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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