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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 evolution 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 infrastructures, a key problem in this
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 enhance a
‘park’ plants in full maturity, adjusting the offer to the regular increasing
level of energy demand in the world, mainly originating 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 improvement 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
viewed 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, 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
consisting of 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 rather 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 and
not in CMEs, making liberal market economies more inclined 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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