Micro-generation or big is beautiful? : alternative visions of a low carbon energy system, path dependency and implications for policy

• Main Author: Gross, Robert J. K.
• Published: Imperial College London 2008
• Subjects: 333
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.486585

This thesis is concerned with long run developments in energy systems. It considers the implications of developments in economics related to path dependence and lock-in for climate change mitigation policies. Path dependence can arise when markets, technological systems and institutions co-evolve and are subject to increasing returns to adoption. This can have the effect of entrenching incumbent technologies and systems, which can preclude the emergence of alternative technologies or systems. This lock-in by historical events is argued to be particularly acute in the energy system. This thesis uses energy system scenario modelling to explore the potential for path dependence to create mutually exclusive low carbon energy futures. It concludes that radically different contigurations of energy technologies are equally able to deliver low carbon energy. It finds that there are good reasons to expect that development will be path dependent. This matters because the literature on path dependence also highlights the potential for lock-in to a sub-optimal outcome. However the thesis also finds that it is possible to maintain a variety of emerging options until more is known about their potential. Policy needs to create the con~itions that allow a variety of low carbon options to emerge and prosper. But, perhaps paradoxically, over time policies will also need to ensure that the most promising low carbon options can themselves benefit from increasing returns to adoption. The same processes that created lock-in to a high carbon energy system can be harnessed to reduce the costs and improve the performance of low carbon technologies. The thesis argues that the conceptual underpinnings of environmental policy intervention need to be fundamentally reassessed in the light path dependence, lock-in and increasing returns effects. The orthodox approach to environmental policy analysis uses a 'static equilibrium' paradigm which considers only extant externalities. Internalising external costs is important, but orthodox economic theory does not provide policymakers with any information about the processes which created t!Ie current energy system, nor the options needed to allow economies to extricate themselves from 'carbon lock-in'. Increasing returns could be harnessed to overcome carbon lock-in, if policymakers engage directly with issues related to technology choice and technological strategy. Along the way some important shibboleths of existing economic policy will need to be reassessed, not least the notion that policy can never, and must never even seek to, 'pick winners'.