2022 GGSD Forum- Summary Report

Green innovation and the impact of economic shocks

2022 #GGSD Forum

Green innovation and the impact of economic shocks

Why a Forum on green innovation and the impact of economic shocks?

The economic shocks caused by the COVID-19 pandemic and Russia’s large-scale aggression against Ukraine are likely to reshape the science-policy interface with significant implications for net-zero goals, green growth, and sustainable development. The recent experience from the governmentsupported acceleration for the development and deployment of vaccines and the renewed priority given to energy security have provided an impetus to mission-oriented innovation approaches to address environmental challenges. In addition, the pandemic has severely affected some vital actors of innovation ecosystems, such as start-ups and small and medium-sized enterprises (SMEs), which are also more exposed to the consequences of high energy prices.

The 2022 OECD Green Growth and Sustainable Development (GGSD) Forum discussed how these recent developments affect mission-oriented approaches for green innovation and the role that low-carbon hydrogen and the bio-economy sectors could play in a sustainable recovery. It also discussed the specific challenges and opportunities faced by SMEs, and the lessons learnt from the international scientific co-operation in response to the COVID-19 pandemic for Science, Technology and Innovation (STI) efforts to address environmental degradation.

Background documents

Do mission-oriented policies for net-zero deliver on their many promises?

Lessons for tackling complex and systemic societal challenges

by Philippe Larrue, OECD oe.cd/ggsd2022Note-mission-oriented

Will post-COVID-19 recovery packages accelerate low-carbon innovation?

Preliminary findings

by Frida Aulie, Antoine Dechezleprêtre, Fernando Galindo-Rueda, Inès Pitavy, Alzbeta Vitkova, OECD

oe.cd/ggsd2022Note-postCOVID19-recovery

Assessing environmental impact of measures in the OECD Green Recovery Database

by Enrico Botta, OECD

oe.cd/4rD

High-Level Opening Session

Mathias Cormann, OECD Secretary-General, opened the 2022 GGSD Forum by highlighting that countries face three intertwined challenges: cushioning the impact of energy price rises on the vulnerable, shoringup energy security, and progressing towards carbon neutrality by 2050. Three key actions can help to jointly meet these objectives. First, ensuring that the goals of energy security and emissions-reduction are aligned. Second, since half of the emissions reductions necessary to meet carbon neutrality targets by 2050 needs to be delivered by technologies that are not yet commercialised, governments need to support further research on such technologies. Missionoriented innovation approaches may help to increase the effectiveness and efficiency of innovation policies. Third, there is a need to improve policies and regulatory frameworks to address the constraints faced by smalland medium-sized firms for green innovation.

Kerri-Ann Jones, OECD Deputy Secretary-General, kicked off the panel discussion by highlighting that the mandate of the annual GGSD Forum is to bring together OECD Committees to engage in multidisciplinary dialogue. In this context, she welcomed the participations by delegates of several OECD Committees and their secretariats in the Forum sessions, along with business representatives

Mariana Mazzucato, Professor in Economics of Innovation and Public Value at the University College London, opened her scene-setting presentation by calling on governments to shift from a market-fixing to market-shaping approach, and highlighted that the Apollo Programme offers important examples of how to design such policies. Then, she argued that a mission-oriented approach should be: inspirational and with a clear direction; ambitious but realistic in terms of research and innovation objectives; cross-disciplinary, cross-sectoral and drive multiple bottom-up solutions. Then, she stressed that cities are also starting to apply a mission-approach to some of their challenges, thus it will be important to promote knowledge exchange across different levels of government to ensure sharing of best practises and policy alignment. She concluded

by emphasising the need for conditionality in publicprivate partnerships and subsidies, and cited the example of COVID-19 support to airline companies in France that required them to commit to accelerate actions for the low-carbon transition.

Stuart Nash, Minister of Economic and Regional Development, Tourism, Small Business and Forestry in New Zealand, highlighted that there is growing agreement on the need to consider improvements in well-being among the key metrics used to evaluate economic performance. New Zealand is the first country in the world to introduce a requirement to assess all budget allocations against their impact on different aspects of well-being such as resilience, sustainability, inclusion and productivity. Then, he stressed the role of SMEs in driving an inclusive transformation, as over 50% of New Zealanders work in businesses with fewer than 100 employees. In the past 5 years, the government has invested over NZ$ 4 billion in infrastructure and community projects, and provided concessionary loans to SMEs and start-ups.

He concluded that transforming traditional extractive economies into sustainable, high-wage, and circular economies will only be possible through innovative partnerships underpinned by a shared new vision of success – one that is values-driven, purpose-led, and mission-oriented.

Micheala Spaeth, Ambassador, Permanent Representative of Germany to the OECD, highlighted that the double shock of the COVID-19 pandemic and the Russian large-scale attack on Ukraine created an opportunity to accelerate the green transformation: fossil fuel dependency is damaging for the climate and diminishes economic sovereignty of European countries. She underlined that the transition to a zero-carbon economy will have geopolitical consequences, including the development of new trading relations. New trading partners need to be chosen wisely: prosperity and security must go together with human rights. Then, she underlined that research and innovation are the main levers of a successful energy and sustainability transformation. The Germany’s Research for Sustainability Strategy, which has a €4 billion budget, will focus on three main themes: climate, natural resources, and good living conditions. She concluded by highlighting the role of green hydrogen to drive the transformation towards sustainable and climate-neutral societies.

Javiera Petersen, Undersecretary of Economy and Small Business at the Chilean Ministry of Economy, Development and Tourism, underlined that sectors targeted by green policies have different level of technological capabilities and needs for improvement across countries. In emerging economies, green innovation policies must contribute to the building of domestic productive and technological capacities, economic diversification and the shift towards knowledge-intensive exports. An understanding of the complex and intertemporal relations between production and environmental sustainability is needed for sound policy design. Such approach lies at the heart of the green taxes chapter of the fiscal reform proposed by Chilean government, which aims to increase government revenues and promote green structural reforms in a fiscally responsible manner. Finally, she remarked that the definition of what is green and sustainable is a political decision that requires social consensus. Therefore, a strong democracy is a necessary condition for any policy that seeks to address the current climate crisis.

Jens Lundsgaard, Deputy Director at the OECD Directorate for Science, Technology and Innovation, highlighted that the key green transition challenge is the need to develop breakthrough technologies at a record speed. This would require three main elements: investing in R&D, collaborating around mission-oriented innovation, and linking science and industrial transformation. Green Recovery programmes marked a welcome increase in public R&D expenditures in low-carbon technologies, which had remained flat for decades. But this level of funding must be sustained over the longer-term and complemented by market-pulls policies, such as carbon pricing. Then, he agreed with Professor Mazzucato that mission-oriented approaches can help to accelerate green innovation, and highlighted OECD work on analysing and distilling best-practises for their implementation. Finally, he stressed the importance of linking scientists working on cuttingedge research with blue collar workers to support breakthrough innovation.

The open discussion moderated by DSG Jones focused on how priorities for green science and innovation have changed after the shocks of the pandemics and the war in Ukraine. Micheala Spaeth underscored that there is stronger sense of urgency and that it would be important to work on different low-carbon technologies to avoid “putting all eggs in one basket”. Jens Lundsgaard highlighted that high gas prices are creating a massive push for innovations, including in low-carbon technologies. Javiera Petersen underlined that institutional mechanisms to foster dialogue and build political consensus are needed for a fast, green, and just transition. She also welcomed the creation of the Climate Change Fund for Loss and Damage at COP27. Stuart Nash highlighted that dialogue between politicians and communities about how to ensure a better future has improved, but much more work needs to be done to involve all stakeholders. As SMEs account for than 70% of jobs in OECD countries, it is crucial to involve them.

Session 1: Mission-oriented innovation for a net-zero energy secure future

Yongsuk Jang, Senior Research Fellow at the Korean Science and Technology Policy Institute (STEPI) and Chair of the OECD Committee for Scientific and Technological Policy (CSTP), moderated this session on mission-oriented policies for the low-carbon transition.

In her scene-setting presentation, Ann Mettler, Vice-President for Europe at Breakthrough Energy, echoed Ambassador Spaeth’s call for weaning off dependency on fossil fuels, which has proved to be a threat for climate and energy security. She underlined that the “breakthrough” spirit that animated countries’ response to the pandemic is not yet visible for the energy transition. However, COVID-19 recovery packages are a step in the right direction: preliminary findings from the work by Breakthrough Energy and the OECD on the innovation impact of COVID-19 recovery packages suggest that we are witnessing a turning point in the energy sector since they injected $1.2 trillion towards low-carbon technologies. But more needs to be done for less advanced technologies: less than 10% of recovery spending is dedicated to R&D and demonstration of emerging clean technologies, such as hydrogen and carbon capture, utilisation and storage. Furthermore, analysis shows that recovery funding does not close the IEA estimated gap in investments needed to reach 2050 net-zero targets.

Philippe Larrue, Policy Analyst at the OECD Science and Technology Policy Division, underlined that the dominant policy paradigm is based on the concept of “fixing” market failures. However, this is increasingly considered ineffective to address systemic challenges as it results in a fragmented approach. For this reason, a number of countries have started to look at Mission-

oriented Innovation Approaches (or MOIAs) to accelerate innovation to address societal challenges, including climate change. Recent OECD work finds that MOIAs represent a marked improvement over existing frameworks because of stronger orientation of innovation and better coordination across policy and administrative silos. However, improvements are still needed. For instance, albeit displaying some systemic features, net-zero missions remain mostly focused on research and innovation and are led by science and technology agencies.

Matthias Weber, Head of Centre for Innovation Systems and Policy at the Austrian Institute of Technology, stressed that next-generation missionoriented innovation policies need to adopt a “goaloriented project modulation” approach rather than fixed “targets”, because of the uncertainty generated by the current period of multiple crises. Also, he stressed the importance of a wholegovernment approach and strong involvement of the private sector and citizens. He also highlighted the need to invest in the public sectors capabilities to oversee, trigger and govern these collective change processes. Finally, he noted that national differences, including cultural aspects, are likely to have implications for governance mechanisms of missions.

On screen: Yongsuk Jang and Ann Mettler; On stage from left to right: Philippe Larrue, Yongsuk Jang, Matthias Weber, and Göran Marklund.

Göran Marklund, Deputy Director-General at Vinnova, Sweden, and Chair of the OECD Working Group on Innovation and Technology, underscored that clear targets are needed to ensure that missions fully deliver on their orientation capacity. Also, he underlined that a whole-of-government approach is the ideal mechanism for mission design and governance, but this is often very difficult to achieve. The Swedish experience shows that bottom-up collaboration could be a second-best alternative. He highlighted some recent positive developments. Fist, COVID-19 has shown that governments can successfully adopt mission-oriented approaches. Secondly, Swedish businesses believe that greenness is a key lever for competitiveness in the future and are leading an industrial transformation in the carbon-free steel and electric mobility sectors. Finally, he argued that EU Mission on Climate Neutral Cities is a game-changer because it sets a clear target for carbon-free citiese.

Jennifer Gerbi, Acting Director at the US Department of Energy, Advanced Research Projects Agency-Energy (ARPA-E), highlighted the ARPA-E focuses on high-risk and high-reward search. Programme directors have a 3- to 5-years term to spend the programme budget of $40 million. Given the focus on high-risk innovation, the Agency accepts technical failure: as few as 3 out of 12 funded technical pathways are successful. ARPA-E is characterised by strong cooperation among teams, which is aided by the short duration of directors’ terms and group stress-testing of ideas, including from a carbon lifecycle perspective. For example, hydrogen is a very potent indirect greenhouse gas that is difficult to contain: if policy does not keep up with the technology, there is the risk of unintended consequences. She concluded by remarking that the Agency invests in broad portfolios of technologies, including options that are not on roadmaps yet.

In the open discussion, Mathias Weber stressed the importance of avoiding micro-management in MOIAs and the role of soft coordination mechanisms, such as the development of shared problem perceptions, to bring together multiple actors. Göran Marklund highlighted that the contracts that cities are signing on climate neutrality in the context of the EU Mission on Cities can be an effective tool to generate a whole-of-government approach. Philippe Larrue presented the example of the Irish Challenge Programme, which established the position of “societal challenge champion” to ensure that a systemic dimension is integrated in all financed projects. Ann Mettler remarked that “clean” products are often not very different from those developed using polluting technologies, except for their lower carbon content. Therefore, incentives are needed to create a market for these products.

Key takeaways and knowledge gaps

• Recovery packages marked an important increase in funding for net-zero innovation, but they fell short of closing the investment gap to meet net-zero targets. Future work could investigate how to mobilise private capital and the potentially catalysing role of philanthropic capital.

• Evidence suggests that mission-oriented innovation approaches are characterised by stronger orientation of innovation systems than traditional innovation approaches, and could help to accelerate green innovation

• Existing net-zero missions tend to focus mostly on research and innovation and to be led by Science and Technology Agencies. Further research is needed on how to make missions more systemic and the changes needed in public sector governance for their successful adoption.

• Many breakthrough technologies are developed by young firms that often lack the global reach of larger firms. Better understanding of the interplay between incumbents and young firms is needed.

Session 2: Innovation in bio-economy sectors for a circular economy

Mary Maxon, Executive Director for BioFutures at Schmidt Futures, started her scene-setting presentation by highlighting that that the bioeconomy can help to meet 11 of the 17 UN Sustainable Development Goals (SDGs). Over 60 countries have adopted bio-economy strategies, and these vary along several dimensions, including the role of biotechnology. She also stressed that the bioeconomy can lead to the creation of new industrial value chains because, for instance, the waste produced by one company could become an input for another firm. Key elements of policy frameworks to promote the bio-economy should include: the adoption of credible indicators to guide decisions and investments, the development of effective bioeconomy knowledge management platforms, public procurement of bio-based products, and adoption of incentives that recognise innovative industrial value chain links. Finally, she described the US White House Bio-economy Executive Order, which is an whole-of-government initiative and provides $2 billion funding to bio-economy related initiatives.

Ole Jørgen Marvik, Special Advisor for Life Sciences at Innovation Norway and Delegate to the OECD Working Party on Biotechnology, Nanotechnology and Converging Technologies (WPBNCT), highlighted that the bio-economy alone cannot address all sustainability challenges. A holistic approach that includes improved recycling and efficient energy production is needed. Then, he underlined that considerations for domestically available bioeconomy resources and their potential use by domestic firms define the scope of bio-economy strategies.

Finally, he agreed on the importance of carefully considering the innovative industrial links that the bio-economy can generate, and presented the example of Norway where CO2 captured from metallurgical industry flue gas may be used to produce aviation fuel or protein for the aquaculture industry.

Giulia Gregori, Head of Strategic Planning and Institutional Communication at Novamont, also stressed that the circular bio-economy often involves partnerships between sectors that are not linked in a linear economy. For this reason, strategies and policies to support the bioeconomy need to be truly cross-sectoral. She presented the three main pillars of Novamont business model: repurposing existing industrial sites to avoid land use, use of by-products and crops that can grow in marginal lands, and focus on products that are complex to recycle or face a high risk of dispersion in the environment. She concluded by highlighting the importance of explaining the benefits of improvements in waste collection systems to consumers when new practises are introduced.

Presentation by Mary Maxon, Executive Director for BioFutures at Schmidt Futures

Gernot Klepper, Chairman at the International Sustainability & Carbon Certification Association, agreed that government support is needed for the bio-economy to grow, and stressed the role of certification to ensure government budget is wellspent and sustainability trade-offs are addressed. He presented the case of used cooking oil that became more expensive than fresh palm oil because of market distortions introduced by incentives. He also argued that certification systems need to be international because most of the value chains today are global, and require sound monitoring, reporting and verification (MRV) systems. He underscored the speed of innovation in the bio-economy sector: for instance, the greenhouse-gas savings from the use of biofuels compared to fossil fuels increased from 50% to 70% in the 10 years.

Marta Gomez San Juan, Senior Expert on Circular Bioeconomy at the FAO Office for Climate Change, Biodiversity and Environment, presented the numerous challenges that food and agricultural systems currently face. The food sector currently uses 74% of global biomass and is responsible for onethird of global emissions. At the same time, 30% of soils are already degraded, one-third of agricultural land is used to produce food that is lost or wasted, and around one-third of the world’s population does not have access to healthy diets. A key issue is that economies fail in capturing the maximum value from biological resources, and valuable resources are considered as “waste”. A combination of innovation and traditional and indigenous knowledge is needed to improve food and agricultural systems. She highlighted that FAO members have made the bio-economy a strategic priority for the next 10 years, and that the bio-economy is a genuine game changer because of its cross-sectoral nature.

In the open discussion, Mary Maxon highlighted that the US Sustainable Aviation Fuel Challenge is a mission-oriented policy approach where biobased solutions could play a role. Giulia Gregori underlined that there is the need to update government policies to reflect that bio-based products are beyond the research stage and are currently being commercialised. Gernot Klepper stressed that sustainability certification systems are influenced by government regulations, thus it is important to develop regulations through a multi-stakeholder approach. Ole Jørgen Marvik underscored that governments have introduced measures to support biofuels but not biomaterials and biochemicals. Marta Gomez San Juan remarked the importance of developing a global framework for the bio-economy but also of considering local opportunities and trade-offs.

Key takeaways and knowledge gaps

• Bio-based products can support the transition to a circular low-carbon economy. Over 60 countries have adopted bio-economy strategies, which differ in scope and definitions.

• A suite of policy instruments is needed to support the development of this industry, including public procurement, incentives, and regulations.

• The bio-economy can generate innovative value chains and create links between usually unrelated sectors. This cross-sectoral nature requires to break silo-thinking in policy making.

• Further research is needed on how to design standards and certifications, ensure feedstock security, and address possible sustainability trade-offs.

From left to right: Mary Maxon, Ole Jørgen Marvik, Marta Gomez San Juan, Christian Patermann, Gernot Klepper, and Giulia Gregori.

Session 3: International co-operation to accelerate green technology innovation and transfer

Jens Lundsgaard, Deputy Director at the OECD Directorate for Science, Technology and Innovation, moderated this session that focused on the challenges and best practices for international cooperation on green science and innovation, and key lessons learnt from international collaboration on COVID-19 research for the green transition.

In her scene-setting presentation, Alessandra Colecchia, Head of the Science and Technology Policy Division at the OECD Directorate for Science, Technology and Innovation, highlighted that today’s strategic competition in science, technology and innovation (STI) and geographic concentration of the mineral resources needed for several green technologies create some challenges for international STI cooperation. At the same time, she underlined that international cooperation was at the heart of the STI response to COVID-19, including through better data sharing and collaborative platforms. She presented three key elements that could improve international green STI cooperation. First, collaborative platforms, such as the Access to Covid-19 Tools Accelerator (or ACT-Accelerator), have proved effective in the health sector and could be replicated in other domains such as climate change. Second, scaling up blended finance can help to accelerate the development and deployment of green technology. Thirdly, since COVID-19 has demonstrated that international mobilisation of STI for specific objectives is possible and can accelerate innovation, the application of a “global mission” framework to sustainability challenges should be considered.

David Elvira-Martinez, Head of Sanofi Global Corporate Public Policy, argued that the factors that helped to accelerate vaccines innovation were: enhanced data sharing; collaborative consultation and dialogue between industry and regulators to speed-up approval while ensuring safety and efficacy; private-private partnerships to accelerate R&D and manufacturing; the establishment of public-private risk-sharing governance mechanism that enabled early investments in production capacity. Building on these insights, he argued that continuous knowledge and data sharing, sustained investments in research across sectors, clear global regulatory and legal frameworks, and partnerships will be essential in addressing other global public good challenges, such as climate change. He concluded by focusing on green growth in the health sector, and highlighted that certain diseases can double or triple a person’s carbon emissions: better health means lower emissions. A common language for collecting data and baselining emissions in the biopharma value chain, and regulatory standards that account for low-carbon treatments and care delivery models are needed to accelerate green growth in the sector.

From left to right: David Elvia-Martinez, Alessandra Colecchia, and Jens Lundsgaard.

Joanna Drake, Deputy Director-General at the European Commission Directorate General for Research and Innovation, highlighted that the Horizon Europe Program aims at accelerating green research and innovation, which underpin the ambitions of the EU Green Deal and focuses on promoting collaboration between and beyond EU Member States. She mentioned that the EU has joined the Mission Innovation Initiative, which is a group of 22 countries aiming at accelerating clean energy innovation, and has a co-leadership role for the Clean Hydrogen and the Urban Transition missions. She also stressed that 48 cities joined the Urban Transition Mission, which builds on the EU’s Cities Mission under the Horizon Europe programme, during COP27

Amy Dietterich, Director of the Global Challenges Division at the World Intellectual Property Organisation (WIPO), underscored the key role that intellectual property (IP) plays in innovation systems: it creates incentives to innovate and makes information about innovations more transparently available. WIPO administers the Global Patent Cooperation Treaty (GPCT) that allows innovators to protect their innovations for a certain period of time, but requires them to disclose certain information. Building on the large amount of information collected in the context of the GPCT, the WIPO Green Database, which can be accessed for free, promotes diffusion of information about new green technologies and matching of their demand and supply.

John-Arne Røttingen, Ambassador for Global Health at the Norwegian Ministry of Foreign Affairs, argued that COVID-19 further stressed the importance of adopting a One Health approach in policymaking to capture the interconnections among health, climate change, and biodiversity loss. Then, he highlighted that an independent evaluation of the Access to Covid-19 Tools Accelerator (or ACT-Accelerator) found that it was effective in mobilising USD 23.7 billion for R&D, market shaping, and pool procurement of vaccines, diagnostics and therapeutics. However, there were large inequities in access to vaccines between low- and high-income countries. He echoed Professor Mazzucato’s comments on the role of conditionality in public support to ensure fair risk- and benefit- sharing between public and private sectors. Finally, he highlighted the need for global collective mechanisms to coordinate R&D, and called for the development of national, regional and global mission-oriented programmes. In this context, the Global Research Council, which comprises the heads of science and engineering funding agencies from around the world, is currently exploring ways to collaborate on mission-oriented innovation for sustainable development.

Virutual speakers, top row from left to right: Joanna Drake and John-Arne Røttingen.

Bottom row: Amy Dietterich

Xiaojun Grace Wang, Deputy Director for Programme and Operations at the UN Office for South-South Cooperation (UNOSSC), stressed that greater international cooperation, through SouthSouth cooperation among developing countries and with the support of developed countries through triangular partnerships, is needed to address global sustainability challenges. SouthSouth policy coordination and regional integration schemes can help developing countries to create the conditions for ambitious development agendas that involve structural transformation. Furthermore, increased South-South foreign direct investment and knowledge sharing would contribute to relieve the capital constraints that hinder investment in green technologies, and help developing countries to identify and adopt concrete actions for climate mitigation and adaptation.

The open discussion focused on the role of regulations to promote green innovation. David Elvira-Martinez argued that one of the lessons learned from the pandemic is that it is possible to have flexible regulations without jeopardising safety. Alessandra Colecchia highlighted that anticipatory governance of emerging technologies might promote more productive innovations that are better aligned with social needs. John-Arne Røttingen agreed on the positive impact of enhanced regulator–industry interactions, and argued that digital technologies can increase transparency in value chains. Amy Dietterich highlighted that an independent research from the Questrom School of Business (Boston University) concluded that IP was an important jump starter for the development of COVID-19 vaccines but also found three main sticking points: a lack of transparency in licensing agreements, a lack of access to vaccines developed by public funding, and “vaccine nationalism”. Joanna Drake remarked that responses to current and future crises must accelerate the green transition rather than slow it down.

Key takeaways and knowledge gaps

• Valuable lessons from the rapid development and roll-out of COVID-19 vaccines that could be applied to green STI include the use of collaborative platforms, increased cooperation between regulators and industry, and the development of innovative mechanisms to share risk between firms and governments.

• There is often a limited understanding of how the global IP system works and how it can be successfully leveraged for green innovation.

• Trans-disciplinary research, which combines knowledge from different scientific disciplines and public and private stakeholders, can help to address major global challenges.

• Governments should support multilateral cooperation on science and innovation, including SouthSouth and Triangular initiatives, since this can help to maximise benefits while managing cost and risk sharing.

• Further research is needed on how to design effective blended finance mechanisms since they can help to crowd in private capital and increase funding for the development and deployment of green technologies.

Session 4: Stimulating green innovation in SMEs

Martin Godel, Head of Small and Medium Size Enterprise Policy Division at the Swiss State Secretariat for Economic Affairs and Chair of OECD Committee on SMEs and Entrepreneurship, moderated this session that focused on greening existing SMEs and supporting green start-ups.

The scene-setting presentation by Céline Kauffmann, Head of the OECD SMEs and Entrepreneurship Division, illustrated the key role that SMEs play in the green transition as both innovators and adopters of green technologies. On the one hand, SMEs have a limited individual environmental footprint but in aggregate they account for 40-64% of industrial waste and 5070% of greenhouse gas emissions by the business sector. On the other hand, SMEs play a key role in green innovation, accounting for up to 70-90% of clean tech firms in some countries. The energy shock may hinder SMEs capacity to invest in green technologies, especially because many firms are coming out of the COVID-19 crisis heavily indebted. Critical areas for government intervention include: promoting the development of green skills, helping eco-innovators commercialise their work, and addressing barriers that constrain access to finance. The OECD work shows that there is a need to address both demand- and supply-side barriers to access finance. Finally, she highlighted the need to adapt disclosure requirements that were designed for big companies to SMEs and smaller companies.

Arvinder Kainth, Industrial Technology Advisor at the Canadian National Research Council (NRC), described the functioning of the NRC’s Industrial Research Assistance Programme (IRAP), which is Canada’s leading innovation assistance programme for SMEs. Central to the IRAP model is a wide network of advisors, who are located in 106 communities across Canada and are private sector professionals with over 20 years of experience in SMEs and multinationals. This diffuse network allows working regularly alongside the client SMEs, providing timely advice, connections and finance to accelerate their growth. The program also provided grants amounting to around $300 million to 1 000 clean tech SMEs in the last four years. Supported SMEs are developing technologies for emissions reduction, climate change remediation, clean transportation, energy storage, biofuels, carbon capture and sequestration, and hydrogen.

Trond Moe, Managing Director of the Nordic Environment Finance Corporation (NEFCO), explained that NEFCO, which is an international finance institution owned by the five Nordic countries, aims to accelerate the green transition by financing green SMEs that have the potential to scale up globally. He highlighted that promising start-ups often have access to equity financing but not to commercial debt. This is because fastgrowing small companies lack assets and are considered high-risk due to their lack of historic performance records by traditional banks. NEFCO aims to cover this financing gap. Finally, he highlighted that the EU’s new green taxonomy set objective criteria to identify “green” companies, but its technical details can be too complex for SMEs. As SMEs will be required to report on them by 2026, it will be important to accompany them in this process.

Presentation by Céline Kauffmann, Head of the SME and Entrepreneurship Division, OECD

Véronique Willems, Secretary-General at SMEunited, highlighted that many SMEs are financially constrained because they have used their savings to keep the companies afloat during the pandemic and are highly indebted as COVID-19 support measures mostly consisted of loans. These elements and current high energy prices have led SMEs to stop investing, including in green technologies. She described four key enabling factors to the greening of SMEs. First, a stable policy framework with clear targets. Second, awareness and know-how. This entails easily accessible neutral information on available technologies, technical assistance on the ground, and capacity building of SME organisations. Third, funding. It is important to have tools to provide the upfront financing for investing in green technologies due to the negative impacts of the multiple crises on SMEs’ capacity to invest. Fourth, programs need to be in place to provide workers and entrepreneurs with green skills.

Pamela Jouven, Director at the UK SME Climate Hub, presented the business model used by the Climate Hub to address both knowledge and capacity gaps in SMEs. The Hub provides a one-stop shop where SMEs can find the tools and resources to reduce their carbon emissions. These include: a business carbon calculator that provides SMEs with estimates of their Scope 1, 2 and 3 emissions; an online course for SMEs (i.e. ClimateFit) that provides guidance on mainstreaming climate action in governance, supply chain management, employee engagement and other fields; and information on available funding opportunities for greening businesses. Finally, the Hub has just launched a reporting tool to help SMEs communicate on the progress they have made on their net-zero commitments.

The open discussion focused on the topics of skills development and how to ensure that reporting requirements act as springboard for SMEs’ greener growth. Arvinder Kainth highlighted that exposure to international markets is critical for clean tech SMEs to grow, and that NRC provides funding to small companies to participate in international co-innovation projects and supports them in joining international value chains. Véronique Willems stressed that reskilling and upskilling is a joint responsibility of all social partners (e.g. employers, authorities, workers). Trond Moe remarked that simplified and standardised ESG reporting could help SMEs to leverage their sustainability performance to access financing. Pamela Jouven argued that ESG reporting may also help SMEs to signal their better environmental performance to corporates looking into greening their supply chain. Céline Kauffmann underlined that reporting requirements tend to exempt SMEs that are under certain thresholds, and this may act as a barrier to growth since SMEs may be tempted to remain below these thresholds.

Key takeaways and knowledge gaps

• SMEs are crucial to a successful green transition given their large aggregate environmental footprint and key role in developing green innovations.

• Further evidence on how specific actions for climate mitigation can reduce costs and help SMEs to become more resilient would be valuable.

• More information and data are needed on the skills implications of the green and digital transitions, and how their interaction could affect SMEs.

• Further research could focus on the mechanisms to finance the scaling-up of green SMEs and whether dedicated financial institutions are needed.

Virtual speakers, top row from left to right: Véronique Willems, and Arvinder Kainth Bottom row: Pamela Jouven.

Session 5: A new push for hydrogen

Noé van Hulst, Chair of the International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE), moderated this session that explored the role of low-carbon hydrogen in the net-zero transition.

Timur Gül, Head of Energy Technology Policy Division at International Energy Agency (IEA), opened his scene-setting presentation by highlighting that hydrogen is not a new vector in the energy system: 94 million tonnes of hydrogen were produced in 2021, primarily for refineries and the chemical industry. The new push is about producing low-carbon hydrogen and favouring its adoption in “hard to abate” sectors. The IEA data shows that the pipeline of announced lowcarbon hydrogen projects is growing fast: annual production could reach 24 million tonnes by 2030, which is equivalent - if all announced projects were to be realised - to 70% of the annual lowcarbon hydrogen production needed to reach government net-zero pledges. He highlighted the role of international trade for the adoption of lowcarbon hydrogen, and that Japan and Australia have spearheaded efforts on this front with a first shipment of liquefied hydrogen from Australian to Japan in February 2022. He concluded by underlining that lack of infrastructure, of clear trade rules and regulations are among the key barriers for the growth of international trade in low-carbon hydrogen.

Eiji Ohira, Strategy Architect at the Fuel Cell and Hydrogen Technology Office of the Japanese New Energy and Industrial Technology Development Organisation (NEDO), underscored the long-standing support to hydrogen R&D in Japan, which started in 1970s and currently builds on a roadmap to 2050. The roadmap envisages to sensibly increase low-carbon hydrogen production in Japan by 2030 by focusing on two main pillars. First, increasing the number of liquid hydrogen tankers and, second, scaling-up of hydrogen production through different technologies, including water electrolysation. He highlighted the importance of scaling up hydrogen use in the transport sector, in particular for heavyduty and commercial vehicles. Finally, he underlined ongoing initiatives to support the development of a regional hydrogen energy system in conjunction with local governments, akin to the European Hydrogen Valley initiative.

Presentation by Timur Gül, Head of the Energy Technology Policy Division, IEA

Angel Caviedes, Head of New Energies Unit at the Chilean Ministry of Energy, stressed that lowcarbon hydrogen plays a crucial role in achieving carbon neutrality in Chile by 2050: projections show that hydrogen could contribute 25% of the required emissions reductions. He reported that the government has set up an inter-ministerial committee for the development of a low-carbon hydrogen industry, and described key milestones and challenges to support domestic growth of this industry. First, the need to grow domestic demand from 52 000 tons per year today to 5 million tons by 2050, which would represent just over 1% of expected global demand. Second, the creation of high-value local employment, increasing R&D, and technology transfer. Third, ensuring that the development of this industry is respectful of the environment, and integrates local communities in a fair and balanced manner. He concluded by highlighting the importance of strengthening domestic export capacity, and that first exports of low-carbon hydrogen are expected by around 2030.

Christelle Werquin, Director at Hydrogen Europe, highlighted the three main pillars of the French hydrogen strategy. First, decarbonising “traditional” industrial users of hydrogen (e.g. refineries and the chemical industry) by increasing electrolyser production capacity up to 680 000 tons by 2030. Second, promoting hydrogen adoption in new sectors, including transport with heavy duty vehicles. Third, investing in research and innovation, skills, job adaptations and training. She also highlighted the importance to shift from a discussion of the energy used to produce hydrogen (e.g. renewables, nuclear, natural gas) to one on total greenhouse gases (or GHG) emissions, and recalled that EU Taxonomy for Sustainable Activities sets the GHG emissions thresholds for “sustainable hydrogen” production. Finally, she argued that the US Inflation Reduction Act is a game changer for the industry, and underlined the need of setting clear standards and regulations in Europe to support domestic industry. She concluded that France will launch a mechanism to offset the higher production costs of low-carbon hydrogen in 2023.

From left to right: Timur Gül, Chistelle Werquin, Noé van Hulst, Eiji Ohira and Antoine Dechezleprêtre.

Antoine Dechezleprêtre, Senior Economist at the OECD Science, Technology and Innovation Directorate, highlighted that most of OECD countries have set deployment capacity rather than cost reduction targets for hydrogen, and argued that latter type of targets should be at the centre of national hydrogen strategies. He also stressed that the need for coordination and harmonisation across countries on regulations on guarantee of origin and purity of hydrogen. Such changes are need for the creation of an international hydrogen market, which is likely to lead to important economy of scale in hydrogen production. The possible risk of slowing down the decarbonisation of the power sector due to competing use of low-carbon energy source to produce hydrogen should be carefully considered.

In the open discussion, speakers focused on the challenges and policy solutions to promote cost reduction in hydrogen production. Timur Gül stressed that electrolysers are a technology ready for market deployment, therefore policies should support their commercialisation while also continuing to support R&D. Christelle Werquin highlighted the projects under the EU “Important Projects of Common European Interest” (or IPCEIs) framework have the potential to reduce the cost of electrolysers by a factor of 4. Eiji Ohira remarked the importance of considering both capital (i.e. CAPEX) and operating (i.e.OPEX) cost, including maintenance cost when evaluating hydrogen projects. Antoine Dechezleprêtre stressed that much could be learnt from the policies to promote innovation in solar and wind energy technologies to identify the optimal policy mix for bringing down the cost of low-carbon hydrogen. Angel Caviedes underscored that energy prices are a key component of the levelised cost of hydrogen.

Key takeaways and knowledge gaps

• If all planned projects are built, the production of low-carbon hydrogen could reach 24 million tonnes per year by 2030.

• Research could look at the successful experience of solar and wind energy innovation to identify the optimal policy mix for promoting hydrogen adoption.

• International trade is needed to unlock the potential of hydrogen. Further research is needed to understand the costs of transport, logistics, and relative bottlenecks. The geopolitical implications of dependence on imported hydrogen should be carefully considered.

• Low-carbon hydrogen could initially tap into the existing market for hydrogen, such as for refineries and the chemical industry. Further research is needed to evaluate barriers and opportunities for low-carbon hydrogen adoption also in potential new markets, including transport and heavy industry.

Speakers and Panellists

High-Level Opening Session

Master of ceremony:

• Jo TYNDALL, Director, Environment Directorate, OECD

Moderator:

• Kerri-Ann JONES, Deputy Secretary General, OECD

Welcome remarks:

• Mathias CORMANN, Secretary-General, OECD

Scene-setting presentation:

• Mariana MAZZUCATO, Professor, University College London (UCL)

Session 1

High-Level Keynote speeches and panel discussion:

• Stuart NASH, Minister of Economic and Regional Development, Tourism, Small Business and Forestry, New Zealand

• Michaela SPAETH, Ambassador, Permanent Representative to the OECD, Germany

• Javiera PETERSEN, Undersecretary of Economy and Small Business, Ministry of Economy, Development and Tourism, Chile

• Jens LUNDSGAARD, Deputy Director, Directorate for Science, Technology and Innovation, OECD

Mission-oriented innovation for a net-zero and energy secure future

Moderator:

• Yongsuk JANG, Senior Research Fellow, Science and Technology Policy Institute (STEPI); Chair, OECD Committee for Scientific and Technological Policy

Scene-setter:

• Ann METTLER, Vice-President for Europe, Breakthrough Energy

Session 2

Panellists:

• Matthias WEBER, Head of Center for Innovation Systems & Policy, Austrian Institute of Technology

• Göran MARKLUND, Deputy Director General, Vinnova, Sweden; Chair, OECD Working Group on Innovation and Technology

• Jennifer GERBI, Acting Director, Advanced Research Projects Agency-Energy (ARPA-E), US Department of Energy Technology

• Philippe LARRUE, Policy Analyst, Science and Technology Policy Division, OECD

Innovation in bio-economy sectors for a circular economy

Moderator:

• Christian PATERMANN, Former Director EU Commission and Advisor to the German Government on bio-economy matters

Scene-setter:

• Mary MAXON, Executive Director, BioFutures, Schmidt Futures, United States

Panellists:

• Ole Jørgen MARVIK, Special Advisor for Life Sciences, Innovation Norway; Delegate OECD Working Party on Biotechnology, Nanotechnology and Converging Technologies (WPBNCT)

• Giulia GREGORI, Head of Strategic Planning & Institutional Communication, Novamont, Italy

• Gernot KLEPPER, Chairman, International Sustainability & Carbon Certification (ISCC System)

• Marta GOMEZ SAN JUAN, Senior Expert Circular Bioeconomy, Office of Climate Change, Biodiversity and Environment, Food and Agriculture Organisation (FAO)

Session 3

International co-operation to accelerate green technology innovation and transfer

Moderator:

• Jens LUNDSGAARD, Deputy Director, Directorate for Science, Technology and Innovation, OECD

Scene-setters:

• Alessandra COLECCHIA, Head of Division, Science and Technology Policy Division, Directorate for Science, Technology and Innovation, OECD

• David ELVIRA, Head of Global Corporate Public Policy, Sanofi

Session 4

Stimulating green innovation in SMEs

Moderator:

• Martin GODEL, Head of Small & Medium Size Enterprise Policy Division, State Secretariat for Economic Affairs, Switzerland; Chair OECD Committee on SME’s and Entrepreneurship (CSMEE)

Scene-setter:

• Céline KAUFFMANN, Head of the SME and Entrepreneurship Division, OECD

Session 5

A new push for hydrogen

Moderator:

• Noé VAN HULST, Chair, International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE)

Scene-setter:

• Timur GÜL, Head of the Energy Technology Policy, International Energy Agency (IEA)

Panellists:

• Joanna DRAKE, Deputy Director-General, Directorate General for Research and Innovation of the European Commission

• Amy DIETTERICH, Director of the Global Challenges Division, World Intellectual Property Organization (WIPO)

• Xiaojun Grace WANG, Director, Ad Interim, UN Office for South-South Cooperation (UNOSSC) (via video message)

• John-Arne RØTTINGEN, Ambassador for Global Health, Ministry of Foreign Affairs, Norway

Panellists:

• Trond MOE, Managing Director, Nordic Environment Finance Corporation (NEFCO)

• Pamela JOUVEN, Director, SMEs Climate Hub

• Véronique WILLEMS, Secretary General, SMEunited

• Arvinder KAINTH, Industrial Technology Advisor, National Research Council, Canada

Panellists:

• Eiji OHIRA, Strategy Architect, Fuel Cell and Hydrogen Technology Office, New Energy and Industrial Technology Development Organization (NEDO), Japan

• Angel CAVIEDES, Head of the New Energies Unit, Ministry of Energy, Chile (via ZOOM)

• Christelle WERQUIN, General Delegate, France Hydrogène

• Antoine DECHEZLEPRÊTRE

Senior Economist, Productivity, Innovation and Entrepreneurship Division, OECD

Key references

Cordonnier, J. and D. Saygin (2022), “Green hydrogen opportunities for emerging and developing economies: Identifying success factors for market development and building enabling conditions”, OECD Environment Working Papers, No. 205, OECD Publishing, Paris, https://doi.org/10.1787/53ad9f22-en.

OECD (2022), Policies to Support Green Entrepreneurship: Building a Hub for Green Entrepreneurship in Denmark, OECD Studies on SMEs and Entrepreneurship, OECD Publishing, Paris, https://doi.org/10.1787/e92b1946-en

OECD (2022) Horizontal project on Building Climate and Economic Resilience in the Transition to a Low-Carbon Economy https://www.oecd.org/env/cc/brochure-horizontal-project-on-climate-and-economic-resilience.pdf

Cammeraat, E., A. Dechezleprêtre and G. Lalanne (2022), “Innovation and industrial policies for green hydrogen”, OECD Science, Technology and Industry Policy Papers, No. 125, OECD Publishing, Paris, https://doi.org/10.1787/f0bb5d8c-en

OECD (2022), Global Plastics Outlook: Economic Drivers, Environmental Impacts and Policy Options, OECD Publishing, Paris, https://doi.org/10.1787/de747aef-en

OECD (2022), Agricultural Policy Monitoring and Evaluation 2022: Reforming Agricultural Policies for Climate Change Mitigation, OECD Publishing, Paris, https://doi.org/10.1787/7f4542bf-en

OECD (2022), Enabling Conditions for Bioenergy Finance and Investment in Colombia, Green Finance and Investment, OECD Publishing, Paris, https://doi.org/10.1787/20f760d6-en

Dechezleprêtre, A. and T. Kruse (2022), “The effect of climate policy on innovation and economic performance along the supply chain: A firm- and sector-level analysis”, OECD Environment Working Papers, No. 189, OECD Publishing, Paris, https://doi.org/10.1787/3569283a-en

OECD (2021), Policies for a Carbon-Neutral Industry in the Netherlands, OECD Publishing, Paris, https://doi.org/10.1787/6813bf38-en

OECD (2021), “Effective policies to foster high-risk/high-reward research”, OECD Science, Technology and Industry Policy Papers, No. 112, OECD Publishing, Paris, https://doi.org/10.1787/06913b3b-en

OECD (2021), OECD Science, Technology and Innovation Outlook 2021: Times of Crisis and Opportunity, OECD Publishing, Paris, https://doi.org/10.1787/75f79015-en

Larrue, P. (2021), “The design and implementation of mission-oriented innovation policies: A new systemic policy approach to address societal challenges”, OECD Science, Technology and Industry Policy Papers, No. 100, OECD Publishing, Paris, https://doi.org/10.1787/3f6c76a4-en

IEA (2021), Global Hydrogen Review 2021, IEA, Paris https://www.iea.org/reports/global-hydrogen-review-2021

IEA (2021), CCUS in Industry and Transformation, https://www.iea.org/reports/ccus-in-industry-and-transformation

IEA (2021), Direct Air Capture, IEA, Paris https://www.iea.org/reports/direct-air-capture

OECD (2021), “No net zero without SMEs: Exploring the key issues for greening SMEs and green entrepreneurship”, OECD SME and Entrepreneurship Papers, No. 30, OECD Publishing, Paris, https://doi.org/10.1787/bab63915-en

OECD (2021), “An in-depth analysis of one year of SME and entrepreneurship policy responses to COVID-19: Lessons learned for the path to recovery”, OECD SME and Entrepreneurship Papers, No. 25, OECD Publishing, Paris, https://doi.org/10.1787/6407deee-en

OECD (2021), “Business advice for entrepreneurship and small firms”, OECD SME and Entrepreneurship Papers, No. 23, OECD Publishing, Paris, https://doi.org/10.1787/299705ad-en

IEA (2020), Energy Technology Perspectives 2020 - Special Report on Carbon Capture Utilisation and StorageCCUS in Clean Energy Transitions, IEA, Paris, https://iea.blob.core.windows.net/assets/181b48b4-323f-454d-96fb0bb1889d96a9/CCUS_in_clean_energy_transitions.pdf

OECD – OPSI (2020), “Anticipatory Innovation Governance: What is it, how it works, and why we need it more more than ever before”, https://oecd-opsi.org/wp-content/uploads/2020/11/AnticipatoryInnovationGovernance-NoteNov2020.pdf

OECD (2020), “The effects of R&D tax incentives and their role in the innovation policy mix: Findings from the OECD microBeRD project, 2016-19”, OECD Science, Technology and Industry Policy Papers, No. 92, OECD Publishing, Paris, https://doi.org/10.1787/65234003-en

Borowiecki, M., et al. (2019), “Supporting research for sustainable development”, OECD Science, Technology and Industry Policy Papers, No. 78, OECD Publishing, Paris, https://doi.org/10.1787/6c9b7be4-en

Diakosavvas, D. and C. Frezal (2019), “Bio-economy and the sustainability of the agriculture and food system: Opportunities and policy challenges”, OECD Food, Agriculture and Fisheries Papers, No. 136, OECD Publishing, Paris, https://doi.org/10.1787/d0ad045d-en

Philp, J. and D. Winickoff (2019), “Innovation ecosystems in the bioeconomy”, OECD Science, Technology and Industry Policy Papers, No. 76, OECD Publishing, Paris, https://doi.org/10.1787/e2e3d8a1-en

Philp, J. and D. Winickoff (2018), “Realising the circular bioeconomy”, OECD Science, Technology and Industry Policy Papers, No. 60, OECD Publishing, Paris, https://doi.org/10.1787/31bb2345-en

OECD (2018), Meeting Policy Challenges for a Sustainable Bioeconomy, OECD Publishing, Paris, https://doi.org/10.1787/9789264292345-en

Related websites

• OECD Green Recovery Hub

www.oecd.org/coronavirus/en/themes/green-recovery

• OECD Green Recovery Database

www.oecd.org/coronavirus/en/themes/green-recovery#green-recovery-database

• IEA - Fuels and Technologies - Hydrogen www.iea.org/fuels-and-technologies/hydrogen

• IEA - Data and Statistics - Renewables and waste www.iea.org/data-and-statistics

• OECD - OPSI: Mission-Oriented Innovation: Tackling society’s grand challenges

https://oecd-opsi.org/work-areas/mission-oriented-innovation/

• OECD Database - Environment-related technology development by inventor country

https://doi.org/10.1787/data-00760-en

• OECD Global Plastics Outlook

www.oecd.org/environment/plastics/

• OECD Science, Technology and Innovation Outlook

www.oecd.org/sti/science-technology-innovation-outlook/

• OECD Digital for SMEs Global Initiative

www.oecd.org/digital/sme/

• OECD-OPSI-MBCGI: Achieving Cross-Border Government Innovation

https://cross-border.oecd-opsi.org/#intro

• OECD Statistics - International collaboration in technology development (rates)

https://stats.oecd.org/Index.aspx?DataSetCode=PAT_COL_RATES

Relevant OECD Committees

The theme of this year’s GGSD Forum draws on the work of the Economic Policy Committee (EPC), Employment, Labour and Social Affairs Committee (ELSA), Investment Committee, Committee on Fiscal Affairs (CFA), Joint Meetingson Tax and Environment Experts (JMTEE), Council Working Party on Shipbuilding (WP6), the Trade Committee (TC), Regional Development Policy Committee (RDPC), RDPC’s Working Party on Urban Policy (WPURB), Public Governance Committee, Committee for Scientific and Technological Policy (CSTP), the Environment Policy Committee (EPOC), the Tourism Committee, as well as the International Energy Agency (IEA) and the International Transport Forum (ITF).