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Eco-innovation and green
Prof. Dr. Rainer Walz, Fraunhofer ISI, May 2014
The current European policy debate focuses on the Europe 2020 strategy for
smart, sustainable and inclusive growth. The Europe 2020 strategy was
launched not only with regard to overcoming the financial crisis, but also
with a vision to address the long-term challenges, among them globalization
and trade, and pressure on resources and environmental concerns. After four
years of implementation, the EU launched a process of taking stock of the
experience (COM (2014) 130 final), which aims at helping to develop the
strategy for the 2015-2020 period.
The implementation of the Europe 2020 goals started seven flagship
initiatives, among them 3 with specific importance for Eco-Innovation:
• The Flagship Initiative on “Innovation Union” calls for increasing R&D
spending and improving innovation efficiency. It defines a more
strategic approach to innovation as an important area of action, and
committed explicitly to developing an Eco-innovation Action Plan.
• The Flagship Initiative on “Resource Efficient Europe” aims to
support the shift towards a resource-efficient and low-carbon
economy. However, it also links increasing resource efficiency to
securing growth and jobs for Europe, by stimulating innovation,
improving competitiveness and opening up new export markets.
• The Flagship Initiative on “Integrated Industrial Policy for the
Globalisation Era. Putting Competitiveness and Sustainability at
Centre Stage” underlines the importance of a strong manufacturing
value chain for the EU. It puts attention to a radically changing global
business environment, with globalizing value chains and emerging
economies catching up. It calls for an integrated approach, and for
using strategic intelligence such as impact assessments and insights
into sectoral innovation performance.
The GLOBIS project aims at rethinking globalisation in the light of
sustainable development. Within this project, Fraunhofer ISI performed a
case study on “Global Eco-innovation, economic impacts and
competitiveness”. This policy brief puts the main results of this case study
into the context of stock taking of the experiences related to the above
are a field in
the EU to achieve
the Europe 2020
goals are in
The EU should
in order to establish
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Sectoral eco-innovation watch
Eco-Innovation is any form of innovation resulting in or aiming at significant and demonstrable progress
towards the goal of sustainable development, through reducing impacts on the environment, enhancing
resilience to environmental pressures, or achieving a more efficient and responsible use of natural resources. A
systematic classification of eco-innovations has to take the most pressing environmental problems into
account. Thus, even though there is no final list of fields of eco-innovation, technological delineations of eco-
innovations typically encompass innovative technologies which relate to the following 5 different technology
Green energy supply Energy efficiency Waste and material
Green mobility Water supply and
Figure 1: Patent and Export Shares in Eco-innovation
Source: calculation of Fraunhofer ISI
Figure 2: Specialisation of EU 27 in subsectors of eco-
Source: calculations of Fraunhofer ISI
Using the latest available data, the analysis of technological capability underlines the leading role of the EU in
eco-innovations. More of one-third of transnational patents relevant for eco-innovations originates from the
EU. This is well above the share of Japan and the US. Even if trade is measured without intra-EU trade, the EU
Since 1990, the five regions shown in Figure 1 constantly account for about 90 % of eco-innovation relevant
patents. However, during this time, various changes in the distribution among the countries have been taking
• The EU lost more than 10 percentage points since 1990; especially during financial crisis, the patent
share of the EU was reduced by about 8 percentage points.
• The US has kept her patent share constantly from 1990 to 2002, but has been losing constantly since
then around 10 percentage points.
• Japan has been picking up patent shares especially since the late 1990s and has increased her share by
12 percentage points since 1990.
• China and South Korea have emerged as new players in the last 10 years, with substantial increases in
their shares in the last years.
With globalization and fast growing emerging economies, it is no surprise to see that the shares of the EU 27
are shrinking. However, with increasing division of labour among the world’s region, it is especially the sectors
in which a region is especially strong which show the best opportunities for future success. These strong sectors
are identified by looking at the specialization pattern in patents (relative patent advantage, RPA) and trade
(relative export advantage, RXA), which are normalized between -100 and + 100. If a region has a positive
specialization, the analysed field is stronger than the average of the region.
EU27 USA Japan China Rep. Of
export share (without intra-EU trade)
RPA RXA (without intra-EU trade)
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The data shows a positive specialization for eco-innovations in both patents and trade. Thus, eco-innovations
are a field in which the opportunities for the EU to achieve the Europe 2020 goals are in particular good.
However, a disaggregated analysis also shows the challenges Europe has to cope with, e.g. in the mobility and
the water sector.
Success factors for green competitiveness
Eco-innovation needs to be accelerated in order to safeguard the environment and to increase European
competitiveness. The following success factors have to be taken into account when assessing the competitive
advantage of countries:
• Technological capability of the country: international trade performance depends on technological
capabilities. If a country has a comparatively high knowledge base, it also has an additional advantage
in developing and marketing future technologies.
• Market factors on the supply side: If countries already show a high level of successful technological
applications, they will find it easier to export their products.
• Domestic market factors on the demand side: A growing (domestic) demand oriented towards
innovations and readily supporting new technological solutions leads to economies of scale and
learning effects, which drive the costs of the technology down.
• Structure of actors and involvement in communication along value chain: Powerful economic actors are
able to develop new (foreign) markets, and to drive future process and product development.
Interaction along the value chain between suppliers, users and science are an important element, as
well as integration into international value chains.
• Innovation-friendly regulation: For eco-innovations, the demand depends very much on the extent of
environmental policy. However, the regulation should be open to diverse technical solutions, and
should set the standard for the regulatory regime, which other countries are likely to adopt.
The patent and trade data presented above indicates that Europe still has a very good technological capability
and favorable market factors on the supply side. The other factors are more difficult to evaluate on an
aggregated basis, and require a technology specific analysis.
Policy impact on eco-innovations and green competitiveness
Eco-innovations have penetrated to the markets relatively quickly in form of renewable energy. Therefore
renewable energies are a very good example to illustrate the effects of policies on innovation and green
• There is strong empirical evidence that the creation of demand, which has been triggered by policies
such as feed-in-tariffs, has been accelerating innovation. Patent data, but also data relating to technical
characteristics show a tremendous innovation dynamics especially in renewable energy technologies.
• Innovations not only show up such as technological innovations. In addition, the move to renewable
energies has led to new actors becoming active. The interaction of direct and indirect, technical and
organizational innovations is what constitutes a system innovation which enables the transformation
towards sustainable energy system.
• The policy style is of uttermost importance for the effect of policies. Stringent mid-term targets are in
particular an important element, which seems to be more important than implementation details of
The renewable energy policies in Europe have also triggered internationally relevant innovations. The
development of the relevant capacities e.g. in Asia is also the result of equipment being imported from Europe,
into which European know-how and experiences had been integrated. Over time, this has not only contributed
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to declining costs and prices of the technologies in Europe, but has simultaneously sparked innovations, e.g. in
manufacturing equipment. The enormously reduced costs of renewable energy technologies have facilitated
application in developing and newly industrializing countries. These countries are now pursuing entirely new
strategies in the expansion of their electricity systems. Thus, Europe has initiated an innovation process which
spills over internationally.
Europe shows an above average specialization in eco-innovation, which underlines the opportunities to make
them a cornerstone of the Europe 2020 strategy. However, catching-up of Japan and new competitors require
that the EU further strengthens this sector. The analysis within the GLOBIS project leads to the following
• The EU should increase its positive specialisation in eco-innovation, and should reverse the trend of
losing patent shares, which has accelerated during financial crisis. One important measure is to invest
heavily in increase of knowledge base for eco-innovation, e.g. in the context of European and member
state innovation policy programs. These programs should systematically link technological to
organisational and institutional innovations, and should give room to include new actors.
• Creation of domestic demand is a key for success. The EU should continue with ambitious
environmental policies in order to establish herself as frontrunner in green competitiveness. The
environmental policies should be designed to allow for diverse technological solutions, and integrate
more systematically the opportunities for growth of eco-innovation niches.
• Targets for the diffusion of eco-innovations are important. In order to foster innovation, they should be
on technological level. Thus, the empirical evidence speaks for having separate targets for renewable
energy development for 2030; they should be accompanied by targets in other areas.
• Innovations are increasingly taking place in international networks and changing global value chains.
This requires a selective industrial policy: Depending on its technological capability and strength of
actors, a country can be strong along most parts of the value chain, e.g. the EU in wind energy. In other
cases, a country can be strong on segments of a value chain only; in photovoltaics, for example, the EU
is strong on machinery for PV production, supply of silicium and integration of modules into the energy
system, but less so in photovoltaic cell production. In the first case, industrial policy should aim at
strengthening the complete value chain. In the latter case, a combination of concentrating on domestic
strengths in the value chain, and securing cooperation with international strong actors in the other
parts of the value chains will be an alternative option.
• Establishing European actors as coordinators of international value chains is becoming more important.
European innovation policy should include this perspective more prominently in the formulation of her
research programs. This also calls for increased opportunities for international partners outside the EU
to participate in such programs, in order to strengthen international value chains under European
The increasing importance of international value chains makes industrial policy more complex. Thus, policy
formulation should be supported by sound strategic intelligence. Monitoring of the five classes of success
factors for green competitiveness on a technology specific level becomes a permanent task, which should
supplement evaluation of programs and impact assessment.
EU-7 FRAMEWORK, FP7-ENV-2008-1 (227055)