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GHG technology developmentInformation on business R&D and innovation activities is needed to evaluate Canada’s commitment to developing and promoting GHG technologies. Monitoring these activities also supports the government’s broader objective of turning Canada into one of the top five R&D performers and one of the most innovative countries in the world.16 As a relatively new technology area, it is difficult to measure the extent of R&D and innovation activities related to GHG technology development. The available data provide some baseline information that could help governments and businesses in their efforts to promote research collaboration, to facilitate networking and to diffuse GHG technologies. Results of future data collection will be critical in assessing the trends in GHG technology development. Research and developmentR&D involves generating new ideas and is the first step in the innovation process.17 Historically, businesses have been the largest R&D performers. In 2002, for example, total R&D expenditures by businesses reached $12.4 billion, accounting for 55% of the total gross domestic R&D spending for that year ($22.4 billion).18 How much of business R&D expenditures are dedicated to GHG technology development? In 2002, R&D expenditures on renewable resources and energy conservation made up 30% of total energy R&D spending (Table 5). GHG technologies continue to compete with conventional technologies such as fossil fuels and energy transportation and transmission for R&D funding. For example, from 2000 to 2002, businesses increased their R&D expenditures on renewable resources and spent less on R&D for energy conservation. In the same period, R&D aimed at increasing fossil fuel supply rose from $161 million to $209 million, making it the most significant technology area for energy R&D expenditures in 2002. Improving the knowledge base on R&D related to GHG technology development—which industries to target, what funding mechanisms to promote, and other issues—would help governments identify the policy levers that could redirect business R&D activities away from conventional technologies and toward GHG technologies. R&D activities tend to occur within clusters of interrelated firms—similar companies, specialized suppliers, service providers and firms in related industries.19 The industry groups most active in GHG technology R&D in 2002 were management, scientific and technical consulting services; scientific R&D services; architectural and engineering services; and machinery manufacturing.
More than half of the environmental firms that carried out R&D for GHG technology development conducted only in-house R&D (Table 6). While parent and affiliated firms tend to be the major source of industrial R&D funding, the financial support for GHG technology development in 2002 came primarily from the federal government. Ottawa has implemented R&D funding support programs for GHG technology development and demonstration such as the Technology Early Action Measures Program and the National Fuel Cell Research and Innovation Initiative. Several tax incentive programs have also been put in place, including those for flare gas generation, renewable energy and energy efficiency.20
InnovationNew ideas and inventions are generated through R&D; innovation is the commercialization of those new inventions.21 GHG-related product innovation refers to new or significantly improved goods or services to reduce GHG emissions. This type of innovation ensures the availability of leading-edge systems and equipment. Another area of interest is innovation associated with the adoption of GHG technologies by businesses. From 2000 to 2002, 24% of firms in 16 primary and manufacturing industries used GHG-related innovative systems and equipment.22 In many instances, businesses cited sufficient return on investment as their main motivation for adopting innovative GHG technologies (Table 7). Corporate policy, culture, awareness and regulations were other frequently reported incentives.
Problems and obstaclesKnowledge of the problems and obstacles to the commercialization, transfer and adoption of GHG technologies helps both suppliers and buyers of these technologies make rational decisions. Technology developers can make realistic assumptions when evaluating market barriers and can plan to overcome these barriers. At the same time, potential buyers of these technologies can better analyse the costs and benefits when choosing the appropriate technology. Wind energy, for example, has been cited as one of the fastest-growing forms of renewable energy in the world.23 Suppliers of wind technology need to consider the ability to offer competitive electricity costs, prospects for good wind sources, access to transmission infrastructure, availability of land to install wind turbines, and ways of minimizing the impact on wildlife (mainly the threat to birds). In some cases, members of the public may object because of aesthetic impacts.24 Most suppliers of environmental goods and services cited lack of market demand, lack of financing and high cost of technology development as the most common problems and obstacles in developing GHG technologies (Figure 6). This could partly explain the low innovation rate among GHG technology developers. Demand volatility, the dominance of small firms and limited applications for some technologies contribute to the relatively high uncertainty in producing and marketing GHG technologies. Firms were more likely to take the risks involved in technology development if they had achieved prior success. Almost three-quarters of firms that still had unsuccessful or outstanding projects at the end of 2002 also had successfully completed and introduced other GHG technology product innovations in that year.25
The problems and obstacles faced by GHG technology producers and developers were reflected in the perspectives of the consumers of these technologies. An OECD progress report on sustainable development indicates that the adoption of GHG technologies is slow. Long lead times are needed to refine and commercialize new technology and higher investments are needed to deploy the technology.26 The 2002 survey results identified three most common barriers to the adoption of innovative GHG technologies: high equipment costs, lack of financing and lack of available technology (Figure 7).27 Costs include not only the initial investment to install the system or equipment but also the cost to operate it. The issue of technology availability, or the lack thereof, is more or less associated with how readily applicable the GHG technologies are to a firm’s production process.
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