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CLIMATE ROUNDTABLE - TOWARDS A GREENER FUTURE
popularity of cycling. The point is that path-dependencies lead
to mutually reinforcing feedback mechanisms.
There is also a well-established political economy asymmetry
that favours incumbents. The losers from change shout louder
and more effectively than winners, even if the latter group is larger.
Yet changes in technologies, systems and behaviours do happen
because either a clearly superior system appears, or there is a
clear and credible social objective to be met. The switch from
horses to cars, kerosene to electricity, canals to rail and charcoal
to coke fall into the first category. They all faced strong opposition
from losers but the changes could not be put off forever. The
Apollo missions or the Manhattan project fall onto the second
category. So do the many technological spill-overs that come
from a commitment to military spending. The move from slavery
to a free labour market has elements of both.
What all historical transformations have in common is the belief
that the transition will be inevitable. They all required dislodging
entrenched social, economic and behavioural networks. Without fully
aligned expectations, deep transformational change will not occur.
The payoff to a business or political leader considering
investment in renewables and energy efficiency depends on
what she expects others to do. If no one else is expected to
move, then the risks are high, the technologies expensive,
the financing niche and the market immature.
But if large players such as China or the U.S. are expected to
move at scale, then one would expect technology and finance
costs to fall and huge new markets to emerge. The development
of new skills as well as supportive institutions and behaviours
would further reduce unit costs. As everyone moves,
expectations become self-fulfilling.
Businesses must also play a role in steering expectations.
For instance, in June, Elon Musk, founder of Tesla Motors,
announced that his company would make their electric vehicle
patents public. Many commentators leapt to applaud this
apparent sacrifice as an astute business decision. Rightly so.
In order to be able to sell more of their electric vehicles
Tesla simultaneously needs scale and an entirely new vehicle-
charging infrastructure. It has to battle against the vast
existing network of petrol stations, and vested interests of
car dealerships, that make driving a combustion-engine car so
convenient. Rather than trying to win this fight alone, Tesla
decided to grow a new market by stimulating the innovative
resources of all car companies. Tesla understood that innovation
does not just happen. Entrepreneurs and companies need clear
incentives to innovate.
Government and businesses have a role in shifting the
expectations by credibly committing to climate policy and
changing the initial conditions by investing in green
infrastructure or funding clean energy research so as to
lower technology costs. The key challenges to achieving full
decarbonisation of the economy are not technological or
economic; they are cultural, institutional and political.
Ideas and practices are also hard to change.
The shape and location of London’s office
blocks and tube stations are in part determined by
Roman planning two millennia ago.
Dimitri Zenghelis,
London School of Economics