Today's Letter IEDI addresses the latest edition of UNCTAD's “Technology and Innovation” report, which highlights the windows of opportunity that are opening to emerging and developing countries with the need to reduce greenhouse gas emissions. The report advocates industrial strategies based on technological development associated with environmental sustainability.

Green windows of opportunity are favorable conditions for the development of countries resulting from the global search for environmental sustainability. But UNCTAD warns: these are opportunities limited in time and seizing them will require technological development, internal and external institutional changes and public policies, as well as new market dynamics.

From this point of view, no matter how well a country is positioned, nothing is guaranteed. Therefore, UNCTAD advocates the adoption of mission-oriented industrial strategies with an emphasis on RD&I. Such policies should be guided by international best practices and be structured around the following principles:

 • Clear definition of objectives and processes for permanent monitoring and evaluation of policies;

 •  Promotion of R&D projects and acceptance of eventual failures, given the high degree of uncertainty of innovation activity; 

 •  Correct distribution of investments between different sectors and agents involved in the partial or intermediate objectives of the missions;

 •  Engagement of a wide number of institutions and agents, public and private, with well-defined responsibilities, coordination and permanent monitoring of performance.

The report also warns that there will probably be feedback loops, that is, the measures adopted should be part of a process of learning, adjustments and improvements as they are implemented. The objectives pursued must be ambitious, but not detached from existing capacities and from the skills built throughout the strategy, under risk of unfeasibility. 

To reduce this uncertainty and, therefore, the possibility of errors, UNCTAD suggests prior alignment between industrial policies, science, technology and innovation policies, environmental and energy policies. That is, more than ever, coordination and synergy are on the agenda. The report cites as a positive example Brazil's experience in encouraging the wind energy sector in the 2000s.

In addition to the previous guidelines, the report also argues that to take advantage of the windows of opportunity, much emphasis should be placed on research and development, taking into account the existing conditions of each country's innovation systems and the level of maturity of the technologies to be encouraged.

In general, more mature technologies (such as wind and solar) are less uncertain. On the other hand, because there are well-established international suppliers, the entry of developing countries into their equipment and input markets encounters greater barriers, especially in core technologies. Policies should then, according to UNCTAD, prioritize encouraging the development of engineering projects, associated services, etc.

Less mature technologies (such as hydrogen by electrolysis and CSP —concentrated solar power) have more uncertain routes and require greater efforts in RD&I and, depending on their tradability, greater or lesser market protection and demand stimuli may be necessary, argues UNCTAD.

The report also analyzes the particular experiences of some countries with certain “green technologies” that UNCTAD sees as successful, emphasizing the aspects that influenced their development. Among these cases are photovoltaic panels in China, biofuels in Brazil, and green hydrogen by electrolysis in Chile.

From other sources, such as reports by McKinsey, Bloomberg, BNDES and Abiogás, the IEDI sought to address Brazil's opportunities in the production of sustainable hydrogen beyond the technological route of electrolysis, in which obstacles to large-scale production are still to be overcome. Other more mature routes, based on biofuels and biomass, for example, are available to the country.

UNCTAD summarizes four possible scenarios based on the preconditions, that is, the previous stage of the technological capabilities already accumulated, and the strength of the country's policy responses in face of the “green windows of opportunity”. The best scenario is when there is a combination of strong preconditions and robust responses.

In Brazil, this is the case of biofuels, in general, but notably ethanol. It would thus be a path from which we could establish an important presence in production chains under construction and with great growth potential, such as SAF (Sustainable Aviation Fuel), fuel cell electric vehicles and sustainable hydrogen.

The full text is available in Portuguese.