The Global Energy Innovation Index: National Contributions to the Global Clean Energy Innovation System

To sustain global prosperity and expand energy access while meeting the challenge of climate change, energy must become more reliable, more affordable, and cleaner. Fossil fuel combustion, the primary source of climate-warming emissions, still supplies about 80 percent of global energy needs—and total consumption is rising. These emissions must either be captured or eliminated in the coming years if the worst consequences of climate change are to be averted.

If dramatic emissions cuts cannot be achieved without raising energy costs or degrading performance, the energy transition will fall short. Few countries will accept higher costs or poorer performance. Yet, right now, no viable clean energy substitutes are available for many essential purposes. For many others, such substitutes are still too expensive or perform too poorly to be acceptable. The transition to a global clean energy system cannot be accomplished without innovation on a massive scale to provide these solutions.

Energy innovation is a global process. The relevant research communities, industries, and financial institutions span nearly every border. Such global interactions are extremely valuable. They allow diverse ideas to be combined in novel ways, for instance, and for field testing of options to occur in settings far from where they originate.

Despite energy innovation’s global scope, national governments are its most important contributors. There is no global entity that can sufficiently provide funding to fuel the process at the requisite scale, guide the application of those resources to key problems, or support the development of problem-solving institutions. National governments have the biggest impact on energy innovation, through their spending, taxation, and regulatory policies, as well as through the signals they send to one another and to their citizens.

The importance of both innovation and the centrality of national contributions to energy transition were acknowledged by the creation of the Mission Innovation (MI) initiative in parallel with the Paris Agreement in 2015. Twenty-four nations and the EU committed to both double their public investments in energy RD&D and collaborate in tackling key innovation challenges. (As we show, most are falling short of fulfilling this commitment in practice.)

MI was a bold declaration. But it will amount to little more than hot air unless the member nations both follow through on their commitments and build on them aggressively, with increasing ambition. Nations should be judged by the actions they take to accelerate clean energy innovation.

This report seeks to provide accountability for these commitments, and to lay the foundation for more ambitious measures by assessing national contributions to the global energy innovation system made by the MI member nations and the EU.

Key Findings

• Without more and faster clean energy innovation it will be virtually impossible to meet global climate emission goals.
• The 23 countries covered by ITIF’s Global Energy Innovation Index make highly varied contributions to clean energy innovation, but all can and should increase their contributions considerably.
• Norway, Finland, and Japan make the most significant contributions to the global clean energy innovation system relative to the size of their economies.
• Norway and Finland are the only countries that invest as much as experts recommend in public clean energy research, development, and demonstration (RD&D).
• Despite announcing its intent to withdraw from the Paris climate agreement, the United States continues to make major contributions to global clean energy innovation, ranking fourth on a per-gross-domestic-product (GDP) basis.
• On an absolute basis, the United States invests more than any other nation to support clean energy innovation. It invests more in total clean energy RD&D ($6.8 billion in 2018) than the next two countries (China and Japan) combined, and more in basic energy science than all other nations combined.
• Australia, Italy, and the Netherlands rank the lowest of the developed countries, owing primarily to their limited contributions to clean energy option generation.
• Despite joining the Paris Agreement and committing to double their public clean energy RD&D investments within five years in the MI initiative, nine countries—South Korea, France, Italy, Netherlands, Australia, Sweden, Denmark, Norway, and Finland—and the EU invest less now in absolute terms than they did in 2015.
• Public funding for demonstration of capital-intensive clean energy technologies, such as carbon capture and storage (CCS) and advanced nuclear energy, appears to be a major weakness in the global energy innovation system.
• The rate at which nations produce high-impact clean energy start-ups, which are important for scaling up some clean energy technologies, varies widely. The global system is dependent on a few countries, led by the United States in absolute terms, to perform this function.
• Although most nations target clean energy with their public RD&D investments, six nations—Mexico, China, Australia, Norway, Italy, and Canada—still spend at least a sixth of their investments on legacy fossil fuel RD&D programs.
• Seven nations—China, Saudi Arabia, United Arab Emirates, Indonesia, India, Mexico, and South Korea—subsidized fossil fuel consumption by $171 billion in 2018, spending far more for this purpose than all 23 nations and the EU combined invested in clean energy RD&D ($22.7 billion in 2018).
• Because fossil fuel subsidies in a few high-emissions countries outweigh the generally modest carbon prices many countries have imposed to curb carbon dioxide (CO2) emissions, the weighted average effective carbon price across all MI countries is -$3.44 (negative) per ton of CO2.