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Update Paper 7: Low emissions technology and the innovation challenge
Summary of key points
- The cost of effective global and Australian mitigation will be materially lower if opportunities for innovation in low-emissions technologies are fully utilised.
- There is too little private investment in innovation generally in the absence of public fiscal support.
- The urgency of the adjustment task and the large change in incentives derived from carbon pricing justify a large transitional increase in public support for innovation related to low-emissions technology.
- Global public expenditure on research, development, demonstration and commercialisation of low-emissions technologies increased in the aftermath of the Great Crash of 2008, reversing several decades of decline in investment in innovation in alternative energy and energy saving technologies.
- The increased global effort has accelerated progress in cost reductions in low emissions energy across several technologies.
- Substantial increases in investment in innovation are still warranted.
- A new feature of the global innovation effort is a substantial contribution from China and then India.
- Australia should do its proportionate part as a developed country in the global innovation effort:
- in basic research focusing on areas where we have comparative advantage in research capacity and strong national interest in application;
- in commercialisation, following business priorities backed by investment commitments; and
- reducing other costs of innovation by expanding relevant high-level education and removing regulatory and legal barriers to new activities.
- Australian policy on research, development, demonstration and commercialisation has evolved in productive ways since the Review.
- New general mechanisms for supporting commercial research and development can play a productive role in delivering additional support for low-emissions innovation at the commercialisation end of the chain.
- To ensure the optimal level of innovation in Australia in the transition to a low-emissions economy, I propose a package of measures including:
- increasing support for public and private basic research;
- market-led support for private demonstration and commercialisation;
- the Low-Emissions Technology Commitment on total funding, leading to roughly a doubling of research, development and commercialisation expenditure to $2-3 billion per annum; and
- strong and independent governance arrangements.