Belfer Center: Governments of Emerging Economies Out-Investing US in Energy Research

By Sara Mansur, originally posted at the Breakthrough Institute

The governments of six developing countries may now be investing more in energy research than the governments of twenty-one of the world's most developed economies, according to a new report by the Harvard Belfer Center for Science and International Affairs.

The report takes a close look at the federal energy innovation policies of Brazil, Russia, India, Mexico, China and South Africa - we'll call them the 'Big Six' developing nations here.

The Belfer Center researchers conclude that in 2008 the governments of the Big Six nations invested about $13.8 billion (measured in PPP) in energy research, development, demonstration, and deployment activities (RDD&D). This inches ahead of the roughly $12.7 billion in combined energy technology investments made by the governments of the 21 IEA member countries, each of which is also a member of the OECD bloc of developed nations.

In deconstructing this figure, however, $11.8 billion of the $13.8 billion in RDD&D funds deployed by the Big Six developing nations are investments by the Chinese government. Further, 90% of this total investment originated from state-owned enterprises (SOEs).

A similarity across energy innovation policies in the Big Six countries is that governmental investments in renewable energy and energy efficiency technology support mostly deployment activities, while national investments in nuclear energy, fossil fuels, and transmission, distribution and storage are mostly targeted towards R&D.

Despite this commonality, the researchers find that the structures of individual energy innovation systems differ substantially. In China and Russia, academies are largely responsible for allocating R&D funds to national labs and universities, while SOEs execute deployment projects. In Brazil, Mexico, and India, the opposite holds, with SOEs most heavily involved in coordinating R&D activities and governments chiefly responsible for deployment projects. In South Africa, in turn, the government is solely responsible for funding the RD&D that is conducted by universities and private industry.

As the study notes, the Big Six are increasingly significant players in the global energy domain, comprising 44% of the world's population, 32% of global energy consumption and 35% of the world's energy production. In 2010, China became the single largest energy consumer in the world, while by 2030 China and India alone are expected to comprise 30% of global primary energy demand.

Despite their rising importance in the international energy sphere, there has been little data available to date on national energy innovation investments made by developing countries. This report takes an important first step in measuring these policies and highlighting areas for cooperation between countries, albeit with difficulties noted by the researchers in gathering comprehensive data on innovation spending across countries and establishing a standardized categorization method amidst varying definitions of RDD&D across data sources.

The findings of this research bode well not only for the Big Six countries but for the global clean energy sector as a whole, as the participation of these developing countries is crucial to catalyzing a global clean energy transformation. At the same time, however, growing clean tech prowess in these big developing economies continues the globalization of technological leadership, putting greater competitive pressure on America's traditional 'comparative advantage' in innovation.

Ultimately, the Belfer Center report underscores the emerging global consensus around the importance of investing in energy innovation, and the need for the United States to step up its own clean energy investments or risk losing competitiveness to other emerging economies.