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The process of innovation needs the involvement of many subjects. In order to achieve the transition to a low-carbon economic system, scientific and technological research play a crucial role. That is why the previous analysis allows us a connection to the need of financing for R&D and training. The low-carbon economy requires technological innovations that are guaranteed not only by ambitious policies but also by investments, which have a key function to accelerate the development of technologies, reduce costs and facilitate the implementation on a large scale. Moreover, the new technologies are those that will have to challenge the old economic system; a transformation of this magnitude cannot consider to be obtained without a constant search for development and innovation by both public and private entities. Indeed, financing for R&D offers a very important contribution that is not only of vital importance in this sector, but it also offers a chance for an action plan focused on long-term objectives. The development of low-carbon technologies is also clearly connected to the lack of infrastructure, a key problem in the energy sector. It can be argued that low-carbon technologies are the best response to this deficit, especially from a sustainability and equity perspective. In the world of energy infrastructures, there is a strong need to renew and innovate a ‘park’ plants in full maturity, adapting the offer to the ever increasing level of energy demand in the world, mainly coming from a life expectancy in sharp growth in the coming decades. The energy infrastructures and sectors essentially need massive amounts of liquidity moving towards them. Hence, investments can profoundly influence climate change. Throughout the process of transition to a low-carbon economy, major investments are needed: an Accenture research1 estimates a requirement of 2.9 trillion euros to finance development and roll-out in five key sectors in Europe in the coming years.

Various studies have highlighted the existence of positive correlations between the amount of resources that Venture Capital (VC) funds have to support innovation projects and the growth of the innovation technology rate in a given country (Helmann and Puri 2002; Kortum and Lerner 1998; Kaplan and Stromberg 2000). The VC is seen as an instrument particularly suited to the financing of the innovation, since it is an instrument that, due to its characteristics, has a high adaptability. . Indeed, the presence of Venture Capitals is known to establish a beneficial circle which produces and spreads the innovation. In particular, the Venture Capital funds can contribute to specific managerial or sector knowledge and can also provide for reputational capital, useful to attract managerial/scientific talents.

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Observing the Varieties of Capitalism framework (2001) and the structure of funding of LMEs and CMEs’ financing, the availability of investments and therefore access to credit shapes the transition of the two models of capitalism.

Historically, in LMEs financing needs are mainly met through the raising of capital on the stock market. Indeed, these economies are characterized by a strong presence of private non-institutional investors who invest personal capital (Venture Capital) or specialized financial intermediaries. While, CMEs’ credit system characterized by a much less developed stock market and the long-term financing needs mainly met by banks, drastically reduces the possibility of developing risky innovation, which instead have to rely more on firms’ internal capital.

Therefore, institutions such as Venture Capitals, which are more helpful for the advancement of low-carbon innovation, have their biggest diffusion in LMEs than in CMEs, making liberal market economies more predisposed to the financing of radical innovation which are risky by their nature.

However, in order to speed up the development of low-carbon economy financial and economic sectors, clear public policies on the target to be achieved, are needed. This leads us to the last section of our analysis based on the political-institutional context behind countries.


1 Accenture, Carbon Capital – Financing the Low Carbon economy, in collaboration with Barclays

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