“In many sectors profits are growing strongly and companies can afford to spend more on R&D,” says Norman Price, an industrialist at the UK Department of Trade and Industry, which publishes the annual scoreboard. “Where profits are weak, such as the automotive industry, the competition is so fierce that companies dare not cut their investment.”
But the scoreboard – the world’s most comprehensive R&D ranking – provides little reassurance for European policymakers who are concerned about Europe’s poor long-term R&D performance. European companies spent 5.6 per cent more in 2005-6 than the average of the previous four years. The comparable increase for US companies was 15.4 per cent.
The most spectacular growth is in Asia. The 44 Taiwanese companies in the scoreboard increased their R&D investment by 30.5 per cent last year, while the 17 South Korean companies posted 11.9 per cent R&D investment growth.
While Taiwanese R&D is spread among a number of electronics and computer companies, the Korean scoreboard is dominated by three fast-growing giants: Samsung and LG in electronics, and Hyundai in cars.
Samsung’s R&D spending has grown to $5.44bn (€4.3bn, £2.9bn) from $1.88bn over the past four years. “The way Samsung has poured resources into R&D has had an impact elsewhere in the electronics industry, with other companies increasing spending so as not to be left behind,” says Mr Price.
But R&D growth in Japan remains modest – a continuing legacy of the country’s long period of economic stagnation. Japanese companies raised spending by 4 per cent in 2005-6 and their investment was only 5.9 per cent above the average of the previous four years.
The most striking sectoral change in the scoreboard since its inauguration in 1992 has been the rise in pharmaceuticals, which provided no companies among the top 20 R&D spenders 14 years ago and has six entries now. In contrast, the telecoms and chemicals industries, each of which had two top-20 companies in 1992, have none now.
The automotive sector has held the top spot from the start: General Motors for most of the 1990s and Ford or DaimlerChrysler since then. A pharmaceutical company, Pfizer, was widely predicted to take the lead in 2005-6 but this has not happened. Ford increased its R&D spending by 8 per cent to $8bn – determined to innovate in the face of stagnant sales and falling profits – while Pfizer was one of the very few pharma companies not to spend more on R&D last year.
Aerospace and defence showed the fastest R&D growth of any sector in 2005-6 (13.5 per cent) as companies responded to governments’ rising defence budgets. Next was oil and gas (11.8 per cent) in response to rising energy prices. Software (8.9 per cent) and pharmaceuticals (8.3 per cent) also showed above average growth.
At the other extreme, R&D spending in the chemicals sector fell 0.9 per cent in 2005-6 and is 3.3 per cent below the average of the previous four years. Well-known chemicals companies whose R&D appears to be on a downward trend include Bayer, BASF, Akzo Nobel, ICI, Clariant and Rhodia.
Looking at the broader trends in corporate R&D, Georges Haour, professor of technology and innovation management at IMD business school in Geneva, says the two most important are “open innovation” and the move to Asia. Open innovation – a term coined by Henry Chesbrough of the University of California, Berkeley – means the end of the traditional R&D centre where scientists worked on confidential corporate projects in relative isolation from the outside world. Instead, companies are working with growing networks of external partners to commercialise their internal innovations and find other people’s inventions to exploit.
Linked to open innovation is the move by western companies to set up R&D centres in Asia, particularly China and India, in search of new sources of innovation. “They want to take advantage of all the talented people in Asia and the dynamic markets there,” says Prof Haour, with cost saving a secondary consideration.
The scoreboard shows that indigenous Chinese and Indian companies are still funding relatively little R&D of their own. The only Indian companies that feature are Ranbaxy and Dr Reddys in pharmaceuticals and Tata Motors. Analysis showed that several well-known technology companies in India, including Wipro, Infosys and Biocon, still spent less on R&D than the $33m minimum required to make the global top 1,250.
The FT reports that the delay of at least two years in the delivery of the first Airbus A380 superjumbos would cost Emirates “hundreds of millions of dollars in lost revenues,” Tim Clark, president of the Dubai-based airline said on Friday. “It is a big dent.”
Emirates, the biggest single customer for the A380 would have had 18 superjumbos flying, under the terms of the original delivery schedule, by the time it is now supposed to receive its first in August 2008.
Mr Clark said that Emirates believed that there could be yet more delays in A380 deliveries, and the airline had therefore decided to send its own team of engineers into the Airbus plants in Toulouse and in Hamburg to conduct an audit of the assembly process.
“The A380 was critical to what we were planning,” he said. Emirates was planning “a huge lift in the network. We have had to put that on hold.“
It was trying to lease seven more Boeing 777-ERs to fill some of the gap in capacity from late 2008 and early 2009.
Mr Clark said that Emirates had not yet engaged with Airbus in negotiations on compensation or the details of the new delivery schedule, and talks would not begin until it had the report from its own engineers on the extent of the problems. It also had an issue with Airbus, that the aircraft was still around 5 tonnes over weight, which would affect performance guarantees.
“This is the third delay and we were not convinced after the first two that that would be the end of it. Airbus has had four chief executives in 18 months. We prefer to wait and let Airbus get its house in order, to see if they can deliver the timeline they have given us,” he said.
Emirates accounts for 45 of the 159 firm orders that Airbus has taken to date for the A380, and as one of the world’s biggest buyers of long-haul aircraft it has more leverage over the European aircraft maker than most carriers.
The group of eight Emirates engineers are due to visit the Airbus plants for a week in mid-November, and Mr Clark said that the visit could be extended if necessary.
“Airbus is being very co-operative at a time when they are turning the company inside out,” he said.
The airline has already had difficult experiences as an early launch customer for a previous Airbus aircraft, the ultra-long range A340-500, where the wings were too heavy on the early versions.
In a very unusual move Mr Clark said that the airline had also cancelled previously placed firm orders for 12 of the large capacity, long range A340-600 (high gross weight) aircraft.
Maurice Flanagan, Emirates deputy chairman, said that the A340-600 HGW could not meet the performance needs of the airline for services from Dubai to Los Angeles, and Airbus had already agreed to refund $160m of pre-delivery payments in a deal that was “ring-fenced” from the negotiations still to be held on the A380.
Mr Clark said that the extent of the delays meant that it was open to Emirates to cancel orders for the A380, but the airline still very much wanted the aircraft, which were still an integral part of its expansion plans.
“If Airbus delivers on its performance guarantees, on fuel burn and seat mile costs, this will still be a huge, potent profit generator for us,” he said.
The audit team would be assessing, however, whether Airbus could deliver on its latest schedule.
“It would be foolish for us not to expect something further, it would be foolish for us to believe we can plan step by step our network growth based on what we have heard today,” he said.
The New York Times reports that cheers fit for a revival meeting swept a hotel ballroom as 1,800 entrepreneurs and experts watched a PowerPoint presentation of the most promising technologies for limiting global warming: solar power, wind, ethanol and other farmed fuels, energy-efficient buildings and fuel-sipping cars.
“Houston,” Charles F. Kutscher, chairman of the Solar 2006 conference, concluded in a twist on the line from Apollo 13, “we have a solution.”
Hold the applause. For all the enthusiasm about alternatives to coal and oil, the challenge of limiting emissions of carbon dioxide, which traps heat, will be immense in a world likely to add 2.5 billion people by midcentury, a host of other experts say. Moreover, most of those people will live in countries like China and India, which are just beginning to enjoy an electrified, air-conditioned mobile society.
The challenge is all the more daunting because research into energy technologies by both government and industry has not been rising, but rather falling.
In the United States, annual federal spending for all energy research and development — not just the research aimed at climate-friendly technologies — is less than half what it was a quarter-century ago. It has sunk to $3 billion a year in the current budget from an inflation-adjusted peak of $7.7 billion in 1979, according to several different studies.
Britain, for one, has sounded a loud alarm about the need for prompt action on the climate issue, including more research. [A report commissioned by the British government and scheduled to be released today calls for spending to be doubled worldwide on research into low-carbon technologies; without it, the report says, coastal flooding and a shortage of drinking water could turn 200 million people into refugees.]
President Bush has sought an increase to $4.2 billion for 2007, but that would still be a small fraction of what most climate and energy experts say would be needed.
Federal spending on medical research, by contrast, has nearly quadrupled, to $28 billion annually, since 1979. Military research has increased 260 percent, and at more than $75 billion a year is 20 times the amount spent on energy research.
Internationally, government energy research trends are little different from those in the United States. Japan is the only economic power that increased research spending in recent decades, with growth focused on efficiency and solar technology, according to the International Energy Agency.
In the private sector, studies show that energy companies have a long tradition of eschewing long-term technology quests because of the lack of short-term payoffs.
Still, more than four dozen scientists, economists, engineers and entrepreneurs interviewed by The New York Times said that unless the search for abundant non-polluting energy sources and systems became far more aggressive, the world would probably face dangerous warming and international strife as nations with growing energy demands compete for increasingly inadequate resources.
Most of these experts also say existing energy alternatives and improvements in energy efficiency are simply not enough.
“We cannot come close to stabilizing temperatures” unless humans, by the end of the century, stop adding more CO2 to the atmosphere than it can absorb, said W. David Montgomery of Charles River Associates, a consulting group, “and that will be an economic impossibility without a major R.& D. investment.”
A sustained push is needed not just to refine, test and deploy known low-carbon technologies, but also to find “energy technologies that don’t have a name yet,” said James A. Edmonds, a chief scientist at the Joint Global Change Research Institute of the University of Maryland and the Energy Department.
At the same time, many energy experts and economists agree on another daunting point: To make any resulting “alternative” energy options the new norm will require attaching a significant cost to the carbon emissions from coal, oil and gas.
“A price incentive stirs people to look at a thousand different things,’ ” said Henry D. Jacoby, a climate and energy expert at the Massachusetts Institute of Technology.
For now, a carbon cap or tax is opposed by President Bush, most American lawmakers and many industries. And there are scant signs of consensus on a long-term successor to the Kyoto Protocol, the first treaty obligating participating industrial countries to cut warming emissions. (The United States has not ratified the pact.)
The next round of talks on Kyoto and an underlying voluntary treaty will take place next month in Nairobi, Kenya.
Environmental campaigners, focused on promptly establishing binding limits on emissions of heat-trapping gases, have tended to play down the need for big investments seeking energy breakthroughs. At the end of “An Inconvenient Truth,” former Vice President Al Gore’s documentary film on climate change, he concluded: “We already know everything we need to know to effectively address this problem.”
While applauding Mr. Gore’s enthusiasm, many energy experts said this stance was counterproductive because there was no way, given global growth in energy demand, that existing technology could avert a doubling or more of atmospheric concentrations of carbon dioxide in this century.
Mr. Gore has since adjusted his stance, saying existing technology is sufficient to start on the path to a stable climate.
Other researchers say the chances of success are so low, unless something breaks the societal impasse, that any technology quest should also include work on increasing the resilience to climate extremes — through actions like developing more drought-tolerant crops — as well as last-ditch climate fixes, like testing ways to block some incoming sunlight to counter warming.
Without big reductions in emissions, the midrange projections of most scenarios envision a rise of 4 degrees or so in this century, four times the warming in the last 100 years. That could, among other effects, produce a disruptive mix of intensified flooding and withering droughts in the world’s prime agricultural regions.
Sir Nicholas Stern, the chief of Britain’s economic service and author of the new government report on climate options, has summarized the cumulative nature of the threat succinctly: “The sting is in the tail.”
The Carbon Dioxide Problem
Many factors intersect to make the prompt addressing of global warming very difficult, experts say.
A central hurdle is that carbon dioxide accumulates in the atmosphere like unpaid credit card debt as long as emissions exceed the rate at which the gas is naturally removed from the atmosphere by the oceans and plants. But the technologies producing the emissions evolve slowly.
A typical new coal-fired power plant, one of the largest sources of emissions, is expected to operate for many decades. About one large coal-burning plant is being commissioned a week, mostly in China.
“We’ve got a $12 trillion capital investment in the world energy economy and a turnover time of 30 to 40 years,” said John P. Holdren, a physicist and climate expert at Harvard University and president of the American Association for the Advancement of Science. “If you want it to look different in 30 or 40 years, you’d better start now.”
Many experts say this means the only way to affordably speed the transition to low-emissions energy is with advances in technologies at all stages of maturity.
Examples include:
¶ Substantially improving the efficiency and cost of solar panels;
¶ Conducting full-scale tests of systems for capturing carbon dioxide from power plants and pumping it underground;
¶ Seeking efficient ways to generate fuels from crops;
¶ Finding new ways to store vast amounts of energy harvested intermittently from the wind and sun.
Carbon dioxide levels will stabilize only if each generation persists in developing and deploying alternatives to unfettered fossil-fuel emissions, said Robert H. Socolow, a physicist and co-director of a Princeton “carbon mitigation initiative” created with $20 million from BP and Ford Motor.
The most immediate gains could come simply by increasing energy efficiency. If efficiency gains in transportation, buildings, power transmission and other areas were doubled from the longstanding rate of 1 percent per year to 2 percent, Dr. Holdren wrote in the M.I.T. journal Innovations earlier this year, that could hold the amount of new nonpolluting energy required by 2100 to the amount derived from fossil fuels in 2000 —a huge challenge, but not impossible.
Another area requiring immediate intensified work, Dr. Holdren and other experts say, is large-scale demonstration of systems for capturing carbon dioxide from coal burning before too many old-style plants are built.
All of the components for capturing carbon dioxide and disposing of it underground are already in use, particularly in oil fields, where pressurized carbon dioxide is used to drive the last dregs of oil from the ground.
In this area, said David Keith, an energy expert at the University of Calgary, “We just need to build the damn things on a billion-dollar scale.”
In the United States, the biggest effort along these lines is the 285-megawatt Futuregen power plant planned by the Energy Department, along with private and international partners, that was announced in 2003 by President Bush and is scheduled to be built in either Illinois or Texas by 2012. James L. Connaughton, the chairman of the White House Council on Environmental Quality, said the Bush administration was making this a high priority.
“We share the view that a significantly more aggressive agenda on carbon capture and storage and zero-pollution coal is necessary,” he said, adding that the administration has raised annual spending on storage options “from essentially zero to over $70 million.”
Europe is pursuing a suite of such plants, including one in China, but also well behind the necessary pace, several experts said.
Even within the Energy Department, some experts are voicing frustration over the pace of such programs. “What I don’t like about Futuregen,” said Dr. Kutscher, an engineer at the National Renewable Energy Laboratory in Golden, Colo., “is the word ‘future’ in there.”
Beyond a Holding Action
No matter what happens in the next decade or so, many experts say, the second and probably hardest phase of stabilizing the level of carbon dioxide will fall to the generation of engineers and entrepreneurs now in diapers, and the one after that. And those innovators will not have much to build on without greatly increased investment now in basic research.
There is plenty of ferment. Current research ranges from work on algae strains that can turn sunlight into hydrogen fuel to the inkjet-style printing of photovoltaic cells — a technique that could greatly cut solar-energy costs if it worked on a large scale. One company is promoting high-flying kite-like windmills to harvest the boundless energy in the jet stream.
But all of the small-scale experimentation will never move into the energy marketplace without a much bigger push not only for research and development, but for the lesser-known steps known as demonstration and deployment.
In this arena, there is a vital role for government spending, many experts agree, particularly on “enabling technologies” — innovations that would never be pursued by private industry because they mainly amount to a public good, not a potential source of profit, said Christopher Green, an economist at McGill University.
Examples include refining ways to securely handle radioactive waste from nuclear reactors; testing repositories for carbon dioxide captured at power plants; and, perhaps more important, improving the electricity grid so that it can manage large flows from intermittent sources like windmills and solar panels.
“Without storage possibilities on a large scale,” Mr. Green said, “solar and wind will be relegated to niche status.”
While private investors and entrepreneurs are jumping into alternative energy projects, they cannot be counted on to solve such problems, economists say, because even the most aggressive venture capitalists want a big payback within five years.
Many scientists say the only real long-term prospect for significantly substituting for fossil fuels is a breakthrough in harvesting solar power. This has been understood since the days of Thomas Edison. In a conversation with Henry Ford and the tire tycoon Harvey Firestone in 1931, shortly before Edison died, he said: “I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.”
California, following models set in Japan and Germany, is trying to help solar energy with various incentives.
But such initiatives mainly pull existing technologies into the market, experts say, and do little to propel private research toward the next big advances. Even Vinod Khosla, a leading environment-oriented venture capitalist who invests heavily in ethanol and other alternative energy projects, said in an interview that he was not ready to back solar power because it did not appear able to show a profit without subsidies.
The Role of Leadership
At the federal level, the Bush administration was criticized by Republican and Democratic lawmakers at several recent hearings on climate change.
Mr. Connaughton, the lead White House official on the environment, said most critics are not aware of how much has been done.
“This administration has developed the most sophisticated and carefully considered strategic plan for advancing the technologies that are a necessary part of the climate solution,” he said. He added that the administration must weigh tradeoffs with other pressing demands like health care.
Since 2001, when Mr. Bush abandoned a campaign pledge to limit carbon dioxide from power plants, he has said that too little is known about specific dangers of global warming to justify hard targets or mandatory curbs for the gas.
He has also asserted that any solution will lie less in regulation than in innovation.
“My answer to the energy question also is an answer to how you deal with the greenhouse-gas issue, and that is new technologies will change how we live,” he said in May.
But critics, including some Republican lawmakers, now say that mounting evidence for risks — including findings that administration officials have tried to suppress of late — justifies prompt, more aggressive action to pay for or spur research and speed the movement of climate-friendly energy options into the marketplace.
Martin I. Hoffert, an emeritus professor of physics at New York University, said that what was needed was for a leader to articulate the energy challenge as President John F. Kennedy made his case for the mission to the moon. President Kennedy said they were imperative, “not because they are easy, but because they are hard.”
In a report on competitiveness and research released last year, the National Academies, the country’s top science advisory body, urged the government to substantially expand spending on long-term basic research, particularly on energy.
The report, titled “Rising Above the Gathering Storm,” recommended that the Energy Department create a research-financing body similar to the 48-year-old Defense Advanced Research Projects Agency, or Darpa, to make grants and attack a variety of energy questions, including climate change.
Darpa, created after the Soviet Union launched Sputnik in 1957, was set up outside the sway of Congress to provide advances in areas like weapons, surveillance and defensive systems. But it also produced technologies like the Internet and the global positioning system for navigation.
Mr. Connaughton said it would be premature to conclude that a new agency was needed for energy innovation.
But many experts, from oil-industry officials to ecologists, agree that the status quo for energy research will not suffice.
The benefits of an intensified energy quest would go far beyond cutting the risks of dangerous climate change, said Roger H. Bezdek, an economist at Management Information Systems, a consulting group.
The world economy, he said, is facing two simultaneous energy challenges beyond global warming: the end of relatively cheap and easy oil, and the explosive demand for fuel in developing countries.
Advanced research should be diversified like an investment portfolio, he said. “The big payoff comes from a small number of very large winners,” he said. “Unfortunately, we cannot pick the winners in advance.”
Ultimately, a big increase in government spending on basic energy research will happen only if scientists can persuade the public and politicians that it is an essential hedge against potential calamity.
That may be the biggest hurdle of all, given the unfamiliar nature of the slowly building problem — the antithesis of epochal events like Pearl Harbor, Sputnik and 9/11 that triggered sweeping enterprises.
“We’re good at rushing in with white hats,” said Bobi Garrett, associate director of planning and technology management at the National Renewable Energy Laboratory. “This is not a problem where you can do that.”
