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2023 Technology and Innovation Report by UNCTAD: Opening Green Windows

By Mia Hem

UNCTAD has recently published the 2023 Technology and Innovation Report, which focuses on green windows of opportunity in innovation and technological pathways for developing countries to achieve sustainable and equitable growth. Developing countries need national preconditions and capabilities to adapt and adopt frontier technologies, and renewable energy technologies may offer just this, allowing them to convert to more complex and sustainable production. However, these windows are time sensitive and must be taken advantage of quickly. There is a need to strengthen capacities and analyze new sectors to fit into global value chains which are greener, and digital and which embed strong social and environmental values. Thus, governments must prioritize and strengthen sectoral innovations to achieve sustainable production. This can be done through collaboration with the private sector and setting mission-oriented policies to address previous market failures and involve broader programs of co-creation and shaping.

UNCTAD proposes that latecomer countries prioritize:

Green windows of opportunities: There is a need for more diverse and productive economies to create better jobs, reduce poverty, and tackle climate change. Nevertheless, fast economic growth requires more energy, which could result in rising carbon emissions. Thus, Governments must make trade-offs between promoting economic growth and protecting the planet. They must therefore create these green windows of opportunity, which are time-bounded opportunities that arise from changes in public institutions, policy interventions, and technologies, which will help developing countries catch up. The governments can use green innovation such as renewable energy technologies, apply frontier technologies to greener global value chains, and diversify towards sectors that have lower carbon footprints.

Moving fast with frontier technologies: Frontier technologies such as the Internet of Things, Artificial Intelligence, Electric Vehicles and nanotechnology have experienced exponential growth in the last two decades, and with it also their potential economic benefits. They can open green windows for economies to drive their economic growth, but developing economies need to optimize their mobility and close the gaps for the use, adoption and adaptation of frontier technologies. This requires more government support, as the impact on jobs will depend on the specific technology and the balance between job creation and extinction. Trade can be a channel, also for innovation transfer, as international cooperation and multilateral initiatives assist in sharing knowledge and encourage progress in frontier technologies.

Growth powered by renewable energy: Countries have different potentials and opportunities in producing, distributing and using bioenergy, solar and wind energy, and green hydrogen. Research, development, education and training must be oriented in such a way as to build domestic capacity. Domestic innovation systems, institutional support, and public-private collaboration are crucial in promoting technological upgrading and developing new markets, and strategies for achieving these goals include investing in scalable and replicable green projects, developing green hydrogen hubs, and establishing partnerships with other countries. But the challenges that remain consist of the need to lower the cost of production and transportation and set clear standards and regulations. Policymakers should select and adapt policy instruments to local circumstances, use a combination of measures, find finance for renewable energy projects, establish demonstration programs, assess and sustain sectoral systems, and reform intellectual property regimes.

Twin transitions for global value chains (green and digital): Latecomer countries can benefit from twin transitions of greening and digitalization in global value chains. This environmental upgrading involves reducing a firm’s ecological footprint and incorporating more sustainable production and product lifecycles. Social upgrading involves improving the rights and entitlements of workers. Moreover, digital upgrades in product design, production inputs, production processes, and consumption through data analytics, cloud computing, artificial intelligence and blockchain technology can aid in reducing environmental impact in the production and practices involved in production. Governance along the value chain can influence the adoption of sustainability standards and the cost of sustainability compliance for suppliers. Latecomer countries must build digital competency along with the necessary infrastructure and institutions while building innovation capacity and overcoming financial barriers to seize windows of opportunity created by these technologies. Governments, the private sector, and other stakeholders must align digital and green strategies, develop infrastructure, build digital skills, build international partnerships, set standards and regulations, and provide financial support to combine barren and digital objectives.

Pathways to more complex and sustainable production: Developing countries must diversify their economies towards sectors with lower carbon emissions, and aim to greener directions through the use of renewable energy and more knowledge-intensive industries. Governments in low- and middle-income developing countries must, however, act strategically, quickly, and decisively. Policymakers may foster new sectors through interactive processes that include the evaluation of each potential product, considering social, economic and environmental impacts, and shortlisting potential products through repeated evaluations every few years. There is a need for policies to enable entrant firms to reach the levels of productivity required to compete with more technologically advanced countries, specific measures such as establishing clusters of industries developing green technology, and participating in global value chains for trade facilitation.

International collaboration for more sustainable production: Lastly, there is a need for international cooperation to support green innovation in developing countries. Currently, it lacks the necessary preconditions for seizing green opportunities, such as effective sectoral innovation systems, digital infrastructure, and adequate finance. The gap between developed and developing countries in terms of research and development expenditure is significant, with the latter investing far less. International cooperation supports tailored programs for environmental management efforts, including implementing multilateral environmental agreements and providing sustainable energy. Trade rules should permit developing countries to protect infant industries to build cleaner and more productive production, and align trade with the Paris Agreement on climate change. Developing countries could also subsidize new cleaner sectors and use a stable and competitive exchange rate as an alternative to tariffs, and the international community could propose new trade mechanisms to support the development of innovative capacity in cleaner production. Thus, UNCTAD suggests developing partnerships for common public goods, shifting research for green innovation from the national to the multinational level, and implementing a multilateral challenge fund for innovations in response to global challenges. They emphasize a need for technology assessments that consider local context and values, as well as the importance of promoting cooperation in science and technology.

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