The IEA’s Energy Innovation Policy Guide has been compiled to help governments and other stakeholders navigate and be inspired by the range of available policy options for enhancing clean energy innovation. Different types of policies can spur and support researchers and innovators to overcome challenges specific to their technology, market, maturity and local context. Effective policy packages will blend multiple policies resulting in faster and more impactful energy technology development.

Nurturing new technologies to maturity can create local economic prosperity, and clean energy transitions will be a major market opportunity for all economies during the 21st century. Countries around the world are striving to be the home of the next breakthrough clean energy technology company or host world-class clean energy supply chains, with good reason. Given the role of new and improved energy technologies in underpinning the transition to cleaner energy, energy innovation is critical for meeting the ambitious objectives for reducing greenhouse gas emissions that nearly all countries have in place. Without enhanced energy innovation, energy and climate goals will be out of reach.

While advanced economies have a leading and central role to play in the clean energy transition that is the mainstay of climate action, emerging and developing economies (EMDEs) are also integral to achieving this transition as they enlarge their economies and energy supplies to meet their developmental aspirations. In recognition of this, the Research and Innovation Working Group (RIWG) of the G20, established in 2024, requested the creation of a compendium of energy innovation policies that would facilitate the sharing of institutional experiences and knowledge between countries and, above all, provide information and inspiration to EMDE governments as they seek to develop effective policy support for innovators operating in their countries. Many of these countries do not possess a strong legacy of institutional and funding support to energy technology innovation and can greatly benefit from a resource that summarises different policy design options and where they have been tested.

Governments and other stakeholders are especially interested in how to catalyse clean energy innovation in EMDEs.

Governments in these countries recognise the potential economic benefits of domestic production in a world that is scrambling to deploy renewable and other low-emissions energy as far and as quickly, and cheaply, as possible. Examples of global technology leadership in these countries are more plentiful than is often recognised, with many EMDEs already having extensive experience in technology R&D and deployment. However, this is often not considered collectively in the context of the local and global clean energy innovation challenges.

Beyond these countries, other governments, investors and philanthropists are asking what they can do to help EMDEs into a virtuous cycle of technology deployment, learning, research, manufacturing and process improvement, boosted by further deployment or exports with higher local content. As well as accelerating the global pace of technological change, innovation can speed up that rate at which countries reach tipping points where the advantages of clean energy to the domestic economy clearly outweigh the benefits of continuing along a higher-emissions pathway.

Innovation policy is a broad topic. There is abundant evidence that the most successful innovating regions have well-integrated ecosystems of researchers, entrepreneurs, government institutions and potential technology users. Typically, they have targeted government support to each phase of the innovation journey that creates links between stakeholders and phases.

In recognition of the importance and specificities of clean energy technologies, experimentation and creativity with innovation policy design in this area is growing. For example, the number of governments that offer dedicated support to technology-based start-ups developing climate mitigation technologies has risen in recent years. The range of policies in place or in development now includes not just R&D grants, but also tax incentives, inducement prizes, business equity, loans, loan guarantees, incubation services, knowledge networks, cross-border cooperation and access to laboratories. For developing economies it can also strongly feature capacity building programmes, either for institutional capabilities or expertise relating to specific technologies.

As new technology designs progress through the four phases of innovation the types of support that they require evolve. This includes the type and magnitude of capital that is necessary to help innovators to undertake R&D, develop prototypes, scale up businesses and fund first-of-a-kind large-scale demonstration projects. Without appropriate capital provision and, for more radical environmental technologies, other support services, the risk of high potential technologies failing to cross the so-called “valley of death” is high.

New clean energy technologies have specific characteristics compared to technologies in other sectors. Clean energy technologies – especially those related to hardware rather than software – can have relatively long development timelines and require large upfront investments. Unlike for information technology start-up, clean energy technologies are not always well suited to the prevailing venture capital model. There is a mismatch between the short time horizons of most venture capital funds (which promise to return capital to investors in around five years), which has led many venture capital funds to focus on asset-light business models in the energy sector, leaving hardware developers with fewer options for raising capital.

Clean energy technology developers must often overcome many technical, commercial and regulatory hurdles to become sustainable businesses. The products are frequently not yet valued in the marketplace due to the environmental costs of incumbent technologies being externalised and regulatory regimes not yet recognising the benefits of the new technology.

Each time a government takes an action in pursuit of a policy objective it can choose from a wide range of possible instruments. The options branch out from a basic choice about whether the goal can be most efficiently achieved by: setting strategies or targets; regulating the behaviour of companies or individuals; transferring government funds to companies, institutions or the public; or providing information and education. These branches each contain policy design choices, such as whether to allocate government funds via grants, tax incentives or debt, and how to select the recipients. Policy packages may combine different measures towards a single objective or multiple objectives. A full menu of possible instruments that governments can apply to a given policy objective is suggested below.

Innovation policies represent a subset of the overall menu of policy instruments. Perhaps the most widely used options are grants to research projects and direct funding of public research institutions. However, the guide shows that the range of measures adopted is much broader and includes roadmaps, financial instruments, knowledge networks and regulation of large companies.

One observation about the collected policies relates to the increasing diversity of measures used by governments. The vast majority of entries were implemented for the first time within the past few years and many represent policy types that had not previously been used by these governments in the area of energy technology innovation. While “resource push” measures represent the bulk of the entries, there are interesting examples of novel approaches to how to select recipients and ensure they receive the capital support they need. This includes giving grants as prizes or organising public “requests for information” to explore a technology area before choosing how to structure a call for proposals. There are several policy types for which we are aware of only a few examples globally, of which all are from recent years. These include higher rates of R&D tax incentives for clean energy technologies, laboratory vouchers, equity funds, workforce training and inducement prizes. In some cases, it is still too early to judge how best to design these tools or the scale of their impact, which highlights the importance of evaluating impacts and widely sharing the findings.

It is notable that some of the interesting policy examples combine multiple policy types to strengthen their impact. For example, the European Innovation Council combines an equity fund for start-ups with grants for new business scale-up and advice on access to resources, depending on the needs of recipients. Canada’s Women in Cleantech Challenge combined an award to recognise innovation with a grant to an incubator, grants for R&D and new business scale-up, actions to connect innovators and potential customers, as well as access to public laboratories, facilities and technical expertise. The United States’ ARPA-E blends grants for R&D projects with advice on access to resources, expert platforms to inform government and grants for new business scale-up.

An additional finding of relevance to EMDEs is that the dataset includes measures that encourage and reward domestic innovation without requiring deep pockets. These include: participating in projects co-funded by more than one government; prizes (including inducement prizes); facilitating access to government-led laboratory and testing facilities; establishing networks of researchers and users; knowledge sharing; patent processing; and information campaigns. These examples can hopefully help interested governments to find out more about policy design for these tools, and help bilateral and multilateral funders to identify effective opportunities to provide support.