Study "Research and Technology Competence for a Sustainable
Transcription
Study "Research and Technology Competence for a Sustainable
Research and Technology Competence for a Sustainable Development in the BRICS Countries Study of the Fraunhofer Institute for Systems and Innovation Research for the German Council for Sustainable Development Rainer Walz Katrin Ostertag Wolfgang Eichhammer Nele Glienke Arlette Jappe-Heinze Wilhelm Mannsbart Jan Peuckert Rainer Walz Katrin Ostertag Wolfgang Eichhammer Nele Glienke Arlette Jappe-Heinze Wilhelm Mannsbart Jan Peuckert Research and Technology Competence for a Sustainable Development in the BRICS Countries collaborators A. Enzmann, R. Frietsch, N. Helfrich, F. MarscheiderWeidemann, J. Rager, C. Sartorius, M. Strauch, Fraunhofer ISI as well as Han Xiaoding, Fraunhofer Representative Office Beijing; Can Wang, Tsinghua University, Dep. of Env. Science and Engineering; Leena Srivastava, The Energy and Resources Institute TERI (Delhi); Vitaly Gorokhov, Deutsch-Russ. Kolleg, Univ. Karlsruhe/Moscow State University Ricardo Rose, Deutsch-Brasilianische Auslandshandelskammer; Reinie Biesenbach, Global Research Alliance (GRA), Pretoria Karlsruhe, May 2008 Preface Sustainable development represents a growing challenge for science. Science is responsible for informing us about the type and extent of global problems concerning the climate, the environment, energy supply and the social dimension of "development". It is expected to develop locally effective solutions for global social problems of high complexity. Results from research and science have contributed significantly to being able to better predict our paths into the future in the sense of scenarios, for example, regarding climate change. Analyses such as those by the Intergovernmental Panel on Climate Change (IPCC) or the Stern Report on the expected future costs of climate change present us with clear opportunities and ways to achieve a turnabout, but also with the consequences of a failure to act. We need a guiding line in order to be able to construct the foundations for an informed debate from the data, models and measurements. The concept of sustainable development is necessary in order to make the right decisions for our future under uncertain conditions. Which are the technologies to invest in? Where will new, as yet unknown and unexplored fields emerge? One example: Is science able to show us a way to use CO2 as a raw material and not regard it as waste? Science is working towards Utopia. Given the many open questions, risks, opportunities, demands and decisions to be made: It remains undisputed that the necessary reorganization of our society will not succeed without • technological and social innovations, • thinking in processes and institutional developments, • the integration of solutions from politics, science and the economy. The burdens imposed by modernization upon the environment and society are not only challenges for highly industrialized countries which are concerned with decoupling environmental and resource consumption from economic processes. Fast growing economies with an increase of GDP of more than 8% per year have long been causing serious and dramatic damages to the environment and the social cohesion of societies which eat up a large part of the welfare impacts. This results in increasing resource scarcity and rising prices for raw materials as well as a loss of biodiversity. To manage a global turnaround in the direction of sustainable development, a fundamental role will be played by building up research and knowledge capacities in sustainability when shaping our ties with developing and newly industrializing countries. Against this background, the German Council for Sustainable Development together with the GTZ (Gesellschaft für Technische Zusammenarbeit GmbH) conducted a dialogue about sustainability and growth with large emerging economies and transition countries in 2005. The result was that the Council for Sustainable Development recommended the German federal government to give this kind of dialogue initiative more scope in its national sustainability policy. The German Federal Ministry for Education and Research has followed this advice and is continuing a dialogue project in cooperation with the German Development Institute (DIE) with the title "Dialogue 4S: Sustainable Solutions - Science for Sustainability - International Dialogue of the BMBF on sustainability research". This aims to break open the thematic restriction and widen the focus of Germany's technology and research competence in sustainability. To lay the ground for and, at the same time, provide an impulse for this research dialogue, the Council for Sustainable Development commissioned a comparative study by the Fraunhofer Institute for Systems and Innovation Research (FhG ISI) to analyse the technological performance and scientific competence in Brazil, Russia, India, China, South Africa (BRICS) and Germany, the results of which are now available. Six selected sustainability topics were subjected to a critical inventory and supplemented by German companies' experiences of cooperation in BRICS countries. For the first time, the study puts the global responsibility of Germany's research competence to the test. Germany has a responsibility to act as partner in structuring the economic development in developing countries and emerging economies in a sustainable way by allowing them access to its knowledge and technical solutions. The future markets of these countries will increasingly determine the demand for research results on sustainability. The international orientation of the research landscape and the coming together and interaction of different cultural systems, experiences and access to knowledge and technology development ultimately represent a source for the development of innovations. The Council would like to thank all those who made this study possible with their contributions, discussions and cooperation. Special thanks go to the scientists in the partner countries and the private-sector experts in globally active German companies. The Council also gratefully acknowledges the well-founded and broad analysis of the research and innovation systems by the authors at the Fraunhofer Institute for Systems and Innovation Research. On behalf of the German Council for Sustainable Development Dr. Günther Bachmann, Secretary General Executive Summary i Executive Summary Against the backdrop of the fast development in rapidly growing economies, the challenge presented by sustainable development is becoming more and more urgent from a global perspective. Taking the strong and increasing links between many transformation and newly industrialising countries (NIC) and Germany into account raises the question of how to design these links so that they promote global sustainability. In the context of the further development of the European Research Area, the EU is also emphasising the objective of contributing to sustainable development through increased Science and Technology (S&T) cooperation with rapidly growing economies. This is the background to the initiative launched by the Federal Ministry for Research and Education (BMBF) together with the German Council for Sustainable Development (Rat für Nachhaltige Entwicklung, RNE) entitled “Sustainability Solutions through Research in Brazil, Russia, India, China, South Africa plus Germany”. Within this context, this report determines the research and technological competence in the BRICS countries plus Germany in six selected fields of sustainability: 1. Renewable energies and CO2-free fossil energies as two key – and partly competing – technologies for supplying energy, 2. Energy efficiency in buildings, 3. Water technologies (supply and waste water disposal systems), 4. Material efficiency, 5. Transport infrastructure and mobility, as well as 6. Accelerating the diffusion and innovation processes in the 5 above fields of technology as a cross-cutting topic. The study follows a “Systems of Sustainability Innovations Approach”. It focuses on the relations between general framework conditions, the research system, technological capability and the conditions for technology diffusion and cooperation. It is increasingly recognised that, within the scope of catch-up processes, the absorption of developed technologies, building the capacity to further develop these technologies and to bring them to international markets are not separate phenomena, but closely interlinked. The following questions are examined: • Outlining the general framework conditions in the countries with regard to the readiness to adopt new technologies and implementing innovation activities. • Analysis of research institutions and main fields of research in the six sustainability fields in the BRICS countries as well as a statistical evaluation of German research activities. ii Executive Summary • Analysis of (technological) capability in the sustainability fields using innovation indicators. • Analysis of the cooperation experiences of German companies from the perspective of the actors involved in order to supplement the statements resulting from the more indicator-based analyses. The data on quantitative innovation capacity give a first indication of the general conditions for innovation. The volume of national R&D expenditure, the sectoral share of the R&D expenditure of industry or the number of scientists is much higher in China than in the other BRICS countries. As far as the specific values are concerned, the BRICS countries are on a similar level, except for India, which lags behind. Based on the main indicator of R&D intensity, however, there is still a clear gap between BRICS and OECD countries. Figure 1 Survey based profile of general innovation conditions for sustainability innovations 1. Human resources 2. Technology absorption 3. Innovation friendliness 4. Environmental protection Russia China Brazil South Africa India Germany The analysis of general framework conditions for innovation also makes use of the survey results of the International Institute for Management Development (IMD) and the World Economic Forum (WEF). The indicators are bundled into four fields: human resources, technological absorption, innovation friendliness and importance of environmental protection. Germany has the best general conditions for (sustainable) innovation in all four categories. India and South Africa are ranked as the BRICS countries with the best starting conditions. However, environmental protection is not particularly marked in India and South Africa's biggest problem is the availability of Executive Summary iii human resources. The conditions in Brazil and China are less favourable. In Brazil there are clear deficiencies in innovation friendliness, especially regarding the regulations governing start-ups. China’s problems cannot be limited to a single factor of influence. The general framework conditions are assessed as being the least favourable for Russia. Although the share of the BRICS countries in consolidated German direct investments is still small, their large domestic market potentials and the opportunities for growth make it likely that they will increasingly become the preferred locations for new investments of German companies. This is supported by evidence for the attractiveness of these countries in the relevant surveys, the importance they already have in global shares and their increasing shares in annual German direct investments. Different aspects are of particular relevance in the different BRICS countries: • Brazil’s strengths are in its raw materials and agricultural sector which lead to new direct investments and supplement its long established investments – for instance in the automotive sector. • In Russia, energy and raw materials form the main base for direct investments. • In India, the service sector is very attractive including services beyond IT services. Indian industry is currently still in a development phase. • In spite of many risk factors, China clearly leads in receiving capital inflows from all over the world, whereby the main emphasis is on industry. This corresponds to a strategy – often referred to as 'extended workbench' – to build up production capacities in China, in order to gain not only comparative cost advantages but also access to a gigantic and rapidly expanding domestic market. • In South Africa, foreign direct investments have played an important role in making vehicle construction more significant. In none of the five BRICS countries does the research and innovation policy specifically target the decoupling of environmental and resource consumption from economic development. The primary objective in all BRICS countries is to promote innovation in the corporate sector. With a few exceptions, there are no separate institutions specifically dedicated to sustainability research in the science and technology (ST) policy of the countries regarded. Sustainability does not constitute an autonomous field of research support; if it is covered at all, this takes place within general research and innovation policy measures. Applied R&D is often directly linked with government investment measures, primarily where infrastructure investments in energy, water and transport are concerned. There are no reliable figures on the main areas of promotion within the sustainability fields which could be used for comparisons beyond the five countries. Based on the iv Executive Summary qualitative estimates of the experts questioned, the following national strengths are highlighted: • Brazil: renewable energies from biomass followed by R&D on water management. • Russia: more efficient conversion of primary energy as well as R&D on hydrogen technologies. • India: diffusion of decentralised, renewable energy sources; sustainability and fighting poverty. • China: development of renewable energies; efficiency standards for buildings; research in transport sector but without clear reference to environmental issues. • South Africa: R&D on water management; extensive activities are also planned in public rail transport. The lack of young scientists is a decisive obstacle to capacity development in sustainability research - and in public research in general - in all the BRICS countries, except China. Especially against the backdrop of strong economic growth and the related career opportunities offered in the private sector, a career in scientific research is comparatively unappealing in these countries. At the same time, domestic companies lack the absorption capacity for highly qualified graduates. The technological capability of the BRICS+G countries is examined with the help of patent and foreign trade indicators. On the one hand, this is a methodology which is well established in reporting technological performance; on the other hand, for the first time the focus is on sustainability-relevant technologies in economies outside the OECD so that the methodology had to be modified in various ways. For example, the technologies relevant to sustainability had to be identified in the patent and foreign trade classification. In order to cope with the international scope of analysis, the data searches concentrate on transnational patent applications and global trade which encompasses all the countries. The strong position of Germany is already apparent from the fact that 20 % of international patents and 15 % of global exports in the sustainability-relevant technologies regarded originate here. It is clear that Germany has enormous potential and, at the same time, the global responsibility to provide knowledge and technologies needed for sustainable development at a global level. The shares of BRICS countries in the identified patents for sustainability technologies range from a few tenths of a per cent to 1 % for China. China has the highest exports of sustainability-relevant technologies of all the BRICS countries, followed by Brazil. In both countries, the world trade shares are considerably higher than the patent shares. This indicates that both countries are quite active in foreign trade, but that this is grounded on a below average knowledge base. The characterisation of the two Executive Summary v countries as “extended workbench” (China) or “resource supplier” (Brazil) thus also applies to a certain extent to sustainability-relevant technologies. When looking at the figures as a ratio to the number of inhabitants, it is noticeable that activities with regard to sustainability technologies in India are lower compared with the other BRICS countries. This is evidence for the overall substantial gap in economic development which India still shows at present compared with the other BRICS countries. Figure 2: Share of BRICS+G countries in global exports and international patents for the sum of the 5 sustainability fields regarded 10.0% 25% values BRICS 15% 5.0% 10% 2.5% values DE 20% 7.5% 5% 0.0% 0% BR patent share CN IN world trade share RU patent share DE ZA DE world trade share DE The relevance of the sustainability technologies in each respective country is also revealed in its specialisation profile. This shows the technological capability of the sustainability technologies for each country compared with the average of all technologies. Positive values indicate an above average activity of the country regarding sustainability-relevant technologies, negative values a below average one. The results show clear differences between the countries: • Brazil has been specialising on sustainability technologies in both knowledge competences and international trade. • Russia shows considerable knowledge competences, but weaknesses in converting these into internationally competitive technologies. • Overall, sustainability-relevant technologies play a below average role in India. • Overall, sustainability-relevant technologies play an almost average role in China. vi Executive Summary • South Africa has been specialising on sustainability technologies with regard to knowledge competence, but this is only converted into an average trade specialisation. • Germany is not only a key player in sustainability technologies in absolute numbers; the specialisation profile shows that these technologies form a stronghold of German knowledge competence and international trade. Figure 3: Specialisation patterns of BRICS+G countries for all 5 sustainability fields regarded sustainability technologies regarded specialisation exports 100 BR CN IN 0 RU ZA DE -100 -100 0 specialisation patents 100 Fraunhofer ISI Germany achieves above average specialisation in all the regarded fields. However, the aggregated values disguise the fact that there are considerable differences between the five technological sustainability fields in the respective BRICS countries. For instance, the individual countries show clear emphases in developing competences. Brazil specialises in renewable raw materials, among others; South Africa in material efficiency and mobility technologies. China’s performance in the building sector and mobility technologies is above average. On the other hand, the BRICS countries also show similarities. There are high patent activities in water technologies, but there is still a considerable dependency on imports to cover domestic demand. A similar picture emerges for energy sources with regard to the significance of technology imports for the BRICS countries. To this extent, these two areas at present Executive Summary vii reflect the classical picture of technology transfer, where countries such as Germany act as the supplier of know-how and technology and the BRICS countries as technology takers. However, the recent massive upward trend in patent activities especially in China and to a smaller extent in India – makes it seem very realistic that the BRICS countries will become more heavily involved in technology development in this segment in the foreseeable future. The capacity to accelerate diffusion and innovation processes was examined with the aid of a publication analysis of social science-related sustainability research as well as with case studies and interviews. The publication analysis showed above average performance for South Africa. All the other countries regarded - also Germany – only show below average activity in this field. The interviews with companies and other institutions focus on mechanisms which can contribute to accelerating diffusion and innovation processes in the direction of sustainability. Regulation almost always emerged as a necessary framework condition for the formation of strong market demand. The relevance of the regulations of leading industrial nations in the BRICS countries is especially noticeable, above and beyond the respective national regulation context. The example of water-based coatings shows that German automobile manufacturers apply German laws in their overseas branches as well, unless local regulations are even stricter. International spillover effects are also triggered by the fact that, within the framework of supply chain management, exporting companies from BRICS countries are subject to the demands – sometimes including legal requirements – of their foreign clients. In general, a process of globalisation can be observed at the level of the origin and the impact of environmentally-relevant regulation which also has repercussions on the strategy formation of German companies. This refers to the necessity but also the opportunities which may lie in the development and standardisation of regulation in international cooperation. Besides these acceleration mechanisms, which are features of the public sector, there is another market-related "door opener" for technology transfer to BRICS countries. Outfitters tend to follow their German clients who establish branches abroad in BRICS. The interviews showed indications that similar mechanisms can also result in corresponding actor constellations between the BRICS countries against the background of increasing South-South cooperation. Numerous obstacles have to be removed if innovation and diffusion processes are to be accelerated. In several cases it has become clear that the company-external environment plays a particularly important role here. This concerns the value chain to start with, i. e. the network of upstream suppliers, service providers and customers viii Executive Summary within which the company is embedded. If specific products or actors are missing here, it could be that necessary complementary inputs to the application of a technology are not available. The task of guaranteeing a suitable environment with regard to embedding the innovation into the value chain (to the extent that this is possible) is often not taken seriously enough, according to the statements made in the interviews in the BRICS countries. Situations then result in which – partly through publicly forced demand – certain products are present on the market, but can only achieve positive environmental effects to a limited extent on account of a lack of embedding in the system as whole. Those interviewed also report differences in mentality as an obstacle to cooperation between BRICS and Germany. These are revealed especially in questions concerning organisation and quality assurance as well as the implementation of environmental regulations. Generally, environmental awareness was found to be only weakly developed. Those questioned would like greater involvement of the German embassies or German politicians in passing on contacts, supporting the construction of local networks and setting up platforms for product presentations (e.g. trade fairs), especially as increased activities on the part of rival countries are being observed in this domain. Overall, the results clearly show an excellent starting position of Germany as a potential technology supplier in cooperation with BRICS countries. In the BRICS countries, the sustainability fields regarded do not actually represent key areas of national competence and development strategies, but there are numerous points of contact and considerable dynamics in the development of absorptive capacities. However, all the BRICS countries are facing the challenge that competence on its own does not guarantee environmental improvement or a strong export position. In contrast to Germany, the capability within the BRICS countries is much more heterogeneous and there are some disparities in the competences between the different elements of the innovation system. The emergence of a consistent competence profile is thus one of the most urgent tasks in the BRICS countries. Political support of cooperation efforts should consider the different cooperation constellations and the respective strategies of the actors involved. In the fields in which the competence of BRICS countries is weak, the demand for these kinds of technologies is often a bottleneck factor. Policies could support the exchange of experience by designing environmental policy measures and building up absorptive capacities. Cooperation frequently occurs in those areas in which competence building in the BRICS countries is still taking place but has already led to considerable capacity increases. Especially in small and medium-sized companies there is then uncertainty about how the protection of intellectual property can best be guaranteed during Executive Summary ix cooperation under these conditions. Intensified support and advice on the dangers but also on the existing opportunities to successfully assert companies' own rights would be helpful here. Other starting points for policy measures concern cooperation in the field of policy formulation. An important beginning is exchanging experiences of how sustainability topics are integrated into shaping research priorities in the individual countries. Another topic is the coordination of the individual policy fields since the systematic strengthening of the research and technology competence which is essential for sustainable development is the subject of several policy fields. Finally, from a strategic viewpoint, it should be considered that the policy design of such a complex domain requires monitoring of the respective strengths and weaknesses and their modifications. It should therefore be analysed which periodically recurrent information requirements are necessary for a systematic policy design to strengthen the research and technology competence for sustainable development. Table of Contents I Table of Contents Preface................................................................................................................ i Executive Summary........................................................................................... i 1 2 3 Introduction................................................................................................. 1 1.1 Objectives and Terms of Reference ............................................ 1 1.2 Conceptional Background and Structure of the Report ............... 3 Framework Conditions............................................................................... 8 2.1 Basic Data on Innovation Capacity.............................................. 8 2.2 Analysis of the Regulatory Regime............................................ 10 2.2.1 Methodology .............................................................................. 10 2.2.2 Human Resources..................................................................... 12 2.2.3 Technology Absorption .............................................................. 13 2.2.4 Innovation-friendliness............................................................... 14 2.2.5 Status of Environmental Protection ........................................... 16 2.2.6 Summing Up.............................................................................. 17 2.3 Direct Investments..................................................................... 20 2.3.1 Global Direct Investments.......................................................... 20 2.3.2 Direct Investments of German Companies in the BRICS States ........................................................................................ 23 2.3.3 Summing Up.............................................................................. 25 Research Programmes ............................................................................ 27 3.1 Research Programmes in the BRICS Countries........................ 27 3.1.1 Methodology .............................................................................. 27 3.1.2 An Overview of the BRICS Country Profiles .............................. 29 3.1.2.1 Brazil.......................................................................................... 29 3.1.2.2 Russia........................................................................................ 30 II 4 5 Table of Contents 3.1.2.3 India ...........................................................................................32 3.1.2.4 China .........................................................................................33 3.1.2.5 South Africa ...............................................................................35 3.1.3 Summing Up ..............................................................................36 3.2 Sustainability Research in Germany..........................................37 3.2.1 Data Basis and Analytical Methods ...........................................38 3.2.2 Research Activities in the Selected Subject Areas ....................40 3.2.3 Focuses within the Subject Areas..............................................43 Capability in the Selected Sustainability Fields.....................................48 4.1 Technological Sustainability Fields ............................................48 4.1.1 Methodology ..............................................................................48 4.1.2 Renewable Energies and CCS ..................................................52 4.1.3 Energy Efficiency in Buildings....................................................58 4.1.4 Water Services ..........................................................................62 4.1.5 Material Efficiency......................................................................67 4.1.6 Transport Infrastructure and Mobility .........................................71 4.1.7 Summary of All the Sustainability Fields Examined ...................76 4.2 Capability in Non-Technical Sustainability Research.................78 Analysis of Diffusion and Innovation Processes...................................85 5.1 Objective and Methodology .......................................................85 5.2 Results by Topic ........................................................................87 5.2.1 Renewable Energies and CCS ..................................................87 5.2.1.1 Market Potentials in BRICS .......................................................87 5.2.1.2 Market Players...........................................................................89 5.2.1.3 Knowledge Base........................................................................91 5.2.1.4 Experiences in Germany............................................................91 5.2.1.5 The Role of CDM for Renewable Energies in BRICS ................92 5.2.1.6 Summary ...................................................................................93 5.2.2 Energy Efficiency in Buildings....................................................94 Table of Contents III 5.2.2.1 Market Potentials for and Obstacles to Energy-Efficient Building...................................................................................... 94 5.2.2.2 Drivers of Demand..................................................................... 96 5.2.2.3 Market Players........................................................................... 97 5.2.2.4 Summary ................................................................................... 98 5.2.3 Water Services .......................................................................... 99 5.2.3.1 Framework Conditions in BRICS ............................................... 99 5.2.3.2 Customers in BRICS ............................................................... 100 5.2.3.3 Other Market Players in BRICS ............................................... 101 5.2.3.4 Experiences in Germany and Prospects for BRICS ................ 102 5.2.3.5 Summary ................................................................................. 103 5.2.4 Material Efficiency ................................................................... 103 5.2.4.1 Drivers of and Obstacles to Demand in BRICS for WaterBased Coatings in the Automobile Industry ............................. 103 5.2.4.2 Actor Structures in Water-Based Surface Coating Systems................................................................................... 104 5.2.4.3 Utilisation of Shredder Residues in Germany .......................... 105 5.2.4.4 Utilisation of Shredder Residues in BRICS.............................. 106 5.2.4.5 Summary ................................................................................. 107 5.2.5 Mobility and Logistics .............................................................. 108 5.2.5.1 Demand for Synthetic Biofuels in BRICS................................. 108 5.2.5.2 Cooperation between Germany and the BRICS Countries to Produce Synthetic Biofuels.................................. 109 5.2.5.3 Diffusion of Synthetic Biofuels in Germany.............................. 111 5.2.5.4 Regulation of and Demand for Low-Emission Heavy Good Vehicles (HGVs) ............................................................ 112 5.2.5.5 Supply Structure for Low-Emission HGVs ............................... 114 5.2.5.6 Demand for Rail Transport Systems in China.......................... 115 5.2.5.7 Obstacles to Cooperation in China Based on the Example of Rail Transport Systems ........................................ 116 5.2.5.8 Supply of and Demand for CO2-Neutral Logistics Services................................................................................... 117 5.2.5.9 Summary ................................................................................. 119 5.3 Results spanning more than one sustainability field ................ 120 IV 6 7 Table of Contents 5.3.1 Financing .................................................................................120 5.3.2 Clean Development Mechanism (CDM)...................................124 5.3.3 The United Nations Cleaner Production Programme...............126 5.4 Summary of the interview results.............................................129 General Summing Up and Conclusions ...............................................132 6.1 Brazil........................................................................................132 6.2 Russia......................................................................................134 6.3 India .........................................................................................137 6.4 China .......................................................................................139 6.5 South Africa .............................................................................143 6.6 Germany ..................................................................................146 6.7 Conclusions for Cooperations..................................................147 Literature .................................................................................................151 Table of Contents V Figures Figure 1-1: Systems of Sustainability Innovation ...............................................5 Figure 2-1: Sub-sector Profiles and Total Ranking of the Factor Human Resources .....................................................................................12 Figure 2-2: Sub-sector Profiles and Total Ranking of the Factor Technology Absorption..................................................................14 Figure 2-3: Sub-sector Profiles and Total Ranking of the Factor Innovation Friendliness..................................................................16 Figure 2-4: Indicators and Total Ranking of the Factor Environmental Protection ......................................................................................17 Figure 2-5: Survey based profile of general innovation conditions for sustainability iInnovations..............................................................18 Figure 2-6: Annual Direct Investments and Accumulated Stocks of BRICS Countries* in the Year 2005 (US $ m)................................21 Figure 3-1: Groups Receiving Project Promotion acc. to Subject Areas 2003-2005 .....................................................................................42 Figure 4-1: Shares of the BRICS+G countries in international patents and the world exports of industrial goods.......................................52 Figure 4-2: Share of BRICS+G countries in world exports and international patents in the field of “renewable energies and CCS” .............................................................................................54 Figure 4-3: Specialisation pattern of the BRICS+G countries in renewable energies and CCS........................................................55 Figure 4-4: Share of the exports of BRICS+G countries in the field of "Renewable energy sources and CCS" to other BRICS+G countries in %................................................................................57 Figure 4-5: Shares of the BRICS+G countries in global exports and international patents in the field of energy-efficient buildings ........................................................................................59 Figure 4-6: Specialisation pattern of the BRICS+G countries in energyefficient buildings...........................................................................61 Figure 4-7: Share of exports of the BRICS+G countries in energyefficient buildings to other BRICS+G countries in % ......................62 Figure 4-8: Shares of the BRICS+G countries in world exports and international patents in the field of water........................................64 VI Table of Contents Figure 4-9: Specialisation of the BRICS+G countries in the field of water............................................................................................. 65 Figure 4-10: Share of exports of the BRICS+G countries in the field of water to other BRICS+G countries in % ........................................ 66 Figure 4-11: Shares of the BRICS+G countries in world exports and international patents in material efficiency..................................... 68 Figure 4-12: Specialisation of the BRICS+G countries in material efficiency....................................................................................... 69 Figure 4-13: Share of exports of the BRICS+G countries in material efficiency to other BRICS+G countries in % .................................. 70 Figure 4-14: Shares of the BRICS+G countries in world exports and international patents in the field of mobility.................................... 72 Figure 4-15: Specialisations of BRICS+G countries in the field of mobility ......................................................................................... 73 Figure 4-16: Share of BRICS+G countries' exports in the field of mobility to other BRICS+G countries in %.................................................. 75 Figure 4-17: Shares of the BRICS+G countries in world exports and international patents for all 5 sustainability fields examined .......... 77 Figure 4-18: Specialisation of the BRICS+G countries in all 5 sustainability fields ........................................................................ 78 Figure 4-19: Publication figures in six fields of social science sustainability research, 2001 - 2005.............................................. 82 Figure 4-20: Specialisation of the BRICS+G countries in publications of social science sustainability research, 2001 - 2005....................... 84 Figure 6-1: Specialisation of Brazil in the Selected Sustainability Fields ....... 133 Figure 6-2: Specialisation of Russia in the Selected Sustainability Fields .......................................................................................... 135 Figure 6-3: Specialisation of India in the Selected Sustainability Fields......... 138 Figure 6-4: Specialisation of China in the Selected Sustainability Fields ....... 141 Figure 6-5: Specialisation of South Africa in the Selected Sustainability Fields .......................................................................................... 144 Figure 6-6: Specialisation of Germany in the Selected Sustainability Fields .......................................................................................... 146 Table of Contents VII Tables Table 2-1: Basic Data on Innovative Capacity in the BRICS+G Countries, 2004 ...............................................................................9 Table 2-2: Strengths and Weaknesses of the BRICS countries*.....................19 Table 2-3: German Direct Investments in BRICS Countries in Manufacturing Industry; in € m (sum 2003 to 2005).......................25 Table 3-1: Research Projects in Germany according to Ufordat database, 2003-2005 ....................................................................41 Table 3-2: R&D Funds for Projects beginning in 2003-2005 according to Foekat .......................................................................................41 Table 3-3: Research Projects according to Technology Field in Ufordat, 2003-2005 .......................................................................45 Table 3-4: Funding Priorities according to Technology Areas, Foekat 2003-2005 .....................................................................................46 Table 4-1: Publications of the BRICS+G countries 2003 and 1993.................80 Table 4-2: Sustainability topics in social science research in BRICS+G countries........................................................................................81 Table 5–1: Most important potentials for renewable energies according to interview results.........................................................................88 Table 5-2: Emission standards for HGVs in BRICS+G .................................113 VIII Table of Contents Annex A Annex.......................................................................................................157 A.1 Annex to Section 2.2................................................................157 A.2 Annex to Section 2.3................................................................162 A.3 Sustainability Research in the BRICS Countries: Individual Country Profiles .......................................................164 A.3.1 Brazil........................................................................................164 A.3.1.1 The Brazilian innovation system ..............................................164 A.3.1.2 Core themes of sustainability research in Brazil ......................167 A.3.1.3 Research funding agencies .....................................................171 A.3.1.4 Leading research organisations...............................................174 A.3.2 Russia......................................................................................176 A.3.2.1 The Russian innovation system ...............................................176 A.3.2.2 Core themes of sustainability research in the Russian Federation................................................................................179 A.3.2.3 Research funding agencies .....................................................180 A.3.2.4 Leading research organisations...............................................184 A.3.3 India .........................................................................................186 A.3.3.1 The Indian innovation system ..................................................186 A.3.3.2 Core themes of sustainability research in India .......................188 A.3.3.3 Research funding agencies .....................................................191 A.3.3.4 Leading research organisations...............................................195 A.3.3.5 Importance of R&D for sustainability – expert views ................197 A.3.4 China .......................................................................................201 A.3.4.1 The Chinese innovation system...............................................201 A.3.4.2 Core themes of sustainability research in China......................203 A.3.4.3 Research funding agencies .....................................................205 A.3.4.4 Leading research organisations...............................................208 A.3.5 South Africa .............................................................................210 A.3.5.1 The South African innovation system.......................................210 A.3.5.2 Core themes of sustainability research in South Africa............213 Table of Contents IX A.3.5.3 Research funding agencies ..................................................... 217 A.3.5.4 Leading research organisations............................................... 220 A.3.6 References for Country Reports .............................................. 222 A.3.7 Contributing Experts ................................................................ 224 A.3.7.1 Brazil........................................................................................ 224 A.3.7.2 Russia...................................................................................... 225 A.3.7.3 India......................................................................................... 227 A.3.7.4 China ....................................................................................... 229 A.3.7.5 South Africa ............................................................................. 230 A.4 Annex to Section 4.1 ............................................................... 232 A.5 Annex to Section 4.2 ............................................................... 242 A.6 Annex to Chapter 5.................................................................. 243 A.6.1 Overview of important discussion points with companies and experts.............................................................................. 243 A.6.2 Overview of the actors interviewed and the innovations observed.................................................................................. 244 1 Introduction 1 Introduction 1.1 Objectives and Terms of Reference 1 Against the backdrop of the extremely fast development of rapidly growing economies, the challenge presented by sustainable development is becoming increasingly urgent, from a global perspective. The question arising in this context is how economic growth in the transformation countries and newly industrialising countries (NIC) can be so shaped that the attainment of sustainability goals in the ecological, social and economic dimensions is not undermined. Simultaneously, achieving sustainable development also makes great demands of industrialised countries like Germany. Germany is therefore developing its research and knowledge competences in a direction which contributes to questions of global resources and sustainability. If the strong and constantly increasing links between many transformation and newly industrialzing countries and Germany are considered, the question arises of how to design these links so that they promote global sustainability. At the same time, in its Green Book on the further development of the European Research Area, the EU (2007) emphasises the target of contributing to sustainable development through intensified science and technology (S&T) cooperation with the fast growing economies. Against this background, the Federal Ministry for Education and Research, in collaboration with the Council for Sustainable Development, launched an initiative entitled "Sustainability Solutions through Research in Brazil, Russia, India, China, South Africa plus Germany". The goal of this initiative is to exchange experiences about sustainability strategies and sustainability research among the participating countries, in order to utilise the potentials and results of sustainability research even more efficiently. The study's target is to determine the research and technology competences in the BRICS countries and Germany in six selected fields of sustainability 1. renewable energies and CO2-neutral fossil energies as two key – and partly competing – technologies in the field of energy, 2. energy efficiency in buildings as an important sub-area of energy efficiency, 3. water technologies (supply and waste water disposal systems), 4. material efficiency, 5. transport infrastructure and mobility, as well as 6. acceleration of the diffusion and innovation processes in the 5 above mentioned technology fields as a cross-cutting issue. 2 1 Introduction A reference basis should thus be created for identifying and implementing (cooperation) potentials to increase mutual knowledge and technology transfer between the BRICS states and Germany. The specialisation patterns of the countries and the experiences with cooperations gleaned up to now will be compared. The following tasks result from these objectives, namelý to: • Outline the general framework conditions in the countries with regard to their willingness to adopt new technologies and implement innovation activities. • Analyse research institutions and main research areas in the six sustainability fields in the BRICS countries as well as a statistical evaluation of German research activities (in these fields). • Analyse (technological) capability in the above mentioned sustainability fields. • Evaluate the cooperation experiences of German companies with the BRICS countries in the selected sustainability fields. Cooperations were undertaken with a number of research institutions in the BRICS countries, in order to analyse the research institutions and main focuses in the six selected sustainability fields. Furthermore, the questionnaire developed in this context was sent to a number of institutions and individuals, in order to base assessments of this field on as broad a foundation as possible. At this point we would like to express our thanks to these persons for their collaboration. The analysis of the direct investments was made possible by a special evaluation which the Bundesbank kindly placed at our disposal. Our special thanks, however, go to the 27 companies and institutions that were willing to be interviewed in connection with the fourth task. They all contributed decisively to the success of this study by providing their valuable information. The structure of the final report essentially mirrors the above sketched tasks. For a better understanding of the structure of the report, these chapters will be preceded by a short sketch of the conceptual framework which serves as heuristic for the questions discussed here and establishes the connections between the individual chapters. In order to make the report more readable, numerous empirical details have been transferred to the Annex and only essential findings are presented in the main body of text. 1 Introduction 1.2 3 Conceptional Background and Structure of the Report The environmental problems in the rapidly growing economies are becoming more acute and global environmental problems cannot be tackled without timely action in these countries. Thus anchoring the idea of sustainability in the economic development process as early as possible is gaining enormous significance. For the development process in the rapidly growing economies, the hope has been expressed that global objectives, such as stabilising the concentration of greenhouse gases or improving water infrastructure can be achieved through knowledge transfer and technology cooperations. Conceptionally, this matches the environmental-economic concept of "Tunneling through the Environmental Kuznets Curve" (cf. Munashinghe 1999; Walz/ Meyer-Krahmer 2003). When assessing potentials for knowledge transfer and possibilities of technological cooperations, questions concerning the knowledge-intensity of the technologies and the differences in the knowledge base between the countries emerge as important factors. Since the end of the 1980s, the important role of complementary capabilities has been the object of scientific discussion, with catchphrases such as social or absorptive capacity (Abramovitz 1986; Cohen/Levinthal 1990). The results of the knowledge management research (cf. e.g. Nonaka/ Takeuchi 1995; Hipp 2000), as well the research into economic catching-up processes (cf. e. g. Nelson 2004; Fagerberg/ Godinho 2005) have further intensified the significance of the absorptive capacity. At the same time, it must be borne in mind that measuring absorptive capacity remains a problem which can only be partially solved, as numerous influential factors can only be quantified with difficulty. Besides the knowledge- and technology-based factors, openness to new solutions, complementary branch clusters and the availability of userproducer interactions which favour fast learning processes are important factors (cf. Fagerberg 1995). It is more and more acknowledged that the absorption of developed technologies and the development of abilities to further advance these technologies and their international marketing are closely interwoven (Nelson 2007). Knowledge generation, which can be used for the further technical development of products, and successes in international competition thus also become a yardstick of absorptive capacity, particularly as they also indirectly infer openness to new solutions and international developments. Policies to promote knowledge transfer and technology cooperations must be in the interests of the participating political institutions. For the countries in the economic catching-up process, reduction of environmental pollution and availability of technology to build up modern infrastructure systems are important rationales. The economic significance of sustainability innovations also plays a role for countries oriented towards 4 1 Introduction foreign trade. The goals of the EU sustainability strategy, the High-tech Strategy of the German federal government, or the initiatives of the German Environment Ministry regarding an "ecological industrial policy" are all based on the logic of first mover advantages: an intensified (national) strategy in the corresponding technology and policy field, according to this argumentation, leads to the first mover countries specialising early in providing the goods necessary for this. In a subsequent extension of the international demand for these goods, these countries are then in a position to assert themselves against international competition, thanks to their early specialisation and the innovation lead they attained. In order to realise these first mover advantages, domestic suppliers must demonstrate long-lasting competitive advantages in the corresponding technologies. Here the conditions for establishing so-called lead markets play an important role. Establishing not easily transferable industrial clusters which consist in combining technological capability with demand that is open to innovations and favours early learning effects and their integration in differentiated production structures, are decisive pre-conditions for the success of a national innovation system (cf. Meyer-Krahmer 2004, Beise/Rennings 2005, Walz 2005; Jacob et al. 2005, Walz 2006). Besides the marketrelated factors and adaptable regulations, the technological capability of the technologies regarded and the competitiveness of complementary branch clusters are key conditions. The discussion about setting up lead markets has concentrated up to now primarily on the industrialised countries. In the recent past, however, increases in technological capabilities have also been ascertained in the rapidly growing economies: "During the last decade, the playing field in the international innovation competition is no longer being recruited only from the industrialised western countries, but has been greatly extended through the integration of the European periphery as well as the Asian catching-up countries, including China and India" (TLF 2006, p. 48). Thus they are increasingly in a position to build up a lead market position on their own. In connection with the integration of sustainability innovations in the economic catching-up processes, Walz/Meyer-Krahmer (2003) propose the thesis that the rapidly growing economies could display a particularly high potential to establish lead markets, especially with sustainability innovations. Background for this are a greater significance of regulation-dependent demand as well as less path dependencies, as the structures have not yet become as rigid as in "old" industrialised countries. With the prospect of lead markets for sustainability innovations emerging in the BRICS countries, the interest of these countries could change dramatically: sustainability technologies would not only become an element of technological modernisation and establishment of a domestic infrastructure, but also object of a world-market-oriented export strategy and 1 Introduction 5 would experience an enormous increase in importance within the catching-up strategy of the countries involved. For both strategies – knowledge transfer and establishing lead market positions – it is necessary that corresponding competences are developed and a well functioning innovation system is founded. Thus the heuristic of the innovation system, which more recent innovation research calls on to explain innovation activity (cf. e. g. Carlsson et al. 2002; Lundvall et al. 2002, Edquist 2005), also gains relevance for the analysis of sustainability innovations in catching-up processes. Newer forms of the "systems of innovation approach" emphasise a disaggregated analysis on a sectoral or technological level (Malerba 2005), as well as consideration of the functions of an innovation system which could facilitate a comparative systematisation between the countries (Smits/Kuhlmann 2004; Hekkert et al. 2007). Main tenet of this concept is that the production and diffusion of new solutions depend crucially on the interplay of the different actors in the innovation process. With regard to sustainability innovations, a triple regulatory challenge exists (Walz 2007), because environmental policy and infrastructure specific needs must be accounted for in addition to the R&D needs. This results in a specific “systems of sustainability innovation” approach (see Figure 1-1). In the framework of this heuristic, soft context factors (e. g. situative conditions for policy design and impacts) and aspects of a demand-oriented innovation policy (ISI 2006) can be analysed. Systems of Sustainability Innovation International trade Market Regulation Demand for sustainability technologies Environmental problems resource availability Environmental regulation Public utility regulation Industrial competences System in sustainability technologies Research research related System to sustainability technologies General framework conditions for innovations Policycoordination Industrial policy Context factors for policy design and impacts R&D Policy Internationale policies Figure 1-1: 6 1 Introduction For the following analysis of the six sustainability fields – Renewable Energies and Carbon Capture and Storage (CCS), Energy Efficiency in Buildings, Material Efficiency, Transport/Mobility, Water Technologies (Supply and Waste Water Disposal Systems), as well as Acceleration of Diffusion and Innovation Processes – in the BRICS+G countries, the following should be stated: • The general framework conditions for innovations also influence the execution of sustainability innovations. Besides the availability of human resources and other aspects of the knowledge base, subjects like environmental regulations in the sense of a demand-oriented innovation policy play a role. Other themes such as receptiveness to new ideas, which in the wider sense can be classified as social absorptive capacity, can be added. Furthermore, the knowledge base and technology availability in general are very strongly influenced by foreign direct investment. These topics will be dealt with in Chapter 2. • The research system and R&D policies in the relevant sustainability fields are important components of the "system of sustainability innovations" in the countries investigated. Their prime function is to build up and continually improve a corresponding knowledge base in the countries. This subject complex is the main topic of Chapter 3. • Developing technological competences in the sustainability fields being examined is a key indicator not only for the absorptive capacity of sustainability technologies, but also the starting situation with regard to building up lead market positions. In addition, international patents and successes in foreign trade in particular indicate to what extent a country is already able to 'open up' internationally in the respective technology field. These topics will be examined in Section 4.1. • The sixth chosen core topic of sustainability deals with the acceleration of diffusion and innovation processes as a cross-cutting question complex. The diffusion of sustainability innovations depends to a great degree on political and societal framework conditions. Accordingly, social science sustainability research examines the institutional and actor constellations which contribute to, or hamper, sustainable development, as well as how societies deal with environmental risks. This field which is more strongly influenced by social sciences can also be interpreted as an activity to increase the absorptive capacity of new technologies in the own country. Therefore, performance in social science sustainability research will be investigated, using a publication analysis, to supplement the examination of performance in the technically defined sustainability fields (Section 4.2). • The analysis of German enterprises' experiences with cooperations is intended to complement the statements elaborated from the strongly indicator-based analyses from an actor's perspective. Due to the different methodological approaches and the highly disaggregated analysis level, this "corresponding perspective" must always remain cursory and cannot be statististically representative. On the other hand, it offers the possibility to capture all mentioned influential factors in their interplay/ 1 Introduction 7 interaction and to obtain, at least partially, qualitative estimates of how the innovation systems function. It offers an appropriate starting point to proceed beyond the quantitative, measurement-based perspective of the indicator-based analyses. The results from this methodological approach are the subject of Chapter 5. • The work presented in Chapters 2 to 5 analyses the competences and operative capabilities for a sustainable development in the countries investigated, each from a different viewpoint. Conclusions will be drawn in Chapter 6, whereby the different analytical levels for the individual countries will be integrated and starting points for cooperation will be worked out. 8 2 Framework Conditions 2 Framework Conditions 2.1 Basic Data on Innovation Capacity In this section we provide an overview of fundamental indicators of the innovative capacity of the BRICS countries. This information will serve to make as up-to-date a comparison as possible of the five countries with regard to national R&D expenditure (gross domestic expenditure on R&D (GERD)), its financing sources according to main sectors (government, business enterprise sector, from abroad), the R&D intensity of the economy (GERD as a percentage of gross domestic product GDP), the number of R&D personnel and researchers, as well as the internationally visible scientific publications. Indicator selection is oriented towards the OECD S&T reporting system. Relevant national sources were consulted for Brazil and India. For the sake of comparison, the statistics for Germany are also quoted in each case. As far as the absolute level of R&D expenditures is concerned, China is without doubt the dominant BRICS country. The R&D expenditures are many times higher than the level reached in the other BRICS states. If one considers the specific figures, however, a more differentiated picture appears. The R&D intensity is highest in China and Russia and exceeds that of the other three BRICS countries by approx. 50 %. This can be traced back to developments since the mid 1990s. Whereas the R&D intensity in China and Russia just about doubled, only modest increases were registered in India and Brazil. Nevertheless, even the leading BRICS countries are still far removed from the level of the industrialised countries. The R&D intensity in Germany, for instance, is still approximately double that of China. As regards the financing sources of the R&D expenditures, China and South Africa display the greatest similarities with the industrialised countries. In both of these BRICS countries the business enterprise sector, similar to Germany, finances the lion's share of R&D. In Brazil and Russia, the government is admittedly the most important source of funding, but the share of business enterprise R&D expenditures is also considerable. By contrast, the R&D activities in India are still largely dominated by the government alone. 2 Framework Conditions Table 2-1: 9 Basic Data on Innovative Capacity in the BRICS+G Countries, 2004 Brazil Russia India China South Africa Germany Population 1000 GDP (current prices US $ m) 183,913 603,973 143,850 581,447 1,079,721 691,163 1,296,157 1,931,710 45,509 212,777 82,501 2,458,889 GERD (PPP $ m) GERD per capita (PPP $) R&D intensity (GERD/ GDP in %) 13,494 73.4 16,669.7 115.9 21,7087 20.1 93,992 72.5 4,029.7 88.5 59,115 716.5 0.83 1.15 0.78a 1.23 0.87 2.49 39.9 31.1** 19.8 65.7 54.8 671 57.9 No data 60.6 7.6 75.3 No data 26.6 1.3 34 10.9 30.4 2.3 157,595 951,569 296,300b (pers.) 1.152,617 29,080 472,533 84,979 477,647*** 93,800b (pers.) 926,252 14.131 268,942 141 821**** 136 479 66 109 0.46 3.32**** 0.09 0.71 0.31 3.26 8,684 1.24 15,782 2.26 12,774 1.83 29,186 4.18 2,364 0.34 44,305 6.34 14 27 18 15 11 18 0.10 0.03**** 0.14 0.03 0.17 0.16 GERD acc. to financing sources GERD enterprise sector (%) GERD state (%) GERD from abroad (%) R&D employees (fulltime equivalents) Scientists (full-time equivalents) Scientist intensity (pers./ $ bn GDP) Scientist density (pers./1000 pop.) a Publications in SCI Share in SCI publicaa tions worldwide (%) Publication intensity (publ./ $ bn GDP) Publication frequency (publ./scientist) a a a = 2003; b = 2000; Sources: OECD Main Science and Technology Indicators 2006; World Development Indicators, World Bank 2006; Science Citation Index (SCI): US National Science Board: Science & Engineering Indicators 2006 (fractioned classification of articles to countries). Brazil: Federal Ministry of Science and Technology MCT. India: NSTMIS Department of S&T, Government of India. ** Contains funds from the business sector and non-budgetary public funds. *** Goskomstat names a lower number of scientists: 409,300 in 2003, of whom only 102,451 (25 %) are highly qualified scientists, i. e. doctoral candidates or those with doctorates (cited acc. to OECD, 2005: 33). **** The high scientist density in Russia is relativised, if one considers the data of Goskomstat on the numbers of highly qualified scientists (foot note ***), simultaneously the frequency of publication rises. With regard to scientist density (number of scientists per 1000 population), Russia approximately reaches the German indicator level and thus lies very clearly ahead of China. The other BRICS countries follow – once again separated by a wide margin – with India bringing up the rear. Russia's lead is relativised if Russian sources for the number of highly qualified scientists are considered (Goskomstat). Measured by the number of publications per scientists (publication frequency), the highest incidence of 10 2 Framework Conditions publication emerges for South Africa and India – both reach figures which are comparable with those of Germany, whilst China and Russia lie far behind the field. These opposing effects result in – with the exception of Russia – an apparent similarity in the publication intensity (publications per $ bn. GDP) in the BRICS countries. Russia admittedly still lies clearly ahead in numbers of publicatons per researcher, but the margin has clearly decreased in the past years and China in particular has made considerable advances in this area. On the whole, it can be stated that China indubitably displays the greatest innovative capacity among the BRICS countries. Compared with India, this can be explained by a higher per capita income with at the same time higher research intensity per unit of GDP. Compared with the other BRICS countries, China shows, on the one hand, similar structures of innovative capacity. On the other hand, since the beginning of the 1990s China has simultaneously shown the most dynamic increase in innovative capacity (Krawczyk et al. 2007), so that China's strength is is not merely an effect of its size. Despite all their successes in the catching-up process, with regard to their specific innovative capacity, the BRICS countries are still clearly far removed from the leading industrialised states, in particular for the dimension of R&D intensity. 2.2 Analysis of the Regulatory Regime 2.2.1 Methodology The regulatory regime influences societies' innovative capacity and willingness to innovate in many ways. In the following, the framework conditions which affect national innovation capacity as a whole, namely human resources, the pre-conditions for technology absorption and innovation friendliness, are scrutinised. Furthermore, with the societal integration of environmental protection we consider an influential factor which refers specifically to sustainability innovations in the technology fields studied. The following aspects form the backdrop for the observation of these four influential factors: • Innovations can only be implemented if highly educated/trained employees within the companies can grasp new findings and convert them into innovative products and services. But the absorptive capacity of a national economy to integrate foreign innovations also pre-supposes a solid knowledge base which makes possible the understanding and adaption of the new technologies to the specific requirements of the country. • The transfer and diffusion of innovations depend on the technological absorptive capacity of the companies. Important aspects here are the sub-areas networking of 2 Framework Conditions 11 firms, conducting own research and development in the enterprises and aggressiveness in absorbing foreign technologies. • The government can promote technology exchange with partners abroad by means of innovation-friendly regulation. Which regulations promote innovations, however, is very controversially discussed. Some pre-conditions are undisputed. Access to corresponding financing sources, for example, is indispensable for the market introduction of innovations. In addition, in the context of the "systems of innovation approach“, not only must supplier-side regulations be taken into account, but also those concerning demand. For this reason, the demand side will also be examined as a sub-area of the factor innovation-friendliness. • The investigation of environmental protection in the economy and politics of a country is based on the assumption that its strong embeddedness positively influences the transferability of innovations in the environmental technology fields studied. When interpreting the results, the difficulties inherent in this methodological approach must be kept in mind. The analysis is based on the indicators for economic competitiveness published by the World Competitiveness Center of the International Institute for Management Development (IMD) and in the framework of the Global Competitiveness Report 2006-2007 of the World Economic Forum (WEF). They consist for the most part of subjective estimates by international economic experts and industrial associations gathered from surveys. The results are thus potentially biased by specifically posed questions and the choice of questionees. Political opinions of the surveying organisations may have an influence on the data. This is especially important when it concerns the assessment of regulatory interventions. In addition, the estimates may reflect different social backgrounds and experiences of the questionees. Even with the few hard data, considerable differences can be ascertained between the two surveys which can probably be explained by different measurement concepts. In order to make the data from different origins comparable, they are transformed on a standard scale between 1 and 7. While implicitly assuming the equal importance of the individual indicators, the mean values of the thematically grouped scaled indicators are formed in a two-step procedure. First of all, the single indicators are summarised to form sub-sector indicators. The exact composition of the sub-sector indicators is explained in the Annex. The results are presented in the form of a spider plot, whereby high values (in the outer area of the diagram) point to an estimated high performance of the country in the sub-sector concerned. By means of aggregating the sub-sector indicators, the resulting total ranking for each of the four influential factors is presented in the bar chart. 12 2 Framework Conditions The selected methodology facilitates a clear country comparison of the framework conditions for each factor, on the one hand, and permits a more precise analysis of the national strengths and weaknesses in the subordinate sub-sector levels, on the other hand. 2.2.2 Human Resources The following two sub-sectors were analysed to evaluate human resources: • Availability of human resources: the availability of human resources is not only a pre-condition for innovation activities, but also for a successful integration of foreign technologies. Various estimates of the availability of qualified workers, in particular of engineers and scientists, serve as indicators here. • Willingness of the firms to invest in the education and further training of the employees: especially in the case of technologies with a high share of implicit knowledge, a long-term commitment of the employee and active education and further training are necessary for knowledge accumulation. The results of surveys on the extent of further education in the companies and on the availability of relevant services are taken as indicators for this. Figure 2-1: Sub-sector Profiles and Total Ranking of the Factor Human Resources Education and further training Availability China Germany Russia India S outh Afric a Brazil China Russia South Brazil India Germany Africa For the single indicators of the availability of engineers, scientists and qualified workers, the interviewed experts came to the conclusion that the availability of human resources best meets industry's requirements in India. In this sub-sector, Germany lies behind India, in particular due to the limited availability of engineers. The availability of qualified workers is judged to be especially problematical in South Africa. The survey 2 Framework Conditions 13 results on the availability of human resources relativise the results from Section 2.1 to a certain extent. Although for China a relatively high, and for India a low scientist density was reported, the labour supply in China appears to fall short of market requirements to a much greater extent, according to the opinion of economic experts. This may be explained on the one hand by differences in the level of demand or by quality differences in education/training. On the other hand, language barriers may restrict the number of qualified workers. Staff education and further training, measured by the survey results on the extent of further education measures in the companies and corresponding services offered, is not nearly so pronounced in the rapidly growing economies as in Germany. South Africa lies in second place behind Germany in this area and thus compensates for the extreme lack of qualified workers with regard to the total ranking of the factor human resources. Russia loses ground by contrast especially in this sub-sector. On the whole, Germany ranks ahead of India for the factor human resources. Brazil, South Africa, China and finally Russia follow these two countries, despite entirely different problematical situations, after a relatively large gap. 2.2.3 Technology Absorption The following sub-sectors will be considered in order to assess the absorptive capacity: • Firm networks: the formation of company cooperations promotes technological diffusion. The presence of national suppliers indicates the existence of enterprise clusters, which can potentially facilitate technology transfer e. g. due to intensive user-producer relationships and transaction cost reductions. • Technology transfer: estimates of the significance of foreign direct investments (FDI) and licensing in the appropriation of new technologies, as well as the capacity and aggressiveness of the firms in the absorption of other people's technologies, will be interpreted as indicators for the receptiveness of industry to technology transfer. • Research and development in enterprises: own research and development favour the successful integration of "foreign" technologies. On the one hand, the absorptive capacities are strengthened, in that the understanding and the abilities to adapt the technologies to the local needs are raised; on the other hand, the negotiation position for foreign licences is stronger if one can credibly threaten to produce an alternative, own development. The indicators point to a relatively weak networking of firms in Russia, China and Brazil. India and South Africa lead the BRICS states in this field, but the difference to German industry is considerable. The broadly based networking of its actors may well be one of the particular strengths of Germany's innovation landscape. 14 2 Framework Conditions Technology transfer as a source of new technologies apparently plays a more significant role in India, South Africa and Brazil than in China and in particular Russia. It appears plausible that this form of technology appropriation is less characteristic for Germany, as high national competence in technology development already exists here. Also in the area of in-company R&D, all the rapidly growing economies lie far behind the German level, not only as far as the experts' assessment of the innovative capacity and R&D expenditures of the firms are concerned, but also in the question of legal promotion of development and application of new technologies. India leads the BRICS countries in this area, while Russia brings up the rear. Figure 2-2: Sub-sector Profiles and Total Ranking of the Factor Technology Absorption Research and development in enterprises Russia Technology transfer Firm networks Germany China India Brazil South Africa Russia China Brazil South India Germany Africa Germany's lead is relatively clear for the factor 'Technology Absorption', in particular due to the high degree of networking and pronounced in-house R&D. India does best in the BRICS country group, whereby the higher assessment of technology transfer should be underlined. South Africa, Brazil and China follow thereafter at regular intervals. Russia is clearly in last place in all sub-sectors and thus in the total judgement too. 2.2.4 Innovation-friendliness In order to assess the innovation-friendliness of the framework conditions, the following sub-sectors were investigated: • Regulations governing start-ups: the facilitation of company start-ups tends also to promote the introduction and diffusion of innovations. In order to judge the founding expenses, on the one hand 'hard' data on the length and number of 2 Framework Conditions 15 approval procedures, and on the other hand survey results on the founding friendliness of regulations will be taken into account. • Innovation financing: the introduction of innovations is characterised by the need for capital and, in part, high risks. Access to corresponding financing sources thus promotes the use of new technologies. In order to pass judgement, statements about access to venture capital, survey results on the general financing situation regarding innovations, as well as the access to loans will be referred to. • Innovation-friendly demand: the discriminating attitude of potential buyers has special significance for the success of innovations in the market. Well-informed buyers, who, besides the product price, take performance characteristics and product innovativeness into account in their buying decisions, promote the turnover and thus the diffusion of innovations. The public procurement system is a means for the government to positively influence demand. For this reason, the experts' assessments of the significance of quality and degree of innovation are referred to as decision-making criteria in public procurement. Demanding standards should promote innovations, although their impact is not undisputed. Brazil lies far behind all the other countries in regulating start-up firms. While start-ups in Russia are particularly unbureaucratic and the legal framework in India and China appear to be particularly founder-friendly, Germany, due to a relatively bad evaluation of the latter, appears only in fourth place in the IMD survey. Germany leads in innovation financing, just ahead of India. China, Russia and Brazil occupy the last positions at about equal level while in China general innovation financing is regarded as relatively good in the IMD survey, given the reported very bad/ limited access to credits/ loans and venture capital. Germany has the highest quality in private and governmental demand as well as the most stringent standards and therefore lies in first place in the sub-sector of innovationfriendly demand. Regulative standards are clearly less demanding in all the other countries. When judging these survey results, it must be remembered that high regulative standards are sometimes categorised as hindering innovation by champions of a free market economy. The influence of technological regulation on innovations is regarded in India, China and South Africa in the IMD survey as more innovationfriendly than in Germany. Correspondingly, China, whose regulative standards are the lowest, compensates for its low marks for private buyer behaviour and standards somewhat via this indicator. Russia lies in the sub-sector innovation-friendly demand clearly in last place. On the whole, Germany displays the most innovation-friendly framework conditions. The difference to India and South Africa is however not so clear-cut as with other factors. Russia and China follow at a greater interval. The framework conditions in Brazil are obviously the least conducive to innovations. 16 2 Framework Conditions Due to diverging opinions about the impact of certain regulative interventions, which are also reflected conclusively in the survey results, the total ranking in the area 'Innovation-friendliness' depends to a great degree on the selection and weighting of the underlying single indicators. Taking indicators of different origins as a basis by giving equal weight leads to a levelling of the differences at the expense of clearer national differences. Figure 2-3: Sub-sector Profiles and Total Ranking of the Factor Innovation Friendliness Innovation-friendly demand Brazil Innovation financing Regulation of start-ups Germany Russia India China South Africa Brazil Russia China South India Germany Africa 2.2.5 Status of Environmental Protection As an approach to the question of the societal embeddedness of the notion of environmental protection, single indicators were examined for the following subaspects: • Environmental protection in enterprises: here expert opinion was sought in the question whether health, safety and environmental aspects are appropriately met by the enterprises and how frequently measures to protect the environment are undertaken by industry. • Environmental regulation: state pressure on industry to adopt sustainability technologies is increased by means of stringent environmental regulation. This indicator is also formed on the basis of subjective survey results, although we cannot reconstruct to what extent the answers refer merely to the legal state-of-theart or also to the actual implementation of environmental legislation. According to the IMD survey, South Africa is the country apart from Germany where the enterprises obviously place the most value on health, safety and environmental 2 Framework Conditions 17 aspects. Brazil, India and China are all in midfield. Despite comparably formulated questions, the data for China with IMD and WEF are miles apart. According to the WEF survey, environmental protection measures by the enterprises are rather few and far between in China. The IMD survey, on the contrary, confirms that Chinese enterprise managers take (rather) adequate account of health, safety and environmental aspects. According to both surveys, environmental aspects have the least status in Russian companies. As far as the stringency of environmental regulation is concerned, Brazil leads the BRICS states, followed by South Africa and India. Environmental regulation is categorised as very lax in Russia and China, especially by comparison with Germany, which has by far the strictest environmental regulations. Figure 2-4: Indicators and Total Ranking of the Factor Environmental Protection Stringency of environmental regulations Russia Protection of ecosystems by business Health, safety & environmental concerns Germany China South Africa India Brazil Russia China India Brazil South Germany Africa On the whole, as regards the environmental protection factor, Germany lies far ahead of South Africa which leads the BRICS countries. This striking difference stems essentially from the more stringent environmental regulations in Germany. In Russia environmental protection is clearly of lower significance than in all the other countries studied. 2.2.6 Summing Up Germany thus possesses the best general framework conditions for (sustainable) innovations in all four investigated factors. The clearest lead can be seen in environmental protection. For human resources and innovation-friendliness, however, the framework conditions in India almost match Germany's. 18 2 Framework Conditions Figure 2-5: Survey based profile of general innovation conditions for sustainability iInnovations 1. Human Resources 2. Technology Absorption 3. Innovation-friendliness 4. Environmental Protection Russia China Brazil South Africa India Germany It must be underlined that India and South Africa are the BRICS countries with the best pre-conditions for innovation transfer. In India, however, environmental protection is not particularly developed. Stricter environmental regulation could clearly improve the framework conditions for sustainability innovations here. In South Africa, the greatest problem lies in the availability of human resources, while on the other hand environmental protection is ascribed the greatest significance among the BRICS countries. A consistent improvement of the education and (vocational) training system promises the most success here. Brazil and China make up the lower midfield. In Brazil, large deficits in the factor innovation-friendliness are striking, especially in regulating start-ups. Faster and unbureaucratic approval processes for company start-ups could clearly improve the framework conditions for the transfer of sustainability innovations. China's problems cannot be limited to a single influential factor: with human resources it is the availability, with technology transfer the relatively poor networking and lack of R&D capacities as well as innovative abilities of the enterprises, with innovation-friendliness deficits can be discerned in the access to loans and venture capital and in the quality of private demand, while a lax environmental regulation regime limits the significance of sustainability innovations. 2 Framework Conditions 19 Russia's general framework conditions for the transfer of sustainability innovations are the worst of all the countries considered here. Only for the factors human resources, and that only because of the (still) existing stocks of qualified workers, scientists and engineers, as well as for the factor innovation-friendliness, due to a low founding input with regard to time for start-up and number of approval procedures, can Russia keep up with the other BRICS countries. The greatest improvement potentials lie in strengthening the absorptive capacities and embedding the concept of environmental protection in society. The analysis thus shows widely differing national pre-conditions for a successful innovation transfer in the area of sustainability. Strengths and weaknesses of each national innovation system should be taken into account when designing an effective cooperation policy. The reservation must be repeated that these results are based on surveys of experts, in which choice and different basic conceptions – e. g. with regard to the expected impact of regulations – can influence the results. Table 2-2: Strengths and Weaknesses of the BRICS countries* Human Technology Innovation- Environmental Resources Absorption friendliness Protection India + + + (-) South Africa (-) (o) + + Brazil (o) (o) - + China - (o) (+) (o) Russia (+) - (+) - Country *Brackets characterise relative strengths (+) or weaknesses (-) or the average (o) with reference to own performance 20 2 Framework Conditions 2.3 Direct Investments Direct investments make the integration of new technologies possible. They form an important source of technological absorption. A number of direct investors strive to advance sustainable development in their entrepreneurial activities abroad.1 Therefore, the development of direct investments (foreign direct investments (FDI) as "outflows" and "inflows") in the BRICS countries will be analysed first of all. With regard to the interlinking of the BRICS countries with Germany, the development of German direct investment relationships with these countries will then be shown. The flows between Germany and the BRICS countries will be regarded in this context and sectoral focuses will be determined. 2.3.1 Global Direct Investments From the "World Investment Report 2006" of the UN Trade and Development Organisation UNCTAD (2006) about worldwide FDI in 2005 (incl. takeovers and fusions, M&A, mergers & acquisitions) it emerges that for the global inflows of direct investments to the BRICS states, China (without Hongkong) lies far ahead of Brazil and Russia. India und South Africa by contrast have received the lowest inflows. China was ahead of Brazil and Russia also with inward stocks in 2005. The accumulated investments for South Africa are momentarily still clearly higher than for India. The high inflows to China also concur with the assessment of the "FDI Confidence Index Ende 2005" (A.T. Kearney 2006), in which China takes first place among the most attractive locations competing for international direct investments. On the other hand, in Section 2.2 it was found that China's framework conditions are less outstanding. The great attractiveness for direct investments must therefore be considerably influenced by other factors. China's great significance as a domestic market and active Chinese politics in the form of e. g. high import duties and regulations to protect Chinese enterprises must also be mentioned. Additionally, the strategy of international companies to achieve comparative cost advantages by outsourcing production, in order to improve price competitiveness, also plays a role. India occupies place 2 in the FDI Confidence Index, which has however not yet been reflected in the level of currently realised FDI. Although no complete opening of all branches for direct investments has taken place, a clear rise is already expected for the 1 In Germany, for example, at present 24 multi-nationally active enterprises and organisations are members in the Econsense Forum Sustainable Development of German Industry. See also the remarks in Chapter 5 on the adoption of German environmental standards in foreign production plants. 2 Framework Conditions 21 future (bfai 2006b). Russia and Brazil occupy places 6 and 7, and South Africa is not included in the field of the best 25 countries. For purposes of comparison, the USA occupies place 3 and Germany lies in ninth place. Figure 2-6: Annual Direct Investments and Accumulated Stocks of BRICS Countries* in the Year 2005 (US $ m) Accumulated Stock (US $ bn) Annual FDI (US $ bn) 80 300 70 250 60 200 50 40 150 30 100 20 50 10 0 0 BR Inflow RU FDI in other countries IN CN Stock of FDI at home ZA Stock of FDI abroad Source: Data from UNCTAD 2006 * China without Hongkong In global FDI outflows, i.e. the direct investments from the BRICS states in other countries, Russia and China exhibited the largest amounts in 2005. By contrast, the direct investments transacted by enterprises from Brazil, India und South Africa are distinctly lower (Figure 2-6). In accumulated outflows, the Russian Federation is clearly ahead in 2005, followed by Brazil and China. The lion's share of total global direct investments in 2005 was allotted to the area services (examples: financial sector, trade, telecommunications, real estate, recently also private equity/hedge fund investments). With the exception of the area "resourcebased manufacturing", the share of industry as a whole declined compared to 2004. The primary sector (above all the oil industry) is still a focus of attention. Transnational transactions were mostly undertaken by private enterprises, although stated-owned enterprises are increasingly appearing as investors abroad – for instance, from China. 22 2 Framework Conditions In the BRICS countries where these activities have intensified in the last decade, different sectors are found as base for direct investments: • The agricultural and raw materials sector is very important in Brazil, • Russia profits from its raw materials/ sources of energy (involvement of international oil and gas concerns), • India relies on knowledge-based service sectors (e. g. off-shore services in the ICT area), • China already has a broad industrial base (great interest in "more advanced technologies"), and • South Africa heads the ranking list of FDI inflows in Africa; main focuses are transport technologies, in particular the automobile sector (UNCTAD 2006). In direct investments, the activities between the developing economies are becoming increasingly significant. At over US $ 334 bn, these states notched up a record value in inflows in 2005, but at the same time also gained increasing significance as investors (around US $ 117 bn), mainly to secure raw materials. The capital flows in the developing countries come to approx. 70 % from Asia, where the number of multinational enterprises has distinctly increased within the last decade (Rabe 2006), so that many new multi-national companies originate in these countries (Müller 2006). Within this group of countries, Chinese investments and diplomatic activities have greatly increased in the past, above all in South America, Asia and Africa. Strong company groups have been formed which with government support are attempting to assert themselves in the world market by buying up cross-border enterprises ("going global strategy" UNCTAD 2006). China's direct investments in Africa in 2006 were estimated at US $ 6.6 bn. Oil and raw material projects or also complete solutions for infrastructure plans are involved (Drechsler/Hoffbauer 2007). Indian and Brazilian firms also expanded internationally (example: steel branch). South Africa pursues an intensive collaboration, not only with Brazil and India, but also with China (Federal German Foreign Office 2006c). In Brazil, there is still an enormous need for investment in the country's infrastructure. Already existing business relationships with other BRICS countries should gain importance in the future. In the case of Russia, foreign direct investments in "strategic branches" (e. g. energy) admittedly are made more difficult, while on the other hand, a stronger international interlinking of large concerns is foreseeable (Handelsblatt, 31.01.07). 2 Framework Conditions 2.3.2 23 Direct Investments of German Companies in the BRICS States The share of the BRICS countries in the consolidated German FDI abroad has grown since 2002 from 2.8 % to 3.5 % (2004: € 23.6 bn). In absolute figures the growth is about 29 %, whereby the direct-investment/ equity capital in Russia, South Africa and China increased at an above average rate in this time period. Among the BRICS countries, China (without Hong Kong) is clearly in the lead in 2004 receiving 36 % of German FDI to the BRICS countries. Brazil follows with approx. 25 %, whereby the main focus of the direct investments here lay prior to 2002, and Russia and South Africa, with 16 % and 15 % respectively. India holds a share at present of less than 9 % of German FDI to the BRICS countries. German direct investments in the BRICS countries amounted to € 4.5 bn in 2005 and came to approx. 13 % of total German direct investments. This figure lies clearly above that of the consolidated shares, which further highlights the increasing significance of the BRICS countries for German direct investments. Above all, the transactions in China rose sharply in 2005. It became clear that India is also becoming more interesting for German direct investments. Brazil is much more significant than South Africa. In the case of the Russia, German equity capital was influenced by high liquidation values from 2003 until 2005. Of the total of € 345 bn in consolidated foreign direct investments in Germany, in 2004 the largest share fell to the EU partner countries (€ 242 bn) and the countries of North America (€ 52.5 bn). The share of the BRICS countries was approx. 1 %. By individual investor countries, South Africa (€ 1 bn) is ahead of Russia (€ 0.9 bn), with China (€ 0.2 bn), Brazil (€ 0.1 bn) and India (< € 0.1 bn) following far behind. The most important countries transferring foreign direct investments to Germany in 2005 were the EU states, Switzerland and South Korea. The sum of the transactions from the BRICS countries were in total only relatively small, as in previous years (2004: € 0.37 bn, 2005: € 0.12 bn). In view of the fact that the number of multi-national enterprises in these states is growing, a distinct rise in activities is to be expected in the years to come (see UNCTAD 2006). The Deutsche Bundesbank carried out a sectoral special evaluation of the direct investments between Germany and the BRICS countries, based on the balance of payments statistics from 2002 until 2005 for this project.2 Main focuses of this 2 Re-invested profits are not considered hereby; see Annex on definitions, methodological remarks and detailed presentation, as well as Deutsche Bundesbank 2006. 24 2 Framework Conditions evaluation are manufacturing industry, energy and water supply, the building industry, trade and the transport sector. The banking and insurance industries, the areas "real estate, housing, letting, services" as well as public budgets and private households and other services were not taken into account. In manufacturing industry, the total sum of German direct investments abroad in 2005 amounted to around € 3 bn, according to the Deutsche Bundesbank statistics. The sum for the BRICS countries amounted to over € 2.5 bn (sum 2003 until 2005: € 4.7 bn). Thus the significance of the BRICS countries for the direct investments of manufacturing industry is much higher than the average of all direct investments. Main target countries were China (focuses: vehicle construction, chemical industry and mechanical engineering) and Brazil (vehicle construction and rubber and synthetic goods). Thus direct investments of almost € 4 bn were made in these two countries alone (see Table 2-3). Considerable direct investments in vehicle construction were also effected in Russia. German manufacturers decided in 2006 to invest in assembly plants in the locations Russia and India. In South Africa the liquidation of FDI by manufacturing industry appeared to predominate in the year 2005, but this does not seem to be a general effect, as comparison with the previous years shows. The automobile branch is the main industrial sector for transactions with South Africa; German car makers have also committed themselves in this market, besides a number of other international manufacturers. A number of automobile supplier firms have also established themselves here in the past years. Between 1995 and 2005, car production clearly increased on the whole and some of the manufacturers there have announced a stronger export orientation for their models to Europe, North America and Asia in the future (UNCTAD 2006). The other branches in South Africa are not the focus of German direct investments. Liquidation of FDI have even been observed on the average of the last 3 years. The involvement of German industry in the BRICS countries demonstrated by the Deutsche Bundesbank was rather low in the areas energy and water supply as well as in the building sector and in the transport infrastructure sector (the categories land transport/ transport in pipelines, shipping and aviation were recorded) in 2004 and 2005. The direct investments in trade were concentrated above all in China. Brazil also played a role herein in the year 2004. 2 Framework Conditions Table 2-3: 25 German Direct Investments in BRICS Countries in Manufacturing Industry; in € m (sum 2003 to 2005) Status: May 2006, (without re-invested profits) Manufacturing Industry Thereof selected branches: - Vehicle constr. - Mechanical eng. - Chemical ind. - Rubber, synthetic goods - Others Sum BRICS states 4732 Brazil Russ. Federation 1312 India 509 209 R China (without Hongkong) 2673 South Africa 29 1950 557 767 247 931 52 47 143 142 58 150 57 -16 77 34 0 792 358 587 55 101 12 R -51 R -8 1211 139 102 114 881 -25 R Remark: R = repatriations (withdrawal of existing German direct investments exceeds new direct investments) Source: Deutsche Bundesbank 2006, 2006b 2.3.3 Summing Up Although the share of the BRICS countries in consolidated German direct investments is still small, with their large domestic market potentials and overall economic growth opportunities they should increasingly become preferred new investment locations for German enterprises. Not only the great attractiveness of these countries in relevant surveys and their actual importance in worldwide direct investments, but also the increasing shares in annual German direct investments speak in favour of this happening. However, different aspects are particularly relevant in each BRICS country: • China, despite many risk factors, clearly occupies a top position with inflows from the whole world, whereby the emphasis lies in the industrial area (AHK/GIC 2006). This corresponds to a strategy – often referred to as 'extended workbench' – to build up production capacities in China, in order to gain not only comparative cost advantages but also access to a gigantic and rapidly expanding domestic market. With the simultaneous technological upgrading in the domestic market and the emergence of large enterprises in China, companies from China are also appearing as investors in foreign markets with increasing frequency, often in connection with safeguarding access to raw materials (bfai 2006a). • Whereas the service sector in China is still under-developed, this area above all is very attractive in India, even beyond IT services. Indian industry is presently in a phase of building up capacities. As far as the the level of prior foreign direct investments is concerned, it must be taken into account that India has pursued rather restrictive policies for many years. 26 2 Framework Conditions • Brazil's special strengths are in the raw material and agricultural areas, which lead to new direct investments and complement the long established equity interests – for instance, in the automobile area. • The energy and raw material sectors are the central basis for direct investment activities in the Russia. • In South Africa vehicle construction has gained in importance, whereby large foreign enterprises have played a significant role. Manufacturing industry (vehicle construction and chemicals) dominates in the direct investments in the BRICS countries, whereas areas such as energy and water supply, construction industry or transport have not played a role up to now. A stronger orientation towards sustainability calls for large investments in the coming years (e. g. in China). Good chances for foreign firms are seen, above all in the environmental and energy sector. Conversely, the share of the BRICS countries' foreign direct investments in Germany has only been small till now. Examples in the steel sector and with wind power plants, however, show that in future increased activity can be reckoned with on the part of enterprises from the BRICS states. 3 Research Programme 3 Research Programmes 3.1 Research Programmes in the BRICS Countries 3.1.1 Methodology 27 The application conditions for sustainable technologies and their further development possibilities depend greatly on the performance of the research system. For each of the BRICS countries a "country profile sustainability research" was drawn up, which examined the following questions with reference to the six selected topic fields: 1. What status do sustainability research themes have in the framework of national science, technology and innovation policy? 2. Which national agencies (e. g. ministries, foundations) provide funding for R&D in the six thematic fields and on what scale (financially)? 3. Which universities and research institutions are attributed a leading position within the country? The analysis of "research programmes" refers to direct government research funding, i. e. in the first instance those institutions will be considered which allocate funds in the form of R&D projects, subsidies or scholarships directly to beneficiaries from science and enterprises. However, the state financing of universities and research institutions, i.e. institutional research funding, usually amounts to a considerably larger share of national R&D expenditures than R&D project funding. Information on the leading research institutions was included for this reason. Indirect R&D funding instruments are not considered, such as e. g. R&D promotion through tax concessions. These are as a rule not tailored to single R&D thematic fields, but target entrepreneurial innovation activity, independent of branch membership, so that in this area no specific impacts on the sustainabilty fields are to be expected. Only few R&D programmes in the BRICS countries were specially developed for problems of sustainability research. The South African Water Research Commission or the sectoral R&D funds in the energy, water and transport sector in Brazil, for instance, are among the exceptions. Mostly the sustainability topics are integrated into general, technology-independent funding instruments. Great value was laid in the analysis on all available information which sheds light on the financial magnitude and thematic priorities of R&D programmes. However, the data on government R&D expenditures are usually documented and published only on a highly aggregated level. For this reason, only in few cases statements are possible on the disaggregated level of the single thematic fields. 28 3 Research Programme The country profiles provide an up-to-date overview of actors, research themes and areas research needs in the BRICS countries. An analysis of this topic was not available up to now. It provides valuable indications of salience of research results from Germany to the individual BRICS countries and can thus serve as starting point for follow-on activities on S&T collaboration. Sustainability research in the BRICS countries was analysed on the basis of three different sources of information: • Assessment of literature, i. e. scientific publications and above all "grey" literature on science, technology and innovation policy in the individual BRICS countries. • Analysis of statistics on science and technology (S&T statistics) from international (OECD) and national sources (national ministries). • Survey of selected S&T experts in each BRICS country. Whereas literature and S&T statistics contain background information on national innovation policies, these sources provide little systematic information about sustainability research up to now. For this reason, the cooperation with experts in the BRICS countries forms the heart of the investigation. The cooperation partners for each BRICS country were partly recruited through existing contacts, and partly identified and contacted through searches in relevant national research institutions. The German embassies in the BRICS countries were also contacted. Most cooperation partners are scientists from the BRICS countries with expertise in one of the technological themes concerned in this study. A complete list of the experts can be found in the Appendix. In order to collect structured information, an open questionnaire in German and English was formulated and was mailed to the experts in October and November 2006, together with a project description and a description of the thematic fields. An example of the questionnaire is included in the Appendix. Some questionnaires were completed by individual scientists, while other expertises were collated by our main contact persons and already integrate the estimates of a whole group of experts. The total of ca. 100 persons who contributed information and evaluations to the expertises are named in Appendix A.3.7. Due to the variety and heterogeneity of the information gathered, the evaluation and synthesis together constituted a separate working step. The results of the country analysis were summarised per country in a ca. 10 page "country profile sustainability research" report, which is divided into four sections: 3 Research Programme 1. background information on the national innovation system 2. core subjects of sustainability research (according to our six topics) 3. national R&D funding agencies and programmes, and 4. the most important national research institutions (according to subject fields). 29 The detailed country profile for each BRICS country is found in Appendix A.3. 3.1.2 An Overview of the BRICS Country Profiles In the following, the most significant findings of the country profiles on sustainabililty research for each BRICS country are summarised and the importance of the single sustainability areas within each research system will be elaborated. The detailed country profiles are in the Appendix. The names and institutions of the participating country experts are also listed here, as well as a copy of the questionnaire for the country experts. 3.1.2.1 Brazil The Brazilian research system exhibits a distinct specialisation pattern, which differs clearly from the research focuses in traditional industrialised countries: over 70 % of all scientific publications can be classified in the three large categories agronomy, life sciences, medicine and health care sciences. Further 11 % are "exact sciences and geo-sciences", but only 9 % are engineering sciences. Since the 1980s, university education in Brazil has been greatly expanded, but only a small share of the highly qualified scientists is employed in enterprises up to now. In order to guarantee a more stable financing of R&D, the instrument "sectoral funds" was introduced in Brazil in 2001. These sectoral funds are fed by special taxes on technology-intensive branches and natural-resource exploiting industries. This tax money is dedicated exclusively to promote sector-related R&D. They contribute a considerable share to the total government financing of R&D. The main focuses and priorities of research promotion are fixed for each fund individually by the Brazilian Science and Technology Ministry (MCT) in cooperation with authorities of the sector involved and research funding agencies. Of main interest for the present study are the sector funds in the energy, water and transport areas: CT-Energ (R&D in the energy sector, especially energy efficiency of end use), CT-Hidro (R&D on water resources and water management), CT-Aero (R&D in aeronautics), CT-Aquaviário (R&D in water transport and waterways), CT-Transport (R&D in transport infrastructure and logistics). The institute "Centro de Gestão e 30 3 Research Programme Estudos Estratégicos" (CGEE) has investigated research needs on behalf of the Ministry MCT in the areas energy and water resources. The following picture emerges with regard to the significance of the single sustainability fields: • Field (1) Renewable Energy and CCS: biomass is the outstanding R&D topic in Brazil, among others, the breeding of new sugar cane varieties for ethanol production, ethanol production from cellulosic biomass and sugar cane gasification to produce energy with gas turbines. Further subjects are water power, solar electricity and wind energy. • Field (2) Energy Efficiency in Buildings: in the framework of the federal energysaving programme PROCEL-EDIFICA, a research association of the national energy supplier Eletrobrás with leading Brazilian universities has been established to research the subject "Thermic Comfort and Energy Efficiency" (e. g. passive cooling). • Field (3) Water Supply and Waste Water Disposal: the framework planning for the sectoral fund CT-Hidro foresees the following R&D priorities among others: (a) integrated water management in cities, (b) knowledge of the most important Brazilian water ecosystems with reference to sustainable development, (c) water management in river basins: institutional and technical solutions, (d) climate and environmental variabilities and their prognosis in water systems, (e) modern equipment to monitor the state of water systems. One of the greatest challenges linked with rapid urbanisation is the occurrence of flooding in cities, and in this context, the construction of waste water disposal systems and rubbish disposal. The development needs for water supply were documented in depth in studies during recent years, according to the CGEE. • Field (5) Mobility and Logistics: the great importance of field 5 can already be gauged by the fact that three sectoral R&D funds have been established. Aviation is one of Brazil's internationally recognised R&D competences, with Embraer as the national champion. A distinct orientation towards sustainability cannot be ascertained in Brazilian transport research, according to available information; infrastructure expansion, modern traffic information and logistics systems and increasing road safety have priority. 3.1.2.2 Russia Research and innovation politcy is not an independent, coherent policy field in Russia yet. The research system is characterised by considerable fragmentation and overlapping without synergies between different ministries and research institutions (OECD, 2001, 2005). An integration of sustainability targets in technology and innovation policy could hardly be determined up to now. At national level, the allocation of funds for technological R&D is mainly determined by the Ministry for Economic Development and Trade. The gigantic Ministry for Industry and Energy that is 3 Research Programme 31 practically responsible for the entire military and civilian industries has developed an energy strategy for Russia until 2020 and has an in-house institute working on questions of energy strategy. The country profile in the Appendix contains an overview of federal goal-oriented programmes in Russia in the five selected sustainability fields. According to this, the largest investment sums until 2010 are foreseen for the programmes "Energy-efficient Economy" (US $ 16 bn) and "Modernisation of the Transport System" (US $ 12 bn), whereby the financial means are predominantly raised by the Russian regional administrations. Distinctly smaller programmes exist in the areas "Ecology and Natural Resources" (among others, protection of Lake Baikal and ecological restauration of the Volga), "Energy-efficient Buildings" and "Water Resources". All these programmes however are investment programmes, in which R&D expenditures play a quantitatively subordinate role. For the most important federal R&D programme, eight strategically significant technology fields were identified and approved by President Putin as "Priorities in Science and Technology". The two priority fields "Energy Technology and Energy Efficiency" and "Transport, Air and Space Travel Systems" have a direct reference to the thematic fields of this study; otherwise defence and security research, high technologies and raw materials exploitation take pride of place in the national R&D strategy. The following picture of the ranking in importance of the sustainability fields emerges: • Field (1) Renewable Energy and CCS: this subject field is a priority in the national R&D strategy. According to the Russian experts, the efficiency in energy production (conversion of primary energy) and the development of smaller hydroelectric plants are among the top-priority research themes. Also the development of hydrogen technology and fuel cells tie in with existing competence fields of Russian research, as e.g. the "fuel cell targeted initiative" in the International Science and Technology Centre (ISTC) makes clear. The ISTC is an international non-proliferation programme. • Field (2) Energy Efficiency in Buildings: the efficiency of heating supply in Russia is the subject of one of 12 innovation-policy "mega projects", which the Russian government awarded in 2002, in order to accelerate knowledge transfer from publicly funded research institutions. The project volume should amount to a total of RUB 1.8 bn. • Field (3) Water Supply and Waste Water Disposal: this field is gaining importance at present because of increasing water pollution. • Field (4) Material Efficiency: the Federal Centre for Geoecological Systems is presently developing a national waste database as part of a waste register, as well as policy recommendations on waste disposal charges. One of the 12 R&D mega 32 3 Research Programme projects from the year 2002 deals with the "increasing the effectivity of treating solid waste" (RUB 427.5 m). • Field (5) Mobility and Logistics: top priority of the national R&D strategy is to modernise the transport infrastructure for automobile traffic, especially in the agglomerations Moscow and St. Petersburg. • Field (6) Socio-economic Research on Sustainability Innovations: in this field hardly any internationally visible research has taken place in Russia (see 4.2). 3.1.2.3 India Indian research is predominantly government-led and is therefore mainly directed towards state goals. Over 43 % of the total national R&D expenditures in 2002 were divided among four ministries or authorities in the areas defence, space, agriculture and atomic energy. On the other hand, less than 20 % of the R&D expenditures come from the business enterprise sector. For the fields of this study, the Department of Science & Technology (DST) should be named as the Ministry responsible for civil science and technology policy, as well as the Council of Scientific and Industrial Research (CSIR), the largest Indian research organisation. International donor agencies also play an important role for sustainabilty-related R&D (e. g. World Bank, UNDP, USAID, GTZ). In India, a separate ministry is dedicated to renewable energies (MNES). However, the MNES hardly promotes R&D, but is mainly responsible for the diffusion of renewable energies. The priority goals of Indian politics in this area are a basic supply of energy through renewable energy sources and a decentralised energy supply in rural and urban areas. The Ministry has declared as its goal to provide 10 % of the additional capacity in the whole of India from networked renewable sources by 2012. A rise in energy needs by 350% is predicted for the coming two decades. The following priorities hold in the single sustainability fields: • Field (1) Renewable Energy and CCS: according to experts' estimates, India already disposes of considerable capacity, as far as the production of energy systems, a qualified work force and R&D are concerned. An essential goal in national technology development and adaptation consists in reducing the costs of renewable energy sources. Besides wind power, the increase of efficiency and environmental compatibility in the energetic utilisation of biomass has become increasingly recognised an an important subject for R&D in the past years, as burning biomass constitutes a high share of primary energy consumption of private households in India. • Field (2) Energy Efficiency in Buildings: the development and diffusion of standards and best practices (building codes, energy audits, simulation software), as well as the qualification of personnel to conduct and supervise appropriate measures are 3 Research Programme 33 the main emphasis. Important additional research subjects, according to experts' assessments, are the development of new construction materials and simulation models which are better adapted to the architectural and climatic conditions in India. • Field (3) Water Supply and Waste Water Disposal: primary goal is the access to clean drinking water for all citizens. R&D is needed in the areas water quality/ waste water treatment; materials and tunnel building technologies in hydraulic engineering; increased water efficiency in all sectors, including the diffusion of water-efficient techniques in agriculture; rain water management in the countryside, but above all in some large cities; development of a flood water strategy in endangered river areas; sustainable, decentralised water supply systems. • Field (4) Material Efficiency: one example is the use of fly ash to manufacture stones and cement for the building industry; old iron, paper and textiles are recycled. Various industries use waste products from agriculture as fuel. R&D is needed in, among others, the disposal and exploitation of electronic equipment and waste and in the utilisation of further recycling products in the building sector. • Field (5) Mobility and Logistics: the Indian experts emphasise the urgency to develop a sustainable transport system. Due to the economic development and urbanisation, the volume of transport in all forms, including non-motorised transport, is greatly increasing. Systematic R&D efforts in this direction have not yet been made, according to the experts. In some cities with extreme air pollution, natural gas (compressed natural gas CNG/ liquefied natural gas LNG) is being used as fuel. • Field (6) Socio-economic Research on Sustainability Innovations: one of the most important barriers to the diffusion of sustainability innovations is the widespread lack of highly qualified workers. The experts underline the connection between sustainability and fighting poverty, for example through micro-credits, the promotion of "small" innovations and the entrepreneurial independence of women. 3.1.2.4 China Of all the five BRICS countries, China has by far the largest national innovation system and the highest growth dynamic in R&D expenditures. In China ten times as many scientists work as in India or Brazil and double as many as in Russia. In the past years, the R&D activity of the business enterprise sector has greatly increased and lies in the meantime at two-thirds of gross domestic R&D expenditures. With the "National Outline for Mid- and Long-term S&T Development Planning (2006-2020)", the Chinese government is pursuing the declared goal to catch up with the innovation-based economies by the year 2020. However, up to now the predominant share of R&D activity has been concentrated on experimental development; basic research is only very weakly represented. The most significant national R&D funding programmes are the so-called "National Basic Research Programme (973)", the "High-tech R&D Programme (863)" and the 34 3 Research Programme "National Key Technologies R&D Programme", which are described in more detail in the Appendix. The National Natural Science Foundation of China (NSFC) was established taking the American NSF as its model, to promote research in the natural sciences based on peer review. The important aspects in the single sustainability fields are seen in the following overview: • Field (1) Renewable Energy and CCS: the Chinese government plans to raise the share of renewable energies to 15 % of the primary energy consumption by 2020. The Renewable Energy Law of 2006 commits electricity providers to obtain electricity from RE and offers financial incentives for development plans in this area. Renewable energies are promoted by the two most important state R&D programmes, the National Basic Research Programme (973) and the Hightechnology R&D Programme (863), as well as by the National Natural Science Foundation (NSFC). The main focuses of the R&D promotion are: water power, wind energy, solar power, fuel cells, geothermal energy and wave power. • Field (2) Energy Efficiency in Buildings: central heatiing and cooling systems play an important role in China's towns and cities. The National Development and Reform Commission in its "Medium- and Long-term Plan of Energy Conservation" attached major importance to energy efficiency in buildings. Besides numerous large-scale demonstration projects, the building standards are being raised step by step. International cooperations were initiated with the German federal government (Ministry of Transport), among other partners. • Field (3) Water Supply and Waste Water Disposal: water shortage is being perceived in China in the meantime as the most urgent environmental problem. A large number of sewage treatment plants are presently being built on China's east coast and more are planned. Considerable R&D efforts are invested in the planning and construction of the largest water transfer project which was begun in 2002, in which the Yangtze River will be linked to the city of Beijing. The most important research fields in the water area are water supply, sewage treatment, water supply and waste water disposal in cities, as well as waste disposal. The subject of resource efficiency has only recently gained importance. R&D promotion in the water area is the object of the National Basic Research Programme (973), the National Natural Science Foundation (NSFC), and of the R&D Programme "National Key Technologies". • Field (4) Material Efficiency: R&D on circular economy and recycling, respectively the re-use of metals, are promoted by the National Basic Research Programme (973) and the National Natural Science Foundation (NSFC). The adequate disposal of industrial waste is an unsolved environmental problem. • Field (5) Mobility and Logistics: in the next 20 years the course will be set for China's future transport infrastructure. Transport infrastructure and logistics is therefore a top-priority research field of the High-technology R&D Programme (863), 3 Research Programme 35 which also contains R&D for energy efficiency of vehicles, alternative fuels and emissions reduction. • Field (6) Socio-economic Research on Sustainability Innovations: research activities on the quantitative performance of the Chinese innovation system, on environmental economics and on integrating environmental planning in town planning exist. A topical subject is also the "socialist" building and regional development planning in rural areas. 3.1.2.5 South Africa Notable institutional reforms have taken place in South Africa's research and technology policy after the end of the apartheid regime. Innovation policy is oriented today towards the concept of the national innovation system. A significant component of the reform policy is the development of new missions for science, technology and innovation policy. Biotechnology, new production technologies, information and communication technologies and resource-based industries (including agriculture and energy) were defined as strategic R&D areas. As a result of this new orientation, policy strategy papers abound, among them the National R&D Strategy (DST, 2002), as well as strategies for water policies and transport policies. The most significant research funding institutions in South Africa are the National Research Foundation and the National Innovation Fund, which promotes the innovative capacity of industry. In addition, the water sector has its own funding agency. The Water Research Commission's mission is to promote R&D and to create R&D capacity for sustainable water management. The National Innovation Fund promotes R&D in all five technological subject fields. Regarding the priorities in the single sustainability fields, the following picture emerges: • Field (1) Renewable Energy and CCS: the government plans to install 10,000 GWh of renewable energies by 2013, mainly by means of biomass, wind, solar power and small hydropower plants. Technologies which are going to be deployed first due to market maturity and resource availability are sugar cane bagasse, landfill gas, small hydropower plants and solar power for warm water supply in commercial and residential buildings. • Field (2) Energy Efficiency in Buildings: in South Africa an energy-efficiency strategy was passed in 2005 which includes building efficiency. The goal of 15 % reduction of energy consumption was stipulated for commercial buildings, for residential buildings correspondingly 10 %; by 2015. • Field (3) Water Supply and Waste Water Disposal: the Water Research Commission (WRC) promotes R&D in four "key strategic areas": of water resource management (30 % of the funds in 2006), water-linked eco-systems (12 %), water use and waste 36 3 Research Programme treatment (33 %), water utilisation in agriculture (19 %). In addition, an initiative of the Ministry for Water Affairs and Forestry exists to coordinate R&D efforts to protect groundwater, in which mining companies, representatives of industry and research organisations participate. • Field (4) Materials Efficiency: production technology is one of the new technology missions of South African innovation policy. This contains among others the promotion of a National Cleaner Production Centre (NCPC), which is aimed at small and medium-sized enterprises. Waste recycling is carried out mainly by small companies, but there are collection systems for metal and paper. R&D activities exist also in the area of reclaiming minerals from landfills. • Field (5) Mobility and Logistics: public transport systems are under-developed, so that motorised passenger transport is limited to automobiles, above all in rich urban districts. The offer of public means of transport for the rural population is inadequate and goods traffic is concentrated on roads. The National Land Transport Strategy (2006-11) therefore foresees extensive new investments in building rail transport infrastructure, among other measures. • Field (6) Socio-economic Research on Sustainability Innovations: one of eight "focus areas" of the National Research Foundation (NRF) is the subject area "Sustainable Livelihood and Poverty Eradication". This consists among other topics in research on community-based natural resource management. The national R&D strategy emphasises the significance of social-science research for capacity building and developing innovative ability. 3.1.3 Summing Up In none of the five countries is innovation policy specially directed towards separating environmental and resource consumption from the economic development process. The priority target in all BRICS countries is the promotion of innovative activities in the business sector. Apart from a few exceptions, sustainability research is not institutionalised in dedicated R&D funding agencies or R&D programmes, which means it does not represent an independent field for research policy, but is at best covered by general research and innovation policy measures. Conducting applied R&D is frequently linked directly with government investment programmes, above all with infrastructure investment in the areas of energy, water and transport. China plays in a different league from the other BRICS countries, as far as the amount of national R&D expenditures, the sectoral share of R&D expenditures contributed by industry, and the number of scientists are concerned. Accordingly, the R&D activities in the thematic fields are on a quantitatively higher level, above all in the sectors Renewable Energy Sources, Energy Efficiency in Buildings and Mobility. Nevertheless, there is still only little internationally competitive basic research in China yet. 3 Research Programme 37 Reliable statistics on funding priorities within the six sustainability fields, which would allow comparisons between the five countries, are neither available nor can be expected, in view of the institutional structures. Based on the qualitative estimates of the experts, the following national strengths are to be emphasised: • Brazil: renewable energies from biomass, followed (after a gap) by R&D in water management. • Russia: more efficient conversion of primary energy, as well as R&D in hydrogen technologies. • India: diffusion of decentralised, renewable energy sources; sustainability and poverty eradication (field 6). • China: political goal to expand renewable energies by 2020, therefore research emphases on water power, wind power, solar, and fuel cells; raising of the efficiency standards in buildings and research activity in the transport sector. Challenge how to avoid problems from concentration on a few national R&D priorities. • South Africa: R&D in water management, considerable new investments are additionally planned in public rail transport. In all the BRICS countries, except China, the lack of a next generation of scientists is a crucial barrier to developing capacity in sustainability research in particular and in public research in general. Against the background of strong economic growth and related career opportunities in the private sector, a scientific career in these countries is regarded as comparatively less attractive. Simultaneously, the domestic enterprises lack the absorptive capacity for highly qualified graduates. 3.2 Sustainability Research in Germany This section presents a study of the German research competences in the six sustainability fields. The analysis is based on two databases, the environmental research database of the Federal Environment Agency (Ufordat), as well as the Research Funding Catalogue of the BMBF (Foekat). Ufordat describes environmentoriented research projects in the German-language area, Foekat contains information about project funding by the BMBF and partly also of the BMWi and BMU. The analysis of ongoing research projects and expenditures for research and development (R&D expenditures) refer to the input side of the research and innovation process, while intermediary, respectively output, indicators such as patents and foreign trade data will be considered in the subsequent chapters. The majority of the research projects studied here is completely or in part financed with government funds. With the concentration on R&D financed by government sources, 38 3 Research Programme however, the study covers only a segment of the research competences in Germany, even if a large share of the projects investigated are conducted by firms. In 2004 a total of € 55.4 bn was spent on R&D in Germany, of which 69 % was spent by the business enterprise sector and 30 % by public authorities (Bufo, 2006). However, it must be assumed that the proportion of government R&D expenditures is higher for the development of environmental technologies than for the average of all technology fields. An important role of the state in environment-related research derives not only from the preventive function of the state in environmental protection. The increase in environmental efficiency of industrial processes is a forward-looking element of technological performance. But due to the widespread market failure in price setting of environmental resources, the incentives for firms to invest in environment technology R&D is frequently inadequate. Research projects depict the activity of research organisations and companies and are therefore suitable as indicators of their current competences and thematic interests. However, funding in form of research projects represents only a part of the total government R&D expenditures. On the whole, in 2005 the federal government invested € 9 bn in R&D, of which € 3.46 bn (38 %) went to institutional research funding (Bufo, 2006). In the year 2005, BMBF project funding at € 1.92 bn amounted to 25 % of the R&D expenditures of the BMBF. Basic research which is conducted in organisations with a high share of institutional funding, as e. g. in institutes of the Max Planck Society or the Helmholtz Centres, is not completely reproduced by the indicator "research projects". Complementing the R&D expenditures by output indicators like the patent applications described in Chapter 4 is therefore particularly important. 3.2.1 Data Basis and Analytical Methods The environmental research database Ufordat of the Federal Environment Agency and the BMBF research funding catalogue Foekat were utilised to analyse priorities of German research funding in sustainability fields. Both data sources display a high degree of overlapping, but they are not identical. Foekat contains information on R&D project funding, R&D commissions and studies of the BMBF and in individual areas also R&D project funding on the part of the Federal Ministry of Economics and Technology (BMWi) and The Federal Ministry of the Environment (BMU). Ufordat describes environment-related research projects in the whole German-speaking area and also contains projects which are financially supported by other institutions, such as e. g. the Deutsche Bundestiftung Umwelt (German Foundation for the Environment), the EU Commission or federal state ministries. The advantage of Ufordat thus consists in the breadth of data captured. One disadvantage of the database Ufordat is that data 3 Research Programme 39 on the financial project volume are only available for some of the projects. For this reason, comparisons of financial volume will be based on Foekat. The analysis refers to six selected themes of sustainability and differentiates several sub-fields for each thematic field over and above that. For methodological reasons, the definition of these technology fields was performed separately for both databases. For Ufordat the field definition is based on a database-own classification system and a thesaurus of pre-determined key words (descriptors). Each sub-field was differentiated by an appropriate combination of classes and descriptors and each thematic complex is described by a combination of sub-fields. A complete list of the sub-fields in Ufordat can be found in Table 3-3. In the case of the research funding catalogue Foekat, the field definition is based on the BMBF "Leistungsplan-Systematik" (LP), a taxonomy of funding areas. Each sub-field was demarcated by a suitable combination of LP classes and summarised with other sub-fields into one thematic field. The complete list of the sub-fields in Foekat including the accompanying LP figures is depicted in Table 3-4. In the differentiation according to key words in Ufordat, a partial overlapping of the subfields occurs because the same key words appear in different usage contexts. The field definition in Foekat by contrast is free from overlaps. Most subject fields can be well portrayed in this way, substantive difficulties in demarcation exist only for the field "Material Efficiency". Material efficiency is a core concept of sustainability research, but not a uniform technology field. Innovations and research breakthroughs to increase material efficiency can be realised with different technologies and occur in the most widely varied product or production-processoriented research fields. In Ufordat we distinguish the three sub-fields "Recycling", "Renewable Raw Materials" and "Material-efficient Production Processes and Products". In Foekat the existing definition of material efficiency is based mainly on the LP classes F280 "Integrated Environmental Protection in Branches", also other categories like lightweight construction, bionics and "Technological Key Innovations for System Change" play a role. In this way an essential part of material efficiency projects is captured in Germany, but single relevant projects can also crop up in other funding areas, e. g. in microsystem technology or materials research, without these categories being assigned to the area of material efficiency as a whole. Compared to Foekat, the database Ufordat admittedly offers a broader basis to capture socio-economic research on sustainability innovations. However, here too an exact demarcation of social-science sustainability research is not possible. In order to operationalise the question, the two sub-categories "Environmental Innovation Research" and "Environmental Policy Instruments" will be utilised, which can be differentiated in Ufordat on the basis of key words. In contrast, the research promotion 40 3 Research Programme collected in Foekat as "socio-economic" in the investigated period concentrates predominantly on the activities gathered in the LP category F150 "Cross-sectional Tasks in Research for Sustainability" (Table 3-4). The analysis of research funds in Foekat is based on a cross-section of all research projects which were begun in the years 2003-2005. Projects which were carried out during the observation period but were begun before the beginning of 2003 were not taken into account. Conversely, the duration periods of the projects frequently extend beyond the end of the year 2005. In the following section the superordinated subject fields of sustainability will first be compared. The number of research projects, the shares of different R&D funding institutions, the volume of research funding and the distribution of projects and funds to groups of recipients are presented. In the following section, the distribution of research projects respectively research funds to the subareas of all six areas is depicted. On this basis, conclusions can be drawn about recent priorities of publicly financed sustainability research in Germany. 3.2.2 Research Activities in the Selected Subject Areas Table 3-1 compares the six superordinated subject areas with regard to the number of research projects in Ufordat as well as the share of selected funding institutions. A total of 1,764 projects beginning in the period 2003-2005 were recorded in which recipients of funds from Germany participated. The largest subject areas are the fields "Water Supply and Waste Water Disposal" with 31 % and "Renewable Energies and CO2neutral Fossil Energies" with 25 % of the projects. The areas "Material Efficiency" and "Mobility and Logistics" each amount to 21 %, 9 % are allotted to "Energy Efficiency in Buildings" and 7 % to "Socio-economic Research". Some projects can be classified in several areas, so that the sum of all fields is greater than 100 %. Around two-thirds of the Ufordat projects are being financed by the three Federal Ministries BMBF, BMU and BMWi, each of which has different focuses. In the areas water and material efficiency, the research projects are more stongly concentrated in the BMBF, while the BMU plays a significant role in research into renewable energies. The BMWi, on the other hand, focuses mainly on the areas mobility/ logistics and energy efficiency in buildings. One important funding institution is also the German Federal Foundation for the Environment (DBU) with 17 % of the total of recorded projects. On the other hand, the German Research Association (DFG) plays a subordinate role, with only 3 % of the projects, which can be explained by the mainly applied-research orientation of the technology areas covered. On average, 28 % of the projects are funded by institutions other than those mentioned above, including federal state (Länder) ministries. 3 Research Programme Table 3-1: 41 Research Projects in Germany according to Ufordat database, 20032005 Share of selected funding institutions in all projects (in %) Technology areas Projects Σ Renewable energies and CO2-neutral fossil energies3 444 100 22 36 Energy efficiency in buildings 166 100 18 Water supply and waste water disposal 554 100 Material efficiency 372 Mobility and logistics BMBF BMU BMWi DBU DFG EU Others 5 15 2 3 17 8 27 30 0 2 15 43 4 2 14 3 4 29 100 37 11 3 17 2 6 24 387 100 28 11 15 9 2 6 28 Socio-econ. research on sustainability innovations 132 100 24 38 3 2 2 5 27 Total (6 subject areas) 1 64 100 37 19 8 17 3 5 28 Source: Ufordat, Fraunhofer ISI survey, database host STN Table 3-2: R&D Funds for Projects beginning in 2003-2005 according to Foekat R&D ex penditures in € m Share of R&D expenditures (in %) Number of projects ** Share of projects (in %) Ø project volumes** in € 1 000 Renewable energies and CO2-neutral fossil energies 247,75 46.3 291 26.2 851 Energy efficiency in buildings 41,25 7.7 102 9.2 404 Water supply and waste water disposal 64,41 12.0 254 2.,8 254 Technology areas Material efficiency 57,27 10.7 209 18.8 274 Mobility and logistics 111,60 20.9 243 21.9 459 Socio-economic research on sustainability innovations 12,79 2.4 13 1.2 984 Total 535,06 100 1112 100 481 Source: BMBF research funding catalogue Foekat, survey Fraunhofer ISI; http://oas2.ip.kp.dlr.de/foekat/foekat/foekat. ** The single projects are often sub-projects of larger joint projects. The figures on average project volumes refer in these cases to the allocation to individual research organisations or enterprises (individual allocation recipients). A comparison of the project numbers does not allow meaningful statements about the financial priorities of research funding because the project budgets vary. The Ufordat 3 Of the total of 444 projects, 52 (12 %) could classified unter the field "Carbon Sequestration", the others investigated renewable energies. 42 3 Research Programme database contains data on project volume only for some of the projects and is therefore supplemented by data on R&D expenditures from Foekat. Table 3-2 presents priorities of research funding in a comparison of the six subject areas. The definition of the subject areas is based on the funding taxonomy of the BMBF (Leistungsplansystematik, LP). In the observation period 2003-2005, projects with a total volume of € 535 m were begun in all six areas. This dimension corresponds to 9.4 % of the project funding of the BMBF in the same time period. Clearly in the lead is the subject area "Renewable Energies and CO2-neutral Fossil Energies" with a share of 46.3 %, mainly provided by the BMU, followed by "Mobility and Logistics" with 21 %, with the BMWi allocating funds. A mere 2 % of the funds are allotted to the area "Socioeconomic Research on Sustainability Innovations". Figure 3-1: Groups Receiving Project Promotion acc. to Subject Areas 2003-2005 0% 20% 40% 60% 80% 100% Renewable energies and CO2-neutral fossil energies Energy efficiency in buildings Water services (supply and disposal) Material efficiency Mobility and Logistics Socio-economic research Total Industry Non-university research Universities Others Source: BMBF research funding catalogue Foekat, analysis by Fraunhofer ISI Figure 3-1 compares the share of different recipients by the technology areas, differentiated according to the recipient groups industry, non-university research organisations, higher education institutions (universities and advanced technical colleges) and others (e. g. associations). The analysis shows which actors within the innovation system possess competences in sustainability research. Following aspects are to be emphasised: 3 Research Programme 43 • The rather low share of universities with only 17.5 % of the total project funding is striking; the universities play a more significant role only in the field of water supply and waste water disposal. • The share of project funds to enterprises varies considerably; it is highest in the area mobility and logistics, followed by the areas renewable energies and material efficiency. These fluctuations reflect different purposes of the policy instruments (e. g. instruments to promote research consortia). The institutional differentiation of the research landscape into universities and nonuniversity research organisations plays a significant role – above and beyond project funding – for the future development of research competence in Germany. For the next generation of researchers are mainly educated in Germany in universities, but today the universities are basically provided with much less financial resources for research than the non-university research organisations (Heinze, Kuhlmann 2006). Moreover, the non-university research sector is differentiated into organisations with different organisational models, performance incentives and mission profiles (Helmholtz Centres, institutes of the Fraunhofer Society, Max Planck Society and Leibniz Association). Many subject areas of environmental research are integrated today in the Helmholtz Centres which were originally founded as nuclear research organisations (e. g. UFZ in Leipzig-Halle, Research Centre Karlsruhe, GSF-Forschungszentrum für Umwelt und Gesundheit, Neuherberg). However, the present assessment does not permit meaningful, differentiated statements for the different organisations in nonuniversity research. 3.2.3 Focuses within the Subject Areas The following tables describe the focuses of project-based research funding within the six subject areas. Table 3-3 presents the number of research projects according to sub-areas, based on searches in Ufordat. Table 3-4 contains information on expenditures according to technology field, as well as graphic depictions of the share of the total volume for the corresponding subject area. For methodological reasons the sub-fields in Ufordat and Foekat are not identically defined, both definitions serve as complementary descriptions. Measured in absolute frequencies, the following focuses can be determined for the research projects already begun: in area (1) "Renewable Energies and CO2-neutral Fossil Energies", most projects are carried out in photovoltaics and wind energy. CO2 sequestration in the observation period amounted to approx. 12 % of the projects, but the financial volume for this subject area rose in 2006. In subject area (2) "Energy Efficiency in Buildings" the focus lies on research into heating systems (above all 44 3 Research Programme heating plants and heat pumps), followed by room air conditioning. In area (3) "Water Supply and Waste Water Disposal" protection against flooding is the most frequent research field (30.5 % of the projects), followed by water supply and waste water disposal (both fields show overlapping) and decentralised water management. In subject area (4) "Material Efficiency", the research projects are evenly distributed over the three sub-categories recycling, renewable raw materials (above all wood, followed by rapeseed) and material-efficient production processes and products (above all, projects on eco-friendly products, integrated environmental protection technology and eco-balancing). In area (5) "Mobility and Logistics" emissions reduction and vehicles are the most frequent sub-categories, followed by research on infrastructure (above all roads and road construction). The most frequent key words for the alternative fuels are natural gas and electric engines. In area (6) "Socio-economic Research on Sustainability Innovations" it emerged that a number of projects are being conducted mainly on environmental policy instruments, but also on environmental innovation research. When comparing the absolute frequencies in Table 3-3 it must be taken into account that the average project volumes can differ substantially, according to area. For instance, the projects in the water cluster are on average distinctly smaller than those in the field of renewable energies (cf. Table 3-2 last column). Thus the differentiation of the subject areas according to the research funding catalogue is a significant supplementary source of information. One striking finding in Table 3-4 is that research funds are concentrated on two to three sub-areas - in all six subject areas more than half of the funds, even up to two-thirds. In a purely quantitative analysis, these technology fields represent the priorities of the project-based research funding during the observation period. The concentration of the research funding on priority areas is also clear in the share of the Top 6 in the total expenditures in the 44 sub-fields studied: it amounts to around 50 % (€ 277.9 m). The Top 6 all stem from the two areas Renewable Energies (photovoltaics, fuel cells, wind, and geothermal energy) and Transport/ Mobility (propulsion (aviation), earth-bound transport systems). This illustrates the high current significance of these two fields within the German R&D funding projects. By comparison: in the same period, the BMBF invested a total of € 98.6 m in nuclear energy research (without the disposal of nuclear engineering plants) and € 346.2 m for nuclear fusion research. 3 Research Programme Table 3-3: 45 Research Projects according to Technology Field in Ufordat, 2003-2005 Technology field No. Share % Photovoltaics (incl. thermal solar energy) Wind energy Water energy Biomass Geothermal energy CO2-neutral fossil energies Renewable energies and CO2-neutral fossil energies 154 107 18 79 42 52 444 34.7 24.1 4.1 17.8 9.5 11.7 100 Building envelope Heating systems Room air conditioning Lighting Measurement and control technology in buildings Energy efficiency in buildings 32 98 49 5 24 166 19.3 59.0 29.5 3.0 14.5 100 Water supply Waste water disposal Decentralised water management Efficiency of water utilisation Water utilisation in agriculture Flood control measures Water services (supply and waste water disposal) 153 125 134 29 26 169 554 27.6 22.6 24.2 5.2 4.7 30.5 100 Recycling Renewable raw materials Material-efficient production processes and products Material efficiency 138 122 140 372 37.1 32.8 37.6 100 Vehicles (road, rail, air travel, water) Propulsion Infrastructure (road, rail, airports, waterways) Emission reduction (waste gases and noise) Alternative fuels Mobility and logistics 118 62 106 122 60 387 30.5 16.0 27.4 31.5 15.5 100 Environmental innovation research Environmental policy instruments Socio-economic research on sustainability innovations 51 81 132 38.6 61.4 100 Total topics Total Germany 1 764 4 434 Source: Ufordat, analysis by Fraunhofer ISI, database Host STN. 46 3 Research Programme Table 3-4: Funding Priorities according to Technology Areas, Foekat 2003-2005 LP Technology area Number €m Renewable energies and CO2-neutral fossil energies E210 Photovoltaics E22231 Fuel cells – development E212 Wind energy E216 Geothermal energy E214 Solar utilisation in southern climate conditions E217 Cross-sectional activities in renewable energies O12080 Geotechnol. for CO2 transformation E22232 Fuel cells – demonstration Sum Energy efficiency in buildings E243 Solar-optimised building Rational energy use and solar energy utilisation in households and by small E241 users Energy-optimised improvement of E244 building substance F21040 Needs in fields of leisure/ living Sum Water services disposal) F12025 F12013 F13030 F13010 F13060 F12022 F13040 F13020 F12020 F13050 Sum (supply and waste water Decentralised water supply and waste water disposal Water protection technologies Communal sewage/ waste water Water supply Analytical sensors, measurement processes and models Development of sustainable water technologies Industrial waste water Water re-use Sustainable treatment of the resource water Sewage sludge Shares in technology area (in descending order as on the left) 2% 88.1 63.4 35.9 28.7 7% 2% 1% 36% 12% 17.2 14% 5.5 5.5 3.3 247.7 26% €m 22.8 1% 19% 10.1 7.7 0.6 41.2 55% 25% €m 5% 1% 7% 20.8 18.3 8.6 8.4 13% 4.5 13% 3.0 0.6 0.1 0.0 0.0 64.4 Source: BMBF promotional catalogue, Fraunhofer ISI survey. 33% 28% 3 Research Programme LP Number Technology field Material efficiency F23010 Technological key innovations for system change F28050 Integrated environmental protection system (IP) in metal–producing and metal-processing industries L12110 Lightweight construction F28030 IP chemicals and synthetics F28060 IP electrical/ electronic industry K01510 Sustainable bioproduction F28040 IP textile and leather industry F28083 IP packaging industry F28085 IP in further branches/ topic fields F28020 IP agriculture and food F28070 IPbuilding trade, glass and ceramic industry F28010 IP timber and furniture industry K01610 Bionics Sum Mobility and logistics M01040 Environmentally compatible propulsion (aeronautics) N010 Earth-bound integrated transport systems N030 Goods transport N040 Environment- and resource-friendly N020 Passenger transport N060 Better understanding mobility and transport Sum Socio-economic research on sustainability innovations F150 Cross-sectional tasks in sustainability research F240 Business models for a sustainable market economy F270 Bases and framework conditions for sustainable management Sum 47 €m Shares in technology area (in descending order as on the left) 3% 3% 1% 5% 14.8 27% 5% 9.6 8.2 8.1 3.2 3.0 3.0 2.7 1.8 1.7 5% 6% 17% 14% 14% 0.7 0.3 0.1 57.3 €m 9% 1% 34.8 31% 13% 27.2 24.2 14.1 9.9 22% 1,4 111.6 €m 24% 1% 3% 12.4 0.3 0.1 12.8 96% Total 535.1 48 4 Capability 4 Capability in the Selected Sustainability Fields 4.1 Technological Sustainability Fields 4.1.1 Methodology Technological capability addresses a construct which is not directly measurable. It is therefore necessary to find indicators which at least come close to describing it. A widely accepted system to do so adapts indicators from various sub-fields of the innovation process (see Grupp 1998). This section refers to patents as R&D output or intermediary indicators on the one hand, which are presumed to describe the direct result of the R&D process. At the same time they are assumed to be an early indicator for future technological development. On the other hand, foreign trade indicators are constructed which belong to the class of output indicators. They focus more on the application and diffusion of technologies in R&D-intensive product markets. It is true that sustainability-relevant technologies are also applied with the aim of reducing environmental pollution. Thus, on the one hand, they show an affinity with traditional environmental technologies. On the other hand, they go far beyond the classical definition of environmental technologies which in the past have focussed on end-of-pipe strategies and which have dominated the studies done so far on recording environmental activities. In the sustainability domains regarded here, energy, water and transport infrastructures are main focal points as are efficiency strategies in energy consumption in buildings and material consumption. They are the subject matter of a modernisation strategy in which environmental protection and economic sustainability are achieved simultaneously with the same technology. Unlike the traditional environmental technologies, no internationally comparable convention has emerged so far for the sustainability-relevant technologies regarded here, which could be used to define and classify the technologies in the patent and economic statistics. Therefore it is necessary to come up with a definition tailored to the specific data situation. The methodology, as in the previous approaches (DIW/ISI/Roland Berger 2007), follows a 'potential approach', in which the sustainability-relevant technologies comprise those goods which could serve environmental protection and the modernisation of the subject areas mentioned or refer to technological knowledge with a similar base. This approach thus focuses not on the actually realised application for environmental protection, but on the technological capability which could be mobilised for environmentally-friendly production processes and products in the selected fields.4 4 See Legler et al. 2006, p. 19-22 for further explanations of the potential approach. In several sustainability-relevant technologies it is therefore especially necessary to question the pollution reducing effects of an increased use of the technologies. Examples for this are, e. g. propulsion technologies or the use of first generation biofuels. 4 Capability 49 The problem with empirical studies is that they have to define their subject area empirically and draw on suitable measurement concepts and databases for the subject of interest. This study's main subject of interest is the technological capability of the BRICS countries in the five selected sustainability fields. These technologies are neither a patent class nor a specific trade classification which can be easily detected. Thus, for each technology, it was necessary to identify the key technological concepts and segments. They were transformed into specific search concepts for the patent data and classification schemes for the trade data. This required an enormous amount of work and substantial engineering skills. For some technologies, the classification had to start from scratch, for others it was possible to partly build on experiences gathered in previous studies: • Within the scope of the reports on the technological performance of Germany (TLF), traditional end-of-pipe environmental sectors were regarded with a focus on Germany and the OECD countries. • Within the study by Legler et al. (2006), these traditional end-of-pipe environmental technologies were supplemented by renewable energy sources and a few selected energy efficiency technologies; the focus was on the foreign trade of Germany and the OECD countries. • Within the study "Wirtschaftsfaktor Umweltschutz: Weiterführende Analysen zu Innovationen" (DIW/ISI/Roland Berger 2007), four selected sustainability fields were examined (renewable energies, energy efficiency, transport and water); the innovation indicators here focussed on Germany without international comparisons. With this study, for the first time, interest centres on the capability in the BRICS countries. Directing the analysis at the BRICS countries requires greater consideration of patent applications which do not only target the European market and a focus on the foreign trade of non-OECD countries. This made it necessary to modify the measurement concepts used in the above mentioned studies: • The patent searches primarily draw on patent applications at the World Intellectual Property Organization and thus international patents. In this way, a method of mapping international patents is employed which does not target individual markets such as Europe but is much more transnational in character. The BRICS countries' patents identified in this way reveal those segments in which patent applicants are already taking a broader international perspective. The years 2000-2004 were chosen as the period of study so that a statistically more reliable population is achieved in which chance fluctuations in individual years are evened out. In addition, the available data on national patents in the BRICS countries were analysed in sensitivity analyses in order to be able to take into account any distortions resulting from concentrating on international patents. However, national patent data was only completely available electronically for Brazil, Russia and China. In those cases in which major deviations become visible between the pattern of national patent 50 4 Capability activity and that of international patent applications, this is commented on in the text during the interpretation. • The database UN-COMTRADE is referred to for foreign trade figures. This is not limited to trade with OECD countries, but also covers South-South trade relations. In contrast to other analyses therefore, world trade is not only based on foreign trade flows in which OECD nations are involved, but encompasses the whole world. In addition, the classification of the technologies was structured according to the Harmonised System (HS) 2002. This foreign trade classification allows more detailed and thus more targeted disaggregation compared with the older classifications common in international comparisons (Standard International Trade Classification (SITC)).5 Nevertheless, this foreign trade classification still has many limitations in the level of disaggregation which make the application of the above sketched potential approach indispensable. The data are based on the year 2005. The shares in global activity of the countries examined are used for both the patent applications and foreign trade: • International patent applications are researched and the shares of the BRICS countries and Germany in these calculated. • In foreign trade, the world trade shares (WTS) are calculated, i.e. the shares of the respective countries' exports in world exports. Both the patent shares and the world trade shares are influenced by the size and general development of the country. It is therefore common to additionally construct specialisation indicators. These indicate the position of the technologies and goods of particular interest in relation to the average of all technologies and goods within the country regarded. Positive specialisation values show that the competence of the country in this field is above average, relative to the average of all technologies and goods. These specialisation indicators are constructed for both patents and foreign trade. They are standardised such that the indicators lie between -100 (extremely unfavourable specialisation) and +100 (extremely high specialisation), where a value of 0 corresponds to an average specialisation:6 • For patents, the revealed patent advantage (RPA) is calculated which compares the patent share of the country regarded in the sustainability technology with the patent 5 The HS 2002 is even more aggregated than the German foreign trade classification, but this can only be used to analyse German foreign trade. 6 See Grupp, Schmoch (1992) on the method. In the literature, foreign trade indicators sometimes do without standardising the specialisation indicators in the interval -100 to +100 (see, e. g. Legler et al. 2006 and Krawcyzk et al. 2007), which - in addition to other classification and data-based differences - makes it more difficult to compare the results. This kind of approach has, among others, the drawback that it hinders a comparison of the specialisation in foreign trade specialisation with that in patents. 4 Capability 51 shares of the country in all technologies. The RPA assumes a positive value if there is an above average patent share for the sustainability field. This means that, within the respective country, a disproportionately large number of patents are being applied for in the sustainability fields and therefore – compared with the other fields of technology – the national knowledge in this area is above average. • The RCA (Revealed Comparative Advantage) takes both imports and exports into account and thus counts as a comprehensive indicator of the foreign trade position. It indicates to what extent the import/export relation of a country in the examined sustainability technologies deviates from the import/export relation of the country in all industrial goods. Positive signs indicate comparative advantages - a strong international competitive position of the regarded sustainability technologies in the country regarded. However, the RCA is difficult to interpret if special factors have an influence on imports which do not concern the technological capability. Examples for this are import peaks due to sudden surges in demand which exceed domestic capacities or extremely low imports because of import restrictions. For this reason, the revealed export advantage (RXA) is also constructed, which neglects the import side. Positive values here show that the world trade share of the country in the respective good is above the average world trade share of the country. In the report, the specialisation in foreign trade is mainly discussed based on the RXA, but information is also given on the RCA in the Annex. Cases in which the RXA deviates strongly from the RCA are addressed in the text. To be able to better classify the results for the sustainability fields in the subsequent paragraphs, the shares of the BRICS countries and Germany in all international patent applications and global foreign trade for all industrial goods are listed to start with. These form the benchmark for judging whether the respective country has developed a specialisation in the sustainability fields examined or not. At the same time, these results already illustrate differences in the absolute capacity level between the countries. The BRICS countries have a share of 2.7 % based on all the patents registered in the database; Germany has 17 %. The world trade share of Germany in all world exports amounts to about 10 % - Germany is the market leader worldwide ahead of the USA (9.4 %) and China (7.9 %). Because of these different dimensions, Germany's patent and world trade shares are shown on a separate axis in Figure 4-1. 52 4 Capability Shares of the BRICS+G countries in international patents and the world exports of industrial goods 10% 20% 8% 16% 6% 12% 4% 8% 2% 4% 0% 0% BR patent shares CN WTS IN patent shares DE RU ZA shares DE shares BRICS Figure 4-1: DE WTS DE These variables show considerable dynamics over time. Parallel to the increasing recognition of the WTO rules governing Intellectual Property Rights – for example China signed the TRIPS agreement at the beginning of the century – the number of patent applications has also risen. These increased fivefold within five years in India and China and by a third in Germany and Russia during the same period. In Brazil and South Africa, the increase in this period was approx. 50 %. The world trade shares of the BRICS+G countries remained more or less the same for South Africa, rose slightly for Germany and Brazil and grew considerably for Russia, India and China. These indicators give a differentiated picture of the technological performance. It must be noted at all times that an individual indicator value on its own only has restricted explanatory power. For instance, no comparative statements can be made about the absolute competence of countries from, e. g. comparing specialisation patterns; this requires knowledge of the absolute figures in the sense of patent and global trade shares. It is also important which trends underlie the indicator values and which overall picture results, especially whether strengths and weaknesses in the research results (patents) correlate with economic realisations (foreign trade) or whether there are contradictory developments. 4.1.2 Renewable Energies and CCS According to analyses of the International Energy Agency IEA (World Energy Outlook 2006) the demand for primary energy in its baseline scenario will grow by more than 50 % between 2003 and 2030. Whereas fossil energy sources increase by 1.4 % on average, renewable energy sources grow by more than 6 %, albeit from a much lower 4 Capability 53 level. More than two thirds of the increase will occur outside the traditional industrial countries and, in 2030, half the primary energy demand will be from countries like China, India and Brazil. Fossil fuels will continue to dominate demand (81 % of the primary energy demand in 2030 will be met by fossil sources, more than in 2003). As a consequence of the high demand for primary energy, CO2 emissions will increase by 52 % and further propel the greenhouse effect. The share of coal will fall slightly from 24 to 23 %; but coal use will increase in absolute terms by 44 %. China and India, both countries with large coal reserves, are responsible for two thirds of this increase which is driven primarily by electricity generation in these countries. According to estimates of the IEA, 17,000 billion US $ will have to be invested in the energy sector by 2030, half of this in developing countries and emerging economies. Besides reducing the demand, this development offers renewable energies an opportunity. The market for renewables will increase more than fivefold compared to the present. Manufacturing companies are expecting increasing market potentials even in the short to medium term (DIW/ISI/Roland Berger 2007). It is already apparent today that the BRICS countries India (wind power), China (solar power) and Brazil (biofuel use) could also have important relevance as production locations. Despite this, on account of the high share of fossil fuels and especially of coal in power generation up to 2030, the question arises of how CO2 emissions from fossil sources can be curbed using CO2 capture and storage (CCS). The possible conflict between renewable energies and CCS must not be overlooked, since both technologies are competing for important future markets in the energy supply sector. In detail, the following technologies were examined in the field of renewable energies and CCS: • Renewable energies: PV installations, solar thermal installations (including solar thermal power generation and solar water heating), wind power and hydropower plants (incl. wave and tidal power). • CO2-capture and storage (CCS): pre- and post-combustion technologies for CO2caputre were examined as well as oxycombustion (oxyfuel), which increases the CO2-concentration in the exhaust gas (no nitrogen shares) and thus makes other separation concepts possible. Important technologies in this context are coal and biomass gasification, gas purification and the water-gas shift reaction (including suitable catalysts) as well as modifications in power stations, mainly in gas turbines or in boiler design. The joint share of the BRICS countries in world patents in renewable energies and CCS is just under 3 %. This is lower than Germany's share of 19 % by a factor of 7. China and Russia have the largest shares among the BRICS countries followed by India and South Africa. Brazil has a very low share in world patents. 54 4 Capability Together, the BRICS countries reach a world trade share of almost 7 % in foreign trade (Germany: almost 15 %). China is the leader among the BRICS countries with about 5.5 % followed after a large gap by India with 0.6 %. Germany’s outstanding competence in the technologies regarded here is very apparent from this comparison of the absolute patents and exports. Figure 4-2: Share of BRICS+G countries in world exports and international patents in the field of “renewable energies and CCS” 20% 6% 15% 4% 3% 10% 2% shares DE shares BRICS 5% 5% 1% 0% 0% BR patent share CN IN world trade share RU patent share DE ZA DE world trade share DE The specialisations in patents and foreign trade are shown in Figure 4-3 in the form of a multidimensional chart. Countries with positive specialisation in both areas are shown in the upper right quadrant. If, in contrast, both areas are below average, the country is shown in the bottom left quadrant close to the coordinate origin. A positive patent specialisation but negative export specialisation means a country will appear at the bottom right, and in the upper left quadrant for negative patent but positive export specialisation. This type of diagram has the advantage that countries which share a similar specialisation pattern appear close to each other graphically so that comparison is possible "at a glance". Of the BRICS countries, only Russia and South Africa show a positive patent specialisation similar to Germany. It can be concluded for India, China and Brazil that the technologies regarded are not part of their main areas of competence. However, renewable energies and CCS show a slightly higher relevance at the Chinese/Brazilian patent offices which somewhat qualifies this below average patent activity. In addition it can be seen that China's specialisation is improving over time. The BRICS countries have a below average export situation, while Germany has disproportionately high exports in total. However, particular care must be taken when interpreting Germany's 4 Capability 55 figures because the good export situation is overlapped by even stronger import dynamics (see the technology-specific comments below) so that a below average foreign trade position results for the RCA indicator. A similar, but much less conclusive effect, also results for China. The massive development of energy capacities taking place here probably plays a key role in its substantial imports. The reverse is true for India: the imports here are comparatively low. Compared with China, probably stronger efforts are put into national energy solutions here. Figure 4-3: Specialisation pattern of the BRICS+G countries in renewable energies and CCS renewable energies and CCS specialisation exports 100 BR CN IN 0 RU ZA DE -100 -100 0 specialisation patents 100 Fraunhofer ISI These aggregated figures conceal some clear differences between the technologies: • Brazil shows above average competence in hydropower which is not surprising considering the extremely high share of this energy source (over 80 %) in total electricity generation. Average patent specialisation is achieved in wind energy; the many excellent wind power locations in Brazil have led to the first national activities but so far not to any above average competence building. For all the other technologies regarded in this field, the indicators show below average specialisations. 56 4 Capability • China's competence in hydropower and solar thermal energy is above average. The field of solar cells stands out in particular: China has managed to achieve an export share of almost 10 % with only a slightly positive patent specialisation, but imports many of these goods at the same time, similar to the other technologies regarded here. China has certainly managed to establish itself in world trade in this technology even if this involves low-price solar cells of sometimes poorer quality. Despite intensive discussion and the enormous potentials of CCS – given the predicted number of coal power stations to be built – so far no competence is apparent in this field in China. • In patents India shows, similar to China, above average activities in hydropower and solar thermal power. Export specialisation in wind power systems was achieved for the first time in 2005; Suzlon, the leading Indian manufacturer, certainly played an important role here with its increasing international activities. • Russia has above average competence in the fields of solar thermal power, wind power and CCS. The many years of Russian experience in the field of coal gasification have a strong positive effect on the latter. Nevertheless, the export activities in these fields are in no way able to reach the average level which is dominated by oil and gas exports. • Solar thermal power, hydropower and CCS also constitute main areas of competence in South Africa. The latter is mainly due to the domestic coal reserves and the competence in coal gasification, which were already being pushed during the period of apartheid for self-sufficiency reasons. • In Germany, almost all the renewable energy technologies are areas with an above average patent specialisation. The exception is photovoltaics – the patent share of Germany here is about 15 % compared with the approx. 30 % of market leader Japan. At the same time, the foreign trade specialisation of Germany – measured by the RCA – is clearly negative in solar cells, there is a considerable excess of imports here. Looking at the export side also reveals a negative specialisation, albeit a much less obvious one. However, care should be taken in interpreting this result: It is true that photovoltaics does indeed still have below average specialisation, but at the same time, the enormous surge in domestic demand triggered by the German Renewable Energy Sources Act (EEG) and the accompanying but delayed subsequent build-up of production capacities must be considered. Up to now, the growth in domestic demand has been so strong that the production of German companies has been more strongly channelled towards the home market and additional imports have been brought in from abroad on top of this. The situation resembles that of wind power in which Germany also used to show negative specialisations in the past, but has since advanced to assume world market leadership with the parallel expansion of the market and domestic production capacities with export and patent shares of more than 30 % each. When taking into account these special factors, the prospects for the competitiveness of German suppliers in the sector of renewable energy sources are therefore very good. In 4 Capability 57 Germany, CCS technologies belong to those with an above average patent specialisation. The export specialisation is also positive in this field in Germany. Germany clearly has specialisation advantages here. Overall it can be shown that the BRICS countries are especially strong in hydropower, which represents a more traditional technology and has already been in use for some time in these countries and in solar thermal power, which is the least high-tech of all the technologies regarded. There are other additional individual areas, particularly solar cells in China, wind power in India and CCS in South Africa and Russia. Using foreign trade statistics, it can be calculated which share of the total exports of each BRICS+G country is exported to the other BRICS+G countries. The higher this figure, the more important the BRICS+G countries group is as a target market for the respective country. The calculations reveal that approx. 50 % of India's total exports in the field of "Renewable energy sources and CCS" are exported to the other BRICS+G countries. This share is between 20 and 30 % for Russia, China and Brazil, too. Germany is the most important customer for India and China. Furthermore, China represents a main export market for Russia and Brazil. Figure 4-4: Share of the exports of BRICS+G countries in the field of "Renewable energy sources and CCS" to other BRICS+G countries in % 60% 50% 40% 30% 20% 10% 0% Brazil China Germany India Russia South Africa 58 4 Capability The significance of the individual technologies for trade between the BRICS+G countries varies by country. The following main technologies can be determined for the individual countries: • Brazil: water turbines to China; • Russia: hydropower and power station components, India and China are important customers; • India: solar cells, mainly to Germany; • China: solar cells to Germany, power station technologies to India; • South Africa: hydropower followed by power station technologies, but at a comparatively low level; • Germany: power station technologies (especially to China) and water turbines, in which all the countries are involved. Overall, it is clear that the more traditional technologies of power stations and hydropower dominate the trade among the BRICS+G countries, as well as the exports of solar cells to Germany. In contrast, solar thermal power plants – a technological strength of the BRICS countries – tend to be exported to non-BRICS+G countries. A similar picture emerges for wind power installations from Germany; so far the BRICS countries have played a subordinate role as an export market here. With the considerable expansion plans for renewable energy sources and the substantial potential for CCS, especially in the coal producing countries of India and China, this field can certainly be regarded as an essential one in which Germany can do justice to its global responsibility through intensive cooperation in the future. 4.1.3 Energy Efficiency in Buildings Today, buildings, including their infrastructure and the electrical appliances used in them, have a share of 39 % in final energy demand worldwide with the tendency to decrease slightly to 2030 (IEA World Energy Outlook 2006). In absolute terms, however, this still represents a 50 % increase in the energy consumption in residential buildings and commercial buildings. There is estimated to be a high market potential in the field of energy efficiency in buildings. Western Europe is the most important market for German manufacturers, followed by Eastern Europe and Russia (DIW/ISI/Berger 2007). On account of the often milder climate zones of developing countries, the share in final energy consumption is somewhat lower than the global average. However the BRICS countries have a broad spread of climate zones, even within one country like China: In the northern regions, the climate is similar to Finland, whereas the climate in the south 4 Capability 59 of the country is characterised by subtropical and tropical influences. Still, even in countries with hot climate zones, the energy consumption in buildings is increasing due to the growing use of air conditioning. This has the effect of increasing precisely the type of electricity consumption which has a strong effect on primary energy. Poorly insulated (and poorly shaded) air conditioned buildings in hot zones often consume as much or even more energy than well insulated ones in cold regions. In detail, the following technologies are examined in energy-efficient buildings: • Building services engineering: efficient building services engineering, insulated glass, efficient heating systems, and heat pumps. Systems for room air conditioning, lighting and building automation. • Efficient electrical appliances covering all the common bulk appliances in households. The joint share of the BRICS countries in worldwide patents in the field of energyefficient buildings is just over 2 %. In comparison, Germany’s share in this field is 18 %. Of all the BRICS countries, China is clearly in the lead in patents. Russia comes next with a much lower share. The shares of the other BRICS countries are around 0.25 % or below. In foreign trade, there is a world trade share of about 14 % for the BRICS countries, exactly the same as for Germany. China has by far the biggest share among the BRICS countries. Brazil, India and Russia follow after a large gap with world trade shares in this field of under half a per cent, respectively. Figure 4-5: Shares of the BRICS+G countries in global exports and international patents in the field of energy-efficient buildings 14% 20% 15% 10% 8% 10% 6% 4% values DE values BRICS 12% 5% 2% 0% 0% BR CN patent share IN world trade share RU patent share DE ZA DE world trade share DE The specialisations in patents and exports are illustrated in Figure 4-6 in the form of a multidimensional chart. It is noticeable that China and Germany, on the one hand, and Brazil, Russia and South Africa, on the other, have similar specialisation patterns. 60 4 Capability Germany and China are both clearly above average in exports and slightly below average in patents; the specialisation is even more apparent when looking at China's national patents. As is clear from the patent shares described above, behind the same patent specialisation there is a different level in Germany with a much higher absolute patent activity. This implies that Germany achieves its export success in the higher quality and higher priced segment with correspondingly high energy efficiency, whereas China is more successful in the market segment characterised by price competition. Overall this interpretation suggests that China could mobilise considerable capabilities for a more sustainable design of the building sector, but at the same time that there is still a substantial gap between potential and actual applications for increasing building efficiency. Nevertheless, the national patent activities in China are even more marked than the international ones. This indicates that China is already undertaking large efforts in this specific sector to expand its knowledge base. For Brazil, Russia and South Africa, it generally applies that they have a below average performance in the building sector. In fact, patent specialisation is average, so that knowledge does exist which could be made use of, but the technologies examined are among the weakest in foreign trade. In India, the technology knowledge base is very weak – compared with India's average values – and, at the same time, there is below average export specialisation. There are several differences in the individual segments in the sector of building efficiency. This does not apply so much to Germany but to some other BRICS countries: • In Brazil, building services engineering is stronger than energy-efficient appliances in both patents and foreign trade. • Positive patent specialisation for Russia indicates greater competence in energyefficient appliances than in building services engineering. • India shows an almost average specialisation in energy-efficient appliances, but is very poorly positioned for building services engineering. • China has a stronger position in patents, but a simultaneously weaker one in exports for appliances than for building services engineering. Air conditioning technologies play a particular role in export successes here; indeed some are already accusing Chinese manufacturers of following a predatory pricing strategy. As the interview results in Chapter 5 show, it has to be challenged whether Chinese products contribute to an efficient use of energy or not. The claim outlined above that these capabilities could be more strongly applied to increasing energy efficiency in buildings is probably correct, particularly as far as building services engineering is concerned. 4 Capability 61 • Competence in building services engineering is almost average in South Africa and thus much stronger than the very weak field of energy-efficient appliances. Figure 4-6: Specialisation pattern of the BRICS+G countries in energy-efficient buildings energy-efficient buildings specialisation exports 100 BR CN IN 0 RU ZA DE -100 -100 0 specialisation patents 100 Fraunhofer ISI Between 3 and 14 % of exports are to trading partners from the BRICS+G countries. The BRICS+G countries are still the most important partners for India, but at a lower level of relevance. They play a very minor role for South Africa and Brazil. The trade between the BRICS+G countries is mainly characterised by the exchange of electrical products for rational energy use. Other technologies to be mentioned include exports of thermal insulation products from Germany and China to Russia, and of heating systems from Germany to Russia. Of the goods regarded, air conditioning systems are important export goods for China, but these only play a minor role in trade among the BRICS countries. 62 4 Capability Figure 4-7: Share of exports of the BRICS+G countries in energy-efficient buildings to other BRICS+G countries in % 16% 14% 12% 10% 8% 6% 4% 2% 0% Brazil 4.1.4 China Germany India Russia South Africa Water Services None of the BRICS countries is predominantly arid. Still, there are dry regions in Northern India and South Africa as well as in Western China, in which the population may suffer absolute water shortages under certain conditions. The starting situation is characterised by an often abundant but also irregular supply of water over the year and by the fact that existing water sources are so polluted due to high population densities, especially in agglomerations, and unchecked economic activities in connection with raw materials production, commerce and small industry that they can no longer be used as drinking water without further treatment. Alongside the off-take of freshwater with the help of wells and the purification of various water resources (e. g. surface waters) with the aid of filters, the reduction of emissions to water is thus of the greatest importance. Even in those towns which possess sewer systems, these are often in a poor condition, not sufficient with regard to capacity and catchment area and wastewaters are sometimes channelled into the existing receiving water bodies without prior treatment. An additional problem, above all in Brazil, China and parts of India, are the annual recurrent floods which render every conventional, central wastewater infrastructure inoperable. Another point concerning water pollution is the widespread wastage of water which can be traced back to a lack of technology, but also a lack of incentive structures (i. e. low water prices). 4 Capability 63 Water technologies will become increasingly significant in the future. This is due to a combination of accumulating reinvestment demand in the countries with established water infrastructures and additional demand from the countries which are undergoing rapid economic development. Business consultants expect market potential growth rates of up to 10 %/a (see DIW/ISI/Berger 2007). The following technologies are examined in detail: • Water supply covers both the transportation and treatment of raw water (including seawater) and its distribution to private and commercial consumers. Important technologies are physical-chemical processes and – especially with regard to decentralised water supply and closing water cycles – membrane-based filter technologies for water treatment. Other aspects range from the construction and maintenance of water supply and wastewater disposal infrastructures to pumps, valves, water pipes and water containers. • Sewage disposal covers both conducting the wastewater from where it is discharged and purifying it. Wastewater treatment processes form the core element of sewage disposal and are aimed at the purification of water with the help of mechanical, chemical and biological processes which are integrated into the design of sewage treatment plants and adapted to the respective conditions. Decentralised approaches were also included like small sewage plants, if applicable in combination with membrane filtration. Wastewater pipes and pumps and the disposal of the accumulated sewage sludge also come under this heading. • Increasing the efficiency of water consumption is a decisive element of pro-active water management which does not restrict the challenge of supplying sufficient quantities of high quality water to the supply-side alone. In households, besides household appliances (washing machines and dishwashers), water-efficient fittings play an important role. In agriculture, efficient irrigation technologies are particularly relevant. • Extreme weather events which will probably occur more often in the course of an expected climate shift place increasing demands on managing all the components of water infrastructure. These include structural flood protection and instruments to measure liquid (rainwater) levels and flows as well as the transmission and processing of the collected data. The combined share of the BRICS countries in world patents for sustainable water technologies is almost 3 % and thus less than a fifth of the annual patents from Germany. China has the largest share among the BRICS countries with 1 %. India, Russia and South Africa follow each with about half a percent, Brazil's share is 0.3 %. This situation appears different, however, when looked at over time. While Russia has lost patent shares, a substantial increase can be seen for China, India and Brazil. 64 4 Capability For foreign trade, the world trade share of about 8.5 % indicates a greater importance of the BRICS countries. China has the biggest share with almost 8 %; the other countries have a share of 0.5 %. There has been a continuous increase in China's world trade share over the last 10 years whereas the share for the other BRICS countries has remained more or less constant. Evaluating the pattern of specialisation shows a three-way split. Apart from China, all the BRICS countries have above-average specialisation in patents with below average exports at the same time. This indicates that the increasing importance of this topic is being recognised in these countries. However, there is still an insufficient implementation of knowledge competences in competitive production and process technology so that there has been no expansion into international markets; indeed on the contrary, substantial shares of the required technologies are still being imported. China has average specialisation. The increasing patent numbers give the impression that China has begun to substantially increase its knowledge base which is also supported by the disproportionately high national patent activity. Germany clearly shows positive specialisation particularly in exports. In spite of the lack of a system leader from the German water sector, the numerous component manufacturers from Germany have succeeded here in bringing their long experience with water technologies to the international market. Shares of the BRICS+G countries in world exports and international patents in the field of water 10.0% 20% 7.5% 15% 5.0% 10% 2.5% 5% 0.0% 0% BR patent share CN IN world trade share RU patent share DE ZA DE world trade share DE values DE values BRICS Figure 4-8: 4 Capability 65 Figure 4-9: Specialisation of the BRICS+G countries in the field of water water specialisation exports 100 BR CN IN 0 RU ZA DE -100 -100 0 specialisation patents 100 Fraunhofer ISI The following strengths and weaknesses result for the individual countries within the water technologies examined: • Brazil has a slightly stronger position in the segment of water supply and sewage disposal than in water use efficiency and the weaker flood protection. • The above average patent activities in Russia are solely due to the segments water supply and flood protection. The weak position in foreign trade is a feature of all the water technology segments. • India is also stronger in water supply and wastewater disposal than in flood protection. Within water supply, the sub-segment of seawater desalination should be highlighted. Here, in contrast to all the other water technologies, India even achieves above average export successes. • China is comparatively active in the water sector on average but flood protection really stands out. On the one hand this represents a clearly above average field for patent activities; on the other hand, China's position in exports is relatively weak, particularly in this field. This pattern is compatible with the high national importance attached to this topic. Here, knowledge skills are being expanded and market strategies are oriented first and foremost at the home market and less at foreign ones. 66 4 Capability • In South Africa, the patent activities in wastewater disposal and water supply are clearly above average. Water treatment technologies should be highlighted within this segment. This is the only sub-sector within water technologies for which South Africa manages to generate above average export shares. • Germany's clearly above average activities are spread comparatively homogenously across the individual sub-segments. Only the patent activities in water supply technologies lag somewhat behind the other three segments. Between 6 % of the exports for South Africa and 14 % for India are to trading partners from the BRICS+G countries. Of the BRICS+G countries, Germany is by far the most important export market for Brazil, China and South Africa; Russia and India, in contrast, export more to China. Figure 4-10: Share of exports of the BRICS+G countries in the field of water to other BRICS+G countries in % 16% 14% 12% 10% 8% 6% 4% 2% 0% Brazil China Germany India Russia South Africa Water supply technologies deserve particular mention in the trade between the BRICS+G countries followed by wastewater technologies. No clear patterns can be discerned with regard to the target countries. On the one hand, China and Russia are important markets for the technologies; on the other, suppliers also export individual components to Germany. 4 Capability 4.1.5 67 Material Efficiency Efficiency analyses and optimisation approaches in companies usually concentrate on the cost factor of personnel costs. However the gross production costs in manufacturing contain alongside personnel costs also material and energy costs, depreciations and rents as well as other costs. There is an increasing public awareness of the significance of material efficiency. In the field of material efficiency, the technology segments "renewable raw materials", "raw material and material-efficient production processes", and "recycling" are regarded as the starting points for raising material efficiency. In this field, renewable raw materials are the most important both in patents and world trade. • Many industrial sectors have a long tradition of using renewable raw materials. While in the past, products based on renewable materials were often displaced by fossil-based products (e. g. celluloid, linoleum), recently more and more attention is being paid to renewable-based products because of raw material and degradability considerations. Both chemical raw materials should be listed here (e. g. sugars and starches, oils and fats) and products based on renewable raw materials (e. g. polymers, adhesives, varnishes, coatings and construction materials). • Recycling is also part of the field of material efficiency. Here, the segments covered included the detection, separation and sorting of waste and its material recycling. • The technology field of raw material and material-efficient products with the fundamental idea of designing products as environmentally-friendly as possible represents a compilation of different measures. These include technologies such as, e. g. lightweight construction, lifespan extension, fibre reinforcement or corrosion protection and also more recent service sector concepts (e. g. car sharing, print-ondemand). However, there are considerable difficulties here with collecting the necessary statistics. • The field of raw material and material-efficient production processes also incorporates various sub-aspects such as optimising the production processes (e. g. by reducing wastage or by standardising quality), a better utilisation of appliances, systems and specialised machinery or optimisations which affect the whole of the value added chain. These are also aspects which were only able to be partially researched. The share of all BRICS countries in worldwide patents in the field of material efficiency is just over 4 %. Germany reaches 17 % here. Of the BRICS countries, China has the largest shares followed by Russia and then India and Brazil, which are on the same level. As regards exports, the BRICS countries have a global trade share of almost 7 %. The biggest share at 3 % is accorded to China, closely followed by Brazil with 2 %. Germany has about 15 % here. 68 4 Capability All BRICS countries show positive patent specialisation; this is the most apparent in Brazil, but also clearly visible in South Africa and Russia. However, the situation does change over time. While India and China have shown the strongest growth in patents over the last few years, this growth is the weakest in Russia and South Africa. With regard to exports, there is a two-way split into countries with strong exports on the one hand, namely Brazil and South Africa, and India, China and Russia, on the other. In Brazil, the above average patent activities are probably also linked with other export successes, while in India and China, they are more likely to be explained by the efforts made to build up domestic production and increase competences in processing. In Germany, the patent specialisation is slightly above average. The exports are almost double the imports - this indicates a clear specialisation in material-efficient technologies. Shares of the BRICS+G countries in world exports and international patents in material efficiency 4% 20% 3% 15% 2% 10% 1% 5% 0% values DE values BRICS Figure 4-11: 0% BR CN patent share IN world trade share RU patent share DE ZA DE world trade share DE These aggregated figures disguise large differences between the individual segments: • The activities in Brazil are dominated by renewable raw materials. The world trade share here is over 8 %. There is also a very high patent specialisation. The comparison with national patent activities makes it clear that a disproportionately high number of international patents are being registered for renewable raw materials, which underlines the international orientation in this field. In the other three areas of material efficiency, there is a divergence between positive patent and negative export specialisation. The build-up of national competence is thus underway but without this having led to any significant international marketing. • China and India have negative export specialisation in all the examined areas of material efficiency. However, there are positive patent specialisations for renewable raw materials and raw materials and material-efficient products or production processes. This indicates that there are efforts being made in these sub-sectors to 4 Capability 69 build up the domestic knowledge base. Patent activities in recycling are below average; this implies that this sector is still being operated as a "low tech" one in China and India. Production processes show a slightly better performance than the other fields in China, while this is the case for renewable raw materials in India. • There are above average patent activities taking place in all four subsectors of material efficiency in Russia; at the same time, there is very negative export specialisation. Recycling has the best performance, regenerative raw materials the worst. • In South Africa, there is a clear two-way split: the country shows above average competence in recycling and renewable raw materials, but is below average in raw material and material-efficient production processes and products. • In Germany, renewable raw materials are not one of the sectors with above average specialisation either in patents or in exports; considerable amounts are imported here. The opposite is true for recycling: Many years of political efforts in this field can be seen in the above average output in patents and foreign trade. There are clear specialisation advantages in exports also for raw material and material-efficient production processes and products. Figure 4-12: Specialisation of the BRICS+G countries in material efficiency material efficiency specialisation exports 100 BR CN IN 0 RU ZA DE -100 -100 0 specialisation patents 100 Fraunhofer ISI 70 4 Capability Based on all the BRICS countries it can be stated that raw material and materialefficient products and production processes are among the weaker and regenerative raw materials among the stronger areas. Brazil, in particular, has an outstanding starting position here. More than 25 % of Brazilian and South African exports are to trading partners in the BRICS+G countries but their target countries are very different: While China, Russia and to some extent India are the most important BRICS+G-export countries for Brazil; for South Africa, Germany leads by a long chalk. For the other countries, the relevant figure is just over or just under 10 %. Figure 4-13: Share of exports of the BRICS+G countries in material efficiency to other BRICS+G countries in % 30% 25% 20% 15% 10% 5% 0% Brazil China Germany India Russia South Africa The significance of the individual technologies for trade among the BRICS+G countries varies for the respective countries. The following main conclusions can be drawn for each country: • Brazil: renewable raw materials, which are mainly exported to Russia, India and China; • China: slight priorities in production processes, its exports are relatively evenly spread across BRICS+G trading partners; • India: low level in terms of quantities, although the exports in renewable raw materials to China are a bit higher; 4 Capability 71 • Russia: exports of recycling technologies (especially material detection) and of secondary steel to China and India; • South Africa: relevant for parts for recycling plants, mainly for material separation, which are primarily exported to Germany; • Germany: exports of recycling plants to China and Russia; furthermore, exports in raw material and material-efficient products (mainly for corrosion protection) to China and Russia. Overall, important export goods comprise renewable raw materials (Brazil), recycling technologies (Germany, South Africa) and some secondary materials; the main import countries are China, India and, to some extent, Russia. 4.1.6 Transport Infrastructure and Mobility Satisfying mobility needs also represents a main challenge in the BRICS-countries. Sustainable transport policy has to be based on several pillars: Technological improvements in propulsion systems and fuels, on the one hand, and shifting traffic to more environmentally-friendly alternatives, on the other. This can be done via improved service offers and the appropriate intermodality management of transport services and interoperability, especially of rail transport. The biggest pressure to act is seen in improving environmental conditions and reducing congestion in the large and rapidly growing cities of Central and South America and Asia, as well as in guaranteeing sufficient capacities and improving transport safety in global maritime and air transport because of the enormous growth here. The market volume for mobility technologies is estimated at 360 billion Euro worldwide, which means that investment in these technologies harbours considerable potentials for economic success (see DIW/ISI/Roland Berger 2007). The technologies in the field of sustainable mobility are grouped into five sectors for detailed analysis: • Vehicle engineering: lightweight construction, multifunctionality and attractiveness of rail vehicles and their advanced compatibility with road transport for easier incorporation into logistics chains, continued improvements in aerodynamics and general increase in the size of transport containers. • Propulsion technology and fuels: Hybrid propulsion systems for short-term emission avoidance and as a bridging technology to purely electrical motors, mobile fuel cells, regenerative production and storage of hydrogen and electrical energy as well as the continuous improvement of the efficiency of combustion engines and jet propulsion.7 7 However, competence in propulsion technologies does not necessarily result in the achievement of environmental goals (e. g. reducing the specific CO2 emissions), but can also be used to enhance performance. 72 4 Capability • Infrastructures and transport systems: separate rail systems for the transportation of passengers and goods, expanding ports, traffic control in built-up areas as well as telematic-based information and mobility management to shift demand to environmentally-friendly transport systems. • Emissions reduction: Further development of filters and catalytic converters and their use in rail and shipping as well as noise reduction techniques for all types of transport. • Biofuels: biodiesel, bioethanol and technologies relevant for the manufacturing of second generation biofuels (biomass to liquid (BTL)).8 Since international foreign trade classification does not yet identify biofuels as such, only those subsectors which target necessary technologies or preliminary products were able to be evaluated here. Measured by the development in patent applications, the greatest dynamics are seen in propulsion and emission reduction technologies, alternative fuels and, to a lesser extent, vehicle engineering. In contrast to this, transport infrastructures show a more constant patent development. Shares of the BRICS+G countries in world exports and international patents in the field of mobility 10.0% 20% 7.5% 15% 5.0% 10% 2.5% 5% 0.0% values DE values BRICS Figure 4-14: 0% BR CN patent share IN world trade share RU patent share DE ZA DE world trade share DE The combined share of BRICS countries in global patents is just over 2 % and thus about one tenth of the annual patents from Germany alone. Russia and China hold the biggest shares among the BRICS countries. A world trade share of about 12 % shows the greater significance of the BRICS countries in foreign trade. Here, the share of BRICS countries in the identified, sustainability-relevant mobility technologies almost equals that of Germany, which is about 13 %. China has the largest share of the 8 Biofuels are, however, not necessarily environmentally-friendly; see SRU 2007. 4 Capability 73 BRICS countries with over 9 %, followed by Brazil with 2 %. In both countries, exports are more than double the imports. The assessment of specialisations shows a very different picture. Germany enjoys above average success in the mobility field in both patents and foreign trade. The reverse is true for India: Below average specialisations in patents and foreign trade here indicate weak performance in this field. In Russia and South Africa, there is in fact above average competence, but this does not show through in foreign trade. In these countries, the activities seem to be more concentrated on the respective home market and, in addition, are currently showing signs of slowing down in Russia. In Brazil and China, in contrast, the indicators suggest a below average knowledge base, which is, however, accompanied by clear successes in foreign trade. In China, in particular, there have also been considerable increases in patent activities and export shares over time. Figure 4-15: Specialisations of BRICS+G countries in the field of mobility mobility specialisation exports 100 BR CN IN 0 RU ZA DE -100 -100 0 specialisation patents 100 Fraunhofer ISI These aggregated figures disguise some clear differences between the individual segments. A differentiated analysis is appropriate here, especially for Brazil. Brazil shows considerable capacity, primarily in the field of first generation biofuels and also assumes an internationally significant position here with an export share of over 10 %. However, looking at its patents, the overall slightly below average specialisation can be 74 4 Capability traced back to poor performance in second generation biofuels (BTL). This indicates that Brazil has to augment its efforts in order to safeguard its position. Brazil also shows above average capability in vehicle engineering, especially where foreign trade is concerned. Here, there is a national aviation champion, Embraer, which exists alongside large international automobile manufacturers. The situation is very different in emissions reduction: Brazil's performance is below average here. These results reflect the corporate strategies of foreign vehicle manufacturers, who have been producing cars in Brazil for a long time for exports to other countries, but still acquire considerable parts of the knowledge basis internationally rather than generating this in Brazil. But it also becomes clear that the existing competence in the transport sector in Brazil has to be applied even more systematically to the realisation of environmentalfriendly solutions. The following results were found for the other countries: • No significant specialisation advantages can be discerned in the patent activities in China. On the other hand, China is highly specialised in foreign trade, above all in vehicle engineering (in rail vehicles, too). China seems to function as an extended workbench here with a build-up of production for the world market – under the participation of numerous foreign direct investments – but no complementary development of the knowledge base to the same extent. The strong growth in patent activities, however, is a sign of China’s efforts to bring this about. • With a few exceptions (biofuels), India is not particularly specialised in the sustainability-relevant mobility technologies. An automobile industry is being developed in India, but this is focussed on the national market and is less oriented towards international technology standards which are decisive for exports. • An above average patent but below average export specialisation results for Russia in the mobility sector. In the field of biofuels, the above average patent situation should be viewed in the context of Russia’s competence in coal gasification, which is also relevant for second generation biofuels (BTL). The field of emissions reduction is characterised by below average competence. • In South Africa, the country’s competence in connection with coal gasification has also resulted in a good starting position for BTL technologies, especially as Sasol is an internationally active company here. On the other hand, activities in the field of traditional emissions reduction are below average. • Germany is well positioned in most segments of the sustainability-relevant mobility technologies. There is above average competence in combustion motors, in particular, and also in rail vehicles and rail infrastructure. But Germany also shows above average patent and foreign trade activities in traditional emission reduction technologies. Within biofuels, a less favourable performance for ethanol is compensated for by a better starting position in the promising second generation fuels. 4 Capability 75 Based on all the BRICS countries it can be concluded that emissions reduction is among the weaker and biofuels among the stronger fields of activity. In Germany, mobility technologies form a general main focus of technological capability. However, in general it is true that there is considerable tension between technological competence and environmental pollution in the mobility sector. A high technological competence does not automatically result here in environmentally-friendlier solutions. South Africa exports more than 30 % to trade partners from the BRICS+G countries. By far the biggest share of this is to Germany. For the other BRICS countries, other export markets are of greater importance; the corresponding figures here are only between 5 and 10 % of the exports. Figure 4-16: Share of BRICS+G countries' exports in the field of mobility to other BRICS+G countries in % 35% 30% 25% 20% 15% 10% 5% 0% Brazil China Germany India Russia South Africa The following main points emerge for trade among the BRICS+G countries: • Brazil: export of propulsion technologies, mainly to Germany, as well as classifiable preliminary products for biofuels; • Russia: overall lower importance, no clear focus among the technologies (although there are hardly any emissions reduction technologies), target countries are mainly China and India; • India: overall lower importance, drives and vehicle engineering are the strongest without clear national focal points; • China: vehicle engineering and design, mainly to Germany; • South Africa: propulsion technologies mainly to Germany; • Germany: propulsion technologies; China is far and away the biggest importer within the BRICS countries. 76 4.1.7 4 Capability Summary of All the Sustainability Fields Examined This section analyses the performance of the examined countries for all the technologies regarded. The strong position of Germany is already obvious in that 20 % of international patents and 15 % of world exports in the regarded sustainability technologies originate in Germany. This emphasises the enormous potential and at the same time the global responsibility of Germany in supplying technologies for sustainable development. The shares of the BRICS countries in the patents range from a few tenths of a per cent up to 1 % for China. Of the BRICS countries, China has the highest exports of sustainability-relevant technologies followed by Brazil. The much higher world trade shares in both countries relative to their patent shares make it clear that both countries are indeed actively engaged in foreign trade but from a below average knowledge base. The characterisation of the two countries as “extended workbench” or resource supplier (Brazil) thus also applies to a certain extent to the sustainability-relevant technologies regarded. When looking at the absolute figures – in proportion to population – the relatively low international relevance of India is noticeable compared with the other BRICS countries. This is evidence for the overall gap in economic development which India still shows compared with the other BRICS countries. The significance of the regarded sustainability technologies within each individual country is revealed in its specialisation profile. This shows the technological performance of the sustainability technologies for each country compared with the average of all technologies. The results reveal clear differences between the countries: • Brazil has been specialising on sustainability technologies in both knowledge competences and international trade. • Russia shows considerable knowledge competences, but weaknesses in converting these into internationally competitive technologies. • Overall, sustainability-relevant technologies play a below average role in India. • Overall, sustainability-relevant technologies play an almost average role in China. • South Africa has been specialising on sustainability technologies with regard to knowledge competence, but this is only converted into an average trade specialisation. • Germany is not only a key player in sustainability technologies in absolute numbers; the specialisation profile shows that these technologies form a stronghold of German knowledge competence and international trade. Whereas Germany achieves above average specialisation in all the regarded fields, these aggregated values tend to disguise the fact that there are some considerable 4 Capability 77 differences between the five technological sustainability fields in the respective BRICS countries. For instance, the individual countries show clear emphases in building competences. Both Brazil and South Africa specialise mainly in the fields of material efficiency and mobility technologies (Brazil above all in renewable raw materials). China’s performance in the building sector and mobility technologies is above average. On the other hand, the BRICS countries also show similar patterns, e. g. there are high patent activities in water technologies, but still a considerable dependency on imports to cover domestic demand. A similar picture emerges for energy sources with regard to the significance of technology imports for the BRICS countries. To this extent, these two areas at present reflect the classical case of technology transfer where countries such as Germany act as the technology provider and the BRICS countries as technology receivers. However, the recent strong upward trend in patent activities especially in China and to a smaller extent in India – makes it seem realistic that the BRICS countries will become more heavily involved in technology development in this segment as well in the foreseeable future. Figure 4-17: Shares of the BRICS+G countries in world exports and international patents for all 5 sustainability fields examined 25% 10.0% values BRICS 15% 5.0% 10% 2.5% 5% 0.0% 0% BR patent share CN IN world trade share RU patent share DE ZA DE world trade share DE values DE 20% 7.5% 78 4 Capability Figure 4-18: Specialisation of the BRICS+G countries in all 5 sustainability fields sustainability technologies regarded specialisation exports 100 BR CN IN 0 RU ZA DE -100 -100 0 specialisation patents 4.2 100 Fraunhofer ISI Capability in Non-Technical Sustainability Research Technologies which increase the efficiency of environmental consumption create additional scope for economic growth with limited environmental resources. However, the research conducted up to now shows that the spread of sustainability innovations depends to a large degree on political and social framework conditions. Among the most important of these is the strategic orientation of environmental innovation policy. This should have ambitious targets which can, however, be reckoned with in the long term by those addressed by the policy (companies and consumers) and stable framework conditions (see, e. g. Klemmer et al. 1999 or Jänicke/Jacob 2006). Accordingly, the political and economic research of environmental innovation studies the social conditions for the origin and diffusion of environmental innovations. More generally, sustainability research in the social sciences examines the institutions and actor constellations which contribute to or impede sustainable development as well as how societies handle environmental risks. This chapter examines the capability of the BRICS+G countries in sustainability research. The analysis contains a bibliometric comparison of national publications. Six 4 Capability 79 science fields were defined within the topic "social science-related sustainability research": (1) Environment and society, (2) Environmental economics, (3) Energy policy, (4) Environmental policy (excluding energy), (5) Urbanisation and environmental planning, (6) Environmental awareness. In view of the overall limited data on social scientific aspects of sustainability research, an exclusive focus on the fields of environmental innovation and diffusion research would have been too narrow for the planned country comparison. Defining the fields is oriented on the availability of international journals which specialise in certain sustainability topics. The field "Environment and Society" is characterised by a comprehensive, transdisciplinary perspective as is expressed, for example, in the title of the journal "Gaia – Ecological Perspectives for Science and Society". The fields of "Energy policy" and "Urbanisation and Environmental planning" address policy fields which are very important internationally, whereas the fields "Environmental economics" and "Environmental policy" follow a disciplinary differentiation. The field of "Environmental awareness" covers research on environmental psychology, environmental ethics and changing social values. The bibliometric analysis is based on the publication databases of the Institute for Scientific Information and on the Social Science Citation Index (SSCI) in particular. The fields were defined using a selection of relevant specialist journals. The SSCI contains approx. 1,700 journals from about 50 social science disciplines and research fields. Several suitable journals were also added from the Science Citation Index Expanded (SCI). The SCI is a multidisciplinary database with approx. 5,900 natural science and technical journals. A total of 46 journals were included in the research, of which 37 journals contained publications corresponding to the search criteria. All publications of the type scientific article, book review, review and editorial were taken into account in the sample of journals in the period 2001 - 2005. A complete list of the science fields and journals can be found in the Annex Table Annex A.5-1. The production of scientific publications is still strongly concentrated on the traditional industrialised nations. This fact is shown particularly clearly in the SCI/SSCI because these databases document mainly English language journals. The SCI/SSCI is therefore more than just a neutral data basis for international comparison: As a medium for scientific work it also represents an important channel for scientific attention. Publications not listed in the SCI/SSCI are less likely to be noticed abroad, at least in the West and in English-speaking countries. Publications in the SCI/SSCI are thus a very stringent measure for scientific output because they are directed at an international audience. 80 4 Capability The complete range of scientific competence in the BRICS+G countries is not represented due to this focus on international publications. This is particularly valid for non-English speaking countries such as Germany, but also for Brazil, Russia and China. For example, the Brazilian National Council for the Development of Science and Technology (CNPq) cites about six times as many national publications for the social sciences as international publications in the period 2000 - 2003 (figures from the experts' report on Brazil's profile). National journals, which have a more limited reach due to language barriers, are known to play an important role especially in applicationoriented science and technology fields like the sustainability topics examined here. However, suitable national publication databases are not available or can only be compared to some extent. For this reason, even with all its limitations, the publication analysis with SCI/SSCI still remains the best available basis for comparative country analysis. Table 4-1 compares the publications of the BRICS+G countries in the databases SCI and SSCI over a period of ten years. The total number of publications recorded in the two databases grew by 30 % in this period. The relative share of Germany and India remained more or less unchanged, while China and Brazil showed strong growth and there was a clear drop in the Russian share in global publications. In South Africa, the number of absolute publications did not really alter, combined with a slight drop in the relative share. Table 4-1: Total SCI+SSCI Germany Brazil Russia India China South Africa Publications of the BRICS+G countries 2003 and 1993 2003 Publications Share (%) 698,726 100 44,305 6.34 8,684 1.24 15,782 2.26 12,774 1.83 29,186 4.18 2,364 0.34 1993 Publications Share (%) 540,491 100 34,103 6.31 2,885 0.53 19,659 3.64 9,763 1.81 7,566 1.40 2,377 0.44 Source: National Science Board (2006), Science & Engineering Indicators, at05-41. Publications are assigned to countries based on the author address. The data in this Table are fractioned, i. e. where there are addresses from different countries, only fractions of the publications are counted, e. g. if there are 3 countries involves, each one is assigned 1/3. Table 4-2 shows the ratio of sustainability research to total publications in the SSCI. The number of articles makes it clear that sustainability topics are not very significant in the social science-related research of the BRICS+G countries which is aimed at an international audience. Only 503 publications were recorded in Germany in five years, 1.7 % of the German SSCI publications. India leads in relative terms: Sustainability 4 Capability 81 fields make up 4.2 % of its SSCI publications. Russia brings up the rear with only 0.3 %. For comparison: Research fields related to the environment in general had a share of approx. 9.3 % of all publications in the SCI in 2002; the main focus was on natural science research fields and not environmental technologies (Jappe 2007). In view of the rapid environmental change, it is most likely that sustainability topics will become increasingly important in the social sciences as well in the future. Table 4-2: 2001-2005 Germany Brazil Russia India China South Africa Source: Sustainability topics in social science research in BRICS+G countries Total national SSCI publications 29,912 3,452 3,523 3,163 9,049 3,325 Social science sustainability publications 503 97 12 132 186 67 Share of national SSCI publications (%) 1.7 % 2.8 % 0.3 % 4.2 % 2.1 % 2.0 % Share of social science sustainability publications 4.2 % 0.8 % 0.1 % 1.1 % 1.5 % 0.6 % SSCI/ SCI Web-of-Science, research and calculation Fraunhofer ISI. Publications are assigned to countries based on author addresses. The data in this Table are counted as whole units, i. e. if an article has several addresses from different countries then each country is assigned 1 publication. The absolute publication figures in SSCI per country in Table 4-2 can therefore not be directly compared with the absolute figures in Table 4-1. In total, 12,034 publications were registered for the period 2001 - 2005 in the field of social science sustainability research. Of these, about 33 % are in "Urbanisation and Environmental planning" followed by "Environmental economics" (25 %), "Environment and Society" (15 %), "Energy policy" (11 %), "Environmental policy" (10 %) and "Environmental awareness" (6 %). Figure 4-19 shows the absolute publication figures of the BRICS+G countries in the six fields. Germany has as many publications in social science-related sustainability research as the other five BRICS countries together. Measured against the international average, the field of environmental economics is strongly developed in Germany, as it is in India. China is relatively specialised in urbanisation and has a similar publication output in absolute numbers as Germany. In Brazil and India, the research in energy policy is above average. There are hardly any studies of environmental awareness in the BRICS countries. When comparing the non-technical capability of the BRICS+G countries, it must be taken into account that the absolute figures are often only small and for this reason may be subject to relatively large fluctuations over time. 82 4 Capability Figure 4-19: Publication figures in six fields of social science sustainability research, 2001 - 2005 250 Environment & society Environmental economics 200 Energy policy Environmental policy 150 Urbanisation Environmental awareness 100 50 0 Germany Source: Brazil Russia India China South Africa SSCI/ SCI Web-of-Science, research and calculation, Fraunhofer ISI. The analysis of SSCI and SCI publications illustrates the internationally visible social science-related sustainability research in the BRICS+G countries. Although scientific journals already exist which are devoted exclusively to sustainability research topics, these very specialised journals still only have a very small share of total social science publications in the SSCI. This confirms the finding that sustainability topics are still not really counted as part of the core subject matter of the traditional social sciences of economics, politics, sociology, cultural studies etc. In view of rapid environmental change, however, it is very likely that sustainability topics will become increasingly important in the social sciences. The science fields examined here still have limited significance in the BRICS countries - in Russia, there are hardly any international publications in the whole of the sixth field. Relatively, urbanisation and environmental economics are the most important subjects in the BRICS countries, followed by questions of energy policy. Innovation research publications in the narrower sense are mainly recorded in the field of environmental economics and to some extent also in the field of energy or environmental policy. The limitations about the representativeness of the publication figures described above, especially with regard to possible distortions between English-speaking and nonEnglish speaking countries, make it difficult to compare countries using absolute 4 Capability 83 figures. For instance, the shares of India and South Africa in the recorded publications are probably disproportionately high since the language of science in these countries makes it easier for them to publish in the English language SSCI journals than the other countries. This language bias can however be removed in that – in analogy to the specialisation indicators of foreign trade (RXA) and patents (RPA) - the shares of a country in sustainability publications can be related to the country's shares in all SSCI publications.9 This indicator shows whether the regarded country has a disproportionately high (values larger than zero) or low (values smaller than zero) specialisation in social science sustainability publications. Figure 4-20 shows the results of this indicator. In the South African research system, social scientific sustainability research has a disproportionately high position. All the other countries have a below average specialisation, which is particularly strongly marked in Russia and China. Measured against international publications, social science sustainability research in these countries is therefore weaker than the average of all research fields. The relevance of these results has to be seen against the background of the challenges in all the countries regarded to change course in the direction of sustainability. In order to accomplish this, building technological competence is an essential condition, but not a sufficient one. Since, as transition research emphasises, technological changes of direction have to be embedded in the socio-cultural system, there needs to be a co-evolution of the technological, institutional and social systems (Kemp et al. 2007). Social science-related sustainability research is particularly concerned with changes in the latter two systems. Below average specialisation in this field with simultaneous specialisation in technological sustainability competence raises the question of whether it would be necessary to reflect more on the social and institutional changes necessary for sustainable development in the countries affected. 9 The calculation algorithm is identical to that of the RPA or RXA, so that the indicator values are also standardised to between -100 and +100. 84 4 Capability Figure 4-20: Specialisation of the BRICS+G countries in publications of social science sustainability research, 2001 - 2005 ( ) DE ZA RU IN CN BR -100 -50 0 50 100 5 Analysis of Diffusion and Innovation Processes 5 Analysis of Diffusion and Innovation Processes 5.1 Objective and Methodology 85 Sustainability innovations face many obstacles which hamper their diffusion and them realising their potential contribution to sustainability. These difficulties are multiplied in the global context if the aim is to tap new markets in addition to domestic ones. This chapter analyses the experiences and estimations of German actors in this regard. This aims to examine the sixth field more closely, that is, the question of which mechanisms can accelerate diffusion and innovation processes in the direction of sustainability because the largely technology-oriented statistical analyses cannot contribute much here. Furthermore, the aim is to highlight the market and cooperation experiences of German companies in the BRICS countries. Qualitative interviews were selected as the empirical approach10. This seemed appropriate since the players involved are a relatively small group and their background experiences are to be examined as well. A guideline was developed for the interviews, which was divided into four subject areas11: 5. Demand side of the technology regarded in BRICS: e. g. supportive and restrictive influences on the demand for the technology. 6. Supply side of the technology regarded in BRICS: e. g. challenges in supply chain management and important local cooperation partners. 7. Knowledge base of the BRICS business relations in the business segment of the regarded technology: e. g. estimating the knowledge lead of the company compared with customers, suppliers and competitors and its significance for the success of the business activity. 8. Innovation/diffusion conditions for the regarded technology in Germany: e. g. drivers and obstacles in the innovation and diffusion process; learning effects for the business activity in BRICS. In addition, the actors were asked for their opinion on how Germany is positioned in the subject field as a whole – in an international comparison as well as with the BRICS countries. These statements serve as a verification of the statistically based results concerning the specialisation patterns of the BRICS countries and Germany. 10 The term "qualitative interview" is used as a synonym for "guided conversation". For methodology, see e.g. Schnell et al. 1995. 11 A more detailed overview of the interview points is found in the Annex (see A.4.1). 86 5 Analysis of Diffusion and Innovation Processes Interview partners were selected from companies and organisations who are shown to be leading innovators in a relevant technology in at least one of the BRICS countries. In line with the underlying criteria, primarily integral approaches were chosen which for methodological reasons could not be considered in the indicator-based analysis (see Chap. 4.1). For example, we chose architecture and town planning in Topic 2 as well as innovations which are linked with organisational measures and new business models in Topic 5 such as, e.g. certain logistics services. Concentrating on innovators is based on the theory that such companies • have good knowledge of the social, marketing and regulatory mechanisms which contribute to the acceleration of the diffusion and innovation processes, • have market and cooperation experiences in the BRICS countries, and • are competent in assessing the competitiveness and specialisations of Germany and the BRICS countries. Alongside criteria for individual candidates, all the interviews also cover the topics and countries in general. Interview results for China are particularly numerous. This matches the results of the analysis of direct investments (see Chap. 2.3) according to which German companies are more involved in China than in the other BRICS countries. Mainly actors from the supply side of the innovations examined were selected as the topic-specific candidates. In order to also illuminate the demand side of the regarded technologies in the BRICS countries and to determine the potentials for cooperation with innovative consumers, interviews were conducted on the UNIDO Cleaner Production Programme. The generic expertise of actors from the financial sector was used to supplement this. Starting from these criteria, 27 companies and institutions were selected for interviews12 in a two-stage process; these were assured that the evaluation would be anonymous. Most of those questioned were involved in environmental and sustainability management, sales and marketing with a focus on the country in question or on research and development. It became clear in large companies that the country expertise is mainly located in the local branches. In individual cases this was taken into account by conducting telephone interviews with local branches. The interviews were recorded, software encoded13 and evaluated anonymously. In spite of the large 12 12 interviews were held on location, the others were done by telephone. 13 The software Atlas.ti V5.0 was used to analyse the qualitative data. 5 Analysis of Diffusion and Innovation Processes 87 number of interviews, the results only spotlight certain insights into the concrete market and cooperation experiences given the wide range of questions asked. Generalisations require further testing. The key innovations and countries discussed in the interviews are summarised in Annex A.6.2. A brief outline of their contribution to sustainability is also given there. 5.2 Results by Topic 5.2.1 Renewable Energies and CCS Six interviews were conducted in this field: three in the field of renewable energies (RE), one interview in the field of carbon capture and storage, CCS (in connection with biofuels from renewable raw materials14) and one interview covers both fields. Interviews focussed on wind energy, solar updraft towers, and the capture and storage of CO2 (CCS). In addition, we conducted an interview and research on the cross-cutting topic "Clean Development Mechanism" (CDM), which is important for the diffusion of RE in the BRICS countries. 5.2.1.1 Market Potentials in BRICS The demand for RE depends on the natural conditions and the corresponding potential of the respective country as well as its energy supply situation (see Table 5–1). The experts believe that Brazil, India and China already show increased involvement in the use of RE for electricity generation which they could probably expand. Brazil is anxious to become even more independent of energy imports. The market for wind energy shows large growth here and the country is producing ethanol from biomass for domestic use and export. For India and China, a strongly rising demand for energy combined with a large degree of interest in diversifying the energy supply is unanimously stated to be a driver for RE. Regular bottlenecks in India's energy supply are the reason for the high demand for RE technologies among private companies here. A large domestic supplier of wind plants, who is currently expanding internationally, has already been established. In China, a market for wind energy is currently being developed. The experts are all of the opinion that Russia and South Africa have less interest in RE. Fossil energy sources are reasonably priced in these countries and available in sufficient quantities. Activities in RE would raise the low electricity prices in these countries according to the experts and are not wanted for this 14 See topic mobility and logistics 88 5 Analysis of Diffusion and Innovation Processes reason. In Russia, a bill was proposed to set fixed payments for power from renewable energy sources and presented to the Duma in spring 2007. It is largely oriented along the lines of the German EEG (German Renewable Energy Sources Act) and experts believe it will probably have clear incentive effects. These efforts mirror Russia's strategic interest in being able to increase its exports of natural gas by reducing its domestic consumption. Table 5–1: Most important potentials for renewable energies according to interview results Country Dominant source Brazil Hydropower energy potential for Biomass (esp. bagasse from sugar cane production) Wind Russia Gas Biomass India Coal Wind Biomass Hydropower China Coal Water Solar thermal (in certain regions) Biomass Wind South Africa Coal Solar thermal In contrast to the use of RE, CCS technologies are so far not commercially available on a large scale and the interview partners agree that these will not achieve a significant penetration of the market until after 2020. The experts see a high potential for the use of CCS in BRICS countries with a coal-based energy supply, i. e. in India, China and South Africa, and in Russia's use of natural gas. European plant operators are active in research and demonstration projects because of expected regulations within the scope of the European Emission Trading Scheme. The research programme COORETEC15 and one of its research projects, COORIVA, should be mentioned here. These kinds of 15 http://www.fz-juelich.de/ptj/projekte/index.php?index=1325 5 Analysis of Diffusion and Innovation Processes 89 activities cannot yet be identified on the part of the BRICS countries themselves, the experts agree that it is still too early for this. According to them, the BRICS countries are not yet playing a role in the development of CCS. A lot of weight is attached to legal regulations for promoting the diffusion of both fields of technology. There is general agreement that these should give the investor planning and investment security.16 Fixed payments are seen as the decisive driver for electricity generation from RE (the German EEG is cited as an example of good practice). The existing legal regulations in Brazil and India are assessed as insufficient in this respect and the payments as uncertain. In Brazil, market protectionism makes it even harder to access the comparatively small market for wind power. With regard to CCS, there was general agreement that putting a price on the emission of CO2 is the only way to promote the commercial use of this technology. An international trading system (example EU ETS), a tax (example Norway), the use of Joint Implementation (JI) and Clean Development Mechanism (CDM) or similar agreements after the end of the Kyoto Protocol are cited as possible options. It is seen as important that developing countries should profit from the experiences of industrial nations with legal regulations. Compared with conventional technologies, RE and CCS have higher investment costs which restrict the demand for these technologies. In the case of RE use, it is expected that these cost disadvantages will be overcome through learning effects. For CO2 separation, these kinds of learning effects are only expected in the long term since the technology is not yet commercially available. There was a general agreement that, without a price on the emission of CO2, CCS will not offer any financial incentives since it is only possible to utilise the gas on a very small scale.17 This is why all agreed that, to start with, avoiding CO2 emissions should be promoted in the BRICS countries by improving the efficiency of existing and new installations. The application of CCS would only make technical and economic sense once these saving potentials have been exploited. The learning effects achieved by then in the RE sector could result in CCS not being applied at all in the BRICS countries. 5.2.1.2 Market Players Most enquiries about RE projects in the BRICS countries are from domestic private companies and project developers. International players with investment motives are 16 A negative example given here is the change in the promotion of biodiesel. 17 For example, the technology in China and Russia could become economically attractive to a very limited extent through enhanced oil recovery or coal bed methane recovery (see Annex A.4.2). 90 5 Analysis of Diffusion and Innovation Processes turning up more frequently who invest in private funds or CDM projects. Power station operators and the international (petro) chemical industry are potential future clients for CCS technologies in BRICS. International conferences, publications (studies, companies' in-house magazines) and active participation in the political process are agreed to be important for acquiring clients in both fields of technology. Firms which are active in conventional technology fields make use of existing contacts. The wind power training courses offered are seen as successful for building up customer contacts. These are requested by energy suppliers who are affected by the new legal regulations. The local embassies are criticised for their poor performance as mediators in passing on contacts. This makes it harder for small German companies to contact international clients because they do not have sufficient (financial and personnel) capacities. Large German equipment manufacturers are represented by their own local branches in the BRICS countries. Several are cooperating with domestic partners or working towards such long-term cooperations.18 In RE, the existing cooperations are based on sales and marketing and partly on local production. As far as competition is concerned, the market for RE and CO2-neutral fossil technologies is dominated by European and large international equipment manufacturers. The R&D of the interviewed German manufacturers takes place outside the BRICS countries for both technologies, usually in Germany or the EU. An Indian RE supplier conducts his R&D activities in Germany. There is little global technological know-how in the field of CCS. What little there is tends to be concentrated in Japan, the US and the EU. German equipment manufacturers are active in German and EU-wide research cooperations. An expansion of the R&D activities in CCS to the BRICS countries is considered a possible step in the long term. There is agreement that RE plant producers choose their suppliers depending on price and the complexity of the plant components. The raw materials and the low-cost/lowtech parts are bought from the BRICS countries or are manufactured by the BRICS countries themselves. There are production capacities for wind energy in Brazil, India and China, some of which are the result of German technology transfer projects. The price advantages of the Indian products come at the cost of lower quality, which results in greater effort for subsequent reworking. South Africa is the only African country which is technically well positioned for the use of solar energy, but it lags far behind in production. Complex components are purchased globally by all RE equipment manufacturers. According to the interview partners, this supplier structure is also 18 Working together with domestic firms and the political acceptance of the projects is of particular importance in China. 5 Analysis of Diffusion and Innovation Processes 91 expected for CCS in the BRICS countries. Above all, the (low-tech) plant construction would be carried out by domestic companies. Complex components, licences and the process design would have to be procured globally. 5.2.1.3 Knowledge Base All the interviewees believe that German firms possess a large knowledge advantage compared to their customers, competitors and suppliers in BRICS, which makes it possible for them to freely expand their business activities. German technologies for utilising RE are available in the different fields (such as wind, water, solar etc.) and on a commercial scale. However, there is a lack of engineers in Germany and in the BRICS countries as well to some extent. Large companies have the advantage that they can draw on an international pool of workers of a uniformly high technical standard. In all the interviews, a clear distinction is made between the ability to operate a plant and the further development of the technology. All agree that there has to be existing basic knowledge of how to handle the technology because otherwise the communication and the operation of the plants are problematic. The resulting need for training in BRICS is seen by small companies as a burden since this is not part of their core competence. Large companies have integrated this service into their portfolio in the case of RE. This is also assumed for CCS plant construction. According to the interview results, there are no relevant domestic development capacities for any of the technology fields in the BRICS countries. The resident companies are (still) a long way away from autonomous implementation of the technologies. Only of China is it expected that it will build up its own development capacities in the near future because of the rapid economic growth here. The interviewees' own experiences are that Chinese workers are well qualified as far as theory is concerned, but at present lack practical project experience. In spite of the strong demand, German plant construction companies are cautious about upping their project activities in China because they are worried about industrial espionage. 5.2.1.4 Experiences in Germany All agree that the German leadership in both fields of technology results from the long tradition of environmental protection in Germany19, which led to corresponding legal regulations early on. It is emphasised that the successful application of the technology 19 In this context, the EU climate protection targets are also cited. 92 5 Analysis of Diffusion and Innovation Processes at home and its presentation abroad are important success factors for tapping international markets. The extensive use of wind power in Germany, for example, represents a competitive advantage for German industry. Since solar thermal power stations and solar updraft towers are not commercially feasible in Germany, it is feared that German technology could fall behind in this field. The interview partners believe that future R&D activities could be concentrated on domestic suppliers in Brazil, India, China and South Africa. These produce for the European market and will move on to tap the domestic market in the course of improved framework conditions in the BRICS countries. The necessary investment in a reference plant bears a financial risk for all technology suppliers. In the case of RE, the statutory promotion through the German Renewable Energy Sources Act (EEG) is seen as a decisive driver for German technology development. This led to innovative companies returning profits which they then channelled into research activities. The strong research landscape in Germany is a result of this. Especially the German wind power industry has profited from these developments. It is the global leader in this field and Germany is globally considered to be a competence centre. With regard to CCS, the German plant manufacturers have the know-how and the technology in power station construction and in the gasification of solids which are decisive for the use of CCS-technologies. German technologies could therefore become the "export hits of the 21st century" in the field of CCS. However, it is also pointed out that government aid and reliable legal regulations (also with regard to permits) are necessary in order to create favourable framework conditions for developing and testing the technology. 5.2.1.5 The Role of CDM for Renewable Energies in BRICS The "Clean Development Mechanism" (CDM) is a political instrument which promotes the diffusion of cleaner technologies in developing countries. One main focus of CDM is on RE, which is why its use by German industry is examined more closely in this section. Brazil, India and China have large shares in total CDM projects, about two thirds are conducted by domestic project developers with their own technologies. These are frequently located in the field of electricity production since additional profits can be attained via the sale of power alongside the profits from the generated certificates (Certified Emission Reduction Units, CERs). This incentive is questionable (see Chapter 5.3.2) especially with regard to the additionality of CDM projects. The experts are of the opinion that German technologies have a competitive advantage in CDM projects because their robustness and resilience lower the project risk. A good 5 Analysis of Diffusion and Innovation Processes 93 technology basis for biogas projects exists in Germany which experts believe has not been used so far. Overall, German participation in CDM projects is very low. Great Britain, Sweden, Japan and Switzerland are the leaders in this field. Domestic industrial associations and banks are important collaborators in the search for project partners. They provide a good overview of developments in the host country and have access to important information. The experts' view is that platforms are important for German firms to present and market their technologies in the BRICS countries (like environmental trade fairs and information functions of embassies and chambers of foreign trade). It is pointed out that the embassies of other nations (such as e. g. Denmark, Great Britain and Austria) are more active in this regard and that without such means it is hard for German firms to present their technologies and find CDM project partners. 5.2.1.6 Summary The interview results show that legal regulations promoting RE and CCS play a significant role. Political assertiveness and long-term planning security for the investor are important design criteria. Regarding instrument design, the BRICS countries can profit from an exchange of experiences with industrial nations. International agreements are decisive for the use of CCS, for instance within the scope of post Kyoto negotiations. However, it could be that CCS is not even applied in the BRICS countries if RE become competitive beforehand due to learning effects. German ambassadors and chambers of foreign trade are important "door openers" for German business activities expanding to BRICS. It would be conceivable to offer German companies support by, e. g. providing suitable platforms to present German technologies and (especially within the scope of CDM) looking for project partners. Reference installations are central to the spread of certain technologies (such as solar thermal). It is difficult for firms to realise them since large financial volumes are involved. This is where possibilities for cooperation open up with research institutions in the BRICS countries. In Germany, and increasingly in the BRICS countries, suitable skilled workers (especially engineers) are scarce. This lack of qualified labour could be tackled with training and exchange programmes. 94 5 Analysis of Diffusion and Innovation Processes 5.2.2 Energy Efficiency in Buildings Five company representatives were interviewed on this topic. The topic of energyefficient building is considered very important for climatic and economic reasons especially in China and Russia, which is why the interviews concentrated on these countries. The main focal points are energy-efficient design and construction, integrated planning of urban energy supply based on the example of China and knowledge transfer about energy-efficient building to Russia. The situation in the other BRICS countries is only looked at briefly. 5.2.2.1 Market Potentials for and Obstacles to Energy-Efficient Building There are high potentials for energy saving in new buildings in China due to the continued building boom taking place in this country with double digit growth rates20. The refurbishment of existing buildings (for instance through thermal insulation) is of secondary importance. Private home building hardly exists in China. Mainly professional investors and project developers operate in the high-priced segment of new building developments. They can make between 400 and 1000 % profit on the sale of a new building21. According to the experiences of the interviewees, in spite of these high profit margins, these professional builders are still not prepared to accept any cut in profits due to additional costs for energy efficiency measures. Their shortterm and profit-oriented calculations result in quality deficiencies with regard to energy consumption. It is therefore seen as important to change investors’ views in the direction of the long-term property value retention of the buildings. The Chinese government is currently developing efficiency standards for buildings with the participation of US and Japanese experts. One interviewee believes that German experiences with the energy passport are not being used enough. The experts’ opinion is that the American influence has resulted in the topic of energy efficiency playing practically no role in the Chinese building standards. The existing Chinese building standards are specified in so-called "Standards books". These contain nationally agreed and standardised construction details which have to be assembled by the architects. There are considerable problems in implementing the legal regulations in China. The executive authority lacks knowledge of the relevant regulations and the overall context is often disregarded. As a result, buildings are constructed which do not 20 According to the Deutscher Energie-Agentur (German Energy Agency), by 2015 half of the building stock in China will have been built after 2000 (Deutsche Energie-Agentur: Energieeffizientes Bauen in China, http://www.dena.de/de/themen/international/schwerpunkt-china/projekte/projekt/bauen-in-china/: 02.05.07). 21 For comparison: In Germany, those questioned estimate the returns at between 5 and 15 %. 5 Analysis of Diffusion and Innovation Processes 95 comply with the prescribed threshold values. Even some Western companies are producing buildings of poorer quality than in their home countries. To complicate matters further there is a regulation in China which forbids heating south of the Yangtze, which is counterproductive to meeting space heating demand in an energyefficient way. In the course of the continued economic growth of China and the climatic conditions in this region, tenants are increasingly heating their rooms by subsequently installing small electrical systems. Compared with non-electrical heating systems, these measures are inefficient from the viewpoint of primary energy consumption and, as a result, electricity consumption in the residential sector will probably continue to increase rapidly in China in the next few years. There is a high saving potential in Russia due to energy efficiency measures22, which is still largely unexploited. Because of the climatic conditions, the know-how concerning the technical implementation of energy-efficient building was developed very early on. Here, the main necessity is to modernise the older buildings. For historical reasons, in many places there is no standardised municipal administration of apartment buildings. Many apartments are privately owned without there being any structure in place in the form of homeowners associations. The many different private interests hinder energyefficiency activities in buildings. Furthermore there is seldom a consumption-oriented billing for energy so that there is no direct financial incentive for energy saving. In many cases the financing of building efficiency projects is a problem for the local councils. Innovative financing methods, for example within JI projects, are hardly used. The German experiences made after reunification are particularly helpful in this context since there were similar housing administration structures in the former GDR. The German Energy Agency, dena, is heading this German-Russian exchange of experience. The energy consumption of a building has to be analysed with a view to the whole system. Finding the optimum combination of several technology options is decisive when it comes to energy efficiency. This key understanding is not yet present in Russia and China.23 The building planning practice in China is assessed as being especially problematic. Building projects are not planned by one body, but the architect’s designs are given to so-called Design Offices. This patchwork procedure prevents a comprehensive approach. 22 "According to Russia's energy strategy for 2020 the current energy consumption can be reduced by nearly 50% if energy resources are used more efficiently". (German Energy Agency: Focal point Russia, http://www.dena.de/en/topics/international/focal-point-russia/, last accessed: 04.05.07) 23 According to the interviewed experts, this is only slowly becoming adopted in Germany too. The relevant German degree courses have only appeared recently. 96 5 Analysis of Diffusion and Innovation Processes Brazil, India and South Africa offer hardly any market for thermal insulation. These countries do not have a strategic role to play for the companies questioned. However, it was explicitly pointed out that they could have potential in the field of energy-efficient building because of their economic development and the associated high consumption of raw materials. 5.2.2.2 Drivers of Demand Those interviewed all pointed to the German legal framework24 and the funding measures of the KfW as good practice for increasing energy efficiency in buildings and the corresponding economic incentives. The price of energy plays an important role for the cost effectiveness of energy efficiency measures. Energy prices are very low in China and Russia so that the profits to be made with energy conservation measures are low. In addition the investors and those who stand to gain from the energy efficiency measures are usually different persons. In Germany, this dilemma can be solved through a higher basic rent (excluding utility charges). However, the experts believe this is not possible in China and Russia since the population are largely ignorant of the links between energy efficiency measures and saving possibilities and the achievable financial gain is small. In China, the emergence of a broad and politically active middle class, which is increasingly opposed to the worsening environmental devastation, is having a favourable impact. In contrast to this, the growing wealth in Russia is concentrated on a narrow upper class, which hinders the formation of a broad awareness of this topic. Energy efficiency measures offer customers few directly recognisable economic advantages in China and Russia. Their diffusion therefore has to be pushed using other advantages of energy-efficient building such as improved living quality. Energysaving building is still being contested in China according to the experts and must be promoted much more strongly through suitable marketing strategies in the public and private sectors. Buildings designed to Western standards are seen as prestige objects and Western building standards are regarded as quality labels in themselves. But the necessary checks of the measures are frequently omitted. Furthermore, the experts are of the opinion that simply copying Western building styles is usually not suited to the respective local climatic conditions in China and does not fit in with local building traditions. All were agreed that Western building technologies should not simply be transferred, but adapted to the country's respective conditions together with those affected. This process requires additional financial outlay and takes longer. 24 For example the Thermal Insulation Ordinance, the Federal Immission Control Act and the Energy Passport. It should also be pointed out in this context that the German Energy Conservation Ordinance is too complex and obscure for users. 5 Analysis of Diffusion and Innovation Processes 97 In Germany there is a long tradition of companies in the field of energy-efficient building. The continuous progression in legal regulations since the oil shock has had the effect of promoting this. The legal framework for energy efficiency has grown in analogy to technological progress in Germany. This has created a corresponding demand and resulted in German companies being able to expand over a long period and become more professional before finally being able to break into foreign markets. 5.2.2.3 Market Players In China, German architects compete primarily with international suppliers, especially from the US, Canada and France. The protectionist market represents a large obstacle to all foreign suppliers equally. Up until last year it was only possible to set up foreign branches in China as joint ventures. Certain prohibitions in the call for tenders for large projects exclude foreign companies from competing. It is therefore advantageous to be resident in the country. Since the search for Chinese partners is very time consuming, for the most part only large architectural offices are represented by branch offices in China. In international comparison, Germany is assessed as being a technology leader in the sector of energy-efficient building. Based on its good technological starting position, German industry is a leader, especially in highly complex technologies. However, to some extent this good international position is not being successfully communicated to foreign clients. One reason for this cited by several experts is that German companies receive less political and financial support for expanding their business to the BRICS countries than their international rivals. So far, German companies have been winning clients through chance (personal) contacts. The American government’s approach, in contrast, is described as being very pro-active. The Chinese market often seems incomprehensible and unpredictable to German suppliers who do not grasp how it functions or how to access it. As a consequence, it is difficult for them to locate business partners and customers. International studies and publications are seen as conducive to making contacts in academic circles. The Chinese Tongji University in Shanghai is cited by all the experts as an important cooperation partner for the topic of building efficiency. This university maintains good contacts with Germany and is involved in many exchange activities.25 In the case of one company, successful cooperation has been managed within the scope of a twinned towns programme. The public demand for energy-efficient buildings can be reinforced through good contacts to the Chinese authorities. 25 http://www.tongji.de/english/mframeen.html 98 5 Analysis of Diffusion and Innovation Processes According to the experts, Chinese architects do not have sufficient know-how in the field of energy-efficient building. In contrast to Russia, it is thought there is no engineering tradition in this field, to some extent not even basic knowledge of energyefficient building. Autonomous R&D activities are not expected in China in the near future. The experts did note, however, that there is continuous growth there in the level of knowledge26. At the level of component manufacturers, there was general agreement that there is competition in China and Russia from cheap domestic products of low quality. Investors in China request only Chinese components due to the price differences and as a consequence of a directive to use national products. Long drawn-out licensing procedures for foreign products in China represent one hurdle. In addition, there is insufficient patent protection. Despite this, German companies are represented in the market segment of more complex components (such as for example high-quality glass or facade elements) in China because of the large market potential here. The raw materials and individual parts required are shipped to China and assembled there. Since the workers are trained by the German suppliers, the manufacturing quality is satisfactory. Chinese suppliers also manufacture complex components but of much poorer quality. The inferior quality of the work at building sites is a large problem in China and Russia. In many cases, the workers do not have the necessary broader qualifications because of a lack of suitable degree courses and job training centres. 5.2.2.4 Summary Getting the wider population in the BRICS countries to become aware of the links between efficiency measures and saving potentials is the starting point for the diffusion of energy-efficient building. Since the knowledge of energy-efficient building can best be acquired in scientific and practical exchanges within concrete project work, German planners and architects could function as multipliers. A building project which demonstrates the implementation of German technologies in BRICS could improve awareness there. With regard to China, the interview results seem to contradict the positive specialisation figures determined in Chapter 4.1.3. This is another indication of the fact that China does possess the competence for a more energy-efficient orientation of the building sector, but that this would have to be mobilised for an actual increase in building efficiency. Educating Chinese investors about the long-term advantages of energy 26 For example, more and more conferences and trade fairs are being organised in this field. 5 Analysis of Diffusion and Innovation Processes 99 efficiency measures and supporting the Chinese government in improving and actually implementing legal regulations seem to be country-specific starting points. In Russia, a decisive starting point is the creation of framework conditions for efficiency measures in older buildings. The German Energy Agency, dena, is active here with consulting projects for the Russian government and local councils. The low activities of German industry in Brazil, India and South Africa in the sector of energy-efficient building could indicate missing framework conditions for an expansion of German business activities to these countries. However, there is no indication from the interviews to what extent and in which field there are market potentials in these countries. 5.2.3 Water Services Two interviews were conducted on the topic of water services. The interviews concentrated on technologies for wastewater treatment in Russia and China as well as the conditions for small treatment plants in Germany. 5.2.3.1 Framework Conditions in BRICS In the long term, wastewater technologies are seen as having potential in all the BRICS countries. China, in particular, has a large market. There is already a high demand for drinking water. The markets for wastewater technologies in China and India will still be developing in the next five years. In China, the achievable prices for wastewater technologies are between 30 and 40 % of the European prices, which is why not many foreign technologies are being imported at present. The general view is that environmental protection is still of minor importance in these countries. However, there are signs of growing pressure resulting from problems combined with an awakening environmental awareness which could lead to a growing interest in water service technologies in China. The achievable prices for wastewater treatment technologies in Russia are on a European level. Here there are mainly risks of non-payment for installations on order, which is why contracts are only being concluded with insurance (for example via Hermes bonds). The experts are of the opinion that good environmental legislation and its enforcement are decisive for the diffusion of wastewater technologies. The lack of enforcement of existing requirements is problematic in both Russia and China. In China, the licensing and monitoring of plants is frequently dominated by corruption and a lack of environmental awareness on the part of the authorities. In Russia, the legal requirements in the field of water protection are often so strict that local companies actually prefer to pay the fines. As a rule, non compliance with requirements has no 100 5 Analysis of Diffusion and Innovation Processes further consequences. It is extremely difficult for foreign companies to assess how these requirements are monitored and sanctioned so that international concerns tend to obey them more often than local companies do. Knowledge transfer to China is viewed by German suppliers as a threat. The fear is that Chinese companies will use the knowledge gained through cooperation to later produce the technologies autonomously. In this context it is pointed out that technical changes are implemented very quickly in China. In order to keep their knowledge lead, German equipment manufacturers keep their Chinese cooperation partners technologically dependent, for example by making sure that important components and production steps come from Germany. Against this backdrop, public calls for tenders in China are seen as a problem. Suppliers are expected to provide technological details from the offset which are then incorporated into the tender and excluded from the scope of the order. Since engineering services are poorly paid in China, the consequence is that the size of the order is small compared with the value of the knowledge revealed. 5.2.3.2 Customers in BRICS Wastewater treatment technologies are purchased by both private and public customers in the BRICS countries. In Russia, about two thirds of the industrial customers are local companies, the rest are globally active regular customers. For Russia, Brazil and China, it is generally agreed that being present on location and adapting to country-specific conditions are of great importance for acquiring customers. Local qualifications and training standards vary strongly and have to be taken into account. In Russia, for example, proficiency in steel-working is very good, but poor in plastics processing. The quality of the construction work often does not correspond to German standards so that the plants have to be adapted accordingly. One example of such necessary adaptation measures is that all the documents have to be available in the national language. One problem which was mentioned in the interviews is that there are no data available on the chemical composition of the wastewater in many newly industrialising countries. The plants can then only be designed along the lines of certain basic parameters (e.g. COD values). Finally, the climatic conditions and country-specific "special requests" also have to be considered.27 Recruiting local staff has a positive effect on the company's acceptance. However, there is often a lack of qualified personnel. In Russia and Brazil, usually only graduates can be recruited, who lack practical experience. In Russia, in particular, research projects are being used to recruit local workers. 27 In Russia, for example, customers do not want a sewage plant to be visible as such from the outside. 5 Analysis of Diffusion and Innovation Processes 101 The experience of one company shows that good reference projects are decisive for market development in BRICS countries. These develop out of working together with large international "regular customers" who are in the process of expanding and use the same technologies at all their locations. These kinds of "lighthouse investments" make sure the technologies are well perceived by the public and demonstrate the possibilities of the most up-to-date technologies in the BRICS countries. It is particularly important to have reliable and competent customers and partners on location able to correctly operate and service the installations. The majority of the interviewed companies operate branch offices or subsidiaries in the BRICS countries, because the adaptation to country-specific conditions and the contact to partners and clients are so important in wastewater technologies. The branch offices are used for initial contacts and sales and marketing. Up until now there have been no R&D activities in any of the countries. In one company, however sub-components are being produced in China, because China is regarded as a market with huge potential. There are high import duties in China which considerably diminish the achievable prices; compared with this, paying the tax for producing on location is much cheaper. In Brazil, the achievable prices are also below German levels28 and are further decreased by import duties. Despite the unfavourable framework conditions one company still managed to construct a reference installation by means of a public-private partnership, which now represents the basis of earnings in Brazil.29 5.2.3.3 Other Market Players in BRICS On the Russian market German plant manufacturers face international competition, primarily from Turkey and the Benelux nations. Significant Russian capacities are not perceived in this field. In contrast to this, local competitors are presumed in China, since China is interested in producing its own technology. The knowledge edge that German plant manufacturers have enjoyed up to now is cited as being decisive for their internationalisation. Other competitive advantages of German producers are seen in the quality of their production and products. Especially in Eastern Europe, German products stand for quality and are preferred to local ones for prestige reasons. Unorganised production processes in China make it harder to locate sources of error during production. Furthermore, the European part family (i. e. 28 In the interviews, 50 to 70% lower prices were mentioned. 29 In the case of untapped markets (these do not include the BRICS countries), research projects are mentioned as a good way of making customer contacts and becoming familiar with country-specific customs and practices. 102 5 Analysis of Diffusion and Innovation Processes measurement and control technology, fittings, valves, pumps, control panels etc.) is seen as being more modern than the American part family. Usually, only one family is used within a factory so that the attractiveness of the European family represents an additional competitive advantage for German suppliers. Commissioned by German firms, companies from the BRICS countries produce fixed buildings and system parts on location. To some extent, the planning of these structures is also done by partners in the target country which have to take into account any necessary adaptations to ensure the quality of the construction work (see above). The other parts ("core component") are imported from German or Western Europe. Local suppliers of components are not known; reference is made to China's interest in producing its own technology. 5.2.3.4 Experiences in Germany and Prospects for BRICS The German Environmental Liability Act introduced the personal liability of management and also that damages due to the environmental impacts of a plant should be judged a statutory offence. This is cited as being a decisive trigger for a shift in the thinking of central management among industrial customers of wastewater technologies. Well developed environmental awareness on the part of German authorities, industry and workers has promoted the diffusion of wastewater treatment technologies. The experts believe that cost-covering wastewater levies in the future will play a decisive role which is why positive effects are expected of the EU Water Framework Directive. The German national obligation to retrofit individual properties as well as operating schemes which offer a package of treatment including monitoring are seen as being additionally supportive to the diffusion of decentralised small treatment plants in Germany. The current lack of qualified personnel is the main obstacle in Germany. Training and further training is being forced in Germany in order to have specialised workers available with closer ties to the companies. An additional factor hindering the diffusion of small treatment plants are the monitoring regulations for decentralised plants which vary from one federal state to another. The market in the BRICS countries has not played any role up to now in the innovation and diffusion process of small treatment plants. Developing the European market is of top priority. In the BRICS countries there is mainly a need to catch-up in the field of mechanical-chemical wastewater purification. This may change in the longer term because of the low degree of connection to centralised sewer networks in the BRICS countries. 5 Analysis of Diffusion and Innovation Processes 5.2.3.5 103 Summary Legal requirements in China and Russia are not or only insufficiently enforced. The main reason for this is the lack of environmental awareness on the part of the domestic industry, authorities and workers. Promoting the environmental awareness of the different stakeholder groups in the target countries is therefore an important starting point for the diffusion of wastewater technologies. Direct personal contacts and the adaptation to country-specific conditions are very important for the spread of wastewater treatment technologies in BRICS. International companies which are in the process of expanding to BRICS countries can help to gain a foothold here and pave the way for German technology providers. Lighthouse investments enhance the perception of German technologies in BRICS. It became clear that there are large differences in qualification and training between the BRICS countries and Germany which make cooperation more difficult. A general lack of qualified personnel in Germany is restricting the expansion activities of German companies. 5.2.4 Material Efficiency Two companies were interviewed on the topic of material efficiency. The main topics in the interviews were water-based coatings in automotive coating systems as well as a method for using shredder residues from recycling end-of-life cars and electrical appliances. 5.2.4.1 Drivers of and Obstacles to Demand in BRICS for Water-Based Coatings in the Automobile Industry The automobile sector in Brazil and South Africa comprises only international car manufacturers. These are also important players in China. The experts believe that these international players are shaping the demand for finishing lines using waterbased coatings in the BRICS countries, since they try to apply the same technologies as in their countries of origin in order to achieve the same quality standards, assume a pioneering role and avoid possible reputation losses due to "environmental sins" abroad. If German customers shift production overseas to the BRICS countries, this can serve as a door opener and access to business there for the outfitters, too. In China there was real competition among car manufacturers as to who would be the first to apply water-based coatings. The knowledge level, which is comparable with Germany, was explained by one expert by the international line-up of the customers. The advantages of the plants are easy to communicate. 104 5 Analysis of Diffusion and Innovation Processes Russia and India are very hesitant about using water-based coatings. There are only a few foreign manufacturers on the Indian market. Domestic Indian car makers have their own technologies and prefer solvent-based products. There are no water-based coatings available on the market in Russia. International paint and coating concerns and manufacturers of coating plants are trying a joint approach here. Generally, both markets show a tendency towards "low cost" vehicles. According to the interviewee, German technologies are "over-engineered" and implementing simpler technical solutions while maintaining the positive environmental effect is sometimes difficult. Regulation is one driver of the demand for water-based coating systems in Germany and the BRICS countries. In Germany, the Environmental Law on Pollution Control, above all the TA Luft (Clean Air Guideline), was a main framework condition for the development of low-emission technologies. The local branches of German concerns also apply German laws in the BRICS countries. As a rule, these are the strictest standards. If, in an individual case, the local requirements are stricter, then these prevail. For example, Russia has stricter discharge values for wastewater. 5.2.4.2 Actor Structures in Water-Based Surface Coating Systems Similar to the customer side, the producer side of water-based coating systems in the Brazilian market is characterised by internationally active companies. Brazilian producers do not play a role as competitors unlike China, where there is strong local competition. To some extent, former suppliers here have developed into rivals. Even if production cooperations are avoided for this reason, knowledge drain still occurs because of the high fluctuation of workers. The rapid development of a company's own knowledge base is seen as one way to effectively counter this. Paint and coating suppliers are important upstream suppliers. A few international companies control the market here such as, e. g. BASF or Nippon-Paint. Local suppliers provide the sheet metal used to manufacture the coating plants, e. g. in Brazil. Beyond this and customer relations, other contacts with local actors do not play a role. The companies questioned do not conduct research and development in BRICS countries; this is mainly concentrated in Germany and the US. Overall, knowledge exchange between Germany and the BRICS countries is perceived as one-sided: There is no feedback of the diffusion process in BRICS to Germany. Knowledge only flows in the opposite direction. 5 Analysis of Diffusion and Innovation Processes 5.2.4.3 105 Utilisation of Shredder Residues in Germany The statements about coating systems in the automobile sector show that the production processes in vehicle manufacturing and its preliminary stages are showing strong signs of convergence in Germany and BRICS. However, at the end of the car's useful life – in the recycling of end-of-life vehicles – the routes taken are very different. In the EU, the 1999 Directive on End-of-Life Vehicles made automobile manufacturers responsible for their correct disposal. In the meantime, there has been a sharp rise in the prices of raw materials so that for strategic reasons scrapped vehicles now represent an important source of (secondary) raw materials for the automobile industry itself among others. These legal and market framework conditions have pushed the further development of recycling technology for end-of-life vehicles in Germany. A very good starting basis for this was the differentiated recycling system in the former GDR. With regard to the technological knowledge base, the interviewee sees Germany as having a long headstart. He sees a particular challenge in creating a suitable network of suppliers and consumers, which optimally combines the individual plants from the recycling pyramid. This has to consider country- or regional-specific material flows and transport routes and optimise the mechanical requirements made of the individual fractions of recycled materials by each consumer. The technology is battling strong obstacles to its implementation. To date, no reference plant has been able to be built in Germany. The main obstacle is that, despite the provisions contained in the TA Siedlungsabfall (Technical Instructions on Municipal Waste), many landfills are still open for shredder residues and represent a more cost favourable disposal possibility. Because of considerable pressure from the sector, the expert interviewed believes it probable that landfills will be closed to reusable waste from 2012. Another obstacle is the movement of waste from the EU mainly to China. According to the expert, since 1989 the quota of recycled end-of-life vehicles has decreased from 50 % to approx. 15 - 20 %. This is explained by the cost ratio between disposal using shredders and the comparably lower transport costs incurred for exporting the scrap vehicles to China or India. Contradictory legal regulations such as for example waste legislation and REACH30 are also seen to be driving waste exports. 30 Author's comment: The background to this estimation is the discussion concerning when waste is no longer characterised as such and becomes a product in the form of a secondary raw material. As waste it is subject to waste legislation, as a product, secondary raw materials are subject to the REACH legislation, i. e. among other things the distributor has to register them and supply certain information (for example material properties). The introduction of REACH and the uncertainties about how recycling companies are affected by it have resulted in a high degree of insecurity in the sector (www.reach.bvse.de, 26.07.2007; BDE 2006). 106 5 Analysis of Diffusion and Innovation Processes The high waste exports are seen as a problem for another reason in the interviews: When recovering secondary raw materials from waste, recycled materials are used to some extent, i. e. recycling companies are simultaneously the consumers of recycled materials. If waste is exported instead of being recycled in Germany, this reduces the demand for recycled materials accordingly. For example, it was planned to use several fractions for slag formation in order to recover metals from electronic scrap. But the electronic scrap was exported and purchased by China. 5.2.4.4 Utilisation of Shredder Residues in BRICS The company interviewed had not, up until that point, exported any plants for recycling shredder residues to the BRICS countries or produced any there. With the exception of China, these countries are seen as being technologically far behind Germany in recycling waste. The waste processing in China causes much greater environmental pollution. The company interviewed expects that it will soon be confronted in all the BRICS countries by similar regulations as those in the EU. The company could imagine the technology being exported to Brazil and South Africa if there is a favourable development in environmental legislation and in the total recycling chain from disassembly through shredding and up to the consumers of the recycled material. In South Africa and Brazil, there is already a high quality industry which the company believes is suited for cooperatively planning a regional recycling system. Domestic partners and the private-sector viability of the concept are seen as preconditions for its realisation. The role of the German technology supplier would be restricted to exports and the function of a "coach". The expert is of the opinion that only large urban centres are possible as locations because the required supply of scrapped vehicles and the consumers of the different recycled materials are only present in sufficient numbers here. One argument in favour of the expansion of the business activity to South Africa and Brazil is the expectation that these countries will not develop into competitors for the utilisable waste in spite of the use of advanced recycling technologies because they possess sufficient raw materials themselves. China, in contrast, is feared as a rival for recyclable waste, because raw materials and utilisable waste are relatively scarce there. On the political side, China has held talks with the interviewed German technology producer, in which it revealed an interest in the technology for recycling shredder residues and the intention to introduce a directive on disposing of end-of-life vehicles. Since at present there are only relatively few end-of-life vehicles occurring there (approx. 5000 per year), the Chinese also enquired about the possibilities of importing scrapped cars. The German company sees its objective of safeguarding the domestic raw material supply endangered by this. Still it does not want to shut itself off 5 Analysis of Diffusion and Innovation Processes 107 from developments in China but is prepared to tackle the peculiarities of this market (among others lack of patent protection, forced joint ventures). The demand for shredder technology by India, similar to China, is feared rather than hoped for. The difference is that, in India, the infrastructure preconditions are not seen as given. In Russia, too, the necessary actor structure in the recycling pyramid is not sufficiently developed. However, Russia, in contrast to China and India, is not perceived as being a potential rival for utilisable waste because it possesses many raw materials of its own. 5.2.4.5 Summary The mechanisms to accelerate innovation and diffusion processes in material efficiency are as varied as the technologies encompassed by this field. It is conspicuous how existing actor cooperations are used for the spread of the "key innovations" examined here in the BRICS countries. In particular, the contacts with German customers are used to equip their foreign branches in BRICS countries. The use of water-based coatings is spreading in this way. In both technology examples, diffusion is influenced by regulation. The wider effects of German environmental regulations in the BRICS countries are particularly apparent for water-based coating systems. They are brought about by the proactive behaviour of internationally operating German groups which produce in compliance with German environmental laws even abroad. Cooperation potentials contributing to sustainability can be identified in several sectors. Water-based coating systems need to break out of their former role as "isolated solutions" between international equipment suppliers and automobile manufacturers. Their transfer to the domestic automobile industries in Russia, India and China is still to come. For this to happen, however, technically simpler solutions must be developed. The cooperation potentials in the technology for recycling shredder residues are overshadowed by the perceived competition for recyclable waste and secondary raw materials between Germany and the BRICS countries, primarily China. Finally, it should be noted that, for the actors questioned, the focus is not limited to the BRICS countries. Alongside the BRICS countries, other emerging economies are also important to them, e.g. the so-called "Next eleven"31, including Mexico, Iran, Turkey, and Vietnam. 31 The "next eleven" refers to a list of 11 countries published in December 2005 by Goldman Sachs, which could experience a similar economic upturn as the BRICS countries. The "next eleven" comprises the following countries: Egypt, Bangladesh, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, Vietnam (http://en.wikipedia.org/wiki/Next_Eleven, 19.12.2007). 108 5 Analysis of Diffusion and Innovation Processes 5.2.5 Mobility and Logistics Five companies were interviewed in the field of mobility and logistics. The main topics discussed were renewable raw materials and their use for second generation biofuels32, emission reduction technologies for Heavy Good Vehicles (HGVs), rail transport systems in China and CO2-neutral logistics services. The following sections are structured accordingly. 5.2.5.1 Demand for Synthetic Biofuels in BRICS As in material efficiency, the raw material situation plays a key role for synthetic biofuels (biomass-to-liquid BTL). Since this concerns a substitute for oil, high oil prices are the driver for this technology. Technically, BTL-processes and coal liquefaction converge and the processes are identical in the final process stage – the conversion of synthesis gas to fuel. In addition, biomass can be added during coal liquefaction. Countries with large coal reserves which practise (or want to) coal liquefaction are therefore predestined for the application of BTL processes. Alongside India and South Africa, this also applies to China: It is pursuing many development activities for coal liquefaction using its own and imported technologies. The rapidly growing energy demand acts as a driver for BTL which gives high political priority to issues of energy supply. Especially in the transport sector, the expected demand on the part of the Chinese is so large according to the person questioned that it does not seem realistic they will be able to meet this demand with imports. Further drivers are the large amounts of available biomass, environmental problems arising from the current practice of burning biomass in the open and the political desire to create jobs in agriculture in order to counter migration to the cities. In addition, the speed with which politically desired developments are implemented in China is very high and permit procedures are consequently unproblematic according to the experiences of the interviewee. At the same time, the experts believe there is a problem in that the necessary biomass logistics could quickly overload the transport network in China. The political framework conditions for BTL will have to be put in place first before the economic efficiency threshold can be crossed. German companies are playing a part here by contributing their experiences with German framework conditions, supportive policies and actors. 32 It is characteristic for these fuels that the whole plant is used and not just the fruit. Examples are biomass-based synthetic fuels (Biomass-to-Liquid, BTL) or ethanol production based on pulping lignocellulose. See meó et al. 2006 on distinguishing biofuels and for more technical details. 5 Analysis of Diffusion and Innovation Processes 109 India is another coal-rich country with low reserves of oil and gas. Coal gasification is being pursued there based on German plants. First generation biofuels are also produced. There are different estimations of the availability of biomass in India. Like China, India is very interested in manufacturing synthetic biofuels to meet the strongly growing demand and to create jobs in agriculture. In India as in China, the production of fuels based on renewable raw materials is also being pursued in CDM projects (see Section 5.3.2) with German participation. South Africa is also a country rich in coal but poor in oil. Due to its prior policy of apartheid and the international sanctions imposed on it as a result, the country was cut off from imports for a long time and therefore was forced to develop other ways of obtaining fuels. For this reason, it was already active in coal gasification early on. This early period is seen as the nucleus for the German-South African cooperation in this field of technology. Today, a large share of the fuel in South Africa is from coal gasification and represents a high quality "designer fuel" which opens up very good possibilities for emission reduction technologies in the transport sector. Based on this, there is increasing interest now in synthetic biofuels. However, to start with, the framework conditions, specifically the promotion of renewable energies, have to be further developed and put into practice. Domestic coal only plays a subordinate role in Brazil's primary energy mix. The technical proximity of BTL to coal gasification is therefore irrelevant. Up to now, Brazil's strength has mainly been in ethanol production. Here, similar to sugar production, large volumes of biomass (bagasse) are leftover which could be used to produce synthetic biofuels. As in China and India, CDM projects are drivers, but also the diversification strategies of oil concerns and – from a political perspective - aspects of energy security and the job effects of "home-made fuels". Russia is now beginning a substantial number of bioethanol projects and has indicated interest in German BTL processes. 5.2.5.2 Cooperation between Germany and the BRICS Countries to Produce Synthetic Biofuels Reports were made of several ongoing cooperations in the field of synthetic biofuels. The cooperation between Germany and China in biofuels is taking place within the scope of the "German Chinese Sustainable Fuel Partnership" (GCSFP) among others. This project is pushing the use of biofuels, synthetic fuels and hydrogen in the transport sector in China through pilot systems and fleet vehicles for demonstration purposes etc. The German side is made up of the Federal government and companies from the automotive sector, the mineral oil industry, the chemical industry and systems engineering. The German Energy Agency, dena, is providing organisational support for 110 5 Analysis of Diffusion and Innovation Processes the project. The Chinese side involves partners from the automobile industry, energy sector, universities and associations as well as the China Automotive Technology and Research Center (CATARC) and government authorities33. The cooperation examined in the interview is being realised via cooperation and licensing contracts with Chinese partners since the company questioned has no production capacities itself. The main partner for constructing a demonstration plant with attendant research is a German-Chinese firm found via a trade fair contact. As in other fields, there is a perceived threat that the plant will be copied. In this specific case, the company in question is confident that the German-Chinese partner is limiting this risk through suitable contracts with the cooperation partners. According to the experiences of the interviewee, not all the knowledge of a company should be made public. For the implementation it has been agreed that components will be supplied by German firms who were also partners in pilot projects in Germany and provided services there at their own cost. Questions concerning the biomass logistics are the responsibility of the Chinese partner. The demonstration plant is going to be installed in an industrial park because the infrastructure is very good in these high-tech zones. Cooperation on the research side is now being developed with a university. Overall, the interviewee believes China to be very good in systems engineering and engineering capacities in general. Even if the fundamental ideas still tend to be generated in Germany, it is expected that China will be quick to adopt and realise these concepts. The experts see the high social status of perfect copying as the reason behind this. They expect, however, that copying – similar to Japan – only represents one phase which will soon turn into the development of autonomous ideas. In South Africa, international actor relations are based on the existing links in the field of coal gasification. There are joint R&D projects with South African companies. South Africa does have its own development capacities, albeit still on a small scale, but has not yet reached the stage of implementation using their own technologies. There are also existing links to South African research institutions, the South African National Energy Research Institute SANERI 34, is one concrete example which, among others, is studying the available potentials for cleaner energies in South Africa. For BTL, however, industrial research (e. g. by Sasol) is considered more important. Those questioned have hardly any experiences of cooperation with the other BRICS countries. According to their statements, there are no competences in Russia 33 see also http://www.dena.de/de/themen/international/schwerpunktchina/projekte/projekt/gcsfp-2/ (02.05.1007) 34 see also http://www.dst.gov.za/landscape/pubresearch/pubresearch_12.php (03.05.2007) 5 Analysis of Diffusion and Innovation Processes 111 specifically targeting BTL. On account of the limited personnel capacities of the interviewees, no cooperation projects with Russia have been launched. Further cooperation is also still open in Brazil. The knowledge basis for producing bioethanol is seen as given there. Processes to manufacture fuels from bagasse are being developed on site. This is mainly being pushed at the level of universities; there have not been any demonstration projects up to now. One interviewee estimates the technical standard as falling well behind that of Germany. 5.2.5.3 Diffusion of Synthetic Biofuels in Germany The experts’ viewpoint is that Germany is well positioned in BTL. Other countries' use of biomass is moving more in the direction of electricity generation or – like the US – in the direction of ethanol. This can be added to petrol. In the US, petrol is more widespread than diesel. Synthetic biofuels can be promoted by setting policy targets for obtaining renewable energies from renewable raw materials, even if the R&D activities in Germany were already begun earlier. The challenge of reducing CO2 from vehicle emissions is creating additional dynamics in this domain. The solution is seen in the upstream fuel production chain. Biodiesel producers are beginning to rethink in the direction of BTL. For them, these processes offer the possibility to further process their residues. A recent innovation in the actor constellation is the participation of the oil industry in BTL activities. Diesel consumption has increased due to good diesel technology in Germany. This is why diesel has to be additionally purchased or the refineries have to be retrofitted. Both options are expensive. The recent interest of the oil industry in fuels from biomass is one result of this. Compared to the BRICS countries, the overall knowledge margin is estimated as large. This is seen as an advantage according to the company interviewed since it promotes the sale of a BTL plant including a compete service, which covers, e. g. questions of raw material logistics and the adjustment of the fuel to the conditions and quality requirements of the demand-side. Training personnel to operate the plant is also offered. The experts attribute Germany's knowledge edge to its technical know-how in coal gasification, which made suitable partnerships between applied research and systems engineering possible early on. The strengths of Germany in the field of renewable energies in contrast generate fewer synergies to BTL, according to the interviews, because the developments are very technology-specific. A competition for the use of the available biomass could turn out to be obstructive to the further development of BTL. The specific problem is pointed out that the Renewable Energy Sources Act directs biomass towards electricity generation, that is 112 5 Analysis of Diffusion and Innovation Processes the framework setting of the government is actually reinforcing the competition of use. Generally, legal framework conditions are required to be reliable. The tax changes in the case of biodiesel are referred to as a negative example. These have resulted in a precarious situation for several manufacturers. Taking into account the development period which is still necessary, those questioned believe it important to be given clarity about the long-term support policy at an early point in time. Another factor which acts as a brake is the rapid changeover in company owners in Germany and the associated frequent new strategic orientation of the firms. Finally, it must be considered that the potential for available biomass in Europe is limited. Against the background of import demands, the experts attach particular importance to certain (interim) forms of biomass (e. g. pyrolysis oil) because of their transportability. On the other hand, this point actually fuels the experts' expectation that countries rich in biomass will try to build up a larger part of the value added in their own countries. For the companies interviewed, this makes them important candidates for cooperation in the field of BTL. The authors of this study were very surprised that the negative environmental effects of cultivating biomass play hardly any role in the interviews. One possible explanation for this is that mostly plant residues were cited as biomass sources in the interviews which so far have not been the feedstock for any other energy-related use. However, palm oil was also mentioned specifically as a suitable form of biomass for imports. Current studies of the WWF and SRU show that the environmental balance of this form of biomass is clearly negative in the cultivation methods dominant today (Reinhardt et al. 2007; SRU 2007). In the expectation of continued significant imports of palm oil, which, on top of this, are actually supported by the government via the Renewable Energy Sources Act, they therefore recommend to introduce mandatory quality criteria for environmentally-compatible crop cultivation. 5.2.5.4 Regulation of and Demand for Low-Emission Heavy Good Vehicles (HGVs) Besides CO2-neutral fuels, another important starting point for lowering the emissions of the transport sector comprises emission reduction technologies for road vehicles. One person questioned is of the opinion that customers from BRICS countries only make minimum investments in exhaust emission technologies in HGVs. But they are very well informed about the market and the available products. The German demand and the demand of German logistics companies in BRICS countries for low pollutant HGVs do not exceed the legally required level. They buy products according to the local licensing requirements, i. e. for example Euro 3 vehicles in Russia, even if they have to use Euro 4 vehicles in Germany. The vehicles used for transnational journeys are an exception. For these, Euro 5 vehicles are offered in BRICS countries, too. 5 Analysis of Diffusion and Innovation Processes 113 The demand driven by the legal emission standards for HGVs plays an important role (see overview in 5-2). The regulation in Germany, which is very strict in an international comparison, was judged positively by the company questioned since it gives Germany an edge on the global market. Other incentives – in concrete terms, the toll charge reduction which is granted in the EU and Germany for Euro 5 HGVs – ensure that EURO 5 vehicles are already being sold even though the standard has not yet been enforced. This has resulted in the entire market in Germany moving in the direction of the AdBlue emission after-treatment technology because Euro 5 is only achieved with this. However, Euro 5 vehicles which meet the standard using technologies inside the engine will soon enter the market. The market in the US is the driver for this because AdBlue is not permitted there and the EPA 2007 Standard which is to be introduced there is comparable to the EURO 5. Table 5-2: Emission standards for HGVs in BRICS+G • Brazil: Euro 0/2 since 199335, Euro 4 from 1/2009 • Russia: at present Euro 3; Euro 4 from 2010/2011 • India: Euro 2/3, tendencies towards Euro 4 • China: Euro 4 in cities, less strict emissions standards in rural areas. • South Africa: no emission regulations so far; Euro 4 from 2009/10 • Germany: at present Euro 4 and toll reduction for Euro 5; mandatory introduction 2009 It is seen as positive that the BRICS countries are following the Euro system of emission standards and not the US emission standards for HGVs and thus have the same regulation basis as Europe36. However they have more lenient limits which hinder the diffusion of low emission HGVs in BRICS. There are absolutely no emission standards in South Africa. One of the experts questioned traced this back to the partly justified reservations that advanced emission technologies are connected with additional costs and reliability losses. In China, the stricter emission standards which apply in urban built-up areas are often circumvented by Chinese transport companies who register their trucks in outlying districts. 35 http://www.dieselnet.com/standards/br/ (Stand: 06.06.2007) 36 Standardised "vehicle homologation values" are also mentioned here. Homologation refers to the procedure for testing the fitness of a vehicle to be licensed in a specific country. 114 5 Analysis of Diffusion and Innovation Processes As well as emission standards, the fuel quality is decisive for the actual emissions. If quality is poor, emissions are often significantly above the valid threshold limits despite complying with the standard. Experts' reports, for example, claim that the fuel sulphur content in Brazil is so high that the exhaust after-treatment no longer functions; a similar situation applies to Russia and China. In South Africa, besides domestic "designer fuels", world market diesel is purchased in very different qualities which makes the emission situation worse. In Germany, the sulphur content in vehicle fuel was lowered and the quality defined. These are good prerequisites for exhaust aftertreatment. 5.2.5.5 Supply Structure for Low-Emission HGVs The (commercial) vehicle industry is very different in the different BRICS countries. Russia, India and China have their own large automobile industries. They produce vehicles which are comparatively old-fashioned in technical terms. The manufacturing costs, however, are optimised so that these vehicles are 30 - 50 % below German vehicles’ sales prices. German HGVs can only be sold in niche markets. The company questioned expressed the hope that the whole market will develop in the direction of higher quality in these countries; this trend can already be observed in the passenger vehicle sector. Domestic providers (e. g. TATA India) are trying to keep up, among others, by strategic acquisitions of Korean vehicle producers. In Brazil, in contrast, there are only international vehicle manufacturers. The competitive situation is therefore seen as being similar to that in Germany or Europe. The same is true for South Africa. The German producers are relatively well represented here. However, the South African market is assessed as being relatively small (approx. 20,000 commercial vehicles per year). The materials and components necessary for production are purchased by the company interviewed via global sourcing. The world market price for steel determines the price of components for cast and forged parts, in addition it is not profitable to transport these. These parts are purchased on location wherever possible. In Brazil, this is the only field in which domestic suppliers play any role at all. Otherwise, producers use the same suppliers as those in Germany; ones which have local branches in Brazil. To this extent, the quality of the supplies is not regarded as critical. In India, there is also a broad spectrum of internationally positioned suppliers. With regard to domestic supplies for cast and forged parts, the company questioned reported difficulties. It is true that domestic industries are strong as far as quality and testing processes are concerned, but they are weak in stipulating test criteria. Such situations are countered by the targeted development of suppliers, even at the risk of 5 Analysis of Diffusion and Innovation Processes 115 the competition profiting from this. In South Africa, the overall price-performance ratio of the automotive supply industry is considered less good, apart from leather and forged parts. Other parts purchased from BRICS countries are those with moderate technology requirements and a high share of manual labour input such as, e. g. elastomer parts. They are purchased from the BRICS countries within the scope of global sourcing for facilities outside of BRICS as well. The good transportability of the parts encourages this strategy. For electronic systems, e.g. brake systems, the competence in BRICS is not considered sufficient. There are contacts in all the BRICS countries to supplier organisations similar to the VDA or TÜV.37 The company interviewed counts the suppliers in Germany as one of the strengths in the field of "sustainable mobility and logistics", from which the sector of emission technologies is able to profit greatly. Another strength is the German regulation, which is very demanding compared to other countries, and which has resulted in Germany getting a headstart on the world market. Germany is seen as a specialist for emission reductions, even if this features less strongly than it does for drive systems. There is a fairly relaxed attitude to an improvement of the competitors in BRICS. Because the company can compete well on the European market, this does not represent an additional challenge. 5.2.5.6 Demand for Rail Transport Systems in China On account of the large distances involved, China is estimated as a “pure railway market”. The experts questioned see potentials for improvement in goods transportation and in logistics. So far, there are hardly any free market structures in place, but state-controlled logistics networks. German logistics companies which focus on rail transport see an opportunity to market their know-how (e. g. the concept of dispatcher centres) and have drawn up the first declarations of intent with the Ministry of Railways. Another additional aspect which favours passenger rail transport is that, especially at certain peak times, such as the Chinese New Year’s celebrations, the number of passengers is very large. High speed lines are experiencing a boom, because the objective is to reduce air traffic for certain routes. The experts questioned link this with the raw material reserves of the country: China has to import crude oil in order to produce kerosene, but has its own large resources of lignite, hard coal and hydropower which can be used to generate electricity for high speed trains. The 37 Verband der Automobilindustrie: Quality management system for the German automobile industry. TÜV: Technischer Überwachungs-Verein, Technical Monitoring Association 116 5 Analysis of Diffusion and Innovation Processes Chinese want a modern railway system which is also marketed in a highly professional manner (online seat reservations, catering etc.). With the Ministry of Railways and individual cities, the demand for rail transport systems in China is characterised by strong involvement of public institutions. According to the experiences of the expert interviewed, for political reasons, the preference is for Chinese systems – independent of their quality. The company sees increasing difficulties in placing so-called turnkey solutions on the market. There is a limited willingness-to-pay for such an all inclusive, worry-free package which covers the necessary technical modules (e.g. signalling equipment, overhead contact lines, electricity supply), their systems integration and some services for operation and maintenance (e. g. training drivers). of Systems integration and additional services are not perceived as being necessary or adding value. Foreign suppliers often had to contribute funding to finance large rail transport projects in the past (see Chapter 5.3.1). Today, the Chinese banking system is strong enough to handle financing on its own. As a rule, the (state) customer requires the realisation of public-private partnership models. This means that the supplier has to acquire contributions to its equity capital. Local investors are often looked for who, e.g. want to use stations as commercial shopping centres and contribute to creating additional passenger numbers. 5.2.5.7 Obstacles to Cooperation in China Based on the Example of Rail Transport Systems The obstacles to cooperation with China can be revealed based on the example of turnkey solutions for rail transport systems. The competitive situation and the strong knowledge drain quickly give rise to upstart new Chinese rivals (e.g. so-called design institutes). Turnkey solutions are characterised by the systems integration provided among other aspects. According to the experience of the interviewee, Chinese partners believe they are ready to take over this role themselves after one or two joint projects despite the large knowledge gap displayed by them at the beginning. The German supplier is targeting co-operation with these new rivals in order to obtain consulting contracts. German turnkey suppliers are only still being selected if the projects involved are particularly difficult with tight deadline constraints. The strong knowledge drain is promoted by the special requirement that foreign branches may only be established in the form of joint ventures with 50 % Chinese involvement. The experts’ experiences are that the Chinese partner is able to duplicate what has been built up in the joint venture in another company. One interviewee also sees the transfer of knowledge being additionally pushed by the fact that calls for 5 Analysis of Diffusion and Innovation Processes 117 tender require up to 80 % localised services, i.e. services have to be provided by local suppliers or through technology transfer (e. g. in the form of licence sales) or in joint ventures. Joint projects in rail transport are entered into in spite of the knowledge drain and in spite of the low prospects for follow-up projects because otherwise other (international) competitors will push in. Finally, the primary function of turnkey solutions is as door openers for technologies from the same producer in subsequent projects. Furthermore they are seen as an important connecting link to politics. Operation is another obstacle to turnkey solutions in rail transport systems. The state does not guarantee a specific number of passengers; at the same time, it controls the ticket prices. In local transport, buses are sometimes operated in parallel. From the viewpoint of the experts, when setting up a new route, the local authorities would have to ensure that the concessions for existing traffic flows are not extended so that a transfer to the new system takes place. A new model with competitive elements, the so-called dedicated passenger line, is acting as a driver, in which owners and operators are decoupled. Experts view the large number of incompatibilities to be a weakness of Germany and Europe in the sector of rail transport, e. g. in the railway control centres, signal-boxes, the track gauge of the rail vehicles or the different degrees of electrification. In the case of signalling equipment, however, a strength has developed from this: The political demand for a Europe-wide transport system led to a new standardised signalling system being developed (ETCS-Level 2). The Chinese now also want to introduce this system. However, they are using the competitive situation between European and Japanese suppliers to obtain cheaper offers and are profiting from their delayed adoption of the technology. 5.2.5.8 Supply of and Demand for CO2-Neutral Logistics Services With a view to CO2-neutral logistics services, the opinion was proffered that the market for these is not yet mature in the BRICS countries, among other reasons because they have not yet become actively involved in climate protection. Even in Germany, the willingness to pay more for CO2-neutral logistics services is not very pronounced, especially among the main customer groups of large companies. True, the pilot phase of product introduction proceeded positively, but overall the company interviewed judged the product’s success as rather mediocre. Opportunities are seen in online shipping, which makes climate-neutral shipping possible and which is well visited despite limited advertising. It is assessed as positive that the increased attention paid to climate change is raising public awareness of this issue. From the perspective of the company interviewed, this increases the visibility of its service and may mean a first mover advantage in the future. 118 5 Analysis of Diffusion and Innovation Processes CO2-neutral logistics services are still relatively young in the market. The company interviewed sees itself as a pioneer. A Swedish product served as a role model; a similar product is otherwise only offered by the UK Royal Mail. In international express services, i. e. time-defined products, which form their own market segment, the company is the first and so far the only provider. In the pilot phase, the cooperation with two mail order companies which have ecologically-oriented product programmes was of high relevance. Offering CO2-neutral logistics services in the case studied is based on a companyinternal CO2 management with company-external and –internal projects to reduce CO2, which are offset against the CO2 emissions of the logistics services to be neutralised. Linked with this are complex back office processes of emissions calculation and offsetting and of marketing. The possibilities to reduce CO2 in the logistics sector itself are seen as very limited. According to the interviewee, so far there are no commercial vehicles with alternative propulsion systems or especially low CO2 emissions. The power of the demand is not sufficient to initiate a supply of low-CO2 commercial vehicles. Talks with other logistics providers are being held in order to be in a better position to bargain with the commercial vehicle industry. However, the manufacturer of commercial vehicles questioned sees the solution not in the automobile industry itself, but in CO2-neutral fuels. The substitution of fossil fuels by renewable energies in the fleet is already the subject of company-internal CO2 reduction projects. Corresponding projects are planned in BRICS, where exactly these will take place is still being investigated. The framework conditions are decisive – there has to be a public supply of alternative fuels and filling station networks. Brazil is not suitable, however. Ethanol is already used as a standard fuel here and does not count as an additional reduction as defined by the CO2 management of the company. In addition, there is the possibility to offset remaining emissions through CO2 reduction projects in other sectors. Examples for this are company-internal projects in Germany using photovoltaics to supply the energy for a central hub and a block heating station, or projects to increase energy efficiency. In all the projects, the CO2 reductions have to be quantifiable and additional. Projects to reduce CO2 are also being pursued in the BRICS countries, albeit outside the company. That means Certified Emission Reduction Units (CERs) are drawn from CDM projects to offset CO2 emissions, but it should be pointed out that Verified Emission Reduction Units are also explicitly accepted38. From the viewpoint of the company questioned, the bureaucracy and 38 For the definition see the comments on the Cleaner Development Mechanism under 5.3.2. 5 Analysis of Diffusion and Innovation Processes 119 transaction costs associated with CERs are so high that small projects which only yield a small number of CO2 credits are not being realised. In addition, the higher prices are slowing the demand for CO2 credits. Examples of realised projects include a solar energy project in India and a reafforestation project in the Amazon region in Brazil. The latter is turning out to be difficult according to statements made in the interview because of cultural differences. The requirement of a quantifiable measure for the CO2 reduction which also bears up under an audit is contradictory to local thinking and mentality. 5.2.5.9 Summary The interviewed experts agree that there is no pro-active demand for sustainable mobility and logistics in the BRICS countries. In this field, regulation is seen in many cases as an important driver for innovation and diffusion processes which benefit sustainability. The setting of ambitious emission standards for trucks drives technology development and demand. Technology development is not only influenced by the local standards but also by the strictest international ones such as those in the US now. The Chinese requirements for local content of production are also acting as an accelerator even if these are seen as cutting both ways. From the company’s perspective, their high effectiveness in guaranteeing knowledge transfer from international suppliers to Chinese ones is not paralleled by any corresponding benefit for the international suppliers. Cooperation projects are still being entered into despite this due to the competition among several international suppliers. Potentials for cooperation contributing to sustainability can be identified in three fields. Since market forces in general do not generate sufficient demand for sustainable mobility and logistics solutions, cooperating to develop suitable framework conditions (e.g. minimum emission standards) could tap potentials to improve sustainability. The prerequisite for this is that the “clean” technologies have to be embedded in a properly functioning overall system. The interviews indicate deficiencies here which manifest themselves in the reduced effectiveness of “clean” technologies in BRICS. Examples for this are unsuitable fuels for exhaust gas cleaning systems, but also the deficient execution of legal requirements or the low quality standards demanded by the consumers, for example, of systems integration in the rail traffic system. Finally, CDM should be examined more closely for cooperation potentials in the field of mobility and logistics. So far, the accelerating effect of CDM in this field is restricted to projects in the domain of alternative fuels. Especially BTL technologies offer potentials for the BRICS countries and Germany to the same extent. The role of the BRICS countries here is not limited to that of raw material suppliers. In fact the technology also 120 5 Analysis of Diffusion and Innovation Processes serves to market the fuels on location with economic profits in the BRICS countries themselves. Cooperation between Germany, China, India and South Africa can fall back on German technology competence and cooperation experience in coal gasification to further expand cooperation in the field of BTL. 5.3 Results spanning more than one sustainability field 5.3.1 Financing Providing funding can increase the demand for and diffusion of technologies which contribute to sustainability and can also indirectly influence the framework conditions for the topics regarded here. The financing perspective spotlights institutional aspects of the diffusion and innovation processes in particular. In order to include the experience of internationally active German financial institutions which have high relevance for the topics examined here, Internet research was used to select three banks for interview. These represent three different market segments: • Financial Cooperation within the scope of German development cooperation policy; • Financing private-sector projects in developing countries under commercial conditions, but with a focus on providing long-term, venture capital and with close reference to Germany’s development cooperation; • Project funding under commercial conditions in an international context. Germany’s development cooperation is based on the concept of anchor countries. Apart from Russia, all the BRICS countries fall under this category. Compared with other countries, the financing possibilities are better rated for companies in BRICS, especially in China. According to the experiences of one German company, which has implemented turnkey projects in the transport sector in China, China now has sufficient financial resources of its own and Chinese banks are even becoming active abroad. There is a controversial discussion about the sense of Financial Cooperation with China. The financial sector is also functioning fairly well in Brazil so that financial support via long-term and venture capital now seems less necessary there. Financial Cooperation has few connections with research. It tends to start with proven and tested technologies and so only becomes relevant at a relatively late phase of the innovation cycle. Bad experiences have been made with innovation programmes whose object was to finance German companies in positioning new technologies in developing countries. “Isolated islands without connection to the mainland” resulted from these and there were high “free rider” effects. The projects which are at the forefront today are still innovative in the sense of being new for the countries even if the technologies, e. g. wind power plants, are established ones. 5 Analysis of Diffusion and Innovation Processes 121 Financial Cooperation plays a different role in the different topics. Commercial financing became feasible through the new market-based organisation of the classical infrastructure systems like energy and transport (introduction of cost-covering prices etc.). Financial Cooperation is now concentrating on specific sectors, for example on renewable energies in the field of energy. German bilateral Financial Cooperation is classed alongside the World Bank as the most important capital provider for renewable energies in developing countries. Interested governmental or parastatal institutions from developing countries can apply for funding from the German government through the Special Facility for Renewable Energies and Energy Efficiency. In addition, institutions which give loans to investors in renewable energies are refinanced, for example, the Indian Renewable Energy Development Agency IREDA. Activities in the field of energy efficiency are traditionally related to efficient energy generation and distribution. Some support given to the financial sector may also be allocated to the topic of energy efficiency, if Germany refinances, for example, funding programmes of the borrowing countries for energy-efficient buildings. However, very few opportunities are seen for Financial Cooperation in the topic of energy efficiency in buildings since, first of all, supply security is regarded as having greater priority and, secondly, the institutional framework conditions (among others, ownership questions, low energy prices) are classified as difficult. 12 % of the funds accorded for Financial Cooperation were assigned to the transport sector from 2000 until 2005. However, in recent years the funds for the transport sector have been characterised by a considerable decrease both in absolute and relative terms. As a result of this, the involvement in this sector is currently focussed on only a limited number of partner countries. The main areas are rail transport, local public transport, the development of direct connections to shorten journey times, the introduction of free-market principles (mainly polluter/user pays principle) as well as the promotion of less polluting technologies. For example, in China, rail transport is being promoted as an energy-efficient and environmentally-friendly alternative to road and air transport. There are also activities in the fields of water management and material efficiency. These are mainly low tech in nature. A large part of the target group of Financial Cooperation is resident in rural areas. The main source of wastewater pollution here is organic and experts believe it can be treated with relatively simple technologies. In waste management, priority is placed on sealing landfills before recycling. In the context of Germany's development cooperation, the bank questioned rarely finances commercial projects in the subject areas of this study. The experience of the interviewed bank is that the opportunities to conduct projects in environmental 122 5 Analysis of Diffusion and Innovation Processes technologies are rare because German small and medium-sized companies do not like moving abroad and tend to use their own funds if they do so. The bank would like to finance more projects in the field of renewable energies, also in order to meet the bank’s own climate protection target. The so-called PPP (Public-Private-Partnership) Programme gives a somewhat different picture. These partnerships with industry link economic interests with development cooperation goals. Cooperation takes place, for example, during the introduction of innovative, environmentally-friendly technologies when implementing pilot installations or in research. 425 applications were approved up to March 2007 in this programme, around 9 % of them in the field of renewable energies and approx. 12 % in water services. One of the questioned companies in the field of water used the PPP programme in order to become active in a cost-effective way with a reference project in Brazil. This reference wastewater centre is now the basis for acquiring local customers. The number of new approvals for water projects in the PPP programme is currently low. The share of PPP projects with direct environmental relevance amounts to about 58 % of the total. These include projects outside the topics regarded here, e. g. projects to improve soil and to reduce pollutant emissions. There are currently no PPP projects in the field of energy efficiency in buildings. This field is also underrepresented in the commercial projects in total. PPP financing is relevant, however, in the fields of renewable energies, water management and material efficiency (projects in waste management). Financing is provided for exports to but also production in the BRICS countries, e. g. biomass installations in Brazil and wind power plants in India. To a certain extent, commercial project financing can influence institutional framework conditions which are relevant for accelerating the innovation and diffusion processes studied. One example concerns the conditions for new projects. These may involve, for example, having to comply with national or international standards – e. g. environmental and social standards. The financial institutions can thus support the enforcement of (environmental) laws and can bring about a positive (environmental) effect in this way. A different type of condition is the demand for certain examinations in the course of approving loans. This may result in an earlier and better recognition and consideration of the significance of environmental and social risks in the project country but also of the advantages of promptly taken protective measures and of generating public awareness. Finally, the financier can make his readiness to provide funds dependent on the implementation of project-specific (e.g. environmentally-relevant) requirements. Another example for the influence of commercial project funding on institutional framework conditions is the development of innovative financial services. If financing 5 Analysis of Diffusion and Innovation Processes 123 modes are successfully developed for a type of project in a specific country and are proven to function well, this results in further financing requests for similar projects. One example for this is a loan in local currency if the revenues also only occur in the local currency in order to exclude the foreign exchange risk. Since foreign exchange risks are relevant for investors in all the countries, such financial products are accorded a high significance for the positive development of cooperative relations. If, however, the conversion of currency is totally restricted, profits cannot be transferred back to Germany. This means having to aim at a local branch and permanent business in the foreign country which is hardly feasible for small firms. In countries with a weak financial sector, the provision of financing is a decisive driver for the activity of German companies on location. In such countries, the call for tenders often already include the demand that the service provider should guarantee the financing by, e. g. providing a letter of intent of a financier. The diffusion process is accelerated in this way by the financing. In Financial Cooperation, the project development is designed to be monitored longterm; this process begins at the political level. Concrete projects only result at the end of a chain of cooperation steps starting with the definition of sector concepts and funding programmes. The possibilities to exert influence are more far-reaching here. The institutional and economic integration of the technology is central. The Financial Cooperation offered is supposed to be an incentive for the borrowing country to design framework conditions in such a way that planned projects really function, i. e. contribute to economic sustainability, among others. For example, the framework conditions have to guarantee that the operating costs are covered. The experts believe that the demand for economic sustainability should not be underestimated in terms of the generation of positive environmental effects: Win-win effects are caused through the long utilisation of an installation and high productivity in the operating phase. Conditions are also set for social issues. For example, a weir was financed in China and, in the course of this, changes in the resettlement law were initialised. Financial Cooperation funds have been decoupled from German supply interests for a long time. However, Financial Cooperation still generates revenues for German companies. Thanks to the high quality of German goods and services, German companies often win international calls for tenders. With a view to their development cooperation goals, German organisations offering Financial Cooperation exert influence on the technical specifications in the bids and press for life cycle costs as one criterion for awarding loans to the borrower. Overall, Germany profits from the fact that aid tying is also no longer pursued by other countries. Compared with the funds of German Financial Cooperation, the returns in the field of water management amount to 124 5 Analysis of Diffusion and Innovation Processes up to 80 % of the costs in foreign currency; the returns are similarly high in energy and transport. And yet the significance of Financial Cooperation for the exports of German companies is still infinitesimal since this only involves approx. 1 billion Euro per year. In comparison to this, German exports are almost 1000 times this amount annually. To summarise, financial services play a large role in accelerating innovation and diffusion processes in the subject fields regarded here. This is only missing in the topic of energy efficiency in buildings and CCS; in the first case on account of the difficult framework conditions for projects, in the second case, among others, because it is still in an early phase of the innovation cycle. The accelerating effect of financial services occurs directly by enabling projects to be implemented and indirectly by influencing framework conditions. Bilateral Financial Cooperation is in a special position to do this due to its policy contacts. There is a slightly contradictory view of those questioned regarding the supply of venture capital. From the viewpoint of the banks, this function is fulfilled, but not demanded on a large scale. From the companies’ perspective, in contrast, there are complaints about financing problems for country reference installations among other things because the risk cannot be covered. 5.3.2 Clean Development Mechanism (CDM) CDM is one of the three flexible mechanisms of the Kyoto Protocol. It allows public and private actors from industrial nations to conduct projects to reduce emissions in rapidly growing economies and developing countries in order to generate Certified Emission Reduction Units (CERs) in this way. CDM projects may only be carried out in countries which do not have their own emission reduction obligations. Of the BRICS countries, these are Brazil, India, China and South Africa. Since Russia has its own emission reduction obligations, Joint Implementation (JI), the project-based mechanism of the Kyoto Protocol, is of relevance here. Through the so-called Linking Directive of the EU39, it is possible for companies subject to the EU Emission Trading Scheme to use CERs to partially cover their emissions.40 A 39 "Directive of the European Parliament and of the Council amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, in respect of the Kyoto Protocol's project mechanisms", download under: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32004L0101:EN:NOT 40 In accordance with the revised German National Allocation Plan 2008-2012, the share of emissions permitted to be covered by CDM or JI projects should be 20% of the installationrelated allocation amount ("Revidierter Nationaler Allokationsplan 2008-2012 für die Bundesrepublik Deutschland", BMU, Date: 13.02.2007). Additional limits are valid for certificates generated from CDM re- and afforestation projects. See also Betz et al. (2005). 5 Analysis of Diffusion and Innovation Processes 125 cost advantage may result from this since the emission reduction costs in the rapidly growing economies and developing countries are often much lower than in the European Member States. CDM projects require a contribution to the sustainable development of the host country, for instance through additional investment flows and technology transfer. This contribution must be certified by the designated national authority of the host country before a CDM project can be carried out. The CDM Executive Board has international control of the CDM process and decides whether to approve an emission reduction measure as a CDM project. The proof of the project's additionality and the methododoly applied for determining the achieved emissions reductions are decisive for approval.41 The additionality of a measure is intended to ensure that the project is only conducted on account of the additional incentive of the issuance of emission reduction credits. So that the project participants are able to provide this proof, the Executive Board developed the so-called "Tool for the Demonstration and Assessment of Additionality". This demands the demonstration of certain existing barriers, for example in technology and capital procurement which would prevent a realisation of the measure without the CDM. To determine the achieved emissions reductions which are paid out in the form of CERs, first of all a reference scenario, the so-called baseline, has to be developed. This indicates how the project emissions would have evolved without the reduction measure. During the project, the actual emissions have to be measured in a monitoring process. The difference between the baseline and the measured real emissions determines the amount of the generated emission reductions.42 To determine the emissions reductions, the project participants have to use the methodologies approved by the Executive Board or apply to use a new methodology which, after its approval by the Executive Board, is then available free of charge to all other participants. Applications for a new methodology are lengthy processes and very cost-intensive which is why they are only done by companies if these expect to obtain a large share of the generated emission reduction credits. For this reason, so far, there are only a few approved methodologies for CDM projects for specific sectors such as, e. g. transport. The majority of approved methodologies are allotted to projects in the 41 Furthermore, the investing and the host country must conform to several formal requirements which are stipulated by the EB (see Marrakech decisions; decision 17/CP.7 F Number 31). Private actors can only participate in CDM if they are authorized to do so by the designated national authority (in Germany this is the German Emissions Trading Authority, DEHSt). 42 For details on checking additionality and determining emission reduction credits, see Betz et al. (2005). 126 5 Analysis of Diffusion and Innovation Processes sectors energy management, waste treatment and disposal and the manufacturing industry. Up to now, approved methodologies are largely missing in the construction industry and in the sectors of energy distribution, transport and agriculture.43 In order to more strongly promote the sustainability contribution of reduction measures, the WWF launched the Gold Standard in 2003. This is an additional test to the official controls made for CDM and JI projects, which aims to guarantee real economic benefits and additional sustainable investments in the recipient countries.44 Increased project costs arise due to the additional proof obligations. By contrast, reduction measures can also be carried out outside the official controls. Emission credits generated in this way (Verified Emission Reduction Units, VERs) are generally cheaper. Companies or private persons who are not subject to emission trading use them to voluntary offset their emissions (see Chap. 5.2.5.8). The quality of the VERs is only checked by the respective provider which is why they cannot be used in emissions trading. 5.3.3 The United Nations Cleaner Production Programme The Cleaner Production (CP) Programme of the United Nations promotes integrated environmental protection and can thus raise the demand for the innovations examined in this study. In order to analyse its effect, four interviews were conducted based on Internet research, which take a closer look at the main programme of the UN and examine national activities based on the example of Brazil. The CP Programme was launched by UNIDO (United National Industrial Development Organization) in cooperation with UNEP (United Nations Environment Programme) in 1994 and aims to build a bridge between competitive industrial production and environmental concerns. It follows a comprehensive, life-cycle oriented approach and pushes capacity building for cleaner production on a national level. National Cleaner Production Centres NCPCs are established to do so. The centres in Brazil, China and India were among the first 10 NCPCs to be created. Since then, a total of 35 centres have been founded, among others, also in Russia and South Africa. The centres have to become self-financing after initial start-up financing; this is already the case, e. g. for Brazil. Financial sources include public funds for demonstration projects and carrying 43 See UNFCCC: Approved methodologies by scope, http://cdm.unfccc.int/Statistics/Methodologies/ApprovedMethPieChart.html (last accessed: 18.04.2007). 44 See WWF: The Gold Standard, http://www.panda.org/about_wwf/what_we_do/climate_change/solutions/business_industry /offsetting/gold_standard/index.cfm (Date: 18.08.2006, last accessed: 18.04.2007). 5 Analysis of Diffusion and Innovation Processes 127 out programmes, e. g. of the Ministry for Science and Technology and recently also the Ministry for the Environment. The CP Programme is aimed first and foremost at SMEs. The main sectors in almost every country comprise food and luxury foods, textiles and leather, chemical industry and metal processing. There are other additional sectors which are country-specific. The programme focuses on win-win measures: Preventive methods which avoid the generation of pollutants and waste from the outset should replace end-of-pipe strategies. The CP programme overlaps the "material efficiency" topic in this study, but focuses on the reduction of classical pollutants and hazardous wastes which are not included in the examined topics. The topics of energy efficiency in buildings and water are affected to the extent that these involve industrial buildings or water use in industry. In Brazil, one focus is on the construction sector: Alongside the energy efficiency of the buildings, the efficient use of water and energy during the construction process is propagated. Renewable energies are also the subject of the programme unlike the field of mobility and logistics, which is hardly covered. The CP Programme covers five core elements45: 1. Training of CP experts: This element is accorded the highest priority. The theoretical and practical training of CP experts covers a broad range of topics. These range from awareness raising activities, multilateral environmental agreements and environmental management up to (environmental and energy) technical issues. The target group includes associations, public administrations, research institutions and financial institutions alongside SMEs. 2. Information dissemination: This targets providing technical information on the available technologies for specific environmental problems and promotes the sharing of experience and network formation. 3. Policy advice for Cleaner Production: The NCPCs advise their respective governments on formulating framework conditions which promote CP. 4. Technical Assistance: Concrete potentials for CP activities are worked out at the level of individual firms. Staff training courses conducted at the same time aim to guarantee continuous improvement. 5. Promoting investments in Cleaner Production: The main concerns here are to facilitate the access to financing, also within the scope of bi- or multilateral development cooperation and to assist in the formulation of investment projects. The first years of the programme have shown that very large environmental effects can be achieved with no-/low-cost-measures. This is where the primary interest of SMEs 45 see http://www.unido.org/en/doc/5136 (18.05.2007). 128 5 Analysis of Diffusion and Innovation Processes and the focus of the programme in Brazil lie. SMEs primary aim in making use of the support from the NCPC is to save costs. Regulative pressure plays only a subordinate role for the interest in cleaner production due to a lack of enforcement of the actually strict environmental regulations46. This is seen as being the case for other countries, too. Foreign environmental laws are often relevant for companies wanting to export. They have to comply with these within the scope of the supply chain management of their foreign clients. The Brazilian ministry for the environment intends to establish forums for cleaner production. The aim is to develop suitable policy instruments for promoting integrated environmental protection in a participative process involving industrial and environmental organisations, banks, universities and regional cleaner production centres. The UN believes it is necessary to initiate more complex measures and investments in companies, too. Great importance is therefore attributed to procuring access to funds (information about funding programmes, international financial institutions etc.). This approach is viewed rather critically by the questioned Brazilian expert because it is accompanied by increasing technology orientation and the sales of consultancy services to SMEs. As a prerequisite for low-cost measures, he demands a permanent change in corporate culture in the direction of resource efficiency (among others, organisational measures, improvements in management). Only in this way will funds be released which can be used to finance investments. The experts believe that several hurdles stand in the way of this change, for instance that the cleaner production approach is not very well known. Also cited are the lack of awareness of the problem and the poor qualifications of company heads and staff. Furthermore, societal change is thought to be necessary in which the corporate cultural change would have to be embedded. While the Brazilians view the UN programme as favouring technological solutions, from the viewpoint of the UN, it is the target countries´ unquestioning faith in technology which results in too little value being given to staff qualification, training, and management. In general, the CP programme is implemented in cooperation with domestic partners (e.g. universities, chambers and governments) and foreign institutions. Some projects are also done in cooperation with internationally active – also German – (large) companies. So-called “reference institutions” support the training of national CP experts and the director of a NCPC. These reference institutions are dominated by institutions from Austria, the Netherlands and Switzerland. This can be explained by 46 The Brazilian environmental law was developed based on German model with the assistance of the GTZ. The criticism is being made, however, that it has not continued to be developed like the German law since the withdrawal of the GTZ. 5 Analysis of Diffusion and Innovation Processes 129 the funding structure for the programme and its origins, in which Austria and the Netherlands played a leading role. Those questioned stated that, specifically regarding cooperation possibilities with Germany, German technologies presume sufficient water availability which is often not the case in developing countries and rapidly growing economies. The Brazilian NCPC has contacts to universities in Africa and Latin America which are concerned with the implementation of cleaner production. Domestic universities also feature among the important partners of the NCPC. With its good contacts to industry, the NCPC sees itself as a mediator between universities and companies because experts view these actors as being separated by a large divide. To bridge this gap, the Brazilian state Rio Grande do Sul in cooperation with the Fraunhofer Gesellschaft founded a centre for applied research in 2000, the CETA Center of Excellence in Advanced Technologies. Today, this centre and the NCPC share a joint director. A stronger orientation towards technology (transfer) could be the direct output of this cooperation for cleaner production. The CETA focuses on automation and the IT sector. Overlaps to the topics dealt with in this study are present in those CETA activities which are to do with automation and measurement to increase energy efficiency in buildings or concern waste reduction, biogenic fuels and logistics solutions. To sum up, the UN Cleaner Production Programme plays an important supporting role in disseminating this concept. The actual demand for the know-how and technologies required in the implementation of cleaner production, however, depends heavily on national framework conditions. Demand for knowledge on "soft" measures, i. e. those which incur hardly any costs and are characterised equally by economic and environmental benefits, is more likely. Each further step would have to be supported by a corresponding change in the corporate culture. If cooperation potentials are to be developed from this, it is necessary to take into account the strong cultural imprint and the necessary societal embedding of such a corporate culture change. 5.4 Summary of the interview results The interviews with companies and other institutions focus on mechanisms which can help accelerate diffusion and innovation processes in the direction of sustainability. Looking at all topics together, the following mechanisms and aspects seem to be the main ones. Regulation has emerged as a necessary framework condition across-the-board for the creation of strong market demand. The relevance of the regulations of leading 130 5 Analysis of Diffusion and Innovation Processes industrial nations in the BRICS countries is especially remarkable above and beyond the respective national regulation context. The example of water-based coating systems shows that German automobile manufacturers apply German laws in their overseas branches as well, unless local regulations are even stricter. International spillover effects are also triggered by the fact that, within the framework of supply chain management, exporting companies from BRICS countries are subject to the demands – sometimes including legal requirements – of their foreign clients. In Germany, too, foreign standards as well as German laws influence company strategy. In the case of low emission HGVs, the US exhaust emission standards play a driving role for the development of the technology in Germany. In general, a process of globalisation can be observed with respect to the emergence and the impact of environmentally-relevant laws. This shows the necessity, but also the opportunities, which may lie in the development and standardization of regulation in international cooperation. Besides these public sector related acceleration mechanisms, there is a more marketrelated "door opener" for German companies in BRICS countries. Equipment suppliers tend to follow their German clients who establish branches abroad in BRICS, a set-up which can be described as piggybacking into a new market. This is the case, for example, for one of the interviewed wastewater technology companies. The interviews show clear differences in how business relations can develop after entering a market in this way. In the case of water services, the door opener was used to start the knowhow exchange with the local economy and to use the project realised with the German regular customer as a lighthouse project to acquire new local clients. Piggybacking also has an outstanding role in the automobile sector – internationally active car makers tend to draw on their internationally active regular suppliers. However, here, the application of environmental technology turns out to be more of an isolated bubble among "expats". It may be possible to promote sustainability by encouraging knowledge exchange with the local economies outside this bubble. A slightly different kind of piggybacking should be mentioned in connection with the South-South networking among the BRICS countries in the field of renewable energies. In the course of expanding his business to Brazil, an Indian producer of wind power systems brought his German partner for technical services on to the market there. Even if it is not possible to judge whether this specific case can be generalised based on the available information, this type of actor constellation should be considered against the background of increasing South-South networking. Every question concerning mechanisms to accelerate innovation and diffusion processes is answered, at least partially, by looking at obstacles and ways to dismantle 5 Analysis of Diffusion and Innovation Processes 131 them. It became clear in several cases that the products – technologies or services – regarded require a "fitting" environment in order to be effective and to contribute to sustainability. First of all, this concerns the network of suppliers and clients in which a product is embedded. If specific products or actors are missing here, this may mean that necessary complementary inputs for the application of a technology are also missing. For instance, the sale of water-based surface coating systems in Russia failed because water-based coatings are not available on the market. The task of guaranteeing a suitable environment politically (to the extent that this is possible) is often not taken seriously enough, according to the statements made in the interviews in the BRICS countries. Situations then result in which – partly through publicly forced demand – specific products are present on the market, but can only achieve limited positive environmental effects because they are not embedded in the system as a whole. Emission technologies for HGVs are one example: Some countries (e. g. Brazil or China) demand specific emission standards with which the vehicles have to formally comply. Due to fuels with very high sulphur concentrations, however, the actual emission values are much poorer. And yet a regulation of fuel quality is still not being considered. Those interviewed also report differences in mentality as an obstacle to cooperation between BRICS and Germany. These are revealed in particular in questions concerning organisation and quality assurance as well as the implementation of environmental regulations. Generally, environmental awareness was found to be only weakly developed. As the example of the surface coating system producer in Brazil shows, the differences in mentality are partially reinforced by mainly graduates being employed due to the local job market conditions. This results in power struggles with experienced German workers who may have a lower formal education. Finally, a frequently cited deficiency should be mentioned which is seen by those interviewed as a calling for politicians and public institutions. In their eyes, the engagement of German embassies, or more generally, of German policy makers in passing on contacts, supporting the construction of local networks and setting up platforms for product presentations (e.g. trade fairs) is disappointing in an international comparison and could be stepped up. 132 6 General Summing Up and Conclusions 6 General Summing Up and Conclusions 6.1 Brazil Brazil's overall economic dynamic is distinctly lower than other BRICS countries such as China and India. The framework conditions for innovations are characterised by a low R&D intensity which has also increased only moderately in the past. In Brazil, considerable deficits are striking for the factor innovation-friendliness, in particular the regulation of start-ups. Speedier and unbureaucratic approval procedures for founding firms could considerably improve the framework conditions for transferring sustainability innovations. The financial sector functions relatively well in the meantime, but problems with financing can still crop up, on account of the high real rate of interest. Brazil's rating for country-risk assessment in the international lending business is still rather negative. Special strengths lie in the raw materials and agriculture sector which lead to new direct investments. In addition, there are long established investments – for example in the automobile area – which in the meantime have also led to foreign investments from companies of the supply chain. However, it is criticised that the spillover effects of these activities are too low. A further barrier to business activities in Brazil is seen in the qualification of the workers. Young workers and graduates with theoretical knowledge but little practical experience dominate the labour market, and there is a lack of engineers. This fits the picture that although very good basic research is performed in Brazil, promotional programmes to develop applied research and development are still inadequate. Brasilian research displays a distinct pattern of specialisation, concentrating on the three large areas “agronomy”, “life sciences”, and “medicine and health care sciences”. The instrument "sector funds" was introduced in Brazil in 2001 with the aim to guarantee a more stable financing of R&D. The energy, water and transport fields are addressed from the selected sustainability fields. Central promotional focuses are renewable energies from biomass, followed after a considerable gap by water management. In the transport field there were overlaps in the past with adapting vehicles to biofuels, otherwise no clear-cut orientation of Brazilian transport research to ecological aspects can be perceived. The technological capability in the selected fields shows a very uneven picture for Brazil. There is considerable specialisation in material efficiency, especially in raw materials. Brazil has definitely specialised in this field, which also fits in well with research competence in the agricultural area. Foreign trade is also above average in 6 General Summing Up and Conclusions 133 the sustainability-relevant mobility technologies, in particular also for ethanol. Not only the building, but also the water sector – which is promoted by a special sectoral fund – display an above-average generation of knowledge. However, against the backdrop of the general innovation problems outlined above, this (knowledge) could not yet be transformed into internationally marketable products. The electricity sector has been dominated by the use of hydropower up to now, so that alternative technologies – not only the use of coal, but also other, renewable energy sources – have not been an issue till now. In this respect, the low capability in CCS and renewable energies is not surprising. Finally, it must be noted that activities addressing innovation and diffusion processes have been only below-average up till now. Figure 6-1: Specialisation of Brazil in the Selected Sustainability Fields Brazil specialisation exports 100 EE+CCS Buildings Material 0 Water Transport Total -100 -100 0 specialisation patents 100 Fraunhofer ISI A number of further field-specific findings can be derived from the indicator-based results and the interviews, which provide important starting points for future cooperation potentials: • In the area of converting renewable energies into electricity, Brazil has a legally prescribed feed-in tariff, which was developed with the help of German expertise. It is intended to encourage the build-up of wind energy – Brazil has some of the most favourable locations for wind energy worldwide – but so far has not been very 134 6 General Summing Up and Conclusions successful, above all as the payment is considered to be too low. High import duties and 60 % domestic value added as conditions for receiving promotion guard against foreign competition, but have not yet led to the development of a Brazilian industry. The competitive situation however appears to be getting tougher, with German and Indian suppliers planning to increase their market presence. As Brazil is increasingly reaching the limits of its electricity system's capacity, electricity generation will become an important topic in Brazil in the future. Cooperations in the field of renewable energies are thus very promising, especially as Brazil is also one of the leading countries in CDM projects. • Brazil is one of the largest world exporters of renewable raw materials. An increase of the real net output ratio of raw material extraction could be a significant option for Brazil. This calls for a move towards "green chemistry". Germany could supply the necessary knowledge base and experience in building up relevant production capacities in cooperations here. • Ethanol is in standard use in Brazil and is also exported. There are domestic efforts to utilise the large biomass leftovers from ethanol production (bagasse) also to manufacture fuel. The development of second generation biofuels is however far removed from the German level, and has been restricted to university research till now. This is a wide field for possible cooperations. • In the field of water treatment, gaining domestic customers by however, lie 50-70 % under the significance of the subject water possible. the interviewed companies have succeeded in setting up local branches. Realisable prices, German price level. In view of the increasing in Brazil, further cooperations in this field seem Environmental regulations in Brazil set relatively high standards. They were developed partly with German support. It is criticised however that they are not being further developed and for example are still strongly based on standard-setting regulatory measures. The assessments of how closely these regulations are obeyed vary greatly. Hopes are pinned to the implementation of preventive environmental laws already passed in the year 2003 and to the current initiative of the Brazilian Ministry of the Environment to establish forums for integrated environmental protection. Progress in this area is regarded as crucial for increasing the importance of sustainability technologies and also appears to be an object for cooperations. 6.2 Russia In the basic data concerning innovative capacity, Russia's are among the best figures for the BRICS countries and the R&D expenditures per capita are among the highest. Also – similar to China – a remarkable rise was noted in this area since the mid 1990s. The lion's share of R&D funding, however, is made by government, even if the share of 6 General Summing Up and Conclusions 135 private R&D activities is considerable. The highest publication intensity within the BRICS countries is also found in Russia. Thus Russia receives relatively good marks in the surveys of innovation capacity for the factor human resources, but only because of the (still) existing stock of qualified workers, scientists and engineers. Young workers and graduates are judged ambivalently, they are perceived to have highly theoretical knowledge, but no practical experience in the labour market. The general framework conditions for innovations in Russia are estimated to be the worst of all BRICS, in particular with regard to the absorptive capability for technologies and the importance of environmental protection. Defence and security research, high technologies and exploitation of energy sources and raw materials are the front runners in the national R&D strategy. For the sustainability fields considered here, energy technology, promotion of energy efficiency in buildings as well as transportation, air and space travel systems - whereby the modernisation of transport infrastructure is also addressed – enjoy special significance. Figure 6-2: Specialisation of Russia in the Selected Sustainability Fields Russia specialisation exports 100 EE+CCS Buildings Material 0 Water Transport Total -100 -100 0 specialisation patents 100 Fraunhofer ISI The specialisation profile for Russia shows that – with the exception of the field buildings – the selected sustainability fields do disproportionately well in technological research. This can be explained by the integration of the fields in the sectors chemicals 136 6 General Summing Up and Conclusions and mechanical engineering, in which Russia has traditionally been strong (cf. Krawczyk et al. 2007). All areas have in common that they play a very below-average role in Russia's export portfolio, which is dominated by the export of energy. On the whole, it appears that the sustainability fields can build on an above-average knowledge base, but that considerable deficits exist in the transformation into corresponding goods. From the indicator-based results and the conducted interviews, a number of further field-specific findings can be derived which provide significant starting points for future cooperation potentials: • Coal-fired power stations are very important in Russia because of the availability of coal at home. Simultaneously, domestic knowledge competences exist which display links to CCS technologies and which could serve as starting points for cooperations. • In the existing business and cooperation relationships between Germany and Russia, energy efficiency in buildings is the most important of all the topics. In this field, Germany's exports to Russia are already considerable. Russia needs to take action in this field, above all in modernising old buildings. There are also significant deficits in training skilled workers, which results in quality problems in carrying out modernisation. Therefore relevant courses of study and training centres are urgently required, especially as recent technological developments also call for increased systems knowledge. In large houses with several flats there is frequently no committee of owners which could make joint decisions, and often no detailed bills concerning energy consumption are available either, which makes decision-making even more difficult. Germany's similar experiences in overcoming these obstacles after re-unification could be referred to, as the ownership and accounting structures in the former GDR were similar to those in Russia. • In the field mobility it should be stated that Russia – like India and China – has a large vehicle manufacturing industry of its own. The products are not up-to-date technically, but optimised from a cost perspective. The price level of trucks amounts to only 30 - 50 % of the German price, for example. German solutions are regarded as "over-engineered". On the other hand, Russia's competence in the area of emission reduction is well below average. For German manufacturers who can offer cost-effective solutions here without renouncing the environmental advantages, there should be considerable potentials for cooperation. • As far as fuels are concerned, interest in biofuels is growing. At present many bioethanol projects have been initiated and Russia has also evinced interest in synthetic biofuels. Spillover effects from knowledge gained from coal gasification could emerge here, which is one of Russia's knowledge base strengths. • Russian performance in waste water treatment is below average, there is little competition in Russia. The market entry for German enterprises could succeed in by supplying regular German customers, i. e. internationally active German concerns that would apply the same waste water treatment technologies in Russia as in their 6 General Summing Up and Conclusions 137 home territory. These plants are "lighthouse investments", with which to gain customers among local authorities and companies. Russia occupies a middle position in the country risk assessment rating of the BRICS countries. Safeguards like e. g. Hermes export credit guarantees are therefore significant aids. The legal environmental regulations are partly very strict – the approved maximum levels of pollutants for discharging waste water for instance are stricter than in Germany. Whether they are adhered to, however, is perceived as arbitrary. In part the regulations of the bureaucracy go further than the status of legislation. While Russian enterprises are prepared to risk fines as punishment, foreign firms fear that production will be stopped in the case of violations of the law. 6.3 India India displays considerable overall economic dynamic, but the present per capita income lies clearly under the level of the other BRICS countries. The framework conditions for innovations are characterised by a low R&D intensity, which in the past has grown only moderately. Of all BRICS states, the R&D activities in India are those most strongly dominated by the government alone. On the other hand, surveys confirm India's outstanding framework conditions with regard to human resources, technological absorptive capacity and innovationfriendliness. However, India has not been able to integrate itself in the worldwide division of labour as e. g. China has done. Indian industry is momentarily still in a constructive phase. As far as the level of direct investments is concerned, it must be remembered that India's position in this matter was restrictive for many years. Sectoral strengths are found in agriculture, life sciences and chemicals, as well as – although difficult to depict in statistics – in the area of services, whereby the export of software applications is remarkable (Krawczyk et al. 2007). Regarded historically, India is the largest recipient country for German financial collaboration. In the more recent past, India has been increasingly developing into a customer for commercial financing, adequate private financial resources appear to exist. India has the second best country risk assessment among the BRICS countries. Indian research is strongly directed towards goals set by government. Almost half of the entire national R&D expenditures were devoted in 2002 to the areas of defence, space, agronomy and atomic energy. For the fields dealt with in the present study, the Department of Science & Technology (DST) should be named above all, as the ministry responsible for civilian science and technology policy. Furthermore, the Council of Scientific and Industrial Research (CSIR), the largest Indian research organisation, has to be mentioned. A research policy directed specifically towards the 138 6 General Summing Up and Conclusions sustainability fields analysed in this report cannot be seen. Of the sustainability fields investigated, decentralised, renewable energy sources are those primarily promoted. The evaluation of the specialisation indicators in the selected fields presents an unambiguous picture: none of the selected sustainability fields belongs to the aboveaverage segments of Indian foreign trade. Starting points for an above-average knowledge base are only found in material efficiency (e. g. for renewable raw materials) and in water technologies (e. g. (sea water) desalination), the other areas are all distinctly below-average. On the whole, it emerges that the fields in which India shows particularly high capabilities offer less possibilities of docking onto sustainability fields than in the other BRICS countries. Figure 6-3: Specialisation of India in the Selected Sustainability Fields India specialisation exports 100 EE+CCS Buildings Material 0 Water Transport Total -100 -100 0 specialisation patents 100 Fraunhofer ISI Further field-specific findings can be derived from the interviews, which supplement the indicator-based results and provide important starting points for future cooperation potentials: • For India, the interviews produced most information in the field Energy. The potential for renewable energies is high, and the great uncertainty about the electricity supply is a strong driver. However, the framework legislation changes constantly, so that the basis for planning is very uncertain. India's strength is seen above all in its 6 General Summing Up and Conclusions 139 potential for high-quality production. On the other hand, its weaknesses lie in the long-term organisation of company processes and in working creatively. The financing opportunities offered under CDM are utilised. India is a leader in CDM, besides Brazil and China. A certain emphasis is laid on CDM projects in the field biomass (above all, sugar cane or rice hulls) and in water power, but projects for energy efficiency in industry and wind energy projects are also increasing in number. • Synergies could emerge with regard to CCS, in particular in view of India's rich reserves of coal and already existing – also German-Indian - activities in this area. However, the state of knowledge is rather low up to now, which speaks in favour of complete package deals from German producers. • In the automotive industry, foreign manufacturers and their suppliers are also present in the market besides domestic producers. Indian manufacturers orient themselves increasingly towards foreign markets, but up to now rather in the SouthSouth context. Low-cost vehicles are preferred. Ecological aspects have only little significance. Cooperations would be necessary above all with a view to ecological upgrading in this market segment. • The area of biofuels is a further aspect connected with the field mobility. Biodiesel and ethanol are already being produced. Similar to China, India is very interested in manufacturing synthetic biofuels in order to meet the growing need for fuel. The availability of biomass however is presently categorised as relatively limited, which reduces the prospects of long-term cooperation. On the other hand, the area shows possible links to the strengths in the agronomic and life science fields and thus belongs to the potentially more promising cooperation fields. One of the crucial weak points in India is the weak role of environmental protection. This is manifested not only in the evaluation of the surveys of the general innovation conditions, but also in the interviews. This corresponds with India's relatively weak performance in the selected sustainability fields. The areas which do somewhat better are primarily motivated by foreseeable scarcities of resources and supply bottlenecks (energy, fuels). Stricter environmental regulations could definitely improve the framework conditions for sustainability innovations in the other areas. 6.4 China From the absolute R&D level, China is clearly the dominant country within the BRICS group. The R&D expenditures amount to many times the levels of spending by the other BRICS countries. China's R&D intensity has increased since the mid 1990s and exceeds that of Brazil, India and South Africa by approx. 50 %. The financing structure also corresponds largely to that of the established industrialised countries. And yet China is also still far removed from the level of the industrialised countries. The R&D intensity in Germany, for instance, is still about double that of China. 140 6 General Summing Up and Conclusions Several problems become apparent when assessing the general conditions for innovation in China: with human resources it is the availability, with technology transfer the relatively bad networking and lack of innovative capacities of the companies. In innovation-friendliness, deficits can be ascertained in the access to loans and venture capital, as well as the quality of private demand. However, the financial sector and the availabilty of financial funds have developed very positively. The country depends less and less on financing by foreign institutions; on the contrary, Chinese banks are increasingly becoming involved in business abroad. The analyses of the direct investments show an undiminished attractiveness of China as a location. China has, despite many risk factors, a clearly leading position with the capital inflows from all over the world, with the main emphasis placed on the industrial sector. This corresponds to a strategy – often characterised as an 'extended workbench' – to rapidly develop production capacities in China, in order thereby to gain not only comparative cost advantages, but also access to an enormous and swiftly expanding domestic market. Increasingly, (Chinese) plant construction and also engineering capacities are gaining know-how. However, a number of weaknesses still exist, which were also confirmed in the interviews. For instance, the focus in China is directed more strongly to product than process innovations, which in part negatively affects the quality of the products. The Chinese are admittedly very quick to adopt and implement ideas, but they still have problems in realising system innovations. The efforts to build up the Chinese research system which is characterised by numerous programmes and increased allocation of funds, must be seen against this background. Although no independent sustainability research has emerged as yet within the research system, within the individual programmes numerous links can be found to the sustainability fields investigated in this study: they concern the energy field with regard to increasing the use of renewable energies, on the one hand. On the other hand, the field of energy-efficient buildings represents an important object for research. Extensive research activities are noted in the transportation field. However, in China the problem of restricting the development of scientific capacity through concentrating on a few national R&D priorities must be prevented. A similar picture for the generation of new knowledge emerges for the selected sustainability fields: the patent applications indicate a rather average activity rate, in part they are even below average, for example transportation. On the other hand, the selected sustainability fields belong to those in which the principle of the 'extended workbench' is reflected in above-average foreign trade successes, such as in transportation technologies and in the buildings field The focuses of the research strategies can be explained with the trade performance: on the one hand areas are 6 General Summing Up and Conclusions 141 being promoted which do well (above-average) in foreign trade (transportation technologies, building area), which corresponds to the country's economic development strategy on the whole, on the other hand foreseeable bottlenecks in the supply of energy and material resources are addressed, in which the country has demonstrated weaknesses up to now. Nevertheless, it must be stated that China's technological capabilities have so far not been directed towards sustainability. This also applies to socio-economic sustainability research. Figure 6-4: Specialisation of China in the Selected Sustainability Fields China specialisation exports 100 EE+CCS Buildings Material 0 Water Transport Total -100 -100 0 specialisation patents 100 Fraunhofer ISI Further field-specific findings can be derived from the interviews, which supplement the indicator-based results and provide importants hints for future cooperation potentials: • China has great potential in the field of renewable energies, on account of its climate. Demand comes mainly from the private sector; however large projects can only be accomplished politically. One advantage of the Chinese market is the very large market volumes. The theoretical state of knowledge is categorised as very good in this area, but practical experience is lacking. China is believed to be capable of own R&D and the further development of the technologies only in the longer term. However, China is already a significant actor in foreign trade with solar cells. Cooperations which join together Chinese cost advantages in production with German technological know-how could result in a competitive advantage. 142 6 General Summing Up and Conclusions • The vast coal reserves and China's development plans for coal-powered power stations clearly delineate a high potential for CCS. The state of knowledge in China is however rather low at present, which argues in favour of German manufacturers offering package deals. At the same time, power station components are already an important part of German exports to China, so that numerous actor relationships are already in place which can be built on. • The field of energy-efficient buildings is still relatively new in China. Until now a very supply-oriented perspective dominated, i.e. how to meet growing energy consumption. One large deficit is seen in the lack of quality in the building sector. This concerns building specifications, especially in the technologies new to China such as insulation. There is no widely available training for skilled workers. The competence for single technologies is also not particularly developed. In addition, the understanding for finding the optimal combination of technologies which is so necessary for energy efficiency is missing. An integral view of a building does hardly exist in China. Cooperation efforts should therefore address these aspects in particular. • In the field of mobility, it can be stated that interest in synthetic biofuels and also the availabilty of biomass is very great in China. However, the innovation indicators do not imply any above-average specialisation in China in these fields. • The large distances involved make China a large market for railways – the highspeed lines in particular are booming. Simultaneously, China has specialised in the area of track vehicles, although the knowledge base is rather below average. From the Chinese perspective, cooperations which strengthen the knowledge base in this area would significantly complement its own position. • China has large domestic manufacturers in the (road) vehicle industry. Even although they offer still simple and technically rather out-of-date products at present, they are regarded as serious competition. The challenge consists here in applying existing Chinese competences to make existing products more sustainable. • From a material efficiency perspective, China plans to introduce recycling of old vehicles. For the estimate of cooperation potentials in this field it should be borne in mind that German actors fear that a diffusion of relevant recycling infrastructures and technologies could lead to competition for secondary raw materials, in view of China's growing demand for raw materials. • The experiences of German companies in the Chinese market for waste water treatment systems point out that environmental protection in China is not de facto regarded with the same importance as in the official government pronouncements. According to the interviewees' assessment, China will not have developed the necessary market maturity in this area within the next five years. Production is battling with inadequate process quality, but – as in other markets - Chinese enterprises are still feared as competitors. Cooperations are therefore faced with the challenge of how to (best) cope with this tense situation. 6 General Summing Up and Conclusions 143 Stepping up cooperations with China must take place against the background of a number of regulations concerning the import of foreign products, as well as the possibilities for foreign companies to establish businesses in China and participate fully in economic life there. In particular, regulations dealing with high import duties and unpredictable approval procedures for foreign products belong in this category. Also, the problematical situation concerning the enforcement of intellectual property rights (IPR) is repeatedly mentioned. One special weakness of China concerns the significance of environmental regulations. The enforcement of environmental standards can on the whole be described as very lax, according to the experiences of persons questioned, indeed perhaps the worst among the BRICS countries. This substantially hampers realisation of the considerable potentials to carry out sustainability innovations. This aspect should be the top-priority starting point in the sense of a demand-oriented innovation policy. 6.5 South Africa South Africa's R&D intensity is average for the BRICS countries, without however corresponding growth rates in the past years. Private activities play a similar role here as in the industrialised states. The conditions for innovation transfer are on the whole regarded as good in South Africa. Environmental protection is accorded the greatest significance in the surveys among the BRICS countries. In the interviews, however, this is considerably relativised. Incomplete control of emissions is referred to, but this appears to be changing in recent times. The availability of human resources is regarded as South Africa's greatest problem. The number of scientists in South Africa lies clearly below that of the other BRICS countries. This can account for the ambivalent assessment of South African competences in the interviews: the areas which are able to attract sufficient well-trained personnel are almost at the OECD level, on the technical side. On the other hand, the competences of well trained personnel is not available in many areas, which leads to outdated production processes and negative price-performance ratios. A special problem could be the financing of investments in South Africa. It takes last place in the country-risk assessment rating among the BRICS countries. Innovation policy in South Africa is oriented towards the concept of the national innovation system. An important component is the development of new missions for science, technology and innovation policy. Biotechnology, new production technologies, information and communication technologies, as well as resource-based industries (including agriculture and energy) were defined as strategic R&D areas. 144 6 General Summing Up and Conclusions There is an independent promotional agency for water, which underlines the significance of this field. The National Center of Cleaner Production, which aims mainly at SMEs which are also patricularly active in the area of waste recycling, is financed within the framework of the focus on production technology. In addition, research in the sense of a demand-oriented innovation policy is directly influenced also by diffusion programmes, particularly in the area of extending renewable energies, increasing energy efficiency in the building sector, and expanding railway transport. One special characteristic of South Africa – in contrast to the other BRICS countries - is the relatively high level of socio-economic research for building up capacity and development of innovative ability. Figure 6-5: Specialisation of South Africa in the Selected Sustainability Fields South Africa specialisation exports 100 EE+CCS Buildings Material 0 Water Transport Total -100 -100 0 specialisation patents 100 Fraunhofer ISI With the exception of the buildings field, the sustainabillity fields investigated are characterised by an above-average activity to accumulate knowledge. The field of material efficiency stands out on account of a positive foreign trade situation, which can be traced back primarily to regenerative raw materials and sub-areas in recycling. A similarly strong foreign trade position can also be ascertained for sub-areas of water treatment, even if this is overcompensated for in the whole picture of water technologies by weaker positions in the other sub-areas. 6 General Summing Up and Conclusions 145 From the indicator-based results and the conducted interviews, a number of further field-specific insights can be derived which provide important hints for future cooperation potentials: • For the energy-relevant fields, it must be stated first of all that South Africa possesses great reserves of coal – although of bad quality. This forms the basis for domestic electricity production. South Africa is traditionally strong in coal gasification. Thus, there are important links and good pre-conditions for the future application of CCS. However, it is still open whether, and within which time horizons CCS will become relevant there. • The pre-conditions to set up recycling systems – among others, in the automobile industry – are considered favourable in South Africa. In the Cleaner Production Programme, South Africa has established so-called "Waste Minimisation Clubs". They promote the exchange of information and experiences among companies, focusing on preventive measures to avoid waste. Due to South Africa's competences in sub-areas of recycling, this should be a worthwhile field for cooperation. However, the framework conditions for recycling must be improved, e. g. as far as environmental legislation, infrastructure and buyers are concerned. • A great number of foreign vehicle manufacturers are present in the South African market. The market volume is often overestimated, but is de facto relatively small. The German firms employ the same technology as in the home country, i. e. for example, water-based paint systems. South Africa depends to a great extent on foreign countries for emission-reducing technologies, as there are few national activities to foster competence-building. • Several German-South African cooperations already exist in the area of coal gasification, also in the R&D field. Because of the technical proximity to biomass gasification, these cooperations can also represent starting points for cooperation in the field of synthetic biofuels. From the South African perspective, this area bundles especially favourable starting conditions, as the good knowledge base is supported by already existing foreign trade experiences – Sasol is an internationally active enterprise here – and simultaneously good links exist to the main focuses of the national innovation strategy. • The water field forms an independent focus of South Africa's national innovation strategy. At the same time, South Africa demonstrates above-average capability in the sub-area water treatment. If one considers the future challenges for South Africa in the availability of water resources, it becomes clear that this cooperation field will gain significance in the future and simultaneously offers good opportunities for cooperation. A specific problem for cooperations with South Africa is however seen in the country's smaller sized market, compared with the other BRICS countries. South Africa played a marginal role not only for the industrial enterprises questioned, but also for the 146 6 General Summing Up and Conclusions surveyed financial institutions. Directing interest towards South Africa will therefore be a particular challenge to strengthening the cooperations. 6.6 Germany The basic data on innovative capacity, but also the results of the framework conditions survey have already highlighted the differences between Germany and the BRICS countries. Then there are the differences in the levels of patent and world trade shares, which confirm Germany's strong technological capability. Among the six sustainability fields observed, Renewable Energies occupy a special place in project-based research promotion, followed by the field Mobility and Logistics. The three other selected technology fields – Energy Efficiency in Buildings, Water Treatment Technologies and Material Efficiency – follow after a clear gap. Promotion for research in the more socio-economically influenced questions on the other hand is weaker by one order of magnitude. Figure 6-6: Specialisation of Germany in the Selected Sustainability Fields Germany specialisation exports 100 EE+CCS Buildings Material Water 0 Transport Total -100 -100 0 specialisation patents 100 Fraunhofer ISI 6 General Summing Up and Conclusions 147 An evaluation of the specialisation profile shows a surprisingly homogeneous picture for Germany. In sum, all the technological fields demonstrate not only an aboveaverage patenting activity, but also an above-average export orientation. The latter especially is to be stressed, as Germany is already an export world champion for all goods. The only area where Germany's specialisation is below-average is in the socioeconomic questions on sustainability, measured by publication output. Here additional need for action appears to be called for. 6.7 Conclusions for Cooperations On the whole, the results attest Germany's outstanding starting position as a potential technology supplier in cooperations with the BRICS countries. The sustainability fields investigated do not form key areas of national competences and development strategies in the BRICS states, but there are numerous linking points and – in particular in China and India – a strong dynamic, which leads to the further growth of absorptive capacities. In individual technology lines, good starting conditions for a further development of the technologies in the BRICS countries and the achievement of foreign trade successes are already visible today. However, all BRICS countries are faced with the challenge that potential competence alone does not guarantee environmental improvement and a strong position in foreign trade. Bottlenecks in the area of demand for the technologies must be tackled by environmental policy measures, and technological competences and environmental policy measures must be coordinated simultaneously with each other. In contrast to Germany, the technological capability within the BRICS countries is clearly more heterogeneous. Strengths in sub-areas march hand-in-hand with weaknesses in others. At the same time, in single sub-areas disparities are found in the competences in the different elements of the innovation system, e. g. between the research system, knowledge generation and implementation in economically marketable products. The development of a consistent competence profile is among the most urgent tasks for the BRICS countries. The following conclusions can be drawn for the individual BRICS countries: • In Brazil, a lead market strategy is most probably imaginable in connection with biomass utilisation. However, this requires considerable upgrading of the technological base and increased consideration of the requirements of a sustainable utilisation. The technological base in the – traditionally strongly distinctive – automobile sector is still very dependent on foreign know-how, on the other hand. 148 6 General Summing Up and Conclusions • In Russia, the knowledge base is (still) available, but at the same time an overall low market implementation is to be observed. Potential strengths of Russia lie above all in the energy- and raw-material-relevant technologies. • India displays a great need for sustainable technologies, in particular for building up its infrastructure. The possibilities to dock onto India's strengths however are limited, as the priorities have already been very clearly placed in other areas. The strongest connections are perceived to the areas of Renewable Energies and Material Efficiency. • China demonstrates great economic dynamics and is the dominant country within the BRICS group of countries because of important industrial parameters. However, there is no continuous specialisation in sustainability-relevant technologies. On the other hand, there is a certain level of competences for all sustainability-relevant technologies. A great challenge lies however in making greater use of the competences towards sustainability. • South Africa has a very good basis in some sub-areas and has strongly specialised in knowledge accumulation in sustainability-relevant areas. On the other hand, bottlenecks exist with human resources which considerably hinder the implementation of these potentials. For all BRICS countries it can be said that the significance of trade among themselves is increasing. We may assume that this will also be the case in future with cooperations in the science and technology area. The actor constellations for cooperations of this kind should become essentially much more diverse and not limited to cooperations of established industrial countries among themselves or of these countries with actors from rapidly growing economies. Simultaneously, it must be borne in mind that the German cooperation partners find themselves in a certain conflict (of interest) in making cooperation decisions: on the one hand, a cooperation opens up new markets and contributes to worldwide reduction of environmental pollution, on the other hand, it also helps to turn potential competitors into actual competitors on the world market more quickly. This conflict of interest – repeatedly mentioned in the interviews – is however of varying significance to the diverse cooperation constellations which could play a role in the formulation of initiatives to strengthen technological cooperation. Therefore different starting points emerge as to how policies can promote cooperations of this kind: • In the areas where the competence of the BRICS countries is very weakly developed, German partners can play a role as exporters of technologies. The bottleneck factor here is often the demand for these kinds of technologies, as relevant environmental regulations are missing or are not being enforced. Supporting policy activities can be put in place here, firstly in the area of consultancy and in the exchange of experiences in formulating environmental policy. Examples 6 General Summing Up and Conclusions 149 are already found in the area of the Energy Feed-in Law for renewable energies. Secondly, supporting regulations in financing are helpful, as the establishment of the CDM mechanism showed, for example. Thirdly, measures which increase the adaptive capability in the cooperation countries play an important role. The exchange of experiences in setting up training programmes and the exchange of qualified personnel, for example, belong in this category. • Cooperations often take place in areas where the BRICS countries are still in the process of building up own competences, but where considerable increases in capacity and production for the world market – based on the know-how placed at their disposal - have already taken place. Particularly in these cases, the above described conflict of interest has a restrictive impact and many technology suppliers are very hesitant to reveal their most up-to-date technological know-how. Especially in small and medium-sized enterprises, uncertainty frequently exists about the best way to guarantee the protection of intellectual property under these conditions. An intensive offer of back-up and consulting about the problems, but also about the existing possibilities to successfully enforce own property rights, would be helpful for this target group. • A third cooperation constellation can arise in those areas where both cooperating countries possess considerable strengths. The rationale for collaboration can consist here in gaining an additional edge over third party competitors in the world market by mutually complementing existing strengths. This form of cooperation will always very much depend on the chosen business strategies in each case. However, in future they will be politically more in the limelight. The European Green Book on the future direction of EU R&D policy takes as its theme not only the global challenges in the area of a sustainable development as the object of an intensified international collaboration of the EU. The Green Book explicitly also cites an already achieved outstanding position of the partner as criterion for this type of collaboration with the emerging economies. Further points of departure for policy measures refer less to the technological areas and actors from industry, but concern cooperation in the area of policy formulation. The analysis of the research systems demonstrated the serious deficit that the BRICS countries do not have an R&D policy which is specially formulated to deal with sustainability themes. Instead, the sustainability-relevant themes are addressed as components of sectorally defined priorities, at best. Processes for exchanging experiences should be established, in which an appraisal can take place, together with the participating actors, of how the sustainability topics are included in shaping research priorities in each country and which findings are particularly relevant for a mutual learning process. The same applies for environmental policy measures as a central parameter which influences the demand for the sustainability technologies. Besides the above mentioned advice on the introduction of environmental policy measures, the question of particular relevance here is how to design innovation-friendly 150 6 General Summing Up and Conclusions environmental policy measures. As the systematic strengthening of the central research and technology competences so crucial for a sustainable development is an objective shared by several policy fields, the coordination of the individual policy fields is of great importance. Thus the exchange of experiences about the possibilities and difficulties of such policy coordination will also become a significant, cross-sectional subject for cooperation. From a strategic viewpoint it must be remembered that designing policy in such a complex area requires monitoring of the particular strengths and weaknesses and the changes which take place therein. In the area of innovation policy, this has led to the development of systems such as the reports on technological capability. In environmental policy, different approaches of environmental indicator systems are used. It should therefore be analysed which periodically recurring information is required to design a systematic policy to strengthen research and technology competences aimed at sustainable development. Already today it is foreseeable that besides information on shaping research policy towards sustainability themes and developing technological capability in the relevant technologies, aggregated impact evaluations of the environmental and infrastructure policies on technology development are also required. 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Invited paper, Global Network on Economics of Learning, Innovation and Competence Building Systems (Globelics) First Conference on “Innovation Systems and Development Strategies for the Third Milennium”, Rio de Janeiro, November 2-6 200 Annex 157 A Annex A.1 Annex to Section 2.2 Table Annex A.1-1: Human Resources Single Indicators Source Description 1.1 Availability Availability of scientists and engineers WEF Scientists and engineers in your country are (1 = non-existent or rare, 7 = widely available) Qualified engineers WEF Qualified engineers are available in your labour market Skilled labour WEF Skilled labour is readily available 1.2 Education and Further Training Employee training IMD Employee training is a high priority in companies The general approach of companies in your country to human Extent of staff training WEF resources is (1 = to invest little in training and employee development, 7 = to invest heavily to attract, train and retain employees) Local availability of specialised research and training services WEF In your country, specialised research and training services are (1 = not available, 7 = available from world class institutions) 158 Annex Table Annex A.1-2: Technology Absorption Single Indicators Source Description 2.1 Firm Networks Technological cooperation IMD Technological cooperation is developed between companies The quality of local suppliers in your country is (1 = poor as they are Local supplier quality WEF inefficient and have little technological capabilities, 7 = very good as they are internationally competitive and assist in new product and process development) Local suppliers in your country are (1 = largely non-existent, 7 = Local supplier quantity WEF numerous and include the most important materials, components, equipment, and services) How is process equipment and machinery specific to your field obtained Local availability of process machinery WEF in your country? (1 = specialised process equipment and machinery are almost always imported, 7 = specialised process equipment and machinery are almost always locally available from capable suppliers) 2.2 Technology Transfer Prevalence of foreign technology licensing Firm-level technology absorption FDI and technology transfer WEF WEF WEF In your country, licensing of foreign technology is (1 = uncommon, 7 = a common means of acquiring new technology) Companies in your country are (1 = not able to absorb new technology, 7 = aggressive in absorbing new technology) Foreign direct investment in your country (1 = brings little new technology, 7 = is an important source of new technology) 2.3 Research and Development in the Company Companies obtain technology (1 = exclusively from licensing or imitating Capacity for innovation WEF foreign companies, 7 = by conducting formal research and pioneering their own new products and processes) Company spending on research and development Development and application of technology WEF IMD Companies in your country (1 = do not spend money on research and development, 7 = spend heavily on research and development) Development and application of technology are supported by the legal environment Annex 159 Table Annex A.1-3: Innovation-friendly Framework Conditions Single Indicators Source Description 3.1 Start-up Regulations Business start sub-index Creation of firms WEF (-) Number of days required to start a business, 2005 WEF (-) Number of procedures required to start a business, 2005 IMD (-) Number of days to start a business IMD Creation of firms is supported by legislation IMD Funding for technological development is generally sufficient IMD Venture capital is easily available for business development WEF Entrepreneurs with innovative but risky projects can generally find 3.2 Innovation Financing Funding for technological development Venture capital su-bindex venture capital in your country (1 = not true, 7 = true) Ease of access to loans WEF How easy is it to obtain a bank loan in your country with only a good business plan and no collateral (1 = impossible, 7 = easy) 3.3 Innovation-friendly Demand Government procurement of advanced technology products Government purchase decisions for the procurement of advanced WEF technology products are (1 = based solely on price, 7 = based on technical performance and innovativeness) Buyers in your country are (1 = unsophisticated and make choices Buyer sophistication WEF based on the lowest price, 7 = knowledgeable and demanding and buy based on superior performance attributes) Technological regulation Presence of demanding regulatory standards IMD Technological regulation supports business development and innovation Standards on product/service quality, energy, and other regulations WEF (outside environmental regulations) in your country are (1 = lax or nonexistent, 7 = among the world’s most stringent) 160 Annex Table Annex A.1-4: Environmental Protection Single Indicators Source Health, safety & environmental concerns IMD Description Health, safety & environmental concerns are adequately addressed by management In your country, companies that harvest or process natural resources Protection of ecosystems by business WEF such as food, forest or fishery products (1 = rarely concern themselves with the degradation of ecosystems, 7 = frequently take steps to preserve the ecosystem they depend on) Stringency of environmental regulations How stringent is your country's environmental regulation? (1 = lax WEF compared with that of most countries, 7 = among the world's most stringent) Figure Annex A.1-2: Education and Further Training Figure Annex A.1-1: Availability Skilled labor Local availability of specialized research and training services Qualified engineers Extent of staff training Availability of scientists and engineers South Africa China Brazil Russia Employee training Germany India Russia China Brazil India South Africa Germany Annex 161 Figure Annex A.1-3: Networking Local availability of process machinery Figure Annex A.1-4: Technology Transfer FDI and technology transfer Local supplier quantity Firm-level technology absorption Local supplier quality Prevalence of foreign technology licensing Technological cooperation Russia China South Brazil India Ge rmany Russia China Brazil Germany Africa South India Africa Figure Annex A.1-5: R&D in Companies Development and application of technology Figure Annex A.1-6: Start-up Regulations Creation costs Subindex Creation of firms Company spending on research and development Capacity for innovation Russia China Brazil South India Germany Brazil China Germany Russia South India Africa Africa Figure Annex A.1-7: Innovation Financing Figure Annex A.1-8: Demand Ease of access to loans Presence of demanding regulatory standards Risikokapital Subindex Technological regulation Funding for technological development Buyer sophistication Government procurement of advanced technology products Brazil Russia China South Africa India Germany Russia Brazil China South Africa India Germany 162 Annex A.2 Annex to Section 2.3 Table Annex A.2-1: Consolidated German Direct Investments Abroad (end of year) € bn All Countries (Status: 4/06) 2004 Shares Increase (%) 2004 (%) 2002-2004 676,686 +2.0 % BRICS States: Brazil 5,796 24.5 +6.8 % South Africa 3,581 15.2 +34.3 % China (without Hongkong 1) 8,424 35.7 +30.1 % India 2,041 8.6 +28.3 % Russian Federation 3,773 16.0 +71.7 % Sum BRICS States 23,615 100 +28.7 % Share in % (all countries) 3.5 Source: Deutsche Bundesbank 2006a (direct and indirect direct investments) Table Annex A.2-2: German Direct Investments Abroad 2003 to 2005 (€ bn; incl. re-invested profits, capital export: -) 2003 All Countries 2004 2005 -5,470 -1,516 -36,695 Brazil +0,408 -1,060 -0,894 South Africa +0,223 -0,337 -0,275 PR China (without Hongkong) -1,558 -1,087 -2,982 India -0,285 -0,285 -0,514 Russian Federation +0,118 +0,643 +0,204 BRICS States altogether -1,094 -2,126 -4,461 BRICS States: Source: Deutsche Bundesbank 2006b (Status: May 2006) Annex 163 Table Annex A.2-3: Foreign Direct Investment in Germany 2003 to 2005 (€ bn; incl. re-invested profits, capital import: +) 2003 All Countries 2004 2005 +25,873 -12,172 +26,264 Brazil -0,070 +0,020 +0,052 South Africa +0,111 +0,110 -0,177 PR China (without Hongkong) +0,308 +0,098 +0,137 India -0,024 +0,009 +0,006 Russian Federation +0,037 +0,130 +0,102 BRICS States altogether +0,362 +0,367 +0,120 BRICS States: Source: Deutsche Bundesbank 2006b (Status: May 2006) Definitions and Methodological Remarks Definition of the Deutsche Bundesbank: direct investiments are defined as financial relationships to domestic and foreign enterprises in which the investor directly holds 10 % or more of the shares or voting rights (incl. branches and operational facilities). As re-invested profits respectively losses are defined the parts of the operating results which exceed the dividend outpayments. Included are shares in capital including reserves, profits carried forward and losses carried forward, long-term credits as well as from 1996 also short-term finance loans and trade credits and other investments (e. g. all investments in real property). Moreover since then raising loans by the direct investors with their daughter companies is considered as repayment of the funds placed at their disposal by the direct investors (reverse flows). Definitions UNCTAD (2006) and ECB (2006): "FDI components: equity capital, reinvested earnings and intracompany loans". Methodological Remarks: an international harmonisation of the FDI data is aspired to, on the basis of the recommendations of the International Monetary Fund ("IMF Balance of Payments Manual") and the OECD ("Benchmark Definition of Foreign Direct Investment"). Nevertheless, the comparability of the data is not always given. Main reasons are e. g. different FDI definitions (such as taking re-invested profits into consideration), differences in classifications and geographical categorisations (OECD International Direct Investment Yearbook). 164 Annex A.3 Sustainability Research in the BRICS Countries: Individual Country Profiles A.3.1 Brazil A.3.1.1 The Brazilian innovation system Most scientific output in Brazil is produced by universities. In a recent bibliometric overview on research institutions in Brazil, Glänzel et al. (2006a, 2006b) found that public universities, i.e. federal and state universities, accounted for more than 80 % of the country's total publications in the ISI database (SCI+SSCI) from 1991 to 2003. 20 % of the publications are authored by researchers affiliated with other institutions from the public sector, mainly research institutes, hospitals, and national enterprises, while only 5 % have authors from private sector institutions, of which private universities play the most important part. During this period, Brazil strongly increased the national output in scientific publications, raising from 1,766 in the year 1988 to 8,684 in 2003 in the ISI databases SCI and SSCI (NSB, 2006, see TableAnnex A.3-1). TableAnnex A.3-1: Basic indicators of R&D resources in Brazil Brazil 2000 2004 Population 1000 173,858 183,913 GDP (million current prices US-$) 601,732 603,973 GERD (million current PPP $) GERD per capita (current PPP $) GERD as a percentage of GDP 13,659 78.6 1.05 13,494 73.4 0.83 39.8 60.2 39.9 57.9 na na 157,595 84,979 6,195 0.98 8,684 a 1.24 na 13.4 na 26.4 GERD financed by industry (%) GERD financed by government (%) Total R&D personnel (FTE) Total researchers (FTE) Scientific publications in SCI+SSCI Scientific publications % SCI+SSCI Foreign trade (billion US-$) Exports of R&D-intensive goods to OECD Imports of R&D-intensive goods from OECD a a = 2003 OECD member countries until 1993, excludes Mexico, Czech Republic, Hungary, Poland, South Korea, Slovakia. Source: Brazilian Federal Ministry for Science and Technology MCT; World Development Indicators, Worldbank 2006; Foreign trade: DIW Berlin. Science Citation Index (SCI): US National Science Board: Science & Engineering Indicators 2006. Annex 165 The most prolific universities in terms of international visible publications are the University of São Paulo (USP) with 24 % of ISI publications, followed by State University of Campinas (Unicamp), Federal University of Rio de Janeiro (UFRJ), State University of São Paulo (UNESP), Federal University of Rio Grande do Sul and Federal University of Minas Gerais (UFMG). The most prolific national research centres are the Brazilian agricultural research corporation EMPRAPA and the Oswaldo Cruz Foundation (medical research), followed by the Brazilian Center for Physical Researches (CBPF) and the National Institute for Space Research (Glänzel et al., 2006: 92). However, this ranking may represent only a partial picture since most of the research conducted in Brazil is published in national publications and often in Portuguese language. A more comprehensive overview on publications in different fields of knowledge is provided in TableAnnex A.3-2. According to these figures published by the National Council for Science and Technology (CPNq), Brazilian science has a pronounced specialization profile: 71.7 % of all national publications contribute to the three fields of agricultural sciences, biological sciences and health sciences. 10.6 % are other "hard sciences and earth sciences", and only 9 % pertain to engineering sciences. TableAnnex A.3-2: Scientific publications in Brazil from 2000 to 2003 Field Number of Authors Scientific articles National publications International publications Published books Agricultural Sciences 6795 44277 12099 1944 Biological Sciences 7919 27680 31413 1209 Health Sciences 8700 46725 23899 2330 Hard Sciences and Earth Sciences Human Sciences 7883 17609 39587 1074 7874 25989 4407 1840 Applied Social Sciences 4625 15822 2440 1880 Engineering 8072 14856 18593 1244 Linguistics, Literature, Arts 2479 8519 1237 1635 46117 165571 105898 14618 Total ** Quelle: CNPq; ** some articles are assigned to more than one field. One of the most important issues of the Brazilian innovation system is an insufficient number of highly qualified scientists, especially with a natural science and engineering background. Since the 1980s, important programmes for the expansion of university education have been implemented. As a result, the output of Master degrees and PhDs 166 Annex has been growing rapidly, from 3,865 Master degrees and 1,005 PhD degrees awarded in 1987 to 27,648 and 8,094 respectively in 2003 (figures from MCT, cited after Glänzel et al. 2006a und 2006b). Still, the number of engineering students remains comparatively low (TableAnnex A.3-3). In the past, the completion of a PhD usually led to a university career as there is still insufficient demand for scientists in Brazilian industry. TableAnnex A.3-3: Number of Researchers in Brazil 2004 Field Agricultural Sciences Biological Sciences Health Sciences Hard Sciences and Earth Sciences Human Sciences Applied Social Sciences Engineering Linguistics, Literature, Arts Total Researchers Researchers Students (without holding PhD students) 9814 10600 15408 10181 15031 9444 13006 4243 77649 6968 8073 8956 8226 8187 4876 8430 2592 47973 11018 17494 15879 12563 17667 8259 17332 5094 102913 Researchers in business enterprises 4137 4426 5145 2386 1792 1204 3255 388 22733 Quelle: CNPq; Brazilian innovation policy recognizes the need to enhance innovative performance of the enterprise sector, which currently accounts for only 40 % of national R&D expenditures. Automobile manufacture and other vehicle construction contribute the largest share of private sector R&D. Almost 50 % of R&D expenditures in industry are accounted for by international enterprises, yet contrary to some of the other BRICS countries there is currently little expansion in foreign R&D investment activities (Krawczyk et al. 2007). The development of R&D intensity, measured as the percentage of GERD in GDP, gives a mixed impression: The strong increase between 1994 and 2001, when R&D intensity reached more than 1 %, has been followed by a decrease (to 1999 level) in 2004 (0.83 %) (Krawczyk et al., 2007). However, during the 1990s research funding has been characterized by strong instabilities. More recently the situation somewhat improved through the introduction of "sectoral funds" in 2001, research money raised through special taxes on technology-intensive and natural resource exploiting sectors (cf.Leite). Annex A.3.1.2 167 Core themes of sustainability research in Brazil The Brazilian innovation strategy has its basic features exposed in the main national planning document, Plano Plurianual de Ação – PPA 2004-2007. More detailed views can be also found in the Industrial, Technology and Foreign Trade principles document, from the Ministry of Development, Industry and Trade and the Ministry of Science and Technology, and in the Strategic Plan from the Ministry of Science and Technology. These documents have not adopted any detailed, separated and integrated vision of sustainability research and technology, but they deal directly with pertinent thematic fields. Renewable energy and CO2-neutral fossil energies Brazil’s energy supply has several important distinguishing aspects (World Bank, UNEP/URC, 2006): • Electricity supply is dominated by hydroelectric generation. On the interconnected national grid about 90 % of generation is hydro. • There is substantial commercial bioenergy consumption. This is dominated by fuel wood and wood-based fuels such as charcoal and black liquor from the large pulp industry, as well as sugar cane residues and alcohol. • Coal use is small and is restricted to a few industries – especially iron and steel. Most coal is imported. • Domestic crude oil production is almost in balance with consumption - Brazil attained net self-sufficiency in early 2006, though there is substantial international trade in oil derivatives. • Natural gas use is still relatively small but is growing rapidly. The priorities of the national innovation strategies in Brazil with regard to sustainable innovation research in renewable energies are almost all related to biomass. For liquid fuels production, the priorities are related to developing new varieties of sugar cane for ethanol production with higher yields and more resistant to diseases, weather conditions etc; moving forward with ethanol production from cellulosic biomass; improving the economics of bio-diesel production from different crops for stationary power production and for automotive vehicles; resolving the stabilization problems of mixing bio-diesel from different crops with mineral diesel; and moving forward with the H-bio process, which consists of introducing vegetable oils into oil refineries for biodiesel production, which is already done by Petrobras as a pilot project. For power production, the priorities are related to improving the economics of sugar cane gasification for power generation in combined-cycle gas turbines. In addition, for power production some addition innovation research is needed how to integrate wind power generation into the national interconnected grid. 168 Annex Current R&D strengths are related to: • Hydropower of great, average and small port: installed capacity: 80 %; • Biomass: more of 20 % of energetic balance • Alcohol and biofuel: intensive use of sugar cane alcohol • Residues biomass (bagace): use for heat and energy generation • Energy generation of wood residue • Solid biofuel on steel industry • Solar collector: several groups of research in solar collectors, products certification and area of labelling • Photovoltaics module produce – national technology: CB-Solar Energy efficiency in buildings PROCEL is a national programme to combat the waste of electricity, administered by Eletrobrás, the federal holding company in the power sector. In the branch PROCELEDIFICA, Eletrobrás collaborates with 12 universities in R&D projects on thermal comfort and energy efficiency. Among other topics, research topics include passive cooling (bioclimatology), building simulation, thermal comfort, measurement of thermal properties of building components. [http://www.labeee.ufsc.br/ eletrobras/laboratorios.html] Government programmes have achieved significant energy efficiency gains in some areas, for example with appliance labeling programmes and in public lighting. (World Bank, UNEP/URC, 2006). Water supply and waste water systems The main policy documents which relate to water supplies and sewage systems are the Industrial, Technological and Foreign Trade Policy from the Ministry of Development, Industry and Commerce – PITCE/MDIC, the Water Resources National Plan from the Ministry of Environment and National Plan to Fight Water Losses and Modernization of Sanitation System Program from the Ministry of Cities. All of them have strong links with the energy sector in Brazil, due to the predominance of hydropower in the Brazilian energy mix. The Centro de Gestão e Estudos Estratégicos carried out an assessment of research and technology needs in water resource management (CGEE, 2005: Prospecção Technológica em Recursons hídricos). After the creation of the sectoral fund CT-HIDRO (R&D in water resources and water management) (cf. A.3.1.3, chapter sectoral funds) a framework of action was Annex 169 developed in 2001 considering the main societal needs in water resource management and taking into account existing investments in R&D in Brazil. According to this action framework, the following stand out as priority areas for R&D: (a) Integrated urban water management, especially research dealing with integration of water supply, sanitation, drainage & flood plains and total solids; (b) knowledge of the main Brazilian freshwater ecosystems and sustainability; (c) Water resource management at basin level, especially institutional and technical arrangements; (d) climate and environmental variability and forecasting in water systems; (e) modern equipments for monitoring water system, among other main aspects. Especially the integrated urban water management research has manifold connections to the further development of technologies. The following challenges are emphasized: (a) site planning and environmental certification for sustainbility cities; (b) water reuse; (c) innovative solutions for waste treatment in large cities (52 % of Brazilian population are in cities with more than 100,000 inhabitants, and 27 % above 500,000 inhabitants where it is the smallest coverage of waste treatment); (d) urban drainage and total solids management and implementation of the Integrated Urban Waters Plan. As Prof. Tucci underlined in his questionnaire, a decisive difference between the case of Brazil and developed countries is that in Brazil the rapid urbanization over the last decades (50 % of urban population in 1970 to 83 % in 2000) generates floods and environmental impacts in urban drainage which are not common in Europe. Urban drainage and floods are serious problems which affect all countries of South America, and are going to affect Central America, Asia and Africa, mainly due to the lack of source control of the urbanization impacts, together with the lack of waste treatment which has generated a cycle of contamination which in the end contaminates the water supply basins. Brazilian experts listed the following areas as R&D strengths in the field of water supply and waste water systems: • Energy efficiency in water supply and waste water systems; • Technologies for removal of nutrients (phosphorus and nitrogen); • Lagoas de Estabilização (stabilization lagoons); • Reactors: aerobic and anaerobic; • According to CGEE, extensive assessments of the water supply system have taken place in recent years, yet little progress is made in implementation. 170 Annex Material efficiency Brazil has strengths in the production of renewable resources as production input. This is also reflected in the research priorities. Especially Bioplastics are mentioned as relevant FuE-topics. Other areas are recycling of contaminated packages and the use of renewable materials. Mobility and logistics The document which comes closest to representing an innovation strategy for the transport sector is a proposal by the Ministry of science and technology for the sectoral funds CT-TRANSPORT (R&D in building and construction, road works, materials, logistics, equipment, software for conveyance of passengers and goods). This document also makes reference to environmental requirements and sustainability of transport development. In total there are three sectoral funds in the field of mobility and logistics, with the CT-AERO (R&D in aeronautics) and CT-AQUAVIÁRIO (R&D in water transport, materials, engineering, maintenance and repair of waterways). Aviation is an important R&D specialization, with the national champion Embraer (Empresa Brasileira de Aeronáutica S.A.) (civil and military aviation). The strategy for the sectoral funds lists the following R&D topics: • Traffic flow and safety with the aim to reduce externalities • Development and application of logistic methods and systems • Management of transport systems • Development of new technologies for transport infrastructure and equipment - development and application of intelligent transport systems - development, maintenance and diffusion of transport information systems - use of recycled materials for roads • Improvement of existing infrastructure through introduction of new technologies for control and maintenance - study on the current transport system management and externalities - development of processes for better management of transport infrastructure - systems for operational management of transport equipment • Studies on the technological development of water transport, especially in the North of Brazil • Support of education and professional training for transport R&D • Reduction of negative environmental impacts of traffic Annex 171 • Improvement of management processes in transport enterprises • Development of prediction and simulation models for transport planning • Comparative studies on institutional and regulatory experiences, on national and international level • Development and evaluation of technologies and equipment aimed to improve safety in the transport sector. Upon request of the CNPq a document on priorities and orientations of Brazilian research in the transport sector was produced by ANPET, the national association for research and teaching in transport which brings together 15 universities specializing in transport research. ANPET also publishes the Brazilian journal "Transportes" [www.anpet.org.br]. Socio-economic research on innovations for sustainability Detailed information on priorities has not been provided by the country experts. The publication analysis in the report revealed that 2.8 % of Brazil’s SSCI publications can be attributed to the socio-economic research on innovations for sustainability. A.3.1.3 Research funding agencies Ministry of Science and Technology (MCT) The ministry is in charge of national S&T policy. The funding from MCT is granted through Cnpq and FINEP and it comes mainly from the sectoral funds. Sectoral funds In 2001, Brazil created a scheme under which funding for research is raised and allocated through so-called "sectoral funds". Money is raised through a tax on companies working in technology-intensive and natural-resource exploiting sectors such as biotechnology, energy, and fuel, and subsequently used to fund research in this area. The instrument of sectoral funds was introduced to overcome instabilities in government spending on R&D which characterized the 1990s, and to inject large amounts of money into the Brazilian research and innovation system. For this reason, the money cannot be spent for other purposes than investments in science and technology. In 2003, 1.2 billion reais (US-$ 413 million) were raised. However, contrary to their initial purpose, and despite opposition by scientific communities, large portions of the sectoral budgets have been subsequently retained in treasury as national contingency reserves (Leite, 2005). In 2005, R&D expenditures of 768.4 million reais (US-$ 263 million) were made in connection with sectoral funds (figures from FINEP). 172 Annex Today there are 16 funds of which 14 are tied to specific sectors, while two funds are devoted to overarching mandates such as improvement of public research infrastructure and fostering interaction between public research and industry. For instance, the funding for the CT-Energ comes from 0.4 % of the liquid budget (faturamento liquido) of the electric utilities. In 2006, there were R$ 150 million available (income from utilities) but due to government budget cuts (contingenciamento), only R$75 million (US-$ million 25.6) were applied. Water Resource Fund receives 0.24 % of the energy budget of a hydropower due to compensation from flooded area. It represents about US $ 20 millions a year. This fund is managed by MCT in a committee with Water Agency, Water Secretary, Energy Secretary, FINEP, CNPq and representatives from private and scientifical community. The following sectoral funds correspond to the selected thematic fields of this study: 1. CT-ENERG: R&D in the energy sector, particularly energy efficiency of end use. 2. CT-PETRO: R&D in the oil and gas sector. 3. CT-BIOTEC: R&D in biotechnology 4. CT-HIDRO: R&D in water resources and water management. 5. CT-AERO: R&D in aeronautics. 6. CT-AQUAVIÁRIO: R&D in water transport, materials, engineering, maintenance and repair of waterways. 7. CT-TRANSPORT: R&D in building and construction, road works, materials, logistics, equipment, software for conveyance of passengers and goods. National Council for Scientific and Technological Development (CNPq) CNPq is a foundation linked to the Ministry of Science and Technology. It is one of the major public institutions for the support of STI, contributing directly to the training of researchers – masters, doctors and specialists – in the various fields of knowledge. It supports research through individual grants or research projects (TableAnnex A.3-4). Detailed figures on thematic fields of sustainable innovation are not available, but the total category of engineering research amounts to only 14 % of all funded projects in 2006. Annex 173 TableAnnex A.3-4: Research projects supported by CNPq in 2006 Science Field Ciências Agrárias Ciências Biológicas Ciências da Saúde Ciências Exatas e da Terra Ciências Humanas Ciências Sociais Aplicadas Engenharias Lingüistica, Letras e Artes Não informado, Project Agricultural Sciences 561 20,719,861 Total % (US$) Total 6,811,263 11.8 Biological Sciences 781 40,875,860 13,436,804 23.2 Health Sciences 710 40,412,137 13,284,727 23.0 Hard Sciences and Earth Sciences Human Sciences 450 23,234,761 7,637,989 13.2 639 11,656,226 3,831,764 6.6 Applied Social Sciences 399 6,634,636 2,181,011 3.8 Engineering Linguistics, Literature, Arts 604 88 24,898,172 969,938 97 4329 6,614,905 176,016,495 No information Total Total (R$) 8,184,804 14.1 318,849 0.6 2,174,525 57,861,735 3.8 100 Source: CNPq Research and Projects Financing – Brazilian Innovation Agency (FINEP) FINEP is the main agency for funding research in the business enterprise sector. FINEP is also part of the Ministry of Science and Technology. It offers grants (i.e. nonreimbursable funds) and loans, providing support throughout every stage of the innovation process - from basic research to market development and incubation of high-tech firms. FINEP supports a programme of research in basic sewage treatment (PROSAB - Programa de Pesquisas em Saneamento Básico). Figures on thematic fields of sustainable innovation were unavailable. The State of São Paulo Research Foundation (FAPESP) Many Brazilian states have a foundation for fostering scientific and technological research. FAPESP was the first to be established (1962) and is the model for the rest of the country. It is a trend-setter and policymaker, with an importance that rivals the federal CNPq. Scholarships and grants are the traditional means offered by FAPESP to students and researchers from the state of Sao Paulo for fostering scientific and technological research in all areas of knowledge (Global Watch Service). Total R&D expenditures by FAPESP in 2006: R$ 466,734,899.06. 174 Annex A.3.1.4 Leading research organisations Based on the responses from the country experts, the following leading research organizations were identified: 1. Renewable energies and CO2-neutral fossil energies − Federal University of Rio de Janeiro (UFRJ)/Coordenação dos Programas de Pós-graduação de Engenharia (COPPE): o Center of Integrated Studies on Environment and Climate Changes (CentroClima) o Energy Planning Program (PPE) o Laboratório Interdisciplinar de Meio Ambiente (Lima) o Virtual Institute of Global Changes (IVIG) − University of São Paulo (USP): o Advanced Study Institutes (IEA) o Electrotechnical Energy Institute (IEE) (photovoltaics) o National Center of Biomass (CenBio) o Engineering School Sao Carlos − Federal University of Itajubá: o Center of Excellency in Natural resources and Energy (Cerne) o National Center of Small Hidro (CRPCH) o Nucleus of thermaleletric and distributed generation studies (NEST) − State University of Campinas o Interdisciplinary Nucleus of Energy Planning (Nipe) o Nucleus for supporting renewable energy projects o Faculty of Mechanical Engineering (FEM) (renewables) o Institute of Physics (IF) − Federal University of Pernambuco/Brasilian Center of Wind Energy (CBEE) o Group of Energy Studies (Green solar) o The Brazilian Reference Center for Solar and Wind Energy (Cresesb) o Federal University of Pará/Energy Biomass and Environment Group (EBMA) − Catholic University of Rio Grande do Sul/Brazilian centre for Fotovoltaica Solar Energy Development (CB Solar) − Ceará/Alternative Energies Center (CENEA) − Federal University Paraná/Group of Studies and Development of Energy Alternatives (GEDAE) − Centro de Tecnologia Canavieira (sugar cane) − Instituto Agronômicl de Campinas (biomass and sugar cane) − Escola Superior de Agricultura Luis de Queiroz (biomass and sugar cane) − Embrapa (Agricultural R&D governmental institution) major research institution in the area of biomass. − Petrobras Research Center (CENPES/PETROBRAS) − Eletrobras Research Center (CEPEL) (Photovoltaics) Annex 175 2. Energy efficiency in buildings − Federal University of São Carlos (UFSC)/Laboratory of energetic efficiency in buildings (Labeee) − University of São Paulo o Institute of Technological Researches (IPT) o Architecture Faculty − Federal University of Alagoas/Laboratory on comfort environmental (LAbCOn) − Brazilian Association of Energy Conservation. Service Companies (ABESCO) − Energetic efficiency in buildings (PROCEL-EDIFICA/ELETROBRAS) − Application Center of Efficient Technology (CATE/CEPEL/MME) − Post-Graduate Studies Program in Architecture (PROARQ/FAU/UFRJ) 3. Water supply and waste water systems − Hidraulic Research Institute/Federal University of Rio Grande do Sul – IPH/UFRGS − Hidraulic Technological Foundation Centre/State University of São Paulo – FCTH/USP − Programme for Environmental Technology and Hidric Resources/ Department of Civil Engineer/University of Brasília – DE/UnB − Programme of Environmental Planning and Managment/Catholic University of Brasília – PPGA/UCB − Programme of Post-Graduation in Civil and Environmental Engineer/ Federal University of Campina Grande – UFCG − Federal University of Minas Gerais (UFMG) − Federal University of Rio de Janeiro (COPPE/UFRJ) 4. Material efficiency − Federal University of Rio de Janeiro (COPPE/UFRJ) o Metallurgical and Materials Engineering Program at A. L. Coimbra Institute Graduate School and Research in Engineering − Federal University of São Carlos (UFSCAR) − Federal University of Santa Catarina (UFSC) − State University of São Paulo (USP) − State University of Campinas (Unicamp) − Federal University of Minas Gerais (UFMG) − Technological Foundation Centre of Minas Gerais (CETEC) − Technological Research Institute of São Paulo (IPT) − National Metrology Institute (Inmetro) − Aeronautics Technological Center (CTA) − Pontific Catholic University of Rio de Janeiro (PUC-RJ) − Centre for Mineral Technological (CETEM) − Federal University of Rio Grande do Sul (UFRGS) 176 Annex 5. Mobility and Logistics − Federal University of Rio de Janeiro (COPPE/UFRJ) o Transport Engineering Program at A. L. Coimbra Institute − State University of Campinas (Unicamp) o Department of Geotechnology and Transport of the Faculty for Civil Engineering, Architecture and Urbanism − State University of São Paulo (USP) o Transport Engineering Program at Polytechnic School − Petrobras Research Center (CENPES/PETROBRAS) − National Technology Institute (INT) − Natonal Space Research Institute (INPE) − Military Engineer Institute (IME) − Aeronautics Technological Center (CTA) 6. Socio-economic research on sustainable innovation − Federal University of Rio de Janeiro (COPPE/UFRJ) − Applied Economic Research Institue (Ipea) [www.ipea.gov.br] − Economic Research Institute/State University of São Paulo (PROCAM-IPEUSP) − Centre for Sustainable Development/University of Brasília (CDS/UnB) [www.unbcds.pro.br] − State University of Campinas (Unicamp) − Nucleus of High Level Studies of the Amazon Region/Federal University of Pará (NAEA/UFPA) − Federal University of Santa Catarina (UFSC) A.3.2 Russia A.3.2.1 The Russian innovation system The research system in Russia continues to be stamped by institutional heritages from Soviet time, when R&D effort was organised in the form of the following independent pyramids: military, research institutes of the Academy of Sciences, Ministries' institutes, university R&D, industrial R&D departments. About 50 % of R&D efforts were devoted to military applications, and the remainder were increasingly concentrated in the research institutes of the Academy of Sciences and Ministries. Only a few of the largest industrial enterprises had internal R&D departments. Universities were generally discouraged from developing their own R&D activities, with the exception of a few leading technical universities. Centralised planning allowed more and more resources to be devoted to R&D with little emphasis on economic return (Global Watch Service). Today, the bulk of R&D is still carried out in the academies and in the 52 state research centres and financed by government. According to a recent OECD study "the public Annex 177 R&D system remains highly fragmented (in terms of funding and steering mechanisms), with the risk of duplication without synergies' (…) overloaded with developmental activities as opposed to fundamental research or ambitious R&D; and poorly connected to both the education and the market-driven production systems" (OECD, 2005). According to the same authors, Russia's innovation performance remains strikingly modest compared to what could be expected in light of its accumulated stock of human capital with scientific skills and engineering know-how, and given its overall investment in R&D. After a collapse in the initial stage of the economic transformation, the total R&D expenditures of Russia have grown steadily since 1993, but they remain far below most OECD countries in terms of % of GDP (TableAnnex A.3-1). The number of R&D personnel declined dramatically between 1989 and 1998 and has been stabilizing on a lower level since, with a slight decline in the most recent years. Many capable researchers have emigrated (brain-drain), although no precise numbers exist, and an equally severe problem consists in the declining influx of young researchers due to low salaries in state funded research organisations (Allakhverdov, Pokrovsky 2006). Technology and innovation policy is yet no coherent policy field in Russia. The state funding of R&D results from a combination of budgetary channels and programmes whose objectives and priorities are set independently. Nonetheless, some recent reforms are likely to have a major impact on the institutional landscape of public science. In December 2006, the Russian government took control of the formerly autonomous Russian Academy of Sciences, including control over RAS' senior appointments, activities, budget and future structure. It is expected that the Russian government will restructure the Academy (438 institutes in 2004), retaining merely 100200 "strategically important" institutions, while closing down or privatizing the majority of less competitive and applied research institutes (Lachinov, 2006). 178 Annex TableAnnex A.3-5: Basic indicators of R&D resources in the Russian Federation Russian Federation Population 1000 GDP (million current prizes US-$) 2000 146,303 259,709 2004 143,850 581,447 GERD (million current PPP US-$) GERD per capita (current PPP $) GERD as a percentage of GDP 10,898.6 74.5 1.05 16,669.7 115.9 1.15 32.9 54.8 12 31.1 60.6 7.6 1,007,257 506,420 951,569 477,647 65 18,271 2.9 56 a 15,782 a 2.3 na na na na 4.6 34.0 0.8 11.9 GERD financed by non-budget public funds and industry (%) GERD financed by government (%) GERD financed by abroad (%) Total R&D personnel (FTE) Total researchers (FTE)* Triadic patent families (priority year) Scientific publications in SCI+SSCI Scientific publications % SCI+SSCI Foreign trade (billion US-$) Exports of R&D-intensive goods to OECD Imports of R&D-intensive goods from OECD Exports of R&D-intensive goods to Germany Imports of R&D-intensive goods from Germany a a = 2003 OECD member countries until 1993, excludes Mexico, Czech Republic, Hungary, Poland, South Korea, Slovakia. Source: OECD Main Science and Technology Indicators 2006; World Development Indicators, Worldbank 2006. Foreign trade: DIW Berlin. Science Citation Index (SCI): US National Science Board: Science & Engineering Indicators 2006. * Goskomstat has lower numbers of total researchers: 409300 in 2003, of which only 102451 or 25% count as highly qualified researchers, i.e. candidates or doctors in science (cited after OECD, 2005: 33). Another important development is the creation of "special economic zones" (SEZ) in some of Russia's huge formerly closed science cities. The objective is to commercialize scientific and technological capabilities and to diversify the Russian economy away from oil toward more innovative sectors. In 2005, four locations were chosen as centres for technology research, including the science city of Dubna and Zelenograd, both close to Moscow, as well as St Petersburg and the Siberian City of Tomsk. Dubna is expected to specilize in IT and nuclear physics, Zelenograd in microelectronics, St. Petersburg in IT and analytical instrumentation, while the focus of Tomsk is on advanced materials and nanotechnology. Two other locations in Yelabuga, Tatarstan and the Lipetsk region in central Russia were chosen as special zones for manufacturing. Tax breaks and other incentives are designed to attract company investments. The federal budget for 2006 includes 8 billion roubles (277.9 million US-$) Annex 179 for investments in infrastructure inside the special zones, and another 8 billion roubles are expected to come from the private sector. Companies admitted to the special zones are required to invest at least 10 million € in the zones over 20 years (Lachinov, 2005). A.3.2.2 Core themes of sustainability research in the Russian Federation The "strategy to develop science and innovations in the Russian Federation until 2015" analyzes a number of problems that Russian R&D sector is currently facing and that are affecting Russian position in an international scientific area. Eight priority directions were determined and approved by the President of the Russian Federation in May 2006: • National Security and Terrorism Counteraction • Life Systems (biomedicine and bioengineering) • Nanosystems and nanomaterials development • Information and communication systems • Perspective military equipment and armament • Rational use of natural resources • Transportation, aviation and space systems • Energy technologies and energy efficiency A new Federal Programme on R&D priority directions for the period from 2007 to 2012 has adopted the same directions and has been already approved by the Government on 06.07.2006 (cf. TableAnnex A.3-6). The Ministry of Science and Education created a Scientific Coordination Committee which is to coordinate the process of the changes and corrections of the R&D priority directions every 2-4 years. One of the potential directions proposed in the Strategy 2015 is defined as “future energy sources and energy saving technologies” and is based on the priority R&D direction "Energy technologies and energy efficiency". Future energy technologies are understood to mean use of biofuels, renewable energy sources, hydrogen and nuclear energy. A sub-programme for accelerated atomic energy development could become one of the key elements of such programme. The responsible agencies are: Ministry of Industry and Energy, Ministry of Science and Education, Federal Agency for Atomic Energy (Rosatom). In terms of the sustainable development the Strategy 2015 does not make any explicit statement. 180 Annex In 2002, the Russian government launched a set of 12 "megaprojects" as a new instrument to mobilize knowledge of the public research sector for industrial competitiveness. Each megaproject aims to complete a whole innovation cycle of applied research, development, utilisation and market launch. Among the 12 projects that were selected from a much larger number of applications, five are related to the thematic fields of this study: Project 7 aims to develop "highly effective steam gas power installations of more than 200 MWatt (budget funding: RUB 150 million, extra budgetary: 318.7 million). Project 11 treats the "development and fine-tuning of technological, organisational and financial solutions to improve the efficency of the heating supply in Russia (budget funding: RUB 250 million, extra budgetary: 1800 million). Project 12 focuses on "raising the effectiveness of solid waste processing" (budget funding: RUB 400 million, extra budgetary 427.5 million). Finally, project 10 treats the production of competitive diesel engines and project 5 aims at catalysts and catalytic technologies for the production of motor fuels. There is as yet no information available on the success of these megaprojects (OECD, 2005). Institutions for environmental protection in the Russian Federation are weak and there is little enforcement of existing regulation. In 2000, the restructuring of federal environmental management responsibilities led to the elimination of the State Committee for Environmental Protection (SEC) and the absorption of its responsibilities into the Ministry of Natural Resources. According to a study by the World Bank, this was the second major "downsizing" of Federation-level environmental functions, since in 1997 the SEC replaced the former Ministry of Environment which had been established in 1991. According to the same authors, widespread and vehement opposition was raised at the time by environmental experts and non-governmental groups "over integration of environmental protection responsibilities into a Ministry whose primary goal was the development of the mining, oil and gas, and forestry sectors" (World Bank, 2004). These reforms were accompanied by a shift in the basic functions of compliance and enforcement, leading to a dramatic decrease in the number of Federation-level inspectors, inspections carried out and environmental fees collected. A.3.2.3 Research funding agencies Ministry for Economic Development and Trade The Ministry for Economic Development and Trade is the most important R&D funding agency for technology development which is pertinent to sustainable development. It allocates resources to the "federal goal-oriented programs". These programmes target economic development objectives, including the development of the "national technology basis". A number of these thematic or sectoral programmes are relevant for Annex 181 sustainable development, and some of the development and modernization oriented programmes also contain important amounts of R&D funding (see TableAnnex A.3-6). The federal programmes "Research and development in priority areas of the scientificindustrial complex" and "Integration of science and university education" are administered by the Federal Agency for Research and Innovation (Ros-Nauka), the Federal Agency for Education (Ros-Obrasovanije), and in part directly by the Lomonosov Moscow State University. The priority areas of the former programme are described in section A.3.2.2. TableAnnex A.3-6: R&D expenditures in Russian federal programmes (US-$ million) Federal goal-oriented programme Period Federal budget Budget by sponsors* all Total 47.1 R&D 11.1 Total 15,955.6 R&D 101.0 Energy efficient economy 2002-2005, perspective until 2010 Energy efficient buildings 2002-2010 3.0 0.4 269.4 13.4 Water resources 2002-2010 8.5 0.2 109.0 0.2 Waste (Recycling) 2002-2010 1.7 0.4 3.1 0.4 Modernization of the transport system 2002-2010 1,828.5 1.1 11,759.4 74.5 National technology basis (including new materials) 2002-2006 52.6 42.0 Ecology and natural resources 2002-2010 33.8 3.9 745.4 9.4 Integration of science and university education 2002-2006 9.0 6.7 14.5 7.7 R&D in priority areas of the scientific-industrial complex 2002-2006 517.1 485.0 687.7 655.6 R&D in priority areas of the scientific-industrial complex 2007-2012 4,644.7 6,763.8 * Includes federal budget, regional government budgets and contributions by large companies. Source: Ministry for Economic Development and Trade [http://faip.vpk.ru/cgi-bin/uis/faip.cgi/G1]; 2004 exchange rates Ministry for Education and Research (MES) The Ministry for Education and Research plays no significant role in allocating research funds to environmental innovation. 182 Annex Ministry for Industry and Energy (MinPromEnergo) The huge Ministry for Industry and Energy is a merger of several former Ministries and Federal Agencies and has basically taken over responsibility for the whole defence and civil industry. In 2003, MinPromEnergo produced an energy strategy for Russia until 2020 and in 2006 a new five-year plan for sustainable energy development. It proposes a basic scenario that would meet power demand in 2015 in the amount of 1426 billion kwh, and, as a probable scenario, 1600 billion kwh. Among the measures planned is a gradual increase of the internal gas price that would bring internal revenues equal to those from export by 2011. MinPromEnergo created an investment fund to support innovation projects. The ministry sustains an internal research institute for energy strategy (www.energystrategy.ru). Russian Foundation for Basic Research (RFBR) The Russian Foundation for Basic research was created to support funding of R&D on a competitive basis. Among the priority research areas the following relate to sustainable development: New materials and chemical products, transport with alternative energy sources, ecology and rational use of nature, hydrogen energy, renewable energies. From 2001-2006 RFBR supported an annual conference on "Global Problems of Sustainable Development and Modern Civilization" in Moscow. TableAnnex A.3-7: Growth of RFBR funds 2000-2007 2000 2004 2005 2006 2007 RUB million 995.62 2386.60 3360.00 4283.24 5340.00 US-$ million 34.55 82.83 116.61 148.65 185.33 2004 exchange rates Other funding agencies for sustainability research The International Science and Technology Centre (ISTC) was established by international agreement in 1992 as a non-proliferation programme. The ISTC coordinates the efforts of numerous governments, international organisations, and private sector industries, providing weapons scientists from Russia and the former Soviet Union new opportunities in international partnership. In 2005, ISTC funded 163 new projects in the amount of $51 million. 14 % of the ongoing research was dedicated to the environment. Recently, ISTC started a "Fuel Cell Targeted Initiative" which seeks to focus ISTC-related activities on the final goal of development, manufacture and testing of a pilot power plant of five-kilowatt capacity based on fuel cell technology. This pilot power plant will then be used as a production prototype for commercialization. The Annex 183 selection of fuel cell technology for the first ISTC Targeted Initiative was based on the availability of skilled teams of scientists in closed science cities, the international importance of this technology, and an ISTC portfolio of more than 40 research projects related to fuel cell projects (ISTC annual report 2005). The Institute for Sustainable Communities (ISC) is a non-profit U.S. organization operating in Russia through its representative office in Moscow. It created the nonprofit Russian foundation "Fund for Sustainable Development" (FSD) which describes itself as "one of the few Russian organizations that combine a strong reputation for transparency and inclusiveness in grant making with a focus on environment and sustainable development." FSD works in the areas of energy efficiency technologies and implementation, management of natural resources and environmental health, but does not specifically target R&D projects. The mission of FSD is to enhance multisector interaction in fulfilling specific projects aimed at sustainable regional and community development. The non-governmental Ecological Vernadsky Foundation was founded in 1995 on the initiative of a number of Russian fuel and energy complex enterprises, Russian Academy of Medical Sciences, public and government organizations with the objective to "formulate and realize the sustainable development concept". The foundation regularly convenes conferences, e.g. on "Innovation technologies of the 21st century for the rational use of nature, ecology and sustainable development" in 2004. The Vernadsky Foundation also supports research through scholarships, awards or grants. Examples are support for the chair of sustainable innovation development at Dubna International University, Moscow; support for a research project on "Ecological aspects of heat energy industry". The budget is 1.55 Mio RUB per year (53.800 US-$). 184 Annex A.3.2.4 1. Leading research organisations Renewable energies and CO2-neutral fossil energies Moscow Power Engineering Institute (Technical University) MPEI, Moscow The largest Russian university and scientific centre in the field of power engineering, one of the leading universities in the field of power engineering, electrical engineering, electronics and computer sciences. Ca. 10,000 students, ca. 500 PhD students. Energy research institute of the Russian Academy of Sciences ERIRAS, Moscow Main research areas: electrical engineering, FuE for gas, petrol and coal industries The International Science and Technology Centre ISTC established a "Fuel Cell Targeted Initiative" in 2005 which seeks to focus ISTC-related activities on the final goal of development, manufacture and testing of a pilot power plant of five-kilowatt capacity based on fuel cell technology. Norilsk Nickel Corporation and Russian Academy of Sciences In 2004, the Norilsk Nickel Corporation invested 30 million US-$ in a collaboration with the Russian Academy of Sciences for the development of fuel cells. This was the largest agreement of this type so far. After one year, the company retreated due to dissatisfaction with the bureaucracy and ineffective management of RAS. 2. Energy efficiency in buildings Academic centre for energy efficient heat engineering (ACHEET), St. Petersburg Energy efficiency in heat engineering and optimization of technical processes, main research areas: mathematical modeling and energy saving programmes for regional government agencies and firms 3. Water supply and waste water systems Institute of aquatic problems of the Russian Academy of Sciences, IWP, Moscow Main research programmes: "Water resources as a decisive factor for long term sustainable development of Russia", "Complex steering of the water sector" Annex 4. 185 Material efficiency Research Center for the Problems of Resources and Waste Management of MinPromEnergo, Moscow Federal Centre of Geoecological Systems at the Federal Nature Management Supervision Service, Moscow Research areas pertaining to material efficiency: waste regulation: development of state waste data bank as part of the state waste cadastre; recommendations for the improvement of charges for waste disposal and for the compensation of environmental damage caused by unauthorized waste disposal. Participation in the Federal Goal-oriented Programme "Destruction of Chemical Weapons" 5. Mobility and Logistics Higher School of Economics HSE, Moscow International Centre for Logistics and study programme "Executive Logistics Manager", with links to the National Logistic Association NLA. Coordination Council for Logistics, founded by the Moscow Auto and Road Institute (TU) and the Moscow Transport Institute, Moscow Research institute of the movement of goods and wholesale markets conjuncture ITKOR, Moscow This joint-stock company is assign of the former state Scientific Research Institute of Economics and Organisation of Maintenance Supply, SRI 6. Socio-economic research on sustainable innovation Chair of ecology and sustainable development at the International University Moscow, Prof. Gennadi Jagodin Chair of sustainable innovation development at Dubna International University, Moscow, Prof. B. E. Bolshakov Centre of Theoretical Analysis of Environmental Problems MNEPU at the International Independent University of Environmental and Political Sciences, Moscow, director Prof. Marfenin MNEPU publishes the yearbook "Russia in the surrounding world" and a regular information bulletin which distribute information on environmental issues in Russia. 186 Annex A.3.3 India A.3.3.1 The Indian innovation system Research in India is predominantly government-led. Two thirds of GERD are funded by central government, with an additional 9 % from state governments and 5 % funded by the higher education sector. Only 20 % are financed by the private sector. By international standards, India's research strengths include mathematics, theoretical physics, chemistry, molecular biology and biotechnology, nanotechnology, information technology and space research. Agricultural research has a much larger share in India than internationally. TableAnnex A.3-8: Basic indicators of R&D resources in India India 2000 2004 1,015,923 457,371 1,079,721 691,163 0.85 21.708,7 20.1 a 0.78 18.0 68.2 9.7 19.8 66.7 8.6 4.0 4.9 Total S&T manpower (graduates) 1000 Personnel in R&D organisations 1000 Researchers in R&D organisations 1000 (public and private) 7,800.2 296.3 8,087.2 na 93.8 na Scientific publications in SCI Scientific publications % SCI 10,047 1.6 12,774 a 1.8 na na na 9.1 16.1 1.3 na 2.8 Population 1000 GDP (million current prizes US-$) GERD (million current PPP $) GERD per capita (current PPP $) GERD as a percentage of GDP GERD financed by private sector (%) GERD financed by central government (%) GERD financed by state government (%) GERD financed by higher education sector (%) Foreign trade (billion US-$) Exports of R&D-intensive goods to OECD Imports of R&D-intensive goods from OECD Exports of R&D-intensive goods to Germany Imports of R&D-intensive goods from Germany b a a = 2003; b = 2001; Source: NSTMIS Department of S&T, Government of India; World Development Indicators, Worldbank 2006; Foreign trade: DIW Berlin; Science Citation Index (SCI): US National Science Board: Science & Engineering Indicators 2006. Annex 187 The single most important research organisation in India is the Council for Scientific and Industrial Research (CSIR), which runs 38 laboratories and 39 outreach centres across the country and employs 18,250 people, including 13,340 S&T staff (2004-05). Apart from CSIR, several autonomous research institutes are funded directly by the Department of Science & Technology. The Indian Council of Medical Research and the Indian Council of Agricultural Research have strong research capacities. Until now, the best research in the country has been based at these research institutes rather than universities. Universities excel in teaching science, but their R&D activites are often hampered by a lack of funds and minimal equipment. Universities that excel in research also tend to be directly funded by central government, such as the Indian Institutes of Technology, the Indian Institute of Sciences (Bangalore) and the Jawaharlal Nehru University (New Delhi). Some state-funded universities, such as Delhi University and Anna University, Chennai, also have strong academic and publication records (Global Watch Service). Between 1995 and 2004, the average growth of Indian Gross Domestic Expenditure on R&D (GERD) was more than 13 % per year nominally. Nevertheless, India's R&D intensity, measured by GERD as a percentage of GDP, declined slightly after 2000 in the light of strong economic growth and remained at a low level of only 0.8 % (TableAnnex A.3-8). The Tenth Plan 2002-2007 provides 252.4 billion Rs. (ca. 5.6 billion US-$) for six major central government S&T departments (atomic energy, ocean development, science & technology, biotechnology, scientific & industrial research, space), 2.09 times the expenditures under the Ninth Plan (121 billion Rs.) The major share of government funded research is focused on applied research and development (TableAnnex A.3-9). TableAnnex A.3-9: Share of government R&D expenditure by type of work, 2002-03 Type Applied Research Experimental Development Basic Research Other Activities Percentage 41.7 34.0 17.8 6.5 R&D expenditures by central and state government, excluding higher education and industrial R&D. Source: NSTMIS Department of S&T, Government of India. According to a recent survey by NSTMIS, R&D financed by the private sector is concentrated in the fields of drugs & pharmaceuticals and transportation, followed by chemicals (other than fertilizers), electrical & electronics equipment and information technology (NSTMIS, 2005). Pharmaceuticals and biotechnology are the only sectors 188 Annex where cooperations with foreign or international firms have already been practiced for many years. Currently, one third of foreign direct investments in India go to the ITsector. Many foreign firms, especially from the U.S. set up R&D centres in India, e.g. in the IT-cluster of Bangalore. IT services account for only 3 % of Indian GDP but make for 50 % of national service exports (Krawczyk et al. 2007). A.3.3.2 Core themes of sustainability research in India The following priorities of national innovation policy are based on investigations by the Indian experts whose contact details are given at the end of this country profile (A.3.7.3). Renewable Energies According to the country experts, the innovation policy is also linked to various diffusion targets of the technologies. The following priorities were identified: a) Technology mapping and benchmarking of renewable energy and renewable energy systems. b) Development of standards, specifications and performance parameters of indigenously developed products & services. c) Grid interactive renewable power, with the target to install around 10 % of capacity through renewable power by 2012 and around 15 % by 2032. d) Non-conventional energy in urban areas: 1) Energy recovery from municipal waste - in 423 class-I cities including 107 municipal corporations where suitable waste is available – by 2032, 2) Solar Water heating systems - 100 % coverage of all prospective users like hotels, hospitals etc. - by 2032, 3) 100 % coverage of street lighting control systems by solar sensors in all cities - by 2012, Mandatory use of solar water heating systems in some cities. e) Non-conventional energy in industry- 1) Energy recovery from industrial wastes where suitable waste is available across the country – by 2032, 2) Solar Water heating systems - 100 % coverage of potential industries - by 2032, 3) Cogeneration - 100 % coverage of potential sugar and other biomass based industry - by 2032. f) Non-conventional energy in rural areas- 1) Provision of lighting/electricity in around 10,000 remote un-electrified census villages apart from remote hamlets of electrified census villages – by 2012, 2) Augmentation of cooking, lighting and motive power through renewable energy means in electrified villages – by 2032. Annex 189 g) Indigenous designs, development and manufacture of renewable energy systems. h) Development of cheaper raw material. i) Development of technology for effective grid interfacing. j) Development of technologies for synthesis gas cleaning, technology for control of NOx emissions during gasification, increasing the conversion efficiency. k) Development of 100 % producer gas engine for biomass gasification plants, biomethan. Energy Efficiency in Buildings a) Implementation of energy conversation building codes. b) Development of human resource to carry out energy conservation and energy audit activities in all sectors. c) Development of codes, standards and best practises for carrying out energy conservation activities. d) Research in India centric building simulation softwares and materials. e) Development of testing standard protocols and evaluation methodolgy. Water supply and waste water treatment a) Access to water for drinking purposes to all. b) Water quality management by improving the existing technology and supporting the development of newer, innovative technologies such as nano-filtration technology, etc. c) Promotion of new construction materials and tunneling technologies and research on the development of economical designs for water resource projects. d) Improving the water efficiency in different sectors. In agricultural sector, various techniques such as micro-irrigation, drip irrigation, sprinkler irrigation have been proposed. Several incentives and disincentives along with proper regulations have been identified for promoting efficient use of water resources. e) Promotion of various techniques for rain water harvesting in the country and making it mandotory in some large cities of India. f) Development of master-plan for flood control management in flood prone basins. g) Development of sustainable decentralized water supply infrastructure. 190 Annex Material Efficiency a) Promotion of research in multidisciplinary aspects of environmental protection, conservation and management b) Strengthening of R&D infrastructure facilities. c) Increase in process efficiency in various sectors (e.g liquor, textile). d) Development of new generation eco-friendly products (e.g ash bricks). e) Waste and e-waste management and recycling. f) Promoting the use of agricultural and industrial wastes in construction of building and in other areas through incentives, excise duty exemptions. Mobility and Logistics a) Reduce exhaust emission from automobile engines by stricter emission norms, improved petroleum fuel quality and shift to less pollutant alternate fuel. b) Encourage and mandatory usage of CNG/LPG as an auto fuel in highly polluted cities. c) Support research and development of technology and processes for production ethanol/bio fuels from different renewable sources. d) Assist the development of vehicles propelled by alternative fuels (e.g battery operated and hydrogen fuel). e) Encourage use of new materials of road construction and use of machines to improve quality and speed of construction particularly for development of HDCs (High Density Corridors). f) Augmenting the capacity of High Density Corridors (HDC) in the country in all modes of transportation. In railways through up-gradation to higher axle loads, up-gradation of passenger and freight terminals, construction of bypasses in major cities, reducing the speed differentials between freight and passenger cars, introduction of modern telecommunication and signaling systems to improve safer and reliability, accelerate containerization, machination of track maintenance. g) Maintenance of infrastructure by employing high maintenance standards and upgradation of the same. h) Increase in productive and economic efficiency in the field of transport. i) Reduction in accidents through improved safety. j) Alternate Fuels (bio-fuels, synthetic fuels and hydrogen) Substitution up to 10 % oil by bio-fuels, synthetic fuels and hydrogen in transport, portable and stationary applications by 2032. Blending of ethanol in petrol in selected cities is made mandatory. Annex 191 Socio-economic research on innovations for sustainability a) Development of women as entreprenuers. b) Interlinking student-community from technical institutions with small-scale industries and enterprises for sustainable development. c) Supporting patenting of small innovations. d) Development of markets for small innovations. e) Strengthening of scientific manpower to shoulder the responsibilities for environmental management in the country. f) Sustainable transformation of agricultural sector to support the alleviation of poverty. g) Provision of micro and rural credit for supporting socioeconomic development. h) Strengthen insitutional mechanisms for rural development. i) Promoting community based bio-diversity conservation and management. j) Adaptation for climate change issues. k) Capacity building of institutions for disaster management. A.3.3.3 Research funding agencies Central government funding is allocated through a series of five year plans and involves a considerable number of central government agencies. Civilian science policy is the remit of the Ministry of Science and Technology (MST), which has three main departments, the Department of Science and Technology (DST), the Department of Biotechnology (DBT) and the Department of Scientific and Industrial Research (DSIR) with its vital Council for Scientific and Industrial Research (CSIR). Other agencies of particular interest for this study are the Ministry of New and Renewable Energy (former Ministry of Non-Conventional Energy Sources, MNES) and the Ministry of Environment and Forests (MOEn). TableAnnex A.3-10 shows the major S&T agencies. The figures also include institutional funding for government research organisations, as in the case of CSIR. A new Ministry of Earth Sciences was created in July 2006 after merger of India Meteorological Department; National Centre for Medium Range Weather Forecasting; Indian Institute of Tropical Meteorology, Pune and Earth Risk Evaluation Centre with the then Ministry of Ocean Development. The Ministry’s mandate is to look after Atmospheric Sciences, Ocean Science & Technology and Seismology in a integrated manner. 192 Annex The major objective of R&D financed by state governments is the development of agriculture, forestry and fishing (92.8 % of expenditures), followed by the development of health services (2.1 %) and the promotion of industrial development (1 %) (NSTMIS, 2005). TableAnnex A.3-10: R&D expenditure by central government S&T agencies, 2002-03 Agencies in focus for this study Department of Science & Technology (DST) Council of Scientific and Industrial Research (CSIR) Ministry of New and Renewable Energy (MNES) Ministry of Environment and Forests (MOEn) Other agencies* Defence R&D Organisation (DRDO) Department of Space (DOS) Indian Council of Agricultural Research (ICAR) Department of Atomic Energy (DAE) Department of Biotechnology (DBT) Indian Council of Medical Research (ICMR) Department of Ocean Development (DOD) Ministry of Information Technology * Rs. million US-$ million 5095.2 9512.5 113.2 211.4 % major scientific agencies 5.0 9.4 % total GERD 123.9 2652.25 2.8 58.9 0.1 2.6 0.1 1.5 30800 21500 13700 12400 1600 1600 1400 1000 101577 684 479 305 275 36 36 32 23 2257 30.3 21.2 13.5 12.2 1.6 1.6 1.4 1 100 17.1 12 7.6 6.9 0.9 0.9 0.8 0.6 56.4 2.8 5.3 Budget figures for these agencies are approximations. Source: NSTMIS Department of S&T, Government of India; TERI experts. Ministry of Science and Technology (MST) The activities of the Department of Science and Technology are primarily focused towards scientific research, technology development, socioeconomic development, scientific services, international cooperation and supporting autonomous S&T institutions. It prioritises R&D in harnessing indigenous resources, material efficiency, technologies for mitigation and management of natural hazards, industrial and scientific R&D. The Department of Scientific and Industrial Research DSIR is the administrative link between the government of India and the research organisation CSIR. CSIR is currently undergoing an organisational restructuring aimed to render the organisation more responsive to customer and market needs, to stimulate intellectual property management, to enhance investments in selected areas of high quality science. Faced with an ageing workforce, CSIR seeks to become a more attractive career option for young scientists and to enhance training of senior scientists. Annex 193 The Ninth Plan programmes/activities of the CSIR were implemented in 16 broad sectors, including: aerospace; biology and biotechnology; chemicals; drugs and pharmaceuticals; earth resources and natural hazards mitigation; ecology and environment; electronics and instrumentation; energy; food and food processing; housing and construction; information products; leather; machinery and equipment; minerals, metals and materials; rural development; and exports of R&D and services (DST five year plan 2002-2007). Ministry of New and Renewable Energy (MNES) The broad objectives of renewable energy policy in India are to meet the minimum energy needs through renewables, and to provide decentralised energy supply in agriculture, industry, commercial and household sectors in rural and urban areas. The focus of the MNES is rather on development and diffusion of renewable energy technologies and less on research. The MNES priorities for R&D are development of standards, protocols for deployment of renewable energy systems, which are cleaner and cheaper. The ministry also forsees use of new raw materials for low cost technologies as one of the priority areas. According to MNES, in 2005, the total capacities of renewable energies reached about 7,000 MW, which is about 7 % of the country’s grid power capacity. Of this, wind energy contributed about 4,000 MW. The ministry has set a goal of installing 10 % of the additional power generation capacity in the country through grid connected renewable power by 2012. Other programmes foster the electrification of remote villages, wind power, standalone renewable energy systems (biogas and solar photovoltaic lighting systems), solar thermal energy and energy recovery from urban and industrial wastes. More recently, biofuels and hydrogen receive increasing attention (see section A.3.3.2). Ministry of Environment and Forests The main priorities in research on innovations for sustainable developments are reduction in pollution, regeneration of degraded areas and protection of the environment. Its mandate includes the conservation and survey of flora, fauna, forests and wildlife, the prevention and control of pollution, afforestation and regeneration of degraded areas and protection of environment, all within the larger legislative framework. The main tools utilized for this include surveys, impact assessment, control of pollution, regeneration programmes, support to organizations, research to find solutions and 194 Annex training to augment the requisite manpower, collection and dissemination of environmental information and creation of environmental awareness among all sectors of the country's population. Details on the content of research programmes funded by the ministry are available in the ministry's annual reports. [http://envfor.nic.in/]. International Funding Agencies International funding agencies play also a remarkable role for sustainability technologies in India. The following agencies were identified in particular: a) Work Bank - provided about USD 200 million for National Agricultural Innovation Projects. b) USAID - USD 60 million. Support being provided for carrying out R&D in areas related to water, energy, environment and energy conservation. c) GTZ - provides financial support for conducting research in sustainable economic development, energy and environmental policy. d) UNDP - provides financial support for projects related to energy efficiency, access to rural energy, conservation of traditional medicinal plants, sustainability of bio-diversity and coal bed methanation. About USD 60 million were provided for these activities. Annex 195 A.3.3.4 1. Leading research organisations Renewable energies and CO2neutral fossil energies 1. Center for Materials for Electronics Technology, Pune 2. National Physics Laboratory 3. Indian Institute of Science, Bangalore 4. Indian Institute of Tecchnology, New Delhi, Mumbai, Chennai, Guwahati, Kharagpur 5. The Energy and Resources Institute (TERI) 6. Centre for Wind Energy Technology C-WET, Chennai 7. Solar Energy Centre, New Delhi 8. Centre for Energy Technology, Osmania University, Hyderabad 9. Centre for Scientific Research, Auroville 10. Regional Research Institute, Bubaneshwar 11. HNB Garhwal University 12. Geological Survey of India, Government of India 13. West Bengal Renewable Energy Development Agency (WBREDA), West Bengal 14. National Environmental Engineering Research Institute, Nagpur 15. BHEL Limited 16. Alternate Hydro Energy Centre, Rorkee 17. Jadhavpur University, Kolkotta, West Bengal 18. Devi Ahilya Vishwavidyalaya, Indore 19. R&D Centre, Indian Oil Corporation Ltd 2. Energy efficiency in buildings 1.Indian Institute of Technology (Mumbai and Delhi)- Various aspects of energy efficiency in buildings including solar passive space conditioning (visual and thermal comfort) 2. Indian Institute of Information Technology (IIIT - Hyderabad) 3. School of Planning and Architecture (New Delhi) 4. Center for Environmental Planning and Technology (CEPT – Ahmedabad) 5. The Energy and Resources Institute (TERI) 6. Development Alternatives (DA) 7. National Physics Laboratory, New Delhi 8. Malviya National Institute of Technology, Jaipur 9. School of Engineering and Environment Studies, Indore 10. Building Materials and Technology Promotion Council 11. Central Public Works Department, Government of India 12. HUDCO (Housing and Urban Development Corporation) 3. Water supply and waste water systems 1. Central Water and Power Research Station (CWPRS), Pune 2. National Insitute of Hydrology, Roorkee 3. National Institute of Ocean Technology, Chennai 196 Annex 4. Central Ground Water Board (CGWB) 5. India Institute of Chemical Technology, Hyderabad 6. Agharkar Research Institute 7. The Energy and Resources Institute (TERI), New Delhi 8. National Water Development Agency, New Delhi 4. Material efficiency 1. Central Leather Research Institute, Chennai 2. Regional Research Institute, Bubaneshwar & Trivandrum 3. National Chemical Laboratory, Pune 4. Central Paper and Pulp Research Institute 5. Sardar Patel Research Institute 6. Central Electrochemical Research Institute, Karaikudi, Tamil Nadu 7. Advanced Research Centre for Powder Metallurgy and New Materials, Hyderabad 8. National Environmental Engineering Research Institute, Nagpur 9. The Energy and Resources Institute(TERI), New Delhi 10. National Productivity Council, New Delhi 11. G B Pant Institute of Himalayan Environment & Development (GBPIHED) 5. Mobility and Logistics 1. School of Planning and Architecture, New Delhi 2. Indian Institute of Technology, New Delhi 3. Central Road Research Institute 4. Sardar Swaran Singh National Institute of Renewable Energy (SSS-NIRE) 5. Shri. A M M Murugappa Chettiar Rersearch Centre (MCRC), Chennai 6. Banaras Hindu University (BHU), Varanasi 7. SPIC Science Foundation, Tuticorin 8. Indian Institute of Technology, Karagpur 9. Indian Institite of Technology, Madaras, Chennai 10. Indian Institute of Petroleum, Dehradun 11. Delhi College of Engineering, New Delhi 12. Indian Oil Corporation, R&D centre, Faridabad 13. The Energy and Reosources Institute(TERI), New Delhi 6. Socio-economic research on sustainable innovation 1. Indira Gandhi Institute of Development Research, Mumbai 2. Indian Institute of Management, Ahmedabad 3. National Innovation Foundation, Ahmedabad 4. Society for Research and Initiatives for Sustainable Technologies and Institutions 5. Department of Science and Technology, Government of India 6. Swiss Agency for Development and co-operation, New Delhi 7. Centre for Science and Environment, New Delhi 8. The Energy and Resources Institute(TERI), new Delhi 9. M S Swaminathan Research Foundation, Chennai Annex A.3.3.5 197 Importance of R&D for sustainability – expert views The following tables present comments of the contributing experts on the importance of Indian R&D in the thematic fields and subfields in this study. TableAnnex A.3-11: Renewable energy & fossil free energy sources Technology Comments Renewable energy The total demand for power is expected to increase 3.5 times or more in the next two decades. This will necessitate increasing the generation capacity in the country. Undertaking this capacity expansion in a sustainable and environmentaly benign way will reduce harmful negative impacts. A more concerted effort to increase the renewable- electricity will reduce the country's dependance on imported fuel. A large indegenous capacity in terms of manufacturing, man-power, R&D exists in the country. This needs to be converged with acutal implementation using appropriate policies. The average solar insolation in the country is 6 kWh/meter2/day. At present the photovoltaic technology is expensive and the cost of electricity exceeds Rs.20/kWh. Efforts to reduce costs and increase efficiency are necessary. R&D should be focussed on developing thin-flim technology. Solar thermal is economical for water heating. Much of its potential has yet to be exploited. Appropriate policies need to be designed to accelerate the exploitation of this potential. R&D should be carried out to develop low-cost solar heaters. India is 5th largest producer of wind power. The potential for onshore wind power is assessed at 45,000 MW. At present the capacity utilization in existing plants is low due to various factors. Efforts are required to carry R&D in this prespective. The offshore wind power potential has not yet been assessed. Tidal Energy has been identified as an uneconomical and commercially unviable option in India. India’s hydel resources are estimated to be 84,000 MW at 60 % load factor. Efforts are required to tap the available resources (mainly in north-eastern states, Uttaranchal and Himachal Pradesh). Proper Ecological, socio-economic research has to be conducted to reduce the negative impact while realizing this potential in the country. While tidal/wave technologies are less important, this is not the case with small hydro which is being harnessed vigourously. Bio-mass is the major domestic fuel for cooking. It provides 1/3rd of the country's primary energy needs. Efforts are required to improve the efficiency and convenience of using biomass. Establishment of sustainable fuelwood plantations are necessary. 350 hot springs have been identified in the country. Several pre-feasibility tests have been carried out. However, more concerted efforts have to take to tap the potential in this area. Hybrid technologies are being tested and tried out in the country. The most widly accepted technologies are: Wind-Solar hybrid, wind-diesel hybrid and small hydro-batteries. Research priorities should focus on the cost effectiveness of clean-coal technologies, carbon sequestration, coal being the major energy resource in India with the potential of providing long-term security of supply. Photovoltaic energy Solar thermal energy (heat or electricity) Wind power Water (incl. also e. g. tidal or wave) power Biomass Geothermal energy System integration Carbon CS 198 Annex TableAnnex A.3-12: Energy efficient buildings Technology Comments Building shell Use of new materials in building construction have to be promoted after carrying out intensive research Heating systems Industries should be encouraged to use CHP systems. A large number of industries have already installed such systems in India Air conditioning Use of passive cooling methods can be promote Lighting Use of low-wattage CFL, T5 tubes Measurement and control engineering Development of simulation tools with specific applicability to Indian conditions TableAnnex A.3-13: Water supply and sewage systems Technology Comments Water supply Supply of drinking water has been identified as a priority in the National Water Policy. Research in developing water supply systems as integration of canals and rivers is underway. Financial support is provided by the Central Government. Waste water and sewage systems Sewage control and sanitation has been identified as a priority by the Central Government. However, no significant research is being undertaken in this respect in the country. Decentral water infrastructure Several programmes supported by the central government are operating in the country to improve the water infrastructure in the country. Development of sustainable, decentralized water infrastructure across the country has been identified as a priority area for several reasons. Rain water harvesting and management Adoption of rain-water harvest and management techniques across the country is important to off-set water scarcity witnessed in many parts of the country. Water use efficiency India's water resources are sufficient to meet its future demand; however it lacks the ability to effectively utilize the available water resources. If effective policy instruments and technological advances are made, India will be in a better position to meet the 20-40 percent increase in water requirment that is expected over the next 20 years. Water use in agriculture Enormous potential exists for effecient and productive use of water in the agricultural sector. Flood management Proposals to link major rivers have been initiated to channelize surplus water in flood probe regions to drought prone regions in the country. This would prevent the occurance of catastrophic events on the one hand and probably increase the arable land in the country Annex 199 TableAnnex A.3-14: Material efficiency Technology Comments Recycling Development and use of coal-fly ash as a raw material for making bricks and cements is underway. Several scrap metal industries are operating in India which make use of scrap metal for various end products. Other wastes like paper and textiles are also being recycled. Renewable resources Several industries at present are making use of agro-residues as fuel. Material efficient production processes and products National productivity council has taken a major step towards increase in process efficiency and cleaner processes with waste minimization. More of such steps are needed. TableAnnex A.3-15: Mobility and Logistics Technology Comments Mobility and logistics India's economic growth to a large extent depends on the transportation infrastructure. Rising population combined with increasing urbanization will exert pressure on the nation’s current transportation and logistic systems. This will necessitate extensive research and development in this sector. Vehicles (road, rail, air, water) Two important modes of transport for India are the roadways and railways. Efforts to increase their carrying capacity in a sustainable manner are required for sustainable development. It is important to shift frieght transportation from road to rail, to save fuel and reduce emissions. Similarly efficient public transport is required to reduce personal vehicles on the road. Drives Research in innovative drive concepts is underway. Infrastructure (road, rail, air, water) Infrastructure constraints are increasingly being felt across the transport sector. Research into developing a sustainable transport-system is lacking in the country. More importantly, research and development of infrastructure for non-motorized modes of transport are lacking. This is of great importance to India as the population using this mode of transport is expected to increase in great numbers. Emission reduction Rising pollution level in major Indian cities has been a cause of concern. Introduction of CNG as a fuel for public transportation in the nation’s capital was a welcome relief. Efforts to introduce EURO IV are being planned for the year 2010. Alternative fuels Though there is a directive from the government for promoting the usage of alternative fuels for transport, no deadline for actualizing the implementation of the same has been set till date. 200 Annex TableAnnex A.3-16: Socio-economic research on innovations for sustainable development Technology Comments Socioeconomic research on innovations for sustainable development The role of public, financial, R&D, market and design institutions in building a value chain and providing back up support for socio-economic research is important. There is a serious shortage of qualified people in various institutions (only 157 million scientists and engineers are engaged in R&D activities in the country) and this directly influences the innovative capability of the nation. More efforts are required to increase the skill-base of the country. Barriers and drivers for environmental innovation Economic barriers, lack of awareness and institutional barriers have to be overcome. The complexity of behavioural patterns has to be understood in depth to fuse innovation and sustainable development in the country. Market development and diffusion of environmental innovations Inefficient and improper linkages between technology development and technology application have resulted in non-conducive markets. Developing proper linkages between research and bussiness is necessary for sustainable innovation and development. Innovation systems and innovation policy Creating an environment in which entrepreneurship can flourish at all levels is essential to support innovation in the country. Incentives for innovations, accountability towards innovators to generate more efficient and competitive livelihood support measures are necessary. Environmental Policy Development strategies have to be tuned to the ecological concerns that in turn ensure that threats and trade-offs are appropriately evaluated at every stage. TableAnnex A.3-17: System integration across technological areas Technology Comments System integration across technological areas There are existing examples of interlinkages between renewable energy and buildings as natural resources are used in sustainable buildings. Energy water nexus USAID has financed USD 10 million for a project on water energy nexus. This project aims to build an understanding of the water-energy nexus among policy makers, utility managers, farmers, urban industries and residential customers; Act as a resource and catalyst for behavior change in water policy, distribution and use; Introduce technologies and methodologies to industry professionals to improve distribution and decrease loss; Foster efficient urban and rural water and energy usage; Advance sustainable financing practices for utility providers; Demonstrate approaches for making services commercially viable – decreasing public reliance on subsidies. More such efforts need to be done recognising the nexus between various other sectors too. Annex 201 A.3.4 China A.3.4.1 The Chinese innovation system The largest research organisation in China is the Chinese Academy of Science (CAS). It runs a nationwide system of over 100 research institutes and a prestigious research university (the University of Science and Technology of China at Hefei, Anhui). Research funding at the institute level is a combination coming from CAS Headquarters, the Ministry of Science and Technology (MOST) and the National Natural Science Foundation of China (NSFC) (Hsiung, 2002). In addition, CAS institutes earn varying amounts of money owning and operating spin-off enterprises. Several ministries also fund their own Academies, smaller in scale than CAS. Although there are over 1,100 higher education establishments (not including adult education) in China, only a few of the top 10-20 are well known outside China. Only a minority carry out significant amounts of research. Much of China's R&D effort is carried out in specialised Research Institutes. According to Global Watch Service, about 50 % of China's R&D funds are spent in China's 6,000 research institutes, funded at national, provincial and county level. State Key Laboratories are prestigious research groups that have made a successful bid to the State Planning and Development Commission (SPDC) for designation as SKL in their field of research. A specific feature of the emerging Chinese innovation system is university-run enterprises (UREs) (also enterprises run by research institutes). According to Eun et al. (2006), UREs in China differ from the university spin-offs common in the US and other industrialized countries in that way that they are typically established, staffed, funded and managerially controlled by the universities and are usually endowed with the de facto right to exclusively take advantage of the mother institutions' various assets. UREs are widespread in China. According to the Chinese Ministry of Education (cited by Eun et al., 2006), in 2001 there were 5,039 UREs in China of which 40 were listed on the stock markets in Mainland China and Hong Kong. China is experiencing a phase of very rapid R&D expansion. Between 1995 and 2004, Gross domestic expenditures on R&D (GERD) have grown by approximately 20 % annually. After a relative decline in the first half of the 1990s, the research intensity, measured as GERD percentage of GDP, increased from 0.58 in 1996 to 1.23 in 2004. Thus, while Chinese R&D intensity is still much lower than the average of OECD countries (2.26 in 2004), the absolute volume of R&D expansion clearly places China in the top position among the BRICS countries. Most of China's R&D activities are concentrated in a few large cities. 202 Annex TableAnnex A.3-18: Basic indicators of R&D resources in China China 2000 2004 Population 1000 GDP (million current prizes US-$) 1,262,645 1,198,480 1,296,157 1,931,710 GERD (million current PPP $) GERD per capita (current PPP $) GERD as a percentage of GDP 44,777.1 35.5 0.9 93,992 72.5 1.23 57.6 33.4 2.7 65.7 26.6 1.3 922,131 695,062 1,152,617 926,252 87 18,142 2.9 177 a 29,186 a 4.2 na na na 221.7 115.2 22.9 na 19.7 GERD financed by industry (%) GERD financed by government (%) GERD financed by abroad (%) Total R&D personnel (FTE) Total researchers (FTE) Triadic patent families (priority year) Scientific publications in SCI+SSCI Scientific publications % SCI+SSCI Foreign trade (billion US-$) Exports of R&D-intensive goods to OECD Imports of R&D-intensive goods from OECD Exports of R&D-intensive goods to Germany Imports of R&D-intensive goods from Germany a a = 2003; OECD member countries until 1993, excludes Mexico, Czech Republic, Hungary, Poland, South Korea, Slovakia. Source: OECD Main Science and Technology Indicators 2006; World Development Indicators, Worldbank 2006; Foreign trade: DIW Berlin. Science Citation Index (SCI): US National Science Board: Science & Engineering Indicators 2006. Since the mid-1990s the distribution of R&D between the government and private sectors changed significantly. In 1995, 50 % of R&D expenditures were invested by government sources, while less than a decade later already two thirds of R&D expenditures are coming from industry. The industry branches with the largest share of R&D expenditures are electronics, vehicle construction, electrical engineering, and mechanical engineering. A lot of Chinese research is still devoted to the appropriation and advancement of imported technology. Almost three quarters of Chinese R&D expenditures are dedicated to experimental development, with a further 20 % for applied research and only 5 % for basic research. A strong orientation towards applied research and experimental development with only a small portion of basic research (6 %) are also observed in universities and specialized research institutes. (Krawczyk et al., 2007). Chinese R&D policy places a strong emphasis on innovation and the commercialization of R&D results. In the "National Outline for Medium and Long Term S&T Development Annex 203 Planning (2006 -2020)”, the Chinese government concentrates a considerable portion of its R&D investments on a limited number of research areas to achieve "more breakthroughs in less time" (MOST). Critics of this approach are concerned that longterm planning and concentration of government R&D investments on megaprojects could reduce the flexibility of the Chinese innovation system in the face of rapid scientific and technological development and is harmful to scientific creativity and bottom-up competition of ideas (Hao Xin, Gong Yidong, 2006). A.3.4.2 Core themes of sustainability research in China Renewable energy and CO2-neutral energy sources In recent years, in response to the rapid growth of energy consumption and corresponding environmental problems, China has initiated a number of special programmes and action-plans to improve the energy efficiency and change energy consumption structure in the country. In 2003, China's renewable energy consumption accounted for only 3 percent of the country's total energy consumption (RenewableEnergyAccess, 9 March 2005). The government plans to raise this figure to 15 percent in 2020 as a proportion of primary energy. In 2002, the Ministry of Science and Technology of China promulgated the "Science and Technology Outline for Sustainable Development (2001-2010)". Clean energy and renewable energy is one of the priority areas. In the year of 2004, National Development and Reform Commission launched the "Medium and Long-term Plan of Energy Conservation". In this plan which covers two phases, 2005-2010 and 2010-2020, detailed energy conservation targets were set up. Key actions and comprehensive policy measures were put forward, as well as 10 key energy conservation projects. In January 2006 a "Renewable Energy Law" entered into force. It requires power grid operators to purchase resources from registered renewable energy producers. The law also offers financial incentives, such as a national fund to foster renewable energy development, and discounted lending and tax preferences for renewable energy projects (RenewableEnergyAccess, 9 March 2005). The government lists renewable energies, including hydroelectricity, wind power, solar energy, geothermal energy and marine energy, as a preferential area for hi-tech development and hi-tech industrial development, and allocates funding for the scientific and technical research. Energy efficiency in buildings In China, central heating systems or systems with a combination of heat, cooling and electricity generation play an important role. The heated surface in Chinese cities equals more than 2.5 billion m². Large cities as Guangzhou, Beijing and Shanghai even 204 Annex employ central cooling systems. For example, the central cooling system of the university district of Guangzhou is the number 2 in international comparison. In the Medium and Long-term Plan of Energy Conservation of the National Development and Reform Commission, Architecture, commercial and civil energy is one of the key energy conservation fields. Apart from numerous large demonstration projects, the standards for buildings are gradually being raised. Recently, many research activities and international cooperations have been initiated. In September 2006, the German Federal Minister of Transport, Building and Urban Affairs, visited China in preparation of a bilateral government agreement in cooperation for energy efficiency with a focus on buildings. Water supply and waste water systems More than 60 % of Chinese cities have no waste water systems, and there is practically no waste water treatment in rural areas. More than half of the most important Chinese rivers are considered to be extremely polluted. In the cities, 90 % of surface and 50 % of ground water are heavily polluted. It is estimated that half of the population have no access to safe drinking water. Water use by firms and households is extremely inefficient. Water shortage is meanwhile perceived by many people as China's most pressing environmental problem. A large number of water treatment plants are being planned or built at China's East coast (Schmitt, 2005). Significant R&D activites are involved in the design of the massive water transfer project to connect the Yangtze River with the city of Beijing which was begun in 2002. The main working areas of R&D institutions are water supply, wastewater treatment, water and wastewater systems in cities, and garbage disposal. More recently the topic of resource efficiency is gaining more importance. Material efficiency The Ministry of Science and Technology embraces the concept of a "circular economy" as a priority for research and innovation, yet information on R&D priorities in this sector is incomplete as there is no clear conceptual distinction between technologies for environmental protection as opposed to cleaner production technologies or cleaner products. Treatment of industrial wastes is an urgent environmental problem. Mobility and logistics The next 20 years are the key time for the development of Chinese transportation. Many important projects will be constructed such as high-speed railway, urban railway transportation system, highway, flight between cities etc. Many problenms such as Annex 205 energy demand, traffic jams, and transport security must be solved. So the research field of mordern transportation is alredy an important field in the 863 programme in 11th 5-Years plan. Many universities and research organisations have been investing much for that, and already get a strong capacity on rail transportation control, intelligent transportation and transportation organisation. Socio-economic research on innovations for sustainability Socio-economic research on sustainable innovation in China is mostly taken charge in institutes and universities.The focus in innovation research is on R&D input and related performance measures. There is also some research on environmental economics and on the integration of environmental planning into urban planning. Construction in the countryside is a more recent topic of planning research. A.3.4.3 Research funding agencies The organizations listed below administer most civilian science and engineering research in China, although the Ministries of Defense, Health, Agriculture and the State Forestry Administration and other economic agencies also have significant research operations under their direct management. The Ministry of Education oversees and funds all universities in the country. Ministry of Science and Technology (MOST) The Ministry of Science and Technology (MOST) provides policy guidance on the S&T systemic reform agenda, and provides funds for major national S&T programmes, including the National Basic Research (973) Programme, the High-Tech R&D (863) Programme and the National Key Technologies R&D Programme. In 2006, the new S&T plan was published, the "National Outline for Medium and Long Term S&T Development Planning (2006 -2020)”. One distinct feature of the Plan is the adoption of innovation as a new national strategy and the goal of advancing China to the rank of innovation-oriented countries by 2020. During the 10th five year period (2001-2005), the government allocated an investment of 20 billion RMB (2.4 billion US-$) to 12 "megaprojects", with the expectation that this strong concentration of resources produces "more breakthroughs in a shorter period of time" (MOST). Strong prioritizations have also been made in the research plan for 2006-2020. The favored research areas include (non-comprehensive list): protein science, quantum research, nanotechnology, development and reproductive biology, next-generation broadband, large-scale oil and gas explotation, transgenic plant breeding, drug development and manned moon exploration (Hao Xin, Gong Yidong, 2006). 206 Annex National Basic Research (973) Programme The purpose of the National Basic Research Programme is to strengthen basic research in line with national strategic targets. According to MOST, the "strategic objective of the Program is to mobilize China’s scientific talents in conducting innovative research on major scientific issues in agriculture, energy, information, resources and environment, population and health, materials, and related areas." The budget of the 973 Programme attained ca. 1 billion RMB in 2005 (ca. 120 million US-$). According to the contributing experts from Tsinghua University (A.3.6), the National Basic Research Programme supports sustainabilitiy research in the thematic fields listed in TableAnnex A.3-19. With regard to energy, an important focus of this programme is the geological distribution and exploitation of coal, oil and gas in China, as well as the development of cleaner, more efficient coal technologies. TableAnnex A.3-19: Sustainability research supported by the Chinese National Basic Research Programme Thematic field Renewable energy Water supply and waste Basic research supported by 973 Programme − Renewable energy in large scale − PV cells with low cost and long life − Developing wind energy and biomass energy − Advanced theory and methodology of energy saving, especially in high-energy consumption areas − Materials for efficient energy transport − Water recycling and high efficiency use of water resources in areas with water shortage water systems Material efficiency Mobility and logistics − Circular economy and resource recovery − Urban transportation, logistics and engineering safety High-Tech R&D (863) Programme The National High Technology R&D Programme aims at the "forefront of world technology development" and seeks to "intensify innovation efforts and realize strategic transitions from pacing front-runners to focusing on 'leap-frog' development" (MOST). The government budget of this programme amounts to ca. 1.5 billion RMB in 2005 (ca. 180 million US-$). Yet total R&D funding is significantly higher since funding under this programme usually comes from various channels including government, industry and society. Annex 207 TableAnnex A.3-20: R&D areas of the 863 programme in 2002 R&D area Information technology Biotechnology and advanced agriculture Advanced materials Advanced manufacturing and automation Energy (including nuclear energy and clean coal) Resources and environment (with focus on the exploitation and monitoring of marine resources and environmental pollution) Source Share of 863 R&D expenditure 20 % 33 % 17 % 10 % 14 % 6% MOST, 863 annual report 2002. According to the contributing experts, The High-Tech R&D programme currently supports R&D on a MW-scale grid-connected photovoltaic system and on demonstration systems for power generation with solar energy. In the field of mobility and logistics, the programme supports R&D on energy efficient vehicles and alternative fuels, as well as R&D for controlling vehicle emissions. National Key Technologies R&D Programme The National Key Technologies R&D Programme is geared to demands of economic construction and social development. According to MOST, the programme "focuses on promoting technical upgrading and restructuring of industries, and tackling major technical issues concerning public welfare". The programme also supports selected megaprojects which, according to the contributing experts, include research on watersaving forms of agriculture and on the management of water pollution. National Natural Science Foundation of China (NSFC) The National Natural Science Foundation of China (NSFC) funds peer-reviewed basic and applied research in natural science fields. Principal grant awardees are Chinese universities and CAS research institutes. The budget of the foundation amounts to ca. 3 billion RMD/year (ca. 361 million US-$). The NSFC cooperates with the German DFG in the Sino-German Center for Research Promotion. According to the contributing experts from Tsinghua University (A.3.6), the NSFC supports sustainabilitiy research in the thematic fields listed in TableAnnex A.3-21. 208 Annex TableAnnex A.3-21: Sustainability research supported by the National Natural Science Foundation of China Thematic field Renewable energy Water supply and waste R&D supported by NSFC − Solar cells − Energy storage technology − Fuel cells − Energy safety and energy policy − Solar energy utilization − Biomass energy utilization − Water resource management in constructing a resourceeconomical society water systems Material efficiency A.3.4.4 1. − − Recycling Secondary utilization of metallurgical resources Leading research organisations Renewable energies and CO2-neutral fossil energies − Tsinghua University, Institute of Nuclear and New Energy Technology; www.inet.tsinghua.edu.cn − Energy Research Institute of National Development and Reform Commission; www.eri.org.cn − Zhejiang University − Xi'an Jiaotong University Companies with important R&D activities in this thematic field (field 1): China Petroleum & Chemical Corporation, www.sinopec.com; Tianwei Yingli New Energy Resources Co., Ltd., www.yinglisolar.com/en/ 2. Energy efficiency in buildings − Tsinghua University, School of Architecture; http://arch.tsinghua.edu.cn/chs/eng − Tongji University, College of Construction − Southern China University of Technology − Chinese Academy of Building Research, Institute of Construction Physics; www.cabr.ac.cn − Xi'an University of Architecture and Technology Heat pump technology has shown rapid development in China. Institutes with strong competences in this area, also in the area of system integration, include the Haerbin Institute of Technology, Tongji University, Chinese Academy of Building research. Companies with important R&D activities in this thematic field (field 2): Beijing Morden Group; Beijing Fenshang Co.; Nanjing Langshi Co.; Fousun Group; www.fosun.com/cn/index/ Annex 209 3. Water supply and waste water systems − Tsinghua University, Department of Environmental Science and Engineering; http://env.tsinghua.edu.cn/Eng/ − Tongji University − Haerbin Institute of Technology − China Institute of Water Resources and Hydropower Research; www.iwhr.com − Chongqing University − Chinese Plan Institute − Central and Southern China Municipal Engineering Design & Research Institute − Beijing General Municipal Engineering Design & Research Institute − Shanghai Municipal Engineering Design General Institute − Different design and plan institutes for water and wastwater etc. The example of water research capacity at Tongji University: The College of Environmental Engineering of Tongji University has more than 50 professors, and Institute of Environmental Science, State Key Lab etc. Together with Nanjing University it operates the State Key Lab for Pollution control and resource management, and educates 31 post doc, 130 doc and more than 300 masters, and does a lot of basic and innovative research in different environmental fields. The MOE Key Lab for Yangtze Water environment is also operated by Tongji University. Its main working areas are: protection against water pollution and water security, ecological development and security, geological and environmental development, use and manangement of water resources, all regarding the Yangtze river basin. The same key lab is conducting an 863 project for development of low cost high efficiency technologies for waste water treatment. It is also taking the Shanghai municipal project aimed at harnessing of the Suzhou river and participates in the International cooperation project "ecological construction and environment protection of Chongming island". The latter includes environmental protection planning, research on key technologies for evironmental protection, research and realisation of demo project on environment protection, research on evironmental management of Chongming Island. The objective of this research is to develop strategies for sustainable development, to develop some practical technologies and to solve the problems. 4. Material efficiency − University of Science and Technology Beijing, School of Materials Science and Engineering − Zhejiang University, College of Materials Science and Chemical Engineering − State Key Laboratory of Advanced Technology for Materials Synthesis and Processing in Wuhan University of Technology − The National Center for Nanoscience and Technology (NCNST) − Chinese Academy of Sciences; www.cas.ac.cn Companies with important R&D activities in this thematic field (field 4): − China Ocean Shipping (Group) Company COSCO 210 5. Annex Mobility and Logistics − Beijing Jiaotong University − Tongji University − South-East University − Academy of Rail Science − Academy of Science of Ministry of Transportation − Research Institute for Transportation of National Development and Reform Commission − Research Institute of Highway, Ministry of Communications; www.rioh.cn/head.asp − China Automotive Technology & Research Center; www.catarc.ac.cn − Tsinghua University; Institute of Transportation Engineering; http://ite.civil.edu.cn Companies with important R&D activities in this thematic field (field 5): ChangAn Vehicles- Hybrid Vehicles; www.changan.com.cn; Shanghai GDWAY Intelligent Transportation System Corporation; www.gaodewei.com 6. Socio-economic research on sustainable innovation − Beijing University − Chinese Academy of Social Sciences; www.rcsd.org.cn, e.g. Research Center for Sustainable Development A.3.5 South Africa A.3.5.1 The South African innovation system The largest research organisation in South Africa is the Council of Scientific and Industrial Research (CSIR). CSIR is organised in five operating units: Built Environment; Biosciences; Defence, Peace, Safety and Security; Natural Resources and the Environment; Materials Science and Manufacturing. The CSIR receives an annual grant from Parliament, through the Department of Science and Technology (DST), which accounts for close to 40 % of its total income. The remainder is generated from research contracts with government departments at national, provincial and municipal levels, the private sector and research funding agencies in South Africa and abroad. Additional income is derived from royalties, licences and dividends from an intellectual property (IP) portfolio and commercial companies created by the CSIR (CSIR website). Apart from CSIR, there are several thematically specialized research councils: the Agricultural Research Council, the Medical Research Council, the Council for Minerals Technology (Mintek), the Council for Geoscience and the Human Science Research Council. Annex 211 In 2004 South Africa started reforming its higher education system, merging and incorporating small universities into larger institutions. The biggest universities are the University of Cape Town, the University of KwaZulu Natal, the University of Pretoria, the University of Stellenbosch and the University of Witwatersrand. According to Kahn (2006), these big five account for 70.5 % of R&D expenditures by the higher education sector, 63.4 % of scientific publications and 45 % of PhD students in South Africa. 90 % of SCI publications of South African origin are published by universities. One of the main threats to progress of the South African innovation system is the "frozen demographics" of its R&D personnel. South Africa has an aging, predominantly white male, scientific and engineering workforce. There are insufficient numbers of new entrants, including women, to undergraduate and postgraduate S&T ranks. Universities struggle to retain young scholars, especially black and women post-graduates, and the research population is ageing rapidly as white 'over 50' men' advance on retirement. Studies have uncovered several causes of this problem: lack of stability in a transforming research environment, lack of funding, including for scholarships, institutional cultures that are alienating to a diverse population of young scholars, lowpaid compared with the private sector and the 'brain drain'. According to the National R&D strategy, R&D undertaken by large South African firms shows a declining tendency, although resource based industries, i.e. agriculture, fishing and forestry, mining and minerals, and energy production, remain critical to South Africa: "the forces of globalisation have reduced the propensity of South African firms to engage in the large-scale innovation that characterised earlier decades" (DST, 2002: 40). It is maintained that South Africa currently suffers from an 'Innovation Chasm'. Consequently, one of the priorities is to enhance the innovativeness of SMEs and to close the Innovation gap that exists between the knowledge generators and the market. The National Advisory Council on Innovation (NACI) has been established to advise the Minister of Science and Technology on strategies for the promotion of technology innovation; international scientific liaison; science and technology policy and the coordination and stimulation of the National System of Innovation. 212 Annex TableAnnex A.3-22: Basic indicators of R&D resources in South Africa South Africa 2001 2003 a 44,000 45,509 GDP (million current prizes US-$) 132,878 212,777 GERD (million current PPP US-$) GERD per capita (current PPP $) GERD as a percentage of GDP 3,344.4 76.0 0.73 4,029.7 88.5 0.87 55.8 36.4 6.1 54.8 34 10.9 21,196 14,182 29,080 14,131 38 2,327 0.36 38 2,364 0.34 Population 1000 GERD financed by industry (%) GERD financed by government (%) GERD financed by abroad (%) Total R&D personnel (FTE) Total researchers (FTE)* Triadic patent families (priority year) Scientific publications in SCI+SSCI Scientific publications % SCI+SSCI a a = 2004; Source: OECD Main Science and Technology Indicators 2006; World Development Indicators, Worldbank 2006. Science Citation Index (SCI): US National Science Board: Science & Engineering Indicators 2006. Gross domestic expenditure on R&D (GERD) declined initially after the end of the apartheid regime. By 2001, GERD had recovered to the 1991 volume in real terms and has shown accelerated growth since then. Between 2003/04 and 2004/05 total R&D expenditure in South Africa grew from just over 10 billion Rand to 12 billion Rand in nominal terms representing a real annual increase of about 12.8 %. The lion's share of R&D expenditures is devoted to applied research and experimental development (TableAnnex A.3-23). TableAnnex A.3-23: Gross Expenditure on R&D by type of research, 2004 Type Basic Research Applied Research Experimental Development Percentage 18.6 38.7 42.6 Source: DST (2006): National Survey of Research and Experimental Development. While international isolation under apartheid inspired the white regime to support research that made South Africa economically and militarily self-sufficient, it created a highly fragmented S&T system. The consequences of such fragmentation were severe and deeply interconnected - poor or non existent communication and coordination Annex 213 across the system, disjuncture between the science system and the challenges of development, and failure of the system to complete the cycle of innovation. After the end of the apartheid regime, the South African S&T system embarked on a path of remarkable institutional reform. A "national system of innovation" approach was established as the framework within S&T policy and alignment would be developed and directed towards achieving national socio-economic tagets. Part of this reform agenda has been the development of national strategies to define new missions for science, technology and innovation policy. S&T missions in the apartheid era had been focused on issues such as energy, selfsufficiency, offensive and defensive armament capabilities, and a nuclear programme, among others. Today, the following areas have been defined as new priority fields for South African R&D efforts: Biotechnology; Advanced Manufacturing Technology; Information & Communication Technology; Resource-Based Industries and Energy R&D. The new political priorities are laid down in a series of strategy documents: • White Paper on Science and Technology - Department of Arts and Culture September 1996 • South Africa's National R&D Strategy 2002 • Energy Efficiency Strategy of the Republic of South Africa, 2005 • Policy and Strategy for Groundwater Quality Management in South Africa Department of Water Affairs and Forestry - 2000 • National Water Resource Strategy - Department of Water Affairs and Forestry 2004 • Advanced Manufacturing Technology Strategy – 2002 • Integrated Manufacturing Strategy of the Department of Trade and Industry • State of Logistics Survey for South Africa 2004 • Moving South Africa - Transport Strategy for 2020 - Department of Transport A.3.5.2 Core themes of sustainability research in South Africa The following priorities of national innovation policy are based on investigations by the South African experts, in particular Prof. Biesenbach. 214 Annex Renewable energy and CO2-neutral fossil energies A target has been set of 10.000 GWh of energy to be produced from renewable energy sources (mainly from biomass, wind, solar and small-scale hydro) by 2013. Technologies to be implemented first, based on the level of commercialisation of the technology and natural resource availability include: • sugar cane bagasse • landfill gas extraction • mini-hydroelectric schemes • commercial and domestic solar water heaters These technologies are to be deployed in the first phase of the target period, from 2005 to 2007. Once-off capital subsidies have been introduced to assist project developers in implementing economically sound projects that are readily financed by financial institutions. According to the National R&D Strategy, many areas in South Africa have patterns of settlement and conditions that make them unattractive for classical extension of the electricity grid. "This reality has been somewhat submerged in the present phase of electricity roll-out nationally. There is a need to develop local small-scale grid capabilities and household-level energy systems that are affordable, and widely known" (DST, 2002: 44). Energy efficiency in buildings To date, only a handful of countries worldwide have set comprehensive targets for energy efficiency improvements. In South Africa an Energy Efficiency Strategy has been approved in 2005 and efficiency in both commercial and residential buildings has been included in this strategy, as follows - phase 1 2005 - 2008: • Commercial and public buildings: standards for energy efficiency for buildings will be developed and made mandatory; Energy Audits will be implemented; emphasis will be placed on incorporating energy efficiency into building design and energy efficient technologies will be introduced in existing buildings; demand side management will be investigated and the use of efficient lighting systems and possibly heat pumps. • Residential Sector: awareness raising; appliance labeling; standards for energy efficient housing will be made mandatory through incorporation into the National Building Regulations. Attention will be given to the development of energy efficient coal stoves, wood stoves and liquid fuel stoves. Annex 215 Targets for energy demand reduction for commercial buildings is 15 % by 2015 and for the residential sector 10 % in the same period. Support will be provided to appropriate research and the possible adaptation of internationally available technologies and processes. Water supply and waste water systems Priorities in this domain include assessment and development of water resources, management of human impacts on water resources, water resource protection and policy development, estuarine, riverine and wetland processes management and rehabilitation, wastewater and effluent treatment and reuse technology, sanitation, health and hygiene education, water utilisation, and water resource protection. New membrane technologies are being explored and basic pumping, purifying and transporting of water form part of the current need. Products such as the 'play pump' which is a roundabout for children to play on which also pumps water; a drum that rolls for transporting water in rural areas. There is a strong focus on education and training regarding the use of water and regarding sanitation. Groundwater and wastewater systems are regulated by the Department of Water Affairs and Forestry and research and the organisations that play an important part in this area are included in the research and development initiative. These include the mining industry, industry and research organisations. Research includes geohydrological investigations for potential sources of groundwater contamination, contaminated site assessment and restoration, contaminant modelling and risk assessment, community water source protection and land-use practices. Very little research is carried out on water reuse technologies. A job creation initiative from the Department of Water Affairs and Forestry has been the Working for Water Programme. This is a labour intensive process of clearing the alien vegetation which are water hungry and depleting water resources. According to the National Research Foundation, some of South Africa's marine systems are showing signs of severe over-exploitation and degradation and this is impacting significantly on biodiversity. A recent report evaluates current knowledge, identifies data gaps and highlights future priority actions and research requirements in marine biodiversity. Material Efficiency The National Advanced Manufacturing Technology Strategy (AMTS) for South Africa was developed in 2002. This strategy was developed through extensive consultation 216 Annex within the private, public and education sectors, and care was taken to ensure strategic fit with other national strategies and the avoidance of unnecessary duplication. This strategy identified key issues as: • the optimisation of scarce resources (National Laboratories, reduction of waste, human resource development) • development of Capacity • local processing of raw materials This strategy is currently being implemented. Existing Centres of Excellence in the Automotive Sector, Product Development Technology and Cleaner Production Technology will be strengthened and new centres will be created in Logistics and Textile and Clothing. In addition innovation networks will be established including an advanced metals network. Much of the technology and innovation in this area use imported technology and skills and much focus is now going into the development of both the technology and the skills in South Africa. Waste recovery is largely at the small business level but systems are in place for the collection and recovery of waste metal, paper and also the use of materials such as flyash for road and brick building. Some work has been done in the field of mineral recovery from waste dumps. Private companies in the building and automotive sectors are looking at lightweight construction and the aerospace industry is involved in the ongoing investigation of the effective use of materials in production. Mobility and logistics A National Land Transport Strategic Framework (2006-2011) embodies the overarching national five-year land transport strategy developed by the Department of Transport and outlines the following priorities which dictate research and development agendas for the coming years: • Planning must pay greater attention to promoting safe and efficient use of nonmotorised transport e.g. cycling • Public transport information systems will be developed • The informal taxi industry will be regulated and the taxi fleet recapitalised • Reinvestment on a significant scale in rail transport infrastructure • Improved rural development infrastructure and services Annex 217 South Africa has the largest, best equipped ports on the African continent and the airport infrastructure covers international, national and regional services and is constantly being upgraded. Challenges exist in providing adequate public transport which is currently seriously underdeveloped leading to the almost exclusive usage of private vehicles particularly in the affluent urban areas. Mobility of people in the rural areas is problematic. Due to past policies three-quarters of long-haul tonnage is moved by road and logistically a rail/road model would be far more effective - this is being investigated. A pilot of an intelligent transport system is currently being used on a major highway and once the results of this have been analysed further systems could be deployed. Research on innovative low-cost road building has been conducted and partially rolled out particularly in rural areas. Policies are in place regarding emissions and the first bio-fuels plant is currently under construction. Some specific research areas in the mobility and transportation field are : public transport planning and operations, public transport logistics, freight and logistics, urban development and transport planning, rurual transport and technology for development, public transport structuring model, traffic management and transport infrastructure research including new materials and analysis of existing materials. Socio-economic research on innovations for sustainability The national R&D strategy acknowledges the importance of social sciences for developing innovation capability. Some expertise has been developed in integrating across systems to assist in poverty alleviation and there is a strong focus on Indigenous Knowledge particularly from the DST. A.3.5.3 Research funding agencies Department of Science and Technology (DST) National science and technology policy is the mandate of the Department of Science and Technology DST, although several research councils are governed by other sectoral departments, including the Council for Agricultural Research (Department of Agriculture), the Council for Medical Research (Department of Health), the Council for Minerals Technology (Mintek) (Department of Minerals and Energy). The DST does not offer funding directly to applicants but works through several funding instruments. The 218 Annex Strategic Plan of the former DACST (2002) allocates R 861 million (US-$ 133 million) to these transfer payments for science and technology in 2004/05. 20 % of this budget are earmarked for the National Innovation Fund, 40 % are institutional funding including the National Research Foundation and 20 % go to other R&D related programmes, mainly financial assistance projects. National Research Foundation The objective of the National Research Foundation (NRF) is to support and promote research through funding, human resource development and the provision of the necessary research facilities. Funding is directed at all fields of the humanities, social and natural sciences, engineering, and technology; including indigenous knowledge. The Strategic Plan of the DACST (2002) allocates R 263 million (US-$ 56 million) to the NRF in 2004/05 (DACST is a precurser to DST). Two thirds of this budget plan are current expenditures, including R&D programmes, and one third is support for seven NRF research institutions. According to a recent institutional review, the NRF currently translates its mandate into four core Missions: • High-quality human resources in substantially increased numbers; • The generation of high-quality knowledge in prioritized areas that address national and continental development needs; • The utilization of knowledge, technology transfer and innovation to ensure tangible benefits to society from the knowledge created; and • The provision of state-of-the-art research infrastructure that is essential to develop high-quality human resources and knowledge. Mechanisms for funding include Scholarships and Fellowships and an Institutional Research Development Programme (Technikon and University Research funding) and a Technology and Human Resources for Industry programme. Through the Focus Area Programme, NRF directs research funds to priority themes and societal needs. The total allocation for focus area grants for 2005 was R 163.8 million (US-$ 25 million). "Sustainable Livelihoods and Poverty Eradication" is one of currently eight focus areas, with the aim to investigate ways of reducing vulnerability, generating sustainable livelihoods and eradicate poverty in South African society. Among other things, this focus area includes research in water supply and community based natural resource management. The other sustainability related focus area is "Ecosystems & Biodiversity", in recognition of South Africa's distinctive natural heritage and biodiversity. Annex 219 National Innovation Fund The Innovation Fund (IF) is an instrument of the Department of Science and Technology, set up in 1999, to catalyse technology innovation. It is managed by the National Research Foundation and funds near-market and end-stage research that will result in new intellectual property, commercial enterprises and the expansion of existing industrial sectors. The Innovation Fund’s mandate is to promote technological innovations that will benefit South Africa. The IF has three main funding instruments: 1. Research and Development Grants or Investments 2. Intellectual Property Grants or Investments, and 3. Commercialisation (Seed Fund) Investment Since its inception in 1999, the IF has provided R 900 million to 170 R&D projects in various technology sectors, including health, agriculture, manufacturing, mining, education, safety and security, energy, tourism, ICT and biotechnology. The Strategic Plan of the DACST (2002) allocates R 167 million (US-$ 26 million) to the IF in 2004/05. There is no specific allocation of the IF’s annual budget to specific areas the mandate is to support technological innovation in any industry or sector. Applications for funding come from various sources, but mainly from consortiums comprising science councils, higher education institutions, industry partners and individual entrepreneurs. IF investments in R&D projects in the six selected thematic fields: 1. Renewable energies and CO2-neutral fossil energies – R 13,154,790.00 (US-$ 2 million, 2004 exchange rates) 2. Energy efficiency in buildings – R 12,633,266.00 (US-$ 1.96 million) 3. Water supply and waste water systems – R 8,827,000.00 (US-$ 1.37 million) 4. Material efficiency – R 5,620,000 (US-$ 0.87 million) 5. Mobility and logistics – R 25,000,000 (US-$ 3.87 million) 6. Socio-economic research on innovations – none Water Research Commission The mandate of the Water Research Commission WRC is to support water research and development as well as the building of a sustainable water research capacity in South Africa. The WRC serves as the country’s water-centred knowledge ‘hub’ leading the creation, dissemination and application of water-centred knowledge. The WRC was established in 1971, following a period of serious water shortage. At that time, water R&D in South Africa was limited to a few institutions and the funding level was inadequate. There was no research coordination and an apparent neglect of some key research fields. It was deemed to be of national importance to generate new 220 Annex knowledge and to promote the country's water research purposefully, owing to the expectation that water would be one of South Africa's most limiting factors in the 21st century. Total research funding of the WRC amounts to approximately R112 million (US-$ 17.3 million) for 2006/07. Funding of research projects constitutes the largest portion of this budget (approximately 90 %). The remaining portion is made up of allocations for consultancies, workshops and conferences, research sponsorships and mobility funding for capacity building. The WRC has four key strategic areas (KSAs). These KSAs allow for multidisciplinary studies and are focused on solving problems related to national needs and supporting society and the water sector. The allocation for 2006/07 resulted in Water Resource Management receiving 30 % of the funds, Water-Linked Ecosystems 12 %, Water Use and Waste Management 33 % and Water Utilisation in Agriculture 19 %. The balance of 6 % is reserved for the central fund [figures from www.wrc.org.za]. A.3.5.4 Leading research organisations 1. Renewable energies and CO2-neutral fossil energies − The South African National Energy Research Institute has awarded the Energy Chair to the University of Stellenbosch; the same University also hosts the DST funded hub for post-graduate studies in renewable and sustainable energy − University of the Witwatersrand − University of Cape Town, hosts the Energy Research Centre with focus on sustainable energy research and renewable energies − University of Johannesburg, owns IP on photovoltaic technology − University of Pretoria − University of the Free State − University of the North West − University of South Africa − University of the Western Cape, research on hydrogen and fuel cells − Council for Scientific and Industrial Research, research into fuel cells, CSIR Sustainable Development Group, focus on integration of systems − Agricultural Research Council − Eskom, SA's power utility supplier: research into variety of renewable technologies 2. Energy efficiency in buildings − University of the Witwatersrand − University of Cape Town − University of Johannesburg − Council for Scientific and Industrial Research − South African Bureau of Standards − University of Stellenbosch − Agama Energy (non-governmental organisation) [http://www.agama.co.za] Annex 221 3. Water supply and waste water systems − University of the Witwatersrand − University of Cape Town, world class Centres of Excellence in both fresh water and marine systems − University of Pretoria − University of Natal − University of the Free State − University of South Africa − Rhodes University − University of Johannesburg − Council for Scientific and Industrial Research, both marine and fresh water systems and considerable experience in consulting and advising global bodies such as the World Bank − Agricultural Research Council − Water Research Commission, key focus point and coordinating body for African Ministers Conference on Water − CGIAR International Water Management Institute (IWMI) 4. Material efficiency − University of the Witwatersrand − University of Cape Town − University of Natal − University of Pretoria − University of the Free State − Council for Scientific and Industrial Research, strong capacity in materials research − National Cleaner Production Centre (NCPC), a collaborative venture between the United Nations Development Organisation (UNIDO), the Swiss and Austrian technical institutions, DTI and the CSIR − Council for Mineral Technology Mintek, Advanced Material Division, e.g. catalysis research on precious metals such as gold and platinum − University of Stellenbosch 5. Mobility and Logistics − University of the Witwatersrand − University of Cape Town − University of Johannesburg − University of South Africa − Council for Scientific and Industrial Research 6. Socio-economic research on sustainable innovation − University of Cape Town − University of Natal − Univeersity of the North West − University of South Africa − Rhodes University − Human Sciences Research Council 222 A.3.6 Annex References for Country Reports Allakhverdov, A., Pokrovsky, V. (2006): Russian Science. Measuring the Hidden Cost of a Pay Raise, Science, 312, 9 June 2006, 1456. Anon. (2005): China Passes Renewable Energy Law. RenewableEnergyAccess, 9 march 2005 [http://www.renewableenergyaccess.com] Department of Arts, Culture, Science and Technology DACST (2002): Strategic Plan 2002, Pretoria. Department of Science and Technology (2002): South Africa's National R&D Strategy August 2002. Pretoria. Department of Science and Technology (2006): National Survey of Research and Experimental Development (R&D) (2004/05 Fiscal Year). Pretoria. Eun, J.-H., Lee, K., Wu, G. (2006): Explaining the "University-run enterprises" in China: A theoretical framework for university-industry relationship in developing countries and its application to China. Research Policy, 35, pp. 1329-1345. Glänzel, Wolfgang, Leta, Jaqueline, Thijs, Bart (2006a): Science in Brazil. Part 1: A macro-level comparative study. Scientometrics 67 (1) 67-86 Global Watch Service by the UK Department of Trade and Industry: Information on S&T in Brazil, www.globalwatchservice.com; last accessed March 2006, service discontinued by DTI. Global Watch Service by the UK Department of Trade and Industry: Information on S&T in Russia, www.globalwatchservice.com; last accessed March 2006, service discontinued by DTI. Global Watch Service by the UK Department of Trade and Industry: Information on S&T in India, www.globalwatchservice.com; last accessed March 2006, service discontinued by DTI. Global Watch Service by the UK Department of Trade and Industry: Information on S&T in China, www.globalwatchservice.com; last accessed March 2006, service discontinued by DTI. Hao Xin, Gong Yidong (2006): China bets big on big science. Science, 311, 17 March 2006, pp. 1548-49. Annex 223 Hsiung, D.-I. (2002): An evaluation of China's S&T system and its impact on the research community. A special report for the environment, science & technology section, U.S. Embassy, Beijing, China. Kahn, M. (2006): Setting the scene – the NST, measurement and steering. Presentation given at the NACI International Workshop on Measuring Systems of Innovation, Pretoria, 24-25 April 2006. Krawczyk, O., Legler, H., Schadt, C., Frietsch, R., Schubert, T., Schumacher, D. (2007): Die Bedeutung von Aufholländern im globalen Technologiewettbewerb. Studien zum deutschen Innovationssystem, 21-2007. NIW, ISI, DIW. Lachinov, M. (2005): Russia: science and technology framework. Document by the British Embassy in Moscow, Russian Federation – Science, Environment and Global Partnership Section. Lachinov, M. (2006): Russian Government takes control of the Russian Academy of Sciences (RAS). Document by the British Embassy in Moscow, Russian Federation – Science, Environment and Global Partnership Section. Leite, M. (2005): Legitimising Brazil's freeze of research funds. Science and Development Network, 4 August 2005, SciDev.Net. Leta, J., Glänzel W., Thijs, B. (2006b): Science in Brazil. Part 2: Sectoral and institutional research profiles. Scientometrics 67 (1) 87-105. National Science Board NSB (2006). Science and Engineering Indicators. Arlington, U.S. National Science Foundation. NSTMIS (2005): Research and Development Statistics 2004-05. Department of Science and Technology, Government of India. OECD (2005): Fostering Public-Private Partnership for Innovation in Russia. Organisation for Economic Co-operation and Development, Paris. Schmitt, S. (2005): Abwasserbehandlung in der VR China mit hohem Nachholbedarf. Fairs & More Business Magazin, Nr. 1/2005, pp. 16-17. World Bank (2004): Environmental Management in Russia: Status, Directions and Policy Needs. World Bank Environmentally and Socially Sustainable Development Unit, Europe and Central Asia Region. World Bank, UNEP/URC (2006): Developing financial intermediation mechanisms for energy efficiency projects in Brazil, China and India. Brazil country report. 224 Annex A.3.7 Contributing Experts A.3.7.1 Brazil Ricardo Rose Diretor Meio Ambiente Câmara de Comércio e Indústria Brasil-Alemanha Deutsch-Brasilianische Industrie- und Handelskammer Rua Verbo Divino 1488 BR 04719-904 Sao Pãulo www.ahkbrasil.com with advice from Jörg Anhalt, Instituto de Desenvolvimento Sustentával e Energias Renováveis, IDER Laercio Couto, Rede Nacional de Biomassa Para Energia, RENABIO Aldo Roberto Ometto, Instiuto Fábrica do Milénio, IFM Rodrigo Quadros, Instituto para o Desenvolvimento de Energias Alternativas e da Auto Sustentabilidade, IDEAAS, Noélia Lúcia Simões Falcão, Instituto Nacional de Pesquisas de Amazõnia Antonio Carlos F. Galvão, Director of CGEE Flávio Giovanetti Albuquerque Lélio Fellows Filho Marcelo Khaled Poppe Márcio de Miranda Santos Maria Regina Gusmão Paulo César G. Egler all affiliated with: Centro de Gestão e Estudos Estratégicos CGEE Financial Center, 11º andar, Sala 1102, CEP 70712-900 Brasília, DF www.cgee.org.br André Carneiro da Cunha Moutinho de Carvalho Coordenação de Cooperação Internacional - CINT Financiadora de Estudos e Projetos - FINEP Praia do Flamengo, 200 - 8º andar 22210-030 - Rio de Janeiro - RJ - Brasil Patricia Guardabassi Centro Nacional de Referência em Biomassa CENBIO Av. Professor Luciano Gualberto, 1289 - Cidade Universitária CEP: 05508-010 São Paulo - SP - Brasil www.cenbio.org.br Annex 225 Prof. Furtado, André Instituto de Geociências, Departamento de Política Científica e Tecnológica State University of Campinas UNICAMP Prof. Jannuzzi, Gilberto Faculty of Mechanical Engineering FEM State University of Campinas UNICAMP Prof. Lamberts, Roberto Departamento de Engenharia Civil Federal University Santa Catarina (UFSC) Prof. Orrico, Romulo Programa de Engenharia de Transportes Instituto Alberto Luiz Coimbra Federal University of Rio de Janeiro (UFRJ) Prof. Schaeffer, Roberto Programa de Planejamento Enérgetico Coordenação dos Programas de Pós-graduação de Engenharia COPPE Federal University of Rio de Janeiro (UFRJ) Prof. Tucci, Carlos E. M. Integrated urban waters management Universidade Federal do Rio Grande do Sul UFRGS Former secretary of CTHidro Water Resource Fund Former president of Brazilian Water Resource Association A.3.7.2 Russia The expert questionnaire was filled in by Prof. V. Gorokhov who coordinated and integrated inputs from other experts as given below, assisted by Ms. Kaganchuk. Prof. Dr. Vitaly G. Gorokhov Head of the “International Research Centre for Social Consequences of Scientific and Technological Development and Innovations” at the Moscow State University (founded in 2006 together with the Institute for Technology Assessment and Systems Analysis of the Forschungszentrum Karlsruhe). Prof. Dr. Vitaly G. Gorokhov is scientific coordinator of the International Academy for Sustainable Development and Technologies at the University of Karlsruhe (IANET, chairman Mikhail Gorbatchev) and president of the International Institute for Global Problems of the Sustainable Development of the International Independent University for Ecology and Political Science (MNEPU). 226 Annex Address: Moscow State University Department of Philosophy, GSP-2 Leninskie Gory Moscow, 119992 Russia Prof. Dr. Danilov-Danilian President of the Institute for Water Resources Management (IWP) of the Russian Academy of Sciences ul. Gubkina 3 119991 Moskau, Dr.-Ing. habil. Anatoli V. Dolgolaptev Director General of the scientifically-technically Corporation „Kompomash“ (25 companies, Research Institute and engineering offices) 3 projezd Marjinoj Roshi 40 127018 Moskau Sergey A. Klimanov Director of the “Federal Centre of Geoecological Systems” Kedrova str. 8 b.1. 117292 Moscow Juri M. Kolotchkov Head of Department for national research programmes and investments in the Russian Federation Ministry for Economic Development Russian Federation for Economic Development and Trade 1. Bverskaja- Yamskaja 1-3 125818 Moskau Prof. Dr.-Ing. Oleg V. Syuntyurenko Senior researcher of the All Russian Scientific and Technical Information Institute (VINITI) of the Russian Academy of Sciences Russia, ul. Kantemirovskaja 53-1-207 115477 Moscow Ms Vera Kaganchuk OOO "REHAU", Department for logistics Warschavskoje schosse 125 Moskau Annex A.3.7.3 227 India Dr. Ranjan K Bose (Field of Expertise: Mobility and Logistics), Senior Fellow The Energy and Resources Institute Darbari Seth Block, IHC Complex Lodhi Road, New Delhi 110 003 Dr. Geetham Tewari (Field of Expertise: Mobility and Logistics) Assistant Professor Indian Institute of Technology Hauz KhasNew Delhi 110 016 Kapil Kumar Narula, (Field of Expertise: Water) Associate Director The Energy and Resources Institute Darbari Seth Block, IHC ComplexLodhi Road, New Delhi 110 003 Mr. KK Gandhi (Field of Expertise: Mobility and Logistics) Executive Director Society of Indian Automobile Manufacturers Core 4B, 5th FloorIndia Habitat Centre Complex Lodhi Road, New Delhi 110 003 Prof. Sarkar (Field of Expertise: Mobility and Logistics) Head of the Department of Transport Planning School of Planning and Architecture 4, Block B, Indraprastha Estate New Delhi 110 002 Dr. Baskar Natarajan (Field of Expertise: Renewable Energy) Senior Project Offier India-Canada Environment Facility 2nd Floor Sanrakshan Bhawan10, Bhikaji Kama Place New Delhi 110 066 Dr. S K Chopra, (Field of Expertise: Renewable Energy) Senior Advisor Ministry of New and Renewable Energy CGO Complex, Block 14Lodhi Road, New Delhi 110 003 Dr. Vidya S Batra (Field of Expertise: Materials) Fellow The Energy and Resources Institute Darbari Seth Block, IHC ComplexLodhi Road, New Delhi 110 003 228 Annex Dr. Malini Balakrishnan (Field of Expertise: Materials), Fellow The Energy and Resources Institute Darbari Seth Block, IHC ComplexLodhi Road, New Delhi 110 003 Dr. Arun P Kulshreshtha (Field of Expertise: Renewable Energy) Director Centre for Science and Technology of the Non-Aligned and Other Developing Countries (NAM S&T Centre) Zone 6A, 2nd Floor, IHC Complex Lodhi Road, New Delhi 110 003 Mr. Mahesh Vipradas (Field of Expertise: Renewable Energy) Fellow The Energy and Resources Institute Darbari Seth Block, IHC Complex Lodhi Road, New Delhi 110 003 Mr. Amit Kumar (Field of Expertise: Renewable Energy and environemntal technologies) Associate Director, Energy and Environmental technologies The Energy and Resources Institute Darbari Seth Block, IHC ComplexLodhi Road, New Delhi 110 003 Dr. P C Maithani (Field of Expertise: New technologies and Renewable Energy) Director, Ministry of New and Renewable Energy CGO Complex, Block 14Lodhi Road, New Delhi 110 003 Dr. R K Malhotra (Field of Expertise: Fossil fuels and use of natural resources) General Manager Indian Oil Corporation Limited Research and Development Centre Sector-13, Faridabad 121 007, Haryana Dr K S Dathathreyan (Field of Expertise: Hydrogen) Head Centre for Fuel Cell Technology 120, Mambakkam Main RoadMedavakkam, Chennai 601 302, Tamil Nadu Dr Ajay Mathur (Field of Expertise: Energy Efficiency) Director General, Bureau of Energy Efficiency Ministry of Power, GOI NBCC Towers, Hall No. IV, 2nd Floor 15, Bhikaji Cama Place, R K Puram New Delhi 110 066 Annex 229 Dr Veena Joshi (Field of Expertise: Socio Economic Research) Focus-in-Charge, Rural Energy & Housing Swiss Agency for Development and Cooperation Embassy of Switzerland Chandragupta Marg Chanakyapuri New Delhi 110 021 Dr Preety Bhandari (Field of Expertise: Clean Development mechanism and emission reductions) Director The Energy and Resources Institute Darbari Seth Block, IHC ComplexLodhi Road, New Delhi 110 003 Mili Majumdar (Field of Expertise: Sustainable Buildings) Fellow The Energy and Resources Institute Darbari Seth Block, IHC ComplexLodhi Road, New Delhi 110 003 A.3.7.4 China Mr. Han Xiaoding translated our questionnaire to Chinese and collected inputs from Profs. Xu Delong, Tang Tao, Long Weiding and Fu Yigang. Another questionnaire was contributed by Dr. Wang Ke from Tsinghua University and his collaborators. CAN Wang Han Xiaoding Chief Representative Fraunhofer Representative Office Beijing Unit 0606 Landmark Tower II 8 North Dongsanhuan Road Chaoyang District 100004 Beijing, PR China Prof. Xu Delong Xi'an University of Architecture and Technology 710055, Xi'an, China Prof. Tang Tao State key laboratory for Railtransportation control and security Beijing Jiaotong University Shangyuancun 3, Haidian District 100044 Beijing China 230 Annex Prof. Long Weiding Chinese-German College for Engineering Technology of Tongji University Prof. Fu Yigang College of Environmental Science and Engineering of Tongji University Asistant president of Chongqing Three Gouge Academy Expert group from Tsinghua University: WANG Ke CAI Wenjia CUI Junlian JIANG Dongmei All affiliated with the Department of Environmental Science and Engineering, Tsinghua University FU Ping, the Ministry of Science and Technology, China CHU Junying, Engineering Research Center for Water Resources & Ecology, Ministry of Water Resource P. R China A.3.7.5 South Africa Prof. Reinie Biesenbach GRA Nerve Centre P. O. Box 45 The Innovation Hub Pretoria 0087 South Africa with advice from Mr Steve Szewczuk - Sustainable Development Group CSIR South Africa Department of Architecture, University of Pretoria National Advisory Council of Innovation – Mr. Bok Marais Chris Buckley - University of Natal Prof. David Kaplan, University of Cape Town Graduate School of Business Dr. Marius Claassen - Water Expert, CSIR South Africa Water Research Commission of South Africa (publications and discussions with researchers) William Blankley, Human Sciences Research Council - published reports and reviews Ms. Karen van Breukelen, Advanced Manufacturing Technology Strategy Andries Naude, Isabel Meyer, CSIR South Africa Research Offices - University of Witwatersrand, University of Cape Town, University of Natal, University of South Africa, University of Pretoria, University of the Free State, University of the North West, University of Johannesburg, University of Stellenbosch, Rhodes University Annex Prof. Michael Kahn Center for S&T and Innovation Indicators, Human Sciences Research Council Khaya Sishuba Director: International Relations -Europe and Middle East Overseas Bilateral Cooperation Department of Science and Technology DST Private Bag x894 Pretoria, South Africa Michael Wimmer German Embassy Pretoria P.O. Box 2023 0001 Pretoria, South Africa Dr. Alan Brent Energy, Sustainability Science and Technology Management CSIR 231 232 Annex A.4 Annex to Section 4.1 Figure Annex A.4-1: Patent Shares for Renewable Energies and CCS acc. to Technology Areas 2,5% 40% 35% 2,0% 30% 25% 1,5% 20% 1,0% 15% 10% 0,5% 5% 0,0% 0% BR CN Photovoltaics Solar thermal DE IN Solar thermal Wind Power DE RU Wind Power Hydro Power DE ZA Hydro Power CCS DE DE CCS Photovoltaics DE Figure Annex A.4-2: World Trade Shares for Renewable Energies and CCS acc. to Technology areas 35% 10% 9% 30% 8% WTS 6% 20% 5% 15% 4% 3% 10% 2% 5% 1% 0% 0% BR RU IN CN ZA Countries CCS Solar collectors Solar cells Waterturbines Wind power stations DE WTS DE 25% 7% Annex 233 Figure Annex A.4-3: Revealed Patent Advantage (RPA) for Renewable Energies and CCS acc. to Technology Areas 100 80 60 40 20 0 -20 -40 -60 -80 -100 BR CN IN Photovoltaics RU Solar thermal Wind Power ZA Hydro Power DE CCS Figure Annex A.4-4: Revealed Comparative Advantage (RCA) for Renewable Energies and CCS acc. to Technology Areas 100 80 60 40 RCA 20 0 -20 -40 -60 -80 -100 BR RU IN CN ZA Countries CCS Solar collectors Solar cells Waterturbines Wind power station DE 234 Annex Figure Annex A.4-5: Patent Shares in the Area Building Efficiency acc. to Technology Areas 3,0% 20,5% 20,0% 2,5% 19,5% 2,0% 19,0% 1,5% 18,5% 1,0% 18,0% 0,5% 17,5% 17,0% 0,0% BR Building services engineering CN IN RU Energy-efficient appliances ZA Building services engineering DE DE Energy-efficient appliances DE 18% 16% 16% 14% 14% 12% 12% 10% 10% 8% 8% 6% 6% 4% 4% 2% 2% WTS 18% 0% 0% BR RU IN CN ZA Countries Energy-efficient appliances Building services engineering DE WTS DE Figure Annex A.4-6: World Trade Shares in the Area Building Efficiency acc. to Technology Areas Annex 235 Figure Annex A.4-7: Revealed Patent Advantage (RPA) in the Area of Building Efficiency acc. to Technology Areas 100 80 60 40 20 0 -20 -40 -60 -80 -100 BR CN IN RU Building services engineering ZA DE Energy-efficient appliances Figure Annex A.4-8: Revealed Comparative Advantage (RCA) in the Area of Building Efficiency acc. to Technology Areas 100 80 60 40 RCA 20 0 -20 -40 -60 -80 -100 BR RU IN CN Countries Energy-efficient appliances Building services engineering ZA DE 236 Annex Figure Annex A.4-9: Patent Shares in the Area Water Management acc. to Technology Areas 3,0% 25% 2,5% 20% 2,0% 15% 1,5% 10% 1,0% 5% 0,5% 0% 0,0% BR Water supply Water supply DE CN IN RU Water utilisation efficienca Water utilisation efficienca DE ZA Flood protection Flood protection DE DE Waste-water disposal Waste-water disposal DE 10% 20% 9% 18% 8% 16% 7% 14% 6% 12% 5% 10% 4% 8% 3% 6% 2% 4% 1% 2% 0% 0% BR RU IN CN ZA Countries Waste-water disposal Flood protection Water utilisation efficiency Water supply DE WTS DE WTS Figure Annex A.4-10: World Trade Shares in the Area Water Management acc. to Technology Areas Annex 237 Figure Annex A.4-11: Relative Patent Shares (RPS) in the Area Water Management acc. to Technology Areas 100 80 60 40 20 0 -20 -40 -60 -80 -100 -120 BR CN Water supply IN RU Water utilisation efficienca Flood protection ZA DE Waste-water disposal Figure Annex A.4-12: Revealed Comparative Advantage (RCA) in the Area Water Management acc. to Technology Areas 100 80 60 40 RCA 20 0 -20 -40 -60 -80 -100 BR RU IN CN ZA Countries Wastewater disposal Flood protection Water utilisation efficiency Water supply DE 238 Annex Figure Annex A.4-13: Patent Shares in the Area Material Efficiency acc. to Technology Areas 2,0% 25% 1,8% 1,6% 20% 1,4% 1,2% 15% 1,0% 0,8% 10% 0,6% 5% 0,4% 0,2% 0% 0,0% BR CN Renewable raw materials Renewable raw materials DE IN RU Recycling Recycling DE ZA Production processes Production processes DE DE Products Products DE 10% 20% 9% 18% 8% 16% 7% 14% 6% 12% 5% 10% 4% 8% 3% 6% 2% 4% 1% 2% 0% 0% BR RU IN CN ZA Countries Renewable raw materials Ecodesign Production processes Recycling DE WTS DE WTS Figure Annex A.4-14: World Trade Shares in the Area Material Efficiency acc. to Technology Areas Annex 239 Figure Annex A.4-15: Relative Patent Shares (RPS) in the Area Material Efficiency acc. to Technology Areas 100 80 60 40 20 0 -20 -40 -60 -80 -100 BR CN IN RU Renewable raw materials Recycling Production processes ZA DE Products Figure Annex A.4-16: Revealed Comparative Advantage (RCA) in the Area Material Efficiency acc. to Technology Areas 100 80 60 40 RCA 20 0 -20 -40 -60 -80 -100 BR RU IN CN ZA Countries Renewable raw materials Ecodesign Production processes Recycling DE 240 Annex Figure Annex A.4-17: Patent Shares in the Area Mobility acc. to Technology Areas 2,5% 35% 30% 2,0% 25% 1,5% 20% 15% 1,0% 10% 0,5% 5% 0,0% 0% BR CN IN Drive technologies Emission reduction Vehicle technology and design DE Biofuels DE RU Vehicle technology and design Biofuels Traffic infrastructure DE ZA DE Traffic infrastructure Drive technologies DE Emission reduction DE 21% 12% 18% 10% 15% 8% 12% 6% 9% 4% 6% 2% 3% WTS 14% 0% 0% BR RU IN CN ZA DE Countries Drive technologies Biofuels Emission reduction Vehicle technology and design Traffic infrastructure Trafic concepts WTS DE Figure Annex A.4-18: World Trade Shares in the Area Mobility acc. to Technology Areas Annex 241 Figure Annex A.4-19: Relative Patent Shares (RPS) in the Area Mobility acc. to Technology Areas 100 80 60 40 20 0 -20 -40 -60 -80 -100 BR CN Drive technologies IN Vehicle technology and design RU ZA Traffic infrastructure Emission reduction DE Biofuels Figure Annex A.4-20: Revealed Comparative Advantage (RCA) in the Area Mobility acc. to Technology Areas 100 80 60 40 RCA 20 0 -20 -40 -60 -80 -100 BR RU IN CN ZA DE Countries Drive technologies Biofuels Emission reductions Vehicle technology and design Traffic infrastructure 242 Annex A.5 Annex to Section 4.2 Table Annex A.5-1: Field Definitions of Social-economic Sustainability Research Scientific Field Journals in SCI and SSCI 1 Environment & Society Annual Review of Environment and Resources; Ecology & Society; Environment; Environmental History; Gaia-Ecological Perspectives for Science and Society; Global Environmental Change-Human and Policy Dimensions; Population and Environment; Regional Environmental Change; Society & Natural Resources; Sustainable Development 2 Environmental Economics Ecological Economics; Environment and Development Economics; Environmental & Resource Economics; Environmental Impact Assessment Review; International Journal of Life Cycle Assessment; Journal of Cleaner Production; Journal of Environmental Economics and Management; Journal of Industrial Ecology; Research Policy 3 Energy Policy Energy Economics; Energy Journal; Energy Policy; Energy Sources Part B-Economics Planning and Policy; Resource and Energy Economics 4 Environmental Policy, others Climate Policy; Environmental Politics; Global Environmental Politics; Marine Policy; Natural Resources Journal; Resources Policy; Transportation Research Part D-Transport and the Environment 5 Urbanisation Environment and Planning A; Environment and Planning BPlanning and Design; Environment and Planning CGovernment and Policy; Environment and Planning D-Society & Space; Environment and Urbanization; European Urban and Regional Studies; Habitat International; Housing Policy Debate; Housing Studies; International Journal of Urban and Regional Research; Landscape and Urban Planning; Regional Science and Urban Economics; Urban Studies 6 Environmental Awareness Environmental Ethics; Environmental Values; Journal of Environmental Psychology Annex 243 A.6 Annex to Chapter 5 A.6.1 Overview of important discussion points with companies and experts 1. Company profile (mainly researched prior to interview) − Characterisation of business activities in the area of the core themes regarded (see project description) − Characterisation of involvement in the BRICS countries and of a selected technology of the firm (key innovation for sustainability) 2. Demand side of the observed technology in B/R/I/C/S − History of the business activities in BRICS with the observed technology − Customer structure and relationships − Influences fostering and hampering demand for the technology 3. Supply side of the observed technology in B/R/I/C/S − Structure and character of the suppliers − Situation with competition − Cooperation and R&D partners in B/R/I/C/S 4. Knowledge base of the B/R/I/C/S business relationships/ partners in the business field of the observed technology − Competence profile/ status of knowledge of the B/R/I/C/S business partners in the area of the observed technology (equal, complementary, …) − Pre-requisites with regard to knowledge status of business partners in the BRICS countries to ensure optimal business activity 5. Innovation/ diffusion conditions for the observed technology in Germany − Drivers and obstacles to the innovation and diffusion process − Learning effects for business activity in BRICS − Assessment and reasons for Germany's position in the whole topic field, also in an international comparison − Significance of Germany's position in the field on the whole for the success of the observed technology – in Germany and the BRICS countries Key innovation/ subject of talks Renewable energies Wind energy services, offers of further education and policy consulting in drafting legal promotional measures Development, production and marketing of wind power plants, turn-key wind farms in India Solar updraft tower power plants Aufwindkraftwerke International plant builder Service provider in the wind energy field Plant builder and project developer Consulting engineering firm Solar updraft tower plants utilise the greenhouse effect to generate CO2-neutral electricity. Using solar radiation, the air is heated under a transparent roof to create an updraft which rises upward through a cement tower in the middle of the plant. Turbines at the base of the tower convert the rising air into electricity. Compared with other technologies utilising solar energy (e.g. PV arrays), solar updraft tower stations have the advantage that they can be built and maintained by The optimisation of wind energy technologies through R&D measures and the offer of integrated services in the form of turnkey wind farms sustainably increase the efficiency and effectiveness of wind power plants. This creates additional benefit for the client and increases the acceptance of wind energy utilisation to generate electricity. The use of wind energy to generate electricity contributes to reducing worldwide CO2-emissions and conserving resources. The planning, execution and financing of wind energy projects are a considerable hurdle, especially for small and medium-sized firms. External consulting and further education offers simplify the realisation of such projects. In this way the use of wind energy to generate electricity can find broader application. Technologies to convert renewable energy sources can supplement electricity generation from fossil energy sources or supplant them. They contribute to a reduction of global CO2-emissions and to conserving resources. Contribution of innovation to sustainabilityt Overview of the actors interviewed and the innovations observed TOP: Renewable Energies and CCS Enterprise (Report) A.6.2 India, China, South Africa India Brazil, India, China Brazil, Russia, India, China, South Africa Country focus in interview 244 Annex Gasification technologies & CCS International plant builder Energy-saving building 3-litre house Knowledge transfer and market exploitation in the area of energyefficient building Architects' office Building materials producer Energy efficiency consultant Beratungsdienstleister Top 2: Energy Efficiency in Buildings CDM projects in the area of renewable energies Service consultant Beratungsdienstleister for emission trading Knowledge transfer in the area of energy-efficient building promotes acceptance and makes a broad application of the concept possible. See interview on energy-efficient building Energy-efficient building aims to sustainably utilise energy in buildings and in the built-up environment. Reduced energy consumption by means of energy-efficient building lowers the emissions which result from (burning) fossil energy sources and thus contributes to conserving resources. At the same time, the comfort of the user and the room climate is improved. By means of CCS technology, CO2 resulting from burning fossil energy sources is separated in almost pure form and stored in compartments of the environment which never come into contact with the atmosphere. The contribution of CCS to sustainability consists solely in the reduction of worldwide CO2 emissions. CDM makes it possible for actors from industrialised states to conduct emission-reducing projects in NICs and developing countries, in order to generate emissionreduction credits. The pre-condition for a CDM project is a contribution to the sustainable development of the host country, e.g. via additional investment flows and technology transfer. This contribution must be certified by the responsible national authority of the host country before a CDM project is carried out. firms on the spot. Solar updraft tower plants thus create a double bonus especially for NICs and developing countries, for they increase the domestic value added and reduce the dependency on fossil energy sources or imported electricity. China, Russia China China Brazil, India, China, South Afrika Brazil, India, China, South Africa Annex 245 Integral planning of urban energy supply – model observation with a Chinese town as example Energy supplier Plant builder Water-based paint systems Wasserlackbasis Waste water technologies Plant builder Top 4: Material efficiency Sewage (waste water) plants Plant builder Top 3: Water supply and waste water disposal Energy-efficient building and evaluation of energy concepts Research institute For a long time, coating powder Pulverlacke was seen as the ecologically superior alternative to wet paint systems Nasslacksystemen. According to recent developments, water-based paints however have several ecological advantages over solvent-based varnishes and also coating powder. Very thin coats possible are possible (40 micron as opposed to 70-80 micron for coating powders) thus reducing the number of of coats required. Water-based paint is more easily recycled Recyclingfähigkeit ?? than coating powder. See interview on waste water technologies By mechanically and chemically cleansing (industrial) waste water, careful treatment of the resource water is guaranteed and the pollution of groundwater and the neighbouring water ecosystems is reduced. This also has positive consequences particularly for the local drinking water supply. According to simulation models, taking the entire energy supply infrastructure into account in town planning leads to increases in energy efficiency, which exceed the sum of the single contributions of the technological components. An integral planning of the urban energy supply thus contributes to conserving resources and reduces global emissions from fossil energy sources. The evaluation of energy concepts aims to check the set targets for energy-efficiently planned and realised building projects and strives for long-term improvement. In this way, optimisation of the technologies and concepts of energyefficient building will be advanced and additional benefit will be generated for the customer through further energy-saving measures. Brazil, Russia, China, India China Russia China China 246 Annex BIOLIQ process b) Second generation biofuels International plant builder (see also Top 1) Post-shredder technology for scrap cars Scientific expert Top 5: Mobility and logistics Plant builder Second generation biofuels (biomass to liquid: BTL) utilise the whole plant as a basis, thus considerably increasing the energy yield compared to conventional processes (e. g. biodiesel, ethanol). The process has technical similarities with coal gasification and liquefaction. The properties of the fuel can be optimally adapted to the requirements of an internal-combustion engine ("designer fuel"), so that the emissions are reduced. They are CO2-neutral because of the raw material base. Thus BTL processes can make a valuable contribution to lowering street traffic emissions. The A challenge in using biomass lies in its low energy density and the bulk transport required if large biomass quantities are to be centrally processed. This is where the BIOLIQ process comes in. The whole plant is compacted into energetic slurry, thus forming a basic component in the logistics of energy-efficient biomass utilisation, e. g. for its subsequent processing into fuel. When scrapping old vehicles, after several preliminary stages the bodywork remaining is shredded. Iron and other metal materials are separated for recycling, ca. 20 % of the vehicle weight remains as shredder waste. The process regarded here extracts further useable raw materials from this waste. The largest share consists of the material groups granulated materials, fibres and sand. In addition, further metal concentrates and a recyclable PVC-rich fraction (part?) are produced. In Europe, 2 - 3 m t of shredder residues occurs annually from the disposal of car bodies and other metalliferous waste like electrical household appliances. This process thus represents a valuable source of scondary raw materials. The energy consumption and emissions when baking do not apply Einbrennen. ?? However, they are not entirely solventfree like coating powders. Brazil, India, China China Brazil, India, China, South Africa Annex 247 Emission-reducing technologies for trucks CO2-neutral logistics services Vehicle manufacturer Logistics service provider CO2-neutral logistic services are based on the premiss that CO2 emissions linked with certain transport services are calculated and compensated for/ offset by CO2 reductions in company-external and –internal projects. CO2-neutral logistic services are marketed in Germany with an additional charge/ markup. As logistic services can only be performed to a very small extent in a CO2-neutral manner, namely if biofuels are used, compensation takes place predominantly through CO2- The emissions of conventional air pollutants from commercial vehicles and their diesel engines have fallen considerably in the past years (particulate emissions from 1990-2006 reduced by the factor 35 (97 %), for nitrogen oxides by factor 7, with Euro 6 a factor 50 -70 compared with 1990 was realised). In order to meet the guidelines set in the Euro-5 Norm, AdBlue technology was developed to treat exhaust gas. It is not allowed in the USA, because it is feared that drivers would not be able to fill up with the required additive and actually worsen exhaust emissions. Exhaust reduction within the engine appears promising, for it would be very expensive to conform to the standards using exhaust gas purification only. From 2008 the Euro-5 Norm should be met without using the AdBlue exhaust gas treatment. A certain mininum fuel quality is a prerequisite for the emission-reducing technologies to be effective. The problem of CO2 emissions will not be solved by these approaches. advantage over hydrogen is its compatibility with the existing infrastructure (fuel supply and fleet of vehicles). This is where the advocates of hydrogen vehicles see the disadvantage: in gasifying the biomass, hydrogen could be captured auskoppeln ?? and used in drive systems (i. e. fuel cells), which are far more efficient than the internalcombustion engine. The range per hectare of land used for biomass cultivation would be definitely higher with hydrogenbased systems.??? Germany BRICS+D 248 Annex Financing environmentrelated investment projects in the B/R/I/C/S states Financial (development) collaboration Export financing, commercial project financing Promotion of demand for cleaner technologies via the UN Cleaner Production Programme (Development aid) bank Förderbank Bank UN National Cleaner Production Center in Brasilien (Turnkey solutions for) railway transport systems Bank Cross-sectional interviews Systems supplier Railway traffic systems are clearly lower in emissions than street or air traffic, whether in short- or long-distance traffic. They are regarded as the most environmentally compatible means of mass transport. The efficiency and reliability of the systems are increased through the integrated service offered in the form of "turnkey systems". This creates additional benefit for the customers/ passengers and greater acceptance, and is thus a further contribution to sustainability. reductions outside the transport sector, e. g. by means of projects in the renewable energies field or emission reduction credits from projects abroad. The product presents an interesting approach to coping with the rigidities in the transport sector and contributes in this respect to sustainability. It is, however, controversial to what extent the established CO2 reductions really represent additional reductions. Brazil BRICS and others BRICS and others BRICS and others China Annex 249 Promotion of demand for cleaner technologies via the UN Cleaner Production Programme Promotion of demand for cleaner technologies via the UN Cleaner Production Programme Promotion of demand for cleaner technologies via the UN Cleaner Production Programme Industrial parks Research institute (cooperation partner of the UN National Cleaner Production Center in Brazil) Scientific expert UNIDO Cleaner Production Unit Scientific expert China Brazil, Russia, India, China, South Africa Brazil Brazil 250 Annex Annex 251 The English version of the study has already been sent to all the scientists and experts involved as well as to the participants of the international conference on sustainability and growth in Brazil, Russia, India, China and South Africa. It is now available to political institutions in Germany and other interested parties. The German and English versions are available at: http://www.nachhaltigkeitsrat.de/veroeffentlichungen/studien/?blstr=0 http://www.isi.fraunhofer.de/publ/index.htm German Council for Sustainable Development The German Council for Sustainable Development has the task to provide recommendations on Germany’s sustainability policy, to suggest exemplary projects and to strengthen the topic in the public sphere. On European level, the Council regularly exchanges experiences with other European SD bodies on their respective national strategies through the Network of European Environmental and SD Advisory Councils (EEAC). Informations about members and activities of the council are available under: www.nachhaltigkeitsrat.de