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As we reach for a prosperous future, free of poverty, we must

find ways to achieve global economic growth without

unsustainable pressure on resources. Such a future depends

on our ability to direct innovation to transform human activity.

Climate change is already having serious economic consequences,

especially in more exposed areas of the world. Without stronger

action in the next 10-15 years, it is near certain that global

average warming will exceed 2°C, the level the international

community has agreed not to cross. Based on current trends,

warming could exceed 4°C by the end of the century, with

extreme and potentially irreversible impacts.

Yet there is still hope. Human ingenuity and innovation in

technologies, processes and institutions have in the past

allowed us to get more out of the resources we have, escaping

the impending Malthusian trap by building knowledge capital.

Knowledge capital is dependent on a number of factors such

as cumulative R&D expenditures and physical and human

capital investment. For example, new equipment enables new

ideas and innovation in technologies. Investing in computers

sparks bright ideas on how to use them. Investment in physical

and knowledge capital also drives increasing returns.

In this virtuous spiral, knowledge leads to increased output

and frees resources for more investment. The problem is that

with knowledge building on knowledge, changing technological

paths can be difficult.

The fossil fuel network, for example, includes not just mines,

refineries, ports, pipelines, generation plants and filling stations,

but also a vast knowledge and wealth pool, which allows fossil

fuel companies to hire top innovators to extract fuels from ever

more inaccessible sites. They also have extensive lobbying

power in various governments.

Ideas and practices are also hard to change. The QWERTY

keyboard was built to prevent English language typewriters from

jamming. We no longer use typewriters, but much of the world is

stuck with the keyboard, whether or not it enhances productivity.

The shape and location of London’s office blocks and tube stations

are in part determined by Roman planning two millennia ago.

And it’s more than just bricks and mortar. Any visitor to

Copenhagen or Amsterdam will be struck by the popularity

of cycling. People explain this as a result of first-class

infrastructure. But the infrastructure could be a result of the

Innovating for

a sustainable economy

By Dimitri Zenghelis

Co-Head Climate Policy,

London School of Economics