The years. Various studies have highlighted the

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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