policies as most appropriate for different developing country contexts. This requires more impact evaluation studies of innovation policies targeted at green technologies.

The next section explores recent data on existing patterns of green innovation. The third section then presents an overview of green innovation policies, discussing the policy rationale and the range of available instruments. A final section provides summary recommendations.

# **2 GREEN INNOVATIONS – GROWING FROM A SMALL BASE**

Innovation in the context of development should be defined broadly as the commercialization of new ways to solve problems through improvements in technology, with a wide interpretation of technology as encompassing product, process, organizational, and marketing improvements. Besides frontier (new-tothe-world) innovations, this definition includes catch-up innovations, namely the diffusion (both across and within countries) and the adaptation to local context of existing green products, processes, organizational and marketing technologies.<sup>2</sup> Green technologies comprise a vast range of fundamentally different technologies that support wealth creation and achieve more resource-efficient, clean and resilient growth:

- Regarding pollution reduction and greater resource efficiency, technologies include improved recycling and energy efficiency in buildings (thermal insulation and new materials, heating, energyefficient lighting), production processes (new uses of waste and other by-products from firms into production inputs at the same or other firms), agriculture (from GM crops to mechanical irrigation and farming techniques), transport infrastructure, and urban design (including land use).

- Regarding climate change mitigation, technologies include cleaner energy supply (wind, solar, geothermal, marine energy, biomass, hydropower, waste-to-energy, and hydrogen fuels), end-use (electric and hybrid vehicles, climate-friendly cement), and carbon capture and storage (CCS).

- Regarding adaptation, they include more climate-resistant products and processes appropriate for changing environments (such as higher yield seeds for more arid and saline soils together with drought-resistant cultivation practices) and tools to understand and insure against climate risks with improved early-warning system processes (sea-walls, drainage capacity, reductions in environmental burden of disease, and water, forest and biodiversity management).

- They also directly support wealth creation through more sustainable production of plants and livestock, more productive use of biodiversity (natural cosmetics, pharmaceutical products, ecotourism), and ecosystem protection.

# **2.1 Frontier innovations concentrated in high-income countries, few in developing countries but growing**

There has been a significant worldwide increase in frontier green innovation since the end of the 1990s. But most of this is taking place in the high-income countries. Indeed, Japan, Germany and the US account for 60 percent of total green innovations worldwide between 2000 and 2005, based on key greenhouse gas (GHG)-mitigation technologies. These three countries plus France and the U.K. are the top five ̳high-

> 2 See Canuto et al. (2010) and Dutz (2007) for a broad definition of innovation appropriate for development.

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