Emerging market and developing economies (EMDEs) have a major stake in tackling the climate challenge, including through the innovations needed to underpin the clean energy transition. The pathways taken by emerging economies to increase their energy supplies to meet rising demand and boost economic development will be fundamental to achieving energy transitions globally. Given the role of new and improved energy technologies in achieving clean energy goals, technological innovation is critical to addressing the climate challenge for all countries. Without it, energy and climate goals will remain out of reach. According to IEA analysis, 35% of the energy sector emissions savings that are needed to achieve net zero CO₂ emissions globally by mid-century must come from technologies that are not yet commercially available on the market. As well as continued improvements to products already on the market, there is therefore a need for concerted global efforts to successfully demonstrate emissions-reducing technologies that are known, but not yet proven at scale.

Energy and climate policy in emerging economies increasingly targets ambitious innovation objectives. The case studies in this report demonstrate that many countries have put in place substantial policies and programmes to advance a clean energy transition domestically, in a manner that realises the developmental benefits of such a transition. This includes expectations to develop, own, produce or optimise the technologies that they deploy, and to shape domestic markets to the capabilities and aspirations of the local population. In some cases, energy or climate policy documents state a vision of becoming an exporter of technologies in this area.

The economic opportunity is large, but EMDEs face multiple challenges to fully reap its benefits. The emergence of a new clean energy economy, led by mass-market solar PV, batteries and electric vehicles, is bringing the economic opportunities of clean energy transitions into focus for governments, including in developing economies. Nurturing new technologies to maturity can create local economic prosperity, and clean energy transitions will offer market opportunities for all economies in the coming decades. But emerging economies face specific challenges to be overcome in order to take advantage of these opportunities, including constrained public budgets, competition between immediate social needs and longer-term innovation goals, a lack of cutting-edge research infrastructure, high costs of capital for risk-taking enterprises, weak intellectual property enforcement and small or uncertain domestic markets for innovative technologies.

Investment in clean energy and spending on innovation is unevenly distributed. The trend towards higher spending on clean energy is visible all around the world, but most of the spending is in advanced economies and China. For every dollar invested in battery storage in advanced economies and China in 2023, only one cent was invested in other emerging markets. This falls far short of the amounts needed to ensure full access to modern energy and to meet rising energy demand in a sustainable way. Spending on energy innovation also reflects this imbalance: In 2023, just 6% of public energy R&D spending, 3% of corporate energy R&D spending and 9% of energy venture capital was in EMDEs outside China. Considering the active role these countries need to play in energy transitions and the importance of technologies that are a good fit with local markets and contexts, their limited investment participation is a concern.

Policy plays an essential role in clean energy innovation. Governments have a key role to play in enabling and accelerating technology deployment through different policy tools such as financial incentives, regulations and research support. Interest in identifying effective policies to catalyse innovation is growing worldwide, backed by expectations that clean energy technologies can be commercialised almost anywhere – especially mass-manufactured technologies like batteries or solar panels. In many cases, governments and the networks of institutions they co-ordinate, including state-owned enterprises, are the only actors with the influence and overview to bolster and shape innovation ecosystems in EMDEs. Elsewhere, other governments, investors and philanthropists are asking what they can do to support emerging economies to enter a virtuous cycle of technology deployment, learning, research, manufacturing and process improvement, boosted by further deployment or exports with higher local content. Innovation can also help countries more quickly reach tipping points at which the advantages of clean energy to the domestic economy clearly outweigh the benefits of continuing along a higher-emissions pathway.

Effective innovation policy combines a broad range of measures. While most governments channel funding to innovators to guide them towards national technology priorities, countries that are more successful in clean energy innovation support four key policy pillars: resource push (a sustained flow of R&D funding, capital for innovators, skills and research infrastructure); knowledge management (the free exchange of information between researchers, academia, companies, policy makers and international partners); market pull (creation of expected market value for the new product or service that makes the R&D risks worthwhile); and socio-political support (broad cross-society support for new products or services and the tests needed to develop them into commercial products). The case studies confirm that countries struggle to translate research into technological change without action under each pillar. Developing economies typically do not have an extensive legacy of energy innovation, and an energy innovation ecosystem in a developing economy may look very different from that of an advanced economy. It might be mainly composed of the skills, institutions and incentives to evaluate, adapt, manufacture and deploy a technology that is unfamiliar in the country context. These ecosystems are “innovation-ready” platforms that can foster incremental improvements to technologies and grow into more sophisticated communities of innovators at a later stage.

Emerging economies have a wealth of innovation experiences to share, and all countries have much to learn from them. Many already have extensive experience in technology R&D and deployment, whether for energy or in adjacent areas, but it is rarely considered collectively. Examples of global technology leadership in these countries are more plentiful than is often recognised, and include biotechnology in India, nuclear power in Argentina, synthetic fuel synthesis in South Africa, biofuels in Brazil, financial technology in Kenya, fertilisers in Morocco and building materials in Mexico.

The heterogeneity of EMDE country contexts means that sharing policy lessons and successes is more valuable when it accounts for local context. The case studies in this report cover 11 countries, yet the variations among them are broad. While they all illustrate effective policy approaches to boosting clean energy technology capabilities despite relatively low per capita wealth, the institutional, infrastructure and private sector contexts vary widely. These contextual aspects are of particular importance to examining policy design and effectiveness in EMDEs. It is therefore necessary to look not only at the details of the policy documentation, but also at the policy’s origins within the broader national priorities and the factors that shaped the choice of measures, assessment and learning. 

This report presents 11 new case studies of national experiences with policy development and implementation in support of energy innovation in EMDEs. The case studies cover a range of different countries and key technologies, and highlight distinct aspects of the energy innovation process across diverse settings. Each case study was authored by national experts with deep experience of the energy innovation landscape in their countries.

Common to all of these case studies is the aspiration of governments to engage in the clean energy transition, even in the face of resource constraints. A comparison of the case studies reveals a number of key findings that demonstrate the strengths of energy innovation in the countries under consideration:

1. Clean energy innovation has risen high up the policy agenda in developing countries, just as it has in advanced economies. The potential for economic development is a key motivating factor, as is the need to boost energy security and respond to the climate challenge. Countries including Argentina, Colombia, Kazakhstan, Nigeria and South Africa issued new national energy strategies that referenced clean energy innovation shortly after publishing their nationally determined contributions (NDCs) as part of the Paris Agreement process. However, since around 2020, industrial development and inward investment have become equally strong drivers for action.
2. Innovation policy can build upon and reinforce broader trends to catalyse technological change. Energy innovation outcomes are more easily achieved when they align well with national visions for economic and social development. In India, energy efficiency was boosted by the government’s priority of maintaining access to electricity for a growing population despite financial challenges for utilities. In Colombia, hydrogen technologies have the potential to address a range of emergent and pressing policy issues.
3. There are multiple ways to set innovation in motion. In many cases, successes at the national level have emerged through different configurations of private sector-led research, expert interaction through knowledge networks, strategic funding and policy tools, and partnerships with foreign technology suppliers. In Kenya, for example, a new cohort of producers of solar home systems were borne from a funding programme for off-grid solar PV that rewarded innovative means of adapting services to local consumers’ needs.
4. Institutional history exerts a powerful influence on policy choices. South Africa’s “just transition” policies have their roots in a long social and institutional history. Successful innovation policy interventions work in harmony with the existing policy landscape, and it is important that international partners are sensitive to the institutional history. Overall, the state typically plays a more prominent role in the energy sector than it does in advanced economies, and, as illustrated by nuclear innovation in Argentina, there is less reliance on market forces and private sector R&D.
5. Existing technical expertise can provide a springboard, including from adjacent sectors. For example, Kazakhstan’s energy technology plans promote areas that require transferable skills from the oil and gas sector, such as sustainable liquid fuels. Kenya, by contrast, became a leading innovator in solar home systems due to its prior expertise in digital finance technology. Mexico is building on its manufacturing expertise to enter technologies related to solar PV.
6. There are demonstrated ways to make the most of limited resources. International co-operation – whether through financial support or knowledge sharing – is a key feature across the cases. Limited resources demand prioritisation of technology options that match local capacities. Morocco has developed tools and expertise for exploring potential technologies and identifying gaps to be targeted by policy. Nurturing the innovation ecosystem and maintaining connections with international innovators is also important. The earliest solar PV manufacturing in China benefited from individuals with strong international networks and connections to diasporas.
7. Few countries have well-established and comparable processes for evaluating outcomes against the original policy goals. Evaluating innovation policy is complex for all governments, but it should be built into policy design at the outset, to support the process of learning. Mexico is an exception in this regard: its General Law on Climate Change mandates the evaluation of climate change policies through INECC, an institution within the Environment Ministry.
   

Strengthening energy innovation systems in EMDEs is important for the pace of global energy transitions and enhancing clean energy technologies more generally. However, the statuses and forms of these innovation systems vary widely today. While China’s experiences with clean energy innovation policies in the early 2000s provide an instructive case study, the country has since built a sophisticated innovation ecosystem that it has the capacity to maintain. Developing economies with less mature innovation ecosystems will benefit from “innovation co-operation” with advanced economies as well as other EMDEs. We find there is considerable scope for partnerships and knowledge exchange among EMDEs. Shifting the discourse towards “innovation co-operation” may help alleviate some of the setbacks in the political arena that have been encountered by a narrower focus on technology or policy transfer. In this context, roles can be identified for all governments, intergovernmental bodies and other partners to work on effective policy packages and stronger clean energy innovation ecosystems in EMDEs.

For domestic policy makers

As in advanced economies, the importance of fostering predictable and durable domestic demand cannot be overstated. A dependable market for clean energy technologies within a given sector creates the incentives for innovators to take risks and improve existing products. Markets can start small but should reward suppliers of products and services that are a particularly good fit with local needs, as well as those that have higher performance and lower costs.

The lack of an extensive institutional and technical legacy in clean energy may often be a weakness, but also creates an opportunity for creative policy. Enabling policies do not need large R&D budgets – although R&D budgets remain valuable. New agencies to co-ordinate clean energy technology expertise can be established with the responsibility to inform policy. Networks for learning and sharing are also important, and state-owned enterprises, including research institutes, can play a central organising role if their aims are aligned with those of the broader network. Well-designed incentives for domestic procurement can foster competition and technology adaptation, and they can start at relatively small scales, for example by targeting installation and assembly. Encouraging innovation in digital technologies, which require lower capital for development, can be as impactful as much larger R&D budgets.

International engagement can help build domestic energy innovation ecosystems more rapidly if it is targeted towards key national challenges. This strengthens the case for mapping exercises that identify gaps in capacity and policy that hinder the development and take-up of new technologies. Depending on the needs, there are various forms of international co-operation that can be pursued simultaneously. These include participation in international fora (such as Mission Innovation, the IEA technology network and UN bodies); collaboration on tailored studies of opportunities; exchanges of experiences with countries facing similar challenges; multilateral financing of technology deployment programmes and technical capacity building; joint R&D programmes; and financial support to actors in the innovation ecosystem, including incubators and testing facilities.

In countries with limited public R&D budgets, domestic technology innovation advances more quickly when it leverages existing industrial expertise and aligns well with national visions of future socio-economic development. It is therefore important to carefully prioritise technology areas. The skills and capital requirements required to scale up mass-manufactured or digital technologies differ considerably from those required in sectors like carbon capture, hydrogen production, nuclear or biofuels. Examples of countries entering an entirely new technology area and quickly establishing technological leadership are rare, even in advanced economies. To mobilise broad support, the choice of policy measures in support of new technologies should account for societal objectives such as energy access, inclusiveness, affordability and accessing higher added-value production.

For international partners

In the medium-to-long-term, the interests of all countries will be well-served by faster transitions to clean energy in EMDEs and more clean energy technology innovation overall. International engagement on clean energy can promote stronger energy innovation ecosystems in EMDEs and do so within programmes related to the development of clean energy markets, deployment of clean energy technologies, or social and economic prosperity more broadly. Bilateral R&D programmes play an important role in such collaborations, and could be expanded, while also co-funding projects that enhance the innovation ecosystems of the partners in areas tailored to their strengths.

International initiatives related to clean energy should continue to include EMDE priorities in their work programmes. For projects involving several countries, including on R&D and technology demonstration, being at a relatively low level of technological maturity should not be a barrier to participation but requires upfront discussion of expectations and mutual benefits. Consortia of partners from countries with stronger and weaker clean energy innovation ecosystems, but which face similar challenges, could be assembled.

There is scope and need for the technical and market requirements for clean energy transitions in EMDEs to be more highly prioritised within the R&D programmes of the broader international community. Given the considerable economic and infrastructure challenges of shifting away from fossil fuels in key sectors such as transport, industry and power generation, and adopting more energy-efficient building designs, global net zero emissions targets will be out of reach without available and appropriate technologies for EMDEs.

Using development finance to help establish durable demand for clean energy technologies can have a catalytic effect on innovation provided it also supports competition, entrepreneurship and domestic capabilities. Such programmes can facilitate policy experimentation that would be difficult within the existing institutional architecture of the country, or could attract international companies to deploy novel technologies in projects they would otherwise not prioritise. Project loans, technical assistance with standards and regulations, finance for incubators, seed investments and capacity-building grants are just some of the ways in which international capital can spark large changes.