Eco-innovation in Lithuania - European Commission · 2016-08-26 · 23% share of renewable energy...

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1 Eco-innovation in Lithuania EIO Country profiles 2010 April 2011

Transcript of Eco-innovation in Lithuania - European Commission · 2016-08-26 · 23% share of renewable energy...

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Eco-innovation in

Lithuania

EIO Country profiles 2010

April 2011

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Eco-Innovation Observatory

The Eco-Innovation Observatory functions as a platform for the structured collection and

analysis of an extensive range of eco-innovation information, gathered from across the European

Union and key economic regions around the globe, providing a much-needed integrated

information source on eco-innovation for companies and innovation service providers, as well as

providing a solid decision-making basis for policy development.

The Observatory approaches eco-innovation as a persuasive phenomenon present in all

economic sectors and therefore relevant for all types of innovation, defining eco-innovation as:

“Eco-innovation is any innovation that reduces the use of natural resources and decreases the

release of harmful substances across the whole life-cycle”.

To find out more, visit www.eco-innovation.eu

Any views or opinions expressed in this report are solely those of the authors and do not necessarily reflect

the position of the European Commission.

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Eco-Innovation Observatory

EIO country brief 2010: Lithuania

Authors: Daiva Semeniene & Romas Lenkaiti

Coordinator of the work package: Technopolis Group Belgium

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Part 1. Introduction: innovation and environment in Lithuania

Lithuania's economy is a small open economy, which was one of the world‟s fastest growing economies in 1998–2008, driven by exports and domestic demand. The forecast of the economy growth for 2010 is around 2%. Economic confidence of all business activities has rebounded from a record low at the beginning of the year 2009 and suggests further improvements in the economy. The main economy sectors in Lithuania are Information and Communication Technology, Biotechnology, Metal Processing, Oil Refining, Machinery and Electric Equipment, Plastics, Furniture, Wood Processing & Paper Industry, Textile & Clothing, Food, Real Estate & Construction, Transport & Logistics and Lasers. The wholesale and retail trade, transport, and communications sectors make up 33% and manufacturing constitutes 19.8% of GDP (SD, 2010). High value added production is increasing in Lithuania. In the service sector, accounting for the largest share of GDP (in 2009 – 70%, (SD, 2010)), one of the most important sub-sectors is information and communication technologies. The Lithuanian IT market is growing faster than the European average. Several companies produce pharmaceutical substances, components for molecular diagnostics and other sophisticated biotech products. Lithuania has over 50% of the world‟s market for high-energy picosecond lasers, and is a leader in global production of ultra-fast parametric light generators (LEPA, 2010). Lithuanian laser companies were among the first ones in the world to transfer fundamental research into manufacture. Recent global broadband Internet studies show that Lithuania has the fastest Internet in the world, as well as is one of the leading countries in terms of Internet service quality. An excellent telecommunication infrastructure and a well-educated, multilingual workforce enable Lithuania to provide high quality business services worldwide. Business services vary from financial to accounting and reporting services. The share of value added in this sector amounts to 13% (LEPA, 2010). Apart from services, manufacturing constitutes the biggest part of gross value added in Lithuania. The food processing sector constitutes 11% of total exports. Another important manufacturing activity is chemical products. About 80% of production is exported so chemical products constitute 12.5% of total exports (LEPA, 2010). Modern furniture production activity has grown in double-digit numbers over the last three years. The automotive and engineering sector employs about 3% of the working population and receives 5.6% of FDI. The utilities sector accounts for more than 3% of gross value added in Lithuania. The energy sector is one of the most important sectors in the country and has the most significant influence on the development of other economic sectors and the impact on the environment. The supply of heating energy was modernized in the last decade. Technological loss in the heat energy system decreased significantly from 26.2% in the year 2000 to 16.7% in 2008. The amount of air pollution was reduced by one third. The share of renewable energy resources in the total fuel balance for heat production increased to almost 20%. The National Energy (Independence) Strategy targets a 23% share of renewable energy resources in the national final energy consumption by 2020. The focus will be on biomass use in co-generation power plants, as well as on wind and hydro-power development. Despite a decreased share in GDP, the agricultural sector is still important for Lithuania as it employs almost 8% of the work force and supplies materials for the food processing sector. The above description of the economy structure of Lithuania shows that the direction which Lithuania is developing is related to the low or non-natural resources usage sectors.

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As the traditional industrial sectors, such as food, furniture production, oil refining, plastics, textile and similar are dominating Lithuania„s economy, the impact of new technology-based firms on the economy and employment in high-tech services and industries still remains at a comparatively low level. It is not yet the knowledge-intensive sectors that drive the economy today (IPPR, 2009). Manufacturing industries, attributable to advanced and moderately advanced technologies, only constitute one-fifth of sales of the Lithuanian extraction and manufacturing industries (LIS, 2009). Environmental quality in Lithuania remains good. Major environmental priorities are related to the water quality and solid waste management. Surface and ground water resources are abundant in Lithuania. Since 1998, average annual levels of pollutants in water bodies have not exceeded the maximum permitted levels, but diffused pollution from agricultural activities has made the greatest part of overall water pollution. In accordance with the Water Framework Directive (2000/60/EC), the ecological status of 40% of rivers and 68% of lakes in 2010 was evaluated as good. The volume of municipal waste per capita (413 kg) in Lithuania is one of the smallest in comparison to other countries (AB, 2009). However, waste reuse and recycling is not developed yet. Landfilling is the main waste management option in Lithuania. Promotion of eco-innovations in Lithuania is covered under the general innovation policy agenda. As regards innovation policy making in general, Lithuania has made tremendous progress in the recent period mostly due to the Lisbon process and the implementation of the National Reform Programme (NRP). The National Innovation Strategy for 2010-2020 has been adopted recently. The EU Structural Funds (SF) have formed a real base for the implementation of a wide range of innovation support measures, both in the public and private sectors. Although the success of the measures is too early to appraise, and no new trends in the European Innovation Scoreboard (EIS) indicators have appeared, the current stage of play gives positive hope for the future (IPPR, 2009).

Part 2. Eco-innovation performance The analysis in this section is based on the EU 27 Eco-innovation scoreboard (Eco-IS). Via its composite Eco-innovation index, Eco-IS demonstrates the eco-innovation performance of the EU countries compared with the EU average and the EU top performers. Eco-IS is based on 13 sub-indicators which are aggregated into five composite indicators, reflecting the five components: eco-innovation inputs, activities and outputs, as well as environmental outcomes and socio-economic outcomes of each EU27 member state.

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Figure 2.1. EU27 Eco-innovation scoreboard, composite index

Figure 2.2. Eco-innovation composite index components Though the recent developments in policy making and the development of innovative industries have been considerable, according to traditional innovation performance, compared to the other European countries, and according to the composite eco-innovation index, Lithuania was behind all EU member states with an overall score of 45 with the EU average being 100 (see Figure 2.1). In most components it was far below the EU average level, and scored especially low in the eco-innovation outputs index (see below for details).

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In 2006-2008, innovative activities in Lithuania were carried out by 28.8% of enterprises. The turnover of innovative enterprises accounted for more than half of the turnover of all enterprises (58.9% in 2008) and the number of staff in innovative companies made 47% of all employees. In terms of environmental performance 5.3% of enterprices reduced energy use, 5.2% reduced air, water, soil or noise pollution, and 4.2% improved recycling of used products (DIA, 2009). Research and development (R&D) activities were carried out by 45.5% of innovative enterprises; R&D services were outsourced by 14.3% of enterprises. R&D expenditure accounted for 0.84% of GDP in 2009. R&D expenditure in the business sector accounted for 0.2% of GDP, while in the higher education and government sectors R&D expenditure amounted to 0.64% of GDP (DIA, 2009). Eco-innovation inputs According to a number of R&D employees, Lithuania slightly lags behind the EU average. In 2007, the number of R&D employees was 1.15% of the total labour force as compared to EU average of 1.43%. However, already in 2009 this number reached 1.4%. Most R&D employees in Lithuania work at higher education and state institutions. In 2007, only 13.7% of R&D employees worked in the business sector (the average of EU member states in 2007 was 42.3%) (LIS, 2010). In 2009, this share made up about 12%. The Lithuanian venture capital market is still under developed. The amount of venture capital invested in the decade from 1995 till 2005 totalled €520m; 166 investment projects were implemented. During the past decade, Lithuania‟s annual venture capital investments per 1 million population were 5 times smaller than the EU average and the number of businesses that had attracted venture capital investments (per 1 million population) was 4 times smaller than the EU average (VAT,2010). The Governments‟ environmental and energy R&D appropriations and outlays were 0.02% of GDP in 2008. This is a relatively low share compared to the EU-27 average of 0.04%. It should be noted that the majority of government R&D appropriations are spent on research performed by the higher education sector and by public research organisations. Only a small share (1.5%) of government budget appropriations is used for research in the business sector (IPPR, 2009). In the business companies„ investment category, business R&D investments made were the main growth indicator. Total business R&D investments in 2007 comprised €57m, and made up 24.6% of total R&D funding (IPPR, 2009). Leading Lithuanian companies in most innovative sectors, such as laser or pharmaceuticals, have their own research laboratories and devoted part of their resources to research and development (an example from laser industry is provided in Section 4).

Eco-innovation activities As regards the eco-innovation activities, in 2008 Lithuania was only in the 23

rd position, lagging

behind most other EU27 Member States with the overall score of 29, the EU average being 100. This measurement is based on the activities of companies in reducing material and energy consumption per unit of output through innovation, and the number of EMAS certified organisations. According to the Community Innovation Survey (CIS), the share of firms with innovations leading to lower CO2 emissions was 20.73% in 2008. The share of firms that had achieved a reduction in materials and energy per unit of output was 29.34%. As regards material and energy productivity, Lithuania‟s performance became approximately three times higher in 2008 compared to 2000. It should be noted, however, that based on the Lithuanian statistics, the most important motivating factor to introduce environmental innovations was the existing environmental regulations or taxes on pollution, followed by environmental regulations or taxes expected to be introduced in the future, and current or expected market demand from customers for environmental innovation only being in the third place. Lithuania has a necessary structure for registration in accordance with the Eco-Management and Audit Scheme (EMAS). The Ministry of Economy provided financial support for the certification of management systems in enterprises. However there are no EMAS enterprises registered in Lithuania. Companies prefer the international standard ISO 14001. Of the total of 58,325 registered enterprises

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323 enterprises had been certified (ISO 14001) by the end of 2008. This constitutes only 0.6% of the total number of enterprises (KVDO, 2009). Eco-innovation outputs Lithuania‟s ranking in the area of eco-innovation outputs is very low, scoring 4 compared to EU average of 100. Eco-innovation outputs expressed as the number of eco-patents amounted to 0.3 in 2007, representing a share of 0.098 per million population. A similar trend was observed during the period 1999-2007. However, it should be stressed that eco-patents usually are not separated from the overall number of patents in the national statistics. As of 31 December 2009, the number of national patents in force (granted on the basis of national filings and PCT national phase entries) was 682. In 2005-2009 State Patent Bureau granted 433 patents in total. Considering the low level of R&D investments, the overall level of patenting activities in Lithuania is not high. Lithuania is facing a major challenge in converting its innovation inputs into outputs. It is also related to the sectoral structure of the Lithuanian economy, and to the prevailing supplier-driven innovation type in the innovation activities (IPPR, 2009). The low number of registered patents may be also related to relatively high registration expenses. In response to this challenge the Ministry of Economy has a support scheme to finance expenses related to patent registration. Environmental outcomes Lithuania„s ranking in the area of environmental outcomes is below the EU-27 average. Lithuania„s score is 74, as compared to EU average of 100. Material productivity (GDP/DMC) has grown slightly in 2000-2007 from a rate of 0.95 €/kg to a rate 1.03 €/kg which is about 30% below the EU-27 average of 1.51 €/kg. Water productivity was 7.19 €/cubic meter with a domestic water consumption (DWC) of 3.97 billion m

3 in 2001. It was 36% below

EU average. In 2009, €5 of GDP was produced by using one m3 of water in all economy sectors

(based on data from the Department of Statistics of Lithuania). In 1995-2008, energy productivity rose from 2.18 to 5.69 €/tonne of oil equivalent which is 14% below EU-27 average. The GHG emissions intensity of the whole economy was 0.47 kg CO2 equivalent /€ (24,327 million tonnes CO2 equivalent) in 2008. It is 53% below EU average. The improving trend in environmental outcomes can be explained by changes in the structure of the national economy (during the period 1999-2008, income of the companies in the service sector has increased fourfold) and in the application of more environmentally-friendly technologies. Moreover, economic instruments such as natural resources taxes, but especially the water price set according to the cost recovery principle, provide incentives for saving. Socio-economic outcomes Lithuania„s ranking in the socio-economic outcomes is significantly lower the EU-27 average. The composite index amounts to 46, with the EU average being 100. The 1.27% share of eco-industry employment of the total Lithuanian workforce was 26% lower than the EU average of 1.49% in 2008. The turnover of the eco-industries was €372 million in 2004, which makes up 2.05% of the total GDP. These numbers show that productivity in eco-industries is higher than on average in the overall industry sector. The exports of the eco-industry amounted to €4.19m in 2004, comprising 0.04% of total national export; it is approximately one-fifth of the EU average in 2004. There are two aspects related to the above numbers: first of all, the statistics on eco-industries are not developed sufficiently; secondly, as has been noted already, the term “innovation” per se involves “eco-innovation”, as innovation nowadays cannot be the one which does not take into consideration the environmental and climate change related aspects.

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Part 3. Leading eco-innovation areas Cleaner production (CP) initiatives play an important role in the field of implementation of eco-innovations in Lithuania. The CP methodology was introduced in the country in 1993. Since that time, 12 CP programmes have been carried out in different economic sectors with the participation of 119 companies representing 15 branches of industry

1.

The main institution in the country to work in this area is the Institute of Environmental Engineering (APINI), Kaunas University of Technology. In 1994-2009, with the support provided by different donors and in co-operation with different foreign and local partners, APINI supported more than 200 Lithuanian companies to implement cleaner production projects. In this regard, the textile and food industries were most active. In 1998, under the APINI initiative the Nordic Environment Finance Corporation (NEFCO) established a special Revolving Facility for the Baltic States and North West Russia. The Revolving Facility SPIN (System for Preventive Innovations) enables the financing of smaller investment projects in the target countries. Priority was given to innovations that have environmental effects on the Nordic region, i.e. on the projects leading to a reduction in pollution in the Baltic Sea and the Barents Sea. Financial support for this scheme was terminated in 2009. Cleaner production measures, applied during the implementation of CP programmes, have mainly been used to reduce energy and natural resource, such as water, fuel consumption. In terms of the innovation type, most of the investments have been used for process optimization and technology change. Detailed information about CP activities in the selected industry sectors and the economic benefits of innovations is presented in tables 1 and 2 below: Table 1. Environmental benefits from preventive innovations implemented in 1994-2009 in different sectors of Lithuanian economy. Environmental areas Environmental

benefits Units/year

1 Reduction in resources consumption/losses:

1.1 Electricity 29,940 MWh

1.2 Heat energy 237,205 MWh

1.3 Chemicals and additives 2,289 t

1.4 Water 810 thousand m3

1.5 Oil 90 t

1.6 Fuel 448 t

1.7 Fuel consumption, etc. From heat energy saving or from reduction in heat energy losses in production and supply

22,070 tne

2 Reduced impact on the environment:

2.1 Emissions to the atmosphere from stationary pollution sources 3,094 t

2.2 Emissions of greenhouse gasses (CO2) 79,760 t

2.3 Emissions to the atmosphere from mobile pollution sources 184 t

2.4 Wastewater volume 774 thousand m3

2.5 Wastewater pollution 521 t

2.6 Hazardous waste 622 t

2.7 Non-hazardous waste (or waste transformed into raw material fro production of other products)

116,108 t

3 Indirect impact on the environment from electricity and heat energy saving (energy produced elsewhere):

3.1 Reduction in greenhouse gas emissions (CO2):

3.1.1 In accordance to natural gas emission factor 7,108 t

3.1.2 (in accordance to fuel oil emission factor) (22,616) t

1 Information from the publication “Sustainable innovations in Lithuanian industry: development and implementation“ (2010) has

been used in this section, unless otherwise stated in the text.

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Table 2. Distribution of companies that implemented CP innovations in 1994-2009. No

Sector Number of companies

Number of implemented CP innovations

Investments in CP, thousands €

Economic benefits of CP innovations, thousands €/year

1 Production of textile products 15 41 3,082 2,585

2 Production of food and beverages

14 28 2,830 1,893

3 Supply of electricity and heat energy

8 19 5,491 2,519

4 Production of chemicals 6 13 434 492

5 Production of machinery and equipment

6 6 1,153 533

6 Furniture production 6 11 1,423 520

7 Production of other non-metal and mineral products

4 7 742 431

8 Production of wood products 4 7 1,568 1,180

9 Transport and communication 4 7 311 273

10 Production of metal products, except machinery and equipment

3 9

412 362

11 Oil product terminal 3 3 513 169

12 Production of leather and leather products

2 3 182 226

13 Production of radio, television and communications equipment

2 6

1,525 613

14 Production of medical, precise and optical equipment

2 6 361 152

15 Production of refined oil products

1 3 1,299 385

16 Production of glass and glass products

1 1 215 100

17 Agriculture and forestry 1 1 665 205

18 Communal services 1 4 120 50

19 Supply of gas and water 1 1 114 46

20 Washing of textile and fur products and dry cleaning

1 1 410 109

Total: 85 177 22,850 12,846

Two examples of cleaner production projects are provided below.

The renewables sector is getting strength, as well as providing possibilities for eco-innovations, in the Lithuanian economy as a result of growing demand of energy from alternative sources in general, promotion by the Governmental and the availability of different supporting financial measures, including the EU Structural Funds, the Lithuanian Programme for Rural Development, the Lithuanian Environmental Investment Fund, and the Programme for Renovation (Modernisation) of Multi-Apartment Buildings. According to the National Strategy for Development of Renewable Energy Resources (NAEIPS, 2010), a share of renewable energy resources in the final energy consumption, which in 2008 made up 15.3%, will increase to at least 23% in 2020. At present, fuel wood and wood waste account for the largest share (about 90%) of the balance of all renewable energy resources consumed in Lithuania (NAEIPS, 2010). In 2008, Lithuania had 120 electricity producers registered that used renewable energy resources, including 84 hydropower plants, 6 biogas plants, 4 solid biofuel plants and 25 wind plants. Currently, there are 4 enterprises that produce biodiesel from rapeseed and 2 bioethanol production plants (NAEIPS, 2010).

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Lithuania has good practices in eco-innovation development and implementation in the management of territories polluted with oil products. According to the Lithuanian Geological Survey, sites polluted with oil products number about 5,000–6,000, while the area of the polluted hydrogeosphere may amount to 6,000 ha or about 0.1% of Lithuania‟s territory. To solve this problem, several companies in Lithuania have made great progress in developing technologies for cleaning soil polluted with oil products and have been granted patents for these technologies, and their methods are widely applied in practice. The example of a technology for cleaning soil is provided below.

________________________________________________________________________________ Example 1: Development and manufacture of smart electronic electricity meters (Eco design project)

Description: Company Elgama-Electronika develops and manufacturers smart electronic electricity meters. The company applies eco-design as a systematic incorporation of environmental aspects into product design and development. Eco-design offers solutions in minimizing the environmental impact along the entire life-cycle of a product (electricity meter). The eco-design approach has promoted the implementation of the following sustainability ideas: marking of plastics in accordance with ISO 11469, reduction of dimensions of the product,

elimination of internal interconnecting wires by expanded use of SMD (surface mounted devices) technology, elimination of electromagnetic shielding, use of lead-free soldering, etc. Determinants: Barriers: - tenders for electricity meters do not really take into account environmental aspects during the entire life-cycle of the product; - there is more demand for cost-effective products, rather than for environmentally-friendly products. Drivers: - improvement of company image; - Expanded Producer Responsibility (Directives 2002/96/EC on waste electrical and electronic equipment (WEEE), 2002/95/EC on the restriction of the use of certain hazardous substances in electrical and electronic equipment (RoHS), 2005/32/EC establishing a framework for the setting of ecodesign requirements for energy-using products (EuP). Sustainability effects: The eco-design project of smart electricity meters has resulted in some major changes in the construction of the meter, which has allowed minimizing the environmental impact by 2.7 times in Ecoindicator99 points (from 1,159 to 423). In addition to the positive impact of the smart electricity meter on the environment by its generic application, enabling reduction of energy usage, the implementation of eco-design ideas also influences other types of interaction of electronic production and the environment, such as minimizing pollution by used electronic products and reducing pollution by toxic materials. Moreover, integration of eco-design into product development is beneficial to the company, not just to the environment.

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_______________________________________________________________________________ Example 2: Cleaner production solutions in textile company (CP project)

Description: Company Vernitas produces acrylic yarn. The production consists of preparation, spinning, twisting, bulking (finishing by steam treatment), yarn dyeing, waste reuse workshops, and souvenir and knitting departments. The main environmental problems were determined as: (1) waste water in yarn dyeing; and (2) ineffective consumption of water and energy. The company was interested in saving all types of resources, especially heat energy resources in all production processes. As a result, 4 proposals were selected for implementation:

1. Improvement of the steam system. Large amounts of condensate were generated in the non-functioning steam trap. Accumulation of the condensate destabilized the steam temperature. Therefore, the condensate was continuously drained manually. During the manual draining of the condensate, certain amounts of steam were discharged to the sewage system with the condensate that caused significant steam losses. In order to detect any malfunction of the steam trap, avoiding the interruption of the process for maintenance, an ultrasonic leak detector for maintenance check-up of the steam trap was installed. 2. Heat recovery from waste water in acrylic yarn dyeing for technological water heating. Hot water from the yarn dyeing and washing processes was discharged into the precipitation tank and further, by means of pumps, was transported to the piping system where it was used for soft water heating.

3. Heat recovery from general condensate for extra heating of the dye-house. A 1,500 m

2 dye house of the height of 8 m was heated to the temperature of 17°C. For this purpose,

the company consumed 41.9 MWh/month of heat energy. Heat generated in the steam supply line during the technological process was diverted to the heater air ventilation system. The recovered heat from the condensate was used for heating the dye-house in summer.

4. Recycling of waste water for the fibering process preparation department. There were 10 Seydel fibering machines in the preparation department. Each fibering process consumed 2 m

3/h of soft water for cooling the shafts. All water was discharged to the sewerage

system. The company was losing 20 m3/h of clean water. As a result of project implementation, water

for the cooling of the shafts was collected to an open-type reservoir and was further returned to the technological process by means of a circulation pump. Determinants: Barriers: Not known. Drivers:

financial support from NEFCO where priority was given to innovations that have environmental effects;

saving of steam, heat energy and water consumption. Sustainability effects:

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Installation of an ultrasonic leak detector resulted in 2% steam savings of the total steam

consumption in the company. Steam quality and therefore bulking quality were also improved. The payback period of this project was 3.8 months.

Heat recovery from wastewater allowed saving 6% of the total steam consumption in the

company. The payback period of this project was less than 5 months.

Implementation of heat recovery from the generated condensate allowed saving heat energy in amount of 235.2 MWh/year. The payback period for this project was 4.8 months.

Implementation of cooling water recycling resulted in a decrease by 6% of total water consumption in the company.

________________________________________________________________________________ Example 3: complex technology for cleaning soil polluted by oil products

Description: Area of the hydrogeosphere polluted by oil products in Lithuania may amount to 6,000 ha. Most of this pollution was caused by poor management of oil products during the Soviet period. To solve this problem, the company Grunto Valymo Technologijos applies an oil biodegradation method. Bio-preparation of oil oxidizing microorganisms as well as multi-component inoculation of aboriginal oil oxidizing micro-organisms have been elaborated. Simultaneously, technologies for the production and use of these preparations have been developed. The technology is based on

establishing of conditions favourable for the multiplication of micro-organisms. The entire complex consists of an integrated technology for the cleaning of soil polluted by oil products. This technology enables the user to biodegrade 27-29 g/kg of dry polluted soil. To clean the remaining pollutants (6-7 g/kg and less), a phyto-remediation method is used, which is based on the ability of specific plants to decompose oil products. The activity areas of the company Grunto Valymo Technologijos includes: cleaning of soil, water and water bodies polluted by organic pollution; development and modernisation of cleaning technologies, etc. The institution holds 14 patents of the Republic of Lithuania and 6 patents of the Russian Federation.

Determinants: Barriers: - It is expensive to obtain and maintain European patents; - Weak financing for the cleaning of polluted soil that limits the application of this innovation. Drivers: - Cheap, environmentally-friendly technology; - Improvement of the company‟s image. Sustainability effects: Implementation of this composite soil cleaning technology allows achieving the following results: - A big volume of soil polluted by oil products could be treated; - Expensive and environmentally harmful materials are not used; - Effective conversion of former industrial and military zones to areas for public purposes; - A high environmental and economic effect. This technology was used to biodegrade over 4,000 tonnes of oil products that would have caused environmental damage of €145m. This technology enabled the institution to become a leader in the sector (80% of the market); - The problem of ground water pollution is solved; - Soil biodiversity is restored; - Good working and living conditions are ensured;

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- New opportunities to use cleaned areas are created; attractiveness for investment in these areas is increased.

Part 4. New trends: areas on the rise There are few areas and sectors showing growing possibilities for eco-innovative developments and initiatives; some of them have seen the first projects and results, while others are about to take off with support of the national and EU funds. The international project “Sustainable Production through Innovation in SMEs” (SPIN) is under implementation in the Baltic Sea Region (BSR) to intensify eco-innovation development and implementation. SPIN is a project supported by the BSR Programme 2007-2013 of the European Union. Within the project duration (2009-2012), SPIN will reach more than 2500 SMEs throughout the BSR in order to identify the existing/evolving eco-innovation clusters in the BSR and will analyze successful patterns for their build-up (SPIN, 2010). It will take a lead in finding innovative solutions to a better management of resources and will position itself within the BSR programme as a leader in eco-efficient production processes. However, there are no reports published at this stage of the project implementation, and information on Lithuania„s performance cannot be represented.

An attractive area for innovation development in Lithuania is the construction sector due to the fact that more than 60% of multi-apartment buildings were built in the last four decades of the Soviet regime. These buildings are ineffective in terms of energy consumption, particularly in winter. The Programme for Renovation (Modernisation) of Multi-Apartment Buildings (DNAP) was approved by the Government in 2004 and amended in 2010. The Programme promotes efficiency of energy consumption. Renovation will be financed from the governmental funds, municipality programmes, EU Structural Funds, private and other financial resources. It is expected that energy consumption in renovated buildings will be reduced by 30% resulting in a reduction of carbon dioxide emissions by 400,000 tonne per year (DNAP, 2010). In 2005-2010, about 530 buildings were covered by the Programme. Installation of alternative energy sources (solar, wind, etc.) is taking place under the Programme among many energy efficiency measures supported. As a result, the implementation of two projects, where solar cells will be used for the preparation of hot water in multi-apartment buildings, is already in progress. Lithuania has great prospects in the field of solar energy. High-tech companies that have united into the Association of Photovoltaic Technology and Business have launched the development of photovoltaic technologies – a solar energy product industry. At present, as many as 5 companies are in the process of preparation for the manufacture of solar cells in Lithuania using financial support from the Structural Funds. The example of the solar cells manufacture project is provided below. As recently Lithuania has mostly focused on the development of an advanced waste management system and may utilise the Structural Funds supports for this purpose, many regions of the country are implementing landfill gas-to-energy projects. Two regional landfills already have operating plants that use landfill gases for electricity production. The Vilnius region is planning to use, as automotive fuel, gases collected from biodegradable waste and treated in an appropriate way. For the first time four Lithuanian eco-innovation projects were submitted for financing under the

Competitiveness and Innovation Framework Programme 2007-2013 (CIP) in 2010, although it is not

yet clear whether these projects will receive financial support.

Currently, a list of projects is being drafted in the framework of the programme “Composite Development of Ecological Public Transport”, which determines the requirements for applicants and projects to be financed from the EU Cohesion Fund and will become a good impetus for the emergence of eco-innovative projects. The programme will use State and EU financial resources to support activities that have direct impact on increasing efficient energy use in the transport sector,

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including the purchase of environmentally-friendly public transport vehicles (trolleybuses and busses fuelled by gas, electrical and hybrid engines); modernisation and development of bicycle infrastructure in the cities, etc. Unfortunately, there are no pilot projects or examples yet that could be represented. Additionally there are upcoming developments in integrated science, studies and in number of business centres (valleys). Research, higher education and science-intensive business potential concentrated in one area that shares a common or related infrastructure and contributes purposefully to the development of knowledge society and the knowledge economy should also promote the eco-innovation development. Implementing four joint research programmes, research and development will be coordinated in particular sectors: natural resources and agriculture, biomedicine and biotechnologies, materials science and physical and chemical technologies and engineering and information technologies. However, there are no results that could be represented at the current stage of implementation. _______________________________________________________________________________ Example 1: Manufacture of solar cells

Description of the emerging eco-innovation, type, sector The share and development of the alternative energy sources have been more and more emphasised during the recent years. The prices for fossil fuels have been on a slow, but constant rise. Besides, if impact on environment, human health, forestry and agriculture are taken into account, traditional energies may leap in price. The EU Parliament constantly emphasises the significance of renewable sources of energy.

Western European countries pay a lot of attention to research and development of the renewable energy technologies, with particular emphasis on their competitiveness. In order to deal with these issues, Baltic Solar Energy has launched a project whereby the company plans to acquire solar cell manufacturing technologies to allow making innovative products in Lithuania. Successful implementation of the project will enable Lithuania to make its first steps in the photovoltaic energy market; there will be 35 new jobs created, in addition to promoting exports and high technologies development. This issue has gained a particular relevance after decommissioning of the Ignalina nuclear power plant. Therefore, encouraging Lithuania„s energy is gaining even greater significance. The project will be implemented in the growing photovoltaic energy market. History and producer Baltic Solar Energy is well known Lithuanian high technology company. Together with BOD group and Baltic Solar Solutions, the company is going to carry out research and experimental production of solar cells. Possible effects Given that support to alternative energy sources receives favourable political backing, the market is likely to grow further by 10-20% every year. The new activities will be eco-friendly, a particular emphasis being given to quality control. There will be 35 new jobs created. During the projected period from 2010 to 2017, the company will contribute over €11.6m in taxes to the State budget. By 2015, the planned turnover from solar cells will reach €120.2m, with exports accounting for more than 95% of the production. Barriers Not known at this stage. Drivers

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- profits from commercialisation; - increasing demand for renewable sources of energy.

Example 2: Laser application in control of environmental pollution

Description of the emerging eco-innovation, type, sector. Researchers of the leading Lithuanian laser company Ekspla have developed laser-based on-line detection instruments to determine concentration of dioxines and PCBs in processed gas. The instruments have been used by waste incineration companies to optimise waste incineration processes and reduce emissions of harmful

substances to the environment. The instruments allow achieving a substantial advance in the detection time of harmful substances. Ekspla has also developed a laser fluorescence lidar for the detection of oil slicks and autonomous oil spill warning in harbours, terminals and coastal shipping routes. History and producer EKSPLA is ISO9001 certified manufacturer of lasers, laser systems and laser components for R&D and industrial applications. Since its beginning, the company has aimed at production of high performance advanced solutions. Possible effects The application of laser mass spectrometry improves safety management of processed gas and the work environment at waste disposal plants, and allows reducing pollution of the environment. The timely detection of an oil accidents helps to reduce environmental and economic damages as due to continuous control and rapid response the spreading of oil slicks can be prevented. Barriers Not known. Drivers Not known.

Part 5. Public policy in support of eco-innovation The eco-innovation policy is under the general innovation policy instruments in Lithuania. It is understood that environmental considerations are an organic part of innovations nowadays. Innovations cannot really fulfil their main objectives if reduced usage of natural resources and/or decreased resulting pollution is not taken into account. The main strategies in Lithuania for the innovation policy and industrial development are the Lithuanian National Lisbon Strategy Implementation Programme for 2008-2010, the Innovation in Business Programme for 2009-2013 and the High Technologies Development Programme for 2007-2013. Only the Lisbon Strategy Implementation Programme directly specifies environmental issues. One of its priorities is to promote efficient use of energy resources as well as the development of renewable energy resources. It is also stated that a more supportive environment for SMEs should be created. The key objectives of the Innovation in Business Programme are to increase the share of innovative businesses, high technology enterprises and exports. The High Technologies Development Programme concentrates on supporting R&D in biotechnologies, ICT and other fields (CSCP, 2009).

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The Priority Trends of Research and Development for 2007-2010 and the Long Term Research and Development Strategy and the Lithuanian White Paper on Research and Technologies Statements Implementation Programme set the vision of the Lithuanian R&D sector development, whereas the sustainability and competitiveness of the research system is at the core. Newly designed competitive R&D funding instruments demonstrate an attempt to support research areas across thematic priorities, as defined in the Lithuanian thematic R&D priorities for 2007-2010: research to ensure the quality of human life (genomics and biotechnology for health and agriculture, technology of high quality, safe, and ecologically clean food, ecosystems, and climate changes); R&D intended to increase the international competitiveness of the Lithuanian industry (development of biotechnology, mechatronics, laser, information, and other high technologies); etc. (IPPR, 2009). The Lithuanian Strategy for Innovations for 2010-2020 aims at using government resources efficiently in the development of a competitive economy based on state-of-the-art technologies and qualified human resources. This strategy is the first comprehensive long-term strategic document that presents specific objectives, targets and results to be achieved. The following objectives have been specified in the strategy: (i) to increase integration of Lithuania in global markets; (ii) to support the development of creative and innovative society; (iii) to promote innovations; and (iv) to apply a systems approach to innovations (LIS, 2010). The Economy Support Plan, issued in 2009, contains five important action lines, one of them being the support for the improvement of energy efficiency of public and private buildings which directly targets the construction sector. The economic stimulus plan has given a positive impetus to the Lithuanian economy. EU structural support solutions have been simplified. It is foreseen to allocate €300m assistance to the renovation of buildings until 2011. More than half of the projected funds have already been allocated and 200 buildings are under renovation now (IPPR, 2009). An absolute majority of innovation support measures in Lithuania are financed by the EU Structural Funds (SF). The direct support measures targeting the business sector are co-financed by the business sector as a rule of support provision. Public support infrastructure development measures are co-financed by the national budget, municipalities or public non-profit organisations. The structural support trends in 2007–2013 related to the environmental technology innovations and development include energy, research and technology development, innovation, business conditions and tourism infrastructure, protection of natural resources, the environment and sustainable development. In order to promote private investment in R&D and innovation, in 2008 the Parliament of the Republic of Lithuania passed the Law amending the Law on Corporate Income Tax, which enables enterprises to deduct their costs for R&D from income three times. It is also allowed to write off fixed assets used for R&D activities to costs in a shorter period. The current Law also provides that the enterprises, which invest in essential technological renewal, have the following corporate income tax reliefs: such enterprises have a possibility to reduce their taxable profits up to 50% (LIS, 2010). In 2009, the Ministry of Economy introduced two new ways to support the acquisition of patents – prepayment and payment on accounts. Earlier, reimbursement was the sole way to acquire support for a patent. After the introduction of the prepayment and payment on accounts procedures, the numbers of patent applications increased dramatically. The support was granted for 41 patent in 2009 and 43 patents in 2010 . The Law on Pollution Tax provides for tax reliefs for pollution from point sources, of which one relief is related to environmental measures implemented by companies that reduce emissions into the environment. Where implementation of certain measures reduces pollution by at least 5%, a company may be exempted from the tax for pollution that has been reduced. Owners of vehicles that have operating exhaust gas neutralisation systems are exempted from the tax for pollution from mobile sources (MATI, 2010). There is no special financial mechanism in Lithuania to support investments in cleaner production in SME. In principle, nationally available innovation support mechanisms can be applied for support of eco-innovations in SME. However, but due to the lack of interest from SMEs and the insufficient promotion from government authorities, it is not currently the case. The European Cohesion and

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Regional Development Funds as well as the national financial schemes dedicated to improve environmental performance are mainly used to minimize pollution levels and to improve solid waste management. Additionally, the Lithuanian Environmental Investment Fund (LEIF) provides support (through subsidies and loans) mainly for pollution control (end-of-pipe) and waste management projects. Since there are no approved criteria for support of pollution prevention measures, it is unlikely that LEIF could support SMEs willing to invest in cleaner production. It is expected that starting from 2011 LEIF will be restructured and it will offer SMEs grants, subsidized loans as well as equity investments for projects aiming at improved environmental performance (CSCP, 2010). The Lithuanian innovation policy governance structure is based on the dual ministry model, with the Ministry of Economy responsible for innovation policy making and implementation, and the Ministry of Education and Science responsible for higher education and R&D policy design and implementation.

Part 6. Understanding eco-innovation performance Main barriers for eco-innovation in Lithuania In the recent period, Lithuania has made tremendous progress in innovation policymaking and implementation. However, eco-innovation is covered under general innovation policy measures, and there are no separate policies promoting eco-innovation. Research in Lithuania is not sufficiently oriented towards applied research, and co-operation between industry and research organisations is weak. As a result, supplier-driven innovations within firms (basically, in the form of acquisition of new technologies) are dominant (IPPR, 2009). This is a general problem for eco-innovation development taking into account the fact that only joint efforts of business and science could lead to a desired result. Very limited availability of external financial support for innovation research and development. There are several programmes in Lithuania that enterprises can apply to receive funding for innovation implementation (mainly for the purchase of innovations that are already developed). However, the number of applications has been limited. The main barrier is the lack of developed innovations ready for implementation. None of the available financing support programmes designed to promote innovations and to increase their implementation in Lithuania provides support for innovation research and development (V.Arbačiauskas, etc., 2010). Awareness raising among SMEs in sustainable development issues is another important need. Generally, SMEs in Lithuania have sufficiently qualified and well educated technical personnel. This is a good pre-condition for eco-innovation development and implementation. However, many SMEs lack the understanding of environmental problems and sometimes have limited information (particularly when it comes to details) concerning their activities, products and services from the perspective of sustainable development, or more specifically, the performance improvement potential. SMEs also lack methodological competence in terms of the identification of eco-innovation potential and eco-innovation development (V.Arbačiauskas, etc., 2010). Main drivers for eco-innovation in Lithuania The innovation policy mix in Lithuania has been developing particularly rapidly since 2004 as a consequence of the implementation of the EU SF aid programmes. The new mix of measures for innovation and R&D development was designed for the new programming period from 2007 to 2013. The majority of measures, such as technology parks, technology platforms, technological business incubators and intermediary institutions, target the development of R&D and business sector cooperation facilitation by the development of R&D infrastructures, human resources and technology and innovation support systems. Although the success and impact rates of the measures are too early to appraise, and no new trends in EIS indicators appear either, the current state of play gives positive hope for the future (IPPR, 2009).

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Direct financial support and economic incentive mechanisms are available to fund the implementation of innovations. These sources include national and EU funding in the framework of different programmes. EU support is provided directly (e.g. EU subsidies) or through the programmes administered on the national level, e.g. the EU Structural Funds. Support is also provided through: tax reductions (in accordance with existing legislation); financial support (soft credits, compensation of particular costs, including bank interest rate for credits, quality certification costs, etc.), subsidies for the establishment of new work places; consultations, training; and the establishment of business incubators, technology parks and their services (V.Arbačiauskas, etc., 2010).

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References: Aplinkos būklė (AB) (Environmental Quality), 2009. Aplinkos apsaugos agentūra. Available on http://gamta.lt/cms/index?rubricId=3338ced7-6297-4a8e-9e8a-2380e8701e37

Audrius Mickaitis, Gintarė Zaščižinskienė, Tautis Pasvenskas, 2009. Kokybės vadybos diegimas organizacijoje: žmogiškasis aspektas (KVDO). Ekonomika ir vadyba:14. Available on http://www.ktu.lt/lt/mokslas/zurnalai/ekovad/14/1822-6515-2009-1077.pdf Daugiabučių namų atnaujinimo (modernizavimo) programa (DNAP), 2010. Available on http://www.am.lt/VI/article.php3?article_id=3201 Development of Innovation activity (DIA), 2008. Available on http://www.stat.gov.lt/lt/catalog/list/?cat_y=1&cat_id=9&id=1937&PHPSESSID=. Innovation Policy Progress Report (IPPR), 2009. Available on http://www.proinno-europe.eu/page/innovation-and-innovation-policy-lithuania Interview with Elvyra Radavičienė, Ministry of Environment Interview with Gytis Mažeika, Ministry of Transport and Communications Interview with Remigijus Bagdonas, Ministry of Agriculture Interview with Tadas Tumėnas, Ministry of Economy Interview with Valdas Arbačiauskas, Visvaldas Varžinskas, Institute of Environmental Engineering (APINI), Interview with Viktorija Aleksevičienė, Ministry of Energy Jurgis Kazimieras Staniškis, Žaneta Stasiškienė, Irina Kliopova, Visvaldas Varžinskas, 2010. Sustainable innovations in Lithuanian industry: development and implementation,Kaunas University of Technology Lietuvos gamtinė aplinka, būklė, procesai ir raida (ABPR), 2008. Aplinkos apsaugos agentūra. Available on http://gamta.lt/cms/index?rubricId=3338ced7-6297-4a8e-9e8a-2380e8701e37 Lithuanian Economic Development Agency (LEPA), 2010. "Lietuvos tiesioginių užsienio investicijų pritraukimo ir eksporto skatinimo strategija". Lithuanian Innovation Strategy for 2010-2020 (LIS), 2010. Available on http://www.ukmin.lt/en/strat_prog/ino_strat/LT_Innovation_Strategy_2010-2020.pdf Ministry of Finance (MF) http://www.finmin.lt/web/finmin/home Mokesčio už aplinkos teršimą įstatymas (MATI) (Law on Tax on Environmental Pollution), 2010. Available on http://www3.lrs.lt/pls/inter3/dokpaieska.showdoc_l?p_id=388626 Nacionalinė atsinaujinančių energijos išteklių plėtros strategija (NAEIPS) (National Strategy for Development of Renewable Energy Sources), 2010. Available on http://www3.lrs.lt/pls/inter3/dokpaieska.showdoc_l?p_id=376097

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National Energy (Energy Independence) strategy (NES), 2010. Available on http://www.enmin.lt/en/activity/veiklos_kryptys/strateginis_planavimas_ir_ES/nes_project_2010_2050.php Oil refinery Orlen Lietuva (Orlen), 2010. www.orlenlietuva.lt SCP in the Baltic Sea Region – Supporting SCP and eco-innovation in SMEs – report of the project SPIN (CSCP), 2010. UNEP/Wuppertal Institute Collaborating Centre on Sustainable Consumption and Production SPIN project (SPIN), 2010. Available on http://spin-project.eu/index.php5?node_id=About+the+project;10&lang_id=1 Statistical Yearbook of Lithuania (SYL), 2010. Available on http://www.stat.gov.lt/uploads/metrastis/LSM_2010_Lt.pdf?PHPSESSID=. Statistical Department of Lithuania (SD), 2010. http://www.stat.gov.lt/en/ Structural Business Statistics Survey Indicators (SBSSI), 2008. Available on http://www.stat.gov.lt/lt/catalog/list/?cat_y=1&cat_id=4 Valdas Arbačiauskas, Jurgita Gaižiūnienė, Asta Laurinkevičiutė and Sigita Židonienė, 2010. Sustainable Production through Innovation in Small and Medium Sized Enterprises in the Baltic Sea Region, Environmental Research, Engineering and Management. No. 1(51), P. 57-65. Verslo angelų tinklas (VAT). Available on http://www.businessangels.lt/cms/index?rubricId=8410733e-f4cb-473f-b9bb-092475dcc5da Visaginas Nuclear Power Plant Project website (VAE), 2010. www.vae.lt