The market won’t solve the climate crisis. So let’s make sure governments step up to stimulate innovation for a more sustainable world.
By Gerard Govers
With a few rare exceptions, we all know it by now. Our planet is rapidly getting warmer, with some very unpleasant consequences, including rising sea levels, acidifying oceans, huge biodiversity loss and reduced agricultural productivity.
We also agree on the cause of this suffering: human activities, almost all of which directly or indirectly release greenhouse gases into the atmosphere. And it’s the basic necessities of life – energy and food production – that account for the vast majority of these emissions.
Meanwhile, things are moving in the wrong direction: both the world population and global greenhouse gas emissions keep increasing. Even if emissions were to stabilise now, we are looking at a warming of around 3°C by the end of the century.
So we’re pretty much doomed.
Unless we start doing things differently. But what we need is not so much a different way of life as a different technology.
We need technology that can provide our energy, cement, steel and food without emitting CO2.
We need technology that companies and consumers are eager to adopt – because it is better.
And we need it on a scale that is hard to fathom.
Things are moving in the wrong direction: Both the world population and global greenhouse gas emissions keep increasing
We already use gargantuan amounts of energy: up to 600 exajoules (that’s 600 with 18 zeros) a year. That number is only going to grow, because there will be more people in the future and no advanced society can do without stacks of energy.
Historian Ian Morris has done the maths: a primitive hunter-gatherer consumed about 4,000 kcal a day, of which 2,000 kcal was in the food they ate. Westerners now consume on average about 60 times as much: 230,000 kcal a day. If we want to provide the entire world population with, say, 150,000 kcal per day in 2050 – meaning that we in the West are going to make do with 35% less energy – then on an annual basis the world population will need about 2,000 exajoules.
That is huge.
We must also make sure that green energy gets to businesses and consumers, is used efficiently, and that we have not less but more flexibility and comfort.
And there is still some work to do: industrial processes like cement and steel production release enormous amounts of CO2. This has to stop.
Finally, there is agriculture, especially cattle farming. About half of CO2 emissions from agriculture are related to raising cattle for meat and dairy. Only when we can produce food without emissions are we getting close to reaching our goal.
Already, we use gargantuan amounts of energy: up to 600 exajoules (that’s 600 with 18 zeros) a year - a number that will grow, because there will be more people
Some believe the technology we need is already here and should just be rolled out. According to them, we need a radical socio-political change, a system change, rather than even more technology.
That position, I think, is not just a bit short of the mark. It is simply incorrect.
We’re hopelessly behind on many technologies that are needed for a sustainable, green energy system. While we may be on track for producing electric cars, we’ll need greater efforts for most other technologies.
Also, we cannot possibly know in advance exactly what technology we will use to solve our problems. Henry Ford is reported to have said that if he had asked his customers what they wanted, they would have said, ‘faster horses’.
Ford’s wisdom illustrates our inability to imagine a different world where innovation creates new solutions to old problems. We can perfectly imagine making livestock farming more animal- and environment-friendly, but we find it much harder to envisage a food system where the bulk of livestock farming disappears and we get our proteins from microorganisms. Yet the latter is also a possibility. The first ‘animal-free’ milk and meat substitutes that actually taste like the real thing are already on the market.
We’re hopelessly behind on many technologies that are needed for a sustainable, green energy system
The main questions, then, are where that new technology should come from and how we can bring it to market – whether that market is an electricity supplier, a company that makes shoes, a farmer or a consumer, here or in Africa. This technology should ensure we can continue to do what we love without further driving the climate to hell, and should make it possible for Africans to finally extricate themselves from the quagmire of underdevelopment.
This is a huge task, but innovation has already helped us make such a quantum leap on several occasions. The agricultural innovations of the last 10,000 years, such as animal husbandry and fertilisation of fields, mostly led to an increase in population. But throughout the agricultural era, the vast majority remained poverty-stricken, with an annual income corresponding to less than €1,000 in today’s money.
Moreover, on average they lived for less than 40 years. It was with the industrial revolution, which only really got going 150 years ago in some countries, that the prosperity of ordinary men and women started to increase: this happened mainly in the West until around 1980, and then also in the rest of the world.
This growth in prosperity is directly linked to our energy consumption: only when energy from fossil fuels became available in large quantities could our standard of living really start to rise, everyone go to school, infant mortality be minimised (from 50 to less than 0.5%) and life expectancy increase (from around 35 to 70 and more).
We now need a transformation comparable in scale and impact to the industrial revolution.
The entire energy system that has brought us unprecedented prosperity over the past 150 years needs to be shaken up and replaced by something different, something better. Industrial production and agriculture must also fundamentally change. All in all, this is an unusually big but also unusually exciting challenge.
The transformation we need now is comparable in scale and impact to the industrial revolution
The good news is that the process is already under way. The best example is the electric car, which may become the standard in a few years, meaning we will all drive much greener.
A few other green technologies are now ready for the big roll-out: electricity produced from wind or solar is often cheaper than electricity derived from coal and natural gas. The price evolution of green electricity is unpredictable: 10 years ago, electricity from solar panels cost about four times as much as that from fossil fuels. Now, solar energy is already out-competing existing fossil fuel power plants and prices are still falling.
Ultimately, a world is emerging in which energy production in the warm, sunny regions of the planet becomes unbelievably cheap. We have as yet no idea what this could mean for global society.
But even if that dreamscape of near-free energy comes true, we still have a long way to go. We need technology to cheaply store electricity, transport it, make cheap green fuels from wind or solar energy, produce steel and cement in a green way, make meat and dairy substitutes and so on.
To a large extent, that technology has yet to be developed. Just one example: no one knows how to green steel production on the scale we need.
A world is emerging in which energy production in the warm, sunny regions of the planet becomes unbelievably cheap
Some think the free market will solve this. The market adepts have long been telling us that if we make energy markets work in a smart way – including a price for CO2 emissions – things will sort themselves out.
They do have a point: it is only natural that an energy producer that pollutes the atmosphere should pay for it. It is also true that if the producer has to pay for emissions, it will tend to produce the necessary energy with less or even none. Pricing CO2, a market innovation, thus encourages technological innovation: more expensive CO2 will undoubtedly make more companies interested in CO2 storage and reuse, hence reducing emissions. We are already seeing the first results of this in Europe.
But we are wrong if we think that, with or without a carbon price, the corporate sector will manage the innovation alone.
The Italian-American economist Mariana Mazzucato, in The Entrepreneurial State, describes the process of business as innovator. It boils down to this: yes, companies are innovating in abundance, but if you give them a free playing field, they will concentrate on those innovations that can be made market-ready in a relatively short period of time – less than five years – and on those relatively certain to result in profitable products or services.
Apple is a favourite example: neither touchscreen nor mouse were invented by the company, but it was the first to integrate these new technologies and many others into good-looking, well-performing products and then market them at a high profit.
This innovation strategy is not just Apple’s, but that of just about all companies: after all, companies need to pay wages and keep shareholders happy, and this is only possible if investments pay off in the relatively short term.
We are wrong if we think that the corporate sector will manage the innovation alone
The broader IT framework, in which a company like Apple was able to grow and prosper, was partly made possible by the US government, which not only pumped a lot of money into IT research, but also developed an entire innovation system. The state deliberately stimulated research in those directions considered strategically important and kept its finger on the pulse.
It was certainly not about funding just any research, but about concrete, steered questioning in which research that no longer made progress was halted. The government dared to say clearly what it needed, was only prepared to invest if the research actually went in that direction and was not afraid to pull the plug if a research track went dead.
Furthermore, the whole innovation chain was supported, from fundamental research to marketable products, with the state’s role as financier and driver gradually becoming less important the closer a product came to market. One of the most striking results of this research is, yes, the Internet, for which the foundations were laid by the US DARPA (Defence Advanced Research Project Agency) and the European Organization for Nuclear Research, CERN.
By the way, the state is not only a fundamental innovator of information technology. In the development of new drugs, too, it is often the state that takes the first steps. This is not surprising: the distance to market in the search for fundamentally new molecules from which medicines can potentially be made is so great that pharmaceutical giants prefer not to venture into this field.
And then there is space travel: a government organisation (NASA) managed to take people to the moon and back in 1969: only now are there timid private attempts at manned space travel. Here, too, the government had to boldly initiate the innovation and drive and monitor the whole process.
Apple's success was made possible by the US government, which pumped a lot of money into IT research and developed an entire innovation system
While Google and Apple are now quite capable of creating fun, new IT products and services, ‘product marketing’ in the energy sector remains much trickier. This also has to do with the nature of investment. In the terminology used by Charlie Wilson and colleagues at the University of East Anglia’s Tyndall Centre for Climate Change Research, in a recent publication in Science, basic energy infrastructure is often very massive (‘lumpy’). It involves large investments that must be made all at once.
For example, what company is going to single-handedly commit to building out a smart and interconnected power grid for Europe? Or make heavy ultra-high-voltage electrical power lines that can connect us to the sunny Sahara where we can build massive solar farms? The infrastructure needed cannot be built without extensive international agreements and massive investments in research.
Only when all that is agreed, the necessary knowledge is developed and such a grid is actually implemented do consumers come into the picture and profits are able to be made by companies. They will offer customers more ‘granular’ products (relatively small devices), which respond optimally to such a smart grid – such as home batteries, all kinds of programmable devices, but also battery complexes that allow an entire hospital to be powered 24 hours a day.
At that point, industry will be only too happy to provide the necessary services and will even be willing to take over (partially). But first, governments must take control, dare to direct and dare to invest.
If we compare it to building a house, the government has to take care of the large-scale investments like foundations, walls and roofs that are long-lasting and that must be put down in one go. After that, the private sector will take care of the finishing touches with granular products bought separately at our convenience: nice furniture, nice curtains and, who knows, maybe a jacuzzi.
Governments must take control, dare to direct and dare to invest
Because of their relatively short time horizon, established companies tend to focus on innovations that take them further along an already known path: more economical cars, for example, or slightly more efficient transformers. In this way, aircraft have become significantly less polluting in recent years. But companies simply avoid a radical turnaround that could cause financial uncertainty and possibly even bankruptcy.
This fear of radical innovation is human nature: the bravery to embark on an unknown path is not given to many. New, small companies often may have the appetite to try something totally new, but they rarely if ever have the necessary capital to push the incumbents out of the market. (Tesla is a notorious exception.)
So if we leave it to companies alone, we run the risk of being saddled with optimised but still polluting tech that cannot be pushed out of the market, thus stalling the necessary transition. Gambling on a carbon tax as the only means of avoiding this is dangerous: it is far from certain that the essential new technology will come about in this scenario, because, for instance, a significant proportion of companies or consumers might prefer not to pay that tax or because companies simply would not have the resources to develop and introduce the costly innovations.
So: innovation in the energy sector must be driven by governments.
Fear of radical innovation is human nature: the bravery to embark on an unknown path is not given to many
Smart business leaders realise this. Writing in Science, Bill Gates has called for a tripling of US government investment in energy innovation. Fatih Birol, executive director at the IEA, puts it this way: ‘The world urgently needs to put a laser-like focus on bringing down global emissions. This calls for a grand coalition encompassing governments, investors, companies and everyone else who is committed to tackling climate change.’
These urgent calls are absolutely necessary. The US government currently invests about $8 billion a year in clean energy research, which includes nuclear power. That may be a large amount, but it is less than 2% of the total R&D effort in the US – the big chunks are for medical research and information technology – and less than 0.04% of US GDP.
And the US is no exception. Many European countries invest even less.
Let this sink in for a moment: the richest societies on the planet invest only a tiny crumb in the innovation of their energy systems, while it is abundantly clear that energy is the lifeblood of a high-technology civilisation and that we will need a completely new system within a few decades.
Indeed, the more you think about it, the more incredible it becomes.
The richest countries invest only a tiny crumb in the innovation of their energy systems, while it is clear that we will need a completely new system
Stepping up funding is an important step. Without substantial investment, real innovation is not possible.
But it is not enough. We need, just as with information technology and drug development, to create a real innovation system for green technology. A system driven not just by money but one where people work from a single vision, so that governments can really steer and we can all make sure that the most needed technologies are the ones that get developed.
That vision should not be rigid. After all, the technological landscape is constantly changing.
On the other hand, direction is needed: if companies or consumers have no idea where things are going, they will not play along and innovation will eventually bleed to death. A consistent, clear policy does pay off.
Such an innovation policy is not without risk; quite the contrary. Governments can and will make mistakes. The consequences of such errors need to be thought through in advance because otherwise there is a real risk that the first big failure will undermine the system.
We need to create an innovation system for green technology - a system driven not just by money but one where people work from a single vision
This is shown by the Solyndra debacle in the US. Solyndra, betting on an alternative technology to make solar panels, received over $500 million from the government, but went under due to silicon-based panels rapidly becoming cheaper, leaving a trail of suspicion in its wake.
Transparency, well-informed decisions and good communication about those decisions are thus essential but do not constitute a watertight guarantee. Therefore, courageous political leadership will be needed to keep the innovation ship afloat even in difficult times: goals will not always be met because the new technology does not meet expectations and/or because someone else ends up developing an even better solution.
Courageous leadership is also needed because it will by no means always be the case that a national government can directly reap the benefits of the innovations it supports. Knowledge is mobile and, in many cases, can be adopted quite easily; China’s industry is currently benefitting fully from the innovations in solar cell technology that American and European research made possible. Gigantic factories are now being built in China to produce enough solar panels per year to replace 10 coal plants.
Transparency, well-informed decisions and good communication are essential. Therefore, courageous political leadership will be needed
It is to be expected that countries focusing on innovation can build a technological lead that also benefits their own industry and citizens. After all, innovating companies like an innovative ecosystem: they want creative universities and research institutions around them and want the government to support this whole process. This helps the entire society move forward.
Given the size of the necessary investments, we should dare to look on a European scale. The new European Commission’s Green Deal is certainly a step in the right direction, but the hesitation to take a leading role as government itself is still strongly present, while Europe should not just facilitate, it should also dare to steer. This will not only greatly increase the chances of a successful transition but, more importantly, ensure that Europe remains a prosperous, innovative region.
The COVID-19 crisis demonstrated the importance of strong governments. Only a well-functioning government can take targeted action and provide the necessary infrastructure and coordinated policy to prevent and control a crisis.
Moreover, the biotech revolution of the last 20 years made it possible to search for drugs and vaccines against the coronavirus faster and more accurately than ever before: without that technology, we would be as defenceless as we were against Spanish flu in 1918. That biotech revolution, like the IT revolution, is partly the result of an active, innovation-oriented government.
In my home country of Belgium, the government-supported VIB (Flemish Institute for Biotechnology) was one of the main links in an innovative biotech ecosystem that has grown there over the past two decades and from which vaccine and medicine development for coronavirus is now being deployed.
Countries focusing on innovation can build a technological lead that also benefits their own industry and citizens
This plea for more government-led innovation is not an appeal for unbridled techno-optimism. Technology is not going to solve everything. Spurring innovation is necessary but far from sufficient.
We will also have to take difficult political decisions such as ending fossil fuel subsidies. We will have to strive for better and fairer pay and trading systems, and we will have to factor ecological shocks into our economic models and indicators. We will have to support those who suffer from innovation (because their jobs disappear) and offer new prospects.
All this and much more is needed. But to avoid being left to the mercy of corporations, we need a massive innovation effort by governments.
Gerard Govers is Vice Rector of the Science, Engineering and Technology Group at the University of Leuven, Belgium. He’s also a full professor of geography at the Department of Earth and Environmental Sciences, and heads the university’s Sustainability Office.