Green innovation of state-owned oil and gas enterprises in BRICS countries: a review of performance

By Amy Myers Jaffe, Research Professor and Managing Director, Climate Policy Lab, The Fletcher School at Tufts University, Zdenka Myslikova, Adjunct Assistant Professor of Innovation Policy, Qi Qi, Fang Zhang, Soyoung Oh & Jareer Elass

ABSTRACT

State-owned enterprises (SOEs) are a major force in energy markets in BRICS countries, including in national energy innovation systems. In this research, we investigate whether some of the largest oil and gas SOEs in BRICS countries – Brazil’s Petrobras, Russia’s Gazprom, India’s ONGC, China’s PetroChina, and South Africa’s PetroSA – are greening their innovation to foster low-carbon solutions in line with shifting government Nationally Determined Contributions (NDCs) on climate change. We compare the innovation priorities of oil and gas SOE firms in these countries, and specifically their efforts in clean energy from 2005 to 2020. Using an original data set, we set forth case studies on five SOEs and highlight differences in their approaches across a number of different features: the level of government ownership; firms’ revenues and financial health; national government policy; and global oil prices. We assess factors influencing performance in clean energy innovation and study each firm’s success in registering patents for specifically targeted energy technologies. Our findings show that all five SOEs demonstrate only modest efforts in greening of their energy innovation outcomes. We observe their heavy reliance on oil revenues to finance innovation and note how ongoing responsibility to avoid oil and gas shortages is stifling green innovation. We recommend policy avenues for governments to realign SOE practices with climate action and specifically NDCs.

Key policy insights

• Low-carbon transition of SOEs in BRICS countries is a necessary and important part of a government’s national strategy for achieving sustainable growth.
• However, the largest SOEs in BRICS countries are making only limited progress in aligning their innovation towards low-carbon goals.
• Fiscal incentives will help support green innovation of SOEs and their efforts to decouple R&D investment from net income, allowing such investment to continue even if net income falls.
• Governments of BRICS countries should step up climate-related disclosures among SOEs and collect and share data on their innovation and greening efforts.

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This article is republished from Climate Policy Journal.