Eco-innovation - putting the EU on the path to a resource and energy efficient economy : study and briefing notes

Full text

JANUARY 2004
Policy Department
Economic and Scientific Policy
Eco-innovation - putting the EU
on the path to a resource and
energy efficient economy
Study and briefing notes
IP/A/ITRE/ST/2008-06 & 14 PE 416.218

This study was requested by the European Parliament's committee on Industry, Research and
Energy (ITRE).
Only published in English.
Authors: Part 1: Study on Eco-innovation putting the EU on the path to a resource
and energy efficient economy
Wuppertal Institute for Climate, Environment, Energy
Prof. Dr. Raimund Bleischwitz (Coordination and lead chapter 4),
Bettina Bahn-Walkowiak, Dr. Wolfgang Irrek, Dr. Phillip Schepelmann
Factor 10 Institute
Prof. Dr. Friedrich Schmidt-Bleek (Lead Chapter 5)
SERI Nachhaltigkeitsforschung und Kommunikations GmbH
Dr. Stefan Giljum (Lead Chapter 2), Stephan Lutter, Lisa Bohunovski,
Dr. Friedrich Hinterberger
UNEP/Wuppertal Institute Collaborating Centre on Sustainable Consumption
and Production gGmbH (CSCP)
Elizabeth Hawkins, Michael Kuhndt (Lead Chapter 3), Dr. Nadine Pratt
Part 2: Briefing notes of the Eco-Innovation Workshop of 12 November 2008
Arnold Black - Resource Efficiency Knowledge Transfer Network, UK
Challenges, Drivers and Barriers to Eco-Innovation a UK context
Geert van der Veen - Technopolis, the Netherland
Public policies for Eco-innovation: focus on The Netherlands
Birgit Eggl - Forseo, Germany
Funding Eco-Innovation
Administrator: Ms. Camilla Bursi
Policy Department Economy and Science
DG Internal Policies
European Parliament
Rue Wiertz 60 - ATR 00L008
B-1047 Brussels
Tel: +32-2-283 22 33
Fax: +32-2-284 69 29
E-mail: camilla.bursi@europarl.europa.eu
Manuscript completed in March 2009.
The opinions expressed in this document do not necessarily represent the official position of the
European Parliament.
Reproduction and translation for non-commercial purposes are authorised provided the source is
acknowledged and the publisher is given prior notice and receives a copy.
E-mail: poldep-esc@europarl.europa.eu
IP/A/ITRE/ST/2008-06 & 14
PE 416.218

TABLE OF CONTENTS
PART 1: STUDY ON ECO-INNOVATION: PUTTING THE EU ON THE PATH TO A
RESOURCE AND ENERGY EFFICIENT ECONOMY.....................................................v
Executive Summary ................................................................................................................vi
1. Background and Scope...................................................................................................1
2. Resources scarcity...........................................................................................................2
2.1. Scenarios of possible resource scarcities (including energy).................................. 2
2.2. Patterns of resource use in different sectors of the EU ...........................................8
2.3. Sectors affected by resource scarcity ....................................................................11
2.4. Summary ............................................................................................................... 12
3. Eco-Innovation: Current Status and Opportunities..................................................14
3.1. Definition and Scope............................................................................................. 14
3.1.1. Different types and levels of Eco-Innovation...................................................................... 14
3.1.2. Measuring eco-innovation and material flows .................................................................... 15
3.1.3. Eco-innovation and resource-efficiency.............................................................................. 15
3.2. Examples of eco-innovations in key areas............................................................ 16
3.2.1. Area Housing: Deep Renovation and Smart Metering........................................................ 17
3.2.2. Area Mobility: the Green Electric Car and Car sharing...................................................... 20
3.2.3. Area Food and Drink: Community Supported Agriculture (CSA) and Sustainable Sourcing
of Retailers.......................................................................................................................... 23
3.3. Drivers and Barriers of eco-innovation................................................................. 26
3.3.1. Drivers and Barriers – an overview..................................................................................... 26
3.3.2. Deep Renovation (the refurbishment of old buildings)....................................................... 29
3.3.3. Smart Metering.................................................................................................................... 30
3.3.4. Green Electric Car............................................................................................................... 31
3.3.5. Car sharing.......................................................................................................................... 32
3.3.6. Community supported agriculture (CSA) ........................................................................... 33
3.3.7. Sustainable Sourcing of retailers......................................................................................... 34
3.4. Conclusions........................................................................................................... 35
4. How to speed up Eco-Innovation in the EU ...............................................................37
4.1. Impact and effectiveness of EU programmes........................................................ 37
4.1.1. Eco-design Directive........................................................................................................... 38
4.1.2. The Competitiveness and Innovation Framework Programme (CIP).................................. 40
4.1.3. The Seventh Framework Programme for research and technological development (FP7) .43
4.1.4. The Environmental Technology Action Plan (ETAP)......................................................... 45
4.1.5. Directive on the energy performance of buildings (EPBD) ................................................ 47
4.1.6. The Action Plan on Sustainable Consumption and Production and Sustainable Industrial
Policy .................................................................................................................................. 49
4.2. Other approaches and best-practices of promoting eco-innovation...................... 50
4.2.1. Regulatory instruments ....................................................................................................... 50
4.2.2. Economic instruments......................................................................................................... 51
4.2.3. Informational instruments (incl. knowledge-creation, research and education, cooperation)
............................................................................................................................................. 53
IP/A/ITRE/ST/2008-6 & 14
Page i
PE 416.218

4.3. Proposals for a future EU framework on eco-innovation...................................... 55
4.3.1. Market-based instruments for the heavy weights: taxing construction minerals................. 55
4.3.2. Greening the EU budget towards eco-innovation................................................................ 59
4.3.3. Engaging industry in developing eco innovation for sustainable ways of living................ 61
4.3.4. The Strategy Areas.............................................................................................................. 62
4.3.5. How the SCP Action plan can further support eco-innovation in the EU ........................... 64
4.3.6. A European Trust Funds for Eco-Entrepreneurship............................................................ 65
4.3.7. A Technology Platform for Resource-light industries......................................................... 66
4.3.8. A Programme for refurbishing and upgrading existent buildings in the EU....................... 67
4.3.9. Eco-innovation and EU Foreign policy............................................................................... 68
5. A Vision for the Future ................................................................................................70
Annex 1....................................................................................................................................73
References...............................................................................................................................77
List of figures and tables:
Figure 1: Gaps of current EU programmes on eco-innovation........................................................................ix
Figure 2: Global resource extraction, by major groups of resources and regions.............................................2
Figure 3: Domestic Extraction (DE) and Raw Material Consumption (RMC) in different world
regions (absolute numbers, left diagram and per capita, right diagram), in 2000..............................3
Figure 4: Net-trade flows in relation to domestic extraction.............................................................................4
Figure 5: Commodity prices in €/t and €/barrel respectively............................................................................4
Figure 6: Worldwide distribution of reserves of the main energy carriers and metals......................................5
Figure 7: Worldwide distribution of reserves of selected minerals and precious metals..................................6
Figure 8: Direct and indirect resource use by economic activities in Germany in 2000.................................10
Figure 9: Domestic use of abiotic primary material by economic activities in Germany in 2002..................11
Figure 10: The three areas with the highest environmental impact...................................................................16
Figure 11: Drivers and Barriers of Deep Renovation........................................................................................30
Figure 12: Drivers and Barriers of Smart Metering..........................................................................................31
Figure 13: Drivers and Barriers of the Green Electric Car................................................................................32
Figure 14: Drivers and Barriers of Car Sharing................................................................................................33
Figure 15: Drivers and Barriers of CSA ...........................................................................................................34
Figure 16: Drivers and Barriers of Sustainable Sourcing of Retailers..............................................................35
Figure 17: Overview on drivers and barriers for eco-innovation......................................................................36
Figure 18: Gaps of current EU programmes on eco-innovation.......................................................................55
Figure 19: 2009 Budget Proposal......................................................................................................................59
Figure 20: Greening the budget according to the European Commission.........................................................59
Figure 21: Diagram illustrating the degree of challenge and strategic impact of each strategy area ................62
Table 1: Predicted peak and depletion of different fuels and metals, and main area of usage.........................7
Table 2: Summary of determinants of eco-innovation, i.e. sources of potential barriers and drivers
for eco-innovative activities ............................................................................................................26
Table 3: Drivers and barriers for acceptance of an eco-innovation...............................................................27
Table 4: Production of primary aggregates (sand and gravel and crushed rock) in 2006 in Europe
and potential revenues of an aggregates tax/charge on the basis of tons produced.........................58
Table 5: Furthering the incorporation of eco-innovation into the SCP Action Plan......................................65
Table 6: Top ten oil reserve countries; end of 2006 ......................................................................................73
Table 7: Top ten natural gas reserve countries; end of 2006.........................................................................73
Table 8: Top ten coal reserve countries; end of 2006....................................................................................73
Table 9: Top ten bauxite (aluminum) reserve countries; end of 2006 ...........................................................74
Table 10: World top ten copper reserve countries; end of 2006......................................................................74
Table 11: World top ten iron ore reserve countries, end of 2006 ....................................................................75
Table 12: World top ten uranium reserve countries; end of 2006 (uranium RAR < 130 $/kg).......................75
Table 13: Literature review concerning peak and anticipated depletion.........................................................75
IP/A/ITRE/ST/2008-6 & 14
Page ii
PE 416.218

PART 2: BRIEFING NOTES OF THE EP WORKSHOP ON ECO-INNOVATION.... 83
NOTE 1: CHALLENGES, DRIVERS AND BARRIERS TO ECO-INNOVATION:
A UK CONTEXT.........................................................................................................84
1. Drivers/barriers to eco-innovation and policy options..............................................84
2. Challenges and their Transition Paths........................................................................86
3. Opportunities for Policy...............................................................................................86
4. Conclusion .....................................................................................................................87
5. Case study: Clean_Prod...............................................................................................88
5.1. Eco Innovation drivers and barriers ......................................................................88
5.2. Goal of eco-innovation.......................................................................................... 88
5.3. Example & Results................................................................................................ 89
6. Case study: Recovery of Flat panel LCD using Advance Technological processes 90
6.1. Eco Innovation drivers and barriers ......................................................................90
6.2. Goal of eco-innovation.......................................................................................... 90
6.3. Example & Results................................................................................................ 91
6.4. Overall evaluation of the eco-innovation.............................................................. 92
7. Case-study: Centre for Remanufacturing and Re-use..............................................93
7.1. Eco Innovation drivers and barriers ......................................................................93
7.2. Goal of eco-innovation.......................................................................................... 93
7.3. Example & Results................................................................................................ 94
7.4. Overall evaluation of the eco-innovation.............................................................. 94
8. Case study: Carbon negative cement to transform the construction industry.......95
8.1. Eco Innovation drivers and barriers ......................................................................95
8.2. Goal of eco-innovation.......................................................................................... 95
8.3. Example & Results................................................................................................ 96
8.4. Business model and investors for platform technologies...................................... 96
NOTE 2: EXAMPLES OF PUBLIC POLICIES FOR ECO-INNOVATION:
FOCUS ON THE NETHERLANDS ...........................................................................97
Executive Summary ...............................................................................................................98
1. Eco-innovation and eco-innovation policy..................................................................99
2. Framework for analysing innovation policies: Theory of functions of innovation
systems .........................................................................................................................100
3. Policy examples...........................................................................................................102
3.1. Energy transition ................................................................................................. 102
3.2. Eco-innovation policy in the Netherlands........................................................... 104
3.3. Analysis of Dutch policies .................................................................................. 105
3.4. Other policy practices in other Member states and at EU Level......................... 106
IP/A/ITRE/ST/2008-6 & 14
Page iii
PE 416.218

4. Conclusions..................................................................................................................110
Bibliography .........................................................................................................................112
NOTE 3: FUNDING ECO-INNOVATION.......................................................................113
1. Financing Eco-Innovation..........................................................................................114
1.1. The Innovation Cycle.......................................................................................... 114
1.2. Options to close the financing gap...................................................................... 115
1.3. Innovative funding combinations by technology developers.............................. 118
2. Best case examples......................................................................................................120
2.1. Sustainable Development Technology Canada (SDTC) - Smart grants............. 120
2.2. Berlin Energy Saving Partnership – Performance contracting............................ 121
2.3. Entrepreneurship and innovation programme (EIP) ........................................... 121
2.4. Risk-Sharing Finance Facility (RSFF)................................................................ 122
2.5. The “High-Tech Gründerfonds” – Venture capital............................................. 122
3. Recommendations.......................................................................................................123
3.1. Integrated government strategies......................................................................... 123
3.2. Barriers to Access Funding .................................................................................123
3.3. Risk reduction and sharing.................................................................................. 123
3.4. Regional authorities eco-innovation strategy...................................................... 124
3.5. Adaptation to Local Market Conditions.............................................................. 124
3.6. Public sector performance criteria....................................................................... 124
3.7. Green saving accounts......................................................................................... 124
3.8. Green public procurement and green saving accounts........................................ 125
Bibliography .........................................................................................................................126
IP/A/ITRE/ST/2008-6 & 14
Page iv
PE 416.218

PART 1:
STUDY ON ECO-INNOVATION: PUTTING THE EU ON THE
PATH TO A RESOURCE AND ENERGY EFFICIENT ECONOMY
IP/A/ITRE/ST/2008-6 & 14
Page v
PE 416.218

EXECUTIVE SUMMARY
The objective of this study is to support the European Parliament’s ITRE Committee in its
work on the EU's industrial and energy policy and to give advice on the following issues:
Why is the issue of resource scarcity back on the agenda? What are the strategic conclusions
for the EU? What can the EU expect from eco-innovation in a large range of industrial
sectors? Are existing measures meeting the EU aims and expectations, and what new policy
initiatives should be set forward? To meet these objectives, this study is structured as follows:
Chapter 2 will give an overview on resource scarcities. Chapter 3 elaborates on eco-
innovation, including trends, barriers and driving forces. Chapter 4 outlines proposals for
future EU policies. Chapter 5 sketches out a possible vision for the future.
Chapter 2 reveals recent findings on resource scarcity. Global extraction of natural resource
is steadily increasing. Since 1980, global extraction of abiotic (fossil fuels, minerals) and
biotic (agriculture, forestry, fishing) resources has augmented from 40 to 58 billion tonnes in
2005. Scenarios anticipate a total resource extraction of around 80 billion tonnes in 2020 (200
% of the 1980-value), necessary to sustain the worldwide economic growth.
On average, a European consumes per year around three times the amount of resources of a
citizen in the emerging countries while producing twice as much.
Analysis on patterns of current resource use (direct and indirect use) is still in its infancy and
shows data gaps. Based on country studies, however, one can arrive at tentative conclusions.
A recent study on Germany reveals that ten production sectors account for more than 50 % of
German Total Material Requirements (TMR). Industries of three areas are of strategic
importance because here a huge number of technological interactions among production
sectors take place:
• Stones, construction, and housing = housing
• Metals and car manufacturing = mobility
• Agriculture, food and nutrition = food.
The rapidly increasing demand for resources has led to an unprecedented boost in resource
prices, especially during the last five years until the breakout of the financial crisis in Fall
2008.
The EU is the world region that outsources the biggest part of resource extraction.
In comparison to the overall global growth rate (45 % over the last 25 years), Europe’s
resource extraction grew only by 3 %, but studies show that these domestic raw materials are
increasingly substituted by imports from other world regions.
World reserves in fossil fuels and metals are unevenly distributed across the world regions.
Additionally, for various commodities, the peak of extraction has already been reached or is
currently about to be reached. Not only for oil and gas, but also for critical metals such as
Antimon, Gallium, Indium, Platinum and others the supply for European industry is at risk.
Natural gas cannot replace oil as main energy source, once the latter is depleted.
From this, the following main conclusions are derived:
• The European economy is increasingly dependent on resource imports from other world
regions.
IP/A/ITRE/ST/2008-6 & 14
Page vi
PE 416.218

• Scarcity of ‘Critical metals’ will affect the European economy more subtle, but further-
reaching. High-tech industries, in particular the electronic industry, will be affected by
declining availability of precious metals. Also the development of new eco-technologies,
such as photovoltaic electricity generation, could be slowed down by resource scarcity.
• It can be expected that worldwide competition for these resources will significantly
increase in the near future, potentially leading to serious conflicts related to the access to
resource reserves.
• In order to deal with this increased scarcity of natural resources, a significant reduction of
the worldwide resource use will be necessary.
Chapter 3 gives a definition of eco-innovation as well as an overview of different types of
eco-innovation and deals with measurement issues. Furthermore, it illustrates selected eco-
innovations in key areas, and highlights also trends, drivers and barriers analysed for these
examples and illustrated by fishbone diagrams. The scrutinised eco-innovations and the
regarding key conclusions are
(1) In the area of housing
a. “Deep Renovation”, which enables a minimisation of negative impacts on
environment and health by system design and choice of components and is
possible in nearly every building, though standardisation is limited, and
b. “Smart Metering”, for which there is worldwide evidence that giving consumers
appropriate, relevant information on their energy and water use is an important
basis for additional measures leading to a reduction in this use and thus in GHG
emissions.
(2) In the area of mobility
a. the “Green Electric Car” and
b. “Car sharing”;
(3) In the area of food and drink
a. the “Community Supported Agriculture” (CSA) and
b. “Sustainable Sourcing of Retailers”.
The chapter concludes that eco-innovation has a crucial role to play in putting the EU on the
path to a resource and energy efficient economy and thus significantly reducing the
environmental impacts in each of the areas, housing, mobility and food and drink. Experts
estimate that this is likely to become an $800 billion market worldwide by 2015 and a $
trillion market afterwards.
Overcoming the barriers and building up eco-industries for energy and resource efficiency
however calls for an active European Union. It requires the engagement of many different
actors in society, and strategies should be implemented from many different sides. For an eco-
innovation to be fully accepted and diffused into wider society, a concerted effort must be
made to engage people and target the emotional and psychological aspects required to
reinforce its uptake.
Chapter 4 (How to speed up eco-innovation in the EU) undertakes an attempt to analyse
existing EU policies and initiatives; selected member states’ efforts are also considered. This
is done via a comparative methodology with a joint format. The annex to this study contains
three further briefing notes on this issue written by other authors. The following policies,
initiatives and instruments are considered in this study:
IP/A/ITRE/ST/2008-6 & 14
Page vii
PE 416.218

• The Eco-design Directive (2005/32/EU) – focuses on energy use for a number of
products and neglects other environmental dimensions, functional innovation and
system innovation are not yet covered;
• The Competitiveness and Innovation Framework Programme (CIP) – first experience
suggests a bias in favour of recycling technologies and energy along existing
technology trajectories, less visibility of resource efficiency and new pathways;
• The Seventh Framework Programme for research and technological development
(FP7);
• The Environmental Technology Action Plan (ETAP) – Despite many achievements,
environmental technologies still remain a niche market; further green procurement,
greater financial investments, the establishment of technology verification and
performance targets systems, and focussing on sectors with high gains is needed;
• The Directive on the energy performance of buildings (EPBD) – good ambitions, but
a lack of implementation in many Member states, implementation requires both a
speeding up and a scaling up, addressing the resource efficiency of buildings is
desirable;
• The European Union Action Plan on Sustainable Consumption and Production and
Sustainable Industrial Policy
• The European Directive on Waste from Electrical and Electronic Equipment
(WEEE)
• The UK Aggregates Levy and Aggregates Levy Sustainability Fund (ALSF)
• Environment-driven Business Development in Sweden
• The European Union Energy Label.
The analysis identifies specific gaps in the areas of entrepreneurship, pre-commercialisation
and mass market development; in addition, the opportunities to refurbish buildings in Europe
have not fully been deployed yet (see Figure 1). Based on this and supported by an expert
workshop conducted by the ITRE on 12 November 08, the study formulates proposals that
could support the EU to speed up eco-innovation. They promote market-based incentives and
the reform of existing initiatives; in addition, new proposals are presented that address
specific gaps in the areas of entrepreneurship, pre-commercialisation as well as the
opportunities to refurbish buildings in Europe.
Bearing in mind the importance of construction as a driving forces of resource use, the
relevance of the construction industry in the EU Lead market Strategy and current deficits,
and the overall success of market-based instruments, this study proposes to extend the
existing eco-tax base in Europe by establishing a minimum tax directive on construction
minerals. It is expected to drive up eco-innovation because it gives incentives to improve
resource efficiency and to refurbish old buildings. In addition, it generates revenues, which
can be utilized for specific eco-innovation programmes.
A greening of the EU budget would be the material basis for speeding up eco-innovation
beyond 2009. This would have to follow two strategic lines: on the one hand unsustainable
spending would have to be cut, on the other hand the money saved by this activity could be
shifted to support investments in structural eco-innovation. A budgetary strategy could
include the following elements:
IP/A/ITRE/ST/2008-6 & 14
Page viii
PE 416.218

• Further redirecting CAP from direct payments towards integrated rural
development schemes, which support eco-innovation in the area of sustainable
production of high-quality food and biomass. These integrated rural development
schemes should include integrated logistical, economic and technological strategies
for adapted sustainable natural resource management in the landscape (food, water,
soil, biodiversity and closed-loop biomass production and use). These strategies
would have to be highly adapted to local economies and landscape conditions thus
inducing local eco-innovation and employment schemes.
• Rigorous environmental appraisal and reduction of Regional Policy schemes for
large infrastructure projects which could support long-term unsustainable
development paths, shifting towards funding for eco-innovation e.g. in the area of
decentralized electricity grids (supporting green electric cars and renewable
energies) and lighthouse projects on resource efficient construction and resource
recovery.
• Redirection of Regional Funds from end-of-pipe technologies towards integrated
solutions and eco-innovation (e.g. decentralized water treatment)
• More advanced schemes for improving energy and material productivity of
economies would require an implementation of the CREST guidelines for
improved coordination between Structural Funds, the Research Framework
Program and the Competitiveness and Innovation Programme (CIP). Only such a
concentration of forces could achieve a measurable improvement of resource
productivity in Europe by means of regional eco-innovation clusters and a
European network of regional resource efficiency agencies.
• Integration spending of the European Investment Bank (EIB) for improved co-
financing of eco-innovation
Figure 1: Gaps of current EU programmes on eco-innovation
IP/A/ITRE/ST/2008-6 & 14
Page ix
PE 416.218

Engaging industry in developing eco innovation for sustainable ways of living is
considered to be essential. The study identifies six strategy areas where industry can act:
1. Strategy Area 1: Creating and satisfying demand for green and fair products
2. Strategy Area 2: Communicating for low impact product use
3. Strategy Area 3: Innovative after sales services
4. Strategy Area 4: Product and service innovations
5. Strategy Area 5: Service-oriented business models
6. Strategy Area 6: Leadership for social change and socially responsible business
The study formulates proposals to strengthen the SCP Action Plan accordingly, with a
special focus on a framework for smarter consumption and leaner production, green public
procurement and international processes.
Following the gaps identified above, the study also proposes to establish three new initiatives:
• A European Trust Funds for Eco-Entrepreneurship, intended to support system
innovation driven by new companies;
• A Technology Platform for Resource-light industries, intended to develop new
markets for European manufacturing industries;
• A Programme to foster energy and resource efficiency in the building sector,
intended to foster
• The deployment of existing opportunities in that area.
Finally, a few thoughts are given to the international dimension of eco-innovation and a
possible vision of an eco-innovative Europe.
IP/A/ITRE/ST/2008-6 & 14
Page x
PE 416.218

1. BACKGROUND AND SCOPE
Evidence is growing that pressure on the availability of natural resources is causing a strain
on the environment as well as affecting our economy. The inefficient resource-use at a time of
growing demand is leading to increasing environmental pressure and resources scarcity that
will affect Europe and other parts of the world over the next years and decades. Prices for
global commodities like oil, raw materials and wheat have been increasing over the past five
years though the current financial crisis has temporarily led to lowering demand for natural
resources.
Achieving resource efficiency and a low carbon society are key challenges for the future of
EU’s economy, its industrial and service sector, and its citizens. Increasing energy and
resource efficiency will lead to lowering material purchasing costs throughout the industry. It
thus enhances competitiveness and offers opportunities to innovate. Eco-innovation – putting
the EU on the path to a resource and energy efficient economy – can be seen as a key to
enhancing Europe’s strategic position on world markets of tomorrow. In this regard, the
current bail out of the financial crisis ought to be seen as a starting point for the build up of
eco-innovation and eco-industries in the EU.
The objective of this study is to support the Committee on Industry, Research and Energy in
its work on the EU's industrial and energy policy and to give advice on the following issues:
• What EU policies are needed for the EU to on the one hand reduce its needs for
resources and energy and on the other hand through eco-innovation create solutions,
which will also drive innovation in a large range of industrial sectors?
• Are existing measures delivering the set objectives and what improvements/ new
instruments should be set forward?
To meet these objectives, this study is structured as follows: Chapter 2 will give an overview
on resource scarcities. Chapter 3 elaborates on eco-innovation, including trends, barriers and
driving forces. Chapter 4 develops proposals for EU policies.
IP/A/ITRE/ST/2008-06 & 14
Page 1 of 126
PE 416.218

2. RESOURCES SCARCITY
2.1. Scenarios of possible resource scarcities (including energy)
Global extraction of natural resource is steadily increasing. Since 1980, global extraction
of abiotic (fossil fuels, minerals) and biotic (agriculture, forestry, fishing) resources has
augmented from 40 to 58 billion tonnes in 2005. Scenarios anticipate a total resource
extraction of around 80 billion tonnes in 2020 (200 % of the 1980-value), necessary to sustain
the worldwide economic growth (Giljum et al., 2008). Depending on the level of economic
development, trade patterns and industrial structures, growth rates and extraction intensities
vary between different world regions, as illustrated in Figure 2 for the three regions of OECD,
the BRIICS countries (Brazil, Russia, India, Indonesia, China and South Africa), and the rest
of the world. Strongest growth will be observed in the BRIICS countries, while the share if
the OECD countries in total global resource extraction will shrink.
Figure 2: Global resource extraction, by major groups of resources and regions
Source: OECD (2008), based on SERI MFA database at http://www.materialflows.net and Giljum, et al. (2008)
The European economy is increasingly dependent on resource imports from other world
regions. In comparison to the overall global growth rate (45 % over the last 25 years),
Europe’s resource extraction grew only by 3 %, but studies show that these domestic raw
materials are increasingly substituted by imports from other world regions.
IP/A/ITRE/ST/2008-06 & 14
Page 2 of 126
PE 416.218

Latin America, for instance, is specialising noticeably in the export of resource-intensive
products, such as metal ores or biomass for biofuels. In 2005, Chile extracted fivefold the
amount of copper of 1980, Brazil threefold the amount of sugar cane – being the raw material
for ethanol fuel.
On the one hand, this development leads to a considerable dependency of Europe on the
imports of other countries, which may put industry at risks of higher prices and more difficult
access. On the other hand, it also leads to an “outsourcing” of the environmental burden,
connected to resource extraction and processing activities to other world regions. The
statement just made can be illustrated by comparing the indicators of Domestic Extraction
(DE) and Raw Material Consumption (RMC) of natural resources in different world regions.
While DE illustrates, where the resources are extracted, RMC shows where the products are
finally consumed, which are produced based on the extracted resources.
Figure 3: Domestic Extraction (DE) and Raw Material Consumption (RMC) in different
world regions (absolute numbers, left diagram and per capita, right diagram), in
2000
Note: “Anchor countries” is the group of emerging economies: Argentina, Brazil, China, Indonesia, India,
México, Philippines, Russia, Thailand, and South Africa. Source: Giljum et al., 2008
On average a European consumes per year around three times the amount of resources
of a citizen in the emerging countries while producing twice as much. In absolute numbers
(left diagram) the EU’s DE, as well as the RMC, is significantly lower compared to other
world regions; however it is noticeable that the EU-25 consume more resources than they
extract, illustrating the net-imports of natural resources. The picture changes considerably
when turning to a per capita perspective (right diagram). The domestic extraction per capita in
EU-25 countries is significantly higher compared to the other world regions; the Anchor
countries (the group of emerging economies: Argentina, Brazil, China, Indonesia, India,
México, Philippines, Russia, Thailand, and South Africa), counting almost 3.2 billion
inhabitants, which lead the list of resource extracting world regions, still fall far behind all
other regions when investigating per capita values.
The EU is the world region that outsources the biggest part of resource extraction.
Relating net-trade flows of materials to levels of domestic extraction enables to illustrate to
what extent different world regions are outsourcing material and energy-intensive production
processes to other world regions. Figure 4 shows that the EU is the world region that
outsources the biggest part of resource extraction required to produce goods for final demand
(private and public consumption and investment), thus exceeding a potential self-sufficiency
of natural resource use.
IP/A/ITRE/ST/2008-06 & 14
Page 3 of 126
PE 416.218

The rapidly increasing
demand for resources has
lead to an unprecedented
boost in resource prices,
especially during the last five
years. While countries with
large raw material deposits
use these revenues to finance
their public expenditures,
countries or regions with
relative resource scarcity, are
especially affected by this
development. Consequently,
in the future these countries
will face increasing competition for resources, for which they will have to pay high (and
likely still augmenting) prices. Figure 5 illustrates the price development of the main metals
and fossil fuels for the past 30 years (quite recent development has not yet been taken into
account). With increasing demand, and consequently extraction, more and more material with
lower concentrations is extracted as increasing prices make this extraction profitable. This
leads to higher process costs, higher energy consumption, and more transportation from
remote areas and higher amounts of overburden. Furthermore, to extract and process the crude
ore more and more machinery is required, causing even higher pressure on resources and
leading to an increase in production costs.
Figure 4: Net-trade flows in relation to domestic extraction
Source: Giljum et al., 2008
Figure 5: Commodity prices in €/t and €/barrel respectively
Note: Tin and nickel do not appear in these diagrams, as their current prices range around 11.000 €/t (tin), and
9.000€/t (nickel), respectively. While the first is steadily increasing, the latter almost tripled in the years 2003-
2007 and is now again at the 2003-level. Source: HWWI Commodity Price Index.
World reserves in fossil fuels and metals are unevenly distributed across the world
regions. Precariously, especially countries with a highly developed economy, such as the EU
or the USA, but also those with emerging economies, such as China or Brazil, which have a
rapidly growing demand for resources, do not possess large domestic deposits. Figure
illustrates exemplarily the worldwide distribution of the reserves of the main fossil fuels (oil,
gas, coal), of uranium as well as of the three quantitatively most important metals (iron,
bauxite, copper). Figure 7Figure 7 additionally reports selected precious metals as well as
some minerals such as phosphorous. All such numbers however should be taken with care
since high prices lead to new exploration activities and extraction activities in areas, which
are known but have not been economical in previous years.
IP/A/ITRE/ST/2008-06 & 14
Page 4 of 126
PE 416.218

Figure 6: Worldwide distribution of reserves of the main energy carriers and metals
Sources: BP, 2006 and 2007; USGS, 2006 and 2008; NAE/IAEA, 2008
IP/A/ITRE/ST/2008-06 & 14
Page 5 of 126
PE 416.218

Figure 7: Worldwide distribution of reserves of selected minerals and precious metals
Source: Cohen (2007) in: New Scientist.
IP/A/ITRE/ST/2008-06 & 14
Page 6 of 126
PE 416.218

Only very small reserves of the main energy sources and metals are found in Europe. As
Figures 4 and 5 show, Europe will rely heavily on imports from abroad in the future in order
to ensure a stable access to fossil and nuclear energy as well as to metals. From this
perspective, adhering to conventional energy sources like oil and gas or reviving nuclear
energy would move Europe into even higher dependency of other countries with oftentimes
precarious political and social circumstances.
Additionally, for various commodities, the peak of extraction has already been reached
or is currently about to be reached, signifying a future decrease of extraction, and
constricted availability respectively. However, data on commodity reserves and expiration
dates diverge significantly. On the one hand, this is due to different assumptions and
estimation methodologies; on the other hand, political and economic strategies often influence
the results of such predictions. Table 1 shows an overview of prognoses concerning the
anticipated peak and a possible depletion of different fuels and metals, and their main area of
use. One may note however that “peak” usually refers to oil production and the supplies of
minerals need to take into account criteria such as co-production, recycling, and
substitutability.
Table 1: Predicted peak and depletion of different fuels and metals, and main area of usage
Commodity Peak Depletion Main area of usage
Oil 2006-2026 2055-2100
Energy generation
Chemical industry and pharmaceuticals
Construction
Natural gas 2010-2025 2075 Energy generation
Coal 2100 2160-2210 Energy generation
Antimony - 2020-2035 Metal alloys
Copper - 2040-2070
Energy transport
Piping
Electronics
Gallium may have
passed - Electronics (mobile phones, solar cells)
Indium - 2015-2020 Electronics (LCDs, solar cells)
Lead Passed 2030
Automobile industry
Chemical industry
Platinum - 2020
Electronics (printer, etc)
Industry (plug, catalyser, glass production)
Medicine (pacemaker)
Silver - 2020-2030
Electronics
Pharmaceuticals
Tantalum - 2025-2035 Electronics (mobile phone, automobiles)
Pharmaceuticals
Chemical industry
Uranium - 2035-2045 Energy generation
Zinc - 2030
Anticorrosives
Energy storage (batteries)
Note that out of the variety of different results, the authors derived the time spans with the largest overlaps; the
list of sources can be found in Annex 1. For some metals, no information about peak extraction could be found
(marked with -).
Natural gas cannot replace oil as main energy source, once the latter is depleted. By
now, “peak oil” is widely accepted as reality. Nonetheless, the assumption that worldwide
huge gas reserves will help to overcome this shortage is critical, as it ignores various
important aspects: first, a considerable share in the gas exploited today is associated with oil
production – ceasing oil production, hence, leads to a decrease in produced gas.
IP/A/ITRE/ST/2008-06 & 14
Page 7 of 126
PE 416.218

Second, gas production is strongly limited by cost and time needed to build gas gathering,
recovery, and transport infrastructures. Third but not least is, again, the dependency issue;
apart from Russia – already at the edge of Peak Gas – the world's biggest remaining gas
reserves are located in politically critical countries such as Iraq, Iran, UAE, Qatar,
Turkmenistan, Nigeria and Venezuela. Generally, it is important to understand the
interrelationship between oil, gas, and electricity; a change in the production of one will
always affect the supply with the other (McKillop, 2006).
‘Critical metals’ will affect the European economy more subtle, but further-reaching.
The European economy is an industrial and service-oriented economy, depending highly on
different raw materials, to produce high-end processed products. As the examples in Table 1
show, an uncountable number of goods of daily use and application contain small, but critical
amounts of certain metals, the depletion of which would cause the cessation of a whole sector,
and considerable interventions in accustomed life styles of European citizens. Apart from the
main energy sources, such as coal and gas, the handling of these materials will become
decisive in the future, as their increasing scarcity will lead to an even more accentuated
augmentation of their prices, and consequently the costs for producing processed goods
downstream.
2.2. Patterns of resource use in different sectors of the EU
Quantifying resource use on a sectoral level requires observation regarding two
different aspects: direct and indirect resource use. Direct use refers to the actual weight of
the products, which are traded between different sectors and countries, and thus does not take
into account the life-cycle dimension of production chains. Indirect flows, however, indicate
all materials that have been required for manufacturing a final product (also called up-stream
resource requirements). For instance, concerning the car production sector, the indirect flows
comprise all the materials already used by providers of raw materials (steel, plastics),
component suppliers, etc.
The flows of goods and transactions between economic activities, both within a national
economy and with the rest of the world, can be illustrated in so-called input-output tables
(IOTs). These tables are used for the investigation of economic structures of national
economies and the analysis of the direct and indirect effects of changes in final demand,
prices, and wages on the entire economy as well as its individual components.
Detailed analyses of sectoral resource use are only scarcely available for some EU
countries and so far missing for the EU. So-called “physical input-output tables (or
PIOTs)” are valuable tools to analyse direct resource use of different sectors in an economy.
PIOTs describe the flow of materials from nature into the economy and back to nature
through the economic activities of processing and consumption. Using mass units, the
principle of the conservation of matter can be applied: resources cannot be created or
destroyed in any physical process.
In the following, the results of three different studies are discussed, in order to illustrate
similarities or differences in the resource use of different EU member states. No reliable
physical input-output table is so far available for the European Union as a whole.
1. Direct resource use: example Germany: The German Federal Statistical Office
(2005) elaborated a PIOT for Germany in the year 1995 with 99 types of materials and
60 different producing sectors. Not surprisingly, stones and construction, coal,
chemical products, metals and semi-finished metal products, glass, ceramics and food
have been identified as the most material-intensive material groups.
IP/A/ITRE/ST/2008-06 & 14
Page 8 of 126
PE 416.218

Note that the ‘Residuals’-section includes water use. However, also without
accounting for the water usage during production, these groups (in slightly changed
order) would be among the most resource-intensive sectors.
2. Direct resource use: example Finland: Several studies (Mäenpää, 2001, 2002, and
2008) exist, which elaborated and analysed a physical input-output table for Finland.
Starting on a very high resolution - 190 industries and 1300 products, orientated at the
monetary input-output tables available for Finland - several service industries were
aggregated and the number of industries reduced to 151 due to lack of physical data.
In his recent work, Mäenpää (2008) shows that in 2002 the most material intense (and
hence less material productive) sector was “Mining and quarrying” with 124 kg/€,
followed by “Forestry” (25 kg/€) and “Construction” (10 kg/€). Hence, in comparison
with the German values, these results are far higher, indicating a more resource-
intensive economy in Finland.
3. Direct resource use: example Denmark: Gravgård Pedersen (1999) created a PIOT
for Denmark in the year 1990. Originally, the resolution of the Danish PIOTs was of
about 117 industries and 2940 commodities. In order to simplify calculations, the 117
sectors were aggregated to 27 industries. The results showed that the greatest
consumer of intermediate consumption materials was the construction industry with
58.7 million tonnes, followed by “mining and quarrying” (45.7 mill. tonnes), and
“agriculture and horticulture” (25.5 mill. tonnes). No information was given regarding
material intensities of the different sectors.
The comparison of the results of different countries is not as straightforward as it may
seem. As stated before, and as demonstrated by means of the examples above, available
PIOTs of specific countries often differ in terms of number of economic sectors and products.
Moreover, due to the enormous amount of work associated with the compilation of PIOTs,
PIOT publication periods vary significantly between different countries. Not surprisingly,
sectors related to primary resource extraction (such as mining and agriculture) as well as
sectors at the first stages of processing (metal industry, chemical industry) and the
construction industry are the most resource intensive sectors regarding direct resource use. As
regards to eco-innovation however downstream processes need to be considered as well.
Economic-environmental models and statistical analysis can quantify the indirect
resource use on a sectoral level. As stated above, in addition to direct resource use, also the
indirect resources necessary to produce products for final demand can be analysed. Thereby,
interdependencies of different sectors are taken into account and consequently the total
amount of resources required to produce final products is illustrated. These findings reflect
economic activities and final demand for goods in monetary terms, which are extended by
environmental data in order to calculate environmental pressures, such as material use,
emissions, etc. Consequently, the material requirements along the whole production chain of a
given final-demand product can be determined.
Direct plus indirect resource use: example Germany. The German Federal Statistical
Office (2005) elaborated a model of 71 different economic sectors for 70 different products
and analysed the development of the German abiotic resource use in the years 1995-2002. It
was shown that direct resource use (domestic extraction plus net imports) decreased by 8.8 %
in that time period. While the domestic use itself was reduced, another reason for the decrease
was the fact that material exports increased to a higher degree than imports. Direct abiotic
resource use in Germany decreased from 1448 million tonnes in 1995 to 1321 millions of tons
in 2002. Based on the economic-environmental model, also the total use of abiotic products
by sectors was calculated.
IP/A/ITRE/ST/2008-06 & 14
Page 9 of 126
PE 416.218

Research done at the Wuppertal Institute (Acosta et al. 2007) reveals that ten production
sectors account for more than 50 % of German Total Material Requirements (TMR). Three
areas are of strategic importance because here a huge number of technological interactions
among production sectors take place:
• stones, construction, and housing (i.e.: construction)
• metals and car manufacturing (i.e.: mobility)
• agriculture, food and nutrition (i.e.: food).
The following figure illustrates the share, which each of the sectors directly and indirectly
uses to produce the outputs.
Figure 8: Direct and indirect resource use by economic activities in Germany in 2000
Source: Acosta et al. 2007.
The use of primary material in Germany is concentrated in just a few branches, which
determine the overall level of resource use. Statistically, the share of the consumption of
the private households is relatively small (only 3.5 %), whereas 96.5% of the abiotic
resources are used in the production sectors. Compared with the analysis of direct resource
use above, it can be noted that the resource extraction sectors have a much lower share, as
they deliver almost all resources to other sectors, which further process primary materials.
According to Destatis (2005) (Figure 9) “Manufacturing of other non-metallic products” leads
the list of resource-intensive sectors with a share of 25.2%, followed by “Construction”
(21.1%) and “Electricity, gas, steam and hot water supply” (18.4 %). Services, on the other
hand, only use 5.1% of the total abiotic resources. According to Acosta et al. (2007),
“construction” accounts for 18 %, “metals” for 9 %, “food” for 9 %, “energy for 8 %,
“automotive” for 6 % of direct and indirect sectoral TMR in 2000.
IP/A/ITRE/ST/2008-06 & 14
Page 10 of 126
PE 416.218

Figure 9: Domestic use of abiotic primary material by economic activities in Germany in 2002
Source: Destatis, 2005
Absolute numbers of sectoral resource use and sectoral resource productivity are closely
linked. In addition to the absolute numbers, the German Destatis study identified the most
resource-intensive producing sectors: “Production of glass and ceramics, processing of stones
and earth” with 21.5 kg/€, “Construction” (2.9 kg/€), “Production and distribution of energy”
(7.6 kg/€), and “Metal production” (1.8 kg/€); which together account for around 70 % of the
used materials. The strong concentration of primary materials use in a few sectors indicated
that the macroeconomic development concerning absolute material consumption and resource
productivity is highly marked by the development in these few sectors. One may note that
other methodologies might lead to slightly differing results.
To sum up, the issue of resource scarcity deserves full political attention. In this regard, the
areas of housing, mobility and food are of strategic relevance for eco-innovation.
2.3. Sectors affected by resource scarcity
Part one of this section focussed on resources, which are likely to become scarce in the short
to middle term. It was shown that, apart from oil and gas – today the main energy sources
worldwide – there exist various “critical materials” which are not used in big absolute
quantities, but are crucial for important sectors as, for instance, electronics or chemistry and
are likely to deplete in the short to medium run. From the analysis of the second part,
specifying sectors with especially high resource use in absolute numbers, it can be deducted
that the materials directly or indirectly used in large quantities are mainly construction
materials and metals regarding abiotic resources and agricultural harvest for the food
processing industries regarding biotic resources. In this final section, we present the
conclusions, which can be drawn from the previous analysis.
Literature dealing with the impacts of resource scarcity on different economic sectors is
hardly available. Studies dealing with reserves and the likely production peak of different
resources are available as are studies analysing patterns of (direct and indirect) resource use
on the sectoral level.
IP/A/ITRE/ST/2008-06 & 14
Page 11 of 126
PE 416.218

However, studies trying to quantify the vulnerability of different sectors due to expected
resource scarcities in the future do not seem to exist yet and should be subject for further
research. Available studies provide their analysis on a very general level; see for example an
analysis done for the ITC industry (German EPA 2007). Therefore, also this study will only
derive some tentative general conclusions.
Oil plays a crucial role for all sectors, both in its energetic and non-energetic use. “Peak
oil” is expected within the next years and oil depletion will occur somewhere around the
middle of this century. Further shortage of oil as the main energy source for many
manufacturing sectors, the construction sector, and in particular also the transport sector, will
cause negative economic impacts in the form of further rise of prices of final goods, if no
alternatives are developed in time and transition towards a non-oil based economy can be
governed in a structured way. Also other sectors, which use oil as a primary raw material for
production, such as the chemical and the pharmaceutical sector, would be heavily affected by
a further shortage of oil.
Further shrinking of the primary extraction sectors in Europe is likely but exceptions
may be possible. The past 30 years saw a continuous shrinking of the European extraction
sectors, in particular in the mining of fossil fuels and metal ores. As the reserves of these raw
materials are mainly located outside Europe, it can be expected that these primary extraction
sectors will further decline in the next decades and that Europe will face growing dependence
on resource imports from other world regions. One may note however that, firstly,
Scandinavian States and others have started to conduct feasibility studies on renewing
extraction activities at certain sites and, secondly, the extractive sector in Europe is likely to
remain strong in the area of industrial (non-metal) minerals.
High-tech industries, in particular the electronic industry, will be affected by declining
availability of precious metals. Some particular industries, which have boomed in the past
few years, such as the information and communication industry or the entertainment
electronics industry are highly dependent on the availability of precious metals (such as
Antimony, Indium or Tantalum) necessary for producing processors, screens or other
electronic parts. It can be expected that worldwide competition for these resources will
significantly increase in the near future, as several of these precious metals have already
reached its extraction peak.
Also the development of new technologies, such as photovoltaic electricity generation,
could be slowed down by resource scarcity. One example are solar cells, for which gallium
and indium is yet required to produce indium gallium arsenide, the semiconducting material
which is at the heart of a new generation of solar cells. A second case for a critical material
might be platinum. Given the critical supply of some raw metals, more in-depth research on
the nexus between materials and renewable energies is needed to clarify possible limitations.
2.4. Summary
While, on the one hand, Europe is one of the world regions with the highest per-capita
resource consumption, on the other hand, the catching-up of other world regions and
emerging economies, respectively, is leading to enormous rapidly growing demand on
energy, metals, construction minerals, etc. Precariously, the reserves of the most important
resources are located outside of Europe, causing a critical dependency relationship of Europe
with other countries and regions.
IP/A/ITRE/ST/2008-06 & 14
Page 12 of 126
PE 416.218

So far, the world’s economy has been strongly dependent on oil as main energy source and as
important raw material for industrial sectors, such as the chemical and the pharmaceutical
industry. Consequently, as peak oil is expected for the very near future, a further shortage will
cause negative economic impacts in the form of further rise of prices of final goods, if no
alternatives are developed in time and transition towards a non-oil based economy can be
governed in a structured way. Additionally, the expected decline in the availability of
precious metals will strongly influence high-tech industries. It can be expected that worldwide
competition for these resources will significantly increase in the near future, potentially
leading to serious conflicts related to the access to resource reserves.
Hence, in order to deal with this increased scarcity of natural resources, a significant
reduction of the worldwide resource use will be necessary.
IP/A/ITRE/ST/2008-06 & 14
Page 13 of 126
PE 416.218

3. ECO-INNOVATION: CURRENT STATUS AND OPPORTUNITIES
3.1. Definition and Scope
A demand for eco-innovation has arisen because of the need to address today’s pressing
environmental challenges. A comprehensive definition of eco-innovation was recently given
by Reid and Miedzinski (2008) in the ‚Sectoral Innovation Watch in Europe: Eco-Innovation’
report, and this definition will also be used for the purpose of this report. The definition states
that eco-innovation is “the creation of novel and competitively priced goods, processes,
systems, services, and procedures designed to satisfy human needs and provide a better
quality of life for everyone with a whole-life-cycle minimal use of natural resources
(materials including energy and surface area) per unit output, and a minimal release of toxic
substances”.
Important to note is that eco-innovation is not simply an end of the pipeline ‚curative’
technology. Eco-innovation can be considered at any stage of a product or service lifecycle.
However, when considering the impact eco-innovation can have on resource or energy
efficiency, the most gains are to be made when tackling the "upstream" or production part of
the supply chain, for example, improving the efficiency of manufacturing and using materials.
It is nevertheless important to emphasise that eco-innovations, which reduce energy and
resource consumption at any stage of the life-cycle are important, and applying a holistic and
multifaceted approach to furthering eco-innovation is necessary. This means not simply
focusing on technological innovations but also on the ‚human’ element of eco-innovation
such as those innovations involving behavioural and lifestyle change.
3.1.1. Different types and levels of Eco-Innovation
The different types of eco-innovations can generally be grouped into three main categories;
process, product and system innovations.
Process Innovations: a process innovation is the implementation of a new or significantly
improved production or delivery method. Production-integrated environmental management
(PIUS) captures manifold approaches of process innovation. ‘Organisational’ innovation
(which can also fall into the category of process innovation) can describe the implementation
of a new organisational method in the firm’s business practices, workplace organisation or
external relations. Such innovation is closely linked to learning and education (see
Bleischwitz 2003; Davenport, Bruce, 2002; Easterby-Smith, Araujo, Burgoyne 1999; Lane,
Bachmann 2002). An organisation’s innovativeness and advanced learning processes are
widely based on identical elements. A final aspect of process innovation includes ‚marketing’
innovations (product design, packaging, product placement, promotion) such as eco-labelling.
Key words in this area include cleaner production, zero emissions, zero waste, and material
efficiency.
Product Innovations: product eco-innovations include any novel and significantly improved
product or service, produced in a way that means its overall impact on the environment is
minimised. This, however, usually implies risks for the company since customers need to be
convinced to purchase the new product. Adding services to selling a product also can be
categorised here. Keywords in this area include the concepts of eco-design (Brezet, van
Hemel 1997), technological sustainability innovations, environmental technology, and the
dematerialisation of products.
IP/A/ITRE/ST/2008-06 & 14
Page 14 of 126
PE 416.218

System innovations: this type of innovation does not only refer to technological systems, but
also to radical and disruptive technologies that alter the market conditions (such as hydrogen
and fuel cells) as well as all types of system changes such as industrial, societal or
behavioural changes. Key words in this area include the concepts of life-cycle analysis,
cradle-to-cradle, material flow analysis, integrated environmental assessment, integrated
sustainability assessment, closed-loop-material-cycles, decoupling, factor 4 and factor ten,
sustainable production and consumption, eco-sufficiency and immaterialisation, user-oriented
systems and sustainable lifestyles.
3.1.2. Measuring eco-innovation and material flows
There is currently little research into methodological approaches to measuring eco-innovation.
A number of methods for measuring eco-innovation such as survey analysis, patent analysis
and digital and documentary source analysis, are highlighted by Kemp and Pearson (2008).
There has also been some reference to adapting innovation systems theory and indicators to
the measurement of eco-innovation (Foxton, Pearson and Spears, 2008). However, the former
study confirms that the general knowledge base for eco-innovation is poor. Reid and
Miedzinski (2008) argue that the primary objective of eco-innovation should be to reduce
material flows. There are a number of approaches to deal with analysing material flows,
resource productivity and decoupling (highlighted in box 1). Excessive man-made material
flows increase welfare, but also have detrimental effects on the environment. Therefore eco-
innovation should be concerned with reducing these material flows and furthering
sustainability objectives (Reid & Miedzinski, 2008).
Box 1: Decoupling Indicators
Since it is impossible to manage a system without metrics, appropriate decoupling indicators
with proper accounting for resources must be used. The OECD (2008) has now released a
handbook on material flows and resource productivity. This includes an overview of the main
material flow indicators grouped according to the purpose of their description. The main
categories include: ‚input indicators’ such as Domestic Extraction Used (DEU), Direct
Material Input (DMI) and Total Material Requirement (TMR); ‚consumption indicators’ for
example, Domestic Material Consumption (DMC) and Total Material Consumption (TMR);
‚balance indicators’ including Net Addition to Stock (NAS) and Physical Trade Balance
(PTB); ‚output indicators’ which are Domestic Processed Output (DPO) and Total Domestic
Output (TDO); finally efficiency indicators which refer to GDP per DMI, GDP per DMC and
GDP per TMR. As to the ecological dimensions of sustainability, calculations of material
input – from cradle to cradle - per unit of service (MIPS), and ecological rucksack
measurements have also been developed.
Source: OECD 2008
3.1.3. Eco-innovation and resource-efficiency
Resource-efficiency can be considered a key strategy of eco-efficiency because of its huge
potentials for cost savings and innovation. German Federal Statistical Agency estimates that
roughly 40 % of Gross Production Costs in manufacturing industry stems from purchasing
materials. Surprisingly however, little research has been done on the potential resource
savings through eco-innovations.
IP/A/ITRE/ST/2008-06 & 14
Page 15 of 126
PE 416.218

According to a study by the consultancy Arthur D’Little, The Wuppertal Institute and the
Fraunhofer ISI (2005), there is a robust potential for resource efficiency in branches such as
manufacturing of metal products, of systems for electricity generation/distribution and
similar, chemical industry (excluding primary industry), manufacturing of synthetic goods,
and construction industry.
This is estimated in the order of 10 – 20 % of current material use, amounting to total between
5.3 and 11.1 billion Euro per year in Germany alone. Eco innovation opens up a new field of
innovation activities, and there are huge opportunities available, not just in terms of saving on
material costs but also by finding alternative options for scarce resources.
3.2. Examples of eco-innovations in key areas
The areas of housing, mobility, and
food and drink have been identified
by the European Commission and
the EEA as having the highest
environmental impact throughout
their full life cycle (EIPRO Study
2006, forthcoming NAMEA Study,
see also chapter 2). This means that
altogether, these fields of demand
account for approximately 70-80%
of environmental impacts arising
from all products over their life
cycles. The environmental impacts
within these areas are multifaceted,
ranging from planetary problems as
divergent as global warming,
acidification, and photochemical
ozone formation, to localised
pollution leading to eutrophication or species loss (EEA, CSCP, 2008). The figure illustrates
the relative proportion of environmental impact from each of the three impact areas and these
areas are discussed in more detail below. Furthering eco-innovation in each of the three areas
is of particular interest, since eco-innovation has great potential to help reduce the use of
resources and lower environmental impacts.
Figure 10: The three areas with the highest
environmental impact
Housing: refers to environmental impacts from aspects relating to extraction and production
of aggregates and construction materials, use of chemicals, maintenance services, finance
services, design of buildings, use of renewable energy sources, energy efficiency in buildings
(public and commercial as well private), household appliances, water use, construction, reuse
of demolition and household waste, etc.
Food and Drink: refers to environmental impacts from aspects relating to agricultural
production, food processing, use of chemicals, energy use, packaging, logistics, retailers,
consumer choices, waste, food services such catering and restaurants, etc.
Mobility: refers to environmental impacts from aspects relating to extraction and production
of metals and other materials, public and private transportation, freight transportation, railway
service, aviation, disposal of vehicles, alternative vehicles and fuels, resource use and
emission etc.
IP/A/ITRE/ST/2008-06 & 14
Page 16 of 126
PE 416.218

In such a framework, more specific resource and energy intensive sectors can be identified
and subordinated to those areas. These sectors, such as coal, peat, chemical products, stones
and earths, other quarrying activities, metals and semi-finished products, construction, food,
feed and beverages, glass ceramics, manufactured stones and earths (also discussed earlier in
Chapter 2.3) fall into the broader areas described above because they deliver materials to
those areas.
In the following section, major trends in each of the areas housing, mobility and food and
drink are summarised, and concrete examples of eco-innovations in each of these areas are
given. These examples have been chosen based on both desktop studies and practical
experience and have an illustrative purpose. Each case is presented as a table, including
information about the name and concept of the eco-innovation, the goal, as well as project,
examples and evaluation where relevant.
3.2.1. Area Housing: Deep Renovation and Smart Metering
Analysing and examining the trends in the area of housing, allows needs and gaps in eco-
innovation to be recognised. In this area, there have been several key trends in recent years,
which contribute to the case for eco-innovation in this area. These trends are summarised and
explained in box 2 below. One may note that these trends partly offset environmental policies
and lead to additional demand for action – which can be responded to via eco-innovation.
Box 2: AREA HOUSING – Main Trends
High-impact use of construction materials: the construction and renovation of buildings is
highly material and energy intensive (especially when materials are evaluated from a life
cycle perspective). Prices for key material inputs have also risen significantly in the past years
(Wallbaum/Kaiser 2006)
Access to appropriate and affordable housing: access to safe, decent and affordable
housing for low-income groups remains a challenge in many countries (SP/HUMI 2005,
Boverket 2005). High incidental energy expenditure from inefficient energy use also plays a
part in this.
Growing demand for housing space: houses are growing in size and number. Increased
single occupancies, multi-property ownership and expectation of living space are all
conributing factors. This trend also reinforces urban sprawl and is linked to higher energy
consumption (EEA 2001, UNECE 2006).
Urban sprawl and lower urban density: increasing urbanisation and expectations of living
close to a city, whilst still having access to the countryside has increased urban sprawl. This
has repercussions on transport patterns and other sustainability impacts (EEA 2006).
Energy consumption in the housing use phase: household heating and other use-phase
energy contribute to different environmental impacts (in cold climates typically 80-90 % of
total life cycle energy use is consumed during the use phase of the building) (EIPRO-Study
2006).
Furthering eco-innovation in the area of housing has the potential to slow or reverse some or
all of these trends. The following two examples of eco-innovations offer solutions to some of
the unsustainable trends described above as well as attempting to improve resource and
energy efficiency. The respective eco-innovation is described followed by its goal, project
examples and an evaluation.
IP/A/ITRE/ST/2008-06 & 14
Page 17 of 126
PE 416.218

Name and concept of eco-innovation
DEEP RENOVATION (refurbishment of old buildings)
System innovation
Sectors
construction, installation, planners and architects, mining
and quarrying, non-metallic mineral products, chemical
products, wood industry, manufacturing services
Deep renovation means the refurbishment of older buildings to ensure maximum use of recyclable
building materials and minimum energy input into production of building materials.
Goals of the eco-innovation:
• To significantly reduce greenhouse gas emissions from buildings
• To reduce energy input in building materials
• To implement a high recycling quota by using renewable raw materials
• To improve the indoor air quality
• To reduce the health risks caused by building materials for example, through fulfilment of
ecological/biological (“baubiologische”) construction criteria
• To reduce costs of construction through the standardisation of components of the building shell
and of the required technical equipment
Selected project examples and results:
There is not yet a well-documented comprehensive project example that achieves all of the goals
mentioned above to a maximum extent. However, there are several examples of new or refurbished,
residential and non-residential passive houses (< 15 kWh/m2/year useful heat demand) or energy-plus
houses that nearly fulfil all the criteria.
A few of these include:
• Refurbishment of a school in Austria according to passive house requirements (<15 kWh/m2year
useful heat demand) (for more information see www.umweltschutz-news.de, 04/11/2008)
• Ecological passive house building in Durlach/Germany, constructed in 2007/2008: mainly made
from loam and wood; ecological colours (for more information see www.eza-allgaeu.de,
17/10/2008).
• Passive house building in Laßnitzhöhe/Austria, constructed in 1997: mainly made from stones,
wood and recycled pulp; no chemical protection of wood, no CFC-free, polyuretan-free, PVC-free,
no mineral insulation (for more information see www.energytech.at, 17/10/2008).
• Sonnenschiff (“sunship”) in Freiburg/Germany, office building constructed in 2005: energy-plus
passive house; ecological materials, e.g., floor cover made of natural rubber, PVC-free; mobility
infrastructure suitable for bicycles (for more information see www.sonnenschiff.de, 20/10/2008)
Overall evaluation of the eco-innovation
Environmental and health aspects: Impacts can be minimised by system design and choice of
components (cf., e.g., www.dgnb.de or www.worldgbc.org for evaluation criteria)
Technical aspects: deep renovation is possible in nearly every building; standardisation is limited.
Quality strongly depends on know-how of architects, planners and installers, and on quality control
systems.
Economic and marketing aspects: Compared to BAU refurbishment, additional costs of deep
refurbishment are limited and often pay off, particularly if available financial or fiscal support is taken
into account. Different financial and fiscal support must be complementary. For example, a tax on
construction materials (see chapter 4) can be considered favourable for deep renovation buildings
projects instead of new dwellings with primary materials; however it must be made compatible with
VAT abatement. Comfort gains should be highlighted in marketing.
Socio-cultural and organisational aspects: High user acceptance due to excellent indoor air quality
and low running costs. Reduced pressure on user’s behaviour, because this is not a very decisive factor
anymore.
IP/A/ITRE/ST/2008-06 & 14
Page 18 of 126
PE 416.218

Name and concept of eco-innovation
SMART METERING
Product innovation
Sectors
energy (electricity, gas), manufacturing services, appliances,
installers, energy services
Currently, the majority of existing electricity and gas meters are hidden from view and provide little
information for the customer on energy usage. Smart metering is a system which measures the
individual energy or water consumption of households and communicates the information to the local
utility for monitoring and billing purposes and often to the user, too. Smart meters use less energy than
conventional meters, which is however more than compensated by the energy consumption of the
additional information and communication technology needed. Nevertheless, by tracking usage patterns
and increasing awareness of energy use, smart metering can stimulate energy saving measures,
particularly if directly combined with additional energy efficiency services (energy advice or audit,
installation or optimisation of energy efficiency technology, energy performance contracting, etc.).
Smart Meters can provide data on how much gas, heat, electricity or water is consumed, how much it
costs and what impact the consumption has on greenhouse gas emissions. In addition, an advanced
metering infrastructure offers the possibility for additional energy-related load management services
such as demand side management and realisation of virtual power plants (a cluster of distributed
generation installations and load reduction possibilities on the demand side which are collectively run
by a central control entity) and respective incentive programmes and/or time-differentiated tariffs.
Goals of the eco-innovation:
• To promote awareness of energy consumption, energy costs and greenhouse gases emissions
• To stimulate customers to monitor energy consumption and to take additional action to save
money on their energy bills
• To decrease the running costs of metering and billing
• To create the technical basis for being able to cope with peak demand challenges
Selected project examples and results:
Smart Meter projects have been tested, for example, in the USA, Italy, Sweden and Australia. For more
information see www.esma-home.eu/smartMetering/caseStudies.asp, (6/11/2008). However, a
systematic combination of smart meters with stimulating energy efficiency measures (programmes or
services) and load management is rare, and there is no well-documented example available.
One smart metering example with significant short-term impact on energy consumption was in Bath
(UK), where energy consumption was monitored over a 9-month period and compared to the previous
years’ consumption. Participants received feedback in various forms, i.e. consumption compared to
previous consumption, energy saving tips in leaflets or on a computer, or feedback relating to financial
or environmental costs. The advice given to the consumer included, home visits and energy saving tips
in leaflets. The results indicated firstly that most households reduced their consumption of electricity
and gas, and secondly that income and demographic features were able to predict the historic energy
consumption but not the changes in consumption during the field study, where environmental attitudes
and feedback were influential. The study showed that the installation of computers helped to reduce
consumption most markedly (ESMA, 1999).
Overall evaluation of the eco-innovation
Environmental and health aspects: There is worldwide evidence that giving consumers appropriate,
relevant information on their energy and water use is an important basis for additional measures leading
to a reduction in this use and thus in GHG emissions. Demand-response leads to energy savings and
more efficient use of electricity generation capacity and the electricity grid.
Technical aspects: Smart Metering for households does not include any manual processing required for
standard meters. Smart Metering enables remote reading of energy and water meters. With Electricity
Display Devices (EDDs), smart metering can provide accurate information on energy use, time of use
and costs to customers, and information about greenhouse gas emissions and historical consumption
data for comparison.
IP/A/ITRE/ST/2008-06 & 14
Page 19 of 126
PE 416.218

Technical possibilities to use a Smart Meter in an efficient way include power line carriers, wireless
modems, radio frequency and internet connection. Since smart metering is heavily reliant on ICT, this
could present problems, as precious metals for electronic devices become more scarce. Better re-use of
precious metals from ICT products is a suitable eco-innovation strategy (see experience from UK in the
briefing note written by Arnold Black). On the other hand, it could be a driver for the development of
alternative technologies in the electronics industry.
Economic and marketing aspects: Smart metering provides the possibility for residential customers to
obtain more accurate bills and prepayment options, and it enables an easier switch of energy suppliers.
Metering companies save costs of manual meter readings and data processing. Smart metering also
reduces customer complaints about mistakes in meter readings, which then brings cost savings at call
centres. For energy suppliers, smart metering offers an easier disconnection of customers and an easier
alteration in tariff structure. Smart metering also provides commercial value to additional energy
services like customer capturing and customer retention. Furthermore, consumers can participate in
electricity spot markets via “time-of-use pricing” and realize load hifts, especially ic combined with
smart home technologies and new smart grids two-way control systems to integrate distributed
generators).
3.2.2. Area Mobility: the Green Electric Car and Car sharing
Analysing and examining the trends in the area of mobility allows needs and gaps in eco-
innovation to be recognised. In this area, there have been several key trends in recent years,
which contribute to the case for eco-innovation. One may note that these trends partly offset
environmental policies and lead to additional demand for action – which can be responded via
eco-innovation These trends are summarised and explained in the box below.
Box 3: AREA MOBILITY – Main Trends
Increasing freight transport: More goods are being transported over longer distances and more
frequently. The freight transport volume has grown by 43% since 1992, outpacing the rate of
economic growth. Demand for freight transport is also expected to increase by around 50% between
2000 and 2020 in the EU-25. The growth in freight transport is dominated by road transport and these
low transport costs have resulted in growing distances between consumers and producers (EEA,
2007).
Increasing fuel price & application of alternative fuels: The price of standard crude oil had tripled
since 2003 until October 2008. This has led to increasing demand of more fuel-efficient cars (hybrid
and diesel) as well as alternative fuels becoming more competitive. This raises questions about the
potential negative effect of biofuels on biodiversity and food production (EEA, 2007).
Increasing long-distance leisure & air travel: Passenger transport (km/person) in the EU-25 is
projected to increase by 53% between 2000 and 2030. This is partly due to the increasing popularity of
low-cost carriers, and the aviation’s share of total passenger-km now almost matches that of rail
transport (EEA, 2005).
Deteriorating quality of public transport: There has been a significant shift from the use of public
transport towards the private car in the EU-15 in recent decades. The share of private car use is now
around 80%. There is also a deterioration in the quality of public transport in some countries, and
public transport fares have increased faster than the costs of private car use (EEA, 2005).
Increasing personal mobility/increase in car ownership: In 2004, the number of passenger cars in
EU-25 reached 216 million and since 1990, the total number of cars has increased by 38%. Cars now
make up three-quarters of journeys travelled in the EU-25 (European Commission 2006; EU/UNEP,
2005).
Fostering eco-innovation in the area of mobility has the potential to slow or reverse some or
all of these trends. The following two examples of eco-innovations describe solutions to some
of the trends described above, as well as attempting to improve resource and energy
efficiency. The concept of the eco-innovation is described, followed by its goal, project
examples and an evaluation.
IP/A/ITRE/ST/2008-06 & 14
Page 20 of 126
PE 416.218

Name and concept of eco-innovation
GREEN ELECTRIC CAR
Product innovation
Sectors
mining and quarrying, metallic and non-metallic mineral products, chemical
and petroleum industries, automotive and suppliers (esp. electronic
industry), automobile trade, mobility services, power industry
Possibilities for electric vehicles include cars that utilise an electric motor powered by battery packs
charged from an electricity grid, hybrid cars that combine an electric drive and a combustion engine,
plug-in hybrid cars that can be connected to the electricity grid, and hydrogen and fuel cell cars (see e.g.
www.roads2hy.com). They can be called “green electric cars”, if electricity is produced from renewable
energies in a sustainable manner (i.e. at least from low carbon and low risk sources).
Goals of the eco-innovation:
• Continue with the concept of personal mobility, i.e. to fulfil the increasing demand for cars without
increasing the environmental impact.
• Reduce dependence on fossil fuels and GHG emissions by the use of renewable energies
• Reduce local air pollutants.
Selected Project examples and results: E-mobility
This is a project involving the German energy provider RWE AG and the German automobile
manufacturer Daimler AG, however there are similar projects also organised by Renault, Nissan and
small and medium sized enterprises such as ‚Betterplace’ (see www.betterplace.com). E-mobility was
started in Berlin and includes all components for an efficient use of electric vehicles. In the first step,
Daimler AG will provide 100 electric cars and RWE AG is responsible or the supply of the electricity
and the development, installation and operation of 500 charging points. Later on the project will be
extended and launched in other cities. The charging points will be installed at the customer’s home, at
the workplace and in public areas. The appropriate charging infrastructure, the affordable prices as well
as an easy payment transaction make the electric car suitable for everyday use, and various customer
groups. The project is supported by the German federal government and shows an innovative example of
what can be achieved if policy makers, energy suppliers and the automobile industry work together in
order to contribute to clean and sustainable mobility solutions.
Overall evaluation of the eco-innovation
Environmental and health aspects: Electric cars increase the demand for power plants. With modern
coal-fired power plants, energy consumption of an electric car consuming 20 kWhel per 100 km sums up
to an equivalent of 5 to 6 litre gasoline (Pehnt/Höpfner/Merten 2007). For the electric car to be truly
efficient and produce low CO2 emissions, the electricity must come from renewable sources. However,
with additional increase in electricity demand by cars, avoiding new fossil fuel-fired power plants
becomes even more difficult than today, even with strong increases in energy efficiency in other areas.
In addition, the noiselessness of the electric car can make it dangerous for pedestrians, meaning perhaps
an increase in accidents.
Technical aspects: the concept strongly depends on the development of batteries and a strong increase
in the supply of electricity from renewable energies. In addition, although the technology for electric
cars exists, changes in infrastructure, predominantly concerning providing access to charging stations
will need to be made before electric cars can be used by widespread civil society; travelling distances
without refuelling service are still very low.
Economic and marketing aspects: recent decline in car sales due to the current financial situation is
helping to push the development of electric cars by car manufacturers.
Socio-cultural and organisational aspects: consumers will be mislead by electric cars offered to them
which look “green” due to the fact that emissions are not visible, but that lead to high GHG emissions in
total because of conventional electricity used. With regard to the costs of electric cars, financial
incentives/disincentives are likely to play a significant role in the general uptake of electric vehicles.
When the consumer perceives the costs of running an electric car as being higher than a gasoline fuelled
vehicle then the electric car will be less appealing. Furthermore, currently the time needed to recharge a
vehicle is longer than to fill up a petrol tank; the frequency is also likely considered to be high (50–200
km range).
IP/A/ITRE/ST/2008-06 & 14
Page 21 of 126
PE 416.218

Name and concept of eco-innovation
CAR SHARING
System innovation
Sectors
construction, mining and quarrying, non-metallic mineral products,
chemical products, automotive and suppliers (esp. electronic
industry), automobile trade, mobility services, rental services
Car-sharing is the idea of renting a car every time there is the need to use one instead of possessing it.
The organised joint use of a vehicle makes it possible for several people to share one car. A car-sharing
organisation owns and operates a fleet of vehicles that can be picked up and returned by the customer in
several designated places of the respective city.
Goals of the eco-innovation:
• Reduce maintenance and fixed expenses for the customer arising from car ownership
• Raise awareness of ‘single driver’ habits and the apparent necessity of using a vehicle
• Reduce the annual vehicle miles of car drivers who coordinate their trips by using the option of
car-sharing
• Reduce private car ownership
• Reduce space needed for parking through decreased vehicle use
• Decrease the traffic in the cities
• Reduce the energy input and the raw material charge of car manufacturing
• Decrease significantly CO2 emissions through reduced car use
Selected Project examples and results: Greenwheels Carsharing
There are many examples of car-sharing initiatives in Europe and it is beyond the scope of this project
to name all of them. In Germany, in 2004, there were about 65,000 car sharing users in total (Wilke,
2004). Greenwheels is just one of the existing initiatives and it offers a fully automated car-sharing
service that started in 1994 as one of the earliest car-sharing initiatives in Europe. It now offers services
in 65 cities in the Netherlands and in Germany with more than 1000 locations where vehicles are
available. In order to become a member of Greenwheels you are required to pay a monthly subscription
as well as a deposit. Thereafter the customer is allowed to make reservations in any place and at any
time. The charges are calculated according to the number of kilometres driven. Greenwheels vehicles
are parked at special pick-up points in designated cities. After use, they can easily be returned to their
reserved parking place so that the customer does not have to look for a parking space. It is reported that
Greenwheel customers reduce between 30 to 45 percent of their annual vehicle miles. Furthermore
every second Greenwheels client uses the car-sharing option as a replacement for previous private car
ownership.
Overall evaluation of the eco-innovation
Environmental and health aspects: car sharing reduces the number of vehicles on the road and
therefore the environmental impacts caused by car use. It also reduces car usage, as consumers are
confronted with per-usage cost of driving, and vehicles are not as accessible as personally owned
vehicles.
Technical aspects: using technologies for easy access to shared vehicles, such as smartcard
technologies, where the customer can make reservations, pay and secure vehicles from theft can be
expensive for car sharing companies to implement.
Economic and marketing aspects: a car-sharing organisation needs the utilisation to be high and
intensive in order to keep per-use costs low. At the moment, car sharing is only economically attractive
to consumers who do not use vehicles intensively.
Socio-cultural and organisational aspects: car sharing must be viewed as a mode of transport between
long-distance transportation i.e. trains and short distance light-transport i.e. bicycles. It has the
advantage of offering a large range of vehicles with fewer ownership responsibilities. It requires
convenient and easily accessible pick-up and drop-off stations (Shaheen, Aperling & Wagner, 1999).
IP/A/ITRE/ST/2008-06 & 14
Page 22 of 126
PE 416.218

3.2.3. Area Food and Drink: Community Supported Agriculture (CSA) and
Sustainable Sourcing of Retailers
Analysing and examining the trends in the area of food and drink allows needs and gaps in
eco-innovation to be recognised. In this area, there have been several key trends in recent
years, which contribute to the case for eco-innovation. One may note that these trends partly
offset environmental policies and lead to additional demand for action – which can be
responded via eco-innovation. These trends are summarised and explained in the box below.
Box 4: AREA FOOD AND DRINK – Main Trends
Intensive farming & heavy land use: Intensive farming, due to increase in consumption of
pig and poultry meat, fish and seafood and cheese, has been the pre-dominant trend in most
EU-15 regions for several decades (EEA, 2005a). Land use efficiency of meat production is
also considerably low compared to other protein sources. For example, usable protein yield
per acre for beef is supposed to be 15times less than that of soybeans (Rosegrant et al. 2001).
Centralisation and concentration of sales: Companies are centralising their purchasing at
group level and opening retail outlets with large floor areas (Sarasin, 2006). Market
restructuring into closed ‘value chains’ is a global phenomenon. More than 50% of growth in
global food retail markets is expected to come from emerging markets (Vorley, 2003).
Increasing packaging waste: A shift towards the purchase of fresh food all year round from
all over the world and of pre-prepared and convenience food has resulted in large streams of
packaging waste, on average 160 kg per person per year in EU-15 (EEA, 2005b).
Increasing food miles: Increasing demand for non-seasonal food and exotic food is leading
to a large increase in the distance food travels from farm to fork, known as ‘food miles’.
Transport of food by air has the highest CO2 emissions per tonne, and is the fastest growing
mode (Smith, et. al., 2005).
Furthering eco-innovation in the area of mobility has the potential to slow or reverse some or
all of these trends. The following two examples of eco-innovations describe solutions to some
of the trends described above, as well as attempting to improve resource and energy
efficiency. The concept of the eco-innovation is described, followed by its goal, project
examples and an evaluation.
IP/A/ITRE/ST/2008-06 & 14
Page 23 of 126
PE 416.218

Name and concept of eco-innovation
COMMUNITY SUPPORTED AGRICULTURE (CSA)
System innovation
Sectors
Food, beverage and tobacco manufacture, chemical
products, agriculture and horticulture, retailers.
CSA is a partnership of mutual commitment between a farm and a community of supporters that
provides a direct link between the production and consumption of food. Supporters cover a farm's yearly
operating budget by purchasing a share of the season's harvest. CSA members make a commitment to
support the farm throughout the season, and assume the costs, risks and bounty of growing food along
with the farmer or grower. Members help pay for seeds, fertiliser, water, equipment maintenance,
labour, etc. In return, the farm provides, to the best of its ability, a healthy supply of seasonal fresh
produce throughout the growing season.
Goals:
• Foster organic agriculture practices (reduced use of hazardous fertilisers etc.)
• Decrease CO2 emissions from transport though local sourcing,
• Increase customer awareness of sustainable food & drink lifestyles by creating dialogue
opportunities with local farmers.
• Support the biodiversity of a given area and the diversity of agriculture through the preservation of
small farms producing a wide variety of crops.
• Create a sense of social responsibility and stewardship of local land among producers and
customers.
Project examples and results: Stroud Community Agriculture Ltd (SCA), Stroud, England.
In 2001, a group of people came together to find a more sustainable way of obtaining their food. Within
3 months they were renting an acre of land and employing a vegetable grower. Within 2 years they had
set up Stroud Community Agriculture (SCA) as an Industrial and Provident Society, were renting 23
acres of land, providing vegetables and meat to 60 families and making profit. At the end of 2007 SCA
was:
• renting 50 acres,
• employing 2 full time farmers/growers,
• providing vegetables and meat to 189 households
• making enough profit to pay a bonus to its farmers/growers,
• paying for a part-time treasurer and membership administrator,
• buying in citrus fruit and olive oil from a sister CSA in Spain,
• maintaining a regular programme of social and working events.
Further information about Stroud community Agriculture Ltd can be found at
http://www.stroudcommunityagriculture.org/index.php
Overall evaluation of the eco-innovation
Environmental and health aspects: able to address environmental issues on a small scale i.e. reduced
fuel consumption from transporting food long distances and reduced chemical usage. CSA can help
people develop healthier eating habits.
Technical aspects: the degree of choice of products from CSA is significantly lower for consumers
used to the convenience and choice of big supermarkets. Successful food production is more dependent
on seasons than mass-produced supermarket food. High turnover of CSA members means that new
members must constantly be found (Perez, Allen & Brown, 2003).
Economic and marketing aspects: CSA is likely to be more appealing if it is available to consumers
for a lower price than other produce of a similar quality. The lack of choice makes the option not so
appealing.
Socio-cultural and organisational aspects: CSA is educational because it connects consumers to other
aspects of the food system. It requires consumers to give up more time to prepare the food available to
them (Perez, Allen & Brown, 2003).
IP/A/ITRE/ST/2008-06 & 14
Page 24 of 126
PE 416.218

Name and concept of eco-innovation
Sustainable Sourcing practices of retailers
System innovation
Sectors
Food, beverage and tobacco manufacture, chemical products,
agriculture and horticulture, energy.
‘Sustainable sourcing practices’ of retailers means that retailers select products that have been shown to
be comparatively less damaging to the environment or to human health. To assess this for a product, all
of the following stages are considered; primary production, processing, transport, packaging and their
storage in the retailers shelves. Sustainable sourcing emphasises communication, collaboration, and
coordination among the retailers supply chain of the product, and on the shops interior design level
(CSCP, UNEP, 2007).
Goals:
• Enhance the fuel, energy and resource efficiency of transport, logistics and storage, for example by
switching to local sourcing
• Decrease vehicle CO2 emissions in the delivery fleet
• Reduce maintenance costs of the delivery fleet
• Switch to cleaner fuel (e.g. bio diesel) and energy sources in the shops and warehouses.
• Invest in carbon offsetting
• Purchase sustainably produced, processed and packaged products and shop equipment
Selected project examples and results: UK Retailer Sainsbury's* use of biopackaging
Besides other aspects of sustainable sourcing of retailers such as improvement of energy or light
efficiency or increase in sourcing of socially and environmentally friendly products, biopackaging is one
way in which retailers can source sustainably. Biopackaging refers to packaging that is either
biodegradable (it will break down or compost), or sustainable (it is made from a renewable resource
such as corn). It can be used for a wide variety of applications, including flexible films, bags, trays,
punnets, netting, bottles, cups, labels, tubs and blister packs. Sainsbury's uses biopackaging for various
fresh products, including fruit, vegetables and prepared salads. As part of its organic standards, the
retailer aims to use compostable biopackaging for 100 % of its fresh products in 2009. The
biodegradable materials used by Sainsbury's are starch-based, and are sourced from various suppliers
based in Europe and East Asia. For example, Sainsbury’s uses NatureFlex, which is a glossy,
transparent film manufactured from renewable wood pulp, sourced from managed plantations and is
certified to EU and US standards for industrial and home composting. Sainsbury’s use of biopackaging
has various positive implications:
• The retailer gets the opportunity to target a growing, environmentally-conscious consumer group.
• Supermarkets create the demand for a certain material, which in turn dictates the supply - if the
demand from supermarkets is not there, there is little incentive for food and packaging
manufacturers to develop and use biodegradable packaging.
• If a large supermarket chain like Sainsbury’s were to make the change to biopackaging across its
entire fresh produces range, this would have a significant effect on the biopackaging industry,
pushing it further towards the mainstream.
• It can save the retailer money in packaging taxes and gives it an easy way of disposing of fresh
produce that is too old to remain on the shelves.
• It allows the retailer to compost old produce along with its packaging, saving the time and money
spent separating the produce from the packaging.
* This is merely one illustrative example and many retailers across Europe are also conducting
similar projects.
IP/A/ITRE/ST/2008-06 & 14
Page 25 of 126
PE 416.218

Overall evaluation of the eco-innovation
Environmental and health aspects: encouraging retailers to engage in sustainable sourcing has great
potential to reduce environmental impacts from the food and drink sector, since retailers can have an
influence on all aspects of a product life-cycle (CSCP et al, 2008).
Technical aspects: retailers need to make some technical adjustments, since the latest evidence shows
adopting information technologies is the most effective way of achieving sustainable sourcing. As in the
case of smart metering, the reliance of sustainable sourcing of retailers on ICT could present problems
as precious metals in the electronic industry become more scarce. The alternative scenario is that the
increased demand for ICT pushes innovation in the electronics industry, helping to develop new
technology not requiring the scarce precious metals.
Economic and marketing aspects: retailers are required to market the internal as well as external costs
of their products so that consumers are able to fully understand where the product comes from and its
environmental and social implications.
Socio-cultural and organisational aspects: customers need to adjust to new and simpler ways of
displaying produce in supermarkets.
3.3. Drivers and Barriers of eco-innovation
In order for the potentials of eco-innovation to unfold, drivers and barriers for eco-innovation
need to be known. Many innovations have failed because they were unable to overcome the
manifold barriers (Bleischwitz 2007: 38ff.). For this report, an overview will be given. In
addition, the drivers and barriers of the specific examples (discussed in Chapter 3.2) in each
of the areas housing, mobility and food and drink, will briefly be discussed.
3.3.1. Drivers and Barriers – an overview
Drivers are generally understood as specific and evident agents or factors leading to increased
or reduced pressure on the environment. Barriers can be considered as those forms of market
imperfections that hinder markets from adopting eco-innovations. Both can be viewed either
from the demand or supply side of eco-innovation (see Table 2). Indeed, it needs to be
underlined that internalisation of negative externalities is not only a legitimate principle for
environmental policy but also a major driver of eco-innovation, especially when it leads to
stable expectations in favour of long-term goals such as CO2 reduction.
Table 2: Summary of determinants of eco-innovation, i.e. sources of potential barriers and
drivers for eco-innovative activities
Supply Side • Technological and management capabilities
• Appropriation problem and market characteristics
• Path dependencies (inefficient production systems, knowledge accumulation)
Demand Side • (Expected) market demand (demand pull hypothesis): state, consumers and
firms
• Social awareness of the need for new products, environmental consciousness
and preference for system innovation
Institutional
and political
influences
• Environmental policy (incentive based instruments or regulatory approaches).
• Fiscal systems (pricing of eco-innovative goods and services)
• Institutional structure: e.g. political opportunities of environmentally oriented
groups, organization of information flow, existence of innovation networks
• International agreements
Source: adapted from Horbach (2005)
IP/A/ITRE/ST/2008-06 & 14
Page 26 of 126
PE 416.218

Demand side: drivers and barriers here are a result of individual choice, socio-cultural and
other external factors. Many psychological studies have been carried out to investigate the
interaction between attitudes and behaviour, or why some people behave pro-environmentally
and while others do not. Table 3 summarises the demand factors affecting the acceptance of
an eco-innovation.
Supply side: drivers and barriers for producers or eco-innovative companies, such as high
costs, perceived economic risks or lack of access to investment or finance. Eco-innovative
companies explore to a high degree uncharted waters, as they have to cope with uncertainty
about market conditions and technological solutions to achieve high environmental
performance of products and processes.
Table 3: Drivers and barriers for acceptance of an eco-innovation
Drivers for acceptance Barriers for acceptance
• „feel good factor“
• applicability of social norm
• individual benefits (financial outlay,
health)
• ease of implementation
• being part of something
• external constraints (infrastructure, costs,
working patterns, demands on time)
• habit
• scepticism
• disempowerment
Specific lifestyle/self-identity (can be both a motivator and a barrier, depending on where people are
starting from)
Source: DEFRA, 2007.
In addition to viewing barriers and drivers in terms of supply and demand, it is possible to
classify barriers and drivers into categories such as political, informational, financial etc. In
terms of these categories, informational and financial barriers present particular problems to
furthering eco-innovation in the EU. Informational barriers come about because there is an
asymmetric distribution of knowledge about material and resource efficiency amongst users
and producers or experts. Specifically, the informational problems include lack of competence
in the areas of material and resource efficiency, the perception that recycling is a method of
waste reduction rather than a recovery of materials, the underestimation of the potential
market value of material and resource efficiency, and the lack of understanding of the benefits
of long-term payback. Companies frequently expect short payback periods for investments
and overlook, in the medium-term, potentials for cost reduction (the expectation in SMEs
frequently lie under 2 years).
Financially, there are often problems of split incentives. This can be, for example, simply
between the user and investor, or within a company itself, where investing and costing are
often carried out in different departments or reflect differing interests of the leaser or property
owner. In addition, when material and resource efficiency is a market advantage, it often will
not be communicated actively between different companies because of competitiveness
concerns.
Another relevant barrier is the gap between research, development and market launch: Due to
competition, companies have an incentive to continuously enhance their processes and
products and therewith gain price and/or quality advantages against their competitors.
However, also risks are associated with the expenses for research and development (‘sunk
costs’): market success is uncertain. Companies, therefore, have an incentive to be the ‘first
mover’ only with a sufficient patent protection.
IP/A/ITRE/ST/2008-06 & 14
Page 27 of 126
PE 416.218

Box 5: Selected sectoral barriers
Barriers result from information deficits, splitted incentives, externalities; they can be
associated with technical, economical, political and social factors. In addition, sectoral
barriers are relevant such as:
• In the building sector the architects’ fees increase with the complexity of the building.
In addition the widespread underground economy leads to ‘flub in building’ with high
material deployment;
• 'Culture of nondisclosure’ in chemical industry restrains transfer of know-how
concerning material efficiency;
• Efficiency gains by dint of pigment-rich printing ink in printing sector is compensated
by the clients’ demand for more colored magazines;
• The wood-processing industry is strongly stamped by conventionalized production
processes and high transaction costs for new machines;
• In areas as optical, medical, measuring as well as information and communication
technology, product innovation and fast market entry attract the most attention of
decision makers; design and visual appearance requirements are overemphasized;
products’ useful economic life is decreasing in many areas; expertise on and feedback
loops to material efficiency are thereby additionally hindered;
• Regulatory risks concerning the recovery of material from LCDs; in Great Britain this
area has not been approached to not call the regulatory authority’s (WEEE) attention
to this problem; a moderated process within the scope of the REFLATED-project
identified a potential market volume amounting to about 40 m £, enough for cost
recovery of the required recycling industry (see briefing note written by Arnold Black
part of this publication).
Given real uncertainties, it is rational behaviour of companies to wait and see initially in order
to benefit as a ‘second mover’ from the pioneer’s efforts of market development. Due to these
positive externalities, the expenses on research and development fall short of the socially
optimal level. According to recent analyses of the EU innovation panel (Europe Innova
2008:72 et seqq.), competition processes are to be considered ambivalent; the relation
between competition and innovation follows an inverse U-curve. From a certain point on,
competition intensity hinders innovation activity of companies for they have to fear not to be
able to realize a margin necessary to cover the costs of the innovation process.
Environmental innovations even underlie a double externality, since environmental quality
exhibits the characteristics of a public good and thus an enhanced environmental quality does
not inure to the benefit of the innovator solely (Rennings 2000). Information and cognitions
on raw material supply and on consequences for the environment have the characteristics of a
public good; material properties can be interpreted at least as a club good.
In addition, it can be stated a gap between the successful testing of a single application and its
market launch: besides deficits in the area of financing (FUNDETEC 2007), deficits in market
development have to be considered. According to analyses by Jacobsson & Bergek (2004:
818) in the energy sector, an innovation system has to fulfil the following functions in order
to assure a successful market launch (see also briefing note written by Gert v.d. Veen part of
this publication):
a. Creation and diffusion of new knowledge (see above statements regarding
information deficits);
IP/A/ITRE/ST/2008-06 & 14
Page 28 of 126
PE 416.218

b. Orientation and stabile commitments of policy trends;
c. Provision of financial resources and required capacities;
d. Mediation of division of benefits from positive externalities;
e. Creation of new markets (e.g. as niche markets by dint of trustworthy
certification and signalling of quality, abatement of administrative restraints,
public procurement, lead market policy and others).
Hence, policy should not restrict itself to enhanced research and technology supply policy, but
also about the development of competences, about an active innovation policy and about the
creation of lead markets. Lead markets can be supported and developed by strengthening
current EU policies in this field (see chapter 4 and the briefing notes about current EU
programmes and proposals).
Finally, the ‘rebound effect’ (Alcott 2005; Greening / Greene / Difiglio 2000; Herring 2008)
should be mentioned: efficiency gains are thwarted at least partly by higher demand; this
effect can be explained to large extend by price mechanisms (decreasing price induces
growing demand). This occurs on a micro- and macroeconomic scale within an economy as
well as internationally. It also calls for additional policies that enable markets to realise the
full potential of eco-innovation.
Political action is thus basically legitimate. Furthermore, numerous case studies on eco-
innovations document that the comparative advantages associated with market launch and
diffusion can be promoted by appropriate governmental regulation (Jänicke 2008; Jacob et al.
2005; German Institute for Economic Research (DIW), Fraunhofer Institute for System and
Innovation research et al. 2007; Ernst & Young 2006). Hence, the issue is not whether the
government ought to intervene at all, but by what means the EU can be efficient and achieve a
long-term effectiveness (Rocholl et al. 2007).
In the following section, the specific drivers and barriers for the examples presented earlier;
deep renovation, smart metering, the green electric car, carsharing, community supported
agriculture and the sustainable sourcing of retailers, will be discussed.
Box 6: Presentation of the Fish-Bone Diagrams
There are numerous ways of structuring, presenting and discussing drivers and barriers in eco-
innovation, and this highlights the complexity of the issue. The fish-bone diagrams used
below are graphical representations of the main drivers and barriers for the specified example.
The main categories of drivers and barriers are shown in the boxes either side of the main
axis, which points to the name of the eco innovation. Along the branches, the specific driver
or barrier is described. It is important to note that the diagram indicates no prioritisation of
importance for the barriers or drivers listed. The categories can differ for each case depending
on which are relevant for the specific example. Additionally, in terms of categories, only
‘political’ drivers or barriers specific to the example are discussed because political drivers
such as CO2 emission reduction, or air quality control are viewed as extremely prominent and
overarching.
3.3.2. Deep Renovation (the refurbishment of old buildings)
The main barriers to ‚deep renovation’ can be classified broadly as financial, socio-economic
and cultural-institutional. The most significant financial barriers include the split incentives
between landlords and building users, and the long payback rates which discourage old
residents to renovate their home.
IP/A/ITRE/ST/2008-06 & 14
Page 29 of 126
PE 416.218

Despite there being a general interest in investing in renovation, there is currently a lack of
financial incentive to invest specifically in eco-innovations. This is due to lack of investment
support, or knowledge about advice schemes about auditing/planning, investment and
implementation.
Socio-economic barriers include the insufficient motivation, training and qualification of
planners and installers. Cultural-institutional barriers are the lack of willingness of public
administrations to develop innovative infrastructure and housing development concepts that
reduce environmental burdens and enhance the living quality of inner-city areas since these
concepts require new thinking and willingness of residents to accept shared housing concepts.
The main drivers of ‚deep renovation’ can be broadly classified as socio-economic, technical,
natural and cultural-institutional. Within these categories, the most important drivers are the
increasing availability and development of low impact technology and building materials, and
the combination of materials with planning and installation techniques. Also, the need for
more affordable and safe housing for low income groups is helping to increase the rate of
refurbishment (SP/HUMI 2005, Boverket, 2005). The demand for housing space and size is
also pushing for more renovation of existing older buildings (Wilson &Boehland, 2005). The
drivers and barriers discussed are included, amongst others, in the fishbone diagram below.
Figure 11: Drivers and Barriers of Deep Renovation
Refurbishment of
old buildings
Barriers
Cultural-
institutional
Barriers
Socio-
economic
Drivers
Socio-
Economic
Drivers
Technical Drivers
Natural Drivers
Cultural-
institutional
Willingness of
residents to
participate in
shared housing
concepts
Lifecycle thinking is
not widespread
Climatic zone
where building is
located
Lack of
information about
exisiting support
measures for
tenants and
landlords
Availability of low-
impact technologies
and materials
Development of
infrastructures
affecting location
of residential and
non-residential
buildings
Insufficient financial
means for initial
investment
Long payback
periods of eco-
innovations in
housing and
construction
Limited incentives for
landlords or tenants to invest
in eco-innovations
Number of
households and firms
General economic
development
Demand for housing
/ building space
Development of
energy and
materials prices
(incl. energy or
emissions
taxes), and
interest rates
Readiness for public administrations
to develop green building and
infrastructure concepts on former
industrial areas in city centres instead
of further following the strategy of
urban sprawl
Transaction
costs for
receiving
information,
advice and
financial
support often
high
Insufficient motivation, training
and qualification of planners
and installers
Insufficient information of
tenants and building owners
about eco-innovations
Barriers
Financial
Hours of use per
year
3.3.3. Smart Metering
The main barriers to ‚smart metering’ are a combination of technical and political. In terms of
technical problems, the technology for smart metering is difficult to implement on a wide
scale; however Italy has recently made a rapid progress. It is also currently too complex to
integrate microgeneration into the energy grid. The need to advance smart metering
technologically is also not supported politically since there are no incentives for fitting smart
metering to private housing or public sector buildings. Socially there has also been some
negative feedback from pilot studies.
IP/A/ITRE/ST/2008-06 & 14
Page 30 of 126
PE 416.218

The main drivers for smart metering are a combination of economic, political and social.
Economically there is a public interest in smart metering when it produces as incentive to
save money, especially as the energy prices continue to increase.
Politically, there are international commitments specifically relating to energy efficiency, and
socially the need to increase security of energy supply makes the concept of smart metering
more appealing as users are able to see regularly how much energy they use. The drivers and
barriers discussed are included, amongst others, in the fishbone diagram below.
Figure 12: Drivers and Barriers of Smart Metering
Note that the technological feasibility may differ between countries.
3.3.4. Green Electric Car
The main barriers inhibiting the mainstream use of the electric car can be listed broadly as
technical, economic, cultural/institutional and socio-economic. In terms of technical barriers,
a current problem is that the batteries used in electric vehicles must be improved in terms of
energy storage capacity and safety. Another technical problem is that there are not enough
electric vehicle plugs or stations where the vehicle can be refuelled. Cultural/institutional
barriers include the lack of coordinating programmes, such as that of RWE and Daimler,
illustrated in the example, able to further the infrastructure changes needed to accommodate
electric cars. Electric vehicles are also perceived as being small, and unattractive, which
presents a barrier to making the eco-innovation marketable for the mainstream.
The main drivers for the green electric car include natural drivers, such as the increasing
difficulty in accessing oil and other fossil fuels due to their scarcity. When clean power
generation is used to produce the electricity for electric vehicles, this will also make the
electric car competitive in terms of energy efficiency and pollution reduction potential.
Economically, the current financial crisis making consumers more reluctant to spend money
on petroleum fuelled vehicles, they are looking for alternatives which may be more cost
efficient in the long-run (Kendall, 2008). Also, planned financial incentives such as free-
parking or exemption of car related taxes are stimulating a consumer interest in electric
vehicles. The drivers and barriers discussed are included, amongst others, in the fishbone
diagram below.
IP/A/ITRE/ST/2008-06 & 14
Page 31 of 126
PE 416.218

Figure 13: Drivers and Barriers of the Green Electric Car
3.3.5. Car sharing
The main barriers to ‘carsharing’ are technical, economic, and socio-economic. Technical
barriers include the limitations of current available car sharing services, such as inadequate
pick-up and drop-off points, or lack of partnerships between transit operators, large
employers, neighbourhoods and car sharing companies. Economic barriers include the
inability to predict the demand for carsharing, as well as costs to potential car sharing
companies, since for the company, carsharing is only financially viable when consumers use
the cars intensively. Additionally, the cost of installing the appropriate technology such as
‘smart’ cards for billing and securing the vehicle can be a barrier for carsharing companies.
Socio-economic barriers include reluctance from consumers to try carsharing since converting
to using a shared vehicle might require substantial changes in household travel patterns and
lifestyles (Shaheen, Aperling and Wagner, 1999).
Drivers for carsharing are mainly economic and socio-economic. When the cost of owning
and running a car becomes more expensive than using a shared car, carsharing facilities will
be favoured and demanded. In terms of socio-economic drivers, as disincentives for driving
increase, for example increased costs for parking, decreased available parking spaces, people
will be more inclined to use a car sharing facility. An important factor is also whether
alternative modes of transport to driving are readily available. When public transport is also
available people will feel less of a need to own a vehicle and be more inclined to try
carsharing. The drivers and barriers discussed are included, amongst others, in the fishbone
diagram below.
IP/A/ITRE/ST/2008-06 & 14
Page 32 of 126
PE 416.218

Figure 14: Drivers and Barriers of Car Sharing
3.3.6. Community supported agriculture (CSA)
The main barriers to CSA are economic, technical, socio-economic and cultural/institutional.
An important economic barrier to CSA is that initial external financing is often required for a
farm or community to set up a CSA project. A technical barrier to CSA is that it can only
implemented on a small scale, since for it to work effectively it requires a relationship
between the farmer and consumer. The produce from CSA projects may also be more
susceptible to disease and other pests, since the use of chemical fertilisers is normally
minimised in CSA. Other main barriers are cultural/institutional. In areas where consumers
are used to a convenience and choice culture, currently offered by large supermarkets, CSA
cannot offer consumers the range of choice they are used to, since the produce is locally
produced and dependent on the climate and seasons of the area. For the CSA projects, this
often leads to a high and fast turnover of customers, putting financial and logistical pressure
on the farm as they are constantly required to recruit new members.
Significant drivers for CSA are technical, economic, socio-economic and
cultural/institutional. The most important of these include the increased technical knowledge
of organic farming methods, the rising interest in environmental and conservation issues, and
the need to reduce ‘food miles’. A socio-economic driver is also public and governmental
interest in health as a result of the global obesity epidemic, since CSA helps people think
more about where their food comes from and develop healthier eating habits. The drivers and
barriers discussed are included, amongst others, in the fishbone diagram below.
IP/A/ITRE/ST/2008-06 & 14
Page 33 of 126
PE 416.218

Figure 15: Drivers and Barriers of CSA
3.3.7. Sustainable Sourcing of retailers
The main barriers for the sustainable sourcing of retailers are technical and economic. The
technical barriers for retailers are the lack of common methodology available about product
lifecycle information, as well as the complex sets of criteria available for assessment of
product lifecycles. This lack of consistency leads to much misinformation and confusion
among both retailers and consumers. Since sustainable sourcing for retailers also necessarily
means considering all aspects of the supply chain, a barrier to this process also includes lack
of awareness among upstream suppliers. The primary economic barrier is then a lack of
financial incentive for supermarkets to start sourcing sustainably, and the high costs of
complying with sustainability certification schemes (CSCP et al, 2008).
Important drivers for the ‘sustainable sourcing of retailers’ are currently socio-economic. The
rising interest from consumers in organically sourced food and improved food quality, as well
as environmental and social issue (e.g. fair trade) is driving supermarkets to consider
sustainability practices also further up the supply chain, and protect their brand value (CSCP,
2007). The drivers and barriers discussed are included, amongst others, in the fishbone
diagram below.
IP/A/ITRE/ST/2008-06 & 14
Page 34 of 126
PE 416.218

Figure 16: Drivers and Barriers of Sustainable Sourcing of Retailers
3.4. Conclusions
Eco-innovation has a crucial role to play in putting the EU on the path to a resource and
energy efficient economy and thus significantly reducing the environmental impacts in each
of the areas, housing, mobility and food and drink (discussed in this chapter). Experts
estimate that this is likely to become an $800 billion market worldwide by 2015 and a $
trillion market afterwards.1
As mentioned, eco-innovations can be used and integrated on three different levels, as
processes, products and systems. ‘Processes’ are the easiest to change, since these entail only
a few adaptations to a method of production or industrial procedure, and can be achieved
through methodology such as cleaner production, zero emissions, zero waste or material
efficiency. Reducing the environmental impact of ‘products’ presents an increased degree of
difficulty because the lifecycle of the product, from the design to the disposal, may need to be
adapted. Finally, changing an entire system to become more energy and resource efficient is
most challenging, since the entire sphere within which processes and products exist must be
modified. In this case, techniques such as life-cycle analysis, cradle-to-cradle material flow
analysis, integrated environmental assessment or decoupling factor 4 or 10 must be used.
The examples given in this chapter cover these angles of eco-innovation. As illustrated, there
are multi-dimensional drivers and barriers to the eco-innovations mentioned in this chapter.
The most important include financial, informational, and lifestyle or behavioural drivers and
barriers. Other drivers and barriers are associated with availability of resources and time for
the implementation of the eco-innovation. A main conclusion therefore is, that the markets for
eco-innovation are enormous. However, political backing and enabling policies is
fundamental.
1 See e.g. the recent German report on eco-industry: BMU (2009), Umweltwirtschaftsbericht, Berlin or the UNEP initiative ‚Towards a Green Econ-
omy’ launched in October 2008.
IP/A/ITRE/ST/2008-06 & 14
Page 35 of 126
PE 416.218

Figure 17: Overview on drivers and barriers for eco-innovation
Overcoming the barriers and embracing the drivers to build up eco-industries for energy and
resource efficiency requires the engagement of many different actors in society, and strategies
should be implemented from many different sides. Strengthening EU policy, for example, in
the creation of lead markets, can help overcome some of the financial and informational
barriers. The next chapter elaborates on how European policy can unleash the market forces
for eco-innovation.
Eco-innovations as processes and products cannot be separated from the part they play in the
broader system. Of course technical barriers need to be overcome, and the development and
production of an eco-innovation must be financed. However, for an eco-innovation to be fully
accepted and diffused into wider society, a concerted effort must be made to engage people
and target the emotional and psychological aspects required to reinforce its uptake. For
example, although the technology for a green electric car is available, for civil society to
adapt to ‘charging’ a car instead of filling it with gasoline will take time and require social
marketing strategies and community development before it can become a trusted part of
everyday life. The ideas presented here lead into Chapter 4, which discusses in more detail
and concretises the specific proposals to speed up eco-innovation in the EU.
IP/A/ITRE/ST/2008-06 & 14
Page 36 of 126
PE 416.218

4. HOW TO SPEED UP ECO-INNOVATION IN THE EU
The final part of the study describes how to speed up eco-innovation in the EU. After a short
introduction to EU programmes on eco-innovation, their impact and effectiveness will be
assessed. Based on the assessment of EU programmes the study will conclude and formulate
proposals on a future EU framework on eco-innovation. Furthermore, the chapter is enriched
with selected best practice examples of promoting eco-innovation. The annex to this study
contains further documents on practical examples.
4.1. Impact and effectiveness of EU programmes
The objective of this part is to give an overview on evaluations of the impacts and
effectiveness of ongoing selected EU programmes related to eco-innovation. The analysis
undertaken in this task has not been based on new formal impact assessments, appraisals or
evaluations, as this would be beyond the scope of this project. The impact and effectiveness
of different policy programmes therefore has been assessed by analysing the objectives of the
programmes, their structure and the plausibility, and consistency of implemented or designed
measures in relation to speeding up eco-innovation in the EU. The analysis is based on (1)
original documents concerning the selected programmes (work programmes, action plans,
directives), on (2) accompanying literature (such as reports, background documents, etc.) and
(3) opinions from scientific experts and stakeholders (internet review of comments,
feedback). In order to work with a consistent method, each programme has been described
and assessed along a set of specific criteria.
IP/A/ITRE/ST/2008-06 & 14
Page 37 of 126
PE 416.218

4.1.1. Eco-design Directive
Title, timeframe
Energy using Products Directive (2005/32/EU; Eco-design Directive).
First mandatory requirements will probably become effective in spring 2009. Existing
working programme for 2009 – 2011. Two possible extensions under discussion for the
time after: (a) products that do not use energy during use phase, but are relevant for energy
consumption, e.g., windows, insulation or shower heads; (b) products that neither consume
energy nor are relevant for energy consumption.
Objective and structure
Establishing a framework for setting ecodesign requirements that products must fulfil in
order to receive the “CE” label, that allows to place them on the market and/or put them into
service in the EU (mandatory standards or self-regulation by industry; added by
requirements with regard to energy labelling; links to Energy Labelling Directive and to
voluntary eco-labels).
While the Directive was originally initiated to address all kinds of products and to achieve
an integrated product design according to a broad range of ecological or sustainability
criteria, the current Directive now focuses on energy-using products with annual sales of
indicatively more than 200,000 units only, not including products in the transport sector.
Moreover, it is literally not really an ecodesign directive, but puts a strong emphasis on
energy efficiency or maximum energy consumption requirements. This more narrowed
perspective is reflected in the methodology determined for preparatory studies preparing
implementing measures, which set requirements for specific product groups, as well as in
the results and recommendations of studies already carried out and in the existing proposals
for implementing measures.
Mechanisms
The political-administrative mechanism applied with this Directive is new and interesting.
Instead of having separate Directives setting specific requirements for specific product
groups, there is now only one framework directive defining procedures, rules, conditions
and criteria for setting ecodesign requirements. Within this framework, the European
Commission, in interaction with a consultation forum and a regulatory committee, defines
product groups to be worked on in preparatory studies, and, in particular, the implementing
measures, which are usually based on the preparatory studies and finally set qualitative
and/or quantitative requirements for these product groups. Up to the end of January 2009,
for 30 product groups and further sub-groups, preparatory studies have been put to tender,
started or already finalised. For the first product groups, mandatory requirements have been
already decided on, further will follow before the EP elections. Additional product groups
will be covered in further steps in 2009 to 2011, and after 2011.
Innovation and market effects
The environmental, economic and social impact of the implementation of the Eco-design
Directive, and its particular impact on stimulating eco-innovations, of course, strongly
depends on the methodological framework, the product groups selected and the political-
administrative process of setting ecodesign requirements.
IP/A/ITRE/ST/2008-06 & 14
Page 38 of 126
PE 416.218

Based on the experiences with preparatory studies and proposals for implementing
measures so far, it can be stated that the Eco-Design Directive still neglects non-energy
aspects, rather concentrates on cutting off the worst products from the market and market
transformation (dissemination) of existing products than stimulating eco-innovative “top
runners” (for the “top runner approach”, cf. Federal Environment Agency/Wuppertal
Institute/UNEP-CSCP 2008), and does not yet explicitly stimulate the development of eco-
innovations. However, indirect impacts on eco-innovations are possible, but not estimated
yet.
Impact on energy and resource efficiency
Following the stepwise procedure described above, in the end, all energy-using products
that are important with regard to their volume of market sales per year and their CO2
emission reduction potentials might be covered. Boilers and water heaters are currently the
product groups with the highest GHG emissions reduction potential for which implementing
measures are already discussed. Other resource efficiency aspects are mostly neglected.
Practical experience and barriers
• The defined scope, methodology and political-administrative process of the Eco-design
Directive focuses on energy-using products in their use phase. Other aspects that are
important with regard to eco-innovation are neglected so far, as well as addition,
coherence and interactions of the eco-design policy with other product policies (RoHS,
WEEE) and with the Energy Performance of Buildings Directive.
• In general, while the European Commission is very ambitious in designing eco-design
requirements that reduce life-cycle costs, energy consumption and emissions during use
phase of the respective product groups to a large extent, the reality of the Eco-design
Directive rather focuses on energy-efficient products available today than eco-
innovations.
• For realising innovation effects, the dynamic relationship within the policy-mix (“push
and pull”) becomes important and is already partly addressed in proposed implementing
measures. In this context, e.g., the proposed labelling schemes should allow to integrate
new eco-innovations easily. Furthermore, the whole package of policies and measures
has to be adapted continuously to market development and research results, so that it
drives further eco-innovations. Against this background, timing of the different policy
instruments becomes important.
• The recommendations given by the preparatory studies and the implementing measures
proposed by the Commission partly follow a rather technology-specific approach. In
contrast, a service-oriented approach would be more adequate, which focuses on
optimising sustainability aspects of specific functionalities the products offer. For
example, consumers or buyers of products in general are not interested in the technology
itself (e.g. the technology of a refrigerator), but in the service or functionality they offer
(e.g., cooling/freezing). From an environmental perspective, the environmental impact
related to a certain service or functionality provided by a product should be considered.
The service-orientation would help to focus on the orientation towards the best
performing products with regard to the services the buyer’s need, instead of just
comparing different products within a specific technological category. The service-
orientation would furthermore allow the development of new eco-innovative products
that fulfil the general requirements for the respective product functionality, but might be
different to existing technology.
IP/A/ITRE/ST/2008-06 & 14
Page 39 of 126
PE 416.218

4.1.2. The Competitiveness and Innovation Framework Programme (CIP)
Title, timeframe
The Competitiveness and Innovation Framework Programme (CIP).
Programme period 2007-2013
Objective and structure
The general aim of the CIP programme is to boost the competitiveness and productivity of
European businesses, and to promote innovation activities by financing and delivering
business support services. Main target group are small and medium-sized enterprises
(SMEs), the programme period runs from 2007-2013. The total budget sums up to €3.6 bn.
The CIP programme is divided into three operational programmes:
• Entrepreneurship and Innovation Programme (EIP) - € 2.17 billion
• Information Communication Technologies Policy support Programme (ICT PSP) - €730
million
• Intelligent Energy Europe (IEE) - €730 million.
Eco-innovation is not a topic within the ICT PSP, but both two other sub-programmes are
relevant for this evaluation:
EIP’s main objectives are to support SMEs regarding start-up, cooperation and all kind of
innovation. EIP consists of several action fields, one of which is “Eco-innovation” (in the
following “Eco-innovation/EIP”), which aims at supporting the first application and further
market uptake of some of the best eco-innovative products. The four priority areas of this
call are materials recycling, building & construction, food & drink, greening business &
'smart' purchasing. EIP is financially by far the biggest part of the CIP, as it holds for about
60% of the total CIP programme. The funds for the Eco-innovation/EIP action are €430 of
the €2166 million (i.e. about half the budget of IEE).
The work programme 2008 of Eco-innovation/EIP foresees an evaluation, with an expected
report in February 2009. The evaluation should provide recommendations regarding the
effectiveness and efficiency of the EIP, on whether or not there is a need to readjust to the
implementing methods and/or means, and on improving the quality and utility of
programme monitoring.
IEE II is the EU's tool for funding action for fostering more efficient forms of energy
production and consumption and the adoption of new renewable energy sources. The IEE
programme does not fund technical RTD projects. Existing measures are 'SAVE' (energy
efficiency and rational use of energy), 'ALTENER' (new and renewable energy sources),
'STEER' (energy in transport) and integrated initiatives.
IEE II follows a bottom-up approach to evaluate its impact. Impact related programme
indicators are to be built up from individual project indicators plus complementary activities
on harmonisation, rationalisation and estimation of the knock-on impact. Performance
indicators are named in the work programme to assess the effectiveness of the Programme
which illustrate
• a balanced participation by public and private, non-profit and profit-making
beneficiaries, appropriate to fulfil the pre-competitive objectives of the IEE II
Programme,
IP/A/ITRE/ST/2008-06 & 14
Page 40 of 126
PE 416.218

• the involvement of previously identified stakeholders relevant to the action,
• a high proportion of SMEs among the private beneficiaries,
• active participation by applicants from all participating countries,
• a good proportion of new beneficiaries applying to and succeeding in IEE II,
particularly from Member States that acceded to the EU in 2004 and 2007 and countries
with just a few organisations participating so far,
• and more active involvement of beneficiaries from new Member States, reaching out to
new local and regional authorities.
The report will concentrate on two parts of the CIP programme: the IEE, as the main
energy-related programme and the Eco-innovation/EIP, as it concentrates on the issue of the
evaluation and covers a large part of the overall budget.
Mechanisms
Within Eco-innovation/EIP projects are funded with 40 to 60% of total eligible costs, in
order to help bridging the gap between research & development and the market place for
eco-friendly products, technologies, services, processes and management methods across
Europe. Calls are issued every year within the programme period.
The IEE II Programme is implemented by grants (call for proposals or concerted action) and
Procurement (calls for tender). In general, a maximum of 75% of the total eligible cost will
be reimbursed for promotion and dissemination projects.
Innovation and market effects
Eco-innovation/EIP:
The Eco-innovation/EIP programme supports the first application and further market uptake
of eco-innovative products and services with high potential in Europe, and aims at helping
to overcome those critical barriers that still hamper their commercial success. Thus it has
the potential to be a major instrument to speed-up eco-innovation within the European
Union. Some sources indicate that there might be a bias in favour of recycling technologies
in Mediterranean countries, due to many applications from that industry, which might not
yet fully exploit the potential strengths of that programme.
IEE
The IEE measures aim at supporting the use of renewable energy sources and the rational
use of energy not through the development of new technologies (see FP7), but it rather aims
at changing the legal and societal framework conditions for initiating a change (optimal
implementation and preparation of legalisation). The work programme stresses that projects
have to build on well-tested strategies and technologies and rather aim at removing non-
technological market barriers than develop new pathways. Thus it aims at transformations
on the system level. ‘Market transformation’ and ‘change of behaviour’ are frequently used
keywords within IEE. Awareness raising campaigns and capacity building on the population
level, but also on the level of key stakeholders (industry, trade) are one means aimed at to
set off behavioural changes. Moreover it is intended to lead by example (of public
authorities).
IP/A/ITRE/ST/2008-06 & 14
Page 41 of 126
PE 416.218

Impact on energy and resource efficiency
Eco-innovation/EIP
The budget of the eco-innovation programme (total of € 430 million) is more than half the
budget of the IEE programme, which seems quite ambitious. In 2008 only €28 million were
foreseen for the eco-innovation action. The programme of “eco-innovation” includes very
diverse approaches on the product and process level (e.g. eco-friendly design and
production of high quality consumer goods, green building techniques or cleaner and more
efficient processing of food and drink) and partly also on the system level (knowledge
sharing, cooperation, criteria implementation). While the aims of the waste, food and
building/construction areas of the eco-innovation programme aim at very specific fields and
rather target the process and product level, the greening business and ‘smart purchasing’
area covers a very wide range of topics (which are rather on a more general, knowledge-
management oriented level).
IEE
Eco-innovation within IEE is focused to the field of energy. No link to material efficiency
seems to be planned yet. Nevertheless, the issue of innovation for energy efficiency and
new (renewable) resources is broadly covered within the sub-programmes. Besides the key
actions, which are mainly organised within traditional areas (such as buildings, products,
heating, cooling, vehicles) there are also a few integrative calls available.
IP/A/ITRE/ST/2008-06 & 14
Page 42 of 126
PE 416.218

4.1.3. The Seventh Framework Programme for research and technological
development (FP7)
Title, timeframe
The Seventh Framework Programme for research and technological development (FP7)
Programme period 2007-2013
Objective and structure
The Seventh Framework Programme for research and technological development (FP7) is
the largest research programme in the world, running from 2007 to 2013. It bundles all
research-related EU initiatives in order to play a crucial role to develop the European
research area (ERA) and to reach the goals of the European Union's Lisbon Strategy:
growth, competitiveness and employment. It consists of four basic components: cooperation
(€ 32 billion), ideas (€ 7.5 billion), people (€ 4.7 billion) and capacities (€ 4.1 billion). Each
of these is the subject of a 'Specific programme’. In addition, there will be a 'Specific
programme' for the Joint Research Centre (non-nuclear activities) and one for Euratom
nuclear research and training activities.
Mechanisms
(Co-)Funding is granted for projects that are proposed following calls for project proposals
in accordance with the requirements laid down in the relevant specific programmes and
work programmes.
Collaborative research constitutes the bulk and the core of EU research funding. Moreover
Joint Technology Initiatives (JTIs) address fields of major European public interest,
focussed on well-defined areas of strategic importance for the competitiveness of European
industry. Besides these initiatives, international cooperation is possible under the 7th FP.
Innovation and market effects
In the programme there are several measures and projects, which are directly related to eco-
innovation. Within the ten distinct themes of the largest FP7 component “cooperation”
(total € 32 billion) several have a strong reference to eco-innovation in their work
programmes. The final dimension of this topic within the FP7 research remains still open.
The “Nanoproduction” work programme aims at ensuring a transformation of the economy
from a resource-intensive to a knowledge-intensive base, by creating step changes through
research and implementing decisive knowledge for new applications at the crossroads
between different technologies and disciplines. Research aims at the product and process
level, enforcing the generation of high added-value products and related processes and
technologies. The first of the series of calls included in the Work Programme 2009 deals
with research in the field of bio-refineries, published jointly with other themes.
The work programme of the “Energy” theme states as its overall topics the adaptation of the
current energy system into a more sustainable one with a broad range of topics such as
reducing the dependency on imported fuels, increase diversification of energy sources,
enhancing energy efficiency, etc. The work programme focuses on technologies identified
in the strategic energy plan as key challenges for the next 10 years, i.e. second generation
biofuels (in particular biorefineries), CO2 capture and storage, solar energy, offshore wind
and smart electricity grids, thus mainly on the micro (product) level.
IP/A/ITRE/ST/2008-06 & 14
Page 43 of 126
PE 416.218

Besides what is called “Long and medium term research“, which follow a problem solving
approach, there are also „Demonstration“ projects funded, which are more industrially
oriented.
The work programme for “Food, Agriculture and Fisheries, and Biotechnology” names as
key objective to build a European Knowledge Based Bio-Economy (KBBE), including the
need for ‘sustainable use and production of renewable bio-resources’. Within the calls for
January 2009 it demands for projects within the topic ‘Innovative biotechnology approaches
as eco-efficient alternative to industrial processes”. The objective of this topic will be to
foster novel alternative eco-efficient processing routes for established industrial processes
using biotechnology enabled approaches. The expected project should have strong industrial
contribution and should foster innovative breakthrough biotechnology applications aimed to
more eco-efficiency approaches on the core of multi-disciplinary research developed in an
industrial context. Measurement of the eco-efficiency or sustainability of the proposed
products and process alternatives should be taken on board within the project.
The “Environment” work programme aims at advancing our knowledge on the interactions
between the biosphere, ecosystems and human activities, but also on developing ‘new
technologies, tools and services, in order to address in an integrated way global
environmental issues’. Within its first two calls a focus will be laid on understanding and
assessing, later on the focus shall be shifted to responding. Demonstration is not a key issue.
The issue of energy efficiency is also tackled within the research for SMEs, which aims at
supporting SME associations to develop technical solutions to problems common to a large
number of SMEs in specific industrial sectors or segments of the value chain through
research.
Impact on energy and resource efficiency
Under the 7th Framework Programme it is estimated that up to 30% of the €32 billion
budget will address environmental technologies. This includes: hydrogen and fuel cells,
clean production processes, alternative energy sources, CO2 sequestration, bio-fuels and
bio-refineries, energy efficiency, information technologies for sustainable growth, clean and
efficient transport, water technologies, soil and waste management, and environmentally
friendly materials.
The work programmes of the FP7 topics discussed above mainly aim at the development of
new green technologies (product level) or new production chains (process level). No special
focus on the understanding of the economic and social driving forces behind unsustainable
patterns of natural resources use (system level) could be found yet.
Practical experience and barriers
The 2nd report on the implementation of the ETAP states that further channelling and
harnessing research under the 7th Framework Programme could optimise outcomes.
Synergies should be established between research themes, technology platforms, emerging
lead markets and regulation.
IP/A/ITRE/ST/2008-06 & 14
Page 44 of 126
PE 416.218

4.1.4. The Environmental Technology Action Plan (ETAP)
Title, timeframe
Environmental Technology Action Plan (ETAP) , Since 2004
Objective and structure
The main policy in Europe to stimulate the development and uptake of environmental
technologies on a broad scale is ETAP. It complements the DG’s regulatory approaches and
directly addresses the three dimensions of the Lisbon strategy: growth, jobs and the
environment.
The Action Plan’s objectives are:
1. to remove the obstacles so as to tap the full potential of environmental technologies for
protecting the environment while contributing to competitiveness and economic growth;
2. to ensure that over the coming years the EU takes a leading role in developing and
applying environmental technologies;
3. to mobilise all stakeholders in support of these objectives.
The achievements of ETAP are reported every two years to the European Council and the
European Parliament. So far, two reports are available: the first report in 2004, the second
report in 2007.
Mechanisms
ETAP consists of a sequence of 28 actions following the order announced in the
Commission's Communication on ETAP published on 28 January 2004. They can be
grouped in nine sections:
• Research and Development: strengthening research (see also FP7)
• Technology platforms, public/private partnerships on a specific research topic.
• Verification of technologies: establishing networks of testing centres, drafting
catalogues of existing environmental technologies
• Definition of Performance Targets: studies have been carried out to set up a
performance target scheme based on best environmental performance, while being
realistic from an economic viewpoint.
• Mobilisation of Financing: e.g. improving financing of environmental technologies
by introducing enhanced funding and risk sharing mechanisms, such as CIP (see
below), LIFE, or via the European Investment Bank or the Cohesion policy;
• Market-based Instruments: reviewing cohesion funds, state aid guidelines,
environmentally harmful subsidies, and market based instruments
• Procurement of environmental technologies: e.g. using life-cycle costing or
technology procurement; promotion via Commission’s handbook on Green
Procurement or Member States action plans.
• Business and Consumer Awareness raising and targeted training, e.g. via the ETAP
website and newsletters;
IP/A/ITRE/ST/2008-06 & 14
Page 45 of 126
PE 416.218

• Acting Globally: promoting environmental technologies in developing countries and
countries in economic transition via global financing opportunities and responsible
investment and trade.
Dissemination of experiences is guaranteed through national roadmaps (22 completed so
far) that show promising schemes and the Forum on Eco-Innovation, a stakeholder platform
that met five times until October 2008.
Innovation and market effects
ETAP focuses on actions from promoting research to changing (international) markets:
• Getting from research to markets: actions aim to improve the innovation process and to
take inventions out of laboratories and onto the market via FP7, technology platforms
and Environmental Technology Verification;
• Improving market conditions: Besides providing financial support (RTD funding, loans,
guarantee mechanisms) ETAP tackles the setting of a performance target scheme,
market based instruments, green procurement and awareness raising.
• Acting globally: this includes provision of capital for eco-efficiency projects worldwide,
as well as responsible trade and investment in order to support eco-technologies in
developing countries, and promoting foreign investment
Impact on energy and resource efficiency
Given the wide range of policy areas involved in the implementation of ETAP (research and
technology development; public procurement; corporate social responsibility; development
aid, etc.), ETAP could be one of the key policy frameworks to realize substantial
improvements in resource and energy efficiency in Europe. As no technological
development per se is aimed for within ETAP, impact will mainly be achieved at the macro-
level.
Practical experience and barriers
The 2nd ETAP report lists the progress made in the reporting period, such as funds available
for environmental technology within the 6th and 7th FP, technology platforms launched,
financing instruments, etc. Despite these achievements it admits that environmental
technologies still remain a niche market and that new driving forces are needed to
encourage further diffusion and up-take on a broad scale. The report suggests a focus on
increasing demand for environmental technologies by further green procurement, greater
financial investments, the establishment of technology verification and performance targets
systems, by building on promising practice of Member States and by focussing on sectors
with high gains (e.g. buildings, food and drink, private transport, recycling and waste water
industries). Second, a focus on support measures is emphasised, including ensuring strategic
knowledge, promoting awareness and participation, harnessing research.
IP/A/ITRE/ST/2008-06 & 14
Page 46 of 126
PE 416.218

4.1.5. Directive on the energy performance of buildings (EPBD)
Title, timeframe
Directive on the Energy Performance of Buildings (EPBD; 2002/91/EC) of the European
Parliament and of the Council of 16 December 2002.
Existing Directive had to be fully applied by Member States by January 2009.
European Commission’s proposal of 13 November 2008 for a recast of the EPBD currently
under discussion.
Objective and structure
Main legislative instrument affecting energy use and efficiency in the buildings sector in the
EU. It aims at minimising the energy consumption of residential and tertiary buildings in
the EU Member States through a number of requirements:
• Development of a general framework for a methodology of calculation of the integrated
energy performance of buildings taking into account national and climatic
circumstances;
• Application of minimum requirements on the energy performance of new buildings
taking into account national and climatic circumstances;
• Application of minimum requirements on the energy performance of large existing
buildings (>1000 m2) that are subject to major renovation taking into account national
and climatic circumstances;
• Energy performance certification of buildings which have to be presented when the
building is rented out, sold or constructed;
• Regular inspections of boilers and air-conditioning systems above minimum sizes in
buildings, and in addition an assessment of the heating installation in which the boilers
are more than 15 years old;
• Requirements for experts and inspectors for the certification of buildings, the drafting of
the accompanying recommendations and the inspection of boilers and air-conditioning
systems.
Mechanisms
Does not directly address building owners or users, planners or installers; requirements had
to be implemented by the individual member states until the beginning of the year 2006
(subsidiarity principle), (implementation of inspection systems and requirements for experts
and inspectors by beginning of 2009).
Innovation and market effects
In countries with ambitious implementation of the EPBD, and similar measures having been
implemented already in the years before, rather strong requirements concerning the energy
performance of buildings and expected even stronger requirements announced for coming
years resulted in eco-innovations like, e.g., nano-gel insulation, vacuum insulation, heat
pumps with high coefficient of performance (COP), micro-CHP solutions, innovative
passive house or energy-plus house concepts, or the revival of renewable building materials
like wood, loam or straw, with these old materials fulfilling modern fire protection
requirements.
IP/A/ITRE/ST/2008-06 & 14
Page 47 of 126
PE 416.218

The energy efficiency measures in buildings reduce energy imports and thus retain
purchasing power and stimulate growth within the EU, while at the same time creating new
jobs in the construction and production sector, and reducing jobs in the energy industry. The
minimum total gross direct impact of the options identified by the Commission as being
most beneficial, and which are therefore included in the Commission’s draft of the recast
proposal of the EPBD is 280,000 (to 450,000) potential new jobs by 2020, not including
secondary job effects yet (European Commission 2008).
Impact on energy and resource efficiency
The EPBD acknowledges the fact that the buildings sector is responsible for about 40% of
the EU’s final energy consumption. Furthermore, buildings account for 38% of the EU’s
CO2 emissions and 45% of the EU’s energy costs (Koskimäki/Lechtenböhmer 2008); the
construction sector is by far the most resource-intensive sector in the EU, see chap. 2. The
EU Action Plan for Energy Efficiency identified energy efficiency in the building sector as
one of its top priorities. The EPBD is assigned a key role in realising the savings potential in
the building sector in the EU. A meta-comparison of EU scenario analyses shows that the
overall potential for CO2 mitigation in the building sector by 2020 is about 200 to 300 Mt
CO2 (without renewables). Depending on the scenario and the measures assumed in other
sectors, heating and cooling of residential and commercial buildings (including sanitary hot
water generation) account for about 29% to 63% of the EU’s total final energy savings
achievable vs. BAU (Koskimäki/Lechtenböhmer 2008). Refurbishment of existing
buildings and replacement of existing heating technology accounts for the largest part of
these potentials. The (recast of the) EPBD together with the respective subsidiary national
legislations and the mainly national support schemes for building renovation, and together
with the implementing measures of the Eco-design Directive for technical building
equipment, forms the main policy instrument to realise the potentials (Wuppertal Institute
2008).
The impact the EPBD has achieved so far on energy and material use is difficult to estimate,
partly because of difficulties in comparing the different degrees of implementation and the
different calculation methods of the energy performance of buildings in the different
Member States. The minimum total impact of the options identified by the Commission as
being most beneficial, and which are therefore included in the Commission’s draft of the
recast proposal of the EPBD is 60-80 Mtoe/year energy savings by 2020 (i.e. reduction of 5-
6% of the EU final energy in 2020) and 160-210 Mt/year CO2 emissions reduction by 2020
(i.e. 4-5% from EU total CO2 emissions in 2020)(European Commission 2008).
Practical experience and barriers
• There is a lack of implementation of the EPBD by a number of EU member states.
Reasons for this include the difficulty of technical implementation due to the
segmentation of the potential, a lack of proper national administration or a shortage of
qualified experts for audits, inspections and certification. It has taken more time than
anticipated to revise national building regulations, set up certification and inspections
schemes and train experts. Furthermore, governments want to keep costs down,
supporting systems for implementing the EPBD were not in place in many cases and
there is a lack of incentives to spur stakeholders to act. Finally, there is almost no
monitoring of the impact of the EPBD on actual energy savings. Due to these facts, the
implementation of the EPBD is behind schedule in some EU member states.
IP/A/ITRE/ST/2008-06 & 14
Page 48 of 126
PE 416.218

• Differences in implementation on Member State level leads to large heterogeneity of
mandatory standards, technical norms and respective calculation methods, with resulting
inconsistencies between the national and the European level, e.g., between the
implementation of the Eco-design Directive and the EPBD (however, the proposal for a
recast of the EPBD addresses some links between both directives). The uneven
standards, norms and methodologies might hinder the European-wide development and
market introduction of eco-innovations, which might be good practice solutions in one
country, but less relevant in others due to different degrees of ambitiousness of the
political-administrative framework.
• The national roadmaps on low/zero carbon and energy buildings, such as passive
houses, proposed as a requirement for the recast of the EPBD (European Commission
2008), will set reliable time frames and thus increase confidence of market actors to
invest into eco-innovation for new buildings. However, such roadmaps should be
required for the dynamic setting of energy performance requirements of buildings in
general, and particularly for the refurbishment of existing buildings.
• The proposal for a recast of the EPBD does not address non-energy issues, and thus
misses a chance to stimulate eco-innovations in the area of resource efficiency and
recycling. In particular, with regard to the expected increase in insulation with non-
renewable materials, recycling problems will become strongly evident in a few decades.
Issues such as integrated functionality of different materials and “urban mining” also
ought to be considered when a “resource performance of buildings” will be envisaged.
4.1.6. The Action Plan on Sustainable Consumption and Production and Sustainable
Industrial Policy
The European Commission SCP Action Plan, launched in 2008, is an outline of actions aimed
at furthering SCP within the EU. Although, one of the current main commitments to SCP, it
forms part of other strategies taken by the EU and the EC towards SCP. Historically, in the
EU, both the EC and member states promote the transition towards SCP in several ways.
However, these may or may not be directly labelled using the term ‘SCP’. Such strategies
include both top down (i.e. broader strategic frameworks and initiatives) and bottom-up
approaches (i.e. pieces of legislation, thematic initiatives) as well as coordination between the
two. One major step in particular, was the formulation of the EU sustainable development
strategy (SDS 2006), which identified SCP as one of the seven key challenges to be tackled
by implementation action.2
In addition to this, the SCP Action Plan can be seen as a response to the Marrakech Process
(2003), which was created by the United Nations within the Johannesburg plan of
implementation (JPOI) and is a ’10 Year Framework of Programmes’ in support of regional
and national initiatives to accelerate the shift towards SCP.3
Despite the efforts already made through the Action Plan on SCP, the EU has the potential to
foster its contribution to meeting our environmental needs through a much more ambitious
strategy, where capturing eco-innovation and turning environmental challenges into economic
opportunities is the central doctrine.
2 EEA Technical Report No 1/2008: Time for Action – towards sustainable consumption and production in
Europe, CSCP, EEA and Republic of Slovenia Ministry of the Environment and Spatial Planning
3 Idem.
IP/A/ITRE/ST/2008-06 & 14
Page 49 of 126
PE 416.218

4.2. Other approaches and best-practices of promoting eco-innovation
In order to bridge the gap between an analysis of ongoing EU activities and proposals, the
following subchapter lays down a few other approaches and best-practice examples of
policies promoting eco-innovation. The examples partly stem from EU member states and
from experiences outside the EU. They cover the full range of policy instruments available
and will be clustered according to the usual typology of instruments, taking into account
recent debates about new policy instruments and governance (Bleischwitz 2007).
4.2.1. Regulatory instruments
These are instruments, relating to norms and standards, environmental liability, environmental
control and enforcement. The WEEE has been selected because it offers an innovative
regulatory approach, which might be used for other purposes of material stewardship.
European Directive on Waste from Electrical and Electronic Equipment (WEEE)4
(Part of EU member state national law since August 2004)
Objectives and
Structure Studies predict that e-waste will rise by 2.5-2.7 % per year from 10.3 million
tonnes in 2005 to 12.3 million tonnes per year by 2020. The objective of
WEEE is to reduce the amount of waste from electronic and electrical
equipment through establishing legal criteria and standards for its collection,
treatment, recycling and recovery. The WEEE can be viewed alongside two
other EU directives; the ‘Directive on Restriction of the Use of Certain
Hazardous Substances’, and the ‘Directive for the Setting of Eco-Design
Requirements for Energy Using Products’ which together are an attempt at
implementation of the EU Integrated Product Policy (IPP)
The WEEE affects producers, retailers/distributors and private households
and prescribes a waste collection rate of 4 kg per capita.
Mechanisms The WEEE affects producers, retailers/distributors and private households
and includes 10 categories of product such as, large/small household
appliances, IT & Telecommunication equipment. For each product category,
producers, retailers/distributors and private households are obliged, via
differing mechanisms, to collect and recycle prescribed quantities of
electrical and electronic equipment (quantity depends on the category).
Innovation and
Market effects The WEEE aims to increase the producers’ incentive and responsibility to
minimise life-cycle impacts, and finance recycling and disposal of electrical
and electronic equipment, while at the same time providing a market
incentive for producers to consider product end of life issues in design.
Impact on energy
and resource
efficiency
The WEEE has resulted in new standards for the phase out of toxic
substances and recycling possibilities. Yet, its impact on energy and resource
efficiency can be considered low.
4 GTZ, CSCP, Wuppertal Institute (2006), Policy Instruments for Resource Efficiency: towards Sustainable
Consumption and Production
IP/A/ITRE/ST/2008-06 & 14
Page 50 of 126
PE 416.218

Practical
experience and
barriers
Collection of WEEE began in 2005 and because of discrepancies in the
implementation, a review was called for in 2006. To date, studies have shown
that there is a low rate of awareness and a general low collection rate of
electrical and electronic equipment (EEE) (UN University, 2007)5. There
have been differences in collection rates between EU member states, and it
has been observed that the target of 4 kg collection of EEE per capita can
easily be met by wealthier states, but it remains a challenge for new member
states. Issues also become more complex when applying WEEE to trade
involving non-EU states. There is also no measure in place to prevent exports
to developing countries where regulation and capacity to deal with the waste
is not so high. Although the implementation process spans around 10 years,
many local governments and smaller companies have not been prepared for
WEEE and are unable to implement it effectively, also a large number of
SMEs are unaware of legal obligations under WEEE. Based on the findings
of a recent study, a number of suggestions for improvement have been made.
These include; better emphasis of regulation of all parts of the recycling
chain, splitting legal framework and key responsibilities from operational
standards, simplification and harmonisation of regulations throughout the
EU27, and fostering consumer awareness to stimulate sector levels of e-waste
collection
4.2.2. Economic instruments
These are instruments which may influence environmental outcomes by changing the cost and
benefits of alternative actions open to economic agents. They aim to do so by making the
environmentally preferred action financially more attractive. Considering economic
instruments for unleashing eco-innovation, it is important to look at the current state of the art
and draw conclusions.Typically, the options to be considered are eco-taxes, tradable permits
and subsidies. The case example considered in this respect is a taxation of Construction
Materials (aggregates).
Construction materials are quite relevant for the area of housing – and taxed in a number of
EU member states (EEA 2008). All European countries collect environmental taxes, which
can be divided into four categories: energy, transport, pollution and resource taxes. The
weighted average of the revenue by environmental taxes in EU-27 constitutes 2.6% of the
Gross Domestic Product (GDP) in 2005. Besides, the trend shows a declining course, at least
in EU-15. Resource taxes are only marginal in Europe: they amount to 4.1% of the total of the
environmental taxes (Eurostat / EC 2007). The overwhelming part of environmental taxes is
usually generated by energy taxes. Some countries however tax construction materials, for
instance UK, Sweden, Italy and the Czech Republic. Different tax bases (such as quantity
extracted or quantity sold or size of the mining area), coverages, levy forms (centralised or
decentralised), recipients (central government, state government, local government),
administrative procedures and, last but not least, the rate of the tax cause differently intense
resource reducing and material substitution effects.
5 UN University (2007): Great Potential to Improve Collection, Recycling of Europe’s Electronic Waste,
http://www.vie.unu.edu/file/UNU_ZEF2007+pr+english.pdf?menu=27 accessed 29/01/09
IP/A/ITRE/ST/2008-06 & 14
Page 51 of 126
PE 416.218

Scheme of UK Aggregates Levy and Aggregates Levy Sustainability Fund (ALSF)
Objectives and
Structure In UK, a construction materials tax, the so-called “Aggregates Levy”, was
introduced in April 2002 with the objectives to
• reduce the demand for primary materials (sand, gravel, rock),
• organise the extraction and transport more environmentally friendly,
• compensate communities and municipalities for the environmental
damages of the extraction activities and increase the proportion of
recycled material used in construction activities.
It was not the scarcity of the resource which was in the foreground but the
internalisation of external costs such as noise and dust emissions from
transport, visible landscape changes, the loss of biodiversity, groundwater
pollution, etc. associated with the extraction and mining processes.
Mechanisms For commercial mining or import of primary materials in or to UK (including
its associated coastal and water territory), £ 1.60 per tonne were rated until
April 2008, £ 1.95 per tonne since then and £ 2.00 per tonne from April 2009
on. This rate is roughly 30% of the total price per tonne (HM Revenue &
Customs 2008).
The Aggregates Levy Sustainability Fund (ALSF), which has been
implemented simultaneously to the tax in April 2002 at the UK Department
for Environment, Food and Rural Affairs (Defra), uses a part of the tax
revenues for external costs associated with the degradation processes that are
linked to the mining processes as well as for selected research and
development projects.
The funds are distributed by various organisations, e.g. by the Department for
Transport.
Innovation and
Market effects The construction materials tax in UK has still rather low direct effects
(reduction of 6 million tonnes of aggregates of 275 million tonnes extraction
altogether in 2005), but - through the increased use of recycled building
materials - it has triggered indirect consumption reductions. It has galvanised
the business with recycling materials enormously (up to a share of recycled
materials of 25%; wrap 2008) through diversification and innovations and it
has induced a rising of standards of the quality of secondary materials.
At the same time, it has also set trade incentives in the border region of
countries which do not have a construction materials tax yet (here Republic
of Ireland) and thus partly forwarded increased shipment volumes.
Impact on
resource efficiency Besides the effected shift towards the use of recycled materials, in particular
the ALSF induced a further spin-off as regards resource efficiency. For the
period 2005/7, around £ 840,000 were used for the assessment and consulting
of some 400 companies (such as site-specific advice to improve energy
efficiency and competitiveness during transport, while improving the
environmental performance and safety) (Department for Transport 2008).
Practical
experience and
barriers
As the example of the UK’s construction materials tax shows, the steering
effect of an economic instrument can gain plausibility when the instrument is
transparent. The transparent coupling with an earmarked sustainability fund
precludes acceptance problems and opens up financial resources for the
internalisation of environmental damages and counselling and compensation
programmes.
IP/A/ITRE/ST/2008-06 & 14
Page 52 of 126
PE 416.218

4.2.3. Informational instruments (incl. knowledge-creation, research and education,
cooperation)
This covers a potentially huge and interesting area when certain target groups including SMEs
ought to be approached and learning effects are to be stimulated. The case examples selected
here are the following:
Environment-driven Business Development in Sweden6
Organised by the Swedish Agency for Economic and Regional Growth (NUTEK) between 2001-2004
Objectives and
Structure The objective was to stimulate product and business development from
sustainability perspectives and thus strengthen the competitiveness of
domestic small and medium sized enterprises (SMEs). Divided into two
themes
• environmentally sound products as a competitive advice
• operational development focusing on continuous improvements. The
main aims were to develop new environmentally sound products whilst
improving leadership, management, stakeholder engagement and
communications in SMEs.
Mechanisms There was a preparation phase, which involved two rounds of project
proposals from SMEs. It involved a preliminary study, which connected
project concepts with company needs. The second stage of the project was
then implementation. This involved regional development organisations,
municipalities, consultants, universities and other research institutions. A
total of 390 SMEs took part in the programme, all of whom were already
active in environmental management, but were looking for ways to create
new market values through environmental innovation. NUTEK as a
government agency co-financed SEK 28 million (on average 32 % of the
costs of each project) and the input of participating companies in terms of
time and money was around SEK 50 million.
Innovation and
Market effects More than half of the companies indicated an increase in their
competitiveness by working on environmental issues more strategically
Impact on energy
and resource
efficiency
As a result of the programme, around 60 products and services have been
made more environmentally sound and more than 100 companies have
ensured a system of continuous improvement.
Practical
experience and
barriers
Conducting the preliminary studies allowed committed and motivated
companies to be found and therefore minimised the risks of project failures or
delays. Project results were documented and disseminated among other
networks as well as websites, industry associations, seminars and
publications.
Further information about the initiative can be obtained at
http://www.nutek.se
6 GTZ, CSCP, Wuppertal Institute (2006), policy Instruments for Resource Efficiency: towards Sustainable
Consumption and Production
IP/A/ITRE/ST/2008-06 & 14
Page 53 of 126
PE 416.218

European Union Energy Label
Energy labelling in a dynamic “top runner” policy-mix
Objective and
structure The European Union (EU) Energy Label rates electric household appliances,
currently from A (the most energy efficient) to G (the least energy efficient),
within a class of products and provides additional information such as the
volumetric capacity of the refrigerator or freezer and the washing and
spinning performance of washing machines. The label must be shown on all
refrigerators, freezers, refrigerator-freezers, washing machines, tumble
dryers, washer dryers, dishwashers and light bulb packaging by law. The EU
Energy Label is a mandatory label for selected household appliances with
application to products also sold for non-household uses. Furthermore, for
circulators, it is used in a voluntary approach of the pump industry.
The objective of the EU Energy Label is to inform consumers about the
energy performance of products. The publication of information on the
consumption of energy and of other essential resources by household
appliances allows consumers to choose appliances on the basis of their
energy efficiency. and further aspects (e.g., water efficiency, noise,
detergency)
Mechanisms The energy labelling particularly unfolds its power in the combination with
other policy instruments within a consistent and comprehensive policy-mix
for the respective field of application. Other policy instruments suitable for
combination with energy labelling are minimum energy efficiency standards,
voluntary product labelling like the European eco-label (“EU flower”), or
fiscal or financial incentives (e. g. rebate programmes). In such a way, it can
contribute to an effective “push and pull” strategy, also named as a dynamic
“top runner” approach following the principle idea of the respective Japanese
approach to support the market transformation towards the most energy-
efficient products, but transferring this approach to the European cultural,
economic and legal conditions.
Innovation and
market effects Evidence from different product groups shows that the energy labelling has
contributed to the development of eco-innovations, i.e. to more products that
fulfil class A requirements or are even more efficient than class A, which in
turn lead to the introduction of new energy classes (“A+; A++”), and to the
rethinking of the naming and dynamic revision of the classes of an energy
label in the current political discussion on EU level (cf. the discussion within
the preparatory studies of the Eco-design Directive; and CECED 2007).
However, the environmental aspects considered with energy labelling are just
end-use energy and water consumption. Other environmental aspects are
neglected.
Practical
experience:
Impact on energy
and resource
efficiency
The combination of a rebate scheme with information on energy labelling in
the Netherlands in the period 1995 – 2004 resulted in annual energy savings
of 0.2 PJ (Irrek/Jarczynski 2007). Impact on resource efficiency has not yet
been explored.
IP/A/ITRE/ST/2008-06 & 14
Page 54 of 126
PE 416.218

4.3. Proposals for a future EU framework on eco-innovation
Based on the previous chapters and the assessments in section 4.1 and 4.2 as well as the
briefing notes the following proposals shall support the EU to speed up eco-innovation. They
address the specific gaps identified in the areas of entrepreneurship, pre-commercialisation as
well as the opportunities to remake buildings in Europe (see Figure 18). In line with the cross-
cutting barrier of currently distorted incentives, the proposals promote market-based
incentives and the reform of existing initiatives; in addition, new proposals are presented that
should help to unleash the potential of eco-innovation in a focused way.
Figure 18: Gaps of current EU programmes on eco-innovation
4.3.1. Market-based instruments for the heavy weights: taxing construction minerals
All European countries collect any environmental taxes. They can be divided into four
categories, energy, transport, pollution and resource taxes. The weighted average of the
revenue by environmental taxes in EU-27 constitutes 2.6% of the Gross Domestic Product
(GDP) in 2005. However, the trend shows a declining course, at least in EU-15. Resource
taxes are only marginal in Europe. They amount to 4.1% of the total of environmental taxes
(Eurostat / EC 2007). The overwhelming part of environmental taxes is usually generated by
energy taxes. Against the background of those rather low environmental taxes in Europe that
are, in addition, dominated by energy taxes, it is recommendable to expand the tax base
gradually to non-energy resources (construction minerals, metal materials, industrial minerals,
other fossil fuels).
IP/A/ITRE/ST/2008-06 & 14
Page 55 of 126
PE 416.218

Due to their great importance within the economic system of almost all European Member
States and since the demand for construction minerals is relatively inelastic, a plausible initial
option for resource taxes could be the European-wide taxation or charging of construction
minerals. Such a scheme could contribute to a long-term restructuring of the tax system: the
establishment of a two-pillar tax system with less weight on wage taxes culminating in a
strong pillar of material input and land use taxes in future decades.
Construction minerals such as sand, gravel and rock (called aggregates) are coarse-grained
materials that are extracted relatively near to the surface. They are usually not regarded as a
hot spot of environmental policy or eco-innovation while they are very important for the
economic process because they serve as essential ingredients for the entire value chain of the
construction and housing sector (cement production, structural and civil engineering, road and
railway construction, reconstruction and renovation). Due to huge mining volumes the
material and environmental intensity (land use conflicts, landscape alterations in the
extraction phase, soil sealing and contribution to an unbroken net addition to stock in the
construction phase, energy consumption and emissions during extraction, transportation and
use phase, to a lesser extent resource depletion) should not be underestimated. Regarding the
absolute weight, the aggregates industry can actually be considered the most resource-
intensive sector throughout Europe. According to the European Environment Agency, they
represent more than 44% of the Direct Material Consumption (DMC) in the European
economy while mineral fuels represent another 25% (Eurostat 2008). In 2004, this came up to
2,862 million tons7 in EU-15, compared to 1,432 million tons of fossil fuels (Eurostat 2008).
Despite predominant regional self-sufficiency in the realm of construction minerals first
regional shortages have emerged and triggered trade, so that the material is becoming
increasingly relevant for the EU environmental policy. Spain, France and Germany are
currently the largest producers of sand, gravel and rock and the largest net exporter in the
Central European area is Germany, followed by the United Kingdom and Norway. In fact, the
Netherlands and Belgium-Luxembourg are even larger exporters but they are the largest
importers at the same time (BGS 2008). Both countries seem to be subject to cross-border
trade proceeding in order to avoid long domestic transport routes of the bulky and portage
sensitive material.
Practical experiences with the effect of taxes on aggregates have been gained in some EU
Member States (in particular in UK, Sweden, Italy and Czech Republic), which all levy taxes
or charges for sand, gravel and/or crushed rock (EEA 2008). Unequal design, administrative
procedures and assessment bases, such as the quantity extracted, the value produced or the
mining area covered, show completely different resource use reducing and material
substitution effects and as instruments they work differently efficient. Moreover, it seems to
be important whether the tax or charge is centrally or decentrally levied, i.e., who is the
beneficiary or the recipient of the tax/charge (central government, state government, local
government). The German system, for example, is federal. Tax beneficiaries of a mining
charge are the federal states. The German mining law leaves it up to the single federal states
either to exempt certain industries from the levy or to charge them depending on the
economic situation of the respective region. This has led to an extensive drop out of the
mining charge in Germany. The comparison of the four systems showed in contrast that the
UK system was comparatively effective and efficient. Referring to the UK example of an
aggregates levy (see chapter 4.2.2) a delineation of a European scheme shall thus be
developed and a rough calculation of the revenues that could be generated by an analogue
European construction materials tax shall be carried out in the following.
7 including industrial minerals which amount to 5-6% of domestic material consumption
IP/A/ITRE/ST/2008-06 & 14
Page 56 of 126
PE 416.218

Due to different tax systems in the single Member States and the unanimity requirement for
tax issues within the European Union it is not possible to design a European Aggregates
Levy. It is however possible to draw on the European Council Directive restructuring the
Community framework for the taxation of energy products and electricity (2003/96/EC of 27
October 2003). This directive was set up in order to harmonise the market-conditions and thus
lays the foundation stone for a further expansion and harmonisation of environmental
incentives hence reducing market distortions and the competition that occurs on the grounds
of different environmental regulations within Europe. A directive like the Energy Tax
Directive concurrently gives necessary flexibility to each Member State to introduce and
enforce the specifications according to the individual national and political context. This may
also include a constitution as a charge wherever a tax seems not realisable due to a particular
taxation law. The elements of a directive on the structuring of the Community framework for
the taxation of construction materials have to include some main elements. These are (a)
scope of the directive, (b) the application range, (c) the tax or charges base, (d) a potential
review process, (e) the validity period and (f) the minimum levels of taxation/charging. They
can be qualified as follows:
As (a) scope a directive should comprise all European Member States and (b) be applied to
primary aggregates, i.e., sand, gravel and crushed rock. The directive should also apply to
aggregates imported into the EU as it could otherwise set a trade incentive and distort
markets; eventually a border tax adjustment needs to be made. The tax/charge base (c) is tons
produced, i.e., extracted and extradited. The directive should come into effect as soon as
possible. If it could be enforced, for instance, from January 2010 on, a review process (d)
should be established to reappraise the effects of the instrument after a four-year period
(2014). The directive should be valid unlimited in principle but (e) at least until the revision
mechanism has proved an effective levy of the tax/charge and an efficient change of resource
use, either through increase of substitution materials (such as wood) or increase of recycling
materials. The minimum levels could start from 1.5 € per metric ton. Table 4 shows the
production statistics of 23 of 27 EU-Member States and roughly calculates what could be
received through a minimum taxation/charging of aggregates by 1.5 € or 2 € per country.
It has to be examined to what extent the budget generated could be earmarked and follow an
analogue target through, for example, a resource efficiency fund, resource efficiency
programs, etc. The earmarking of revenues gained by taxation, as successfully introduced in
the UK system, raises constitutional objections in some other EU Member States. In some
cases it is required that taxpayer and recipient of an earmarked fund have to be the very same;
a directive could include the option to choose a charge system instead. A charge system
however does not appear in the government budget like a tax and thus may contribute to an
intransparent shadow budget which is more vulnerable to misapplication. Another option
could therefore be to set up a support programme for innovations or a research budget
increase in the realm of construction materials and substitution. A minimum taxation on
construction minerals could further help to reduce unintentional trade incentives and
competition distortions. It will be most important to control the implementation and
acceptance problems, which occurred in the wake of the introduction of the ecological tax
reforms in Europe when dealing with fiscal incentives to increase the environmental
performance. A fiscal approach, when specifically used to increase the resource productivity
in the medium term, should therefore keep exceptional rules and tax exemptions as few as
possible.
IP/A/ITRE/ST/2008-06 & 14
Page 57 of 126
PE 416.218

Table 4: Production of primary aggregates (sand and gravel and crushed rock) in 2006 in
Europe and potential revenues of an aggregates tax/charge on the basis of tons
produced
Country Absolute in
million tonnes Production
share in percent
Potential
revenue in
million € (for 1.5
€/ton)
Potential
revenue in
million € (for
2€/ton)
Spain* 415.0
15.5
€ 622.50
€ 830.00
France 407.5
15.3
€ 611.25
€ 815.00
Germany 398.7
14.9
€ 598.05
€ 797.40
Italy (a) 248.5
9.3
€ 372.75
€ 497.00
United Kingdom (e) 237.7
8.9
€ 356.55
€ 475.40
Irish Republic* 160.0
6.0
€ 240.00
€ 320.00
Poland* (f) 128.8
4.8
€ 193.20
€ 257.60
Finland 100.0
3.7
€ 150.00
€ 200.00
Sweden 92.0
3.4
€ 138.00
€ 184.00
Denmark 72.5
2.7
€ 108.75
€ 145.00
Netherlands 72.2
2.7
€ 108.30
€ 144.40
Hungary 64.4
2.4
€ 96.60
€ 128.80
Austria (a) 54.4
2.0
€ 81.60
€ 108.80
Czech Republic 51.7
1.9
€ 77.55
€ 103.40
Belgium (b)(c)(d) 48.6
1.8
€ 72.90
€ 97.20
Slovenia 32.1
1.2
€ 48.15
€ 64.20
Slovakia 22.8
0.9
€ 34.20
€ 45.60
Bulgaria 19.9
0.7
€ 29.85
€ 39.80
Lithuania 12.9
0.5
€ 19.35
€ 25.80
Estonia 12.5
0.5
€ 18.75
€ 25.00
Cyprus 12.2
0.5
€ 18.30
€ 24.40
Latvia 5.8
0.2
€ 8.70
€ 11.60
Romania* 1.6
0.1
€ 2.40
€ 3.20
Total EU-23 2671.8
100.0
€ 4,007.70
€ 5,343.60
Source: BGS 2008 and own calculation
no data for Greece, Luxembourg, Malta, Portugal
* (Partly) estimated
(a) Sales
(b) Deliveries
(c) Includes construction sand and silica sand, excludes gravel
(d) Includes gravel
(e) Includes small quantities for other purposes in Northern Ireland
(f) Includes an estimate for small producers
IP/A/ITRE/ST/2008-06 & 14
Page 58 of 126
PE 416.218

4.3.2. Greening the EU budget towards eco-innovation
The European Commission claims that the 2009 budget will have the highest spending for
growth and employment8: “The proposal presented today also highlights the growing trend to
gear policy spending towards the energy and environment, with a massive 10% of the budget
going on environment”.
Figure 19: 2009 Budget Proposal
Source: European Commission
Figure 20: Greening the budget according to the European Commission
Source: European Commission
8 http://ec.europa.eu/budget/budget_detail/next_year_en.htm
IP/A/ITRE/ST/2008-06 & 14
Page 59 of 126
PE 416.218

Despite additional efforts of supporting eco-innovation an analysis of the EU budget shows
that eco-innovation in the EU will be determined by whether the EU will manage a greening
of the largest spending blocs which are Regional Policy and the Common Agricultural Policy
(CAP). In 2009 the spending for the CAP will remain around €60 billion and the programmes
to support cohesion across Europe will receive a total of around €50 billion. Thus, Regional
and Agricultural Policy still cover almost 80% of the EU budget. Although the Commission
presents a rather conservative approach with new headings such as “sustainable growth”
(Regional Policy) and “sustainable management of natural resources” (CAP), it remains to be
seen whether the largest EU policies can be sufficiently steered towards eco-innovation.
CAP
Over the past fifty years intensification of agriculture often supported by the CAP has
increased overall environmental pressure on landscapes and biodiversity. Agriculture has
contributed to soil degradation, water pollution and loss of biodiversity (EEA 2007).
Sustainable agro-environmental development and cross-compliance schemes show that
farming and protection of the consumer and the environment can be harmonized. By setting
goals towards a diversified agriculture, taking the specific territorial characteristics in
account, this would not just aim to increase its productivity, but also seek to minimize the
external inputs and guarantee quality and food safety through a productive re-organization
and the adoption of high level of technological innovation (Bringezu, S., et. al, 2007). Thus, a
greening of the CAP can be a potential driver of sustainable consumption and production by
improving the quality of our food while protecting Europe’s landscapes and biodiversity.
Regional Policy
From 2007 on, half of the budget for Regional Policy will be dedicated to the development of
the new member states and acceding countries of Central and Eastern Europe. Huge financial
injections will result in structural interventions, which shape the long-term development of
these countries. Schepelmann 2005 has shown that Regional Policy could boost eco-
innovation. Like no other EU policy it can set a frame for research, technological
development and the creation of markets by connecting public and private drivers of eco-
innovation. Regional governments cannot only use the Regional Funds to increase overall
eco-efficiency of their industry, but create regional clusters of eco-innovation (Schepelmann,
Ph. 2005). Nevertheless, most of the funds seem to be dedicated to traditional regional
economic development schemes. Large conventional road transportation schemes will
increase pressure on the environment. Although most of the environmental related spending
of the EU happens in the framework of Regional Policy most of the money is still dedicated
to end-of-the pipe environmental protection.
For improving eco-innovation regional planning for research, economic development and
environment would have to be integrated. A concrete proposal for improving this kind of
policy integration would be the guidelines by the Scientific and Technical Research
Committee of the European Union (CREST). The Commission has published a report based
on the CREST guidelines on using synergies between Structural Funds, the Research
Framework Program and the Competitiveness and Innovation Programme (CIP)9. Such an
advanced scheme for using of the EU budget could be the material foundation for developing
a “triple-helix” consisting of stakeholders from enterprises, the public sector, research and
teaching who could drive and implement eco-innovation in the regions.
9 COM (2007) 474 final
IP/A/ITRE/ST/2008-06 & 14
Page 60 of 126
PE 416.218

Proposal for speeding up eco-innovation beyond 2009
A greening of the budget would be the material basis for speeding up eco-innovation beyond
2009. This would have to follow two strategic lines: on the one hand unsustainable spending
would have to be cut, on the other hand the money saved by this activity could be shifted to
support investments in structural eco-innovation. A budgetary strategy could include the
following elements:
• Further redirecting CAP from direct payments towards integrated rural development
schemes which support eco-innovation in the area of sustainable production of high-
quality food and biomass. These integrated rural development schemes should include
integrated logistical, economic and technological strategies for adapted sustainable
natural resource management in the landscape (food, water, soil, biodiversity and
closed-loop biomass production and use). These strategies would have to be highly
adapted to local economies and landscape conditions thus inducing local eco-
innovation and employment schemes.
• Rigorous environmental appraisal and reduction of Regional Policy schemes for large
infrastructure projects which could support long-term unsustainable development
paths and shifting towards funding for eco-innovation e.g. in the area of decentralized
electricity grids (supporting green electric cars and renewable energies) and lighthouse
projects on resource efficient construction and resource recovery.
• Redirection of Regional Funds from end-of-pipe technologies towards integrated
solutions (e.g. decentralized water treatment) and eco-innovation.
• More advanced schemes for improving energy and material productivity of economies
would require an implementation of the CREST guidelines for improved coordination
between Structural Funds, the Research Framework Program and the Competitiveness
and Innovation Programme (CIP). Only such a concentration of forces could achieve a
measurable improvement of resource productivity in Europe by means of regional
eco-innovation clusters and a European network of regional resource efficiency
agencies.
• Integration spending of the European Investment Bank (EIB) for improved co-
financing of eco-innovation
4.3.3. Engaging industry in developing eco innovation for sustainable ways of living
Industry has a huge role to play in encouraging sustainable ways of living. By reaching
consumers through markets, business can do a lot to communicate and enable sustainable
choices. To tackle the enormous challenge of climate change, simply improving efficiency in
the production of goods and services will not be sufficient. It is vital that business looks
beyond promoting more sales of low-carbon products and services.
There is an urgent need to transform markets by replacing high-carbon and resource intensive
consumption patterns with low-carbon/resource efficient ones. But what strategies and policy
interventions can help business tap these opportunities? The following suggestions can be
classified into six strategy areas. As illustrated in Figure 21, the more willing a company is to
take the challenge of sustainable consumption, the more potential for value creation and
differentiation from competitors a company has.
IP/A/ITRE/ST/2008-06 & 14
Page 61 of 126
PE 416.218

Figure 21: Diagram illustrating the degree of challenge and strategic impact of each strategy
area
Source CSCP (2008)
4.3.4. The Strategy Areas10
Strategy Area 1: Creating and satisfying demand for green and fair products. Businesses
implement environmentally and socially responsible supply chain management and promote
these practices to consumers. Companies can employ tactics such as choice-editing, the
elimination of harmful substances in products, communication and marketing strategies, or
the utilisation of eco-labels and fair trade labels to promote their products. The policy-maker
can support these approaches by engaging in related initiatives, for example, by setting up an
eco- entrepreneur fund.
Strategy Area 2: Communicating for low impact product use. Businesses communicate
the environmental and social impacts associated with product use to their stakeholders. In
economic terms this means explaining and addressing the hidden costs of product ownership.
Companies can increase consumption efficiency by raising awareness and educating
consumers on how to reduce the use-phase impacts of what they purchase, such as through
energy use of electronic devices or waste avoidance on product disposal. A lot is still to be
done to improve product and corporate reporting and labelling of sustainable products. There
is still no ‘sustainability’ label and policy-makers can help to develop and implement
concepts such as a ‘product pass’ for products which meet sustainability criteria.
10 CSCP (2008) Making the Business Case Towards Low Carbon and Resource Efficient Lifestyles - Booklet
Series
IP/A/ITRE/ST/2008-06 & 14
Page 62 of 126
PE 416.218

Strategy Area 3: Innovative after sales services. Businesses focus on prolonging product
life and the end-of-life management for products. Companies can set-up after-sales services to
warrant the durability of their products or run ‘take-back’ schemes for closing resource loops
(re-use or re-cycle). Policy-makers can improve and expand schemes such as the automobile
directive (ELV) towards full recovery of precious metals.
Strategy Area 4: Product and service innovations. Businesses can take a more radical and
revolutionary approach, whereby products and services are (re-)designed to meet future
customer demands, and catalyse drastic environmental and social improvements. Designing
for sustainability would be a common tool used to put this strategy area in practice. This can
be further supported by the incorporation of social aspects into the eco-design directive. A
common framework for putting sustainability criteria into the design process needs to be
established.
Strategy Area 5: Service-oriented business models. Companies aim to serve very specific
needs instead of selling units of products. Sometimes, this strategy requires a radical shift in
companies’ thinking. Such as, how the needs of target customers are served, or the product in
sale is designed. A focus on services with a wide range of partnerships to satisfy the ultimate
need of customers, such as being a mobility provider, rather than an automotive company, lies
at the heart of this strategy, and it carries high potential for dematerialisation. A law
regulating the resources taken and used from nature such as a ‘materials saving law’ can
ensure that there is a core shift in levies and taxes on labour and materials to give strong
incentives to the production sector for minimising the use of natural resources.
Strategy Area 6: Leadership for social change and socially responsible business. This is a
level of ambition for companies, eager to address the underlying drivers of ever increasing
levels of resource use and environmental degradation i.e. the paradigm of our materialistic
societies. This is a highly exploratory area in which companies can engage in the debate about
whether "more is always better". They can also experiment with business models aiming at
encouraging sustainable lifestyles and achieving well-being for all within planetary limits.
Partnerships can be formed between governments and business to ensure business has good
advice on how to achieve sustainability and administer continuing advisory and technical
support, promote marketing to support sustainable business products and services and to
mainstream sustainability into business development programmes.
For most of the strategic areas, besides the policy interventions mentioned above, adopting a
sectoral approach in the development, promotion and application of eco-innovation will be
needed. Market opportunities for eco-innovations within a particular sector and across a
sector can be identified and pushed in different companies. A value of the sectoral approach is
the opportunity to collect and harmonise data and measurement schemes from specific sectors
which can in turn result in a sector-wide reporting mechanism. In the EU, this could result in
a set of standards and benchmarks on energy and resource efficiency respectively sustainable
production and consumption that can be formulated for specific sectors but also for certain
demand areas including different industries. This set of standards could have a number of
repercussions along the supply chain and also on the consumption side – i.e. outside Europe
and not putting the competitiveness of firms at risk. A method of engaging a whole industrial
sector (e.g. cement, steel, automobile, building and metal manufacturing sectors) and breaking
it down in production and but also on the consumption side in different demand areas (e.g.
food, mobility and housing) will help to unleash eco-innovation. It will be of vital importance
to pursue such an approach, not only with regard to climate change, but also with regards to
resource efficiency.
IP/A/ITRE/ST/2008-06 & 14
Page 63 of 126
PE 416.218

4.3.5. How the SCP Action plan can further support eco-innovation in the EU
The SCP Action Plan has been instrumental in drawing the attention to existing and starting
initiatives with relevant for eco-innovation, including the EMAS revision and the eco-design
directive described in this document. The public consultation organised by DG Environment
and the civil society consultation jointly conducted by the EEA and the CSCP has provided a
showcase how stakeholder opinions can be integrated into drafting a strategic guiding
document to coordinate existing initiatives, an approach that could be applied in the eco-
innovation field.
For the SCP Action Plan to more effectively support eco-innovation, concrete perspectives for
its further development and the impacts of its implementation are instrumental. A role of an
advanced SCP Action Plan could be to clarify the relationship between different initiatives
existing in the eco-innovation field, thus creating demand economies of scale across different
user groups (e.g. private customers, public procurement and B2B) and security regarding
market framework conditions for long-term investments in eco-innovation.
To strengthen the implementation, the nature of the “dynamic framework” in the SCP Action
Plan (COM(2008) 397 final) could be clarified: Table 5 provides an overview how the
different areas of the SCP Action Plan can be linked to eco-innovation systematically.
A continuous monitoring of the various specific initiatives11 covered by the SCP Action Plan,
in a complementary fashion to the existing implementation mechanisms for these initiatives.
11 See COM(2008) 397 final or http://ec.europa.eu/environment/eussd/escp_en.htm for the specific initiatives to
be coordinated and further developed by the SCP Action Plan; see also EEA Technical Report No 1/2008:
Time for Action – towards sustainable consumption and production in Europe, CSCP, EEA and Republic of
Slovenia Ministry of the Environment and Spatial Planning
IP/A/ITRE/ST/2008-06 & 14
Page 64 of 126
PE 416.218

Table 5: Furthering the incorporation of eco-innovation into the SCP Action Plan
SCP Action Plan Area Leverage for eco-innovation and market transformation
A Dynamic Policy
Framework for Smarter
Consumption and Better
Products
The Ecodesign Directive /
The Labeling of Products /
Incentives / Consistent data
and methods on products /
Promote Green Public
Procurement / Work with
Retailers and Consumers
Aligning demand-side incentives for eco-innovation would lead to
higher standardisation of requirements for emerging eco-technology
markets, reduced risks in eco-innovation investments, reduced
transaction costs in pursuing innovation opportunities across countries
and sectors. The SCP Action Plan could reach this alignment of
incentives by
- assuring that labelling and data requirements are consistent across
customer groups (by coordinating the standard setting by retailers
and green public procurement);
- promoting the acceptance and active marketing of new eco-design
standards by main customer groups to improve the business case
for compliance and lower industry resistance;
- lowering the cost of Green Public Procurement by achieving
consistency with other labelling and measurement procedures;
- reducing market distortions and intra-community trade through
multiple and conflicting standards.
Leaner Production
Boosting resource
efficiency / Supporting
eco-innovation / Enhancing
the environmental potential
of industry
Beyond the alignment of demand side incentives, the SCP Action Plan
can promote eco-innovation by measures directly addressing
businesses. These would include
- setting clear overall targets for resource efficiency and eco-
innovation to allow planning security for businesses;
- streamline regulatory framework conditions with Lead Market
initiatives;
- support adaptation processes and innovation processes of SMEs by
providing human and financial resources for research and
innovation activities;
Works Towards Global
Markets for Sustainable
Products
Besides incentives on the European market, eco-innovation can be
fostered by global incentives, proposed within the SCP Action plan for
- developing international markets for eco-innovations through new
flexible mechanisms in future versions of the Kyoto Protocol, e.g.
negotiable sector baselines;
- promoting new application areas for eco-innovation in developing
countries through technology transfer programmes and
development cooperation programmes (SWITCH);
- assuring that investments can be regained on international markets
for environmentally friendly goods and services through
preferential trade agreements;
4.3.6. A European Trust Funds for Eco-Entrepreneurship
In an effort to support entrepreneurship and to address the critical shortage of finance at the
stage of pre-commercialisation,12 the EU should establish a European Trust Fund for Eco-
Entrepreneurship. The aim of such a Trust Fund shall be to leverage investment in those start-
up companies with early success on regional markets or niche markets with the aim to go
Europe or international. Being an informed investor, the focus shall be on system innovation
for resource efficiency and low carbon emissions.
12 See also the briefing note written by Birgit Eggl/ forseo / and Fundetec (2007).
IP/A/ITRE/ST/2008-06 & 14
Page 65 of 126
PE 416.218

The Fund shall have a mandate to approach institutional investors and companies seeking for
an investor relationship. Thereby it shall facilitate to ramp up commercially promising eco-
technologies through partnerships, funding, expert advice and large-scale demonstrations. It
shall entail a specific window for capacity building in the new member states. Delivering
practical solutions, it shall also be able to offer financial support such as contingent grants,13
interest-free loans, convertible loans, mezzanine financing,14 equity and venture capital,
guarantees. It may typically invest between 100 K€ and 1.000 K€ in any early stage business.
An early estimation for the overall budget is in the order of 10 bn €.
The Carbon Trust established by the UK government may serve as a model for such a fund
(e.g. Carbon Trust 2008).
Coordination with national governments should be promoted as well, especially with regard
to investment tax incentives, revenue support and national programmes as well as for general
consistency of easing administrative procedures.
In addition, an alignment with green public purchasing strategies and green saving accounts
will be required.
Involvement of regional agencies for eco-innovation will be crucial; they serve important
functions for the early start up period, tasks of identifying stakeholders, aligning an
innovation with customers and regional needs, allocating seed money, making use of public
funding.
The current EU’s Entrepreneurship and Innovation Programme (EIP, funded with € 2.17
billion as part of the EU’s Competitiveness and Innovation Programme CIP) will be evaluated
in February 2009; its existing priority areas materials recycling, building & construction, food
& drink, greening business & 'smart' purchasing have a strong component on eco-innovation.
Strong features of the EIP programme shall be aligned with the new European Trust Fund for
Eco-Entrepreneurship.
4.3.7. A Technology Platform for Resource-light industries
For quite some time, the main focus of eco-technologies has been on pollution control. The
main message of this report – to focus on energy and resource efficiency – leads to the
proposal of establishing a technology platform for resource-light industries, with a focus on
automobiles and construction. Given the undoubtful success of the EU Hydrogen and Fuel
Cell Technology Platform, which has resulted in the establishment of a Joint Technology
Initiative with great commitments, this mechanism seems especially suited to bridge the gap
between R&D and pre-commercialisation of mass markets. One may also note the synergies
with the other proposals made in this study.
The aim of such a technology platform is to develop new materials and combinations of
materials that fit into mass markets for goods in areas which have been classified as being
resource-intensive (see chapter 2).
13 Contingent grants are provided without interest or repayment requirements until technologies and intellectual
property have been successfully implemented. Before revenue is generated contingent grants are useful
mechanisms for SMEs to address specific aspects of business development. The grant is repaid as soon as the
business activity provides returns.
14 Mezzanine financing addresses typical SME financing obstacles such as weak balance sheets and small trans-
action size when they seek for working capital for operations and growth capital loans to expand. Mezzanine
finance groups together a variety of structures positioned between the high risk / high upside, pure equity posi-
tion and the lower risk / fixed returns, senior debt position. Mezzanine financing usually is converted in equity
when a repayment is critical.
IP/A/ITRE/ST/2008-06 & 14
Page 66 of 126
PE 416.218

Such a Technology Platform will not only bring car manufacturers, main suppliers and
independent producers together, but also a broad spectrum of metal industry, other material-
producing industries (e.g. chemical industry), recycling industry, product designer, material
science and applied research. Involving SMEs will therefore be of crucial importance:
additional incentives for them to join may also come from EU FP7 and the CIP programme.
Following a recent evaluation (IDEA consult 2008), formulation visions and including the
socio-economic dimension and stakeholders outside the industry should be part of such a new
technology platform, i.e. support to formulating a vision and strategic aims towards
deployment e.g. through road mapping and foresight exercises.
Indeed, a life-cycle perspective and integrated assessments will be essential to prepare
industry for the markets of tomorrow. The platform thus shall also be used to lower the
carbon intensity of energy-intensive industrial processes upstream, which are often operated
outside the EU (e.g. aluminium melters). Two snapshots may illustrate the usefulness of such
new technology platform:
• Why should a European car of the future weigh more than 500 kg? In the long run, CO2
reduction is unlikely to come from new engines alone but will need to be addressed in
such a comprehensive manner. Any such car of the future will become an integrated part
of service oriented mobility systems comprising a mix of carriers (busses, trains, ships,
trucks etc.) and related infrastructures.
• In a similar way, a European building of the future may not only produce energy from
renewable sources and via stationary CHPs but integrate different functions in a new
architecture with new materials and new products such as super windows and thin layer
photovoltaics to use facades as solar absorber: micro structure materials and a light,
flexible and floating architecture may over time lead to a new face of European cities,
with "Solar trees" combining photovoltaic with battery and LED technology for lightening
services.
In developing such visions and bringing them closer to implementation, the new technology
platform has a role to play for the market entry of new industries such as industrial
photosynthesis, soft biochemistry, and white biotechnology and their cooperation with
modernized established industries.
4.3.8. A Programme for refurbishing and upgrading existent buildings in the EU
The current EU legislation on buildings (see section on the EPBD above) is poorly
implemented, currently unlikely to deliver long-term carbon reduction targets, and it does not
yet address the issue of resource efficiency. Given the promising examples of the “Intelligent
Energy for Europe” programme, some programmes in some member states (see the case study
of the Austrian deep renovation programme above) and the potential to unleash eco-
innovation, there is a case for a European programme to upgrade and modernize existing
buildings. Such new programme should explicitly address the issue of resource efficiency in
buildings; it can be expected to boost jobs and growth throughout Europe.
The proposal is to establish a dynamic programme that – in a kick-off step – compares and
draws upon ambitious national roadmaps on low/zero carbon energy buildings.
Simultaneously, it shall harmonize measurement and certification processes throughout the
EU.
This process shall also lead to a harmonized measurement methodology for local and
municipal action to combat greenhouse gases.
IP/A/ITRE/ST/2008-06 & 14
Page 67 of 126
PE 416.218

To facilitate this kick-off, a European network of local and regional focal points of expertise
shall be established, whose task is to inform the various owners and users and qualify local
craftsmen in their respective areas. Scaling up of these activities to a European network not
only will disseminate knowledge via exchange and the development and implement of
training modules. The European network can also synthesize feedback on administrative
barriers and bring it to the ‘better regulation’ attempts of the EU.
Following a kick-off period, the programme shall fully integrate aspects of material intensity
and resource efficiency in building codes and standards, and work with the European network
to qualify local and regional focal points on these issues. Demonstration projects and an
actively communicated evaluation will help to foster the ramp up of these activities. One
driving forces for this task will result from future waste streams resulting from current
insulation materials. Simultaneously, a European-wide databank on materials embedded in
current buildings shall be established, in order to prepare re-use of construction materials and
metals. This huge task will need to be coordinated with ongoing databank initiatives at
Eurostat and EEA. Indeed, other health aspects (odours, toxicological aspects, electro-
magnetic issues, etc.) will need to be integrated as well.
To ramp up activities, the programme shall enhance and support radical eco-innovation of
existing buildings via e.g. decentralized energy production and new materials at a large scale
in a third step. Possible lighthouses on “urban mining” (extracting materials from end-of-life
buildings) shall be conducted and co-financed by this programme. It can be expected that the
other proposals suggested here – especially taxing construction materials, setting up a trust
fund for eco-entrepreneurship and the technology platform for resource-light industries – lead
to new innovation that can be implemented via such a European programme. Of course,
utilizing the existing EU funds is also an option for eligible regions. Proper incentive schemes
may take advantage of innovative financing instruments (see paper written by Forseo in the
annex, contracting, public purchasing and other means. Counterarguments – does it pass the
subsidiarity test? Will the EU give support to free riders and hitchhikers? – can thus be
balanced against the manyfold advantages of such a programme.
4.3.9. Eco-innovation and EU Foreign policy
The stimulation and increased development and market introduction of eco-innovation in the
EU is not a task for the internal market alone. It offers opportunities and challenges for EU
foreign policy. It offers opportunities because the deployment of eco-innovations in the EU
reduces energy and material import costs and dependencies, and thus increases energy and
material security. Furthermore, eco-innovative goods developed within Europe do have a
significant export potential, and thus stimulate sustainable growth and jobs in Europe (“first
mover advantage”), in addition to the induced growth and employment due to reduced energy
and material costs. The world market for eco-technologies is estimated to become a $800
billion market worldwide by 2015 and a $ trillion market afterwards.15 In that regard, one
policy challenge might result from new mandatory product requirements via standards and
sectoral agreements, which might hold off imports of less environmentally friendly products –
and raise issues at the World Trade Organisation.
In a similar vein, producers or developers from outside the EU might infringe property rights
of European firms by copying eco-innovative products. It is proposed that the EU takes the
following initiatives to support eco-innovation internationally:
15 F.A.Z., 17.08.2007, Nr. 190 / Seite 14
IP/A/ITRE/ST/2008-06 & 14
Page 68 of 126
PE 416.218

• Support companies to source and purchase materials from raw material deposits and
refining routes with least amount of resource extraction and emissions; in that regard,
certification schemes of sustainable materials shall be developed (as it it the case in
the G8 initiative on Coltan).
• To support high quality recycling in the world, especially in emerging economies, via
bilateral and multilateral initiatives; the main tasks will be technology and know-how
transfer on the recovery and recycling, rather than the obstruction of waste exports for
recycling for short term raw material security.
• Negotiate standards and sectoral agreements on energy and resource efficiency for key
products and its components in line with European standards.
• Take initiative for an international convention on sustainable resource management
(see Bleischwitz and Bringezu, 2007).
IP/A/ITRE/ST/2008-06 & 14
Page 69 of 126
PE 416.218

5. A VISION FOR THE FUTURE
Without ecological stability
Sustainable economy is not possible
The bailout of the financial crisis must be paralelled
by the prevention of the ultimate ecological breakdown,
which has some of the same root causes.
In late fall of 2008 the German minister of finance noted: „When the financial market burns,
the fire must be extinguished, even if it was deliberately set“. With unsurpassed speed a bank-
survival package worth 500 billion euro was produced in Germany. Apparently, this is the
presumed size of the expected accumulated losses of an important sector of the economy, due
to the failures of its own leaders. A survival assurance worth close to twice the yearly federal
budget in that country. A commitment worth almost 6100 euro for every German citizen.
Similar packages have passed all Parliaments throughout Europe.
In 2008, sixty minutes of „googling“ would have sufficed to become aware of the fact that a
persistent smouldering fire has increasingly harmed the life-sustaining services of nature
since many years. A smouldering fire that on occasion bursts worldwide into open flames, for
instance in respect especially of greenhouse gas emissions, the extinction of species, and the
increased occurrences of floods and hurricanes 16.
The human economy must be constrained and enabled to function within the limits of the
environment and its resources and in such a way that it works with the grain of, rather than
against, natural laws and processes. This argues for a strong conception of sustainability,
whereby the economy respects and adapts to ecological imperatives, rather than seeking to
substitute manufactured for natural capital where the former fails to deliver the full range of
functions and services of the latter 17.
Consideration of current material flows and their ecological implications, and taking account
of expected population growth, has led to the conclusion that by 2050 the total global
mobilization of natural resources for human use should not exceed 5-6 tons per person per
year, while the emission of climate-changing greenhouse gases should be limited to 2 tons of
CO2-equivalent per person per year.
These goals imply an enormous increase in the resource productivity of industrial economies:
in Germany, for example, a Factor 10 improvement in resource productivity, at a rate of
approximately 5% p.a. from now, would need to be achieved.
Only by dematerializing their economies in this way will the industrial countries free up the
necessary resources and ecological space to allow an economic growth in developing countries
that does not exceed the natural limits of the global environment. Obviously, eco-innovation is
one of the most important tool to reach such targets.
16 See, for instance, the Wiegandt Series „Courage for Sustainability“ Haus Printers, London, 2008/2009; and
the IPCC (Intergovernmental Panel on Climate Change) Climate Report 2007; the UNDP (United Nations
Development Programme) Report 2007 on Climate Change and Poverty; the UNEP (United Nations Envi-
ronment Programme) Report 2007 „Global Environmental Outlook GEO-4“, and the EEA (European Envi-
ronment Agency) Report 2007 „Europe’s Environment – the 4th Assessment“.
17 See, for example, publications by R. U. Ayres, S. Bringezu, Lester Brown, W. Van Dieren, C. Fussler, P.
Hawken, F. Hinterberger, C. Liedtke, A. Lovins, F. Schmiddt-Bleek, R. Stern, E. U. von Weizsäcker, B.
Meyer, R. Bleischwitz und R. Yamamoto.
IP/A/ITRE/ST/2008-06 & 14
Page 70 of 126
PE 416.218

Rate and quality of eco-innovation is particularly urgent for capital goods and other goods
with long life-times, such as infrastructures for transportation and buildings.
While some emphasis must first be placed on energy conserving measures of existing
technology (“easy fruits”), the medium-term goal must be to minimize the use of carbon rich
materials as source of energy altogether, particularly that of imported fossil energy carriers.
The political implication of the import dependence - from Russia for example - should give a
powerful incentive to the EU to develop at the greatest speed possible an economy that does
no longer depend on strategic imports into the EU. For that reason, smart grids and
ecologically-sound buildings and a whole shift to a bio-based economy merge to become a
strong pillar for the future of the European Union.
Incremental resource-saving innovations related to existing technology are important but will
not deliver the long-term targets proposed above. It must become standard in the EU to give
strong preference for R&D funding of projects that are clearly in tune with the definition for
eco-innovation given in this study. Radical eco-innovations are required that not only replace
existing with completely new technologies, but which rethink and develop whole new
systems to deliver the services that are the goals of economic activities with a small fraction
of the natural resources. This very requirement applies for future energy supply systems.
Those who pioneer these innovations must be assured that it is to them that the markets of the
future, and associated profits, will belong.
Policies must therefore be urgently re-oriented towards material-saving technical progress.
The whole direction of technical change in industrial societies, which has been focused on
increasing labor productivity, ought to change towards promoting resource productivity. This
implies a fundamental change in the economic incentives that drive technical progress, both to
squeeze out the manifold inefficiencies in the use of resources by current technologies, and to
kick-start the radical eco-innovation that is required.
Concerned economists 18 suggesting fundamental changes in the framework conditions of
western economies have a preference for economic instruments – environmental taxes and tax
reform, trading schemes and other measures that give explicit prices to the use of natural
resources and the emission of pollutants – because of the way they work with the grain of
markets and give transparent incentives for increased resource productivity without specifying
particular technologies. However, because of market failures and political considerations,
such instruments will often need to be complemented with other policy measures, such as
information and coordination policies, voluntary agreements and regulation of outcomes,
products and processes. In particular, policies complementary to economic instruments will
be required to ensure that the required increases in resource productivity are achieved in ways
that are fair and do not bear disproportionately on those who are relatively poor or otherwise
disadvantaged.
18 The “Lindau Group”, see www.worldresoursesforum.org, and watch for publications by mid 2009.
IP/A/ITRE/ST/2008-06 & 14
Page 71 of 126
PE 416.218

A future basic European “Material Savings Law” can form the legal framework for an
upswing of the proposals presented in this study, the core of which would shift present taxes
and levies on labour to materials needed as inputs into the metabolism of the economy,
including a carbon tax, giving strong incentives to the production sector for minimizing the
use of natural resources. This must be a law that regulates a host of areas in which resources
are taken and used from nature (e.g. material, water, and land-use) along the whole value
added chain for generating food, infrastructures, goods and services. A law that reflects
expected problems for ex- and imports for the countries that have agreed to the legislation.
Many (especially economic) institutions will need to be reformed in order to take account of
and pursue the new imperative of resource productivity: government departments, educational
and research institutions, and statistical offices. However, there is a case for the creation of a
major new public institution, comparable in importance to a central bank, which is
independent of central government, that generates, validates and publishes relevant data and
information, and state of the art developments and experiences, and that carries out policy
analysis and gives policy support. If the amount of resource use is are as important as the
volume of money circulated in the economy – there should be similar tools available to avoid
an inflationary overuse of natural resources. Such public institution should also support
educational and training measures and could administer an award scheme for outstanding
ecological performance or developments that promote resource productivity.
In line with the challenge of climate change in regard to Developing Countries, the EU may
well also take the initiative to establish a large EU “Resource Saving Co-operation Program”
with developing and emerging countries that agree to the European goals for resource saving.
5-6 yearly tons per capita consumption of non-renewable resources world-wide by 2050 could
serve as a common goal, as indicated above. This implies to limit the use of natural resources
in developing and emerging countries – but not to reduce it immediately – and gives
incentives to establish lead markets for eco-innovation in those countries.
After all, the way human societies treat and use the environment and its resources ultimately
reflects their value-systems as expressed in their lifestyles and environmental behaviours.
Social values change slowly, but such change can be promoted and supported by education. It
is vital that, through education, human societies become much more aware than at present,
both of the fundamental roles of the environment and its resources in underpinning economic
activity and generating human welfare more broadly, and of the extent of the threats to the
environment that may prevent it playing that role to the necessary extent in the future.
The monitoring of progress towards greater resource efficiency, and the comparison of the
ecological performance of countries, regions, systems, firms, products, services, processes
and procedures, will require a range of appropriate indicators that are robust, informative,
cost-efficient, practicable and internationally recognized. They must also take account of the
full life-cycle impacts of their subject, and be available on a per capita basis, to link the
impacts being indicated directly to population levels. Extensive further data generation,
research and development will be required to make the necessary indicator framework fully
operational.
Because of the time lags associated with technological innovation and diffusion, the large-
scale dematerialization of economic activities will take several decades. Because of this, and
because of the strains on natural systems that are already apparent, it is essential that
measures, policies and processes to begin large-scale dematerialization at the necessary rate
are developed and adopted without further delay. The sooner Europe takes action the better.
IP/A/ITRE/ST/2008-06 & 14
Page 72 of 126
PE 416.218

ANNEX 1
This Annex lists the detailed tables of worldwide distribution of reserves of different resources.
Table 6: Top ten oil reserve countries; end of 2006
Rank Country Oil reserves (kt) in 2006 Percent of world total 2006
1. Saudi Arabia 39.373.399 21,87%
2. Iran 20.486.010 11,38%
3. Iraq 17.135.000 9,52%
4. Kuwait 15.123.500 8,40%
5. United Arab Emirates 14.572.200 8,09%
6. Venezuela 11.921.788 6,62%
7. Russian Federation 11.851.478 6,58%
8. Libya 6.178.136 3,43%
9. Kazakhstan 5.934.372 3,30%
10. Nigeria 5.396.780 3,00%
Top Ten 147.972.663 82,19%
EU-27 2.295.887 1,28%
Source: BP, 2007
Table 7: Top ten natural gas reserve countries; end of 2006
Rank Country Natural Gas reserves
(kt of oil equivalent) in 2006 Percent of world total 2006
1. Russian Federation 42.885.720 26,26%
2. Iran 25.317.000 15,50%
3. Qatar 22.824.900 13,98%
4. Saudi Arabia 6.365.700 3,90%
5. United Arab Emirates 5.454.900 3,34%
6. USA 5.332.500 3,27%
7. Nigeria 4.689.000 2,87%
8. Algeria 4.053.780 2,48%
9. Venezuela 3.883.500 2,38%
10. Iraq 2.853.000 1,75%
Top 10 123.660.000 75,72%
EU-27 5.538.369 3,39%
Source: BP, 2007
Table 8: Top ten coal reserve countries; end of 2006
Rank Country Coal reserves (kt) in 2006 Percent of world total 2006
1. USA 246.643.000 27,13%
2. Russia 157.010.000 17,27%
3. China 114.500.000 12,60%
4. India 92.445.000 10,17%
5. Australia 78.500.000 8,64%
6. South Africa 48.750.000 5,36%
7. Ukraine 34.153.000 3,76%
IP/A/ITRE/ST/2008-06 & 14
Page 73 of 126
PE 416.218

Rank Country Coal reserves (kt) in 2006 Percent of world total 2006
8. Kazakhstan 31.279.000 3,44%
9. Poland 14.000.000 1,54%
10. Brazil 10.113.000 1,11%
Top 10 827.393.000 91,02%
EU-27 71.880.000 7,91%
Source: BGR, 2006
Table 9: Top ten bauxite (aluminum) reserve countries; end of 2006
Rank Country Bauxite reserves (kt) in 2006 Percent of world total 2006
1. Guinea 8.600.000 23,66%
2. Australia 7.900.000 21,74%
3. Brazil 2.500.000 6,88%
4. Jamaica 2.500.000 6,88%
5. China 2.300.000 6,33%
6. India 1.400.000 3,85%
7. Cameroon 1.100.000 3,03%
8. Guyana 900.000 2,48%
9. Indonesia 900.000 2,48%
10. Greece 650.000 1,79%
Top 10 28.750.000 79,10%
EU-27 1.445.000 3,98%
Source: USGS, 2006
Table 10: World top ten copper reserve countries; end of 2006
Rank Country Copper reserves (kt) in 2006 Percent of world total 2006
1. Chile 360.000 38,30%
2. United States 70.000 7,45%
3. China 63.000 6,70%
4. Peru 60.000 6,38%
5. Poland 48.000 5,11%
6. Australia 43.000 4,57%
7. Mexico 40.000 4,26%
8. Indonesia 38.000 4,04%
9. Zambia 35.000 3,72%
10. Russia 30.000 3,19%
Top 10 787.000 83,72%
EU-27 48.000 5,11%
Source: USGS, 2006
IP/A/ITRE/ST/2008-06 & 14
Page 74 of 126
PE 416.218

Table 11: World top ten iron ore reserve countries, end of 2006
Rank Country Iron Ore reserves
(kt) in 2007 Percent of world total 2007
1. Brazil 41.000 22,78%
2. Russia 31.000 17,22%
3. Australia 25.000 13,89%
4. Ukraine 20.000 11,11%
5. China 15.000 8,33%
6. Kazakhstan 7.400 4,11%
7. India 6.200 3,44%
8. Sweden 5.000 2,78%
9. United States 4.600 2,56%
10. Venezuela 3.600 2,00%
Top 10 158.800 88,22%
EU-27 5.000 2,78%
Source: USGS, 2008
Table 12: World top ten uranium reserve countries; end of 2006 (uranium RAR < 130 $/kg)
Rank Country Uranium reserves
(t) in 2006 Percent of world total 2006
1. Australia 725.000 21,72%
2. Kazakhstan 378.100 11,33%
3. United States 339.000 10,15%
4. Canada 329.200 9,86%
5. South Africa 283.400 8,49%
6. Niger 243.100 7,28%
7. Namibia 176.400 5,28%
8. Russia 172.400 5,16%
9. Brazil 157.400 4,71%
10. Ukraine 135.000 4,04%
Top-10 2.939.000 88,04%
EU-27 49.800 1,49%
Source: NAE/IAEA, 2008
Table 13: Literature review concerning peak and anticipated depletion
Resource Peak End
Oil
• EIA (2004)
• BRG (2002)
• Meadows et al. (2006)
• ASPO (2006)
• Campbell (2003)
• Rempel (2000)
• Bundesanstalt für Geowissenschaften (2008)
• Hansen (2007)
• Energy Watch Group (2007)
Scenario 1
Scenario 2
Scenario 3
2020
2000
2006
2010
2025
-
2075
2020
2026
2037
2047
2100
2120
2125
-
-
-
-
45 Years
-
-
IP/A/ITRE/ST/2008-06 & 14
Page 75 of 126
PE 416.218

Resource Peak End
Gas
• ASPO (2006)
• Campbell (2003)
• Rempel (2000)
• Bundesanstalt für Geowissenschaften (2008)
• Hansen (2007)
• Schweizerische Energiestiftung (2008)
2010
2015
2055
-
2075
2025
-
-
-
65 Years
Coal
• Bundesanstalt für Geowissenschaften (2008)
• Hansen (2007)
• Energy Watch Group (2008)
• World Coal Institue
-
2100
2025
-
200 Years
-
-
155 Years
Resource Peak End
Other minerals
• Bundesanstalt für Geowissenschaften (2008)
• Cohen (2007)
• Lifton (2007)
• Bardi and Pagani (2007)
Copper 2100
Gallium around 2000
Rhodium reached peak
Mercury
Tellurium
Lead
Cadmium
Potash
Phosphate rock
Thallium
Selenium
Zirconium
Rhenium
Gallium
Lead 25 yrs
Zinc 25 yrs
Copper 35 yrs
Uranium 40 yrs
Indium 10 yrs
Antimony 15-20 yrs
Silver 15-20yrs
Hafnium 10yrs
Tantalum 20-30 yrs
Uranium 30-40 yrs
Platinum 15 yrs
Zinc 20-30 yrs
Copper 38-61 yrs
Indium 4-13 yrs
Silver 9-29 yrs
Antimony 13-30 yrs
Sources available on demand at SERI (mail: stefan.giljum@seri.at).
IP/A/ITRE/ST/2008-06 & 14
Page 76 of 126
PE 416.218

REFERENCES
Acosta-Fernández, J. et al. (2007): Identifikation prioritärer Handlungsfelder für die
Erhöhung der gesamtwirtschaftlichen Ressourcenproduktivität in Deutschland.
Projektergebnisse zum Projekt im Auftrag des BMBF „Steigerung der
Ressourcenproduktivität als Kernstrategie einer nachhaltigen Entwicklung“, Wuppertal
Institut, Wuppertal, www.ressourcenproduktivitaet.de
Alcott, Blake (2005): Jevon’s Paradox. Ecological Economics 54 (1): 9-21
Arthur D’Little / Wuppertal Institute / Frauenhofer ISI (2005): Studie zur Konzeption eines
Programms für die Steigerung der Materialeffizienz in Mittelständischen Un-ternehmen,
Abschlussbericht [Study for the Conception of a Program to Increase Material Efficiency
in Small and Medium Sized Enterprises, final report for the Federal Ministry of
Economics and Labour (BMWi)]; Wiesbaden / Wuppertal / Karlsruhe.
BGR (2005): Reserven, Ressourcen und Verfügbarkeit von Energierohstoffen 2005.
Bundesanstalt für Geowissenschaften und Rohstoffe, Hannover.
BGR (2006): Trends der Angebots- und Nachfragesituation bei mineralischen Rohstoffen.
Bundesanstalt für Geowissenschaften und Rohstoffe, Hannover.
BGS [British Geological Survey] (2008), ‘Primary aggregates’, in: European Mineral
Statistics 2002-06, Keyworth, Nottingham, pp. 148-152.
Bleischwitz, R. (2003): Cognitive and Institutional Perspectives of Eco-Efficiency, in:
Ecological Economics, 46: 453 – 467.
Bleischwitz, R. (2006): International Raw Materials Markets: Rising Prices and Growing
Conflict Potential, in “Global Trends 2007”, edited by Tobias Debiel et al. and by the
Foundation for Development and Peace (SEF), pp. 65 – 78.
Bleischwitz, R. (Ed.) (2007): Corporate Governance of Sustainability: A Co-Evolutionary
View on Resource Management. Edward Elgar Publisher.
Bleischwitz, R. / Bahn-Walkowiak (2007): Aggregates and construction markets in Europe –
towards a sectoral action plan on sustainable resource management, in: ‘Minerals and
Energy’ H 3-4, pp. 159–176.
Bleischwitz, R. / Bringezu, S. (2007): Global Resource Management – Conflict Potential and
Characteristics of a Global Governance Regime, SEF Policy Paper No. 27, Stiftung
Enwicklung und Frieden (Foundation for Development and Peace).
BMU (2009) : Umweltwirtschaftsbericht, Berlin.
Boverket (2005): Housing Statistics in the European Union 2004. National Board of Housing,
Building and Planning, Sweden and the Ministry for Regional Development of the Czech
Republic www.boverket.se
BP (2006): Review of world energy 2006. British Petrol, London.
BP (2007): Review of world energy 2007. British Petrol, London.
Brezet, H. and van Hemel, C. (1997): Ecodesign: a promising approach to sustainable
production and consumption; United Nations Environment Programme, Industry and
Environment
Bringezu, S., et al. (2007): Addressing multi-beneficial and cross-sectoral strategies for
sustainability, Technical Report, http://www.forescene.net/Resources.htm
IP/A/ITRE/ST/2008-06 & 14
Page 77 of 126
PE 416.218

Carbon Trust (2008): Enhanced Capital Allowances. Available at:
http://www.carbontrust.co.uk/energy/takingaction/eca.htm, 01 May 2008
Rosegrant, M.W., M.S. Paisner, S. Meijer, and J. Witcover. (2001): 2020 Global food
outlook: Trends, alternatives, and choices. Food Policy Report 30, Washington, DC:
Cohen, D. (2007): Earth's natural wealth: an audit. New Scientist(2605).
COUNCIL DIRECTIVE 2003/96/EC of 27 October 2003 restructuring the Community
framework for the taxation of energy products and electricity
CSCP, gtz, the Federal Ministry for Economic Cooperation and Development and the
Wuppertal Institute for Climate, Environment and Energy (2006): Policies for Resource
Efficiency, Towards Sustainable Consumption and Production, Wuppertal.
Davenport, E., Bruce, I. (2002): Innovation, Knowledge Management and the Use of Space:
Questioning Assumptions About Non-traditional Office Work, in: Journal of Information
Science, Vol. 28, Nr. 3, S. 225–230.
Department of Environment, Food and Rural Affairs [Defra] (2007), Recycling and waste:
Aggregates Levy Sustainability Fund in England.
Department for Transport (2008), Site Specific Advice - Aggregate Levy Sustainability Fund
(ALSF), http://www.dft.gov.uk/pgr/freight/alsf/sitespecificadviceaggregatel3174, 2008-
11-04.
Destatis (Statistisches Bundesamt) (2005): Verwendung von Primärmaterial nach
Produktionsbereichen und Materialarten 1995 - 2002. Statistisches Bundesamt,
Wiesbaden.
Easterby-Smith, M., Araujo, L., Burgoyne J. (Eds) (1999): Organizational Learning and the
Learning Organization. Developments in Theory and Practice, London; u.a.: Sage.
EEA (European Environment Agency) (2001): Indicator Fact Sheet Signals 2001 – Chapter
Households. YIR01HH03 Household number and size. European Environment Agency
(EEA), http://themes.eea.europa
EEA (2005): Household Consumption and the Environment. EEA Report No 11/2005.
EEA (2006): Urban sprawl in Europe – The ignored challenge. European Environment
Agency (EEA), Office for Official Publications of the European Communities (OPOCE).
EEA Report No 10/2006. http://reports.eea.europa.eu/eea_report_2006_10/en
EEA (2007a): Europe’s environment. The fourth assessment, Copenhagen, 2007
EEA (2007b) Transport and Environment: On the way to a new common transport policy,
EEA Report No. 1/2007, EEA, Copenhagen
EEA (2008): Effectiveness of environmental taxes and charges for managing sand, gravel and
rock extraction in selected EU countries, EEA report 2/2008, Copenhagen 2008.
EEA, CSCP, Ministry of Environment and Spatial Planning Slovenia (2008): Time for Action
– Towards Sustainable Consumption and Production in Europe, EEA Technical Report
1/2008.
EIPRO-Study (2006): Environment Impact of Products Analysis of the life cycle
environmental impacts related to the final consumption of the EU-25. Main report
IPTS/ESTO project
Ernst and Young (2006): Eco-industry, its size, employment, perspectives and barriers to
growth in an enlarged EU, Report commissioned by the European Commission, DG
Environment, September 2006.
IP/A/ITRE/ST/2008-06 & 14
Page 78 of 126
PE 416.218

EU/UNEP (2005): Standstill or Move Clean. World Environment Day 5 June 2005
Europe Innova (2008): What is the right strategy for more innovation in Europe? Drivers and
challenges for innovation performance at the sector level. Synthesis Report, Systematic
Innovation Watch (SIW), prepared by Reinstaller, Andreas / Unterlass, Fabian; Vienna:
Austrian Institute for Economic Research (WIFO).
European Commission (2000): Innovation in a knowledge-driven economy. COM(2000) 567
final, Brussels
European Commission (2003): Some key issues in Europe's competitiveness - towards an
integrated approach. COM(2003) 704 final, Brussels
European Commission (2004): Stimulating Technologies for Sustainable Development: An
Environment Technologies Action Plan for the European Union. COM(2004), 38 final,
Brussels
European Commission (2005a): Annual Policy Strategy for 2006. COM(2005) 73 final,
Brussels
European Commission (2005b): Integrated guidelines for growth and jobs (2005-2008).
COM(2005) 141 final, Brussels
European Commission (2005c): A report on the functioning of public procurement markets in
the EU: benefits from the application of EU directives and challenges for the future,
03/02/2004
European Commission (2007a): A renewable Energy Roadmap. MEMO/07/13, Brussels
European Commission (2007b): Observatory of European SMEs: Analytical report. Flash
Eurobarometers 196, Brussels
European Commission (2007c): A lead market initiative for Europe. COM(2007), 860 final,
Brussels
European Commission (2008a): communication from the commission to the european
parliament, the council, the european economic and social committee and the committee
of the regions on the sustainable consumption and production and sustainable industrial
policy action plan, brussels 2008, SEC(2008) 2110; SEC(2008) 2111
European Commission, Energy Transport DG (2006e): Road Transport Policy: Open Roads
Across Europe. Brussels
European Commission (2003b). Towards a thematic strategy for the sustainable use of natural
resources. COM(2003) 572 final, DG Environment, Brussels.
EUROSTAT (2007): Measuring progress towards a more sustainable Europe, 2007
monitoring report of the EU sustainable development strategy, Luxembourg
Eurostat / European Commission (2007), Taxation trends in the European Union: Data for the
EU Member States and Norway, Luxembourg.
Eurostat (2008), Environment: Environmental Accounts, Domestic material consumption, by
material,
http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1996,39140985&_dad=portal&_sch
ema=PORTAL&screen=detailref&language=en&product=REF_TB_environment&root=
REF_TB_environment/t_env/t_env_acc/tsdpc230 , 2009-01-26.
Foxon T., Pearson P. (2008): Overcoming barriers to innovation and diffusion of cleaner
technologies: some features of a sustainable innovation policy regime, The Journal of
Cleaner Production, 16S1 (2008) 148 – 169
IP/A/ITRE/ST/2008-06 & 14
Page 79 of 126
PE 416.218

Fundetec (2007): Comparison and Assessment of Funding Schemes for the Development of
New Activities and Investments in Environmental Technologies. Fundetec Consortium
Fussler, C., James, P. (1996) Driving Eco-Innovation: A Breakthrough Discipline for
Innovation and Sustainability
Gravgård Pedersen, O. (1999): Physical Input-Output Tables for Denmark. Products and
materials 1990. Air emissions 1990-92. Statistics Denmark, Kopenhagen.
Greening, Greene, Difiglio (2000): Energy efficiency and consumption- the rebound effect – a
survey, Energy Policy, Vol 28, Issues 6-7 June 2000, pp. 389-401
Hawken P., Lovins A., Lovins L.H. (1999): Natural Capital, Back Bay Books, New York
Herring H., Roy R. (2007 oder 2008 wie in Kap. 3.3.1.): Technological innovation, energy
efficient design and the rebound effect, Technovation 27 (2007) 194–203
Hinterberger, F., Luks F., Schmidt-Bleek (1997): Material flows vs. ‘natural capital’. What
makes an economy sustainable?, Ecological Economics 23, 1 – 14
HM Revenue & Customs (2008), Aggregates Levy,
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb
=true&_pageLabel=pageExcise_InfoGuides&propertyType=document&id=HMCE_CL_
001169, 2008-11-04.
Horbach, Jens (2005): Methodological aspects of an indicator system for sustainable
innovation, in: Jens Horbach (ed.) Indicator systems for sustainable innovation, Physica,
Heidelberg 2005
IDEA consult (2008): Evaluation of the European Technology Platforms (ETPs). Request for
Services in the context of the DG BUDG Framework Service Contracts on Evaluation
and Evaluation-related Services, Ref. nr.: BUDG06/PO/01/Lot 3, Brussels.
IEA. (2007a): Energy balances of non-OECD countries, 1971-2005. IEA, Paris,
IEA. (2007b): Energy balances of OECD countries, 1960-2005. IEA, Paris,
INSEE, Institut national de la statistique et des études économiques (2006): Household
Consumption.
Irrek, Wolfgang, Jarczynski, Lutz (2007): Overall impact assessment of current energy
efficiency policies and potential 'good practice' policies. Working paper within the
framework of the AID-EE project. Final Version. Wuppertal Institute for Climate,
Environment, Energy. Wuppertal
Jacob, Klaus et al. (2005): Lead Markets of Environmental Innovations; Heidelberg-New
York: Physica
Jacobsson, S., Bergek, A. (2004): Transforming the energy sector: The evolution of
technological systems in renewable energy technology; Industrial and Corporate Change,
Vol. 13, Issue 5, pp. 815-849.
Jänicke (2008): Megatrend Umweltinnovation: Zur ökologischen Modernisierung von
Wirtschaft und Staat; München: oekom
Kemp, René, Pearson, P. (2008): MEI project about Measuring Eco-Innovation, Final report,
Maastricht. Available at:
http://www.merit.unu.edu/MEI/papers/Final%20report%20MEI%20project%20DRAFT
%20version%20March%2026%202008.pdf, 06 April 2008
Kendall, G. (2008): Plugged in: the end of the oil age, WWF.
IP/A/ITRE/ST/2008-06 & 14
Page 80 of 126
PE 416.218

Koskimäki, Pirjo-Liisa; Lechtenböhmer, Stefan (2008): Potential, current implementation,
and initial ideas for reinforcing the EPBD. Presentation at the European Commission
together with Wuppertal Institute at the Sustainable Energy Week, 1 February 2008,
Brussels
Lane, C., Bachmann, R. (Ed) (2002): Trust within and between Organizations. Conceptual
Issues and Empirical Applications, Oxford: Oxford University Press.
Mäenpää, I., Muukkonen, J. (2001): Physical input–output in Finland: methods, preliminary
results and tasks ahead. Conference on Economic Growth, Material Flows and
Environmental Pressure, Stockholm, Sweden.
Mäenpää, I. (2002): Physical input–output tables of Finland 1995 — solutions to some basic
methodological problems. 14th International conference on input–output techniques,
Montreal, Canada.
Mäenpää, I. (2008): Comparison of environmental multipliers of monetary and physical
Leontief inverse. Presentation at the International Input-Output Meeting on Managing the
Environment (IIOMME) in Seville, 9-11th of July, 2008.
McKillop, A. (2006): Peak Oil to Peak Gas is a short ride. Energy Bulletin.
Meadows, D., Randers, J., Meadows, D. (2006): Grenzen des Wachstums. Das 30-Jahre-
Update. German translation and update of “The limits to growth. The 30-years update”.
Hirzel. Stuttgart.
NEA/IAEA (2008): Redbook Uranium 2007. Resources, Production and Demand, Vienna.
NAMEA-Study (2006): Environmental Input-Output Analyses based on NAMEA data — A
comparative European study on environmental pressures arising from consumption and
production patterns. Moll, S.; Vrgoc, M.; Watson, D.; Femia, A.; Gravgård, Pedersen, O.
Draft; European Topic Centre for Resource and Waste Management, European
Environment Agency, Copenhagen
OECD (2008): OECD Environmental Outlook to 2030. Organisation for Economic
Cooperation and Development, Paris.
Pehnt, Martin, Höpfner, Ulrich;, Merten, Frank (2007): Elektromobilität und erneuerbare
Energien, Arbeitspapier Nr. 5 im Rahmen des Projekts “Energiebalance – Optimale
Systemlösungen für Erneuerbare Energien und Energieeffizienz” im Auftrag des BMU,
ifeu-Institut und Wuppertal Institut, Heidelberg und Wuppertal
Perez, J., Allen, P., Brown, M. (Winter 2003): Research Brief #1 Community Supported
Agriculture on the Central Coast: The CSA Member Experience, The Center for
Agroecology and Sustainable Food Systems (University of California, Santa Cruz)
Reid, Alasdair, Miedzinski, Michal (2008): SYSTEMATIC Innovation Panel on eco-
innovation. Final report for sectoral innovation watch. www.europe-innova.org
Rennings, K. (2000): Redefining innovation — eco-innovation research and the contribution
from ecological economics, in „Ecological economics“ Volume 32, Issue 2, pp. 319-332
Rocholl, Martin, Giljum, Stefan, Schlegelmilch, Kai (2006): Factor X and the EU: How to
make the EU the most resource and energy efficient economy in the world; Aachener
Stiftung Kathy Beys, 2nd edition. Aachen
Sarasin, B. (2006): Buying into sustainability - Environmental and social challenges in
Trading, Distribution and Retailing,
http://www.sarasin.ch/internet/iech/en/institutional_clients_trade_2006_iech
IP/A/ITRE/ST/2008-06 & 14
Page 81 of 126
PE 416.218

Schepelmann, Philipp (2005): Die ökologische Wende der EU-Regionalpolitik: die regionale
Resonanz von umweltpolitischen Indikatoren des Lissabon-Prozesses der Europäischen
Union. - Hamburg : Kovac, 2005 - (Studien zur Umweltpolitik ; 8)
Shaheen, S., Sperling, D., Wagner, C (Summer 1998): Carsharing in Europe and North
America: Past, Present and Future, Transportation Quarterly, vol. 52, No. 3 pp.35-52
Smith, A. et. al. (2005): The Validity of Food Miles as Indicator of Sustainable Development
- Final Report produced for DEFRA
SP/HUMI (2005): Sustainable urban development and affordable housing in south eastern
Europe. Summary Progress Report May-November 2005
UNECE (2006): Bulletin of Housing Statistics for Europe and North America 2006.
http://www.unece.org/hlm/prgm/hsstat/Bulletin_06.htm
UNEP (2008a): Environment Ministers Meet to Accelerate Transition to a Low Carbon
Society. Available at:
http://www.unep.org/Documents.Multilingual/Default.asp?DocumentID=528&ArticleID=5745&l=en, 03 April 2008
UNEP (2008b): Cleaner Production - Related Concepts. Available at:
http://www.unep.fr/pc//cp/understanding_cp/related_concepts.htm, 13 April 2008
UNEP (2008c): Breaking Down the Barriers to a Green Economy, 20.02.08. Available at:
http://www.unep.org/Documents.Multilingual/Default.asp?DocumentID=528&ArticleID
=5748&l=en, 16 April 2008
UNEP (2007): Global Environmental Outlook - 4. Progress Press Ltd, Malta. Æ ist das der
UNEP Report 2007 aus Kap. 4.3.8.?
UN University (2007): Great Potential to Improve Collection, Recycling of Europe’s
Electronic Waste, http://www.vie.unu.edu/file/UNU_ZEF2007+pr+english.pdf?menu=27
USGS (2006): Minerals yearbook 2006. United States Geological Survey, Washington, D.C.
USGS (2008): Mineral Commodity Summaries. US Geological Survey, Washington D.C.
Vorley (2003): Food Inc. Corporate Concentration from farm to customer. UK Food Group.
IIED, London http://www.ukfg.org.uk/docs/UKFG-Foodinc-Nov03.pdf
Wallbaum, H., Kaiser, C. (2006): Building materials and conversion factors. Internal working
document, private communication
Wilke, Georg (2004): Konkurrenz belebt das Geschäft, Car-Sharing in Deutschland,
Politische Ökologie, 91-92, 109-111
Wilson, Alex, Boehland, Jessica (2005): Small is Beautiful, Journal of Industrial Ecology.
Vol 9, No 1-2
Wuppertal Institute (2008): Updated study on: How to achieve a domestic 30% GHG
emission reduction target in the EU by 2020? Unpublished draft paper on behalf of WWF
European Policy Office. Wuppertal
IP/A/ITRE/ST/2008-06 & 14
Page 82 of 126
PE 416.218

PART 2:
BRIEFING NOTES OF THE EP WORKSHOP ON
ECO-INNOVATION
A workshop was held on 12 November 2008 in the premises of the European Parliament aim-
ing at presenting the state of play of the Eco-innovation study, gather further expert's contri-
butions as well as exchanging views with MEPs on the different policy aspects of interest to
their policy making work. The following 3 briefing notes have been written by the experts as
an additional contribution to the study and after their participation to the workshop.
IP/A/ITRE/ST/2008-06 & 14
Page 83 of 126
PE 416.218

NOTE 1:
CHALLENGES, DRIVERS AND BARRIERS TO ECO-INNOVATION : A UK CONTEXT
Arnold Black - Director of the Resource Efficiency Knowledge Transfer Network
www.resource-efficiency.org
1. DRIVERS/BARRIERS TO ECO-INNOVATION AND POLICY OPTIONS
Various definitions of innovation are available and Eco-innovation is merely a sub set of
those definitions but with a high degree of sustainability. The Technology need for radical
“re-innovation” (a term coined by Prof Fred Steward19) is the better exploitation of
sustainability opportunities from existing and established technologies e.g. transformation of
18th century windmills to 21st century wind power. Innovation in it’s simplest form is doing a
familiar thing in a completely different way and can also understood as using a familiar
process in a very unfamiliar environment such as technology transfer from market to another
sector. Meanwhile sustainability is a global imperative with Climate change as the 'hotspot
of concern' not least due to daily media coverage, growing stakeholder consensus on the
science, highlighting of the economics by the Stern Review20 and increased visibility
associated with Al Gore's recent Oscar and Nobel Prize. This is leading to growing discussion
over the need for a transformation towards low carbon economies and technologies.
However complex interaction between Climate change and material widespread scarcity can
not be ignored. Consequently there is increasing pressures for significant leaps in resource
productivity and a movement to 'closed loop' solutions. While the focus of this paper is
around the UK’s attempt to address these problems they are equally applicable and often inter
link with the wider global agenda.
For example some of the global phenomena listed below impact the national problems and
highlight a range of drivers for innovation:
• Costs with the increasing price of oil
• Material scarcity and security of supply21
• Capital investment flows being globalised
• Demand led growth by the Third world with massive energy and resource pressures
• Customers with significant consumer interest but little informed knowledge
• Population growth and the aging demographic
• Loss of habitat and biodiversity
However opportunities are starting to emerge. The global market for sustainable
technologies has been projected to be worth $800 billion by 201522. Even this figure
undervalues the market as it does not account for the growing integration of renewable
materials and alternative energy generation into products, technologies and buildings. Areas
that will see significant growth include WIND, solar, biomaterials, bio-energies, green
buildings, sustainable mobility, smart grids, water filtration, and energy monitoring products
and technologies.
19 http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/bm_staff/FredSteward
20 http://www.occ.gov.uk/activities/stern.htm
21 www.resource-efficiency.org
22 http://www.berr.gov.uk/files/file39024.pdf
IP/A/ITRE/ST/2008-06 & 14
Page 84 of 126
PE 416.218

The clarion call is for innovation, innovation, innovation - short, medium and long-term but
there is a need for a new narrative and imperatives for new visions, thinking and solutions.
Some future solutions on conceptual and research-based information and thinking related to
sustainable innovation, technology, product and service design/development on-going in the
UK are listed below.
• Radical change with Market transformation and New scenarios23
• Disruptive technologies in SCP and the Low carbon economy24
• Regional approaches and Product policy25
• Sustainable public procurement, New business models and supply chain
management26
• Collaborations and partnerships
• Eco-entrepreneurship and most importantly Case studies27
Most ‘activity’ is in large companies, driven by their long term vision and stability but is very
‘risk averse’. SME engagement is low and mainly driven by legislation such as WEEE and
Batteries Directive and REACH legislation. Paradoxically however most ‘Innovation’ is
there is limited consumer demand / uptake, unless driven by
icks but are afraid to
build the wall’.
found in small SMEs so we need to fix the divide between those that do and those that don’t.
The Barriers can equally be seen as intransigent. There is little incentive to invest with
funding or access to capital poor (and getting worse!). Market forces are not yet compelling
and mixed messages from Government around trying to support short term business growth
needs while at the same time trying to stimulate longer term eco-innovation; i.e. ambitious
CO2 emission reduction targets, while ‘supporting’ increased air travel. Despite the
protestations to the contrary
fiscal / legislative measures.
Particularly in these uncertain times
there is an undeniable ‘Race to be
Second’, no large company is willing
to invest in eco-innovation unless there
is ‘proven’ technology’ and a lack of
demonstrator / show case facilities do
little to help the situation. Perception
of risk, and more importantly its
management, is not well understood.
There is no lack of technology, just
lack of real vision to use it. To quote
Geert van der Veen of Technopolis
‘we have the br
UK example from the automotive sector:
o Drivers (in use phase): EU Fleet average CO2
targets; UK Fuel tax escalator; UK Road Fund
Licence linked to CO2; Consumer demand for
d of life): EU ELV Directive
existing infrastructure /
tial financial impact of product re-
/ hinder adoption
of beneficial technologies
higher efficiency
o Drivers (en
o Barriers:
¾ Sector is risk adverse / conservative
- investment in
cost of change
- poten
calls
¾ Legislation can lag behind
23 http://www.mtprog.com/
24 UK Department of BERR is setting up a ’Low Carbon Business Opportunities task force with the first consul-
tations coming out in January.
25 UK regional authorities are starting to access EU regional development funds to instigate innovation support
activities such as skills training http://www.k2i.org.uk/home/
26 http://www.greenprocurementcode.co.uk/index.php?q=node/267
27 http://www.cfsd.org.uk/
IP/A/ITRE/ST/2008-06 & 14
Page 85 of 126
PE 416.218

2. CHALLENGES AND THEIR TRANSITION PATHS
Regarding improving the efficiency of the existing System consideration should be given to
Energy (Direct or indirect, heat and electricity and utilisation of ‘Waste’ Energy) and
Materials (Raw and embedded materials).
In Productivity attention needs to be given to scheduling, automation and logistics. New
supply chain architecture and innovation in the service sector28 should be addressed.
Material or Resource security (meaning any input material, mineral, metal, lubricant, water,
etc) needs to concentrate on better utilisation and yields, reduce production of defective
products, find higher value use for by-products and minimise disposal
This is the simplest way to proceed because it involves modifications to known systems and it
is relatively easy to project and then measure the results of the change. Changes can range
from minor modifications to more extensive alterations but they are incremental and the risk
levels can be managed.
At a more extensive scale we should consider alternate systems and review existing
production/processing methods. This is a more radical change. If it involves the adoption of
technology that has been proven elsewhere the risks are those of adaptation to local
circumstances but if a new technology is being developed the risks are higher. To engage in
the higher risk projects the potential rewards must be higher and the support and facilitation
by governments should be stronger. If the technical, commercial or regulatory risks are high
then this type of change is less likely to occur.
Attention needs to be given to the risk - reward profile. Businesses will make changes to
operations in order to make their business more sustainable in the business sense of the word
(improve their profitability). Changes that improve their business in terms of environmental
sustainability can often result in reduced operating costs in addition to a better public profile
so they can also add to the long term sustainability of the business.
Improvements to existing systems can deliver incremental improvements in energy and
resource efficiency. Step change improvements in resource efficiency are more likely to come
from changes in the process technology or system. These more radical changes are usually
more expensive and have a higher risk. Business will look for clear signals from society and
from government that radical changes will be supported. The EU can play a leading role in
levelling the playing field for those long term sustainability improvements.
3. OPPORTUNITIES FOR POLICY
The development of technologies and systems that deliver improved resource efficiency will
create business opportunities in other markets that are moving along the path of sustainable
development.
Clearly policy needs to set the agenda. For example Individual Producer Responsibility
legislation could be used as the collective Environmental Protection Regulation measures
have failed to drive eco-innovation29.
However legislation must also encourage businesses to move in the direction of sustainable
development. Ideally this would be through a system of positive support rather than measures
that increase the cost of business as usual – a carrot and stick approach would be most
beneficial.
28 http://www.nesta.org.uk/innovation-in-services/
29 http://www.publications.parliament.uk/pa/ld200708/ldselect/ldsctech/203/20302.htm
IP/A/ITRE/ST/2008-06 & 14
Page 86 of 126
PE 416.218

If the government is serious about sustainable development the carrot will be bigger than the
stick! For example the development of ways of using by-products should be encouraged by
incentives not only through the avoidance of increased penalties for disposal. If a user is
incentivised to use secondary materials this might help to overcome their concerns about
using ‘waste’ materials.
Realistically creating markets is always the best solution to drive eco-innovation, either
through regulation, economic incentive or public procurement.
Policy could be more demanding from a regulatory point of view (e.g. Waste Incineration
Directive requirements were originally thought to be impossible – why not ban cars doing less
than 35mpg car fuel efficiency as suggested a former chairman of Shell30). Policy should set
very demanding implementing standards together with a genuine timescale for introduction -
especially with a long term perspective beyond 2020.
Substantial support should be made available for “disrupters” like fringe SMEs, individuals,
networks that seem a bit radical, but may be the mainstream in a few years, having previously
been ignored by policy makers. The Centre for Alternative Technology31 (CAT) in Wales
were originally seen a hippy community and is now mainstream often advising Government
policy. Maybe in the near future the individual self build eco-home constructors should
encouraged in the eco-innovation debate and specific policies for refurbishment of existing
homes investigated.
Possible future policy needs at EU level for further driving eco-innovation by looking at VAT
exemption on products that can prove to deliver positive impacts. Consideration should be
given to a shift in taxation from employment towards materials – with the UK aggregate tax
perhaps being a good example.
4. CONCLUSION
There is an unprecedented and urgent imperative. As John Doerr32 put it: “You can bail out
the banks; you can’t bail out the environment”. Consumers and their governments are
demanding industry change its ways. This is a great opportunity to move from the agenda of
‘pure’ invention & research to ‘actual’ customers & products. Many different elements in the
emerging value chain need to work together to deliver the best solution for consumers but the
timing has never been better.
30 http://www.timesonline.co.uk/tol/news/environment/article3308423.ece
31 http://www.cat.org.uk/
32 John Doerr, Partner at Kleiner Perkins at Harvard Business School – Monday 13 October 2008 after a week of unprece-
dented financial turmoil and government intervention
IP/A/ITRE/ST/2008-06 & 14
Page 87 of 126
PE 416.218

5. CASE STUDY: CLEAN_PROD
Clean Prod: "Observing, Linking, Coordinating and ConsoLidating RTD actions in Europe in
order to support effective and efficient innovAtion on sustaiNable PRODuction processes
with the use of innovative technologies".33
The CleanProd project, supported in part by the EC, is a
Coordination Action (in final report stage) to consolidate the R&D
initiatives across Europe towards more innovation in sustainable
production processes. CleanProd aims at changing the paradigm
that cleaner processes are implemented on regulatory constraints
and infringe enterprises’ competitiveness.
It will pave the routes for cleaner processes as opportunities for growth and increased
competitiveness. CleanProd focuses on three classes of processes, impacting many industrial
sectors (aerospace, automotive, energy, agro-food, etc.), and which will require more and
more innovations to improve their sustainability:
5.1. Eco Innovation drivers and barriers
Barriers: R&D across the selected sectors was fragmented and applied in different ways by
each community. Communication was restricted by the implied competitiveness observed by
the key players.
Drivers: Clearly economies of scale and serendipitous research outcomes were enormous.
Understanding of each others business models and needs increased overall sector
competitiveness.
5.2. Goal of eco-innovation
The project’s ambitions are five fold:
- Design 2020 European visions for the development of sustainable manufacturing
processes in the three sectors;
- Propose research roadmaps pinpointing R&D topics that need to be coordinated at
EU level, Member State level or even regional level;
- Launch a European Observatory on sustainable manufacturing that will become the
permanent European knowledge repository for industrial users;
- Implement a first set of R&D coordinated activities, based on priority needs
identified, and involving professional associations and national environmental
agencies;
- Enrich the European manufacturing Technology Platform with a sustainability
dimension, through a permanent working group able to deal with comparable issues
in other sectors of clean/sustainable manufacturing.
33 http://www.greenovate-
europe.eu/content/coordinating_european_rd_actions_towards_cleaner_production_processes_cleanprod
IP/A/ITRE/ST/2008-06 & 14
Page 88 of 126
PE 416.218

5.3. Example & Results
The project team envisioned various orientations for the year 2020.
Surface preparation:
• To reduce the pollution emission of chemical processes
• To reduce the energy consumption of physical processes
• To reduce the exhaust pollution and energy consumption of existing processes, using
process controllers in conjunction with an integrated optimisation of coating and
machining / forming
• To evaluate the impacts of existing and new cleaning processes
• To enhance surface conversion
Surface treatment:
• To favour water based paints
• To improve the quality features of powder spraying processes
• To have changed the Electroplating paradigm where improved process efficiency is
reached at lower energy expenses and pollutant production
• To have validated more energy efficient drying after coating processes
• To have validated the potential of new coating materials over their life time (nano
powders / sol gel / ionic liquids)
• To have achieved 30% to 40% resources savings (material and energy) in painting and
electroplating
Machining / Forming:
• To optimise lubricant needs at shop floor level taking into account the final part
quality, cleaning and recycling constraints
• To amplify the use of near net shape processes that reduces machining needs
• To promote machining processes allowing for low particle emissions
• To promote low energy lubricant free forming processes
The full roadmaps include the description of a set of possible projects to be conducted in
order to properly reach the 2020 visions, through the 2015 targets (intermediate step). These
R&D initiatives will be proposed in the frame of future 7th FP calls.
In addition, the project team highlights horizontal activities with precise 2020 visions for the
integration of the three processes:
• To use eco-efficiency indicators taking into account the three processes at company
level
• To integrate these eco efficiency indicators into the information system of
manufacturing companies (ERP linking shop floor and management)
• To use real time process control approaches that embed eco efficiency indicators
within their optimisation loop
• To maximise the eco efficiency performance at shop floor level through increased
process integration
The full set of roadmaps area available for download on the European Observatory for Eco-
Manufacturing.
IP/A/ITRE/ST/2008-06 & 14
Page 89 of 126
PE 416.218

6. CASE STUDY: RECOVERY OF FLAT PANEL LCD USING ADVANCE TECHNO-
LOGICAL PROCESSES
REFLATED - www.resource-efficiency.org (Special Interest Group – RELATED) (project
finish date mid 2009)
Liquid Crystal Display (LCD) waste is recognised as one of the fastest growing sources of
waste in the EU, yet no appropriate recycling technology has been available up to now. The
REFLATED34 process has been developed to treat the waste LCD screens using a novel
system of techniques. The process aims to recover the maximum value from LCD panels; this
includes the liquid crystal, indium metal and glass. It is also suitable for integration into
current waste processing facilities.
6.1. Eco Innovation drivers and barriers
Barriers: The risk of regulatory pressure meant that the Manufacturers were reluctant to even
consider the problem. On the other hand the Regulator was concerned by the lack of future
End of Life solution around the products.
Drivers: Despite first appearances this was a growing problem and hence a new business
opportunity for the partners involved. An outcome of the project is a better understanding by
the Regulators hence less pressure to regulate. The Manufacturers are now interested in
possible closed loop processes for material recovery.
6.2. Goal of eco-innovation
The REFLATED process is a method for recovering valuable materials contained within LCD
panels. The concept is designed to allow integration within existing waste handling
infrastructure. The equipment could be easily installed and operated on the site of existing
WEEE processors. This would produce some slurries containing the valuable materials which
would be sent to secondary processes at specialist refiners. The other materials recovered
from the panels such as polymer casing, printed circuit boards (PCBs), and wiring are already
being processed by WEEE recyclers. The back lights are treated using specialist equipment.
The process forms a novel approach which accounts for the entire treatment process of the
waste LCD screens. This includes newly developed techniques for:
- Liquid crystal recovery and subsequent fractionation using environmentally benign
solvents.
- Film removal using environmentally friendly solvents and mechanical processing.
- Leaching and recovery of valuable metals from the glass, in particular Indium.
Integration of these new techniques with advanced handling and processing methods result in
the maximum achievable yield of materials. A flow sheet describing the process is shown
below:
34 www.resource-efficiency.org
IP/A/ITRE/ST/2008-06 & 14
Page 90 of 126
PE 416.218

The subsequent refining of the recovered liquid crystal is also a key part of this process. This
can either be purified and used in low grade LC applications or be fractionated to recover
certain types of liquid crystal. These specific types could then be used in new LCD panels.
The metals recovered also undergo further purification processes to remove contaminants,
thus leaving a very pure product.
6.3. Example & Results
The REFLATED process has been developed through a project which was part funded by the
DTI under the Zero Emission Enterprise (ZEE) call in 2006. A pilot scale version of the
process has been constructed and a process patent has been filed. The project comprises of a
consortium of the following partners:
• C-Tech Innovation (project coordinator) is a technology development and
consultancy company.
• The Chemistry Department at the University of York.
• Sims Recycling Solutions is a dedicated business division that is investigating and
implementing practical solutions to waste streams.
• Active Recycling are working with social enterprise and commercial organisations to
establish a supply chain of WEEE products.
• Active Disassembly Research is an international consultancy and research company
that was established to exploit “Active Disassembly” technology.
• NIS is a leading suppler of integrated engineering systems and plants.
• Engelhard Sales is a leader in recycling of electronic equipment and refining of
precious metals.
• Critical Processes carries out contract research into clean production.
• Glass Technology Services (GTS) provides assistance and consultancy to anyone
with glass related issues.
IP/A/ITRE/ST/2008-06 & 14
Page 91 of 126
PE 416.218

6.4. Overall evaluation of the eco-innovation
Economic and marketing aspects – The future volumes of liquid crystal displays (and their
constituent materials) in WEEE for the UK have been estimated and shown to be substantial
at around 9 tonnes of liquid crystal, 0.9 tonnes of Indium and over 8,000 tonnes of glass. The
materials available for recovery from waste LCDs arising in the UK could have a potential
value of £40M, which could support a commercial recycling industry. The logistics of
supplying waste LCD panels to central processing plant can fit into the existing WEEE
recycling supply chain with almost no disruption and provide a free or low cost service to
WEEE recyclers.
The REFLATED process targets this large waste stream and recovers the materials. Based on
this material offsetting virgin production, great savings may be achieved. Life cycle
assessment and economic analysis has shown that per ton of panels, a saving of 960kg of CO2
emissions and cost saving of around £1,500 could be achieved if materials are recovered from
the LCD panels rather than sending them to landfill.
Environmental & health aspects – LCD containing WEEE has been identified as one of the
fastest growing sources of waste in the EU, increasing by 16-28% every five years (and
predictions are expected to be conservative). While the WEEE directive maintains that liquid
crystal displays over 100cm2 or containing a backlight must be subject to special treatment, at
present there are no commercially viable, environmentally friendly solutions either for
recovery and/or purification of LCD waste. To the best of our knowledge LCD waste is
subjected to high temperature incineration or stockpiled. The liquid crystal is fluid-like,
immiscible with water, and has the ability to dissolve/penetrate skin. Stockpiling of displays
or subjecting to a crusher without extraction will leave behind fluid-like viscous remains of a
potentially toxic and persistent material. Additionally incineration if not carefully controlled
can lead to the emission of ozone depleting gases.
Technical aspects – No complete process for the recovery of materials from LCD panels
exists and so the REFLATED process represents a clear technological advance which allows
treatment of this waste stream. The process also includes steps which are in themselves
innovative. The method of recovery and fraction of the liquid crystal to produce viable
reusable product represents a novel approach to that material. Also processes for leaching of
Indium and removal of polymer films from the screens are new developments for this waste
type.
Socio-cultural and organizational aspects – As a result of this project a CIWM accredited
training course in the disassembly of LCD containing devices has been created. This is now
running at a number of prisons in the UK providing prisoners with vocational skills and
potential employment opportunities on their release.
IP/A/ITRE/ST/2008-06 & 14
Page 92 of 126
PE 416.218

7. CASE-STUDY: CENTRE FOR REMANUFACTURING AND RE-USE
Remanufacturing35 is the process of retrieving end-of-life products
and returning them to as-new condition, or better, with a warranty to
match. From the perspective of the user, there is no functional or
guarantee difference between that and a new product. Project completion date 2011.
The Centre for Remanufacturing & Reuse (CRR) has been funded by the UK Department
of Environment, Food and Rural Affairs to promote, where appropriate, remanufacturing.
This is judged on both financial and environmental (including carbon) benefits. CRR helps to
influence customers by development of purchasing standards, specifications and awareness. It
assists businesses through publications, technology seminars and sector manufacturing
standards.
7.1. Eco Innovation drivers and barriers
Barriers: Repair and Re-use was seen as a very low grade, small market however material
recovery technologies were inadequate for many end of life applications. No clear single
organisation was looking at the sector as a whole and financial support for individual
initiatives was difficult.
Drivers: The increasing tendency to disposable manufacturing and the throw away culture
meant that the repair and servicing sector was virtually none existent and hence could present
new business opportunity. Clearly there were substantial energy and material savings to be
made for UK plc if a new sector could be (re-)created.
7.2. Goal of eco-innovation
Virtually all examples of remanufacturing started by consideration of a commercial and
financial opportunity, and some of them not even in relation to the company’s own products.
However, the basis of the profitability lies fundamentally in the material and energy savings
possible, a dimension which has increasingly been recognised as a competitive differentiator.
Informed operators are now systematically quantifying and addressing the benefits that can be
achieved by remanufacturing individual components and sub-systems in efforts to increase
profitability and demonstrate improved environmental impact.
Accordingly, within advanced companies the push to maximise returns has created a driver
for change in multiple dimensions beyond the core product: the business model, customer
relationships, return channels, field support, process and warehouse integration, remediation
technologies as well as design for dis-assembly and repair.
Not all examples of remanufacturing are associated with the Original Equipment
Manufacturers. Similar benefits can be gained by cooperative venturing with contracted
remanufacturing organisations. These may have the benefit of working with multiple
products or sectors, with the potential for cross-learning. Independent operators also exist:
they will not have privileged access to design data so must build capability to “reverse
engineer”. They can offer valuable services in post-warranty periods.
35 http://www.remanufacturing.org.uk/
IP/A/ITRE/ST/2008-06 & 14
Page 93 of 126
PE 416.218

7.3. Example & Results
Xerox: Recognised from an early stage the opportunity for creating an additional source of
income; they saw customers’ waste as their low-cost resource. Sales, marketing and
operations for new and remanufactured is the same and is tightly integrated into field support
with well-established returns channels for products. Products have been designed as
“platforms” to enable maximum reuse and a portfolio of replacement or upgrade options to
customers.
Caterpillar: Is one of the world’s largest remanufacturer, with over $1 billion turnover
through plants in America, UK and China. In the last difficult year, remanufacturing business
grew in contrast to new sales. Starting out as a contract remanufacturer for GN, CAT has
established its own remanufacturing brand as a mark of quality whilst offering life-time
ownership cost savings. Reported material recoveries inside the business hit 86% in 2007 and
around 70% of a CAT machine can be reused directly.
Sony: In supporting its PS2 Playstation, SONY has always used a remanufacturing model for
repairs. However, a review of economies, order times, logistics and customer experience
suggested another option. Using regional outsourced remanufacturing agents – Infoteam in
the UK – SONY, now offers a by-return repair or upgrade service to customers. Across
Europe it has recovered 6.8 million components in 3 years, with additional benefits in reduced
manufacture, handling and learning in product design and reuse.
7.4. Overall evaluation of the eco-innovation
Economic and marketing aspects – The financial drivers for remanufacturing are well
documented – $50 billion p.a. in the US, £5 billion in the UK at least. The best examples
deliver benefits but are completely invisible to the consumer: They are embedded processes
built on supplier trust and branding. The major challenge in adopting and thus increasing the
uptake in remanufacturing is the impact on the business model and organization: It requires a
long-term commitment to products through manufacture, use and retrieval in good state and
sufficient numbers. Much current legislation – especially end of life directives – imbue
insufficient producer responsibility from the current make and sell culture, to the detriment of
the environment.
Environmental & health aspects – Environmental benefits, especially carbon and materials
impacts, have been estimated as over 800,000 tonnes of CO2. It is not uncommon to see 70%
recovery of embodied production energy, cradle to grave. This compares to around 10-15%
benefit available from recycling. Remanufacturers show the same high safety standards as
manufacturing industry.
Technical aspects – Tools and techniques for diagnosis and repair help push back the
frontiers of what it is possible to remanufacture. Higher degrees of automation, and working
with small volumes of additional material drive applicability to lower value products.
Techniques involving surface remediation, plating and material deposition (metal spraying,
laser sintering) are material-efficient and relatively precise. Emerging UK-funded techniques
– aimed at automotive and aerospace – envision leading edge combined building, machining
and measurement in a single device, significant improving economies of scale in mass
remanufacturing.
Socio-cultural and organizational aspects – Remanufacturing can have profound
implications for organizational design. In addition, remanufacturing jobs are more skilled,
fulfilling and can lead to clusters of component remanufacturing competence based around
major product builders, thus defending jobs.
IP/A/ITRE/ST/2008-06 & 14
Page 94 of 126
PE 416.218

Legal and Contractual obligation - Remanufacturing also raises the contractual obligation
around re-use of components which normally means a closed loop products as OEM will not
guarantee their components re-use in other OEM goods. Also legal liability and warranty
issues need to be addresses.
8. CASE STUDY: CARBON NEGATIVE CEMENT TO TRANSFORM THE CONSTRUC-
TION INDUSTRY
Novacem - Innovation and Investment Opportunities in Carbon Capture and Storage. Project
now in first commercialization stage.
The Novacem proposition promises to transform the construction industry with a new carbon
negative Magnesium based cement that will replace Portland cement. Portland cement is a
pervasive and important material (US$150Bn/year) but accounts for about 5% of man-made
CO2 emissions.36
8.1. Eco Innovation drivers and barriers
Barriers: Existing infrastructure and manufacturing capability was a considerable barrier to
new technologies or processes. Clearly the current embedded infrastructure in OPC
production make finance for a disruptive product difficult. Also non-existent quality
standards for a new product make mass market entry difficult.
Eco Innovation Drivers: Clearly large Climate Change issues could be addressed if a solution
could be found.
8.2. Goal of eco-innovation
Novacem has invented a new type of cement that has the potential to achieve cost and
performance parity with Portland cement and best of all, uses less CO2 in its manufacture and
then absorbs CO2 as it cures. This satisfies a function of carbon capture and sequestration
over its life time. Compared to Portland cement it has the have an advantage of approx 1
tonne of CO2 per tonne of cement.
Novacem is a spin-out from Imperial College, London
• Five year pipeline agreement with 5* Civil Engineering Department
• Seed funding from Imperial Innovations (AIM: IVO.L)
• Building word class team under Chairman Stuart Evans
• Leads £1.5Mn Technology Strategy Board (TSB) project with partners
• Rio Tinto Materials, Laing O’Rourke, WSP and Imperial College
• Labs and offices in the Imperial Incubator
In the world of innovative high tech firms, universities and young startups are often closely
linked, they have different (although complementary) objectives. In competitive terms, the
technology is still in its early days with the traditional cement industry is under pressure to
tackle the carbon problem and with a fourfold strategy:
36 http://www.imperialinnovations.co.uk/?q=node/176
IP/A/ITRE/ST/2008-06 & 14
Page 95 of 126
PE 416.218

• Using pozzolans to blend with Portland cement
• Including mineraliser additives to reduce process temperatures
• Energy efficiency/using green fuels
• CO2 sequestration
Other new entrants in the market place are emerging, including
• Calera, California
• TecEco, Australia
• C-Fix, Holland
• Calix, Australia
This level of competition, particularly in the area of an innovative product could be seen as a
threat. However is this case these companies existence reassures the company of a business
case for futures sales as other companies clearly feel there is a profit to be made.
8.3. Example & Results
Novacem has a number of advantages in the form of its collaborative partners;
• A leading global mining & exploration company with £30Bn sales and 47,000
employees www.riotinto.com
• The largest privately held integrated UK construction firm, with 27,000 employees
worldwide. www.laingorourke.com
• An established Engineering & Design company serving the built and natural
environment www.wspgroup.co.uk
• And a World class science-based university focused on science/engineering and
application to industry. www.imperial.ac.uk
8.4. Business model and investors for platform technologies
Novacem still needs to develop and prove the technology which will require a pilot plant prior
to scalable volume production. Size and location have still to be determined but this is an
important goal for the TSB project and likely to be strongly supported for demonstrator
funding.
The Cement industry is globally fragmented with the top 4 companies only share 14% of
industry revenues. However it’s much more concentrated in the UK, and this allows Novacem
to play national AND a global role simultaneously. The business plan recognizes this is a big
job and can’t be done by a small entrepreneurial SME on its own. Novacem aims to build an
ecosystem of investors and partners that can make a real difference and anticipate important
government contribution to make as well.
They don’t plan to have their own cement plants, but will make our technology available to
others on competitive and compelling licensing terms.
IP/A/ITRE/ST/2008-06 & 14
Page 96 of 126
PE 416.218

NOTE 2
EXAMPLES OF PUBLIC POLICIES FOR ECO-INNOVATION WITH FOCUS ON THE
NETHERLANDS
Mr. Geert van der Veen, Technopolis B.V,
Herengracht 141, 1015 BH Amsterdam, The Netherlands
Tel:+31-20-5352244, E-mail: Geert.vanderveen@technopolis-group.com
ACKNOWLEDGEMENTS
For this briefing note and my presentation on Eco-innovations to the European Parliament I
received input from Robbert Droop (Ministry for the Environment, The Netherlands), Albert
Faber (Netherlands Environmental Assessment Agency), Cees van Halen (Partners for
Innovation, Amsterdam), Rene Kemp (MERIT, Maastricht), Marjolein van der Klauw
(Technopolis Group, Amsterdam/Utrecht University), Michal Miedzinski (Technopolis
Group, Brussels), and Peter Vissers (Partners for Innovation, Amsterdam). I thank them very
much for their suggestions.
The final text however is my own full responsibility.
Geert van der Veen,
Technopolis Group, Amsterdam
December 2008
IP/A/ITRE/ST/2008-06 & 14
Page 97 of 126
PE 416.218

EXECUTIVE SUMMARY
Eco-innovation is defined by Reid & Miedzinski (2008) as “the creation of novel and
competitively priced goods, processes, systems, services, and procedures designed to satisfy
human needs and provide a better quality of life for everyone with a whole-life-cycle minimal
use of natural resources (materials including energy and surface area) per unit output, and a
minimal release of toxic substances”.
Because of this systemic perspective, policies to support Eco-innovation should be systemic
as well: they should not be restricted to environmental policy alone, but involve all public
policies; the policies should not be shallowly coordinated but show strong policy coherence;
should contain (more radical) approaches towards framework conditions (taxation, norms,
etc.); make better use of procurement and have a long term perspective.
An attempt of such an integrated policy is the ‘energy transition’ policy in The Netherlands.
With an evolutionary approach and multi-level governance, an ambitious programme was
developed in the early years of this century to decrease CO2-emissions in 2050 with 50% in a
growing economy, with a broad support from all stakeholders.
In the area of ‘eco-innovation’ policy in The Netherlands there is also a lot of activity, but
there is not such a coordinated approach.
In this ‘brief’ the two policies in The Netherlands are compared using the theory of ‘functions
of innovation systems’. Furthermore also some good practices from other Member States (and
at EU-level) are given against this theoretical framework.
The following conclusions are drawn:
• An integrated policy approach does seem to improve opportunities for systems
innovations.
• Important is to create a ‘common view’ among all stakeholders on the direction
where to go. Opinion leaders are important to obtain this.
• Entrepreneurial activities are a key-issue for actual implementation of eco-
innovations. Since entrepreneurs are driven by (potential) profit, instruments for
market creation/conditioning should therefore be a very important part of eco-
innovation policy.
• Policies need to be consistent over time and have a long-term view, otherwise
entrepreneurs might be reluctant to invest.
• Policy making (talking) is very important, but implementation (action) should
follow and should be part of the whole process.
The EU level should be leading in ‘creation of legitimacy’ (putting eco-innovation strongly
on the agenda and create framework conditions that promote eco-innovation); should not
hamper market development mechanisms that are created by Member States (e.g. the
Erneuerbare Energie Gesetz); and can be supporting at promoting entrepreneurship, at
knowledge development (although FP is rather fundamental and not adequately flexible for
market oriented development, but CIP might be more suitable), at ‘guidance of the search
(e.g. development of roadmaps at EU-level’ and at ‘resources mobilisation’ (both financial
resources (e.g. bank guarantees) and human resources (training, mobility, etc)).
IP/A/ITRE/ST/2008-06 & 14
Page 98 of 126
PE 416.218

1. ECO-INNOVATION AND ECO-INNOVATION POLICY
Reid & Miedzinski (2008) define eco-innovation as “the creation of novel and competitively
priced goods, processes, systems, services, and procedures designed to satisfy human needs
and provide a better quality of life for everyone with a whole-life-cycle minimal use of
natural resources (materials including energy and surface area) per unit output, and a minimal
release of toxic substances”.
In this definition the perspective is systemic in different ways: the three aspects of
sustainability (people, planet, profit) are included; with respect to planet all environmental
effects are considered (energy, emissions and recycling, resource extraction and resource use,
etc.); through the entire life cycle of products; and alternatives do no only include other
products, but services as well.
Eco-innovation should be understood at the right level, and effects should be considered at
systems level: for example, ecological detergents can be an improvement over present oil-
based detergents, but developing self-cleaning surfaces might diminish environmental stress
even more. Another example might be the installation of electric sockets in trains: because of
this, the electricity consumption of the train will increase, but it might be a factor for business
travellers to prefer the train to the plane for medium distances.
Services may also play a role: an example everybody knows is the use of a deposit system for
bottles, but also promoting laundry services over individual washing machines may decrease
the use of energy, detergents, materials (for producing the washing machines) and space.
Because of the systemic perspective, policies to support Eco-innovation should be systemic as
well. This requires at first a long-term perspective: Systems changes often require new
infrastructures and the consequential disinvestments in present infrastructure may cause lock-
in situations: long-term perspectives may help in balancing the initial investments against the
high yields (in ecologic and/or economic sense) on the long term.
Furthermore system changes do not require environmental policy alone, but involve other
public domains: eco-innovation is relevant for all public policies, and real system changes
require not only shallow policy coordination, but a policy coherence, to start with a very close
relationship between innovation policy, economic policies and environmental policies. The
reaction of various European Governments on the translation of the recent financial crisis to
the real world to support the car industry massively without any demand to reduce the
ecologic impact of cars, or the heavy subsidising of cattle farmers after the recent cattle
diseases are examples where opportunities were missed: spending billions of euros in
(justified) support, but missing a chance to restructure and improve the eco-efficiency the
sector at the same time.
System changes should contain (more radical) approaches towards framework conditions
(taxation, norms, etc.), and not only rely for subsidies in the development phase. These
framework conditions should create level playing field for emerging technologies: e.g.
offshore wind energy would be competitive with normal energy without subsidies if
governments would provide the electricity grid to the location where the energy is produced,
just like is done with nuclear and fossil power plants.
Lastly a new generation of green public procurement with a far more ambitious approach
might help: why is the building industry still not very ‘green’ while the largest clients of the
building industry are the national governments (public housing, roads, railroads, government
offices…)?
IP/A/ITRE/ST/2008-06 & 14
Page 99 of 126
PE 416.218

2. FRAMEWORK FOR ANALYSING INNOVATION POLICIES: THEORY OF FUNC-
TIONS OF INNOVATION SYSTEMS37
Recently, Johnson (2001) has introduced the concept of functions of innovation systems,
where a set of seven functions emphasizes the desired outcomes of an innovation system. The
functions can be understood as seven requisites, which should all be in place for a technology
to become successful. The functions are also interlinked, so that momentum can be created to
accelerate successful development of a technology.
These seven functions are:
• Entrepreneurial activities
• Knowledge development
• Knowledge diffusion through networks
• Guidance of the search
• Market formation
• Resources mobilization
• Creation of legitimacy/counteract resistance to change
Some elaboration on each function is given in Figure 1.The study of an innovation system
with this set of functions leads easily to recommendations for policy instruments, which
would have to stimulate development of that specific function (Hekkert, M.P. et al., 2007).
37 Text based on Hekkert, M.P. et al (2007)
IP/A/ITRE/ST/2008-06 & 14
Page 100 of 126
PE 416.218

Figure 1: Functions of innovation systems
Function 1: entrepreneurial activities
Since an innovation is only an innovation when it is implemented in real practice (and has not
much environmental or economic effect before that) entrepreneurial activities are essential for a
well functioning innovation system, The role of the entrepreneur is to turn the potential of new
knowledge, networks, and markets into concrete actions to generate–and take advantage of–new
business opportunities. The presence of active entrepreneurs is a first and prime indication of
the performance of an innovation system. When entrepreneurial activity lags behind, causes
may be found in the other six functions.
Function 2: knowledge development
Knowledge is an important source for innovation, and therefore knowledge development, by
means of R&D or by experimenting, is a key function in innovation systems.
Function 3: knowledge diffusion through networks
Networks provide exchange of information. This is important in an R&D setting (e.g. open
innovation), but even more important in the eco-innovation world where R&D meets
government, competitors and market. Here policy decisions should be consistent with the latest
technological insights and, at the same time, R&D agendas should be affected by changing
norms and values.
Function 4: guidance of the search
Since resources are limited there is always a selection needed of which options to follow. This
function indicates furthermore that technological change is not autonomous: changing
preferences in the society can influence R&D priority setting and thus the direction of
technological change.
Guidance of the search is not solely a matter of market or government influence; it is often an
interactive and cumulative process of exchanging ideas between technology producers,
technology users and many other actors.
Function 5: market formation
New technology often has difficulties to compete with embedded technologies. Because of this
it is important to create ‘protected spaces’ for new technologies. Possibilities are creating ‘niche
markets’ (Schot, J. et al, 1994) or providing other market stimulations (tax regimes, feed-in
laws, etc.)
Function 6: resources mobilization
Availability of financial, physical and human capital
Function 7: creation of legitimacy/counteract resistance to change
In order to develop well, a new technology has to become part of an incumbent regime, or it
even has to overthrow it. Parties with vested interests will often oppose to this force of ‘creative
destruction’. In that case, advocacy coalitions can function as a catalyst; they put a new
technology on the agenda (function 4), lobby for resources (function 6) and favourable tax
regimes (function 5), and by doing so create legitimacy for a new technological trajectory. If
successful, advocacy coalitions will grow in size and influence; they may become powerful
enough to brisk up the spirit of creative destruction. The scale and successes of these coalitions
directly depend on the available resources (function 6) and the future expectations (function 4)
associated with the new technology.
IP/A/ITRE/ST/2008-06 & 14
Page 101 of 126
PE 416.218

3. POLICY EXAMPLES
In this chapter the energy transition policy in The Netherlands, a more or less coherent
strategy, is compared to the broader ‘eco-innovation’-policy in The Netherlands, which is not
a specific policy but part of the larger environmental policy. In chapter 3.1 and 3.2 the two
policies are described and in 3.3 compared using the theory of ‘functions of innovations’ (2).
In addition some ‘good practices’ of policy instruments supporting specific functions from
other member states and EU-level are given (3.4).
3.1. Energy transition38
Concerns about the depletion of fossil fuels, dependencies on foreign suppliers, and climate
change led policy makers in the Netherlands to adopt a transition approach for sustainable
energy, mobility, agriculture and resource use. This approach has a focus on transformative
change, a reliance on bottom-up processes and a significant enrolment of business and other
non-state actors in the transformation process.
Transition management relies on ‘evolutionary’ processes of variation and selection. It makes
use of “bottom-up” developments and long-term thinking. The government acts as a process
manager, dealing with issues of collective orientation and interdepartmental coordination. It
also takes on a responsibility for the undertaking of strategic experiments and programmes for
system innovation. Control policies are part of transition management but the government
does not seek to control the process – it is not directing the process but seeks to facilitate
learning and change. Transition management aims for generating “momentum” for
sustainability transitions. Companies join the transition process vary to influence the process,
but also to learn about future developments and try to turn threats into opportunities (with or
without public money).
Transition management has a long timeline: the process started in the early years of this
century, and has created semi-permanent structures that will remain in place as long as
necessary.
At the heart of the energy transition project are the activities of transition platforms. In these
platforms individuals from the private and the public sector come together to develop a
common ambition for particular areas, develop pathways and suggest transition experiments.
There are 7 of these platforms:
• chain efficiency (goal: save 150-180 PJ by 2030)
• green resources (goal: replace 30% of fossil fuels by green resources in 2030)
• new gas (goal: to become the most clean and innovative gas country in the world)
• sustainable mobility (goal: faster market introduction of greener fuels and vehicles,
exploiting export opportunities)
• sustainable electricity (goal: a share of renewable energy of 40% by 2020 and a
CO2-free energy supply by 2050)
• built environment (goal: by 2030 a 30% reduction in the use of energy in the built
environment, compared to 2005)
• energy-producing greenhouse.
38 This paragraph is based on a text provided by Rene Kemp, however responsibility for the content is fully with
the author
IP/A/ITRE/ST/2008-06 & 14
Page 102 of 126
PE 416.218

In total a set of 30 transition paths are being traversed (including biomass for electricity, clean
fossil, micro cogeneration but also radical things such as energy-producing greenhouses for
growing crops).
Based on suggestions from the transition platforms a transition action plan has been
formulated which contains the following goals:
• -50% CO2 in 2050 in a growing economy
• An increase in the rate of energy saving to 1.5- 2% a year
• The energy system getting progressively more sustainable
• The creation of new business
Transition management is a form of multi-level governance with the following activities:
• Strategic level: visioning, strategic discussions, long-term goal formulation.
• Tactical level: processes of agenda-building, negotiating, networking, coalition
building and selection of transition paths.
• Operational level: processes of experimenting, implementation.
Immaterial innovations are the creation of an interdepartmental directorate, a special desk for
innovators (challengers helpdesk, for help and advice), the creation of the seven transition
platforms and a funding scheme for transition experiments (budget some €100 mln 2004-
2007).
The approach is viewed as very successful in stimulating business to engage themselves in
radical innovation projects, something that was not happening before. Furthermore the
systems level of approach is a success in itself, providing opportunities of cross fertilisation
between various domains and stakeholders; the clear and ambitious transition goals provide a
clear and accepted direction of development and the networks of (and esp. between) various
stakeholder groups have improved.
A recent internal evaluation by SenterNovem (Stuij, B., 2008) also identifies a number of
possibilities for improvement:
• The orientation, although clear and broadly accepted can be better defined (what is
destination?)
• The consistency of policy and policy measures can improve (an example is the
support for investments in sustainable energy, where the support measures have
changed at least twice in the last 10 years, while the pay back period for investments
is often larger then 10 years, leading to reluctance by investors to invest any further
because ‘the government changes the rules so often that the investments become
very insecure’)
• Interaction with society insufficient (leading role from society insufficient; complete
innovation chains are not always covered; PPP financing not always successful)
• Public role inadequate and open for improvement (programmatic support for
transition trajectories insufficient, instruments too fragmented, risk coverage too
low, other countries have more attractive support (e.g. Germany!)
• Use of market conditioning instruments (e.g. tradable emission rights) necessary to
create (more) real drivers
• International profile could be improved
IP/A/ITRE/ST/2008-06 & 14
Page 103 of 126
PE 416.218

3.2. Eco-innovation policy in the Netherlands
In the area of ‘eco-innovation’ in The Netherlands there is also a lot of policy activity, but
there is not such a coordinated approach: eco-innovation is just one of the aspects of general
environmental policy.
A strong position in environmental policy was built up in The Netherlands since the late
1960’s. Started was with an approach by compartment (first water (1969) then air (1970),
later waste and soil (1980s)). An important feature of the water law was the combination of
stringent (for that time) norms for pollution with the creation of a financing mechanism
according to the polluter pays principle (a tax paid to the water boards related to the amount
of pollution). This financing mechanism made large and rapid investments in water treatment
installations possible.
The approach by compartment was integrated in the first National Environmental Policy Plan
(1989; undersigned by 5 Ministers) introducing also cross cutting themes like acidification,
pollution distribution, disposal, biodiversity, etc. and target groups (e.g. agriculture, traffic
and transport, industry) this finally lead to the integration of all compartment laws in the Law
on Environment management (1995). Important has always been the attention for
technological innovation (in The Netherlands often stimulated by the Ministry for the
Environment and the Ministry of Economic Affairs). Attention for chain-effects has always
been there (Author has e.g. been responsible in the early 1990s for a programme called
‘Climate and waste’, trying to reduce greenhouse gas emissions by all types of measures in
the area of waste policy, e.g. increasing electrical efficiency of waste incinerators, promoting
digestion of organic waste and increasing the recycling of paper). Furthermore there has been
a large use of voluntary agreements, also called covenants, between sectors of industry and
the government.
In the late 1990s the integrated approach more or less got lost (satisfaction with results
obtained; focus on climate policy; loosing sense of urgency; ….) and The Netherlands lost
their leading position in environmental policy making. EU regulations now often are leading:
relevant policies in the area of eco-innovation are those on Eco-labelling, CO2 emission trade
and others. This does not mean there are no specific (and advanced) instruments, on the
contrary, but the cohesion is less than before.
Examples of (at a lower level of abstraction) successful policy topics and instruments are:
long lasting attention for Corporate Social Responsibility; attention for sustainable policy
theory; project support for R&D in focused clusters with a lot of attention for sustainability
(water, life sciences, materials and chemistry, food); instruments for promoting availability of
venture capital; fiscal measures for investment support for companies (EIA, MIA, VAMIL);
increased attention for Green Government Procurement; Benchmarking Covenant Energy
Efficiency; etc.
These measures have had their successes: The Netherlands chemical industry is leading in the
world in energy efficiency; the Dutch water sector is leading in the world; many Dutch
companies are among the leaders in their fields in CSR-rankings (Unilever, TNT, AKZO
Nobel, DSM); the Dutch have a strong scientific position (in policy theory, but also in the
technological fields of eco-innovation (e.g. ECN being one of the leading institutes in the
world in solar cell research).
However, overall there has been loss of momentum, and the Dutch now are certainly not the
clear leaders in environmental policy they were 10-15 years ago.
(see for a more elaborated description of Dutch eco-innovation policy in the last 40 years
Faber, A et al. (2008)).
IP/A/ITRE/ST/2008-06 & 14
Page 104 of 126
PE 416.218

3.3. Analysis of Dutch policies
Based on the authors' own 20 years of experience in the field, and inputs from various other
experts, a ‘comparison of the above mentioned policies in The Netherlands is made; not a
scientific analysis of the two policies, but a more illustrative approach fitting within the
limited budget of this study. The results are given in table 1.
Table 1: Assessment of two Dutch policies with theory of functions of innovation systems
Energy transition Eco-innovation
1 Entrepreneurial activities +/- +/-
2 Knowledge development ++ ++
3 Knowledge diffusion through networks + +/-
4 Guidance of the search +/- --
5 Market formation +/- +/-
6 Resources mobilisation + +/-
7 Creation of legitimacy/ counteract resistance to
change +/- +/-
Source: Assessment G. van der Veen, 2008
1. Entrepreneurial activity is moderate in both policy areas (in The Netherlands): there are
entrepreneurs, but as in most innovation areas in North West Europe, entrepreneurship is
not extremely well developed.
2. Knowledge development is very well developed in both policy areas: as has been said The
Netherlands is among the scientific leaders in the world in both areas.
3. Knowledge diffusion is well organised in the transition process, but only moderately in
the other areas of eco-innovation: the people know each other, and meet each other, but
not as often and structured as in the transition process.
4. Guidance of the search is one of the strong points of the transition process, although still
considered inadequate. In other areas of eco-innovation this guidance is missing because
there is no clear long-term policy goal .
5. Market formation is also moderate, there are initiatives (e.g. fiscal incentives in the
energy transition area and things like eco-labelling and procurement in the broader eco-
innovation area), but they are of limited size (partially caused by the limited size of Dutch
market) and less interesting than abroad, and also not consistent over time.
6. Resources mobilisation is rather good in the energy area (topic is considered interesting
by students, there are good university programmes, there is money available for research
projects and there are even a number of (government supported) Venture Capital funds for
seed and early stage financing). Capital for larger investments and demonstration projects
is limited (esp. compared to other countries). Resources mobilisation in the eco-
innovation is less well developed: especially the markets are smaller, therefore obtaining
less interest from financial capital
7. The legitimacy for both areas is rather good. Sustainable energy is flourishing on the
climate change ‘lobby’; eco-innovation is getting more and more support because of the
upswing of cradle-to-cradle thinking.
IP/A/ITRE/ST/2008-06 & 14
Page 105 of 126
PE 416.218

In The Netherlands the lobby leads to much polite discussion, rather than to real action,
apart from some examples (like the strong position of large Dutch multinationals on the
CSR rankings and the rapid growth of a sustainable energy company like E-concern.
Strong leaders at the top of these companies seem very important for the process of
translating discussion into action).
3.4. Other policy practices in other Member states and at EU Level
Apart from this Dutch experience there is a wealth of practices on (eco-) innovation policy in
other Member States, at EU level and elsewhere. In 2004 Technopolis has made an inventory
of those practices as part of the Dutch EU chair activities (Technopolis, 2004). Below some of
the examples from this report are given, and some extra examples are added. They are ordered
according to the function of the innovation system they primarily address.
Function 1: entrepreneurial activities
Entrepreneurship is generally supported by communication campaigns promoting
entrepreneurship and by coaching and training programmes. These are present in many
countries, and although the programmes most often are not sector specific, specific coaching
(or training) activities may have a focus on (topics of) eco-innovation. Recently the Dutch
Water Innovation Programme started the ‘Mannen van de WIT’ (Water technology
Innovation Team) programme where six experienced water entrepreneurs help would-be
entrepreneurs with setting up their business.
(http://www.waterland.net/index.cfm/site/Watertechnologie.com/pageid/01E3406C-EB5F-97CB-
77938A3194AC4D6C/index.cfm/mannen%20van%20de%20wit in Dutch).
Furthermore there are many programmes focusing at a specific issue environmental of eco-
innovation entrepreneurship (ecodesign, process intensification, etc.): they do however
generally not focus on entrepreneurship in general but on (technological)
solutions/approaches.
However, entrepreneurship in the eco-innovation sector is not that different from
entrepreneurship in other sectors, so the need for specific instruments might be limited. One
of the best means of promoting entrepreneurship is to create opportunities, markets (see
function 5 below): when there are real market opportunities entrepreneurs will find them.
Function 2: knowledge development
There are many programmes for supporting knowledge development, at regional, national and
EU level, most of them promoting R&D.
At the EU level the Framework Programmes are the most important. Eco-innovations, more
specifically sustainable technologies have become an even more important topic in the FPs
than before. These are however not gathered under one main theme, but quite dispersed in
almost all the research themes. An overall evaluation of the eco-innovation component of the
FPs has not been performed to the author’s knowledge, but at the moment quite a number of
FP6 (sub)-priorities are evaluated (or going to be evaluated in the following year) as well as a
number of cross cutting themes.
Recently Technopolis presented the preliminary conclusions of one of these evaluations, the
evaluation of the sub-priority ‘Global Change and Ecosystems’, at a seminar in Brussels (Van
der Veen, 2008). The findings with respect to the area environmental technologies (restricted
to water technologies and soil remediation) might have a broader relevance:
IP/A/ITRE/ST/2008-06 & 14
Page 106 of 126
PE 416.218

• FP6 has supported projects with a high scientific quality (in this area)
• Cooperation between partners all over Europe was strengthened by the programme
• The projects supported were rather science oriented, so, at the point of evaluation,
only very limited economic and environmental results could be identified. These
effects may increase in the future, but this is very dependent on the R&D trajectory
after FP6, which is still long (on average approx. 5 years) and not supported by FP.
• The bureaucracy related to FP projects is not very supportive for industry
participation. Programmes are also rather inflexible.
• The effectiveness of large projects (NoE’s, IP’s) as introduced in FP6 (and
increasingly promoted in FP7) for technology-oriented projects (in the sub-priority
evaluated) is questionable. Many participants find smaller projects (with a limited
number of partners, max. 5-7) more effective in performing research and translating
research results to the market.
Other programmes of the EU (ETAP/CIP) might be more effective in bringing research to the
markets than FP. This has not been studied, and is too early, since CIP just started.
Function 3: knowledge diffusion through networks
There are also many examples of programmes to support networking. A typical example of a
business driven network with close links to the scientific community is the Netherlands Water
Partnership (http://www.nwp.nl). The FP-projects also offer opportunities for knowledge
diffusion through networks, especially when different types of partners are involved in
projects (universities, industry, etc.).
Function 4: guidance of the search
Guidance of the search is often provided by the development of roadmaps. In some industries
there are industry wide roadmaps, developed by industry themselves (e.g. in micro
electronics: www.itrs.net), in other areas there are roadmaps developed with government
support. Good examples of industry wide roadmaps are found in the FP7 Technology
Platforms (for example at www.eumat.org). There are also many examples of specific
national industry oriented roadmaps at MS level. Guidance is also given by setting clear
policy goals (e.g. 30% sustainable energy in 2020).
To define a roadmap for eco-innovation is however not that simple: eco-innovation is a very
broad topic with a large number of possible development routes. Roadmaps in this area
should be developed topic by topic (there are already roadmaps for e.g. solar cells and the
hydrogen economy), or should be more on a policy level.
Function 5: market formation
There are many opportunities for public policies to promote market formation. This can be
done by creating small ‘niche markets’ that make protected growth and experimenting with
new technologies possible, or with larger market support instruments. These last opportunities
should however be used with care: although the aim of such instruments is to change
something in the market (you want to promote eco-innovations over less eco-friendly options)
the instruments should not lead to market distortion. The boundary between an effective
instrument and a serious market distortion is however thin. At present the (too?) careful
approach with respect to market distortion may hamper effective support for eco-innovations.
IP/A/ITRE/ST/2008-06 & 14
Page 107 of 126
PE 416.218

Examples of instruments that have proven effective and are not considered to distort the
market too much are:
• Green government procurement in Denmark
The Danish action plan for Green Government Procurement requires public authorities to
contribute to environmental objectives via their purchasing activities and draw up a green
procurement policy. When guidelines for environmental purchasing were developed
Green procurement started to take off. In 1998, 90% of the State institutions and
governmental companies had set up such a policy and adopted an action plan.
(www.ski.dk/om/sider/english.aspx).
• The Erneuerbare Energien Gesetz in Germany
Besides various R&D programmes, the Electricity Feed-in Law (EFL, 1991) and the
Green Energy Act (EEG, 2000) played a crucial role in setting the right framework
condition to make investments in sustainable energy attractive. The law was accepted
because there was political consensus that wind turbines should be supported and a
successful lobby of the powerful green movement in Germany. The law required utilities
to accept electricity delivered to the grid by independent wind turbines and to pay 90
percent of the average consumer electricity price. Since the payment was based on a law
and not a temporary programme, the income generated from wind turbines was both high
and predictable, which greatly reduced the risks associated with investment. Farmers,
private individuals and firms had a clear economic incentive to invest in wind turbines
and, as a consequence, private capital was mobilised on a large scale. A further incentive
for investment is given by granted tax advantages for individuals when they investment in
renewable energy production. Overall the EEG helped to mobilise substantial financial
resources and in the end the development of a dynamic market. (see: www.erneuerbare-
energien.de)
• Energy contracting in Austria
Energy Contracting is a financial instrument designed to enhance investments in energy
saving technologies. The basic configuration resembles an outsourcing contract between
the contractor and the organisation in which the investment is realised. The interesting
feature is that envisaged energy savings finances the investment. The contractor pre-
finances the investment and bears the technical risk. Two types of investment can be
distinguished: investments in new energy facilities and investments in broad energy
saving measures. Energy contracting looks like a fairly straightforward financial tool,
which should be easily picked up by the market. At first sight the rational for public
intervention is meagre. However, practice shows that there is a persistent underinvestment
in energy saving technologies. Against this background energy policy in some European
countries put the development of an energy contracting market on the agenda. So far
Germany and Austria seem to be those countries where energy contracting eventually
gained some momentum and developed into a fairly differentiated market.
(http://www.bestpractices.at/main.php?page=vienna/best_practices/administration/energy_contracting&lang
=en)
Function 6: resources mobilisation
Examples of effective resource mobilisation are several and can be separated in the
mobilisation of financial resources and human resources. Here some examples that have
proven to be able to mobilise financial resources:
IP/A/ITRE/ST/2008-06 & 14
Page 108 of 126
PE 416.218

• The Erneubahre Energie Gesetz in Germany:
Apart from a market formation aspect, the EEG also had a large resource mobilisation
effect (see above)
• The Carbon Trust in the UK
The Carbon Trust in the UK (http://www.carbontrust.co.uk/energy) is another example of
the direct use of taxes and levies for financial resource mobilisation and investing the
mobilized resources in solutions. The focus of these solutions is however rather short-
term.
• Green financing in The Netherlands
The green fund scheme is a green investment fund (managed by banks) that invests only
in certified sustainable projects (green projects). A government office performs the
certification of the projects. The (private) investors that make their investments in the
green investment funds receive a tax reduction over the profits they make with those
investments (the investment is free from property tax). Because of this they are satisfied
with a lower interest rate, and therefore the Green Investment Fund can offer lower
interest rates to the green projects they invest in. The success of Green Fund Scheme lies
in the leverage that is created with the government investment: the government only
misses the property taxes (approx. 2% of the investment/year) and administration costs are
low (less then 1% for the government, and for the banks the same costs as for normal
investment funds). In total 2845 projects have been financed with green investment funds
(1995-2002), with a total investment of €4.9 billion.
(http://www.senternovem.nl/greenfundsscheme/index.asp)
Function 7: creation of legitimacy/counteract resistance to change
A very good example of the creation of legitimacy is the process around climate change
policy, and the role of the IPCC (International panel of Climate Change). In very short: A
scientific debate was brought into a political arena, which lead to more funds for research,
more evidence for the climate change assumptions and finally large political support and
Kyoto agreements.
A somewhat smaller example of creation of legitimacy is the Dutch (and Flemish) approach
of negotiated agreements (or covenants). In negotiated agreements the government and a
partner e.g. industries) voluntarily agree on (e.g.) environmental targets, which may be
obtained by means of eco-innovation. When the industry reaches its targets government will
not invoke extra environmental measures. An example is the Benchmarking Negotiated
Agreement for CO2-emission reduction in The Netherlands. In the negotiated agreement on
benchmarking the energy intensive industries in Flanders promise to belong to the most
energy efficient companies in the world. The Dutch government in return promises not to
come with extra measures in this area. An evaluation (PWC, 2003) shows that the industry is
improving its efficiency, but that progress is somewhat slower than expected. Other covenants
(e.g. MJA (benchmark, energy efficiency), some disasters (packaging, might have been cause
because it is difficult to measure eco-performance of various competing options) do not seem
a right way to change incumbent systems, but it is however a fruitful way to provide guidance
to change.
(www.benchmarking.be)
For other good practices is referred to Technopolis (2004).
IP/A/ITRE/ST/2008-06 & 14
Page 109 of 126
PE 416.218

4. CONCLUSIONS
The following conclusions can be drawn, arranged according to the 7 functions of innovation
systems:
General
• An integrated policy approach does seem to improve opportunities for system
innovations. Knowledge development alone is not enough for a system change.
• Policies need to be consistent over time, resist to changes if necessary, and have a
long-term view.
• Complex systems innovations take time, therefore these processes should not be
evaluated on short term CO2-emission reductions, but on long term perspective
Guidance of the search
• Important is to create a ‘common view’, if not a vision, among all stakeholders on
the direction where to go. Opinion leaders are important to obtain this.
• The transition approach in The Netherlands has shown that ‘guidance of the search’
can be obtained in a stakeholder driven process. It has, in the case of energy
transitions, lead to involvement of larger companies in more radical types of
innovation, ehich was not the case before.
• At EU level Guidance of the search is already done within the Technology
Platforms, with mixed results yet. However this concerns only a limited number of
areas. Making a more policy-oriented roadmap for eco-innovation in general could
be a valuable initiative at EU level
Knowledge development
• At EU level promoting knowledge development is done well in FPs with scientific
knowledge; attention for applied knowledge development can however increase,
either within the FPs or adjacent to the FP.
Knowledge diffusion
• A form of knowledge diffusion that might be promoted by the EU is benchmarking
of MS performance in the area of eco-innovation in order to increase awareness and
stimulate MS action.
Entrepreneurial activities/market formation
• Entrepreneurial activities are a key-issue for actual implementation of eco-
innovations. Since entrepreneurs are driven by (potential) profit, instruments for
market creation/conditioning should therefore be a very important part of eco-
innovation policy.
• Market creation subsidies at EU level are not necessary, often these are more tailor
made and effective at MS level. The EU has however a large role in assessing
market support measures from Member States, and should not ban effective
mechanisms at MS level (e.g. EEG in Germany, but also comparable mechanisms
in Spain and other countries).
• For promoting entrepreneurship best opportunities seem also to be at MS level (or
even at regional level). Policies need to be consistent over time, otherwise
entrepreneurs might be reluctant to invest.
IP/A/ITRE/ST/2008-06 & 14
Page 110 of 126
PE 416.218

There is an international aspect as well: when conditions abroad are better,
entrepreneurs (and initiatives) will move there (level playing fields are therefore
important)
• EU-regulation (e.g. on the maximum energy use of buildings) may also give a
strong market impetus.
Creation of legitimacy
• EU regulation may also contribute to creation of legitimacy. On this function the
EU could play a much stronger role by giving eco-innovation real priority and
putting eco-innovation central on the agenda. When this is done the EU may use
opportunities to restructure economic sectors (e.g. cattle sectors after recent
diseases; automobile sector in the present financial crisis) to restructure them in a
eco-innovation oriented way.
• Policy making (talking) is very important to create legitimacy, tight networks and
good framework conditions; but implementation (action) should follow and should
be part of the whole process.
Resources mobilisation
• There seem to be ample instruments in place for resources mobilization for the
R&D phase (both financial en human capital). For the next stage of investment
(demonstration/pre-commercialisation) esp. the financial resources are more scarce
(and certainly have not increased in the last few months). The LIFE programme
offers some support (but is rather small); guarantee mechanisms from EIF
(European Investment Fund) are there but are certainly not used well in all MS
IP/A/ITRE/ST/2008-06 & 14
Page 111 of 126
PE 416.218

BIBLIOGRAPHY
Faber A. et al, 2008 Faber, A., Kemp, R. and Van der Veen, G. Innovation policy for the environment in
the Netherlands and EU, in C. Nauwelaers, and R. Wintjes, Innovation policy in Europe, Edward Elgar,
Chelthenham, 2008.
Hekkert, M.P. et al, 2007 Hekkert, M.P., R.A.A. Suurs, S.O. Negro, S. Kuhlmann and R.E.H.M. Smits.
Functions of innovation systems: A new approach for analyzing technological change. Technological
Forecasting and Social Change 74: 413–432. 2007.
Johnson, A. 2001 Johnson, A. Functions in Innovation System Approaches. in Paper for DRUID’s Nelson-Winter
Conference. Aalborg, Denmark, 2001.
PWC, 2003 Price Waterhouse Coopers, Evaluatie Benchmark Convenant Energie-Efficiency. Onderzoek
naar de werkwijze van betrokken partijen binnen het Convenant, Utrecht, 2003.
Reid & Miedzinski, 2008 Reid, A. and Miedzinski, M., SYSTEMATIC Innovation Panel on ecoinnovation.
Final report for sectoral innovation watch. Brussels, 2008, www.europe-innova.org
Schot, J. et al, 1994 J. Schot, R.E. Hoogma, Elzen, B., Strategies for shifting technological systems,
Futures 26, 1060–1076, 1994.
Stuij, B. 2008 (conclusions communicated to me by e-mail): Stuij, B., Evaluation of policy instruments of the
energy transition, SenterNoverm, Utrecht, 2008.
Technopolis, 2004 Van Giessel, J.F. and Van der Veen, G. (ed), Policy instruments for sustainable
innovation, project supporting the Dutch EU-Presidency preparations for the Informal Environmental Council on
July16-18, Technopolis, Amsterdam, 2004.
Van der Veen, G. 2008 Van der Veen, G., Highlights from the impact assessment of FP6 sub-priority "Global
change and ecosystems”: Environmental technologies area, presentation at Brussels seminar, Technopolis, 2008.
IP/A/ITRE/ST/2008-06 & 14
Page 112 of 126
PE 416.218

NOTE 3:
FUNDING ECO-INNOVATION
Birgit Eggl, Project Manager, Forseo GmbH,
Grünwälder Straße 10-14, 79098 Freiburg, Germany, Phone +49 761 2852317, Fax +49 761
2854651, Email birgit.eggl@forseo.de, web www.forseo.eu
EXECUTIVE SUMMARY
Eco-innovation faces many barriers when it comes to financing. It is often perceived as highly
risky to invest in such projects, many of the investors are not familiar with the technologies
and concepts at all. The small-scale nature of many of the projects is a drawback for investors,
too. General market failures create major gaps of funding. These are only a few reasons, why
technology developers often fail to move their projects successfully through the innovation
chain to market entry. To achieve the EU target of becoming global market leader of eco-
innovation, the barriers have to be removed and instruments to promote eco-innovation have
to be improved or newly implemented.
The objective of this paper is to demonstrate the stages an innovative development has to go
through in order to reach market entry. Eco-innovation in this context concerns concepts of
technology innovation, innovative approaches to eco-friendly services as well as disruptive
and system innovation. A financing continuum shows exactly where the gaps in such a
process are and what could be done to close them. It is important to acknowledge, that in the
case of eco-innovation the tool to finance is corporate finance.
The briefing focuses on public funding mechanisms featuring innovative, effective
approaches. Effective financing mechanisms should fill an existing investment gap, increase
private sector involvement and awareness and have the ability to be phased out over time,
leaving a long-term private sector financing solution in place. The most effective financing
mechanisms do not distort the market. Even though different gaps at different stages are
mentioned, the focus is set on the most prominent early stage gap in the pre-
commercialisation phase. Although the emphasis is on public funding, private financing is
picked upon in several parts of the paper especially when describing the individual financing
solutions some technology developers opted for. In the chapter of recommendations, EU
strategy development is particularly taken into account, proposing the implementation or
alteration of certain approaches to funding.
Many of the statements in this briefing paper, such as the above mentioned description of the
technology developers financing solutions, are based on the findings of the EU-project
FUNDETEC (Funding the Development of Environmental Technologies). The aim of the
project was to examine environmental technology financing, identify opportunities for
improvement, establish a factual basis for innovation by investors and policy makers, and
identify issues for further research.
IP/A/ITRE/ST/2008-06 & 14
Page 113 of 126
PE 416.218

1. FINANCING ECO-INNOVATION
Eco-innovation in this context concerns concepts of technology innovation as well as
innovative approaches to eco-friendly services, disruptive and system innovation. What kind
of funding is available depends on the phase the concept is in. For a concept to be developed
to a point where it attains market entry, there are a number of stages to be followed, from
fundamental research to commercialisation. This is called the innovation cycle.
1.1. The Innovation Cycle
Phase 1: Research and Development (R&D)
R&D is the first step of developing a new technology. The developer will identify market
needs and undertake all the background research and bench testing of the technology and its
component technologies. If this initial research shows good technical and economic promise
then scale pilot testing and planning of the scaling-up can begin. At the end of this stage the
innovations viability will be assessed. At this point intellectual property protection will be
sought for the one of a kind technology designs. Sometimes Proof of concept is treated as a
separate stage of development. At this stage a small-scale pilot model of the technology or
part of the technology is tested to demonstrate the basic functionality of the concept. The
outcome of these tests will determine the support for further scale-up. Any false starts that
require correction will be rectified and retested.
Phase 2: Demonstration
If the concept has been proved then a full scale working model made up using commercially
available inputs will be built. This will be tested under varying conditions in a commercial
operating environment to determine its limitations, benefits, costs and opportunities. This can
spur substantial redesign and debugging. The final optimisation will give the developer
results, which can prove the robustness of their design to future financiers and customers.
Phase 3: Pre-commercialisation
Once the technology has been successfully demonstrated the developer will enter the pre-
commercialisation phase. This may involve the independent verification by an external body
of the results of tests on the technology. This phase also sees the developer identifying
potential client niches, organising the scale-up to production level, finding suppliers,
wholesalers, distributors, working capital and putting into action a marketing plan for the
product launch.
Phase 4: Commercialisation
The final stage of the technology development cycle is the commercialisation stage. This
involves ramping up to full-scale production and marketing of the technology to penetrate the
market. Infrastructure and finance need to be developed to support these actions.
A financing “continuum” conceptual analysis illustrates the stages of investment needed to
bring a technology forward to commercialisation and where there are gaps in this process.
The „Technology Innovation Financing Continuum“ below shows that the financing gap is
most prominent in the mid-demonstration stage.
IP/A/ITRE/ST/2008-06 & 14
Page 114 of 126
PE 416.218

It typically begins in the mid-demonstration stage though and continues through to the early
commercialisation phase. The gap is caused by systemic market failures encountered as
technologies move along the innovation process, and public financing mechanisms
demonstrate options to close existing financing gaps.
Figure 1: Technology Innovation Financing Continuum
Source: UNEP/ BASEL AGENCY FOR SUSTAINABLE ENERGY (2005) Public Finance Mechanisms to
Catalyze sustainable energy sector growth
Throughout these stages of development the technology developer has an ever-increasing
level of expenditure to reach the next stage. One of the interviewees of the FUNDETEC-
projects gave the example that if a developer needed €1 million for R&D then they would
need €10 million for demonstration and €100 million for commercialisation. This example
shows clearly the exponential growth of costs over the period of the development and can be
used as an orientation for the calculation of funding needs of a technology innovation.
1.2. Options to close the financing gap39
In the following section public funding mechanisms to overcome above mentioned gaps are
introduced. Effective financing mechanisms should fill an existing investment gap, increase
private sector involvement and awareness and have the ability to be phased out over time,
leaving a long-term private sector financing solution in place. The most effective financing
mechanisms do not distort the market.
39 Cf: UNEP/ BASEL AGENCY FOR SUSTAINABLE ENERGY (2005) Public Finance Mechanisms to Cata-
lyze sustainable energy sector growth, page 14 - 20
IP/A/ITRE/ST/2008-06 & 14
Page 115 of 126
PE 416.218

Incubators and Accelerators
Technology incubators and accelerators such as the UK Carbon Trust Incubator or
Accelerator Programme or the SEI (Sustainable Energy Ireland) Pilot Sustainable Energy
Incubator Programme play a significant role in technology innovation especially in the stage
of pre-commercialisation. They can help technology developers in covering operating costs,
providing advice on business development and raising capital as well as creating and
mentoring management teams, and providing energy-related market research. Incubators
assist environmental technology start-ups with specific consulting and management services.
In addition accelerators provide the funding, co-ordination and expertise needed to further
lead promising technologies to commercialisation. Accelerators and business incubators can
work together to ensure both the technical and commercial assistance needed when presenting
the business case to the investor.
Grants
Usually grants do not have to be paid back, but some public funding institutions use a special
form of grants, contingent grants. Contingent grants are provided without interest or
repayment requirements until technologies and intellectual property have been successfully
implemented. Before revenue is generated contingent grants are useful mechanisms for SMEs
to address specific aspects of business development. This is an option for the public sector to
provide incremental funds without directly subsidising commercially viable activities, since
the grant is repaid as soon as the business activity provides returns. Grants are mainly
provided for early stage technology projects that lack additional high risk capital to
supplement developer’s equity for research, demonstration and feasibility studies. In some
cases contingent grants increase investor confidence and therefore leverage highly needed risk
capital. This is done for example within the Dutch Senternovem Environment & Technology
Programme (ETP)40.
Loans
1. Soft and convertible loans: the public sector can provide soft and convertible loans
that offer lower or free interest rates as well as short-term interest and payback grace
periods. Soft loans are a very common public finance instrument to support long-term
project and enterprise development. They provide young businesses with the financial
support that bridges the pre-commercialisation. The Federation of Canadian
Municipalities offers soft loans within the Green Municipalities Investment Fund
(GMIF). Soft and convertible loans are also provided by the Netherlands Green Funds,
the New Jersey Clean Energy Programme, the German Bank for Reconstruction
(KfW) and many more.
2. Debt Loans: for larger energy projects the financial structure combines equity, debt,
and insurance41. The German KfW Programme for the Promotion of Renewable
Energies provides technology developers with debt-loans. Debt is provided by
corporate or project-financed loans from commercial banks or through bond offerings
underwritten by investment banks and institutional investors.
40 http://www.senternovem.nl/milieutechnologie/English/index.asp
41 Insurance of specific operational risks is needed to be provided by an insurer. There has been some develop-
ment of dedicated insurance products that provide financial protection to sustainable energy projects. How-
ever, there are still considerable gaps in providing insurance products for the broad array of sustainable tech-
nologies on the market (Geothermal Energy).
IP/A/ITRE/ST/2008-06 & 14
Page 116 of 126
PE 416.218

SMEs face typical obstacles such as weak balance sheets and small transaction size when they
seek for working capital for operations and growth capital loans to expand.
Mezzanine financing models can address these SME financing gaps. The FIDEME fund was
created specifically to fill this gap faced by French SMEs involved in large-scale project
developments.
Mezzanine finance groups together a variety of structures positioned somewhere between the
high risk / high upside, pure equity position and the lower risk / fixed returns, senior debt
position.
Mezzanine capital is most useful in illiquid markets where a lack of exit options makes pure-
equity investments less attractive. These kind of instruments are very popular when creating a
tailor-made financing in the private sector, too.
Incentives
Supportive regulatory and tax environments are key to driving the development and financing
of new technologies. Incentives, for example tax incentives are indirect funding instruments
that can enhance motivation for investment. Tax-incentives are more traditional macro
approaches that can work side by side with finance mechanisms for market uptake. They are
typically implemented by federal or state legislators and can be managed, evaluated and
adjusted by public financing agencies or ministerial departments. Good examples for
incentives are programmes such as the Netherlands Green Funds or the UK Carbon Trust
Enhanced Capital Allowance (ECA).
Equity
The financial structure for eco-innovation projects primarily includes equity provided by the
companies involved in the project. Even though some equity investment is now available in
the environmental technology sector, public intervention is often needed as it is not enough to
cover the required equity share that banks expect in a project, particularly in uncertain
markets. Public mechanisms do usually not provide equity seed capital but there are some
instruments that provide Venture Capital (VC) which is the primary private equity investment
option for technology innovation. The investment typically involves a high level of risk, but
also provides an above-average return on investment because of the company’s growth and
success potential. VC investors obtain equity shares in the start-up company and generally
participate in the management of the company.
Public sector supported VC programmes usually focus largely on investment in new
sustainable energy technologies.
VC and equity investments can be very innovative and play a crucial role in leveraging large
amounts of private investment. Private equity is essential for growing businesses, especially
SMEs that want to expand their activities. Compared to the US, the VC market is less
developed in the EU, which can be associated with cultural differences. Several public
agencies and funds, particularly in the United States, have developed finance mechanisms that
provide equity investment opportunities for sustainable energy businesses, often leveraging
large amounts of investment from private financing sources such as the California Clean
Energy Fund, the Connecticut Clean Energy Fund or the Pennsylvanian Reinvestment Fund.
Programmes providing VC in Europe are for example the Finnish Innovation Fund, SITRA,
the UK Carbon Trust VC Fund, or the Slovak Development Fund.
IP/A/ITRE/ST/2008-06 & 14
Page 117 of 126
PE 416.218

Guarantees
Guarantees are essential for enterprises and project developers lacking sufficient equity to
cover additional loans or new credit. Public sector loan guarantees can act as instruments to
mitigate risk at any development stage. They can cover on the one hand commercial risks
associated with borrowers who have weak balance sheets or credit histories and on the other
hand non-commercial risks. Partial risk guarantees for specific time periods ensure debt-
servicing payments to lenders or investors.
Partial credit guarantees lead to the extension of loan repayment periods, which improves the
project’s cash flows. Both forms of guarantee are a motivation factor for banks to lend for
projects even though they perceive it to be risky. Examples for programmes offering
guarantees are the French ADEME FOGIME programme, or the IFC – Hungary Energy
Efficiency Guarantee Program 2.
Revenue Support
In conjunction with strategic grants, the UK Department of Trade and Industry is also
examining forms of revenue support to fill the pre-commercial gap. This is an example for an
instrument developed for wave and tidal technology innovation. The intervention proposed,
integrates research grants in the early R&D stages, grants for delivery (grid inter-connection
and decommissioning) and revenue support based on successful production in order to
gradually move innovation toward commercialisation. Revenue support would be linked to
ROCs (Renewables Obligation Certificates – similar to RECs). As soon as the production
begins at the early pre-commercialisation stages, ‘photocopied ROCs’ with a proposed value
of £100 per MWh will be provided to the producer in addition to normal ROC benefits. This
would address cash-flow issues, which are a concern to investors and debt providers financing
the commercialisation stages.
1.3. Innovative funding combinations by technology developers
When deciding how to finance the development of an environmental technology, the
developer defines certain criteria, required to be met by the financing source. Firstly, the
technology developer must decide whether they are willing to offer a stake in the business in
return for an investment or not. For many this is a hard decision as they rely on future success
as a source of reimbursement for their efforts now and may not wish to share this with
investors. The other alternative is to use debt instruments usually secured against some sort of
guarantee. The third option is to rely on subsidy type funding mainly from the public sector.
For a young enterprise, it is important to take on investors with experience and good
connections. These so-called ‘added value’ traits are in some cases more important
strategically than the financing itself.
Within the project FUNDETEC, researchers identified that a technology developer uses
various methods of financing over the duration of the technology development. Below are a
few examples of how developers put together a financing package for their projects.
1. A renewable energy technology developer in North-Western Europe started up the
company using the partners own funds. After finding it difficult to get public or VC
funding in the amplitude necessary for their project they set up their own venture capital
fund. They raised funds from regular people investing small amounts in the fund. They
issued bonds into the market every year to provide the liquidity they needed. Still at an
early stage they looked for new avenues of finance. They accessed grant funding from the
EU and the national government for demonstration projects, which they had to co-finance.
IP/A/ITRE/ST/2008-06 & 14
Page 118 of 126
PE 416.218

The venture capital fund was floated on the stock exchange to raise further funds. To build
their first commercial plant the company negotiated loans with a consortium of
commercial banks and the European Investment Bank for a high percentage of the project
costs. They had a guarantee from an industrial partner and they gathered cash for their
own guarantee by issuing bonds. They now have three options for project development
finance: fully finance and own the project where the market is developed; develop and
build it with no financial involvement, or have a priority purchasing agreement with a
single utility company.
2. A technology developer in the Mediterranean was set up using the owner’s personal
funds. They received an industrial development grant from the government but with a
very long time delay. In the interim period to finance the development they received
investment from a public venture capital fund, a private venture capital investment and a
seed financing fund from the state innovation agency. The seed funding had the same
status as VC but the company could buy back the shares at a nominal value and if they
made profits they could be reinvested instead of being distributed to the VC. In a further
ongoing round of funding they received further venture capital investment as well as a
number of private equity investments. They also received a further industrial development
grant for product development.
3. In Central-Eastern Europe a company in the wastewater sector was set up with angel
investment from a few “early stage believers”. To further develop the technology a
venture capital investment was accepted. After 3 years there was a management buy-out
(MBO) of the venture capital investment. To ensure further equity for the company’s
environmental innovations and further dynamic expansion of its environmental services
portfolio the company secured a private equity investment, which was withdrawn after a
year by new owners. The company has undergone a restructuring and has received a
strategic investment from a large corporation active in their field to finance further
development.
4. A North-Western European environmental technology development company was set up
to commercialise a technology developed by a university, using the founder’s own funds,
business angel investment and seed financing from a venture capital firm’s early growth
fund. The seed finance required match funding from a private investment group. Further
developments of the technology were possible through grants given from international
public funding sources. A further funding round is needed for business expansion but the
company is seeking investors who can provide ‘added value’ as well as the finance.
5. In Central-Eastern Europe an academic institute, struggling with state funding alone is
taking on contracts with private companies in order to finance their R&D work. The
companies contract the institute to work on specific research, proof of concept or
demonstration projects and provide the funding and sometimes the equipment and
components for them to carry out the work. For them it is very good for this reason and is
much faster than applying for research funding from EU or other bodies.
IP/A/ITRE/ST/2008-06 & 14
Page 119 of 126
PE 416.218

2. BEST CASE EXAMPLES
In the following section a few instruments with innovative or at least creative approaches are
introduced. Features making an instrument innovative are often not the mechanisms
themselves. A grant instrument for example is not innovative itself, however, the
implementation, the evaluation and due diligence process as well as additional support such
as networking opportunity and transfer of business skills offered in a package makes an
instrument innovative, special and eventually successful.
Sustainable Development Technology Canada (SDTC) is offering those kind of grants with a
smart approach on the national level, assessing the projects with a market-oriented due
diligence strategy and preparing developers very well for their next financing round. VC
investors trust in the assessment criteria of SDTC and often base a positive investment
decision on the previously positive decision of SDTC.
Performance Contracting is quite an innovative approach to eco-innovative services. The
Berlin Energy Agency has successfully implemented performance contracting on a regional
level.
The entrepreneurship programme, as one of the pillars of the Competitiveness and Innovation
Framework Programme (CIP) is targeting specifically SMEs. This is an example for a
mechanism on European level. Another European level instrument specifically designed to
mitigate risk is the risk sharing finance facility, also mentioned below.
The “High-Tech Gründerfonds” is a German instrument, founded by The Federal German
government, the KfW banking group and the industrial enterprises BASF, Deutsche Telekom
and Siemens, that invests venture capital in young, high-opportunity technological companies
implementing promising research results in an entrepreneurial manner. Remarkable are the
co-operation between the private and public sector as well as the achieved leverage effect.
2.1. Sustainable Development Technology Canada (SDTC) - Smart grants
SDTC supports clean-technology projects through the critical stages, where the funding gap is
most prominent, without taking an equity stake and without requiring ownership of
intellectual property. Technology developers are supported in strengthening their
entrepreneurial skills and business cases. The aim is to increase each project’s chances of
successfully getting to market and to help Canadian entrepreneurs carry out their innovation
efforts within Canada.
SD Tech Fund™
The $550M SD Tech Fund™ is aimed at supporting the late-stage development and pre-
commercial demonstration of clean technology solutions: products and processes that
contribute to clean air, clean water and clean land, that address climate change and improve
the productivity and the global competitiveness of the Canadian industry.
Currently only those technologies that have demonstrated their potential to meet market
demand and help achieve Canada’s environmental goals for reducing the effects of climate
change and improving air quality are supported. That is how SDTC effectively de-risks clean
technologies and prepares them for downstream financing.
Every clean-technology project considered for SDTC funding is subject to a multi-phased,
intensely thorough process of due diligence. While acknowledging the desire of entrepreneurs
to gain rapid access to funding, SDTC has to ensure the government fund with which it has
been entrusted is invested wisely.
IP/A/ITRE/ST/2008-06 & 14
Page 120 of 126
PE 416.218

To do so, a combination of the technology and market due diligence of the private sector with
an emissions impact-appraisal element that assesses the potential for broad public
environmental, economic and health benefits is used. In evaluating applications invited to
proceed to the proposal phase, external expertise with strong internal controls are combined
and each applicant site is visited in person, gaining in-depth knowledge of each proposed
project to be able to provide focused and constructive assistance.
2.2. Berlin Energy Saving Partnership – Performance contracting
Energy Performance Contracting (EPC) is a form of third-party financing for consumers that
has proven to be an effective, high-impact and low-cost end-user financing mechanism. EPC
features a process where, after a competitive tendering process, a contracted company is
responsible for project feasibility, design, equipment purchase, installation, maintenance and
operation plus, most importantly, a guaranteed amount of savings.
The management of the project development and tender procedure can be hired out to an
external facilitator, as in the case of the Berlin Energy Saving Partnership. The main
attractions of this form of end-user finance for the customer are the reduced risk when making
a technology upgrade and the opportunity to finance the equipment through energy savings.
The Energy Saving Partnership has been launched in 1992 as Public Private Partnership.
There are 20 Building Pools (groupings of several building complexes to mix more and less
profitable buildings into the contract), comprising over 1,300 buildings. The annual CO2
reductions amount 60,484 t.
2.3. Entrepreneurship and innovation programme (EIP)
The EIP is one of the specific programmes under the Competitiveness and Innovation
Framework Programme (CIP). With this programme, the European Commission seeks to
support innovation and SMEs in the EU.
EIP focuses in particular on the following objectives:
- Facilitate access to finance for the start-up and growth of SMEs and encourage
investment in innovation activities.
- Create an environment favourable to SME co-operation, particularly in the field of
cross-border co-operation.
- Promote all forms of innovation in enterprises.
- Support eco-innovation.
- Promote an entrepreneurship and innovation culture.
- Promote enterprise and innovation-related economic and administrative reform.
With a budget of € 2.17 billion for the overall period of 2007-2013 the programme aims to,
among other targets, improve access to finance for SMEs through "EU financial instruments".
These EU instruments target companies in different phases of their lifecycle: seed, start up,
expansion and business transfer and will support investments in technological development,
innovation (including eco-innovation), technology transfer, and the cross border expansion of
business activities. They are managed by the European Investment Fund (EIF) in co-operation
with financial institutions.
In addition it aims to especially support initiatives to foster entrepreneurship and innovation,
innovative products, processes and services aiming at reducing environmental impacts,
preventing pollution or achieving a more efficient and responsible use of natural resources.
IP/A/ITRE/ST/2008-06 & 14
Page 121 of 126
PE 416.218

At the beginning of each year the European Commission publishes its annual EIP Work
Programme and its associated support measures that give detailed information on the specific
actions to be supported that year.
2.4. Risk-Sharing Finance Facility (RSFF)
In June 2007 the European Commission and the EIB signed a co-operation agreement
establishing the new risk-sharing finance facility to support research and innovation (R&I) in
Europe. The RSFF is an innovative debt-based facility, creating an additional financing
capacity in support of research, technological development and demonstration projects as well
as innovation investments (RDI projects). Its main objective is to improve access to debt
financing for promoters of R&I investments by sharing the underlying risks between the EU
and the EIB.
This risk-bearing instrument will cover, through capital allocations and provisions, the risks
born by EIB when lending directly to the promoters, or when guaranteeing loans made by
financial intermediaries (e.g. banks in Member States and Associated Countries). The
programme is built on the principle of credit risk sharing between the European Community
and the EIB and therefore extends the ability of the Bank to provide loans or guarantees with
a low and sub-investment grade risk profile.
This programme is part of the EU's 7th Research Framework Programme (FP7) and EIB’s
programme for Research and Innovation. The contribution of € 1 billion each from FP7 and
the EIB for the period 2007-2013 is expected to leverage billions of additional financing in
this area.
Initially, RSFF is likely to benefit mostly medium and large innovative companies and large
scale research undertakings such as European or national Research Infrastructures. However,
RSFF is also open to private and public entities of any size and ownership promoting eligible
RDI activities, including SMEs, research organisations and Public-Private Partnerships
contributing to FP7 objectives.
2.5. The “High-Tech Gründerfonds” – Venture capital
The 272 million Euro fund provides VC to young, small companies in Germany in
combination with a special coaching. In a first funding round 500,000 Euro are given to the
company, 20% private equity has to come from the technology developer. Requirements are
that the technology is anticipated to build a competitive advantage within the respective
market and has a capable and skilful management team. The High-Tech Gründerfonds
acquires company shares of 15 % and grants a subordinate convertible loan.
The fund defers the interest (10 % p.a.) for the loan granted for a period of up to 4 years. The
term of the loan agreement totals 7 years. A second financing round is possible with a further
500,000 Euro. The training focuses on the development of strategic and business skills. The
technology developer is free to choose a management trainer from a pool of accredited
experienced experts.
The fund is supported by a public funding pot but reputable companies of the industry act as
co-financiers.
IP/A/ITRE/ST/2008-06 & 14
Page 122 of 126
PE 416.218

3. RECOMMENDATIONS
In the following chapter, recommendations are given based upon the findings of the
FUNDETEC research project. These recommendations are chosen because they seemed most
important within the qualitative research of the project but also most prominent when looking
at this paper and the issue of funding eco-innovation. They look at opportunities for the
development of further innovative and new strategies but also emphasise the need of
improving existing mechanisms. Some of the recommendations below target the public sector
specifically, but most of them have a holistic approach, taking into account the public and
private sector as well as the technology developer perspective and policy makers point of
view.
3.1. Integrated government strategies
Final demand should be driven through an enabling regulatory and legislative framework
integrated at the EU, national and regional levels. Supportive regulatory and tax environments
are key drivers of the development and financing of new technologies. Integrated government
strategies take into account all stages of development, and all available framework
programmes on the EU, national and regional level are required.
Mechanisms should never distort the market and subsidies should remain “smart”, such as
contingent grants and soft loans that have clear exit periods and are used to catalyse growth.
When markets have achieved a certain volume and success rate, market-based loan, guarantee
and equity mechanisms should be introduced that focus on mitigating risk, lowering
transaction costs and building capacity for private sector leadership in investing in clean
technology. Effective mechanisms address the entire financing development at all stages from
R&D until commercialisation with special attention to filling the prominent financing gaps.
Besides filling the gap they should increase private sector involvement and be phased out
over time, leaving the private sector financing solution in place. It should also address the
needs of all key stakeholders. In addition, a financial strategy of a public funding institution
has to take into account the initial obstacles as well as the technology developers’ individual
encountered barriers to access funding.
3.2. Barriers to Access Funding
Overcoming the barriers to accessing funding by addressing issues such as high
administrative barriers, which is particularly relevant on the EU-level, project preparation
problems, lack of management and communication skills, risk assessment, and lack of
awareness is an issue that needs attention from the public as well as private sector. Often the
money is available and can still not be accessed by the technology developers. Often time
constraints and capacity problems are a barrier that needs to be improved by considering the
individual needs of the developers.
3.3. Risk reduction and sharing
With financial instruments certain risks are shifted away from the project sponsors and
lenders to insurers and other parties who are able to underwrite or manage the risk exposure in
a better way. The public sector has different kinds of opportunities to shift or reduce risk. The
FUNDETEC report suggests the implementation of a guarantee fund to be able to support
projects that are currently not eligible for VC and mezzanine finance. Furthermore, it
emphasises the need for stronger private/public partnership.
IP/A/ITRE/ST/2008-06 & 14
Page 123 of 126
PE 416.218

Developers could benefit by obtaining a letter of intent from an industrial partner to trigger
investment for a demonstration project. A private investor or public agencies can guarantee
the output of the technology to reduce the risk to the industrial partner. There could be sharing
of the cost savings too, encouraging investors to provide the guarantee. A letter of intent from
a future buyer could act as a guarantee for a loan necessary to bring the technology to market.
Another alternative to this would be for developers to use funds raised from customer
prepayment.
Technology developers need to be encouraged with suitable start-up packages and risk
sharing instruments by public agencies to avoid them having to risk all their family assets to
support the development.
3.4. Regional authorities eco-innovation strategy
Regional authorities should in particular focus their attention on:
- identifying the stakeholders of an “eco-innovation regional strategy”;
- demonstrating how to develop a regional SWOT (strengths, weaknesses, opportunities
and threats) analysis in the field of “eco-innovation”;
- addressing innovative approaches to offer citizens and SMEs compelling incentives to
buy eco-innovative products;
- building a joint vision/strategy and synergies between regions;
- providing support to SMEs;
- making use of public funding mechanisms on all levels as well as private sector
funding mechanisms.
3.5. Adaptation to Local Market Conditions
The chosen integrated overall strategy (see above) should include the specific institutional and
credit characteristics of target end-user sectors within the region or country. The nature of the
credit and financial needs of end-users and the specific sector will vary as much as the local
market financing conditions. This also helps to ensure market demand via lucrative and
attractive clean technology investment opportunities within companies whose activities can
generate demand for financing.
3.6. Public sector performance criteria
Clear and measurable performance criteria, which allow the evaluation of the achievement of
the overall goals should be implemented in the public sector. Overall goals should focus on
the dissemination of clean technologies instead of other desirable policy or economic targets.
Pro-active communication with the private sector is crucial to implementing successful public
sector financing mechanisms.
3.7. Green saving accounts
Furthermore, the FUNDETEC report recommends scaling a European strategy towards green
saving bank accounts/green fund schemes to provide capital for environmental technologies
and ventures through existing bank savings products. A successful example for this
instrument is the Netherlands Green Funds (Senternovem).
IP/A/ITRE/ST/2008-06 & 14
Page 124 of 126
PE 416.218

3.8. Green public procurement and green saving accounts
Procurement policy is one of the few policy levers that are within the direct control of
governments. In most Western industrial economies government procurement is typically a
large share of overall economic activity. Procurement policy that sets high standards for
emissions, waste reduction and reuse, carbon intensity and resource and energy efficiency can
be a major driver of structural change across the whole EU economy. It can create European
markets for environmental technology, particularly for disruptive technologies and system
innovation, which in turn will allow domestic developers to more easily achieve economies of
scale and compete globally.
IP/A/ITRE/ST/2008-06 & 14
Page 125 of 126
PE 416.218

BIBLIOGRAPHY
FUNDETEC (2007) FUNDETEC ‘Funding the development of Environmental Technologies’ funded by
the EU, 2007, Research Consortium: Banque Populaire, EPE, forseo GmbH, IZT, SDRC, TBLI, TBLI CG
URL: http://www.forseo.de/deutsch/downloads.html
UNEP (2005) UNEP/ BASEL AGENCY FOR SUSTAINABLE ENERGY ‘Public Finance Mechanisms to
Catalyze sustainable energy sector growth’, 2005, pp 14-44
UNEP (2006) UNEP/ BASEL AGENCY FOR SUSTAINABLE ENERGY ‘Public Finance Mechanisms to
Increase Investment in Energy Efficiency‘, 2006, pp 22 - 38
Waldmann A (2007) Waldmann A., ‘Performance Contracting Programme of the Berlin Energy Agency‘,
Presentation 31 May 2007
Websites:
European Commission: Entrepreneurship and innovation programme (EIP)
http://ec.europa.eu/cip/
European Investment Bank: Risk Sharing Finance Facility
URL: http://www.eib.org
High-Tech Gründerfonds
URL: http://www.high-tech-gruenderfonds.de/
Senternovem Environment & Technology Programme (ETP)
URL: http://www.senternovem.nl/milieutechnologie/English/index.asp
Sustainable Development Technology Canada
URL: http://www.sdtc.ca
IP/A/ITRE/ST/2008-06 & 14
Page 126 of 126
PE 416.218