The new federal government's research and innovation policy must become more effective

Responsibilities for research and innovation policy should be bundled in a Federal Ministry for Research, Innovation and Technology (BMFIT), according to the EFI. Currently, they are partly in the Federal Ministry of Education and Research (BMBF) and partly in the Federal Ministry of Economics and Climate Protection (BMWK). This is not appropriate, as research and development, knowledge and technology transfer as well as innovation activities in start-ups and established companies are not phases that follow on from one another in a linear fashion, but are linked by a variety of feedback processes. The EFI is therefore in favour of providing political support for research and innovation processes with a coordinated mix of instruments from a single source.

Creating a digitalisation ministry

The EFI also reiterates its recommendation from 2021 to create a separate Ministry of Digitalisation. "Digitalisation in Germany is still progressing too slowly," states Professor Irene Bertschek from ZEW Mannheim and deputy chair of the EFI, adding: "We need a digital ministry that outlines the broad lines of the digital transformation." The central tasks of the digital ministry would be to develop specific strategies, underpin them with suitable packages of measures and implement them consistently and in a coordinated manner on the basis of roadmaps and milestone plans.

Increasing the accuracy and efficiency of policy measures

The great importance of research and innovation policy in the coming legislative period should be reflected in the federal budget. However, it is not always necessary to move large budgets for this purpose. Rather, the focus should be on measures to improve the framework conditions for research and innovation. The funding spectrum should also be focussed. "If the next federal government wants to make a difference in research and innovation policy, it will have no choice but to set priorities," says Cantner. To do this, it must assess the effects and costs of measures. "Questions of the letter of acceptance|binding promise and the efficiency of political measures still attract too little interest in research and innovation policy," says Cantner.

Removing barriers to the utilisation of innovations

It is not only the task of policymakers to incentivise the development of new technologies and business models, but also to remove barriers to the use of innovations. For example, inadequate infrastructural requirements - such as a lack of power lines or insufficient charging infrastructure for electric vehicles - can limit the use of climate-friendly technologies. Regulatory framework conditions also often have a significant influence on the extent to which innovative technologies and business models are utilised. "It is important to better coordinate the policy areas within the federal government at a strategic level so that innovations are not slowed down," says Bertschek.

Building a digital and agile public administration

Public administration tends to act as a stumbling block rather than a catalyst for innovation. In order to give Germany the necessary tailwind as a centre of research and innovation, there is an urgent need to consistently cut back on the increasingly dense regulatory jungle. In addition, the digitalisation of public administration must finally be advanced. "Germany needs an efficient and agile public administration that keeps its processes and tenders technologically up to date at all times," says Cantner.

The EFI expects digitalisation and decarbonisation to have a significant impact on the labour market. In 2022, more than one in three employees worked in an occupation that could be replaced by computers or computerised machines. One in six had a job that is classified as environmentally harmful and is therefore also at risk from structural change. Particularly critical: many jobs are simultaneously affected by digitalisation and decarbonisation, especially in parts of the manufacturing sector.

Enabling innovation and labour mobility

"Politicians should actively support the structural change associated with digitalisation and decarbonisation," advises EFI Chair Prof. Uwe Cantner from the University of Jena. "Instead of preserving existing structures, policymakers should enable the development and implementation of innovative digital and climate-friendly innovations and thus drive structural change." More must be done to promote digitalisation and, above all, the digital infrastructure and opportunities for data use must be expanded. As a key policy instrument to support decarbonisation, the EFI calls for the efficiency of climate protection to be increased through an effective and uniform carbon price across all sectors. In addition, the requirements for employee mobility should be improved in order to cushion the effects of transformative structural change on the labour market. "If employees are mobile across industries and sectors, they are more likely to switch to jobs that are less easily automated or less harmful to the environment," says EFI member Professor Guido Bünstorf from the University of Kassel. The possible move to an employer from another sector should also be taken into account when promoting continuing education.

Precise knowledge of water abstraction rights and water withdrawals as well as the existence of water prices based on water scarcity are important requirements for developing and implementing technological innovations for water management in an economically sensible way. However, the data and information required for rational water management are still largely lacking. The EFI therefore believes that data collection in accordance with the national water strategy should be implemented swiftly and in digital form in a comprehensive and transparent water register. At the same time, it recommends that water abstraction charges be adjusted according to a standardised national system so that they take into account the scarcity of water in times of prolonged drought and the associated external costs of water abstraction. This creates incentives to develop innovations to overcome these shortages. Finally, dynamic pricing of water withdrawals in selected, water-intensive industries should be trialled in a limited environment in order to weigh up the costs of the additional data collection required for this against the efficiency gains in water use.

Those who pollute should pay or introduce innovative solutions

The incentive function of the wastewater levy to reduce pollutants and introduce the necessary innovative solutions should be improved by basing the amount of the wastewater levy on the actual pollutant emissions and not on the approved emissions. Prof. Uwe Cantner also demands: "Reduction options for the wastewater levy should not already apply to the prescribed 'state of the art', but should only reward those who exceed it." However, this presupposes that the prescribed 'state of the art' is reviewed and adapted frequently enough. The extended producer responsibility of the industry is an important incentive instrument for the use of new technologies - for disposal as well as for the avoidance of micropollutants in wastewater - and should therefore be quickly transposed into national law and implemented.

Introduce structural adjustments and yardstick competition

The enormous fragmentation of the German water industry can hinder the introduction of innovative solutions. On the other hand, the larger a supply area, the more incentives and opportunities there are for the development and introduction of innovations. "Concepts and measures should be developed that make it more attractive for smaller supply units to merge into larger ones," demands Prof. Friederike Welter. Such mergers can help to better coordinate and implement innovative structural solutions more quickly in the event of problems such as floods or droughts that occur across several supply areas. In addition, incentives for innovation and adoption can be created via certain regulatory schemes. The basic principle of this type of regulation is to reward above-average performance by companies in the water industry, such as in the yardstick competitionExternal link.

The race for the top position in quantum technologies is currently dominated by research institutions and companies from the USA, the EU and China. China's rapid race to catch up over the past two decades is particularly remarkable: While at the beginning of the 2000s, around 85 per cent of the world's scientific publications on quantum computing were produced with US or European involvement, China has now overtaken the two frontrunners. "As a single player, Germany has a difficult time competing internationally in quantum computing," says Carolin Häussler, Professor at the University of Passau and member of the EFI. "Close cooperation and joining forces within the EU is therefore essential, for example to enable 'Quantum Computing Made in Europe' in the future. This requires the creation of a strong European innovation ecosystem in which research institutions, companies and investors network across borders and coordinate their activities," says Häussler.

Increasing the focus on transfer

US technology giants such as IBM, Microsoft and Google are currently working flat out to transfer new findings from quantum research into practical applications. Of the almost 1,800 patent applications worldwide in the field of quantum computing over the past two decades, around half come from the USA and only a good 70 come from Germany. This is often a weakness in the German research and innovation system. "Excellent research in Germany alone is not enough to secure a leading position in global competition in the long term," warns Irene Bertschek. "Germany has too often developed ground-breaking ideas that were later brought to market elsewhere," adds Uwe Cantner. In order to avoid this happening with quantum technologies, the transfer of research results into marketable applications must become more of a focus. Specifically, the EFI is calling for support for founders from research, improved financing conditions for start-ups and government anchor customer contracts for key large-scale projects.

Quantum research needs reliable policies

Quantum research is highly complex and expensive. It requires clever minds, complex and highly specialised infrastructure and long-term commitment - because it often takes years to predict which specific processes and technologies will ultimately prevail. Political backing and planning security are therefore needed to successfully drive forward pioneering quantum projects. "The EFI recommends that the new German government create a coherent framework for the further development of quantum technologies with a national quantum strategy," says Häussler. This includes long-term and flexibly adaptable technology roadmaps, the targeted expansion of regional innovation clusters with clear research focus|main research areas, easy access to state-of-the-art research infrastructure and the establishment of a quantum benchmarking platform. In addition, the targeted promotion of expertise in the subject area|field of quantum technologies and the improvement of the attractiveness of the location for top international researchers are important in order to remain internationally competitive.

It is uncertain whether revolutionary new technologies such as the universal quantum computer will be available in five, ten or fifteen years' time. What is clear, however, is that quantum technologies harbour great potential for innovation. They offer Germany and the EU the opportunity to take a leading position in a key technology of the future. The new German government should not miss this opportunity, emphasises the EFI.

"Politicians should always be aware that formulating long-term industrial policy strategies on the basis of their inevitably limited knowledge harbours considerable risks," points out Professor Christoph M. Schmidt from the RWI - Leibniz Institute for Economic Research. "Conversely, however, refraining from a strategic commitment also entails the risk of missing out on important technological developments due to inadequate support and inappropriate framework conditions."

The concrete design of industrial policy measures is therefore crucial. The decision when a measure should be started and according to which criteria it should be ended cannot be answered unambiguously from a scientific point of view. In particular, letting go requires political will and courage. "Political practice has shown time and again that in many cases, a phase-out of funding is not handed out or is delayed," Schmidt points out. "Decisions on industrial policy measures therefore run the risk of being based on political expediency - and not on objective criteria."

Always take industrial policy measures with a sense of proportion

The EFI therefore advises caution and recommends using industrial policy measures with a sense of proportion. Above all, politicians should resist the temptation to use industrial policy measures to compensate for shortcomings in other policy areas. "Industrial policy cannot replace innovation-friendly regulatory and institutional framework conditions, it can only complement them," emphasises Jena economist Uwe Cantner. "It is important not to conceptualise industrial policy measures as permanent support for companies. Instead, they should only ever have a knock-on effect and then be withdrawn," continues the EFI chair.

Cantner and Schmidt also agree that good industrial policy must always be geared towards promoting entrepreneurial activity. "Industrial policy should fundamentally enable the creation and growth of new companies and largely hold back on supporting established companies," emphasises Schmidt.

Avoid subsidy races

One of the EFI's key recommendations to the German government is to avoid being drawn into subsidy races when it comes to attracting innovative companies. Instead, it is important to make locations in Germany highly attractive by expanding innovation-related infrastructures, creating good conditions for entrepreneurial activity and taking measures to promote research activities in companies.

In this context, Cantner and Schmidt emphasise the need to balance openness and sovereignty. "Technological sovereignty must not be confused with self-sufficiency. Especially in times of increasing economic isolation, it is important for us to remember that the international division of labour brings advantages in terms of specialisation and thus creates prosperity. Germany and Europe should therefore continue to campaign for open and fair global trade," recommends Prof. Cantner.