Breaking path dependence in the energy sector – the need for technology-specific policies

Staffan Jacobsson, Chalmers University of Technology , Sweden

The Stern report underlines that emission needs to be reduced by more than 80 per cent if a stabilisation is to occur in terms of concentrations of carbon dioxide. A stabilisation at 500 ppm would entail a reduction of emissions of 50 per cent of the 2005 level by 2050. This scale of the environmental challenge is translated into a formidable challenge in terms of transformation of the energy and transport sectors. It has two dimensions: the time scale and the size and growth of the sectors. By 2050, the electricity sector is expected to have to be largely decarbonised whereas major changes would also have to take place in the transport sector (Stern, 2006, p. 235). In terms of large scale transformation processes, the time scale is quite limited. As shown in studies in history of technology, such processes run over many decades, often more than four. The size and growth of the energy sector adds a second dimension to the scale of the transformation problem. Currently, the global power sector delivers around 17 000 TWh annually and it is expected to grow to about 35 000 by 2050. Out of these, about 29 000 TWh will have to be carbon neutral. As an illustration of the scale, it can be mentioned that a new nuclear power station supplies about 5 TWh annually and that the total supply of solar power in Germany (the country with most installations) is about 2 TWh.
To reduce the emissions to a sustainable level, a whole cluster of technologies need to be developed and diffused – no single technology can replace fossil fuel and the time constraint means that a range of technologies need to be fostered in parallel, not in sequence. For the most part, however, the discussion on policy intervention is in terms of generic policy instruments, i.e. instruments that do not distinguish between different technologies (e.g. tradable emission permits and “green” electricity certificates). Under the influence of such instruments, the main selection mechanism is marginal cost – and investments will first occur in the currently cheapest technologies – the diffusion process will, thus, be sequential.
Whereas general policy instruments, such as CO2 tax, is as vital part of the package of policies required to meet the climate challenge, such policies need to be supplemented by technology-specific ones. The cluster of technologies that will eventually replace fossil fuel would vary in terms of cost levels but also in terms of the maturity of the industrial system that supply them. Each such system, henceforth called technological innovation system (TIS), has unique features (including endogenous learning processes), requiring unique elements of policy intervention. As Rodrik (2004: 14) argues, policy should be thought of as ‘…a process designed to elicit areas where policy actions are most likely to make a difference.’ The relevant issue then is how policy makers can identify those activities/areas that are of critical importance to the dynamics of a specific IS.
The paper presents an analytical framework that may help policy makers find the currently key points of intervention within a given TIS. Whereas much of the literature on ‘Policy and Innovation Systems’ deals with generic policy challenges in terms of weaknesses in a system’s structural elements, we argue that it is more useful to analyse system weaknesses in functional terms, i.e. in terms of a number of key processes that determine both system performance (e.g. diffusion) and system growth. System weaknesses (for a particular TIS) can, thus, be specified in terms of these key processes and an explanation of the weaknesses and strengths of the processes may be found, guiding policy makers in their intervention. The framework is applied, in an illustrative way, to two TIS in Sweden, wind- and biopower.

About the speaker
Staffan Jacobsson is a Professor of Science and Technology Policy He studied at Lund University and graduated with a BA in economics in 1977. In 1978, he gained his Master of Arts at the University of Sussex in England, where he also took a PhD in economics in 1985 with the thesis "Electronics and Industrial Policy - the case of computer-controlled lathes". Apart from two short periods at UNCTAD in Geneva, he worked at the Research Policy Institute at Lund University from 1980 to 1987. In 1987, he became assistant professor at the Department of Industrial Management and Economics at Chalmers. He was appointed "docent" in 1989 and "biträdande professor" in 1995. Staffan Jacobsson's research up to the end of the 1980s focused primarily on industrialisation in underdeveloped countries and the international diffusion of new technology in the engineering industry. Following his move to Chalmers, Professor Jacobsson changed direction and he now works with industrial transformation in Sweden. He has analysed a number of Swedish industries, developed methodological tools and worked with technology policy issues. Professor Jacobsson received the Chalmers Teaching Award for 1994/95.

Venue: Conference room of the UNU-MERIT, 4th floor, Keizer Karelplein 19

Date: 21 February 2008

Time: 16:00 - 17:00