Key points

• The cost of effective global and Australian mitigation will be materially lower if opportunities for innovation in low-emissions technologies are fully utilised.
  • There is too little private investment in innovation generally in the absence of public fiscal support.
  • The urgency of the adjustment task and the large change in incentives derived from carbon pricing justify a large transitional increase in public support for innovation related to low-emissions technology.
• Global public expenditure on research, development, demonstration and commercialisation of low-emissions technologies increased in the aftermath of the Great Crash of 2008, reversing several decades of decline in investment in innovation in alternative energy and energy saving technologies.
  • The increased global effort has accelerated progress in cost reductions in low emissions energy across several technologies.
  • Substantial increases in investment in innovation are still warranted.
  • A new feature of the global innovation effort is a substantial contribution from China and then India.
• Australia should do its proportionate part as a developed country in the global innovation effort:
  • in basic research focusing on areas where we have comparative advantage in research capacity and strong national interest in application;
  • in commercialisation, following business priorities backed by investment commitments; and
  • reducing other costs of innovation by expanding relevant high-level education and removing regulatory and legal barriers to new activities.
• Australian policy on research, development, demonstration and commercialisation has evolved in productive ways since the Review.
  • New general mechanisms for supporting commercial research and development can play a productive role in delivering additional support for low-emissions innovation at the commercialisation end of the chain.
• To ensure the optimal level of innovation in Australia in the transition to a low-emissions economy, I propose a package of measures including:
  • increasing support for public and private basic research;
  • market-led support for private demonstration and commercialisation;
  • the Low-Emissions Technology Commitment on total funding, leading to roughly a doubling of research, development and commercialisation expenditure to $2-3 billion per annum; and
  • strong and independent governance arrangements.

The scheme should be administered by an independent authority, taking important decisions on advice from independent expert bodies.