Environmental Risk Mitigation

As energy-dependent industries bump up ever more frequently on the frontiers of existing technology, the search for new, ground-breaking, game-changing discoveries has become as much an effort to create value, gain market share, and build competitive advantages as it is a policy objective to sustain economic growth and development, maintain societal welfare, increase national competitiveness, and promote international stature. This is taking place against the backdrop of ever increasing environmental risk and increasing efforts to mitigate it. The focus here is on clean energy technology (CET), in particular, on renewable energy (RE) and portable, mobile, and stationary battery and energy supply and storage technologies (B|ESST) and how effectively countries with large and technologically advanced economies are building and coaxing the markets needed to effectively mitigate environmental risk.

What is environmental risk? What are the sources of it? What are the indicators of its sustainability? These are important questions to answer for purposes of this and other discussions. This chapter describes a number of primary causes of environmental risks and indicators of environmental stability or lack thereof. It provides measures of environmental risk and sustainability of seven countries—China, France, Germany, Japan, Korea, the UK, and the USA—relative to the rest of world. This serves the twofold purpose of describing the environmental risks to be mitigated and explaining how countries with some of the largest economies in the world are faring as sources and mitigators of those risks, in market terms.

The very countries that are the biggest sources of environmental risk are also doing the most to mitigate it, at least in terms of research and development (R&D). This is not surprising given that they are among the most capital intensive and technologically advanced in the world. This chapter continues to the discussion of the seven countries —China, France, Germany, Japan, Korea, the UK, and the USA. The focus of this chapter is on technological R&D, especially in environment-related technologies, as well as renewable energy (RE) production and consumption. These factors together explain how well their economies are transitioning toward a greater reliance on renewable sources of energy, in order to effectively lower greenhouse gas (GHG) emissions and additional sources of environmental risk.

The clean energy technologies (CETs) being developed to help to lower the carbon intensity of global GDP and decarbonize the global energy system include renewable energy (RE) and other energy supply technologies, as well as battery and other energy storage (ES) technologies, and combinations thereof. The patent regimes of these new technologies, as measured by the climate change mitigation (CCM) and environment-related patents filed, suggest the research and development (R&D) community is regionally widespread albeit concentrated in a number of countries and industries. The research institutions undertaking scientific R&D are located in academia, corporations, and government research institutes and at the boundaries between them. The role of corporate or business enterprise research and development (BERD) is the biggest, especially in the seven countries in this study—China, France, Germany, Japan, Korea, the UK, and the USA. This together with low international collaboration suggests R&D is very competitive, especially in Japan, Korea, the USA, and China. However, CET R&D collaboration is increasing, as CCM becomes an increasingly global issue.

Governments have climate change mitigating (CCM) policies in place, including fiscal incentives, public finance, and regulations to promote the adoption renewable energy (RE) and promote the development of clean energy technologies (CETs). RE and CET policies are part of a energy and environment policy “mix” to maintain energy security, phase out non-RE supply to RE supplies increase energy efficiency and support, guide, direct, and promote new CET development. The perception of economic, energy, and environmental risks deeply affect clean energy policymaking. They are country-specific. The RE deployment and CCM policies among the seven countries in this study, China, France, Germany, Japan, Korea, the UK, and the USA all promote CET R&D that also reflect different perceptions of economic, energy, and environmental risks. Risk perceptions vary due to energy security or lack thereof and inform CET policy choices. Consequently, global CET policy measures to effectively mitigate environment risk are yet to be realized. Despite years of experience, policy uncertainty persists, as governments contend with competing demands on limited budgets as they attempt to consolidate fiscal responsibilities and satisfy the demands of competing interests.

Viable financial markets underpin all competitive markets. Indeed, their development, depth, liquidity, and viability sustain market competition. The role of financial markets in clean energy technology (CET) market funding—investment and investment financing—is small and therefore a primary reason for its slow development. The primary focus of the investment community has been on large, utility grid-scale renewable energy (RE) financing and not on early and middle stage R&D and manufacturing scale-up financing. Financial market financing of RE supply and storage technology, in particular to fund the wide array of stationary, mobile, portable battery and energy supply and storage (B|ESST), therefore is segmented, not to mention insufficient in scale to meet the capital infrastructure needs of environmental risk mitigation. This chapter describes current financial market conditions, CET funding, and the future prospects for CET financial markets.

Given the ever-increasing number of stakeholders in the battery and energy supply and storage (ESS) area of technological progress, questions arise, such as who and what comprises the frontier of technological innovation and development? Is it market-determined, policy-determined, or some combination thereof? Is the frontier being configured by national comparative advantages that have emerged over time, or have we entered a neo-industrial policy era to promote manufacturing competitiveness? Which industries are most active in the area of groundbreaking technological progress? This chapter configures the frontier of this technology by research area and location and by the type of technology being developed and its market application, including the critical testing and manufacturing scale-up phase of the research and development (R&D) process. The “development–application trajectory” of viable, new technology is a central albeit often neglected part of the market development process. The industries for which battery and energy supply and storage technologies (B|ESST) are being developed are wide-ranging and increasingly scalable to a number of applications. Such cross-industry utility promises speedier and more effective market efforts to mitigate environmental risk through the development and application of B|ESST.

What sort of market is emerging in clean energy technology (CET) industries? Are the all-important market rationale—value creation, price flexibility, risk assessment, information symmetry—needed to catalyze private investment both corporate and individual in CET markets in place? If not, whom are the main actors “coaxing” them and where and, perhaps, most importantly, how are they being coaxed? This chapter aims to identify the progress being made in environmental risk mitigation market creation and development, in terms of CET markets. It does so by positioning environmental risk as part of the “gearing up” of an integrated system and the eventual emergence of a “green economy.” Three cases are included in order to discuss the role of these market rational variables, in turn, in shaping a number of the Environmental-Societal-Financial (E-S-F) Sustainability Interfaces, the component and path interdependent parts that comprise a complexly integrated system.