Building Innovation-System Builders for Biofuels in Developing Countries: Lessons from Developed Nations

Abstract

This thesis examines the possibility of developing an innovation system builder for biofuels in a resource constrained country based on knowledge gained from a more developed national system. The study is inspired by a nagging transition problem. In many developing economies, biomass resources are available and policy interest has been expressed, however, biofuel activity has been fragmented and pilot oriented. Stable innovation trajectories, institutional co-ordination and market formation have therefore not been realised. The objective of the thesis is to identify key system functions; organisational capabilities; gov-ernance arrangements supporting biofuel system-building and to assess how these may be modified to Nepal. The National Innovation System perspective, the triple helix and the cli-mate relevant Innovation-system Builder perspective are informing the study. The concepts of absorptive capacity and institutional distance are used to make sense of the scope and limits of policy learning and functional transfer across contexts. A comparative qualitative case study approach is used. Finland and Nepal are used as the two national cases and VTT Technical Research Centre of Finland and Nepal Academy of Science and Technology as focal organisational cases in them. The empirical material is taken from policy documents, organisational records, sectoral and agency reports as well as peer-reviewed academic literature. The material has been analysed using deductive coding based on the conceptual framework created in the thesis. It is found that The Finnish biofuel system has been underpinned by coordinated policy direc-tion, oil common pilot and test infrastructure, applied research capacity, and credible stand-ards and verification capabilities. These functions have been strengthened by relatively stable institutions, and by ordinary interaction between government, research organisations and industry actors. In the Nepalese case, there is both technical knowledge and policy interest, but poor institutional linkages between research, testing, piloting and standardisation, and the formation of a market. Coordination has been patchy, testing and verification capacity has been limited and pilot activity has yet to be integrated into stable routines for learning. It is concluded that the lesson-drawing in biofuel transitions should be based on functional adaptation and not direct organisational copying. For Nepal the central task is not the replica-tion of the Finnish institutional model, but the piecemeal building up of a smaller set of sys-tem functions in accordance with local constraints. A phased roadmap is therefore proposed in which coordination capacity and a minimum standards pathway are established first fol-lowed by the progressive establishment of pilot nodes, learning loops and broader market support functions. The thesis makes a function-first interpretation of the biofuel system-building and provides practical implications for policy, research and industry in Nepal.