Article

Understanding Carbon Lock In

Article

Understanding Carbon Lock In

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Abstract

This paper narrative argues that industrial economies have been locked into fossil fuel-based energy systems through a process of technological and institutional co-evolution driven by path-dependent increasing returns to scale. It is asserted that this condition, termed carbon lock-in, creates persistent market and policy failures that can inhibit the diffusion of carbon-saving technologies despite their apparent environmental and economic advantages. The notion of a Techno-Institutional Complex is introduced to capture the idea that lock-in occurs through combined interactions among technological systems and governing institutions. While carbon lock-in provides a conceptual basis for understanding macro-level barriers to the diffusion of carbon-saving technologies, it also generates questions for standard economic modeling approaches that abstract away technological and institutional evolution in their elaboration. The question of escaping carbon lock-in is left for a future paper.

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... There are long-standing arguments that the broader challenge to decarbonization is disrupting the systemic lock-in of path dependent, carbon intensive energy systems [16][17][18] which requires understanding the energy system as a socio-technical system and involving energy users in the transition to alternative low-carbon innovations [19]. Even among more conservative projections, decarbonization strategies employ exponential increases in renewable energy [20], whose infrastructure is inherently more physically decentralised [21][22][23][24]. ...
... A low-carbon energy transition requires building a new socio-technical system by reducing emissions in the production and consumption of energy, which requires a reconfiguration of current technologies, institutions, and user practices [57]. Carbon lock in, is a state in which the combination of systemic multi-scalar forces work together to support the dominant fossil fuel regime through the complex network of technological, institutional, infrastructural and behavioural systems that support the continued use of carbon intensive technologies that constrains the diffusion and adoption of alternative low-carbon innovations [16,17]. Path dependency is the continued use of an innovation due to favourable market conditions and first mover advantages, despite the existence and availability of more efficient, alternative technologies [17]. ...
... The correlation between decarbonization and dissemination rate confirms and measures this tendency towards the diffusion of fossil-fuel regime reinforcing innovations in Ontario's energy system, reflecting, in empirical measurement, the theories, analyses and findings presented by Seto et al. [81], Unruh [16,18] and Wilson [9]. Until recently, the Province of Ontario, has been on a path of continued promotion of a breadth of policies supporting diffusion of natural gas efficiency innovations, rather than decarbonized sources of energy and fossil fuel replacing innovations. ...
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To mitigate climate change in an accelerated time frame, more research is needed to understand how to achieve effective large-scale diffusion of low-carbon innovations. The conceptualization of sectoral socio-technical system transitions requires extending beyond an economic and technological focus, towards a wider system view that combines societal, behavioural, and institutional elements alongside the natural environments and infrastructures. Any socio-technical system reconfiguration will be shaped by the diffusion of multiple innovations. This study employs a novel empirical and quantitative framework that integrates considerations of system actors, behaviours, innovations, and infrastructure simultaneously. Based on a review of socio-technical literature, the framework scores demand-side, low-carbon innovations on a scale from regime reinforcing to disruptive across the dimensions of decarbonization, democratisation and decentralisation. It also scores the innovations according to the policy (economic, regulatory, informational) and legitimacy (actors, discourse) factors that support or inhibit their diffusion. This allows for the investigation of the relationship between the diffusion of innovations and socio-technical energy system change, including whether a relationship exists, its strength, and direction. In analysing 80 innovations that diffused to the demand-side between 1998-2018 in Ontario, Canada, diffusion is found to be negatively correlated with system disruption and decarbonization. Although economic supports tend to be a focus of mainstream policymaking, this study found that economic instruments, legitimacy through discourse, and combined policy and legitimacy supports are important to the systemic diffusion of demand-side low-carbon innovations.
... to top-down regulatory mechanisms and organisations of the past (Sengers et al., 2020). There is some path dependency here (Unruh, 2000 (Texeido et al., 2019). Likewise, the CDM rolled out the initial rules for a global carbon governance scheme, intent on helping lesser developed countries escape the carbon trap and carbon lock-in (Unruh, 2000). ...
... There is some path dependency here (Unruh, 2000 (Texeido et al., 2019). Likewise, the CDM rolled out the initial rules for a global carbon governance scheme, intent on helping lesser developed countries escape the carbon trap and carbon lock-in (Unruh, 2000). The next section deals specifically with these governance anchors and the architecture they blueprinted in the earlier days of climate change governance. ...
... A small error in measurement of C02-e, for instance, could lead to substantial climate change impacts, as demonstrated by the VW scandal. Evidence of carbon lock-in abound (Unruh, 2000), the irony is that more dirty diesel autos have been put on the road since diesel-gate than have been fixed (European Federation for Transport and Environment AISBL, 2018: 33). This also shows the pitfalls of government and industry interdependencies, pointed out elsewhere as detrimental to climate change governance (Newel & Paterson, 1998). ...
Article
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Global greenhouse gas emissions are the main contributor to anthropocentrically-induced climate change and have risen 41% since 1990. We are still yet to reach peak emissions. A large share of those emissions result from private sector activity. At the same time, the private sector possesses major resources which should be harnessed to scale up funding and emissions reduction technologies to benefit the 3 climate. Since the Paris Climate Agreement in 2015, there has been an upsurge in private sector activity on climate change, especially in the corporate sector. Researchers have suggested that this groundswell of private sector activity especially in reduction of carbon emissions holds out the promise of plugging conspicuous public governance gaps. But while this surge in private action since the Paris Climate Agreement is to be encouraged, and indeed has been formally welcomed by global public climate governance actors under the UNFCCC, the measurable success of private, public-private and “hybrid” climate governance arrangements on reducing emissions remains unclear. Through an in depth empirical investigation of the actors and initiatives that play a key role in this emerging domain of bottom-up climate change governance, this study finds that, despite a groundswell in private activity, zones of fragmentation among a multiplicity of private actors, initiatives and standards is stymying progress: while key actors are increasingly networked, key metrics remain severely fragmented; while substantial resources have been dedicated to governing carbon emissions, greenhouse gas emissions keep rising. These observations are demonstrated through an empirical analysis of the “carbon-based” governance regime, which we define as the governance of climate change through a unitary focus on carbon measurement, disclosure, and verification. So far, the ultimate goal of carbon-based governance to reduce emissions is far from being realized. Whether this regime can be repurposed to fulfil this crucial function remains an open question.
... When companies emit GHGs, however, there are no immediate visible effects; indeed, the impacts might be diffused, non-linear and in timescales beyond managers' lifetimes (Kaesehage et al., 2019). Moreover, managers can look around and see a world where 80% of energy production comes from fossil fuels, which makes individual action seems meaningless and reduces the perception of urgency (Kaesehage et al., 2019;Unruh, 2000). This reality shapes not only companies but also institutions and social habits (Seto et al., 2016;Sprengel & Busch, 2010;Unruh, 2000). ...
... Moreover, managers can look around and see a world where 80% of energy production comes from fossil fuels, which makes individual action seems meaningless and reduces the perception of urgency (Kaesehage et al., 2019;Unruh, 2000). This reality shapes not only companies but also institutions and social habits (Seto et al., 2016;Sprengel & Busch, 2010;Unruh, 2000). ...
Article
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International oil companies play a central role in the transition towards a low‐carbon economy. These companies have the leadership and influence to advance technological alternatives or sustain the current dependence on fossil fuels. This article aims to analyse the decarbonisation strategies that European oil companies are performing in the wake of climate change. A document analysis was integrated with carbon emission data from 10 European international oil companies and uncovered the four main strategies adopted by companies: sustained carbon dependence, carbon emissions compensation, carbon emissions mitigation and carbon independence. The results indicate that companies have adopted variable levels of action, despite their overlapping discourse on climate mitigation, with only one of the analysed firms performing a transition away from fossil fuels.
... A socio-technical transition refers to the interdependence and co-evolution of technological and social interactions, including changes in markets, actor practices, policies and cultural factors (Geels, 2004). This is a long-term and challenging process since incumbent energy systems are locked-in to their existing conditions due to sunk investments, technological infrastructures, current regulatory frameworks and established behavioral patterns (Unruh, 2000). ...
... For the governance of socio-technical transitions from a complex system perspective, understanding interdependent causalities between technologies, infrastructure and actors is crucial. In addition, understanding the dynamics or the rate and direction of innovations and their diffusion is critical for dealing with systemic problems such as lock-in (Unruh, 2000). By understanding these interdependencies and dynamics, governance principles can be designed to deal with the primary sources of policy failures and avoid overshoot dynamics such as early lock-in (Hekkert et al., 2005). ...
Thesis
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Socio-technical energy transitions are long-term and major transformations in incumbent energy infrastructures. They include fundamental changes in technologies as well as institutions and social patterns. Transition studies are primarily focused on frameworks for analyzing the entire transition process by investigating the historical cases of transitions. A multi-phase approach to transition posits this process begins with a pre-development phase characterized by technological and institutional lock-ins, and resistance from incumbent actors. This period is critical for a forward-looking approach to transitions, since early developments shape path-dependent and irreversible processes leading to the emergence of new transition pathways. However, our understanding about the mechanisms and dynamics of this phase is still very limited. This is mainly due to lack of data, weak conceptualization and the necessity of developing new methods proper to deal with these limitations. This dissertation develops methodologies for investigating some complex questions arising in the pre-development phase, by focusing on the case of smart grid development. The first essay uses insights from modeling interventions in complex systems and builds a System Dynamics model to investigate the cost allocation problem of smart metering roll-out. The second essay takes ideas from Technological Innovation System approach and develops a method to analyze the emergence of spatial diversity in smart grid development by combining Social Network Analysis and Agent-Based Modeling. The third essay builds on ideas from network theory and evolutionary modeling to develop a method for identifying the main path of knowledge development and analyzing knowledge trajectories in smart grid initiatives.
... According to the participants' consensus, the most preferred and desirable low carbon transition model for Qatar is not just about greening sociotechnical system and infrastructure, but includes structural changes in economic composition (managed decline of hydrocarbon extraction), socio-cultural and institutional dimensions as described in the upper-right quadrant IV (blue shaded box) in Figure 4. However, many participants believe that the likelihood of transitioning to quadrant II and III is high given J o u r n a l P r e -p r o o f the prevailing and emerging uncertainties, institutional and infrastructure lock-in (Foxon, 2002;Unruh, 2000). ...
Article
The beginning of the post-fossil fuel era is evident in trends such as fossil fuel divestment, cheaper alternative energy sources, and disruptive technologies that are enabling responsive and reliable alternative energy systems. In this global low-carbon transition, states (countries) that are dependent on hydrocarbon revenues confront an uncertain future, requiring urgent actions to reduce their economic and societal dependence on hydrocarbon revenues. It is well known that choices made will have significant impacts on wealth and prosperity. Unfortunately, desirable transition pathways remain unclear and the benefits ill-defined. Addressing this critical gap in knowledge, this paper frames the construct of a ‘low-carbon transition’ for hydrocarbon-dependent rentier states, presenting 16 decision-support scenarios across three key categories of industrial, economic and energy/ environmental futures. The study used backcasting methods in four creative-narrative scenario workshops focusing on Qatar, engaging with a diverse group of senior technology and policy professionals. The authors discuss the findings in relation to tensions, contradictions and dominant narratives about a low carbon future. The utility of these narratives is concluded by providing a systematic approach for public and private sector leaders to appreciate and plan for a low carbon transition in hydrocarbon-dependent rentier states. The findings provide a useful framing for the future and foresight practitioners working in a similar cultural context.
... Wit hin t his framew ork t he removal of fossil fuel subsidies in 11 order t o est ablish a level playing field bet w een old and innovat ive economic models are regarded as 12 dest ruct ive, alt hough mot ivat ed by creat ive object ives. However, t he use of dest ruct ive policies t o 13 init iat e policy replacement (Kern and How let t , 2009) proves t o be rare due to t he close relat ionships 14 bet w een government and incumbent regime act ors (Unruh, 2000). An except ional case of 15 dest abilizat ion policy in enabling low -carbon energy t ransit ions is t o be found in t he German nuclear ...
Preprint
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The paper deploys a regional actor perspective to detect policy enablers of and barriers to the uptake of civic energy. In common with other forms of regional, decentralized energy, the civic energy concept not only challenges historical energy business models but changes the energy agenda to prioritize community development and climate issues. Energy policy needs to react by shifting from purely market regulations to the promotion of shared community energy solutions. Both current energy structures and mainstream policy are unsuited to deliver on widely recognized energy transition and sustainable development goals. Switching from a centralized to a decentralized energy mode is viewed as a major re-structuring of a socio-technical regime. In a series of expert interviews, two disruptive policy approaches, creative destruction and experimentation, are analysed as to whether they can contribute to overcoming path dependency and carbon lock-in. Over and above dismantling existing administrative and legislative restrictions on civic energy uptake, experimentation is needed to develop new community partnerships that can host civic energy initiatives and mobilize untapped local energy resources. Whereas the fossil versus renewable energy policy debate seems to have been won, the shift from centralized to decentralized systems threatens existing power structures and remains highly contentious.
... The continued financing of environmentally-harmful activities enables damaging stakeholders, technologies, and infrastructures to retain a persistently dominant position in the economy, thus making the transition to more ecologically-sustainable alternatives more difficult and costlyi.e. 'lock-in' effects (Galaz et al., 2018;Unruh, 2000). Indeed, the Dasgupta Review on the Economics of Biodiversity has noted that 'existing private financial flows that are adversely affecting the biosphere outstrip those that are enhancing natural assets, and there is a need to identify and reduce financial flows that directly harm and deplete natural assets' (Dasgupta, 2021, p. 474). ...
Article
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Financial risks related to climate change and biodiversity loss are currently being addressed in a largely siloed manner. Neglecting their interconnections, however, may lead to ‘blind spots’ and misestimations of systemic financial risk, potentially undermining progress on both climate finance policy and emerging policy on biodiversity-related financial risks (BRFR). In particular, the ‘risk measurement–based’ approach dominating climate finance policy, which is now being taken up to address BRFR, is poorly equipped to address the radical uncertainty that characterises both types of risks. Furthermore, many BRFR may materalise over a more immediate horizon than climate risks. In this paper, we examine how central banks and financial supervisors are approaching the topic of BRFR in relation to climate-related financial risk. We argue that policymakers should focus upon the broader concept of systemic environmental-financial risks to account for the interactions and trade-offs between both domains of biodiversity and climate change. Instead of seeking evidence of financial materiality before acting, focusing on how the financial system is actively facilitating direct drivers of environmental damage offers a way for financial policymakers to assess potential sources of such risks on the basis of information available today. In turn, policy interventions should aim to reduce harmful flows of finance that may lead to the crossing of dangerous ecological tipping points.
... As said by a climate scientist, Corinne Le Quéré, "the fall in emissions we experienced during is temporary, and therefore it will do nothing to slow down climate change,". Unruh (2000), speaking on barriers to the diffusion of carbon-saving technologies, attributes this reluctance to economic costs that go beyond fuel cost. He points out that several firms have performed 38 Therefore, since various renewable energies exist, and governments have the capabilities to support companies, both through tax incentives and financial stimulus in importing these technologies and building research and development (R&D) facilities, more can certainly be done. ...
Thesis
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The greenhouse effect is the main driver of climate change. Among greenhouse gases, carbon dioxide (CO2), methane, nitrous oxide and fluorinated gases, CO2 is the largest contributor to global warming. CO2 levels are now 48% above pre-industrial times, hinting at the impact of human industrial activity. As a major step to protect the environment and mitigate climate change, there is a need for ‘strong and sustained reductions in CO2 and other greenhouse gas emissions. Corporate bodies play an important role in ensuring that countries meet their zero emissions target. As of 2019, about 70% of greenhouse gas emissions emanate from the combustion of fossil fuels, 24% of these emissions come from agriculture, deforestation, and changes in land use, whilst 6% of emissions come from building operations; all being significantly linked with Carbon Majors. In other words, companies and other corporate bodies contribute significantly to climate change, and ought to be held more accountable. This paper discusses harmful corporate practices that negatively impact the environment, and exacerbate climate change, focusing on legal and non-legal actions taken by government and firms in the UK and Nigeria. It also highlights good practices by governments and firms’ worth emulation.
... At this meso-level, existing actors, institutions, and networks of actors adhere to the current rules, standards, methods, and interests set in the technical system [47]. Thus, the embeddedness of a technological regime is a function of cognitive routines [48], rules and standards [49], lifestyle adjustment according to the technical system, high infrastructure, and investment costs [50,51]. This configuration complicates the inclusion of new technological innovations and stabilises certain technologies [33]. ...
Article
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Changing our unsustainable linear water management pattern is necessary to face growing global water challenges. This article proposes an integrated framework to analyse and understand the role of different contextual conditions in the possible transition towards water circularity. Our framework combines a systematic multi-level perspective to explore the water system and the institutional work theory for technology legitimation. The framework consists of the following stages: (1) describing and understanding the water context, (2) assessment of the selected technologies’ circularity level, (3) assessment of the alternative circular technologies’ legitimacy, and (4) identification of the legitimation actions to support the upscale of alternative circular technologies. The practical applicability of the integrated assessment framework and its four assessment stages was demonstrated in the exploration of circular water technologies for the horticulture sector in Westland, the Netherlands. The results revealed the conditions that hinder or enable the legitimation of the circular water technologies, such as political environmentalism, trust in water governing authorities, and technical, financial, and knowledge capabilities.
... This suggests a linkage between innovation and raw materials/minerals, with the invention of new resource-dependent technologies (directly and indirectly) giving rise to resource demand. Indeed, technological paradigms may be associated with a degree of technological-cum-resource 'lock-in' (Unruh, 2000), in that innovative efforts may build on past technological knowledge which itself is predicated on certain resource inputs. It is possible that this relationship in technological trajectories may weaken over time as, for example, firms and inventors seek to reduce their dependence on certain inputs through materials substitution. ...
Article
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Critical and conflict materials (CCMs) are providing an important material infrastructure for recent technological shifts. Relying on text analysis of US Patent and Trademark Office (USPTO) data, this exploratory study examines the technological and geographical linkages between technological paradigms and selected CCMs. Our descriptive analysis finds evidence of a clear association between information and communication technologies (ICTs) and CCM intensity over time, and of a striking resource–technology divide between value-creating and -extracting activities across the Global North and the Global South and their regions. The paper emphasizes the need for a more critical, spatially sensitive approach to studying resource-based technological change to expose its uneven development consequences.
... Organizações de natureza variada, universidades, entre outras, possuem um papel importante. Unruh (2000) enfatiza que a criação de coalizões favoráveis, as associações voluntárias e a emergência de normas societais criam forças políticas capazes de gerar pressões a favor de um sistema tecnológico determinado. Unruh (2000, p. 823, tradução nossa) argumenta que usuários e pro ssionais operando dentro de um sistema tecnológico em crescimento podem, ao longo do tempo, aprender a reconhecer interesses coletivos e necessidades que possam ser atendidas através do estabelecimento de organizações técnicas e pro ssionais (…). ...
Book
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O livro Instituições e Desenvolvimento no Brasil: diagnósticos e uma agenda de pesquisas para as políticas públicas apresenta a enorme variedade de temas, métodos e abordagens de análise das relações entre instituições e desenvolvimento, e serve de base para um programa de pesquisa visando a recomendações de mudanças institucionais em várias áreas de políticas públicas. Os seus capítulos articulam-se mais pelo foco em processos (contextos, estratégias, estruturas, desenhos e mecanismos) que em resultados de políticas. Assim, a despeito de sua pluralidade de abordagens, metodologias e áreas de políticas, esta obra mantém uma inusitada articulação e organicidade. As contribuições individuais deste livro apontam a necessidade de ações tendentes à mudança institucional nas várias áreas afetas ao desenvolvimento do país. Com este trabalho, o Ipea propõe uma agenda de pesquisa em arranjos institucionais, governança e capacidades estatais concernentes ao processo de formulação, execução e avaliação das políticas públicas para o desenvolvimento do Brasil.
... Adjusting consumption patterns (desirability) will therefore be increasingly important for the sustainability of oil metabolism rather than optimizing the supply side (viability, feasibility). However, changing consumption patterns means changing social practices [70,125], and this implies a difficult 'lock in' to overcome [126,127]. How the societal consumption pattern of oil products relates to end uses is therefore an important field for future work in relation to decarbonization pathways and energy security. ...
Article
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A novel methodology is presented for assessing the performance of the oil sector across multiple scales and dimensions of analysis. It focuses on the potential impact of the growing share of unconventional oils in the crude supply mix on energy security through an analysis of the societal energy metabolism. Applying our method at the global level, we find that at the current fuel consumption pattern, an increased exploitation of unconventional oils will cause relative shortages of specific refinery products. The imbalances would be more pronounced if the global fuel consumption pattern would change toward that of the US or the EU. In the former case, gasoline supply would become critical, in the latter diesel. Contrasting performances were found on the selected environmental, technical, or economic criteria for the different simulations analyzed. We conclude that it is of paramount importance to study the oil sector as an integral part of society. In the metabolic view, there are no ‘good’ or ‘bad’ primary energy sources (taken in isolation), but a series of trade-offs among various dimensions of performance. Whether or not unconventional oils can provide energy security depends on the overall feasibility, viability, and desirability of the energy metabolic pattern of society.
... Furthermore, we have shown that incumbents may in fact overcome the challenges associated with the lack of expertise and market attractiveness of sustainable technologies (Johnson & Suskewicz, 2009). Although many studies have foregrounded incumbent firms' path dependence in the face of sustainable technologies (Hockerts & Wüstenhagen, 2010;Unruh, 2000), others have suggested vicarious learning's role (Bohnsack et al., 2014). We add the ICV's role in advancing novel business model schemas for sustainable technologies. ...
Article
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Established firms often develop new businesses through internal corporate venturing (ICV), for instance, to capture value from novel sustainable technologies. We illuminate the early definition stage of ICV’s by asking: When and how business model schemas—that is, managerial understandings of how value is created and captured— change in ICV? We conduct a qualitative, embedded case study of the change in a business model schema for e-mobility in a Swiss utility’s ICV. We uncover a key trigger: strategic re-framing—the active re-formulation of the definition of a given situation within ICV–top manager interactions. The strategic re-framing’s specificity level provokes either schema restrictions or expansions via the distinct accommodation practices it induces. Our theoretical model of business model schema change contributes to the literatures on managerial cognition, business models, and ICV, suggesting that business model schema change in ICV is a semi-autonomous process that involves both independent and joint endeavors.
... The intended transition to a low-carbon energy system presents first and foremost a "systemic" challenge for every country [8]. The energy transition is nothing less than a revolutionary restructuring of the entire energy supply in the sectors of electricity, heat, and transportation. ...
Article
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The intended transition to a low-carbon energy system presents a systemic challenge for every country. The focus of this article is on local energy transition, a decentralized approach in which local municipalities will play a key role. The main question in this article is which determinants support the process towards local energy transition. Therefore, an analytic framework is presented. The three-levels-model is a holistic approach which focuses on determinants considering local context, a macro, and a micro framework. It highlights the dependency of the process from the local context and a sound national transition policy. The model summarizes the complex interrelationships of local energy transition and will enable local communities, networks, and citizens to successfully engage in an energy transition process.
... Furthermore, the ongoing use of natural gas creates carbon lock-ins, which will probably delay the energy transition to renewables 57 . The term carbon lock-in describes the interaction of fossil fuel-based technological systems and related institutions that create barriers to the phase-out of fossil fuels 58 , and thus hinder the use of renewable technologies. Carbon lock-in mechanisms can, for instance, be of an infrastructural, institutional or behavioural nature 59 . ...
Article
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Whether additional natural gas infrastructure is needed or would be detrimental to achieving climate protection goals is currently highly controversial. Here we combine five perspectives to argue why expansion of the natural gas infrastructure hinders a renewable energy future and is no bridge technology. We highlight that natural gas is a fossil fuel with a significantly underestimated climate impact that hinders decarbonization through carbon lock-in and stranded assets. We propose five ways to avoid common shortcomings for countries that are developing strategies for greenhouse gas reduction: manage methane emissions of the entire natural gas value chain, revise assumptions of scenario analyses with new research insights on greenhouse gas emissions related to natural gas, replace the ‘bridge’ narrative with unambiguous decarbonization criteria, avoid additional natural gas lock-ins and methane leakage, and take climate-related risks in energy infrastructure planning seriously.
... Lundin, 2004), or designed from scratch. Institutional alignment is, nevertheless, often an arduous, time-consuming process (Edquist, 1997;Unruh, 2000). High legitimacy (alignment of an informal institution) for the technology facilitates the alignment of formal institutions as legitimacy makes policy makers more prone to implement supportive policies (Markard et al., 2016). ...
Article
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Existing theories on the diffusion of innovations fail to sufficiently account for contextual factors such as institutions, infrastructure, and supply-side dynamics. This paper presents a novel framework to analyse technology diffusion from a sociotechnical systems perspective, intended as an analytical tool to identify and assess drivers and barriers to diffusion that could be addressed through policy or business strategy. This framework, referred to as the diffusion innovation system (DIS) approach, is positioned within the innovation systems literature. The framework is applied to two empirical cases of renewable energy technology diffusion in Sweden: solar photovoltaics (PV) and wind power. The cases illustrate how key factors related to institutions, infrastructure, adopters, and supply co-develop over time as the technologies diffuse, hence demonstrating the merits of the framework. As these changes are both a reaction to and a cause of diffusion, the sociotechnical diffusion system develops through positive feedback loops. Although the systems' development is largely conducive of diffusion, some remaining and potential barriers are identified.
... However, with the global transition to low-carbon energy, increasing problems have begun to emerge. As fossil fuels have always been central to the existence and development of modern economies, they have dominated the modern energy system, so barriers are limiting their use imposed by global public policies (Evans and Phelan, 2016;Unruh, 2000). Based on the strong dependence of the market on fossil energy and special interests, society urgently needs a "just transition." ...
Article
In the context of climate change, just transition is particularly significant, and digitalization as a possible solution for a just transition is considered in this paper. We construct an econometric model between the digital economy and just transition by using a balanced panel dataset of 72 economies from 2010 to 2019, and explore their dynamic relationship and mechanism impacts by applying a system-generalized method of moments (SYS-GMM) technique and a mediating model. The main results indicate that both the digital economy index and just transition index increase during the study period. Moreover, the digital economy not only promotes just transition, but also increases distributional justice, procedural justice, and restorative justice. In addition, the infrastructure and social impact of the digital economy also significantly increase the level of just transition; however, digital trade presents a negative effect on just transition. Finally, from the mechanism analysis, the digital economy indirectly improves just transition by increasing the level of human capital and financial development. This paper provides new ideas for realizing just transition in the future.
... It is widely assumed that for carbon-intensive economies, green capital is more inefficient than brown capital, a hypothesis known as the "carbon lock-in" hypothesis (Unruh, 2000;Edenhofer et al., 2006;Kemp-Benedict, 2014). In our model, the only input is physical capital. ...
... We finally argue that this sub-sector is likely to suffer from a carbon lock-in. A carbon lock-in describes a situation where, in a economical context of returns to scale, both public institutions and private actors (which constitute, with the deployed technological infrastructure, a techno-institutional complex) drastically inhibit the competitiveness and roll-out of lowcarbon alternatives [42]. Fig. 9. Illustration of the techno-institutional complex fostering a lock-in on carbon-intensive energy sources. ...
Preprint
Taiwan plans to rapidly increase its industrial production capacity of electronic components while concurrently setting policies for its ecological transition. Given that the island is responsible for the manufacturing of a significant part of worldwide electronics components, the sustainability of the Taiwanese electronics industry is therefore of critical interest. In this paper, we survey the environmental footprint of 16 Taiwanese electronic components manufacturers (ECM) using corporate sustainability responsibility reports (CSR). Based on data from 2015 to 2020, this study finds out that our sample of 16 manufacturers increased its greenhouse gases (GHG) emissions by 7.5\% per year, its final energy and electricity consumption by 8.8\% and 8.9\%, and the water usage by 6.1\%. We show that the volume of manufactured electronic components and the environmental footprints compiled in this study are strongly correlated, which suggests that relative efficiency gains are not sufficient to curb the environmental footprint at the national scale. Given the critical nature of electronics industry for Taiwan's geopolitics and economics, the observed increase of energy consumption and the slow renewable energy roll-out, these industrial activities could create a carbon lock-in, blocking the Taiwanese government from achieving its carbon reduction goals and its sustainability policies. Besides, the European Union, the USA or even China aim at developing an industrial ecosystem targeting sub-10nm CMOS technology nodes similar to Taiwan. This study thus provides important insights regarding the environmental implications associated with such a technology roadmap. All data and calculation models used in this study are provided as supplementary material.
... Incumbents therefore have a strong incentive to politically mobilise to maintain the legal-regulatory framework upholding the established market configuration and impede its replacement with less favourable alternatives [51,53]. Market incumbency thus contributes to locked-in and path-dependant socio-technical configurations displaying a certain market inertia that is difficult to overcome [54][55][56][57]. ...
Article
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Legislative efforts for renewables-based energy decarbonisation hinge upon the support and commitment from different stakeholders holding often conflicting positions regarding disruptive processes of socio-technical transformation. However, the evolving acceptance of market actors on the policy-driven promotion of renewables over time remains under-scrutinised. Simultaneously, despite growing attention to power and politics in sustainability transitions, limited efforts remain invested for elucidating the political-economic nature of the market-based selection environments they are operationalised through, highlighting the need for a more systematic comprehension of the “politics of selection”. To address these shortcomings, this paper provides a more refined understanding of the role of policy-driven markets and its participating agents in facilitating/hindering innovation diffusion and broader (system-wide) sustainability transitions. To do so, it showcases a longitudinal case study of the politics underlying Germany’s evolving feed-in policy support framework for orchestrating a market-mediated diffusion of renewables (1980s–2020). Based on policy analysis and semi-structured interviews, the study traces the changing acceptance and ensuing strategic (re)actions of market actors to the emergence and evolution of Germany’s market for electricity from renewable energy sources. Results show how different market participants effectively shape the selection environments they operate in by proactively contesting/deluding the design features of the support policies organising their economised relations (e.g., market entry conditions, exchange rules, remuneration levels, pricing schemes, etc.). Such efforts are undertaken through legal means and market framing strategies targeting the affordability of policy support costs, coupled with the strategic use of policy instrumentation as a vehicle to further expand/retain their market shares to the detriment of competing actors.
... Both short-term scarcity and mid-to long-term uncertainty are robust to the type of growth model used and create challenges for policymakers, system planners, industry and consumers. Relying on the large-scale availability of green hydrogen could lead to expensive path dependencies or even fossil lock-ins 56 if supply expansion falls short of expectations. Accounting for these risks probably discourages investments in hydrogen supply, infrastructure and end-use technologies, thus exacerbating short-term scarcity and mid-to long-term uncertainty. ...
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How actors react to change is a crucial question for social scientists interested in global energy system transformation (EST). The global oil industry's response to the challenges associated with climate change and EST is a particular topic of discussion. Here, we argue for an interdisciplinary approach, bringing together insights from multiple disciplines within the social sciences that study oil companies, to further our understanding of what they are doing and why they are doing it. Although research on the political economy and socio-technical nature of EST has led to important insights, it tends to treat the global oil industry as a monolith with common interests and strategic objectives. We argue that the analytical and conceptual tools provided by the management and business literature can help unpack this ‘black box’. We explain how this is the case by exploring some of these tools and applying them to a novel heuristic, the ‘Transition Strategy Continuum’ that helps categorise and analyse the emerging strategies of the publicly-traded ‘International Oil Companies’ (IOCs). As such, we respond to the call for interdisciplinarity raised in the inaugural issue of this Journal. Ultimately, we want social scientists working on energy to take serious insights from other fields of inquiry that help illuminate the complexities of the task of transformation ahead for the IOCs and other related stakeholders.
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Transport systems are not purely about technology. In terms of the social functions of transport, new technologies in transport brought society to a different level of spatial interaction and socio-economic development.
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The decarbonisation of socio-energy systems is a fundamental and urgent task to tackle the impending climate crisis effectively. To address this crucial challenge, the article adopts a novel normative/prescriptive, yet empirically informed, approach: the ‘carbon transformation axes’ framework. Each axis lays out a pathway to disrupt the fossil bloc and decarbonise socio-energy systems; together, the axes provide not only an analytical tool for framing these processes, but also the crucial heuristics to support transformative narratives. The carbon transformation axes framework addresses the increasing fragmentation and compartmentalisation of transition studies by adopting a systemic perspective that considers how the fossil bloc thrives and pursues its interests; central to it is the consideration of how ‘agents of transformation’ relate, interact, and apply collaborative ingenuity to disrupt all the ambits and ramifications relevant to the fossil bloc, thereby achieving the just and rapid decarbonisation of socio-energy systems in the public interest. This framework – to be used by a broad constituency of researchers and stakeholders – is empirically relevant, thanks to the combined support of observed evidence and ‘real world’ demands.
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"Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street," observed legendary speculator Jesse Livermore. History tells us that periods of major technological innovation are typically accompanied by speculative bubbles as economic agents overreact to genuine advancements in productivity. Excessive run-ups in asset prices can have important consequences for the economy as firms and investors respond to the price signals, resulting in capital misallocation. On the one hand, speculation can magnify the volatility of economic and financial variables, thus harming the welfare of those who are averse to uncertainty and fluctuations. But on the other hand, speculation can increase investment in risky ventures, thus yielding benefits to a society that suffers from an underinvestment problem.
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An evolutionary model of technological change is proposed in which a technological breakthrough, or discontinuity, initiates an era of intense technical variation and selection, culminating in a single dominant design. This era of ferment is followed by a period of incremental technical progress, which may be broken by a subsequent technological discontinuity. A longitudinal study of the cement (1888-1980), glass (1893-1980), and minicomputer (1958-1982) industries indicates that when patents are not a significant factor, a technological discontinuity is generally followed by a single standard. Across these diverse product classes, sales always peak after a dominant design emerges. Discontinuities never become dominant designs, and dominant designs lag behind the industry's technical frontier. Both the length of the era of ferment and the type of firm inaugurating a standard are contingent on how the discontinuity affects existing competences. Eras of ferment account for the majority of observed technical progress across these three industries.
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The temporal patterns of the diffusion of technological innovations is discussed including the implications of these patterns for the future of the human environment. No instantaneous innovation spreads is presented but a typical S-shaped temporal pattern which is invariant. Diffusion is a spatial as well as temporal originating from innovation centers. The periphery profits from learning and the experience gained in the core area has faster adoption rates. Diffusion is basically a process of imitation and homogenization. The two strategies differ because one focuses on incremental changes while the other opts for more radical departure from existing technologies and practices.
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This paper examines the nature of the core capabilities of a firm, focusing in particular on their interaction with new product and process development projects. Two new concepts about core capabilities are explored here. First, while core capabilities are traditionally treated as clusters of distinct technical systems, skills, and managerial systems, these dimensions of capabilities are deeply rooted in values, which constitute an often overlooked but critical fourth dimension. Second, traditional core capabilities have a down side that inhibits innovation, here called core rigidities. Managers of new product and process development projects thus face a paradox: how to take advantage of core capabilities without being hampered by their dysfunctional flip side. Such projects play an important role in emerging strategies by highlighting the need for change and leading the way. Twenty case studies of new product and process development projects in five firms provide illustrative data.
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Reports the view in 1980 that, despite high oil imports, the US was on the way to solving its energy problems. -K.Clayton
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A reasonable energy-conservation goal of 20 percent can be achieved by simply running what is available a bit smarter, with no capital investment. More can be realized if one understands the importance of buying electric energy and take advantage of the tariffs. With capital investment, a reasonable conservation goal is to cut the energy consumption in half with no loss of production or temperatures and a substantial extension of the useful life of the refrigeration system and with at least a 30 percent annual return on investment.
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Contemporary economic issues concerning technological innovation and compatibility standardization in emergent ‘network’ industries are illuminated indirectly in this paper by the examination of the historical development of the technology of electric light and power systems in the United States and Europe during the late nineteenth and early twentieth century. The discussion focuses on the rivalry between the initially incompatible technical formulations of a system supplying electric lighting and power. In the dynamics of competition between alternative technologies under such conditions, the details of the timing of small historical events could have important and lasting consequences.Special notice is given to the role which the induced invention of a compatibility-creating technical device-the rotary converter-played in the conduct and resolution of the so-called ‘Battle of the Systems’. The rotary converter is analyzed as a paradigmatic ‘gateway innovation’, one of a large class of ‘minor’ technological innovations whose actual importance in the context of network evolution warrants greater recognition from economists.
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The standard ontogenic (life-cycle) model of technological evolution can be characterized briefly as follows (Ayres, 1987): (1) a radical invention (birth) creates a new technology; (2) it is commercialized on the basis of performance and rapidly developed by a series of improvements and modifications (infancy); (3) it is successful enough in the marketplace to attract many variants and imitators who hope to exploit a growing market (adolescence); (4) the pace of technological change finally slows down enough to permit standardization and exploitation of economies of scale, and competition on the basis of price rather than performance (maturity); and finally a new and better technology supplants it (senescence).
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The abstract for this document is available on CSA Illumina.To view the Abstract, click the Abstract button above the document title.
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This paper reviews evidence that energy technologies and systems adapt over time to accommodate external pressures: that technical innovation and systemic change in the energy sector is largely induced by need, and restrained by potentially large transitional costs. A simple integrated model of optimal greenhouse gas abatement over time is presented, in which the abatement cost depends on both fixed and transitional elements. It is shown that the optimal current response and long-run prospects differ radically between the classical economic case — in which the cost of a given cutback in emissions is fixed exogenously — and the adaptive case — in which the response is ultimately adaptive but heavily constrained by inertia (ie low fixed but high transitional cost). If energy systems are indeed to a large degree adaptive, the results demonstrate that as compared with the classical non-adaptive case: long-run stabilization of atmospheric CO2 may be optimal even with moderate damages from climate change; greater near-term abatement efforts are justified; and the cost of a given delay in response may be several times higher. Neglect of the issue of induced technical change and other adaptive responses may invalidate the policy implications drawn from most integrated assessment models developed to date.
The long-range biological imperative for survival has its economic counterpart. The present techno-economic system, with its heavy dependence on exhaustible stocks of natural resources, including environmental waste assimilative capacity, is unsustainable. The stocks of high quality raw materials, such as fuels and metal ores, are being drawn down rapidly. But this is the least of the problems because of possible technical ‘fixes’. More ominous, there is an irreversible disappearance of tropical rainforests and other valuable and irreplaceable ecosystems, erosion of topsoil, a buildup of toxic heavy metals in soils and sediments, an accumulation of ‘greenhouse gases’ in the atmosphere, and a catastrophic loss of biological diversity. None of these trends is reversible by any known or plausible technological intervention. Long-run human survival therefore requires that the use of the environment as a ‘sink’ for waste residuals, especially from fossil fuel combustion and dissipative uses of heavy metals, must be slowed down drastically in the near future. The paper examines the relevant economic adjustment mechanisms in terms of both ‘standard’ neo-classical and evolutionary theories. It concludes that a policy based on reliance on market signals (i.e. prices) alone to induce change is likely to be ineffective. Even if the polluter pays principle (PPP) were fully implemented, market mechanisms would not suffice. The problem is that existing large-scale systems evolved during a period when environmental concerns were not serious, and now retain their economic dominance partly due to economies of scale and partly through influence over the political system.
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Conventional wisdom has it that top-down studies of mitigation costs are too pessimistic while bottom-up studies are too optimistic. In examining mitigation cost studies for Western Europe, this paper finds this interpretation to be flawed. The paper expands the analytical framework for interpreting mitigation cost studies, evaluates the treatment of no regrets options and other input assumptions in the various studies, and includes findings from recent integrated top-down/bottom-up modeling assessments not covered in the IPCC report. Based on these new elements, it is found that mitigation costs tend to be overestimated not only in top-down studies, but also in bottom-up studies. Given this pervasive bias toward pessimism, the body of existing mitigation cost assessments for Western Europe can be read as follows. Over the next three to four decades, a combination of tax shifts, market transformation instruments and policies to reform subsidies and internalize non-climatic externalities could cut carbon emissions in Western Europe by 40–50% relative to the base year, at no loss or at a gain in GDP. Averaged over the medium term and including a phase-in period, an economically optimal rate of implementing Western Europe's no regrets potentials is found to be in the neighborhood of 2% per year relative to base year levels.
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Demonstrates that technical change is attributable to experience. The cumulative production of capital goods is used as the index of experience. New capital goods are assumed to completely embody technical change. The assumption is made that the model will be operating in an environment of full employment although reference is made throughout to the case of capital shortage. The implications of this model on wage earners are discussed, and profits and investments are examined. The rate of return is determined by the expected rate of increase in wages, current labor costs per unit output, and the physical lifetime of the investment. Learning is an act of investment that benefits future investors. Further analysis shows that the socially optimal ratio of gross investment to output is higher than the competitive level. (SRD)
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Examines the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time. Institutions are separate from organizations, which are assemblages of people directed to strategically operating within institutional constraints. Institutions affect the economy by influencing, together with technology, transaction and production costs. They do this by reducing uncertainty in human interaction, albeit not always efficiently. Entrepreneurs accomplish incremental changes in institutions by perceiving opportunities to do better through altering the institutional framework of political and economic organizations. Importantly, the ability to perceive these opportunities depends on both the completeness of information and the mental constructs used to process that information. Thus, institutions and entrepreneurs stand in a symbiotic relationship where each gives feedback to the other. Neoclassical economics suggests that inefficient institutions ought to be rapidly replaced. This symbiotic relationship helps explain why this theoretical consequence is often not observed: while this relationship allows growth, it also allows inefficient institutions to persist. The author identifies changes in relative prices and prevailing ideas as the source of institutional alterations. Transaction costs, however, may keep relative price changes from being fully exploited. Transaction costs are influenced by institutions and institutional development is accordingly path-dependent. (CAR)
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This study is based on the belief that economic organization is shaped by transaction cost economizing decisions. It sets out the basic principles of transaction cost economics, applies the basic arguments to economic institutions, and develops public policy implications. Any issue that arises, or can be recast as a matter of contracting, is usefully examined in terms of transaction costs. Transaction cost economics maintains that governance of contractual relations is mainly achieved through institutions of private ordering instead of legal centralism. This approach is based on behavioral assumptions of bounded rationalism and opportunism, which reflect actual human nature. These assumptions underlie the problem of economic organization: to create contract and governance structures that economize on bounded rationality while safeguarding transactions against the hazards of opportunism. The book first summarizes the transaction cost economics approach to the study of economic organization. It develops the underlying behavioral assumptions and the types of transactions; alternative approaches to the world of contracts are presented. Assuming that firms are best regarded as a governance structure, a comparative institutional approach to the governance of contractual relations is set out. The evidence, theory, and policy of vertical integration are discussed, on the basis that the decision to integrate is paradigmatic to transaction cost analysis. The incentives and bureaucratic limits of internal organization are presented, including the dilemma of why a large firm can't do everything a collection of small firms can do. The economics of organization in presented in terms of transaction costs, showing that hierarchy also serves efficiency and permits a variety of predictions about the organization of work. Efficient labor organization is explored; on the assumption that an authority relation prevails between workers and managers, what governance structure supports will be made in response to various types of job attributes are discussed, and implications for union organization are developed. Considering antitrust ramifications of transaction cost economics, the book summarizes transaction cost issues that arise in the context of contracting, merger, and strategic behavior, and challenges earlier antitrust preoccupation with monopoly. (TNM)
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Private sector corporations in the United States fall short of their potential to increase shareholders'1 wealth in a number of ways. One example is the failure to undertake profitable energy conservation investments. Explanations of this phenomenon include agency and moral hazard problems, imperfect information and incentives, myopia, and X-inefficiency. Data from a survey conducted by the US Environmental Protection Agency and from interviews with corporate executives are used to explore these hypotheses. Good overall corporate performance is found to be associated with longer internal payback requirements for energy investments. Suggestions for improving corporate decision-making in this area are proposed.
Book
In recent years a growing concern that the increasing accumulation of greenhouse gases will lead to undesirable changes in global climate has resulted in a number of proposals, both in the United States and internationally, to set physical targets for reducing greenhouse gas emissions. But what will these proposals cost? Based on the authors' earlier ground-breaking work, Buying Greenhouse Insurance outlines a way to think about greenhouse-effect decisions under uncertainty. It describes an insightful model for determining the economic costs of limiting carbon dioxide emissions produced by burning fossil fuels and provides a solid analytical base for rethinking public policy on the farreaching issue of global warming. Manne and Richels present region-by-region estimates of the costs that would underlie an international agreement. Using a computer model known as Global 2100, they analyze the economic impacts of limiting C02 emissions under alternative supply and conservation scenarios. The results clearly indicate that a reduction in emissions is not the sole policy response to potential climate change. Following a summary of the greenhouse effect, its likely causes, and possible consequences, Manne and Richels take up issues that concern the public at large. They provide an overview of Global 2100, look at how the U.S. energy sector is likely to evolve under business-as-usual conditions and under carbon constraints, and describe the concept of "greenhouse insurance." They consider possible global agreements, including an estimate of benefits that might result from trading in an international market in emission rights. They conclude with a technical description directed toward modeling specialists.
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At present, transfer within a telecommunications monopoly from some users to others support universal service. With the onset of competition in the USA, a complex system of contributory access charges, revenue pools and other devices has been added. Yet these arrangements are not suitable in a competitive environment. This article therefore develops an alternative system for the financing of universal service that is compatible with a multi-provider world. The proposal is for an accounting system that would debit a carrier's added value and credit its transfers to universal service schemes. It creates a fund to support portable vouchers for the benefited users and credits for low-density areas. It operates on the premise of competitive neutrality - equal rights and equal burdens to all carriers, and customer choice.
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The universality of telephone service is generally believed to be an achievement of regulated monopoly and rate subsidies. This paper critically examines the historical claims of what it terms the ideology of universal service. It shows that a ubiquitous telephone infrastructure developed in the USA because of competition between Bell and the independents in the period 1894-1921. Moreover, it shows that it was the refusal of Bell and the independents to interconnect with each other, a phenomenon which is generally ignored or condemned in the historical and economic literature, which propelled both systems into a race to achieve universality, leading to rapid increases in penetration and geographic scope, particularly in rural areas. The phrase universal service, which first emerged in telephone policy debates in 1907, did not mean a telephone in every home or rate subsidies, but the interconnection of the systems into a unified, non-fragmented service.
Chapter
Development of a firm's core competencies is identified as the key for global leadership and competitiveness in the 1990s. NEC, Honda, and Canon are used as exemplars of firms that conceive of themselves in terms of core competencies. Core competencies are the organization's collective learning and ability to coordinate and integrate multiple production skills and technology streams; they are also about the organization of work and delivery of value in services and manufacturing. A firm must conceive of itself as a portfolios of competencies, instead of a portfolio of strategic business units (SBUs). The latter limit the ability of firms to exploit their technological capabilities; they are often dependent on external resources. The real source of advantage lies in management's ability to consolidate corporate-wide technologies and production skills into competencies, which will allow individual businesses to adapt to emerging opportunities. Cultivating core competencies does not mean outspending rivals on RD (2) they significantly contribute to the customer benefits of the end-product; and (3) they should be difficult for competitors to imitate. Cultivating core competencies also means benefiting from alliances and establishing competencies that are evolving in existing businesses. The tangible links between core competencies and end products are core products, which embody one or more core competencies. Companies must maximize their world manufacturing share in core products. Global leadership is won by core competence, core products, and end products; global brands are built by proliferating products out of core competencies. Firms must avoid the tyranny of the SBU, the costs of which are (1) under investment in developing core competencies and core products, (2) imprisoned resources, and (3) bounded innovation. Top management must add value to a firm by developing strategic architecture, which will avoid fragmenting core competencies, establish objectives for competence building, make resource allocation priorities transparent and consistent, ensure competencies are corporate resources, reward competence carriers (personnel who embody core competencies), and focus strategy at the corporate level. A firm must be conceived of as a hierarchy of core competences, core products, and market-focused business units. Obsession with competence building will mark the global winners of the 1990s. (TNM)
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Recent findings indicate that some alternative energy promote equity, efficiency, and self-reliance and are both economical and sustainable. The Asian Development Bank therefore initiated a case study to formulate energy strategies which could contribute to the solution of both local and global energy problems. The study focuses on technical and economic details of energy end uses in India. The conclusions, some of which are surprising, are supported by data from several studies. The study recommends a shift to least-cost electricity planning, improving the available database for and information availability about energy, rationalizing energy pricing and related fiscal policies, and achieving energy efficiency by judicious investment in and support of energy forms which will be both sustainable and affordable in the long run.
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The paradox of why profitable energy-saving investments are not undertaken continues to provoke debate. The underlying phenomenon might be called the ‘efficiency paradox,’ because it represents a case in which business firms, which are often presumed (or taken axiomatically) to be economically efficient, make decisions that do not maximize profits. New data from one of the US Environmental Protection Agency’s voluntary pollution prevention programs enables this paradox to be explored statistically. The data show that both the level and variation in returns to lighting upgrade investments cannot be explained by standard economic models. Substantial gains in energy efficiency can be achieved without sacrificing profitability. Both economic and organizational factors account for some of the variation in observed returns to these investments, but the results suggest a need for improved and more comprehensive theories of the investment behavior of firms and other organizations.
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Many investments in energy efficiency fail to be made despite their apparent profitability. Internal hurdle rates are often set at levels higher than the cost of capital to the firm. Reasons for these practices include bounded rationality, principal-agent problems, and moral hazard. The policy implication is that government can simultaneously improve overall energy efficiency and increase private sector productivity by providing informational and organizational services that go beyond the traditional regulatory framework.
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Why some firms die while others survive? Survival has long been recognized as a basic goal for a manufacturing firm. At least in the long term, survival should be related to various measures of performance, such as market share and profitability. Advocates of population ecology have argued that life chances of organizations are affected by population density at the time of founding. According to this argument, organizations founded during periods of intense competition will have persistently higher age-specific rates of mortality than those founded during periods with lower numbers of competitors. At least for the case of manufacturing firms, there may be more profound causes than competitive turmoil that explain a firm's survival chances. These have to do with the evolution of technology in an industry. Population density may only be a reflection of underlying driving forces based on technological change that determine the form and level of competition, the attractiveness of entry, and ultimately the structure of an industry.
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The procedures and the nature of “technologies” are suggested to be broadly similar to those which characterize “science”. In particular, there appear to be “technological paradigms” (or research programmes) performing a similar role to “scientific paradigms” (or research programmes). The model tries to account for both continuous changes and discontinuities in technological innovation. Continuous changes are often related to progress along a technological trajectory defined by a technological paradigm, while discontinuities are associated with the emergence of a new paradigm. One-directional explanations of the innovative process, and in particular those assuming “the market” as the prime mover, are inadequate to explain the emergence of new technological paradigms. The origin of the latter stems from the interplay between scientific advances, economic factors, institutional variables, and unsolved difficulties on established technological paths. The model tries to establish a sufficiently general framework which accounts for all these factors and to define the process of selection of new technological paradigms among a greater set of notionally possible ones.The history of a technology is contextual to the history of the industrial structures associated with that technology. The emergence of a new paradigm is often related to new “schumpeterian” companies, while its establishment often shows also a process of oligopolistic stabilization.
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The conventional distinction between ‘economic’ and ‘engineering’ approaches to energy analysis obscures key methodological issues concerning the measurement of the costs and benefits of policies to promote the adoption of energy-efficient technologies. The engineering approach is in fact based upon firm economic foundations: the principle of lifecycle cost minimization that arises directly from the theory of rational investment. Thus, evidence that so-called ‘market barriers’ impede the adoption of cost-effective energy-efficient technologies implies the existence of market failures as defined in the context of microeconomic theory. Problems of imperfect information and bounded rationality on the part of consumers, for example, may lead real world outcomes to deviate from the dictates of efficient resource allocation. A widely held contrary view, that the engineering view lacks economic justification, is based on the fallacy that markets are ‘normally’ efficient.
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Conventional wisdom has it that top-down studies of mitigation costs are too pessimistic while bottom-up studies are too optimistic. In examining mitigation cost studies for Western Europe, this paper finds this interpretation to be flawed. The paper expands the analytical framework for interpreting mitigation cost studies, evaluates the treatment of no regrets options and other input assumptions in the various studies, and includes findings from recent integrated top-down/bottom-up modeling assessments not covered in the IPCC report. Based on these new elements, it is found that mitigation costs tend to be overestimated not only in top-down studies, but also in bottom-up studies. Given this pervasive bias toward pessimism, the body of existing mitigation cost assessments for Western Europe can be read as follows. Over the next three to four decades, a combination of tax shifts, market transformation instruments and policies to reform subsidies and internalize non-climatic externalities could cut carbon emissions in Western Europe by 40–50% relative to the base year, at no loss or at a gain in GDP. Averaged over the medium term and including a phase-in period, an economically optimal rate of implementing Western Europe's no regrets potentials is found to be in the neighborhood of 2% per year relative to base year levels.