2 Low carbon is promising

In this part we argue that low carbon technologies such as electric vehicles, wind motors, batteries and solar PV have disproportionate growth potential. They are seeing disruptive innovation (2.1) and strongly increased investment which is likely to continue (2.2). Consequently, producing low-carbon technologies promises to generate above average value-added and, hence, to positively contribute to growth in countries that hold a comparative advantage in this sector.

Low carbon technology in innovation and export

Figure 2.1: Share of low-carbon technology in total exports and patent applications, Note: Technology-product correspondence in the Annex, Source: Patent share based on EPO PATSTAT (EPO 2016), export share based on UN Comtrade (United Nations Statistics Division 2017).

The export of electric vehicles, wind motors, batteries and solar PV has been growing faster than the export of other products. So their share in global exports is increasing. At the same time, these technologies also experienced faster technological development than other technologies – indicating higher returns to innovation.

Global investment scenario

Figure 2.2: Global investment in wind, solar PV, CCS and electric vehicles in a 450bpm Scenario, Source: IEA (2015).

The political momentum to combat climate change was reconfirmed and reinforced in 2015, when for the first time all countries agreed in the Paris Agreement to limit carbon emissions and to aim for carbon neutrality in the second half of the century. Together with growing electricity demand in emerging countries, the market for low-carbon energy will continue to increase.