SIX COUNTRIES PROGRAMME ON INNOVATION

Spring Conference 2002

Innovation policy and sustainable development:

Can public innovation incentives make a difference?

28 February - 1 March, 2002

Brussels

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Contents

1 introduction

2 background

3 outlines of the programme

4 project characteristics and examples

5 results

6 recent and future developments

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1 Introduction

The Dutch E.E.T. programme (Economy, Ecology and Technology) supports strategic middle to long-term research and development. One of the main goals is a sustainable economic development. The market launch of the project results should be between 5 or 20 years after the project-start.

The E.E.T. programme is financed by three Ministries: the Ministry of Economic Affairs, the Ministry of Spatial planning, Housing and the Environment and the Ministry of Education, Culture and Science. Every year approximately EUR 40 million is granted.

This paper will give an introduction to the E.E.T. programme. It will explain the background and the outlines of the programme, and gives some project examples and project results. Furthermore, developments on policy level are described.

2 Background

In 1995 the E.E.T. programme was announced in a policy document named “Knowledge on the move” by the Ministry of Education, Culture and Science and the Ministry of Economic Affairs.

This policy document states that technological innovations can build a bridge between economy and the environment. To achieve both substantial economic and ecological benefits, technological breakthroughs are necessary. The speed of regular, autonomic technology development (incremental) is not fast enough. Favourable conditions have to be created in order to achieve these breakthroughs.

The E.E.T. programme should initiate strategic long-term research and should mobilise knowledge of industry, universities and technological institutes, by subsidising R&D projects.

The E.E.T. programme started off in 1996. The programme is executed by the E.E.T. programme office, which is a partnership between Novem and Senter.

In the policy document “Environment and Economy” (1997) the principles of the E.E.T. programme are further specified. The complete integration of environmental aspects into the development of new processes, products or services should lead to the disconnection of economic growth and pressure on the environment.

As a result, the E.E.T. budget was raised and the programme was expanded with so-called ‘embryonic projects’. These are smaller feasibility projects, that should lower the threshold for multiyear E.E.T. projects.

In this period of time, the Ministry of Housing, Spatial Planning and the Environment entered the E.E.T. programme by contributing to it.

3 Outlines of the programme
Goal

Goal of the E.E.T. programme is to stimulate large long-term projects, aiming at technological breakthroughs. These breakthroughs are intended to lead to substantial economic and ecological benefits.

This should reinforce both the competitiveness of the Dutch industry and the Dutch knowledge infrastructure.

Themes

The E.E.T. programme focuses on five environmental themes:

1 Renewable raw materials

2 Sustainable energy sources

3 Sustainable industrial production processes

4 Traffic and transport

5 Eco design.

These themes are selected because they offer solutions for the main environmental problems as signalled in the Dutch National Environmental Policy Plans.

Target groups

E.E.T. is especially aimed at

-  (large) companies

-  technological research institutes

-  universities

-  SME (small to medium-sized enterprises)

-  intermediates

Execution

E.E.T. subsidies are granted on the basis of a competitive tender procedure.

The budget put out to tender every eight months is EUR 23 million of which EUR 1.1 million is reserved for ‘embryonic projects’ (one year feasibility projects). Accidental budget increases occur. On average EUR 40 million a year is granted.

In each such eight month periods proposals for multiyear projects and for one-year ‘embryonic projects’ can be submitted.

In the case of multiyear project proposals the E.E.T. scheme provides for both an advisory round and a qualification round. The advisory round is intended to make a first selection of projects and to improve the proposals. In the case of one-year embryonic projects there is no official advisory round, only the qualification round.

An external E.E.T. Advisory Committee appointed by the three Ministries assesses the proposals and makes recommendations regarding the form and content of the project. On the basis of their advice the co-ordinator of the project makes a final proposal for the qualification round. In this round, the E.E.T. Advisory Committee ranks all the proposals in order of quality: the extent to which they contribute to the objectives of E.E.T.

Subsidies are then granted in ranked order until the funds are exhausted.

The E.E.T. office plays an important role in advising organisations regarding new proposals.

In 2002 the qualification round for the 9th tender and the advisory round for the 10th tender will take place. Based on the large number of prepoposals in the advisory round sufficient proposals of high quality are expected for the 9th tender qualification round.

Assessment criteria

The assessment criteria for new projects focus at economy, ecology, technology and collaboration. Each assessment criterion comprises approximately twenty subcriteria, of which some examples are given below:

Economy

On what scale will the project lead to economic effects, such as profits, turnover, scale of the market, cost savings, etc. This has to be expressed in millions of Euro.

Ecology

On what scale will the project lead to ecological effects? This has to be quantified, e.g. in Peta Joules, kilograms etc. Will the project contribute substantially to solving major environmental problems?

Technology

Will the project lead to a technological breakthrough? Is the proposal a new development?

Collaboration

Is there collaboration between the knowledge sector and the industry? Will the collaboration lead to a successful project and a successful market launch? Is there enough commitment from the industrial partners?

For economic and ecological effects, risk (chance of success) and reward (potential impact) are distinguished. There is a tendency towards rewarding high risk/high reward projects better than low risk projects, since these projects are best in line with the overall E.E.T. goal.

At the start of the project a collaboration agreement is required to ensure collaboration between industry and knowledge institutes. The agreement describes the terms on which co-operation takes place and arranges the distribution of knowledge and exploitation rights.

Monitoring and evaluation

For monitoring and evaluation in order to measure the outcome of the projects and to improve the E.E.T. programme, ‘input and output performance indicators’ are used.

Input indicators describe the input into the R&D activity in terms of various resources. Typical parameters are R&D costs, public funding, type of technology, type of the companies participating, etc.

The output indicators describe the output that is realised or expected from a project. These indicators include data of new products, processes, services or methods, new companies, applied new technologies, increased turnover, export, employment, ecological effects (e.g. the decrease in emissions of pollutants), etc.

The input performance indicators are mostly collected from the project proposal. A standard form is used for the collection of the output performance indicators. By means of this form the project co-ordinator must report the current insights on the expected outcome of the project every six months and after completion of the project. The standard form is an annex along with the half-yearly progress reports and the final report.

Though relatively simple, the output indicators currently used give reasonable indications for the expected outcome. Yet, at this moment (early 2002) the Programme Office is investigating if indicators can be developed that give more reliable results on the expected outcome (see Chapter six). An important condition is that these indicators must be relatively easy to determine, since the workload for the project co-ordinator should be kept at a minimum.

4 Project characteristics and examples

Characteristics

There is no such thing as an average E.E.T. project. Nevertheless, based on statistics, an average (multiyear) E.E.T. project can be described by the following characteristics:

number of project partners: 5

Mostly a consortium comprises the whole chain of knowledge providers, and suppliers and customers (see figure ‘participants’ below, for participation in E.E.T. per target group).

duration of the project: 5 years

costs and subsidy: The total mean costs are EUR 4 million per project of which half is subsidised (EUR 2 million).

time-to-market: The time-to-market for most projects is between 7 and 10 years

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type of project: The major part of E.E.T. projects fits into the scope of the ‘sustainable industrial production processes’ theme (about 40%). The ‘traffic and transportation’ theme is least represented (see figure ‘themes’).



Examples

Some examples of E.E.T. projects:

Mega Wind Turbines

The development of 5 to 6 Mega Watt offshore wind turbines.

All-PP

The development of polypropylene, reinforced with polypropylene, instead of reinforced with other fibres.

Eco drive

The development of an optimised power train comprising a combustion engine, continuous variable transmission and flywheel for passenger vehicles.

Food preservation

The development of a competitive process to ensure longer shelf life using ultra high pressure.

Signature analysis

Prognosis of the lifetime of xerox machines on the base of changes in behaviour of electromechanical modules.

Micro-algae

Combined production of fine chemicals and energy from micro-algae.

5 Results

The expected results of the E.E.T. programme are evaluated on a regular basis, every two years, by the programme office. The most recent evaluation was in 2000, based on the first six tenders (53 projects).

As the E.E.T. programme supports projects of which the expected market-introduction lies at least five years ahead, hardly any results (products, processes, services etc) have entered the market yet. That is why we are discussing expected results here.

Currently (February 2002), nearly one hundred multiyear projects received E.E.T. subsidy and about 70 ‘embryonic projects’ started off. Only a few E.E.T. projects have been completed.

With each tender the E.E.T. programme office receives a sufficient number of project proposals. The quality of the proposals shows a gradual increase. This is measured by the scores given by the Advisory Committee.

About 60% of the embryonic projects result in an E.E.T. project. This is according to the original intention of these projects. These one-year projects especially meet with the needs of research institutes and SME in the research-field.

If all E.E.T. projects succeed, this would lead to an expected increase in turnover and cost reductions of EUR 10 billion. Experts of the 53 evaluated projects estimated that about 10% of the projects will succeed, which would lead to an economic effect of approximately EUR 1 billion, compared to subsidies amounting to EUR 0.13 billion.

A substantial contribution to ecological aspects is estimated, especially in the fields of climate (CO2 emissions), acidification, soil degradation caused by decrease of the groundwatertabel, and NOx. In case of 100% success of the projects, this could lead to an abatement of the above mentioned environmental problems with resp. approximately 10%, 25%, 45% and 5%.

E.E.T. projects are highly innovative regarding technology. Most projects are aimed at process innovation and/or system innovation. Until the year 2000 67 patens were submitted.

It should be stated again that the results mentioned above were based on a 2000 survey – since then three more tenders have been put out.

6 Recent and future developments
Horizon explorations

In the so-called Horizon Explorations it is investigated every two years if the ecological ambitions (themes) of the E.E.T. programme are still in accordance with the major environmental problems, and if adjustments are necessary in the programme execution to increase the impact of E.E.T. subsidies.

The last horizon exploration was carried out in 2001 by a consultancy firm. One of its conclusions was that the themes were still in accordance with the topical major environmental problems. Recommendations have been made to make minor changes in the evaluation criteria, so that there will be more focus on:

-  system innovations for sustainability rather than eco efficiency,

-  high risk/high reward, and

-  non-technological activities, such as business planning, Lifetime Cycle Analysis and competitive technology analysis.

In addition it was recommended to increase the efforts on monitoring by developing a new monitoring system, named “long-term impact monitoring”. The objective is to have a more reliable view on the contribution of both individual projects and the overall programme to sustainability, at the start, during en after completion. This monitoring system should have more advanced performance indicators compared to the ones currently used. The indicators must be applicable on ecology, economy, technology, the transition to sustainability, community added value, technology and collaboration between industries, research institutes and universities.

The assessment criteria have been changed according to the recommendations. No decision has been made yet on developing the Long term Impact Monitoring system. The E.E.T. programme office has been asked to investigate the options and the feasibility. This investigation will be performed in the first months of 2002.

Evaluation of the programme

A consultancy firm currently evaluates the effectiveness of the E.E.T. programme. Almost thirty subjects of investigation are formulated. Two of the main subjects are:

-  Does the E.E.T. programme contribute to a change of company investments and a direction of R&D towards innovation towards sustainability (e.g. influence on investment decisions, influence on the organisation structure of R&D and influence on technology strategy),

-  Does the integration of fundamental research, industrial research and pre-competitive development and the collaboration between companies, research institutes and universities lead to a better chance of a successful market introduction or to an improvement in speed or quality of R&D.

The evaluation mainly focuses on the programme results so far. But recommendations also have to be made on how to improve the effectiveness of the scheme and on the necessity to make adjustments within the scope of the latest developments in Dutch policy on sustainability (e.g. the 4th National Environmental Policy Plan).

The results of the evaluation will be reported in April 2002.

Policy

The 4th National Environmental Policy Plan was presented in 2001. The plan outlines the Dutch government's environmental strategy up to the year 2030 both in a national and an international context. Seven important environmental problems have been identified. To solve these problems ‘transition to sustainability’ was introduced to the government’s strategy. Solving the major environmental problems requires system innovations: in many cases this can take the shape of a long drawn-out transformation process comprising technological, economic, socio-cultural and institutional changes.