initiatives absorb most of the uncertainty and not a little risk of developing new
energy technologies in the first place.
The ‘green’ energy industry is still in its early stages: even though development
of wind and solar power technologies received a big push in the 1970s (due to the
energy crisis), they are both still characterized by market and technological
uncertainty.
4 It will not develop ‘naturally’ through market forces, in part because
of embedded energy infrastructure, but also because of a failure of markets to value
sustainability or to punish waste and pollution. In the face of such uncertainty, the
business sector will not enter until the riskiest and most capital-intensive investments
have been made, or until there are coherent and systematic policy signals in place.
In a recent interview, Microsoft founder Bill Gates, one of the principals of the
American Energy Innovation Council (AEIC) recognized that ‘a key element to
get an energy breakthrough is more basic research. And that requires the govern -
ment to take the lead. Only when that research is pointing towards a product then
we can expect the private sector to kick in.’
5
As in the early stage of IT, biotech and nanotech industries, there is little
indication that the business sector alone would enter the new ‘green’ sector and
drive it forward in the absence of strong and active government policy. Indeed,
the Climate Policy Initiative (2013) reports that institutional investors contributed
with only US$0.4 billion to climate change mitigation and adaptation projects
(a minimal figure considering the US$70 trillion in assets that they manage); venture
capital, private equity and infrastructure funds invested another US$1 billion only.
Thus, while ‘nudging’ might incentivize a few entrepreneurs to act, most business
actors will need stronger signals to justify their engagement in clean technology
innovation. Only long-term policy decisions can reduce the uncertainty of
transforming core business from legacy into clean technologies. In fact, no other
high-tech industry has been created or transformed with a ‘nudge’ (Mazzucato,
2013b). Most likely, a strong ‘push’ is needed.
National approaches to green economic development
There are differences in how countries are reacting to the challenge of developing
a green economy. Some countries have used the post-crisis stimulus spending as
a way to direct government investments into global clean technology industries,
with two goals: to provide economic growth, while mitigating climate change.
While some countries lead, others are lagging behind. As investments in innovation
are cumulative and the results are ‘path dependent’ (innovation today is dependent
on innovation yesterday), it is likely that the leaders emerging from this race will
remain leaders for years to come. In other words, those acting first or as a fastfollower will enjoy a early-mover advantage, as in the success case of Toyota, who
pioneered hybrid vehicle technology and benefited from an early ‘halo effect’, which
later resulted in it being the biggest winner of the US ‘cash for clunkers’ scheme
6
(Sperling and Gordon, 2009; USDOT, 2009).
The green entrepreneurial state 139
energy technologies in the first place.
The ‘green’ energy industry is still in its early stages: even though development
of wind and solar power technologies received a big push in the 1970s (due to the
energy crisis), they are both still characterized by market and technological
uncertainty.
4 It will not develop ‘naturally’ through market forces, in part because
of embedded energy infrastructure, but also because of a failure of markets to value
sustainability or to punish waste and pollution. In the face of such uncertainty, the
business sector will not enter until the riskiest and most capital-intensive investments
have been made, or until there are coherent and systematic policy signals in place.
In a recent interview, Microsoft founder Bill Gates, one of the principals of the
American Energy Innovation Council (AEIC) recognized that ‘a key element to
get an energy breakthrough is more basic research. And that requires the govern -
ment to take the lead. Only when that research is pointing towards a product then
we can expect the private sector to kick in.’
5
As in the early stage of IT, biotech and nanotech industries, there is little
indication that the business sector alone would enter the new ‘green’ sector and
drive it forward in the absence of strong and active government policy. Indeed,
the Climate Policy Initiative (2013) reports that institutional investors contributed
with only US$0.4 billion to climate change mitigation and adaptation projects
(a minimal figure considering the US$70 trillion in assets that they manage); venture
capital, private equity and infrastructure funds invested another US$1 billion only.
Thus, while ‘nudging’ might incentivize a few entrepreneurs to act, most business
actors will need stronger signals to justify their engagement in clean technology
innovation. Only long-term policy decisions can reduce the uncertainty of
transforming core business from legacy into clean technologies. In fact, no other
high-tech industry has been created or transformed with a ‘nudge’ (Mazzucato,
2013b). Most likely, a strong ‘push’ is needed.
National approaches to green economic development
There are differences in how countries are reacting to the challenge of developing
a green economy. Some countries have used the post-crisis stimulus spending as
a way to direct government investments into global clean technology industries,
with two goals: to provide economic growth, while mitigating climate change.
While some countries lead, others are lagging behind. As investments in innovation
are cumulative and the results are ‘path dependent’ (innovation today is dependent
on innovation yesterday), it is likely that the leaders emerging from this race will
remain leaders for years to come. In other words, those acting first or as a fastfollower will enjoy a early-mover advantage, as in the success case of Toyota, who
pioneered hybrid vehicle technology and benefited from an early ‘halo effect’, which
later resulted in it being the biggest winner of the US ‘cash for clunkers’ scheme
6
(Sperling and Gordon, 2009; USDOT, 2009).
The green entrepreneurial state 139