Innovation in climate mitigation technologies has seen enormous activity and significant progress in recent years. Innovation has also led to, and exacerbated, trade-offs in relation to sustainable development (high confidence). Innovation can leverage action to mitigate climate change by reinforcing other interventions. In conjunction with other enabling conditions, innovation can support system transitions to limit warming and help shift development pathways. The currently widespread implementation of solar photovoltaic (solar PV) and light-emitting diodes (LEDs), for instance, could not have happened without technological innovation ( high confidence). Technological innovation can also bring about new and improved ways of delivering services that are essential to human well-being. At the same time as delivering benefits, innovation can result in trade-offs that undermine both progress on mitigation and progress towards other Sustainable Development Goals (SDGs). Trade-offs include negative externalities – for instance, greater environmental pollution and social inequalities – rebound effects leading to lower net emission reductions or even increases in emissions, and increased dependency on foreign knowledge and providers ( high confidence). Effective governance and policy has the potential to avoid and minimise such misalignments (medium evidence, high agreement ). {16.1, <span class="•-Bold-condensed--dark-blue-"></span>16.2, 16.3, 16.4, 16.5.1, 16.6}

A systemic view of innovation to direct and organise the processes has grown over the last decade. This systemic view of innovation takes into account the role of actors, institutions and their interactions, and can inform how innovation systems that vary across technologies, sectors and countries, can be strengthened (high confidence) . Where a systemic view of innovation has been taken, it has enabled the development and implementation of indicators that are better able to provide insights into innovation processes. This, in turn, has enabled the analysis and strengthening of innovation systems. Traditional quantitative innovation indicators mainly include research and development (R&D) investments and patents. Systemic indicators of innovation, however, go well beyond these approaches. They include structural innovation system elements including actors and networks, as well as indicators for how innovation systems function, such as access to finance, employment in relevant sectors, and lobbying activities. For example, in Latin America, monitoring systemic innovation indicators for the effectiveness of agroecological mitigation approaches has provided insights on the appropriateness and social alignment of new technologies and practices. Climate-energy-economy models, including integrated assessment models, generally employ a stylised and necessarily incomplete view of innovation, and have yet to incorporate a systemic representation of innovation systems. {16.2, 16.2.4, 16.3, 16.3.4, 16.5, Table 16.7, Box 16.1, Box 16.3, Box 16.10}

A systemic perspective on technological change can provide insights to policymakers supporting their selection of effective innovation policy instruments (high confidence). A combination of scaled-up innovation investments with demand-pull interventions can achieve faster technology unit cost reductions and more rapid scale-up than either approach in isolation ( high confidence). These innovation policy instruments would nonetheless have to be tailored to local development priorities, to the specific context of different countries, and to the technology being supported. The timing of interventions and any trade-offs with sustainable development also need to be addressed. Public R&D funding and support, as well as innovation procurement, have proven valuable for fostering innovation in small to medium cleantech firms. Innovation outcomes of policy instruments not necessarily aimed at innovation, such as feed-in tariffs, auctions, emissions trading schemes, taxes and renewable portfolio standards, vary from negligible to positive for climate change mitigation. Some specific designs of environmental taxation can also result in negative distributional outcomes. Most of the available literature and evidence on innovation systems come from industrialised countries and larger developing countries. However, there is a growing body of evidence from developing countries and Small Island Developing States (SIDS). {16.4, 16.4.4.3, 16.4.4.4, 16.5, 16.7}

Experience and analyses show that technological change is inhibited if technological innovation system functions are not adequately fulfilled. This inhibition occurs more often in developing countries (high confidence). Examples of such functions are knowledge development, resource mobilisation, and activities that shape the needs, requirements and expectations of actors within the innovation system (guidance of the search). Capabilities play a key role in these functions, the build-up of which can be enhanced by domestic measures, but also by international cooperation ( high confidence). For instance, innovation cooperation on wind energy has contributed to the accelerated global spread of this technology. As another example, the policy guidance by the Indian government, which also promoted development of data, testing capabilities and knowledge within the private sector, has been a key determinant of the success of an energy-efficiency programme for air conditioners and refrigerators in India. {16.3, <span class="•-Bold-condensed--dark-blue-"></span>16.5, 16.6, Cross-Chapter Box 12 in this chapter, Box 16.2}

Consistent with innovation system approaches, the sharing of knowledge and experiences between developed and developing countries can contribute to addressing global climate and SDGs. The effectiveness of such international cooperation arrangements, however, depends on the way they are developed and implemented (high confidence). The effectiveness and sustainable development benefits of technology sharing under market conditions appear to be determined primarily by the complexity of technologies, local capabilities and the policy regime. This suggests that the development of planning and innovation capabilities remains necessary, especially in least-developed countries and SIDS. International diffusion of low-emission technologies is also facilitated by knowledge spillovers from regions engaged in clean R&D (medium conf idence). {16.6}

The evidence on the role of intellectual property rights (IPR) in innovation is mixed. Some literature suggests that it is a barrier, while other sources suggest that it is an enabler to the diffusion of climate-related technologies (medium confidence) . There is agreement that countries with well-developed institutional capacity may benefit from a strengthened IPR regime, but that countries with limited capabilities might face greater barriers to innovation as a consequence. This enhances the continued need for capacity building. Ideas to improve the alignment of the global IPR regime and address climate change include specific arrangements for least-developed countries, case-by-case decision-making and patent-pooling institutions. {16.2.3.3, 16.5, Box 16.9}

Although some initiativeshave mobilised investments in developing countries, gaps in innovation cooperation remain, including in the Paris Agreement instruments. These gaps could be filled by enhancing financial support for international technology cooperation, by strengthening cooperative approaches, and by helping build suitable capacity in developing countries across all technological innovation system functions (high confidence). The implementation of current arrangements of international cooperation for technology development and transfer, as well as capacity building, are insufficient to meet climate objectives and contribute to sustainable development. For example, despite building a large market for mitigation technologies in developing countries, the lack of a systemic perspective in the implementation of the Clean Development Mechanism, operational since the mid-2000s, has only led to some technology transfer, especially to larger developing countries, but limited capacity building and minimal technology development (medium confidence). In the current climate regime, a more systemic approach to innovation cooperation could be introduced by linking technology institutions, such as the Technology Mechanism, and financial actors, such as the financial mechanism. {16.5.3}

Countries are exposed to sustainable development challenges in parallel with the challenges that relate to climate change. Addressing both sets of challenges simultaneously presents multiple and recurrent obstacles that systemic approaches to technological change could help resolve, provided they are well managed (high confidence). Obstacles include both entrenched power relations dominated by vested interests that control and benefit from existing technologies, and governance structures that continue to reproduce unsustainable patterns of production and consumption (medium confidence). Studies also highlight the potential for cultural factors to strongly influence the pace and direction of technological change. Sustainable solutions require adoption and mainstreaming of locally novel technologies that can meet local needs, and simultaneously address the SDGs. Acknowledging the systemic nature of technological innovation, which involves many levels of actors, stages of innovation and scales, can lead to new opportunities to shift development pathways towards sustainability. {16.4, 16.5, 16.6}

An area where sustainable development, climate change mitigation and technological change interact is digitalisation. Digital technologies can promote large increases in energy efficiency through coordination and an economic shift to services, but they can also greatly increase energy demand because of the energy used in digital devices. System-level rebound effects may also occur (high confidence). Digital devices, including servers, increase pressure on the environment due to the demand for rare metals and end-of-life disposal. The absence of adequate governance in many countries can lead to harsh working conditions and unregulated disposal of electronic waste. Digitalisation also affects firms’ competitiveness, the demand for skills, and the distribution of, and access to, resources. The existing digital divide, especially in developing countries, and the lack of appropriate governance of the digital revolution can hamper the role that digitalisation could play in supporting the achievement of stringent mitigation targets. At present, the understanding of both the direct and indirect impacts of digitalisation on energy use, carbon emissions and potential mitigation, is limited (medium confidence). {Cross-Chapter Box 11 in this chapter, 16.2}

Strategies for climate change mitigation can be most effective in accelerating transformative change when actions taken to strengthen one set of enabling conditions also reinforce and strengthen the effectiveness of other enabling conditions (medium confidence). Applying transition or system dynamics to decisions can help policymakers take advantage of such high-leverage intervention points, address the specific characteristics of technological stages, and respond to societal dynamics. Inspiration can be drawn from the global unit cost reductions of solar PV, which were accelerated by a combination of factors interacting in a mutually reinforcing way across a limited group of countries ( high confidence). {Box 16.4, Cross-Chapter Box 12 in this chapter}

Better and more comprehensive data on innovation indicators can provide timely insights for policymakers and policy design locally, nationally and internationally, especially for developing countries, where such insights are missing more often. Data needed include those that can show the strength of technological, sectoral and national innovation systems. It is also necessary to validate current results and generate insights from theoretical frameworks and empirical studies for developing countries contexts. Innovation studies on adaptation and mitigation other than energy and ex-post assessments of the effectiveness of various innovation-related policies and interventions, including R&D, would also provide benefits. Furthermore, methodological developments to improve the ability of integrated assessment models (IAMs) to capture energy innovation system dynamics, and the relevant institutions and policies (including design and implementation), would allow for more realistic assessment. {16.2, 16.3, 16.7}

Technological change and innovation are considered key drivers of economic growth and social progress (Brandão Santana et al. 2015; Heeks and Stanforth 2015). Increased production and consumption of goods and services creates economic benefits through higher demands for improved technologies (Gossart 2015). Since the Industrial Revolution, however, and notwithstanding the benefits, this production and consumption trend and the technological changes associated with it have also come at the cost of long-term damage to the life support systems of our planet (Alarcón and Vos 2015; Steffen et al. 2015). The significance of such impacts depends on the technology, but also on the intrinsic characteristics of the country or region analysed (Brandão Santana et al. 2015).

Other chapters in this volume have discussed technological change in various ways, including as a framing issue (Chapter 1), in the context of specific sectors (Chapters 6–11), for specific purposes (Chapter 12) and as a matter of policy, international cooperation and finance (Chapters 13–15). Chapter 2 discusses past trends in technological change and chapters 3 and 4 discuss it in the context of future modelling. In general, implicitly or explicitly, technological change is assigned an important role in climate change mitigation and achieving sustainable development (Thacker et al. 2019), as also discussed in past IPCC reports (IPCC 2014, 2018a). Chapter 16 describes how a well-established innovation system at a national level, guided by well-designed policies, can contribute to achieving mitigation and adaptation targets along with broader Sustainable Development Goals (SDGs), while avoiding undesired consequences of technological change.

The environmental impacts of social and economic activities, including emissions of greenhouse gases (GHGs), are greatly influenced by the rate and direction of technological changes (Jaffe et al. 2000). Technological changes usually designed and used to increase productivity and reduce the use of natural resources can lead to increased production and consumption of goods and services through different rebound effects that diminish the potential benefits of reducing the pressure on the environment (Kemp and Soete 1990; Grübler 1998; Sorrell 2007; Barker et al. 2009; Gossart 2015).

Those environmental impacts depend not only on which technologies are used, but also on how they are used (Grübler et al. 1999a). Technological change is not exogenous to social and economic systems; technologies are not conceived, selected, and applied autonomously (Grubler et al. 2018). Underlying driving forces of the problem, such as more resource-intensive lifestyles and larger populations (Hertwich and Peters 2009; UNEP 2014), remain largely unchallenged. Comprehensive knowledge of the direct and indirect effects of technological changes on physical and social systems could improve decision-making, including in those cases where technological change mitigates environmental impacts.

A sustainable global future for people and nature requires rapid and transformative societal change by integrating technical, governance (including participation), financial and societal aspects of the solutions to be implemented (Sachs et al. 2019; Pörtner et al. 2021). A growing body of interdisciplinary research from around the world can inform implementation of adaptive solutions that address the benefits and drawbacks of linkages in social-ecological complexity, including externalities and rebound effects from innovation and technological transformation (Balvanera et al. 2017; Pörtner et al. 2021).

Technological change and transitional knowledge can reinforce each other. The value of traditional wisdom and its technological practices provide examples of sustainable and adaptive systems that could potentially adapt to and mitigate climate change (Kuoljok 2019; Singh et al. 2020). Peasants and traditional farmers have been able to respond well to climate changes through their wisdom and traditional practices (Nicholls and Alteri 2013). The integration of the traditional wisdom with new technologies can offer new and effective solutions (Galloway McLean 2010).

Achieving climate change mitigation and other SDGs thus also requires rapid diffusion of knowledge and technological innovations. However, these are hampered by various barriers, some of which are illustrated in Table 16.1 (Markard et al. 2020).

Table 16.1 | Overview of challenges to accelerated diffusion of technological innovations. Source: based on Markard et al. (2020).

The literature has been growing rapidly over the past decades on how, in a systemic way, the barriers to sustainability transition can be overcome in various circumstances. A central element is that national systems of innovation can help achieve both climate change goals and SDGs, by integrating new ideas, devices, resources, new and traditional knowledge, and technological changes for more effective and adaptive solutions (Lundvall 1992). At the organisational level, innovation is seen as a process that can bring value by means of creating more effective products, services, processes, technologies, policies and business models that are applicable to commercial, business, financial and even societal or political organisations (Brooks 1980; Arthur 2009).

The literature refers to the terms ‘technology push‘, ‘market pull‘, ‘regulatory push-pull‘, and ‘firm specific factors‘ as drivers for innovation, mostly to inform policymakers (Zubeltzu-Jaka et al. 2018). There has also been growing interest in social drivers, motivated by the recognition of social issues, such as unemployment and public health, linked to the deployment of innovative low-carbon technologies (Altantsetseg et al. 2020). Policy and social factors and the diverse trajectories of innovation are influenced by regional and national conditions (Tariq et al. 2017), and such local needs and purposes need to be considered in crafting international policies aimed at fostering the global transition towards increased sustainability (Caravella and Crespi 2020). From this standpoint, a multidimensional, multi-actor, systemic innovation approach would be needed to enhance global innovation diffusion (de Jesus and Mendonça 2018), especially if this is to lead to overall sustainability improvements rather than result in new sustainability challenges.

Policies to mitigate climate change do not always take into account the effects of mitigation technologies on other environmental and social challenges (Arvesen et al. 2011). Policies also often disregard the strong linkages between technological innovation and social innovation; the latter is understood to be the use of soft technologies that brings about transformation through establishing new institutions, new practices, and new models to create a positive societal impact, characterised by collaboration that crosses traditional roles and boundaries, between citizens, civil society, the state, and the private sector (Reynolds et al. 2017). Market forces do not provide sufficient incentives for investment in development or diffusion of technologies, leaving a role for public policy to create the conditions to assure a systemic innovation approach (Popp 2010; Popp and Newell 2012). Moreover, public action is more than just addressing market failure, it is an unalienable element of an innovation system (Mazzucato 2013).

Coupling technological innovation with sustainable development and the SDGs would need to address overall social, environmental, and economic consequences, given that public policy is intertwined with innovation, technological changes and other factors in a complex manner. Chapter 16 is organised in the following manner to provide an overview of innovation and technology development and transfer for climate change and sustainable development.

Section 16.2 discusses drivers of innovation process, including macro factors that can redirect technological change towards low-carbon options. Representations of these drivers in mathematical and statistical models allow for explaining the past and constructing projections of future technological change. They also integrate the analysis of drivers and consequences of technological change within economic-energy-economy (or integrated assessment) models (Chapter 3). The section also describes the different phases of innovation and metrics, such as the widely used but also criticised technology readiness levels (TRLs).

Section 16.3 discusses innovation as a systemic process based on recent literature. While the innovation process is often stylised as a linear process, innovation is now predominantly seen as a systemic process in that it is a result of actions by, and interactions among, a large set of actors, whose activities are shaped by, and shape, the context in which they operate and the user group with which they are engaging.

Section 16.4 presents innovation and technology policy, including technology push (e.g., publicly funded R&D) and demand-pull (e.g., governmental procurement programmes) instruments that address potential market failures related to innovation and technology diffusion. The section also assesses the cost-effectiveness of innovation policies as well as other policy assessment criteria introduced in Chapter 13.

Section 16.5 assesses the role of international cooperation in technology development and transfer, in particular the mechanisms established under the UN Framework Convention on Climate Change (UNFCCC), but also other international initiatives for technology cooperation. The discussion on international cooperation includes information exchange, research, development and demonstration cooperation, access to financial instruments, intellectual property rights, as well as promotion of domestic capacities and capacity building.

Section 16.6 describes the role of technology in sustainable development, including unintended effects of technological changes, and synthesises the chapter.

Finally, Section 16.7 discusses gaps in knowledge emerging from this chapter.

Models of the innovation process, its drivers and incentives provide a tool for technology assessment, constructing projections of technological change and identifying which macro conditions facilitate development of low-carbon technologies. The distinction between stages of the innovation process allows for assessment of technology readiness (Section 16.2.1). Qualitative and quantitative analysis of the main elements underpinning innovation – research and development (R&D), learning by doing, and spillovers – allows for an explanation of past and projected future technological changes (Section 16.2.2). In addition, general purpose technologies can play a role in climate change mitigation.

In the context of mitigation pathways, the feasibility of any emission reduction targets depends on the ability to promote innovation in low- and zero-carbon technologies, as opposed to any other technology. For this reason, Section 16.2.3 reviews the literature of the levers influencing the direction of technological change in favour of low- and zero-carbon technologies. Moreover, representation of drivers in mathematical and statistical models from Section 16.2.2 allows integration of its analysis with economic and climate effects within integrated assessment models (IAMs), hence permitting more precise modelling of decarbonisation pathways (Section 16.2.4).

In addition to technological innovation, other innovation approaches are relevant in the context of climate mitigation and more broadly sustainable development (Section 16.6). Frugal innovations, that is, ‘good enough‘ innovations that fulfil the needs of non-affluent consumers mostly in developing countries (Hossain 2018), are characterised by low costs, concentration on core functionalities, and optimised performance level (Weyrauch and Herstatt 2016) and are hence often associated with (ecological and social) sustainability (Albert 2019). Grassroots innovations are products, services and processes developed to address specific local challenges and opportunities, and which can generate novel, bottom-up solutions responding to local situations, interests and values. (Pellicer-Sifres et al. 2018; Dana et al. 2021).

The innovation process, which consists of a set of sequential phases (Section 16.2.1), is often simplified to a linear process. Yet, it is now well understood that it is also characterised by numerous kinds of interactions and feedbacks between the domains of knowledge generation, knowledge translation and application, and knowledge use (Kline and Rosenberg 1986). Furthermore, it is not just invention that leads to technological change; the cumulative contribution of incremental innovations over time can be very significant (Kline and Rosenberg 1986). Innovations can come, not just from formal research and development (R&D) but also sources such as production engineers and the shop floor (Kline and Rosenberg 1986; Freeman 1995).

This section reviews the literature focusing on innovation as a systemic process. This now predominant view enriches the understanding of innovation as presented in Section 16.2; it conceptualises innovation as the result of actions by, and interactions among, a large set of actors, whose activities are shaped by, and shape, the context in which they operate and the user group with which they are engaging. This section aligns with the discussion of socio-technical transitions (Section 1.7.3, Chapter 5 Supplementary Material, and Cross-Chapter Box 12 in this chapter).

Building on the frameworks for identifying market failures (Section 16.2) and systemic failures (Section 16.3) in the innovation system for climate-related technologies, Section 16.4 proceeds as follows. First, it considers some of the policy instruments introduced in Chapter 13 that are particularly relevant for the pace and direction of innovation in technologies for climate change mitigation and adaptation. Second, it explains why governments put in place policies to promote innovation in climate-related technologies. Third, it takes stock of the overall empirical and theoretical evidence regarding the relationship between policy instruments with a direct and an indirect impact on innovation outcomes (including intellectual property regimes) and also other outcomes (competitiveness and distributional outcomes). Fourth, it assesses the evidence on the impact of trade-related policies and of sub-national policies aiming to develop cleantech industrial clusters.

This section focuses on innovation policies and institutions which are implemented at the national level. Whenever relevant, this section highlights examples of policies or initiatives that delve more deeply into the main high-level sectors: power, transport, industry, buildings, and agriculture, forestry and other land-use (AFOLU). Whenever possible, this section also discusses issues in policy selection, design, and implementation that have been identified as more relevant in developing countries and emerging economies.

Overall, this section shows that national and subnational policies and institutions are one of the main factors determining the redirection and acceleration of technological innovation and low-emission technological change (Anadon et al. 2016b; Rogge and Reichardt 2016; Åhman et al. 2017; Anadón et al. 2017; Roberts et al. 2018) (robust evidence, high agreement ). Both technology push (e.g., scientific training, research and development (R&D)) and demand pull (e.g., economic and fiscal support and regulatory policy instruments), as well as instruments promoting knowledge flows and especially research-firm technology transfer, can be part of the mix (robust evidence, medium agreement ) (Sections 16.2 and 16.3).

Public R&D investments in energy and climate-related technologies have a positive impact on innovation outcomes (medium evidence, high agreement ). The evidence on procurement is generally positive, but limited. The economic policy instruments that can be classified as market pull instruments when it comes to the competitiveness outcome (at least in the short term) is more mixed. The review of the literature in this section shows that market pull policy instruments had positive but also some negative impacts on outcomes in some instances on some aspects of competitiveness and distributional outcomes (medium evidence, medium agreement ) (Peñasco et al. 2021). For several of them – such as carbon taxes or feed-in tariffs – the evidence of a positive impact on innovation is more consistent than the others. Evidence suggests that complementary policies or improved policy design can mitigate such short-term negative distributional impacts.

This section covers international transfer and cooperation in relation to climate-related technologies, ‘the flows of know-how, experience and equipment for mitigating and adapting to climate change amongst different stakeholders’ (IPCC 2000) as well as innovation to support transformative change compared to AR5 (IPCC 2014) and the IPCC Special Report on Global Warming of 1.5°C (SR1.5) (IPCC 2018a). This complements the discussion on international cooperation on science and technology in Chapter 14.

This section first outlines the needs and opportunities for international transfer and cooperation on low-emission technologies. It then describes the main objectives and roles of these activities, and then reviews recent institutional approaches within and outside the UN Framework Convention on Climate Change (UNFCCC) to support international technology transfer and cooperation. Finally, it discusses emerging ideas for international technology transfer and cooperation, and possible modifications to support the achievement of climate change and Sustainable Development Goals (SDGs), building up to Section 16.6.

This section considers technological innovation in the broader context of sustainable development, recognising that technological change happens within social and economic systems, and therefore technologies are conceived and applied in relation to those systems (Grübler 1998). Simplifications of complex interactions between physical and social systems and incomplete knowledge of the indirect effects of technological innovation may systematically lead to underestimation of environmental impacts and overestimation of our ability to mitigate climate change (Hertwich and Peters 2009; Arvesen et al. 2011).

Previous sections of the chapter discussed how a systemic approach, appropriate public policies and international cooperation on innovation can enhance technological innovation. This section provides more details on how innovation and technological change, sustainable development and climate change mitigation intertwine.

Filling gaps in literature availability, data collection, modelling, application of frameworks and further analysis in several sectors will improve knowledge on innovation and technology development and transfer, including research and development (R&D) to support policymaking in climate change mitigation as well as adaptation. These policies and related interventions need to benefit from data and methodologies for the ex post evaluation of their effectiveness.

This section addresses identified knowledge gaps related to: what extent developing countries are represented in studies on innovation and technology development and transfer; national contexts and local innovation capacity; potential and actual contributions of businesses; literature emphasis on mitigation; indicators to assess innovation systems; non-technical barriers for the feasibility of decarbonisation pathways; the role of domestic intellectual property rights (IPR) policy; digitalisation in low-emissions pathways; and Paris Agreement compliance regarding technology and capacity building.

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