drinking water, cooking stoves)
• Long-term costs (inter-generational) of irreversible damage for future
growth and prosperity (costs for present generation depends on time
preferences)
• Cross-border regional and global (external) effects
• Greening growth in developing countries requires
• Technology transfer
• Development of “absorptive capacity“
• Development of own (adaptive) R&D capabilities

The EKC in developing countries: Illustration of
relative decoupling after eco-innovation
pollution



per capita income

The EKC in developing countries: Illustration of
absolute decoupling after eco-innovation
pollution



per capita income

II: The Concept of Eco-Innovation
OECD (2009: 40) describes eco-innovation
as:
“the implementation of new, or significantly
improved, products (goods and services),
processes, marketing methods,
organizational structures and institutional
arrangement which, with or without intent,
lead to environmental improvements
compared to relevant alternatives.”
OECD, Eco-Innovation in Industry. Enabling Green Growth, Paris 2009, p. 40.

Eco-Innovation comprises technological
and non-technological social innovation
Pollution control
Implementation on non-essential technologies:
End-of-the-pipe solutions

Cleaner production
Modify products and production methods:
process optimisation, substitution of material (non-toxic, renewable)

Eco-efficiency
Systematic environmental management and monitoring

Life-cycle thinking
green supply chain management

Closed-loop production
Restructuring of production methods:
minimizing or eliminating virgin materials, product-service systems

Industrial ecology
Integrated systems of production, environmental partnerships,
product service systems

Source: Based on OECD, 2009: 37, 47

Machiba’s proposed framework of eco-
innovations

Source: T. Machiba, Eco-innovation for enabling resource efficiency and green growth: development of an analytical framework and
preliminary analysis of industry and policy practices, in: Bleischwitz et al. (eds.), International Economics of Resource Efficiency,
Springer 2011: 361.

Illustration: Examples of eco-innovations

Source: Machiba 2011, 366

Eco-innovation and the NEXUS
• The concept of eco-innovation is useful for the
NEXUS as eco-innovation focuses on
interdependencies over all three sectors
• … and beyond.
• Three major benefits:
• A broad-based concept including social & non-
technological innovation
• drawing on the insights of the innovation & sustainability
literature
• Application of recent methods to identify drivers and
binding constraints to eco-innovation

NEXUS forum on synergies & trade-offs of eco-
innovations in the use of all three resources

III: How to Trigger Eco-Innovation?
• Technical change requires three steps:
• Invention – creation of something new
• Innovation – taking the idea to the showroom
• Diffusion – the process of adoption of a new technology
• Diffusion is often the major bottleneck for eco-
innovation
• Why?
• Do eco-innovations pay off? Often not!
• But even when they are profitable we often observe low
adoption rates (e.g. energy efficiency gap)

Problem 1: Do eco-innovations pay-off?
• Some may get adopted because of secondary benefits
(e.g. fuel-efficient cars if the (discounted) savings in fuel
exceed their higher costs)…
• …but still face multiple market failures. The most
important market failures for eco-innovations are:
• Environmental externalities
• R&D market failures

• Environmental damage associated with the production or consumption
of a good is not reflected in the market price
• Too much production and consumption of that good
• To much environmental damage at a too low price
• Market for alternative goods or production processes is under-
developed or even non-existent.
• Internalization by environmental policies , e.g. Pigou tax, can address it.

• Some may get adopted because of secondary benefits (e.g.
fuel-efficient cars if the (discounted) savings in fuel exceed their
higher costs)…
• …but still face multiple market failures. The most important
market failures for eco-innovations are:
• R&D market failures, especially
• Public good nature (intellectual property rights)
• Reward for R&D by means of patents are an incentive to innovate but…
• …makes eco-innovations more expansive & reduce diffusion
• Path dependencies of R&D
• History matters! Companies with a history in “dirty patents“ are likely to continue to
innovate “dirty” in the future (see: Aghion et al. 2012).
• Network externalities
• Adoption of a new technology depends on a critical number of adopters

• R&D market failures
• Double market failure is the key constraint on eco-
innovations
• Environmental externality: limits market size
• R&D externality: limits innovation activity and diffusion

A coordinated policy response to address
market failures is needed
• Double externality problem requires a double policy
response to trigger eco-innovation
• Environmental policy (internalization of external effects) to create a
market
• Technology policy to promote technology development and
diffusion
• Each single policy actions is a necessary condition for
unleashing eco-innovation...
• ...but neither policy action is sufficient when undertaken in
isolation.

Evidence on eco-innovations and policies

Source: Dechezleprêtre et al. 2011: 119

Other reasons for low appropriability of
returns
• Other market failures may occur, too.
• Barriers to entry & competition
• Problems in governance
• Bad governance, low institutional quality
• Preference to incumbents, perverse subsidies
• Incomplete property rights
• Macro-economic instability
• etc.

Problem 2: Low diffusion even when market and
governance failures are properly addressed
• Why?
• Lack of social resources
• Norms and values
• Habit inertia
• Lack of complementary economic resources
• Infrastructure
• Human capital (R&D, absorptive capacity, etc.)
• Access to green technology

Summary: What holds back
eco-innovation?
low returns to eco-innovation

lack of complementary resources low appropriability of returns

social resources economic resources market failure governance failure

norms and values inadequate negative
infrastructure externalities Incomplete property rights

habit inertia
low R&D externatlities and path
human capital depenendencies Preference to incumbents,
pervers subsidies

access to green technology barriers to competition
low institutional quality

macro-economic instabilty

IV. Eco-Innovation and Developing Countries

• Most R&D is done in developed countries
• Many green technologies are already available
and may allow for leapfrogging
• Three Problems:
• Affordability of off-the-shelf technologies
• Adaption of off-the shelf technologies to local
circumstances
• Adaptive R&D
• In innovating advanced countries (when home market for such
technologies is limited – Example: R&D in anti-malaria medicine)
• R&D in (some) developing countries
• Absorptive capacity of the technology-importing country

Most R&D is done in developed countries:


…but is there a new role for the BRICs?


Example: China’s patent boom
• Filing for patents in China has
increased drastically, both for
national patents (SIPO) as for US
patents (USPTO).
• The analysis of Eberhard et al.
2011) suggests that although
some patents are truly innovative,
the majority is still incremental –
mostly for adapting production
process to local circumstances.
• Source of Graph: Yu/Eberhard/
Helmers, Is the dragon learning to
fly? An analysis of the Chinese
patent explosion, in: VoxEU.org,
27 September 2011.

The problem of affordability: The 3 major
channels of technology transfer
• Patents are providing an incentive to innovate, but reduce
the diffusion by allowing to charge higher prices.
• Three major channel of technology transfer:
• Exports
• Foreign Direct Investment (FDI)
• 100% FDI
• Joint ventures
• Example: China’s joint venture regulation
• Licensing
• Role of (international) financing
(e.g. Clean Development Mechanism offers polluters in
credits for financing projects for reducing emissions in
developing countries” – see Popp 2011 for more details)

Adaption of off-the-shelf technologies to
local circumstances
• Often technologies do not fit local circumstances
• Adaptive R&D is needed
• Partly an explanation for China’s patent boom
• Example: adapting production process and making them more
labor-intensive (photovoltaic in China)
• R&D policies for technology adaption required
• Inertia and other cultural limits to eco-innovation adoption
• Example: cooking stoves in India
• Randomized control trials may help to identify such constraints
(see Banerjee/Duflo, Poor Economics, New York 2011)

Importing technologies from developing
countries
• There is substantial R&D in (some) developing countries, in
particular China and India, especially on adaption
• China wants to become a technological leader in environmental
technology according to the 12th 5-year plan.
• Developing country technologies may be more appropriate in
terms of factor-proportions required in developing countries and
thus easier to adapt to local circumstances
• Lower technological distance matters
• Lower regulatory distance matters (for example in the
automobile industry where, according to Dechezlepêtre et al.
2012 ,“…countries are more likely to receive newly-innovated
technologies from source countries whose regulatory standards
are “closer” to their own).

New evidence on the geography of green
technology transfer


The importance of advanced countries as
exporters of eco-technologies
• Advanced countries
need to pay attention to
innovate adapted
technology for
developing countries…
• …especially when their
home market for such
technologies is limited
• Example: R&D in anti-
malaria medicine

V. How to Set the Policy Agenda?
• Prioritizing eco-innovation? What is most pressing?
• Prioritizing policy instruments
• Comprehensive approach
• Role of “framework conditions”
• OECD Green growth diagnostics – old wine in new bottles?
• Decision-making process
• National
• International
• Participation of stakeholders

How to set the policy agenda?
Recent World Bank approach suggests to focus on those fields where net immediate
benefits and risks of irreversibility are high:

Source: Hallegatte et al., From Growth to Green Growth, in: VoxEU.org, 24 March 2012

• E.g. “Fishbone Approach” (see Wuppertal Institute, Eco-innovation,
2012). Comprehensive Analysis of certain eco-innovations regards all
• Technical Drivers and Barriers
• Economic Drivers and Barriers
• Natural Drivers and Barriers
• Social Drivers and Barriers

„…the rate and pattern of “green” innovation is heavily influenced by another factor – the
environmental policy framework. … a number of framework policies for innovation are
important. First, a policy environment based on core “framework conditions” – sound
macroeconomic policy, competition, openness to international trade and
investment, adequate and effective protection and enforcement of intellectual
property rights, efficient tax and financial systems – is a fundamental building block
of any effective (green) growth strategy and allows innovation to thrive.” (OECD 2011: 46)
• Towards a green Washington consensus?

• Green growth diagnostics – old wine in new bottles?
• OECD 2011 (Towards Green Growth) has proposed a green growth
diagnostics (GGD) approach to identify the (most) binding constraints to
green growth.
• This GGD is based the Growth Diagnostics (GD) approach proposed by
Hausman et al. (2008). The basic idea of GD is that each country’s
economic growth is hold back by different binding constraints at a certain
time.
• GD thus rejects the idea of a one-size-fits-all diagnosis.
• Useful for identifying country- and time-specific binding constraints to
eco-innovations
(see Sander, 2011 The use and usefulness of OECD’s green growth
diagnostics, GLOBUS Working Paper, Cologne 2011)

A green growth diagnostic (GGD) decision
tree for eco-innovation




habit inertia low R&D externatlities and path
pervers subsidies



The necessary conditions for triggering
eco-innovations in the GGD (marked red)




habit inertia low R&D externatlities and path
pervers subsidies



GGD for triggering eco-innovation
• Step 1: Are adequate environmental and technology
policies in place to address double market failure?

• Step 2: If yes, can they work – or are they facing other
“binding constraints”?

• Step 3: Identify country-specific binding constraints and
appropriate policies to reduce/remove these constraints.

• Involve all relevant stakeholders in identifying binding
constraints
• GGD is a process as binding constraints change over time

VI. Summary & Conclusions (1)
• Broadly defined eco-innovations are key for
greening growth / the NEXUS.
• Eco-innovations need both, environmental and
technology policies to address the double-
externality problem.
• Developing countries need to develop a policy
agenda for eco-technology transfer that is
• country-specific, and
• involving all stake-holders
• in a permanent dialogue.

Summary & Conclusions (2)
• Focus on projects where immediate local benefits
are high and urgent (non-reversibility)
• Effective eco-technology transfer can be
supported by
• Developing absorptive capacity in developing countries
• Developing own (adaptive) research capabilities
• Drawing not only on advanced country R&D but also on
R&D from countries where the technological distance is
lower
• R&D for adapted eco-technologies in advanced
countries for developing countries
• Global and regional financing mechanisms

THANK YOU!
QUESTIONS? COMMENTS?
Harald Sander

For more information on GLOBUS see:
http://www.fh-koeln.de/globus

For more questions and more comments:
harald.sander@fh-koeln.de

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