Suggested Citation:
Hargadon, Andrew (2011) Policy Levers for Fostering Innovation and Entrepreneurship in Clean Technology. Institute of Transportation Studies, University of California, Davis, Journal Article UCD-ITS-RP-11-53

Policies aimed at spurring a clean technology revolution show little understanding of the innovation process, how it drives technological change, and how it builds on, as much as builds, new markets.

“Clean technology” describes renewable energies like wind, solar, and nuclear; energy efficiency; environmentally sustainable materials and manufacturing processes; carbon capture and sequestration; and water and waste treatment. Clean technology innovation aspires to provide solutions for climate change, global energy security, environmental health, and economic growth.

Current approaches to fostering clean technology innovation focus on the supply side, generating new technologies, or on the demand side, attempting to put a market price on clean technologies (e.g., carbon). Done well, these policies have clear benefits. But they are not always effective in practice and, worse, their implementation often is financially and politically costly—preventing more effective policies from being considered or attempted.

Federal R&D spending has produced alternative technologies (inventions), but none has enjoyed broad market adoption (innovations). So, while policies focus on manipulating either the supply or demand side of clean technology innovation, they neglect the innovation process, where supply and demand come together. To describe this neglect, I posit several basic truths about innovation, and explore their implications for a clean technology revolution.