UCL Institute for Innovation and Public Purpose


Green economy for sustainable growth

IIPP research on the green economy and sustainable development focuses on the relationship between sources of finance and the direction of innovation.

Green innovation solar panels
IIPP’s work on mission-oriented innovation policy begins with the fact that innovation has both a rate and a direction. The direction can be chosen passively by the market’s invisible hand, which is often sub-optimal. Or it can be chosen deliberately by policy-makers acting in bold ways to shape new futures, solve public problems and create new markets. It was direction-setting policies that sparked major breakthroughs around the Internet, biotechnology, nanotechnology and today is paving the way towards a potential green revolution.

In IIPP Director Mariana Mazzucato’s work with IIPP Honorary Professor Carlota Perez, Innovation as Growth Policy, the authors argue for green to become a new direction for the entire economy, affecting production, distribution and consumption--similar to the way that suburbanization provided a direction for mass production.

In her book, The Entrepreneurial State: debunking public vs. private sector myths, and recent work on the Green Entrepreneurial State, Mazzucato has looked at the roles of public and private actors engaged in the green tech sector, finding similar patterns to those in biotech and ICT: a network of decentralized public actors supplying the long-term patient finance required for high-risk innovation to get off the ground. From US Department of Energy agency ARPA-E to Germany’s development bank KfW, public finance has been and is leading the way.

Current work of IIPP on green innovation, led by Mazzucato and IIPP Research Fellow Gregor Semieniuk, is looking at the feedback between sources of finance and the direction of innovation in renewable energy.  There are many different types of finance (private banks, public banks, state owned companies, private equity, venture capital etc), with different levels of risk tolerance, and different types of portfolios.

Mazzucato and Semieniuk's work on "Who is financing what?" has shown how these types of finance create different directions in renewable energy, and the need to better align green policies with an understanding of the type of finance needed to invest in more or less risky areas so as to reach particular portfolios of renewable energy sources. In a companion piece they also raised new questions for public financing of innovation that highlight the central role it has in steering investment in the energy sector in the renewable direction.

In 2016, a high-level workshop organized by Mazzucato and Semieniuk at Bloomberg New Energy Finance brought key actors in the sector together with academics to consider emerging findings. The workshop papers and presentations can be found here. Following the adoption of the Paris Climate Agreement, Mazzucato, Semieniuk, and Prof. Jim Watson from SPRU published a policy brief outlining a strategy for speeding up the development of low carbon energy alternatives. In 2016, Mazzucato and Watson also submitted feedback on the UK industrial strategy, arguing that a ‘green mission’ could help steer both innovation policy and industrial strategy. The IIPP work on green innovation and green finance builds on these studies.

Current projects

Innovation-fuelled, Sustainable, Inclusive Growth (ISIGrowth)
IIPP is a partner in the 'Innovation-fuelled, Sustainable, Inclusive Growth' (ISIGrowth) project, funded through the European Commission’s Horizon 2020 programme. ISIGrowth will study the non-linear relationships between innovation, employment dynamics, inequality, environmental sustainability, structural change, globalization of production and growth. Read more.

Central banks and climate change
IIPP is working with the New Economics Foundation and the Swiss Council on Economic Policies on project examining how central banks can align monetary policy and financial regulation to better meet the challenge of climate change and the transition to a low carbon economy. Read more

Further reading

Mariana Mazzucato and Martha McPherson (2018), "IIPP Brief 04 The Green New Deal: A bold mission-oriented approach" (21/12/2018)

Watch Professor Mazzucato’s interview with The Banker, “China under Trump: the green innovation race” (23/1/2017)

Mariana Mazzucato and Gregor Semieniuk (2017), “Financing Renewable Energy: Who Is Financing What and Why It Matters”, Technological Forecasting and Social Change, in press.

Mariana Mazzucato and Gregor Semieniuk (2017), “Public Financing of Innovation: new questions”, Oxford Review of Economic Policy 33 (1), 24-48.

Mariana Mazzucato (2015), “Green Entrepreneurial State”, SPRU working papers, 2015-18.

Mariana Mazzucato and Jim Watson (2016), Evidence on Industrial Strategy to the UK Business, Energy and Industrial Strategy Committee.

Mariana Mazzucato, Gregor Semieniuk and Jim Watson (2015), “What will it take to get us a Green Revolution?”, Sussex Energy Group.

Mariana Mazzucato and Carlota Perez (2014), “Innovation as Growth Policy: The Challenge For Europe”, SPRU working papers, 2014-13.