Innovation and Threshold Effects in Technology Responses to Climate Change

TitleInnovation and Threshold Effects in Technology Responses to Climate Change
Publication TypeTyndall Working Paper
SeriesTyndall Centre Working Papers
Tyndall Consortium Institution

Manchester

Secondary TitleTyndall Centre Working Paper 43
AuthorsAnderson, D, and S. Winne
Year of Publication2003
Abstract

The paper develops a way of characterising technological change in energy systems in a form suitable for economic analysis. The focus is on technological responses to climate change. A large array of non-carbon options is emerging, though their costs are generally high relative to those of fossil fuels. However, costs are also declining relatively with innovation, investment and learning-by-doing. The process of substitution is also argued to be highly non-linear, involving threshold effects.

One consequence of this is that policies may be capable of engendering changes in the industry out of all proportion to the scale of the policy itself; and it is suggested that the external benefits of the policies, when they take root, may be far larger than marginal analysis often assumes. Much of course depends on the scale of the policy impetus-and equally on the durability of the policy, for policy initiatives followed by reversals or a lack of willingness on the part of policymakers to persevere, is no better than no policy at all. A number of implications for policy and economic analysis are drawn.

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