Drivers of innovation of biofuel ethanol. A comparative analysis between the U.S. and Brazil.

Abstract

The United States remains dependent on energy sources derived from fossil fuels. The transportation system in particular is 98% dependent on oil. This overreliance on oil has raised concerns over the long term impact of energy security and climate change. Biofuels have been considered a short term solution to address the increasing demand of fossil fuels for transports in the U.S. However, the innovation of biofuels faces barriers intrinsic to the innovation process of low carbon technologies. Alternative fuels derived from biomass struggle to gain market participation because the institutional environment does not facilitate the adoption of routines and practices that reward the use of alternative fuels over gasoline. Given the potential benefits of biofuels to replace the growing demand of gasoline, the study of the dynamics of innovation of biofuels deserves particular attention. The innovation system school argues that the process of innovation is complex, long, and does not happen in isolation. Some studies of innovation of low carbon technologies use the functions of innovation systems, that is, they evaluate the activities related to innovation performed around a technology. The functions of innovation literature argues that a performing innovation system requires fulfillment of a number of functions or activities over time: 1) Entrepreneurial activity to displace the incumbent technology; 2) Knowledge creation and diffusion to stimulate learning by experimentation and learning by interaction; 3) Guidance of research to guide strategic decision making and stimulate positive expectations around the new technology; 4) Market formation to create a niche market for the new technology; 5) Resource mobilization to stimulate investments in material and human resources; 6) Legitimation of the new technology to help break the inertia of the new technology within the institutional and socio-economic environment; and 7) Building of capabilities in the downstream market to stimulate the alignment of goals between users and producers of the emerging technology.