EN

Brussels, 6.4.2005

SEC(2005) 430

COMMISSION STAFF WORKING PAPER

Annex to the

Proposal for the Council and European Parliament decisions

on the 7th Framework Programme (EC and Euratom)

Main Report: Overall summary

IMPACT ASSESSMENT AND EX ANTE EVALUATION

{COM(2005) 119 final}

TABLE OF CONTENTS

1. Introduction 1

2. What issues are the proposals expected to tackle? 1

2.1 Economic, social and environmental challenges 1

2.2 Weaknesses of the European research system 2

3. What would happen under a “no policy change” scenario? 2

4. Which European S&T system actors and stakeholders would be affected 3

5. What main objectives are the proposals expected to reach? 3

6. Has account been taken of any previously established objectives? 4

6.1 Existing objectives and commitments 4

6.2 Learning from past experience 4

7. What are the main policy options available to reach the objective? 5

8. How are subsidiarity and proportionality taken into account? 7

9. What are the impacts expected from the different options identified? 7

9.1 Expected impacts of the FP7 key actions 7

9.2 Overall economic, social and environmental impacts 9

10. How will the policy be implemented, monitored and evaluated? 10

11. Stakeholder consultation 11

12. Conclusion: the Commission proposal and its justification 12

Annex 1: In-depth Analysis

1. Introduction

This report presents the overall summary of the impact assessment of the European Commission’s proposals for the European Parliament and Council decisions on the 7th Framework Programme (EC and EURATOM), the Specific Programmes and the Rules for Participation. The FP7 impact assessment was based upon inputs from stakeholders, internal and external evaluation and other studies, and contributions from recognised European evaluation and impact assessment experts. The in-depth analysis (Annex 1) upon which this summary is based is contained in the annex, and references are made systematically to the relevant sections of the annexed report so that the reader can find the more detailed material.

Although ambitious in its attempt, the report also comes with a note of warning: assessing the impacts of research policy is particularly difficult. First, it is hard to establish a linear causal relationship between specific policies and particular effects. The reason is that there exists an important time lag between doing research, generating innovations, and reaping commercial benefits. Different policy actors also play a role and their policy instruments generate effects at different times. Second, difficulties arise when trying to quantify many predominantly qualitative effects such as increased networking, improved absorptive capacity, strengthened research competencies of firms, and changed behaviour. Hard data need to be cross-checked with ‘soft’ information to be obtained from interviews, case studies, expert views etc. Focussing only on monetary effects or private returns to intervention ignores the importance of social returns or ‘externalities’ (e.g. knowledge spill-over effects), which normally justify the intervention, but which are harder to measure.

2. What issues are the proposals expected to tackle?

The world economy and society are transforming. A new international division of labour is emerging, with the rise of players such as Brazil, Russia, India and China (the so-called BRIC economies) and the increasing globalization of production; new sources of competitive advantage and new sectors are being created based on innovative technologies such as biotech, ICT and nanotech; the distribution of power and leadership, and institutions of governance are evolving (Annex 1, Chapter 1, Section 1).

2.1 Economic, social and environmental challenges

As highlighted in the Kok Report, Europe is not adapting well to the aforementioned changes. It is confronted with a number of serious challenges:

· European economic growth needs to be boosted;

· European competitiveness – as reflected in standards of living, labour productivity, de-industrialisation, or high-tech exports – needs to be improved;

· More and better jobs need to be created in a sustainable way in the high-tech and knowledge intensive sectors;

· Cohesion needs to be improved in the face of the challenges posed by ageing and enlargement (Annex 1, Chapter 1, Section 1);

· Europe is also faced with environmental challenges in the areas of climate change, water quality, biodiversity loss, food production and soil degradation, over-fishing, deforestation and air pollution (Annex 1, Chapter 1, Section 2);

· Finally, Europe is confronted with social challenges as it still suffers from sub-optimal access to education, poverty, serious diseases, rising health costs, and problems affecting the quality of life (Annex 1, Chapter 1, Section 3).

2.2 Weaknesses of the European research system

S&T can bring solutions in each of these areas (Annex 1, Chapter 1, Sections 1, 2 and 3). But Europe is finding it difficult to meet these challenges because its research system suffers from a number of key weaknesses (for more detail see Annex 1, Chapter 2):

· It suffers from an important R&D investment gap vis-à-vis its main competitors, even though they are increasing investment rapidly, new fields of science have emerged, and the cost of R&D is rising;

· It has too few researchers in its labour force, despite being a major producer of S&T graduates;

· It is excellent in science but needs to invest more effectively to maintain its level;

· It needs to become better at transforming the results of research into commercially valuable innovations;

· It needs to exploit its S&T better in order to improve its competitiveness, especially in terms of selling new products abroad;

· The European research area is not yet sufficiently well organised, making it unattractive, and resulting in net outflows of R&D investment, students and researchers.

The conclusion is that an FP is needed that is substantially larger than FP6 in order to be able to address important weaknesses in the European research system. In addition, the emergence of new and the intensification of existing economic, social and environmental challenges demand a European approach. However, in terms of structure and thematic orientation a sophisticated balance should be struck between continuity and change as compared to FP6. Europe therefore needs to invest more in research, and to do so more effectively. It must open up further by encouraging a greater pooling of knowledge and resources across frontiers, stimulate the mobility of researchers and better coordinate its national research efforts so as to reduce fragmentation and diversification of funding.

3. What would happen under a “no policy change” scenario?

Under a “no policy change” scenario the specific and systemic weaknesses of the European Research Area would only be partially addressed, and consequently the speedy achievement of key EU policy objectives would be endangered. This is notably the case for the achievement of the Lisbon Agenda, the centre piece of the Barroso Commission’s strategy. It would also send a discouraging message to Member States who are currently committed to increasing their investment in R&D. In particular:

· Europe would remain a laggard in terms of economic growth;

· European competitiveness – as reflected in standards of living, labour productivity, high-tech exports, etc. – would continue to decline;

· Far fewer high-quality jobs would be created;

· It would become more difficult to achieve cohesion;

· It would become harder to address environmental challenges;

· Important opportunities would be lost to confront social challenges;

· And the attractiveness of the European Research Area would continue to decline.

[See Table 3 and Annex 1 (Chapter 5, Sections 2 and 3)]

4. Which European S&T system actors and stakeholders would be affected?

It is in the first place the community of individual researchers and of companies, universities and research institutions carrying out research that would be positively affected by addressing the specific and systemic weaknesses of the European S&T system. This community is located in companies of all size classes, in more as well as less advanced regions, and in all 25 EU Member States. Via their contributions to the achievement of the Lisbon objectives, actions at EU level in the field of S&T also have the potential to affect the lives of all European citizens. The impacts of EU level S&T actions spread beyond the EU-25, however, as they affect the global research community (as participants) and societies worldwide (as beneficiaries).

5. What main objectives are the proposals expected to reach?

The FP7 proposal sets out to achieve a number of objectives of critical importance for EU policy. Two key objectives are:

· It aims to contribute to meeting the policy objective set at the European Council meeting in March 2000 to make Europe the most competitive and dynamic knowledge society in the world by 2010.

· It sets out to support progress towards the targets established at the European Council meeting of March 2002, held in Barcelona, which specified that the EU should invest 3% of its GDP in R&D by 2010, of which two-thirds should come from the private sector and one-third from the public sector.

More specifically, the proposal is designed to address the following more detailed policy objectives listed the Communication on the future of Community research policy (COM(2004)353) published in June 2004:

· To enhance the competitiveness of European industry by the common technology initiatives;

· To increase European wide S&T collaboration and networking for sharing R&D risks and costs;

· To contribute to an increase in the level of research investment (contribute to the realisation of the 3% Barcelona objective by more than doubling Community investment in R&D);

· To improve the coordination of European, national and regional research policies;

· To strengthen the scientific excellence of basic research in Europe through increasing coordination and competition at the European level;

· To promote the development of European research careers and to make Europe more attractive to the best researchers;

· To provide the knowledge-base needed to support key Community policies;

· To increase availability, coordination and access in relation to top-level European scientific and technological infrastructure.

6. Has account been taken of any previously established objectives?

6.1 Existing objectives and commitments

In addition to the objectives outlined in the previous section, the proposal is based upon the long-standing objectives of Community research policy as stated in the Treaty, which include the implementation of research, technological development and demonstration programmes, by promoting cooperation with and between undertakings, research centres and universities; the promotion of cooperation in the field of Community research, technological development and demonstration with third countries and international organisations; the dissemination and optimisation of the results of activities in Community research, technological development and demonstration; the stimulation of the training and mobility of researchers in the Community; the promotion of coordination of research and technological development activities in the Union; and cooperation in Community research, technological development and demonstration with third countries or international organisations.

FP7 also takes into account other commitments, for instance those made in Göteborg, and the Sustainable Development Strategy. Care has also been taken to ensure coherence between the Framework Programme and complementary policies such as the structural policies and the Competitiveness and Innovation Framework Programme.

6.2 Learning from past experience

The new Framework Programme builds upon past experience with the FP (Annex 1, Chapter 4). Notably, the recent Five Year Assessment (1999-2003) showed that the Framework Programmes have provided a major contribution to Europe’s knowledge base and the restructuring of Europe’s research system to be more innovative, with a tremendous effect on networking. Through the FP, Europe has successfully supported European S&T in the past. From FP2 to FP6, the FP has experienced significant change. The budget has been increasing, and more projects and participations funded. Priorities have become more diversified. Over time, the participation and funding of different actors in the innovation system has become more balanced. By involving an ever larger number of EU member states, collaborative research consortia have an increasingly integrating effect. All EU member states are able to achieve knowledge returns from participating in FP projects that far exceed their investment in the FP, and FPs have now become increasingly attractive to scientists from all over the world.

The past FPs have had wide-ranging impacts on Europe’s scientific, technological and economic performance. Past FPs have had a positive impact on scientific output. Each collaborative research project generates on average up to 9 peer reviewed scientific publications, most of them international co-publications. Recent evidence has also shown that the scientific impact of publications from EU funded work has for two out of the three fields studied, been higher than other publications. The FP has also had a beneficial effect on the production of innovative outputs such as patents, new tools and techniques, the design and testing of models and simulations, the production of prototypes, demonstrators and pilots, etc. Firms that participate in the FP are, for instance, more likely to be innovative, to apply for patents and to hold patents than firms that do not participate. The FP also generates what is called “behavioural additionality”, that is, FP participants are more likely to continue to carry out research in the future and collaborate in doing that. The results from FP funded research are well exploited economically, and in many cases give rise to important commercial impacts such as increased turnover, higher productivity and profitability, larger market shares, and access to new markets.

The FP has an important structuring effect on the European research and innovation area. Collaborative research projects, networks of excellence, and Marie Curie actions create strong interregional and international links, both between institutions and between individual researchers. Inter-governmental cooperation at the programme level has also been strengthened through instruments such as ERA-net.

The FP has other major impacts too. The FP also has direct and indirect impacts on society and the environment. S&T advances generated by the FP lead to economic benefits (through enhanced innovation, competitiveness, growth, etc.) which in turn put Europe in a better position to face social and environmental challenges. In addition, FPs have increasingly devoted direct attention to social and environmental objectives. The results of FP funded research projects also constitute a critical input into the development of wider EU policy in a variety of fields (for example, from fisheries to energy, transport and the environment), while community research policy strengthens the EU as an international actor, e.g. as frontrunner and leader in international negotiations.

7. What are the main policy options available to reach the objective?

In examining policy options, 3 key factors were taken into account. Firstly, FP7 should be tailored to European S&T needs: acting as an instrument to promote Lisbon and other key policies, while addressing the specific needs of the diverse research players, and having a strong EU added value. Secondly, it should reply to the strong demand for new actions in the fields of industrial and basic research. Thirdly, it should respond to stakeholders’ requests for a more user-friendly and outcome-based FP.

Three basic policy options are assessed (Annex 1, Chapter 5, Section 1). The assessment focuses on their economic, social and environmental impacts, and the extent to which each option takes account of the three key driving factors above.

Þ The first policy option is the do-nothing option. It serves to analyse whether without EU intervention it is possible to reach the same objectives. It relates to a policy of no financial intervention at EU level in the field of research and technological development (discontinuation of FP). It is an essential benchmark for demonstrating the full added value of the FP7 proposal (option 3), which cannot be deduced simply from its marginal effect in relation to the status quo (option 2).

Þ The second policy option is the business as usual option. It would mean launching FP7 as a continuation of FP6, with the same budget allocations, the same objectives, the same institutional actors, the same research priorities, the same instruments, etc. The premise underlying this option is that FP6 can adequately address the major challenges facing Europe in the next few years without introducing any major changes to its size, structure and organization. This option also responds most clearly to the important concerns about continuity and stability of EU research actions.

Þ The third policy option is the proposed FP7 option. It concerns a restructured Framework Programme, twice as large as FP6, and designed so as to better respond to the targets set at Lisbon. It starts from the observation that circumstances have changed very significantly since the launching of FP6, and proposes an action that builds upon the accomplishments of FP6, but is characterised by a new scale, scope and ambition. Within this option certain important choices had to be made, and these are also analysed.

Under this third policy option, 9 different sub-options have been carefully assessed in comparison with 2 reference scenarios. For a detailed overview of the assumptions underlying the 2 reference scenarios and each of the 9 different sub-options, please see Appendix 1 in the attached in-depth report (Annex 1). The differences between the different sub-options relate to, for instance, the rate of growth of FP funding after doubling funding under FP7 (e.g. moderate growth vs. continued rapid growth), or the criteria on the basis of which FP funding will be allocated to countries and sectors (e.g. share in EU R&D expenditure vs. scientific/innovative performance). The number of scenarios that could be imagined with regard to the size of the FP is without limit: increasing FP funding under FP7 by 25 percent, 50 percent, 75 percent, etc. Here, however, we have focused on the three aforementioned basic policy options (do-nothing, business-as-usual, doubling the size of the FP) and on providing in this way a range of minimum and maximum impacts. |

Several management options have been examined too. These include the direct execution of the Framework Programme by the research DGs (status quo), the establishment of Commission executive agency(ies) to implement parts of the programme, and the establishment of joint undertakings or other structures (as foreseen in Article 171 of the EC Treaty and its Euratom equivalent) for the implementation of other parts. In addition, management in association with the Member States has been considered for certain actions. (Annex 1, Chapter 6, Section 1).

Further use of the provisions of articles 169 and 171 of the Treaty will be used for the implementation of certain actions.

Table 1: Characteristics of the various management options available for FP7

Direct Management by Research DGs | Executive Agency | Other Structures | Management in association with the Member States |

Direct management is essential where there is a close link between the activity and policy formulation, or where the tasks require discretionary powers in translating political choices into action. Direct management is not essential for tasks that are purely administrative or that could be better managed locally through shared management with the Member States. | Executive agencies may be entrusted with tasks that are required to implement a Community Programme (with the exception of those tasks requiring discretionary powers in translating political choices into action and where feedback from the actions are relevant for policy orientations).Executive agencies are particularly suited to performing administrative tasks in the implementation of a programme; thus freeing Commission staff for the performance of core tasks including policy. | Joint undertakings or other structures for implementing research actions may be set up under Article 171 of the Treaty. The role of the Commission’s services within the structure would be decided on a case-by-case basis at the time that the structure is created. Article 169 of the Treaty also foresees the possibility of participating in structures created for the execution of research and development programmes undertaken by several Member States.These structures would involve a significant proportion of management outside of the Commission’s services. | Delegation of certain elements of the FP management to public bodies established in the Member States is most appropriate for actions that would benefit from being performed locally, where there are no links between individual grants and policy formulation and where there is sufficient national structural capacity.In the case of Community research, management by such bodies could be considered in cases where the actions involve projects with established participants only in one Member State.Delegated management with the Member States is not appropriate for actions involving multi-national teams, where funds can not be allocated to national programmes or where the policy area is also targeted at non-member states |

Direct management should be retained for the major funding decisions and for the project management in the case of collaborative research. | An executive agency could perform many of the “upstream” tasks relating to programme implementation as well as “downstream” tasks in those areas where the outcome of individual projects is not critical to the shaping of future research policy (this could apply to parts of the Human Resources and Mobility activities and SME-specific support actions).An executive agency could provide a suitable vehicle to support the implementation of the European Research Council projects. | Article 169 applies to Community participation in national programmes.Article 171 allows for the creation of joint undertakings or other structures and could be used for the implementation of technology initiatives and for new infrastructure actions. | Detailed implementation of the individual grant schemes for the co-funding of national mobility programmes could be entrusted to the appropriate national or regional bodies. |

Trade-offs have centred upon finding appropriate balances in the provision of support to different stages in the S&T process and different thematic priorities; between continuity and change in terms of instruments; and between accountability and impact on the one hand and simplification and rationalisation on the other hand.

8. How are subsidiarity and proportionality taken into account?

The subsidiarity principle is intended to ensure that decisions are taken as closely as possible to the citizen and that constant checks are made as to whether action at Community level is justified in the light of the possibilities available at national, regional or local level. Specifically, it is the principle whereby the Union does not take action (except in the areas which fall within its exclusive competence) unless it is more effective than action taken at national, regional or local level.

In designing the proposal, this principle has been carefully considered and respected. It has first been established that government has an important role to play in improving Europe’s S&T. Governments across the world intervene in the field of R&D because of the existence of market and systemic failures. However, substantial attention needs to be paid to a careful policy design, for example, the choice of key areas for intervention, and the most effective instruments to deploy (e.g. fiscal incentives, direct subsidies). Support also has to be provided at the correct policy level.

Furthermore, it has been found that intervention at EU level is fully justified. There are a number of cases where it can be more effective to provide support for research at EU level than at national level. Some research activities are of such a scale that no single Member State can provide the necessary resources and expertise. In these cases, EU projects can allow research to achieve the required “critical mass”, while lowering commercial risk and producing a leverage effect on private investment. EU-scale actions also play an important role in transferring skills and knowledge across frontiers. This helps to foster excellence in research and development through enhancing capability, quality and EU-wide competition, as well as improving human capacity in S&T through training, mobility and European career development. EU support can also contribute to a better integration of European R&D, by encouraging the coordination of national policies, by the EU-wide dissemination of results, and by funding research for pan-European policy challenges (Annex 1, Chapter 3).

The principles of proportionality and necessity, which require that any action by the Union should not go beyond what is necessary to achieve the objectives of the Treaty have also been taken into account. Given the extent of the economic, social and environmental challenges Europe is facing, the substantial increase in resources proposed is justified. It should generate substantial positive impacts through crowding-in and economic multiplier effects.

9. What are the impacts expected from the different options identified?

9.1 Expected impacts of the FP7 key actions

In the field of research cooperation, the substantial increase proposed under FP7 will be crucial in distributing more widely the significant effects on restructuring research in the EU, and on pooling and leveraging resources, and will move Europe closer to a real “single market” for research. The proposed simplification of rules and procedures of FP7, notably in relation to proposals for research consortia, will also have a significant impact in making the FP easier for applicants and participants, and thus more attractive and useful to the research community. On the other hand, ending the collaborative research programmes carried out under the FP would lead to greater fragmentation and inefficiency of research efforts in Europe, while continuing FP6 would be a missed opportunity to further restructure the EU research system and reduce its inefficiencies [See Table 3 and Annex 1 (Chapter 5, Section 2)].

The implementation of Joint Technology Initiatives will contribute to the achievement of the Lisbon competitiveness objective and the Barcelona targets for research spending. The contribution to Lisbon will be made through identifying areas critical for European competitiveness and supporting ambitious, research agendas, which will be strategic and long-term in nature, and will take into account wider policies and issues relevant to research and exploitation. They will involve the commitment of massive financial, organisational and human resources through public-private partnerships, and will result in new and more competitive products and processes, European leadership in these areas, the tying down of those industries to Europe, and enhanced competitiveness in world markets. The contribution to the achievement of the Barcelona objectives lies in the large-scale mobilization of resources, one-third of which would be financed by the public sector and two-thirds by the private sector [See Table 3 and Annex 1 (Chapter 5, Section 2)].

Scaling up funding for breakthrough research (‘Ideas’) to European level will increase competition and drive up the quality of research proposals, leading to higher levels of excellence in Europe’s basic research. This will result in a better and enlarged knowledge base, which will have direct economic, societal and environmental benefits, and can be exploited by European enterprises to generate innovative products and process. The creation of the ERC and the introduction of a European-level funding scheme would also lead to a levelling-up of standards and have important structuring effects (improving the dissemination of results and increasing attractiveness) [See Table 3 and Annex 1 (Chapter 5, Section 2)].

As a result of the different actions envisaged to support researchers (‘People’) under FP7, it can be expected that more research will be carried out in Europe, and that research will generally be of higher quality, will be more inter-disciplinary, and will better take into account industry orientation where appropriate. This will be the result of actions with a structuring effect throughout Europe on the organization, performance and quality of training and researchers’ career development. These actions will make scientific careers more attractive for European citizens (in particular women), will make Europe more attractive to the best foreign researchers, will increase the level and diversity of skills of individual researchers, will introduce sustainable pathways between academia and industry (including SMEs) and between disciplines, will unlock the potential and thereby improve the capabilities of scientific institutions (in particular in the convergence regions of the EU and in the candidate countries), and will network individual researchers and scientific institutions [See Table 3 and Annex 1 (Chapter 5, Section 2)].

For a number of actions enhancing research capacities (Research infrastructures; Research for the benefit of SMEs; Regions of knowledge; Research potential; Science in society; Specific activities of international cooperation), the approach proposed for FP7 would build upon the success of activities undertaken under FP6 and increase their impacts [See Table 3 and Annex 1 (Chapter 5, Section 2)].

Proposed themes (Health; Food, Agriculture and Biotechnology; Information and Communication Technologies; Nanosciences, Nanotechnologies, Materials and new Production Technologies; Energy; Environment (including Climate Change); Transport (including Aeronautics); Socio-economic Sciences and the Humanities; and Security and Space) will help unlock hidden economic potential, meet Europe’s environmental challenges, fulfil European policy objectives and contribute to improvements in European citizen’s lives. Special attention will also be paid to the horizontal integration of priority scientific areas which cut across themes [See Table 3 and Annex 1 (Chapter 5, Section 2)].

9.2 Overall economic, social and environmental impacts

In order to estimate the possible aggregate economic impacts of the FP7 proposal, an econometric model was used. Various scenarios were simulated for long-term trends in FP funding and national/sectoral flows of financing (for a detailed presentation of the model, its scenarios and assumptions, see Annex 1, Appendix 1). On the basis of this modelling, it is concluded that the estimated aggregate economic impacts of FP7 are large [See Table 3 and Annex 1 (Chapter 5, Section 2)]. Compared to its modest share of European public R&D funding, the FP achieves significant impacts, especially in the long-term, mainly because of high crowding-in and economic multiplier effects. The proposed doubling of FP7:

· Will boost Europe’s economic growth. Depending on the rate of growth of FP funding after FP7, doubling FP funding would generate at least 0.45 and up to 0.96 percent of extra GDP over and above the business-as-usual scenario of moderate growth in FP funding by the year 2030. In other words, assuming a GDP of 100 under the business-as-usual scenario for the year 2030, and given that the extra GDP generated by doubling FP funding would amount to from 0.45 to 0.96 percent of GDP by that same year, then total GDP would reach between 100.45 and 100.96 in the year 2030. Given the comparatively small size of the FP this constitutes a large impact. When correcting for quality - i.e. taking account of the fact that as a result of technical progress the quality and capabilities of products increase significantly - the impacts on European economic growth are larger still. Doubling FP funding would then generate at least 0.69 and up to 1.66 percent of extra GDP over and above the business-as-usual scenario of moderate growth in FP funding;

· Will create extra jobs for European citizens (up to 925,000 extra jobs by the year 2030, of which up to 215,000 in research);

· Will raise Europe’s competitiveness (extra-European exports are increased by up to an extra 0.64 percent by the year 2030, imports reduced by up to 0.3 percent), and increase Europe’s R&D intensity (the extra growth in Europe’s R&D intensity could reach 0.2 percent).

The FP is more effective than national funding in reaching these results. On the other hand, under the no framework programme option:

· Europe would lose up to 0.84 percent of GDP by the year 2030 compared to the business-as-usual scenario and up to 800,000 jobs, 87,000 of them research-related;

· Extra-European exports would be lower by 2 percent and imports higher by 1.85 percent;

· Europe’s R&D intensity would be lower by 0.09 percent, making it harder to achieve the 3 percent objective.

The proposed FP7 has large potential aggregate social impacts. It will contribute to the achievement of the Lisbon strategy and to addressing the main future social and political challenges of Europe. Through both thematic efforts in diverse areas as e.g. industrial technologies, energy, transport, ICT, food, agriculture, fisheries, maritime affairs, water management, life sciences, etc., as well as through research that directly aims at the advancement of Social Sciences, FP7 can further enhance issues such as health and safety, social cohesion, human capital, well-being, governance, human rights and ethics, self-sufficiency, equity, etc. Therefore, the new research effort in FP7 will enhance the impact of innovation and competitiveness, both on individual economic entities but ultimately also on the quality of life in the society as a whole. Research on ethics at European level is critical for arriving at a responsible approach towards S&T, which is consistent with the European Charter of Fundamental Rights and reflects public sentiment [See Table 3 and Annex 1 (Chapter 5, Section 2)].

The Lisbon Agenda and the ERA clearly identify the need for innovative and competitive technological progress in line with environmental and socio-economic needs. Advances in knowledge and innovation further sharpen the competitive edge of societies which possess the know-how and capacities and have become key factors in decoupling economic development from adverse environmental impacts. To address the different challenges, research and technological development affecting the environment in FP7 should aim to identify win-win technologies, improve natural resources management and services and understand and predict the environment more precisely. Furthermore, FP7 should recognise the need for research activities for the analysis of sustainable development, scenario building and impact assessment. Cross-cutting enabling technologies, such as nanotechnology, biotechnology and industrial technologies can also have a positive environmental impact [See Table 3 and Annex 1 (Chapter 5, Section 2)].

As far as the time dimension associated with these impacts is concerned, while showing significant results in the short term, investment in research shows its greatest impacts in the medium to long term as it takes time to transform research results into new products and processes (Annex 1, Chapter 5, Section 3).

As far as impacts on particular groups are concerned, care has been taken to make sure that all players in the European S&T system, including SMEs and the new Member States, will benefit to the maximum extent possible from the implementation of the FP. EU scientific achievements have a significant global impact – notably in developing countries, the Mediterranean, the Western Balkans and newly independent countries of the former Soviet Union – and cover key areas such as agriculture, human health, food processing, post-harvest conservation, water treatment, erosion and environmental protection.

10. How will the policy be implemented, monitored and evaluated?

All efforts are being made to ensure that FP7 will be more easily accessible to all participants and more user-friendly. Procedures will be streamlined for FP application, and the requirements and procedures for contract negotiation and project reporting will be improved. The effective management of the enlarged Framework Programme will be ensured by means of new innovative management structures (Annex 1, Chapter 6, Sections 1 and 2).

Because of the proposed large increase in the FP7 budget, and its aim to make a substantial contribution to the achievement of the Lisbon, Göteborg, Barcelona and other Community objectives through the effective use of EU funds, it is crucially important to continue to improve the FP evaluation and monitoring system by setting clear and measurable objectives and regularly tracking progress towards their achievement. Moreover, a set of objectives and indicators and a sound monitoring and evaluation system is a requirement of the Financial Regulation (article 27, paragraphs 3 & 4) for all expenditure programmes (and must be set out in the ex-ante evaluation). Improvements will be made to the data collection and analysis system and to the broad evaluation and monitoring approach. Full details of the new programme evaluation and monitoring system can be found in Annex 1, Chapter 6, Section 3.

It is proposed that the new FP be built on a robust hierarchy of logically interdependent outcome objectives with a limited number of realistic and appropriate indicators. Indicators will be both quantitative and qualitative, as well as progressive to show the path or direction of changes to be expected, in order to allow for tracking of progress. They will be complemented by management and output indicators in order to monitor progress during the lifetime of the research activities.

Monitoring of implementation management would be ensured by operational senior management within the Commission on a continuous basis with annual check points and using a common set of management performance indicators. Adequate resource would be given to this process. The annual results of this exercise will be used to inform senior management and as an input to the ex post assessment exercise.

An interim evaluation of the FP would be carried out by independent scientific panels which would assess the quality of the research activities, progress towards the objectives set and the scientific and technical results achieved. Such an interim evaluation of FP7 (of 7 years duration) would therefore take place 3-4 years after the start. It could be complemented by a similar exercise at the end of the programme to feed into the ex post assessment (see below).

A coordinated programme of studies should be developed for: horizontal assessments of such topics as the impact of research on issues such as productivity, competitiveness and employment; structuring effects of the FP on the ERA (fragmentation, excellence, coordination) through the formation and development of commercial and knowledge networks, and the creation and support to infrastructures; and the impact of Community research on strategic decision making in companies and research organisations and national, European and regional authorities; assessment of impact and achievements at portfolio, programme and higher levels against the strategic objectives and indicators that are set within a clearly defined programme logic.

An independent ex post programme evaluation of FP7 would be undertaken within 2 years of its completion. This would be supported by the coherent set of independent studies, and other evaluation activities carried out over the life-time of the FP. The report of this exercise would be presented to all interested stakeholders, including the Parliament and Council. Furthermore, this report would feed into future ex ante evaluation and impact assessments by the Commission.

Furthermore, ex-ante impact assessments will be carried out at FP level and at the level of specific programme areas before the next FP proposal is made. The articulation between ex-ante impact assessment and ex-post evaluation will also be enhanced, as recommended by the Ormala Report of December 2004, in particular through ensuring the two exercises are timed to feed into each other. Ex-post work will therefore be available in time for the impact assessment of future policy options, and, in turn, the new policy objectives and performance indicators will feed into later ex-post work (Annex 1, Chapter 6, Section 3).

11. Stakeholder consultation

Throughout the history of the FP, great importance has been attached to consulting stakeholders in order to improve implementation and help in the design of the next FP. Indeed, the preparation of the FP7 proposal benefited from extensive inputs from the scientific community, industry and other interested parties making also use of new opportunities to organise online consultations through the internet. Various stakeholder consultations were launched by the Commission in 2004, based on the communication “Guidelines for future European policy to support research”. The most prominent message resulting from these consultations and supported by a broad consensus across different types of stakeholders: support for research at the European level should be strengthened and that all the Commission’s orientations – in particular in the fields of human resources, collaborative research, involvement of SMEs, realising the potential of an enlarged EU, identifying topics of major European interest – deserve the highest degree of backing. Reactions from the decision-making institutions EP and Council also support in a large part these orientations (Annex 1, Chapter 4, Section 3).

Table 2: Results of the stakeholders’ consultation*

Six objectives proposed in COM(2004)353 | % of respondents who consider objective to be important or very important | % of respondents who agree or mostly agree with the text in the Communication | % of respondents who consider the specified impact will be substantially greater or greater | Type of impact specified (compared to the current situation) |

Collaborative research | 90.8 | 88.9 | 84.5 | Overall impact on the quality of European research |

European technology initiatives | 86 | 82.8 | 79.4 | Overall impact on the quality of applied research |

Basic research | 81.2 | 78.6 | 75.2 | Overall impact on the output of basic research |

Human resources | 96.1 | 92.3 | 92.1 | Overall impact on European scientific careers |

Developing research infrastructures | 85.8 | 82.6 | 81 | Overall impact on the performance of research infrastructures (developed through the use of trans-European networks) |

Coordination of national programmes | 84.5 | 82.9 | 80.3 | Overall impact on the efficiency of the overall EU research system |

* 1727 responses were received to the online consultation based on the communication “Guidelines for future European policy to support research” (COM(2004) 353).

12. Conclusion: the Commission proposal and its justification

The final policy choice therefore consists of a substantially larger and excellence-based Framework Programme, which is organised around People, Ideas, Cooperation and Capacities, as outlined above. This choice has been made because all evidence shows that through this option the largest impacts would be achieved in terms of contributing to the achievement of economic, social, environmental and European Research Area objectives. This evidence has been drawn from a wide range of sources: inputs from stakeholders; technical and evaluation studies by European Commission services and the Commission statistical agency, EU-25 Member States and international organisations (OECD, IMF, UN organisations, etc.); inputs provided by recognised European experts in the fields of evaluation and impact assessment.

Although users sometimes complain about bureaucracy and administrative requirements related to their participation in RTD projects funded under the FP, efforts have been made to simplify and rationalise already the processes under FP6. Further special actions have been planned to facilitate participation by, for instance, SMEs and applicants from the new Member States. An enhanced monitoring system will allow for the rapid identification of adverse effects should they arise. To maximise positive impacts, special care has been taken to restrict the FP to actions with a clear European value added and monitoring and evaluation have been improved.

The “do-nothing” option (or indeed the down-sizing of EU intervention) is clearly ruled out as an option. It would stop in its tracks the process of building an integrated European Research Area, and would lead to greater fragmentation and inefficiency of research efforts in Europe. Research teams would carry out far fewer projects on a European scale, and would become more dependent on the resources and knowledge available in their own country. Reduced cooperation would have a weakening effect on the transfer of knowledge in the EU. Some important fields of S&T would therefore advance more slowly, while some countries may find that their capabilities in particular research fields are declining due to inadequate interaction with top teams located elsewhere. In terms of the coordination of national programmes, Europe would return to the complete fragmentation of the pre-ERA period, with 25 Member States and numerous regions defining their research priorities independently from each other and from the EU. The necessity for EU intervention in research is therefore not in question. All stakeholders consulted during the preparation of FP7 were of the view that the FP should be retained as a vital instrument of EU policy for the knowledge-based economy.

The “business as usual” option involves continuing with the FP as it is currently under FP6, with no change to its budget, structure or thematic content. While this option would provide continuity, it would not represent an adequate response to the new challenges facing Europe and the need to introduce improvements in the functioning and orientation of the FP. The Barroso Commission has placed renewed emphasis on the Lisbon objectives. Europe continues to lag behind other world regions in terms of economic and productivity growth and employment creation. While FP6 was devised as an instrument to implement the ERA and has made a positive contribution, to continue with the same FP structure and level of funding would not allow Europe to make sufficiently rapid progress towards the Lisbon goals. The EU now has 25 Member States. Keeping the same budget as for FP6 would result in a greater scattering of EU research effort, which must now be distributed between 25 not 15. It is clear that EU coordinating actions for research will need to grow, and that the FP must be expanded and redesigned to take account of the changing structure of the Union. Outside Europe too the world is changing. Emerging countries such as China and India are beginning to establish themselves as serious global players, and, if anything, competition in world markets is growing. The production and exploitation of knowledge must be at the centre of Europe’s strategy to compete in higher value products and services, rather than on the basis of cheap labour, and thus to be able to ensure balanced and sustainable growth. The next FP must respond to these challenges; business as usual will not suffice.

For the above reasons, it is vital for the FP to respond creatively to new dynamics and new needs, and to reinforce the contribution of EU research actions to the Lisbon strategy.

Table 3 - Expected impacts of the new FP7 and the do nothing option (business as usual scenario taken as a reference)

IMPACTS | POLICY OPTIONS |

| “do nothing” | “new FP7” |

Expected aggregate impacts on the achievement of the Lisbon, Barcelona and other community objectives | LISBON OBJECTIVES |

| Economic growth performance | In the long run, up to 0.84 percent of GDP lost compared to the business-as-usual scenario | In the long run, between 0.45 and 0.96 percent extra GDP is generated compared to the business-as-usual scenario, because of crowding-in and rates of return/multiplier effects. The literature shows that the crowding-in effect of €1 of public R&D funding allocated to business has been estimated to range between €0.7 and € 0.93. The private rates of return to private R&D can be as high as 43 percent, the social ones as high as 160 percent. The rates of return to publicly-funded research could be as high as 67 percent. |

| Employment creation | In the long run, up to 800,000 jobs lost compared to the business-as-usual scenario | In the long run, between 400,000 and 925,000 extra jobs are created compared to the business-as-usual scenario. The literature shows that the rate of growth of total factor productivity (TFP - due to improvements in the efficiency of production or to pure technological progress) has a positive impact on the employment rate, with a one-year lag, and that both in the short- and long-term, countries with higher than average TFP growth tend also to have higher than average growth in employment. |

| Competitiveness | In the long run, extra-European exports lower by up to 2 percent, imports higher by up to 1.43 percent compared to the business-as-usual scenario | In the long run, extra-European exports could be higher by between 0.64 and 1.57 percent; imports lower by between 0.3 and 0.9 percent compared to the business-as-usual scenario. The literature shows that publicly funded research is critical for the development of new products, processes and services. Increases in R&D also increase productivity. |

| BARCELONA OBJECTIVES |

| R&D intensity | In the long run, Europe’s R&D intensity lower by up to 0.1 percent of GDP compared to the business-as-usual scenario | In the long run, Europe’s R&D intensity higher by between 0.059 and 0.23 percent of GDP compared to the business-as-usual scenario. This is because of high crowding-in effects (see above under economic growth performance) |

| Research employment | In the long run, up to 87,000 jobs lost compared to the business-as-usual scenario | In the long run, between 40,000 and 215,000 extra jobs compared to the business-as-usual scenario. |

| OTHER COMMUNITY POLICIES |

| Göteborg strategy | Less informed design of EU Sustainable Development Strategy and disorganised consideration of the three pillars of sustainability | Knowledge-based design of the EU Sustainable Development Strategy and more balanced consideration of the three pillars of sustainability in the decision-making process; EU evidence-based leadership in international negotiations |

| Other Community Policies | More ad hoc and inefficient development of perhaps less effective Community policies | Easier development of more evidence-based and effective policies in the fields of agriculture, economic and financial affairs, employment, enterprises, environment, fisheries, food, health, maritime affairs, etc. |

| SPECIFIC PROGRAMME: PEOPLE |

| People | Less European mobility and cooperation; less attractive scientific careers for European citizens (in particular women); Europe less attractive to the best foreign researchers; reduced level and diversity of skills of individual researchers; less sustainable linkages between academia and industry, and across disciplines | More research can be carried out in Europe; research will generally be of higher quality, more inter-disciplinary, and where appropriate take industry better into account |

Expected impacts of Specific Programmes | SPECIFIC PROGRAMME: IDEAS |

| Ideas | More national, non-competitive and overlapping funding; fewer scientific publications; publications of lower quality and fewer citations as the competition for basic research funding between individual research teams remains organised at national level, i.e. essentially meaningless in highly specialised fields of science in most countries | A better and enlarged knowledge base for European enterprises on which the innovation of products and process can be based; levelling-up effects as incentives are provided to increase institutional and researcher capabilities, produce better research proposals, and carry out higher-level research; structuring effects (dissemination; increased attractiveness ERA) |

| SPECIFIC PROGRAMME: COOPERATION |

| Collaborative research | Greater fragmentation and inefficiency of research efforts in Europe; fewer projects carried out by research teams on a European scale and limited to resources and knowledge available at national level; more slow advance in important fields of science; in some countries, capabilities in particular research fields declining due to inadequate interaction with top teams located elsewhere | Some research activities are of such a scale that no single Member State can provide the necessary resources and expertise. In these cases, EU projects can allow research to achieve the required “critical mass”, while lowering commercial risk and producing a leverage effect on private investment. EU-scale actions also play an important role in transferring skills and knowledge across frontiers. This helps to foster excellence in research and development through enhancing capability, quality and EU-wide competition, as well as improving human capacity in S&T through training, mobility and European career development. EU support can also contribute to a better integration of European R&D, by encouraging the coordination of national policies, by the EU-wide dissemination of results, and by funding research for pan-European policy challenges. |

| JTIs | Reduced competitiveness of European industries; reduced participation of industry in the FP; negative signal given to knowledge-intensive and high-tech industries | Important contribution made to the achievement of the Lisbon and Barcelona agenda through the formulation for areas critical for European competitiveness of ambitious, long-term and strategic research and wider policy agenda, the commitment of a critical mass of financial, organisational and human resources under public-private partnerships, indicatively sharing costs in a 1/3-2/3 format. |

| International cooperation | Europe reneges on its commitments in international fora and goes entirely against the trend whereby other industrialised countries/regions are seeking to expand their international S&T cooperation. | Socio-economic development and global competitiveness stimulated; contributions made to Europe’s many key international commitments (e.g. Kyoto, Convention on Biological Diversity, Biosafety Protocol, the plan of Implementation adopted at the World Summit on Sustainable Development). |

| Coordination of national research programmes | Return to the complete fragmentation of the pre-ERA period, with 25 MS and numerous regions defining their research priorities independently from each other and from the EU; waste of already scarce resources; opportunity lost to restructure the European research fabric so as to enhance EU competitiveness | Strong contribution made to the restructuring of the European research fabric in a coordinated and organised way and to the development of ERA. |

Expected impacts of Specific Programmes | SPECIFIC PROGRAMME: CAPACITIES |

| Research infrastructures; Research for the benefit of SMEs; Regions of knowledge; Research potential; Science in society; Specific activities of international cooperationRealising full potentialRegions of knowledge | Increased inefficiency and fragmentation of the European research landscape; less coordination of efforts, less possibility to share costs and access, potential duplication, loss of research capabilityEuropean SMEs deprived of important resources and opportunities to remain competitive in a global economy | Better efficiency of public funds and stimulation of increased synergies between public and private funds; seamless access to all kinds of resources spread throughout Europe and the world.The exploitation by SMEs of their research improved, EU-wide transfer of technology; research results potentially transformed into products and services |

Expected impacts of management choices | Administrative burden | No administrative burden | Limited administrative burden; cost of participation reduced; procedures simplified and rationalised |

COMMISSION STAFF WORKING PAPER

Annex 1: In-depth Analysis

IMPACT ASSESSMENT AND EX ANTE EVALUATION

For the proposals for the Council and European Parliament decisions on the 7th Framework Programme (EC and Euratom)

EN EN

TABLE OF CONTENTS

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Table of Contents | |

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Introduction | 1 |

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PART I: IMPACT OF S&T ON EUROPEAN CHALLENGES | 1 |

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Chapter 1: Challenges for science and technology set out at Lisbon, Göteborg and Barcelona | 2 |

Section 1: Knowledge for growth, competitiveness and employment | 2 |

Section 2: Knowledge for sustainable development | 6 |

Section 3: Knowledge for social welfare | 8 |

Section 4: Knowledge, the endless frontier | 10 |

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Chapter 2: From analysing the problem to defining policy objectives | 12 |

Section 1: Should Europe invest and perform more in R&D? | 12 |

Section 2: Should the European Research Area be better organised? | 16 |

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Chapter 3: European value added of Community intervention | 19 |

Section 1: Is there a role for government intervention? | 19 |

Section 2: Why should this intervention take place at European level? | 21 |

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PART II : Impact of the 7th RTD framework programme | 25 |

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Chapter 4: Impacts of previous policy objectives and results from the stakeholders’ consultation | 25 |

Section 1: Evolution of the Framework Programmes from FP1 to FP6 | 25 |

Section 2: Impacts of the previous FPs | 29 |

Section 3: Towards FP7: the views of the stakeholders | 38 |

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Chapter 5: Assessing the various policy options | 40 |

Section 1: What are the options for European RTD policy? | 41 |

Section 2: What are the impacts of the various policy options? | 43 |

Section 3: What are the impacts of FP7 on the achievement of the Lisbon, Göteborg, Barcelona and other Community objectives? | 56 |

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Chapter 6: Towards an effective, user-friendly management and outcome-oriented new FP7 | 64 |

Section 1: Effective management and appropriate instruments | 64 |

Section 2: A user-friendly and cost-effective FP7 | 68 |

Section 3: New programme evaluation and monitoring system | 69 |

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Notes and bibliographic references | 74 |

Appendix 1: The NEMESIS Model | 80 |

INTRODUCTION

The 2001 White Paper on European Governance (COM(2001) 428 final, Brussels, 25.7.2001) and the recommendations of the Mandelkern Group on Better Regulation ( Final Report, 13 November 2001) helped to further shape these ideas and the Laeken and Göteborg councils gave the political impetus which led to the emergence in 2002 of the so-called “Better Regulation Package”. As well as a Communication on Impact Assessment (COM(2002) 276 final, Brussels, 5.6.2002), the package contained a Communication on Better Lawmaking (COM(2002) 275 final, Brussels, 5.6.2002), an action plan titled "Simplifying and improving the regulatory environment" (COM(2002) 278 final, Brussels, 5.6.2002) and proposals for general principles and minimum standards for consultation (COM(2002) 704 final, Brussels, 11.12.2002).

The seven key questions on Impact Assessment as outlined in the Secretariat General Guidelines have been taken as a starting point. In order to understand the rationale of the FP7 proposal, chapter 1 starts with a problem analysis of the role and impact of science and technology today and assesses Europe’s ‘research problem’ in economic, social and environmental terms. Chapter 2 is instrumental in defining the policy objectives that will contribute to the solution of the problem. The issue of European added value is considered important in the area of European research policy and is described in detail in chapter 3. Before looking at the various policy options that could contribute to the objectives, chapter 4 looks at the impacts of previous established objectives as embodied in previous Framework Programmes. The results from the stakeholder consultation are also treated in this chapter. An assessment of the various policy options as well as their impacts defined in economic, social and environmental terms, are considered in chapter 5. This chapter concludes with the option that is considered the preferable available option providing the justification why this option contributes best to making Europe more competitive, more cohesive and more sustainable. Finally, chapter 6 assesses the positive and negative impacts of the policy options dealing with policy instruments, management modalities and monitoring and evaluation systems.

Report “Assessing the Socio-economic Impacts of the Framework Programme”, June 2002. Consortium led by PREST.

First of all, because it is difficult to establish a linear causal relationship between certain effects and a specific policy. Research and technological development unfold through complex, context-specific, social interactions and occur in unpredictable ways. It is also difficult, because of the time lag between doing research, generating innovations and reaping commercial benefits as well as the time lag in effects between different policy instruments and different policy actors. Difficulties in quantifying many predominantly qualitative effects such as increased networking, improved absorptive capacity, strengthened research competencies of firms, and changed behaviour add to the complexity. Notwithstanding these limitations, the study attempts to provide a comprehensive and coherent analysis of the expected impacts of FP7 compared with other policy options.

PART I: impact of S&T on European CHALLENGES

One never notices what has been done; one can only see what remains to be done.

Marie Curie

Our time is one of high uncertainty. It is rich with threats and challenges as well as opportunities. The bipolar world has come and gone and with increasing globalization new trends are emerging: the supremacy of the United States, the rise or awakening of Asian giants, but also the persistence of underdevelopment and the growing inequalities between – and within – the nations of the world.

Throughout history, such phases of transition are associated with periods of transformation of the world economy and society, and generate new sources of competitive advantage, new international divisions of labour, new growth markets, new distributions of power and leadership, and new institutions of governance. Science and technology – together with education – are decisive factors in bringing about these structural transformations and in enabling societies to take advantage of them.

Speech by José Manuel Barroso, Plenary session of the European Parliament, Strasbourg, 17 November 2004.

.

The second chapter assesses the need for a reinforced European effort in science and technology, by analysing investment, performance, and the organization of the European research and innovation system itself. The third chapter examines the justification and efficacy of public intervention in science and technology – and looks in particular at the key issue of the added value of European level intervention in S&T.

Chapter 1: Challenges for science and technology set out at Lisbon, Göteborg and Barcelona

Europe needs more science and technology to become the most competitive knowledge based economy, for higher and sustainable economic growth and stability, to generate more and better jobs, for more social and regional cohesion, to satisfy the needs of the ageing society, to sustain a healthy environment, and to strive towards a better life for all. Indeed, if these momentous expectations are to be met, scientific and technological advances will have to provide us with the means to do so.

Section 1: Knowledge for growth, competitiveness and employment

Significant change has characterised the world economy over the past few decades. World trade has been liberalised as both formal and informal trade barriers have been reduced significantly, or disappeared altogether. Capital roams the planet freely in search of the best investment opportunities as barriers to capital mobility have been eliminated. Global communication and transportation networks have become denser and better integrated through a combination of technological and organisational innovation. The speed of technological change has accelerated while technologies are standardised more rapidly and use is made of modular production modes. As the combination of these factors has made it possible to locate the production of goods and services anywhere on the planet and still serve global markets, the global production system is in the process of being reconfigured.

While the new international division of labour provides developing countries with ample opportunities, the blessing has been mixed for developed economies. On the one hand, low-, medium- and to an increasing extent high-technology manufacturing and services industries are under threat from delocalisation or so-called off-shoring and outsourcing, resulting in at least short-term disruption and unemployment. Employment is also under threat from rapid process innovation leading to productivity increases.

On the other hand, rapid product innovation provides developed countries with opportunities to improve competitiveness and serve global markets by fleeing forward as it were. The race to upgrade the economy is never-ending, however, and innovation-based advantages are fleeting and unsustainable as rapid standardisation and modular production techniques quickly allow the production process to move partially or completely to developing countries.

The need to boost European economic growth

Angus Maddison, The World Economy: A Millenial Perspective, Development Centre Studies, Paris: OECD, 2001.

. However, in the second half of the post-war period, growth slowed significantly worldwide, but as shown in Figure 1 the decline was more pronounced in Europe than in the US, Japan and other OECD economies. In the last decade, Europe has done worse than the US, while Japan has once again started to outperform Europe, and the large BRIC (Brazil, Russia, India, China) economies and smaller East Asian economies continue to grow rapidly. It should be acknowledged, however, that some EU countries have performed rather well economically in the past decade. This group includes the Member States formerly classified as cohesion countries (especially Ireland), as well as Finland, the Netherlands and the UK.

Figure 1: Cumulative economic growth gap between the EU and the other industrialised countries (current prices and current PPPs)

(...PICT...)

Source: DG Research Data: OECD

Note: For both the EU-15 OECD countries and the non-EU-15 countries, 1974 GDP at current prices and current PPPs (billions of dollars) has been taken as 100. For all following years, GDP growth in percentages relative to the 1974 amount has been calculated. Then the series for the non-EU-15 OECD countries (Australia, Canada, Iceland, Japan, Korea, Mexico, New Zealand, Norway, Switzerland, Turkey, US) has been set to 100 and the difference with the series for the EU-15 calculated.

International Monetary Fund (IMF), Euro Area Policies, Prepared by the European Department, July 2, 2004, p. 10.

(Sapir Report) An Agenda for a Growing Europe. Making the EU Economic System Deliver. Report of an Independent High-Level Study Group, July 2003 pp. 27-28.

European Commission, The EU Economy: 2002 Review, European Economy No 6/2002, p. 207.

Paraskevas Caracostas and Ugur Muldur, Society - The Endless Frontier, EC, OPOCE, EUR 17655, 1997, pp. 94-95.

. These economic and social challenges can only be met by investing in research and innovation, the key drivers of long-run economic growth according to modern economic growth theory.

The need to improve European competitiveness

European Commission, Competitiveness Report 2004, p. 7.

International Monetary Fund (IMF), Euro Area Policies, Prepared by the European Department, July 2, 2004, p. 14.

Mary O’Mahony and Bart van Ark (Ed.), EU productivity and competitiveness: An industry perspective – Can Europe resume the catching-up process?, European Communities, 2003.

Furthermore, Europe has reached higher productivity to a large extent in a forced manner, by pushing low-skilled labour out of the labour market.

CEPII-CIREM, European Consortium for Trade Policy Analysis (ECTA), L’insertion de l’industrie européenne dans la Division Internationale du Travail: situation et perspectives, Rapport realise pour la Direction Générale du Commerce de la Commission européenne, juillet 2004.

Study carried out in 2004 by Archstone Consulting and Duke University Centre for International Business, Education and Research (CIBER) – www.archstoneconsulting.com.

The relative strength of European industry has an immediate impact on its (high-tech) export performance, another common measure of competitiveness. High-tech trade competition continues to intensify as important new players enter the global market. China’s economy in particular has grown very rapidly, and this has been accompanied by an equally dramatic rise in its high-tech exports, as shown in Figure 2. By 2002, it had already become the world’s 6th largest exporter of high-tech products, which accounted for 21% of total Chinese exports.

See Chapter 5, Section 3.

Figure 2: Growth in share of global high tech export market (1995=100)

(...PICT...)

Source: DG RTD, Eurostat Data: Eurostat Comext, UN Comtrade

Note: EU25 excludes intra-EU exports

The obligation to build a cohesive society

European Commission, Competitiveness Report 2001, p. 9.

International Monetary Fund (IMF), Euro Area Policies, Prepared by the European Department, July 2, 2004, p. 14.

International Monetary Fund (IMF), Euro Area Policies, Prepared by the European Department, July 2, 2004, p. 14.

European Commission, Action for employment in Europe: A confidence pact, CSE(96)final, EU Bulletin 6-1996, Supplement 4/96.

Declining fertility levels, in combination with ever increasing life expectancies, have led to an ageing society. Given the current structure of social security systems, the current average length of working careers, current levels of employment input, and current productivity levels, this will result in unsustainable dependency ratios and higher medical and pension costs. Therefore, in addition to the reform of social security and labour markets, there is an urgent need to create new employment opportunities and increase levels of productivity.

A final challenge to cohesion is posed by enlargement. Convergence does not happen automatically. It only occurs when certain key growth factors and supporting policies are present. The new EU member states already have relatively high levels of human capital. But a decisive effort has to be made to overcome the aged industrial legacy and launch new higher-tech and higher value-added industries and services with the required growth potential.

The requirement to speed up the transition to the knowledge based economy

(Kok Report) Facing the Challenge. The Lisbon Strategy for Growth and Development. Report from the High Level Group Chaired by Wim Kok, November 2004; (Sapir Report) An Agenda for a Growing Europe. Making the EU Economic System Deliver. Report of an Independent High-Level Study Group established on the initiative of the President of the European Commission, July 2003; (Strauss-Kahn Report) Construire l’Europe politique. 50 propositions pour l’Europe de demain. Dominique Strauss-Kahn. Président de la Table Ronde “Un projet durable pour l’Europe de demain” établie à l’initative du Président de la Commission européenne. Rapporteur Olivier Ferrand, Avril 2004; HM Treasury, Meeting the challenge: Economic Reform in Europe, February 2003.

The first policies in reaction to the slowdown in European economic growth were implemented in the late 1980s and early 1990s. They focused on the realisation of a fully open and integrated internal market for goods, services, people and capital; monetary integration and macro-economic stabilisation; and cohesion. They had important effects, but did not result in an improvement in Europe’s economic performance.

The real problem is that the European system no longer delivers in today’s world, which is characterised by economic globalisation and strong external competition. The European system is built around the assimilation of existing technologies and mass production which aims at economies of scale. Its industrial structure is dominated by large firms with stable markets and long term employment patterns. The European system should provide more opportunities for new entrants, greater mobility of employees within and across firms, more retraining, greater reliance on market financing, and higher investment in both R&D and (science) education at all levels. This requires a massive and urgent change in economic policies in Europe.

Knowledge for growth, competitiveness and a cohesive society

European Parliament – Committee on Industry, Research and Energy – Rapporteur Pia Elda Locatelli, Working document on science and technology, the key to Europe’s future – Guidelines for future European Union policy to support research [COM(2004) 454].

Useful literature overviews include Rachel Griffith, How important is business R&D for economic growth and should the government subsidise it?

Estimates of private returns to firms’ own investment in R&D still produce varying figures, but there is an emerging consensus that gross returns between 20 and 30 percent are common and plausible. Microeconomic studies confirm the existence of significant spillovers of knowledge from the firms that perform the R&D to other firms and industries. Taking account of measured spillovers typically raises the estimated gross rate of return on business investment into the range of 30 to 40 percent.

Austrian Research and Technology Report 2004, p. 2.

Both microeconomic and macroeconomic studies find that an important source of productivity growth in all OECD countries comes from the international diffusion of technology. A country’s ability to absorb foreign technology is enhanced by investment in education and by investment in own R&D.

Ben Martin, Ammon Salter, et alii. The relationship between publicly funded basic research and economic performance. A SPRU Review. Report prepared for HM Treasury, July 1996, p. vii.

European Commission, Human capital in a global and knowledge-based economy – Final report. Luxembourg: Office for Official Publications of the European Commission, p. 14-15.

European Commission, European Employment Report 2004, p. 77.

European Commission, European Employment Report 2004, p. 80.

Table 1: Economic literature on returns to R&D

Private rate of return to private R&D |

Author | Year | Private rate of return to private R&D |

Terleckyj | 1974 | 27 percent |

Mansfield | 1977 | 25 percent |

Sherer | 19821984 | 29-43 percent |

Bernstein & Nadiri | 1988 | 9-27 percent |

Bernstein & Nadiri | 1991 | 14-28 percent (6 manufacturing industries 1957-1986) |

Lichtenberg & Siegel | 1991 | 35 percent (Productivity growth for over 2000 US firms, 1972 to 1985) |

Griliches | 1992 | 27 percent |

Nadiri | 1993 | 20-30 percent |

Hall | 1996 | Cluster around 10-15 percent, though can be as high as 30 percent in some studies |

Social rate of return to private R&D |

Author | Year | Social rate of return to private R&D |

Terleckyj | 1974 | 48-78 percent |

Mansfield | 1977 | 56 percent |

Terleckyj | 1980 | 107 percent (25 own plus 82 used R&D) |

Sveikaukas | 1981 | 17 percent (own R&D) |

Sherer | 1982 | 103 percent (29 percent own R&D plus 74 percent used R&D) |

Sherer | 19821984 | 64-147 percent |

Griliches & Mairesse | 1983 | 56 percent (406 Japanese firms, 1973-80) |

Griliches and Lichtenberg | 1984a | 34 percent (own R&D) |

Griliches and Lichtenberg | 1984b | 71 percent (30 percent own R&D plus 41 percent used R&D) |

Odagiri and Iwata | 1986 | 17 percent (135 Japanese firms, 1974-82) |

Bernstein & Nadiri | 1988 | 10-160 percent |

Sassenou | 1988 | 69 percent (394 Japanese firms, 1973-81) |

Bernstein & Nadiri | 1991 | 20-110 percent (Returns to R&D capital for 6 manufacturing industries in the USA over the period 1957-86) |

Nadiri | 1993 | ~40 percent |

Griliches | 1994 | 30 percent (own R&D) |

Griffith, Redding & Van Reenen | 2000 | >40 percent (Inter-industry and international spillovers amongst 13 industries across 12 OECD countries,1970-92) |

Rate of return to publicly-funded R&D |

Author | Year | Rate of return to publicly-funded R&D |

Griliches | 1958 | 20-40 percent (Hybrid corn) |

Peterson | 1967 | 21-25 percent (Poultry) |

Griliches | 1968 | 35-40 percent (Agricultural research) |

Evenson | 1968 | 28-47 percent (Agricultural research) |

Evenson | 1979 | 45 percent (Agricultural research) |

Davis | 1979 | 37 percent (Agricultural research) |

Schmitz-Seckler | 1979 | 37-46 percent (Tomato harvester) |

Davis and Peterson | 1981 | 37 percent (Agricultural research) |

Mansfield | 1991 | 28 percent (All academic science research) |

Huffman and Evenson | 1993 | 43-67 percent (Agricultural research) |

Nadiri & Mamuneas | 1994 | Up to 9 percent |

Mamuneas & Nadiri | 1996 | Both publicly funded R&D carried out in the business sector and in the public sector generate statistically significant benefits. (Cost-reducing benefits of R&D stock in fifteen industries,1956-1988) |

Toole | 2000 | 1 percent increase in the stock of public basic research ultimately leads to 2-2.4 percent increase in the number of commercially available new compounds (Pharmaceuticals) |

Cockburn and Henderson | 2000 | 30 percent+ (Pharmaceuticals) |

Tassey | 2001 | Rates of return on NIST infratechnologies match or exceed rates of return to private investment in technology |

National returns to R&D |

Author | Year | National return to domestic R&D |

Frantzen | 2000 | Gross rate of return on domestic R&D: ~60 percent (OECD ,1961-91) |

Bernstein & Nadiri | 1991 | Private and social marginal rates of return on investment in R&D: private: 21-28 percent; social: 21-86 percent |

Coe & Helpman | 1995 | Marginal rate of social return: G7: 123 percent; smaller OECD countries: 85 percent (22 OECD countries,1971-90) |

Lichtenberg & van Pottelsberghe | 1996 | Social rates of return on domestic R&D: G7: 51 percent; small EU countries: 63 percent |

Guellec & van Pottelsberghe | 2001 | An increase of 1 percent in business R&D generates 0.13 percent in productivity growth; a 1 percent increase in foreign R&D generates 0.44 percent in productivity growth; a 1 percent more in public R&D generates 0.17 percent in productivity growth (16 OECD countries,1980-98) |

Bassanini & Scarpetta | 2001 | 0.1 percent increase in R&D intensity could lead to 1.2 percent higher output per capita; 0.1 percent increase in R&D intensity could boost output per capita growth by 0.3-0.4 (OECD countries over the period 1981-98) |

R&D and innovation |

Author | Year | R&D and innovation |

Adams | 1990 | Productivity growth depends on the accumulated stock of field-specific scientific research, operating with a twenty-year lag (18 US manufacturing industries,1953-83) |

Mansfield | 1991 | 11 percent of new products and 9 percent of new processes could not have been developed without a substantial delay in the absence of academic research (76 US firms in 7 industries) |

Adams | 1993 | Basic scientific research provides fertile ground for applied commercial development (14 R&D-performing industries, 1961-86) |

Acs, Audretsch & Feldman | 1994 | Own R&D activity is particularly important for large firms, whilst smaller firms tend to benefit from the knowledge created in publicly funded research. |

Audretsch & Vivarelli | 1996 | Own R&D is important for large firms, whilst small firms benefit both from their own R&D and also from the presence of university-based scientific research activity in their region (15 regions of Italy, 1978-86) |

Mansfield | 1998 | 15 percent of new products and 11 percent of new processes could not have been developed without a substantial delay, in the absence of academic research. |

Beise & Stahl | 1999 | One tenth of the firms which produced product or process innovations between1993-1995 would not have done so without public research. (2300 German firms in the manufacturing sector) |

Autant-Bernard | 2001 | Public research increases private innovation directly and indirectly by increasing private research. These effects are geographically localised. |

Tijssen | 2001 | Approximately 20 percent of private sector innovations are partially based on public sector research (Netherlands; nation-wide mail survey) |

Countries benefit from foreign R&D |

Author | Year | Countries benefit from foreign R&D |

Benhabib & Spiegel | 1994 | According to the model technological progress is the sum of two components: an exogenous component, as in the neo-classical model; and a semi-endogenous component, related to the rate of absorption of technology from the technological leading country, captured by an interactive terms between the productivity gap and the level of human capital; the interactive term is statistically significant (Econometric estimation to explain variation in 20-year growth rates (1965-85) on a cross-section of 78 countries) |

Coe & Helpman | 1995 | The average elasticity of domestic TFP with respect to foreign R&D capital is 0.09; it is higher for countries with high import ratios (21 OECD countries, plus Israel, 1970-90) |

Lichtenberg & van Pottelsberghe | 1998 | Average elasticity of domestic TFP with respect to foreign R&D capital of 0.11; lower for low-trading countries |

Griffith, Redding & Van Reenen | 2000 | High levels of domestic R&D and educational attainment stimulate the growth of TFP. Investment in both increase the capacity of industries to absorb technology from the overseas leaders (12 industries in 13 OECD countries since 1970) |

Frantzen | 2000 | Confirms the benefits of education in technological absorption (Cross-section study of OECD countries) |

Guellec & van Pottelsberghe | 2001 | An average elasticity of TFP with respect to foreign R&D capital of over 40 percent |

Dowrick & Rogers | 2002 | The level of human capital facilitates technological catch-up, especially amongst the middle-income and richer countries |

Figure 3: Changes in employment in % (1997-2002, EU-15)

(...PICT...)

Source: DG Research Data: European employment report 2003

European Commission, European Employment Report 2003, p. 42.

Through its contribution to product and process innovation, productivity growth, and the creation of more and higher paid jobs, research and innovation can also help meet the challenges of ageing and cohesion.

Higher levels of employment and productivity will allow for the absorption of higher medical and pension costs. At the same time, product and process innovation, coupled with productivity growth, will enable the economically more advanced EU Member States to extend assistance to the new Member States, while allowing the latter to catch up more rapidly. More and better investment in research needs to be seen in a broader policy context. The Barcelona objectives for raising R&D spending have to be achieved, and a doubling of the FP7 budget will give an important signal to the EU Member States.

See the analysis in Tabellini, G. and Wyplosz, C., “Réformes structurelles et coordination en Europe”, Conseil d’Analyse Economique, Paris 2004.

Unless macroeconomic and structural policies – both at Community and national level – can be coordinated in this sense, it will not be possible to achieve the main objective of Lisbon: for Europe to become a dynamic and competitive knowledge based economy in the next decade.

Section 2: Knowledge for sustainable development

Sustainable development is a framework comprising more than just the environmental dimension, and requiring to analyse and acknowledge inter-linkages and trade-offs. It underpins the whole of this Impact Assessment undertaking. The foregrounding of three dimensions – economic, social, and environmental – is both a boon and a drawback, as it could lead to the threefold segmentation (or the ignoring) of cross-cutting issues. Energy is one such interesting case of an issue area extending beyond the environmental dimension alone (also economic, social, and indeed 'strategic' in different ways) and where S&T play a key role.

At the same time, high environmental standards are an engine for innovation and business opportunities, which are both at the heart of Lisbon. Furthermore, Europe is a world leader in environmental technologies.

Yet one of the most worrying global challenges is posed by the deterioration of our environment. This takes different forms. Some are dramatic, while others are less obvious, though they may occur in the long term and possibly with irreversible consequences.

Tacking stock: what are the challenges?

Biamonte and Olson, 2004, "New global agenda: an analysis of major overview studies of the global environment", a White paper prepared for Foresight and Governance project, Woodrow Wilson International Center for Scholars (Washington, Institute for alternative futures).

Brussels, 15.5.2001, COM(2001)264 final, Communication from the Commission “A Sustainable Europe for a BetterWorld: A European Union Strategy for Sustainable Development”

Causes and strategies

The main causes found for these threats are population growth and consumption patterns; market, policy or political failure; nature of technology and finally cultural aspects, world views and values.

Some strategies are identified as a possible contribution to solve these threats. Among them one finds: encouraging sustainable consumption, creating and sharing knowledge, and catalyzing an environmental revolution in technology.

Europe faced with global threats: the case of climate change

We are thus confronted with global challenges that will require Europe to take a firm position and role, including in the field of research. Climate change forecasts indicate that if the level of emissions is not curbed, the temperature level will rise and risks such as water shortage, malaria and hunger will increase and affect millions of people by 2080 (see Figure 4).

Godard Space Study Institute - NASA, US.

Moreover, there is now strong evidence that most of the warming observed over the last 50 years is attributable to human activities. Different areas are sensitive to climate change, for instance agriculture, forestry, water availability, marine systems, terrestrial ecosystems, health and, last but not least, the economy. In order to prevent severe damage to the environment and society, and to ensure sustainable development even under changing climate conditions, not only mitigation, but also adaptation strategies and technologies are required – notably in the domains of energy and transport – while research is needed to provide the knowledge base.

Figure 4: People at risks from global warming in 2080

(...PICT...)

Global temperature increase above pre-industrial (°C)

Source: Perry et al. (2001)

Further challenges, local and global

From 1950 population has more than doubled creating pressures on resources for instance on water resources that passed from 1300 to 4200 millions tons and fish catch that passed from 19 to 91 millions tons.

Waste management is another problem with environmental consequences for all societies. Waste can take up valuable land space and pollute the air and soil. The challenge ahead resides in the development and treatment of data and methods for understanding and predicting trends regarding natural resources, biodiversity and waste as well as the development of related management tools.

This was demonstrated by a number of FP-funded projects In particular, GARP II funded under FP4 and GREENSENSE funded under FP5 applied the ExternE methodology to the calculation of national damage accounts.

The communication “2004 Environmental Policy Review” (COM(2005)17) estimates that 2% - 8% of diseases in the EU-25 can be attributed to environmental factors, especially air and noise pollution from transport. New evidence has also been found on the health impacts of climate change, e.g. by heat waves, floods and climate variability influencing food and vector-borne diseases. This calls for additional research efforts in the field of environment and health.

Last but not least among environmental challenges are disasters. During the period 1990-1999 disasters killed 500,000 people and caused 750 billion dollars of damage, from issues including wildland fires, volcanoes, earthquakes, landslides, subsidence, floods, coastal hazards, tsunamis, ice hazards, extreme weather, and pollution events (also see Figure 7 in the next section). Research should contribute to putting in place prediction systems, observations and infrastructures.

Two indispensable pillars: political will and S&T advances

It is appropriate to acknowledge this grim evidence in the present Report, not least because S&T is an indispensable source for the evidence base on environmental change – and also because in some cases S&T is itself one of the causes of environmental degradations, for example, due to environmentally harmful production and consumption patterns. It is undoubtedly the lack of societal controls on the use of S&T that is at fault in this regard. However, the outlook can therefore change fundamentally if one can conceive of S&T as part of the solution rather than the problem.

Conseil d'analyse économique (D. Bureau, M. Mougeot, et al), Politiques environnementales et compétitivité, la Documentation française, 2004. Fraunhofer Institute Systems and Innovation research (Knut Blind et al), New products and services: Analysis of regulations shaping new markets, 2004.

As discussed in the Commission's communication on Innovation policy: updating the Union's approach in the context of the Lisbon strategy, COM(2003) 112 final.

The story of the catalytic converters provides a compelling example of such R&D-based win-win.

A first step in that perspective consists in acknowledging the need to sever the link between economic growth and environmental degradation. The endeavour of a duly responsible polity – with a concern for the quality of life of present and future generations – is then to optimise the effects of its economic activity, i.e. to minimise adverse externalities without sacrificing part of its material well-being or endangering economic growth.

Commission's communication on Stimulating Technologies for Sustainable Development: An Environmental Technologies Action Plan for the European Union, COM(2004) 38 final.

Available, respectively, at: http://www.rivm.nl/en/milieu/internationaal/Towards_a_more_sustainable_EU.jsp, for the September 2004 report for the Dutch Presidency and Environment Ministry 'Towards a more sustainable EU: the need for investments that benefit economy and environment alike', and and http://europa.eu.int/comm/lisbon_strategy/pdf/2004-1866-EN-complet.pdf for the Kok report.

Of course this also relates to the fragile but powerful synergies, introduced above, between environmental promotion/protection, S&T, and growth and competitiveness.

These potential benefits can also be of great importance for developing countries. With appropriate technology transfer they can provide these countries with affordable solutions for reconciling their desire for strong economic growth with the need to do so without increasing the pressure on the local – or the global – environment. This North-South dimension highlights the sustainable development predicament as differentiated yet common. The question of sustainable development can be posed along two main lines: a question of adapting – or otherwise innovating – appropriate 'clean' technologies, and a question of redefining needs and lifestyles.

For a prospective state of play, see the December 2004 study of the European Environment Agency, 'Greenhouse gas emission trends and projections in Europe 2004', available at http://reports.eea.eu.int/eea_report_2004_5/en

OECD & IEA, World Energy Outlook, 2004.

More widely, S&T play an important part in the EU's capacity to shape – and implement – international agreements.

By way of conclusion, it is worthy of note that the answers which science and technology can bring to environmental problems are increasingly judged with reference to the changes they bring in society. They demand choices of policies and governance, the impact of which on economic and social groups must be measured in terms of efficiency, the spread of costs and benefits, and social or regional equity. This is only possible if research also seeks to develop the knowledge-base and methodologies needed by such analyses.

Section 3: Knowledge for social welfare

It goes without saying that this section can only provide a flavour of these challenges without claiming to be exhaustive. For an attempt at a comprehensive list of societal impact areas,

see http://europa.eu.int/comm/secretariat_general/impact/docs/imp_ass_tech_anx_en.pdf

which is followed by a forward-looking analysis underscoring modern vulnerabilities and the role of S&T in the emerging knowledge society.

Fighting poverty with S&T

EUROSTAT; the at-risk-of-poverty threshold is fixed, for each country, at 60% of the national median equivalised income. The focus is therefore on the relative rather than the absolute risk of poverty, i.e. this risk is defined in relation to the general level of prosperity in each country and is expressed on the basis of a central value of the income distribution.

To name a few: The State of the World’s Children 2005, UNICEF. World Development Report 2000/2001, World Bank.

Per capita income in countries with a literacy rate less than 55 percent averages about $600 whereas per capita income in countries with a literacy rate between 55 and 84 percent is $2,400. Source: World Development Report 2000/2001, World Bank.

World Development Report 2000/2001, World Bank

The International S&T cooperation with third countries (INCO) is one of those programmes which have developed around the idea that poverty can be overcome by successfully developing human and institutional resources.

Also in the developed world, directing S&T investment at improving the returns to a society’s assets are needed to combat poverty in order to provide real relief. Besides investing in education and developing skills, this means dedicating research programmes to find ways to fight inner-city poverty, to relieve the effects of urbanisation, to diminish the impacts of ever increasing mobility on our environment, and to improve the quality of life of the vulnerable groups in society, such as the handicapped and the ill, the elderly and the young.

The State of the World’s Children 2005, UNICEF

Further research is needed to reduce incidence rates and improve living conditions.

Improving human health with S&T

On the relationship between poverty and poor health conditions, see Jeffrey D. Sachs, Investing in Health for Economic Development, 2002 (http://www.project-syndicate.org). Another example: malaria accounts for ca 3% of the global disease burden but attracts just 0.16% of R&D outlays in biomedical research, largely because most malaria victims are impoverished and ignored by industry.

The EDCTP initiative within the legal frame of art. 169 TEC unites and coordinates Europe’s clinical trial activities targeted at interventions for use in developing countries. See COM(2001)96.

.

UNAIDS 2004 Report on the global AIDS epidemic 2004, p. 23.

Marcia Angell, The truth about Drug Companies, in: The New York Review, Volume 51/12, 25/07/2004.

. The bird-flu outbreak in 1997 was the first of direct avian-to-human transmission of influenza.

Unpredicted research actions - such as the FP6 initiative of € 15 million into research on SARS - need to be possible in order to respond immediately to such threats. Research into influenza prevention is particularly pertinent for the EU, since five vaccine manufacturers representing 70% of the worldwide production of human influenza vaccines are located in the EU, thereby making them global suppliers through export.

Health expenditure represents ca 9-10% GDP in DE, FR and Scandinavian countries, ca 7.5% in UK, IT and ES and much less in the new Member States (1.6%). OECD Health Data 2004, 1st edition, June 2004.

. Take the example of demographic change. Advances in medicine, improved healthcare monitoring, better personal hygiene, better geriatric care and more health conscientious behaviour, to name few, have all had favourable effects on people growing older. This offers wide opportunities, but also involves societal challenges. The extension of working life impacts both on the employment and pension systems.

National Audit Office Report (HC 1026, 2003-04): Welfare to Work: Tackling the barriers to the employment of older people, Part I, table 18, p. 30.

. There are many areas where social, organisational and technological innovation might significantly alleviate the effects of population change by promoting active ageing.

The mutual shaping of culture and S&T

The examples in this section show how profoundly our culture is marked by S&T developments. At the same time as S&T shape our society, they are themselves produced, taken up, reconfigured, shaped by society. That is one (double) way in which culture is decidedly scientific culture. But to allow all sections of society to benefit from those advances – as well as to take part in that shaping process – individuals need to be provided with the appropriate equipment, in terms of education, skills, awareness, and appreciation for the stakes in S&T endeavours. Vital for a democratic society, such demands point towards another crucial sense for scientific culture, also exposing the acute need for it to be developed. Actions to foster a thorough public grasp of what is science and how it contributes to society are thus sine qua non to a full-fledged democratic society.

International Development Research Centre (Gaston Zongo), 2001, Information and Communication Technologies for Development in Africa: Trends and Overview. United Nations Research Institute for Social Development (Olivier Sagna), 2000, Information and Communication Technologies and Social Development in Senegal: an Overview/Les technologies de l’information et de la communication et le développement social au Sénégal: un état des lieux.

European Foundation for the Improv