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3B2v8:06a=w ðDec 5 2003Þ:51cXML:ver:5:0:1 JEPO : 1652 Prod:Type:FTP
pp:1212ðcol:fig::NILÞED:Nagesh
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doi:10.1016/j.en
�CorrespondE-mail addr
Energy Policy ] (]]]]) ]]]–]]]
www.elsevier.com/locate/enpol
Globalizing carbon lock-in
Gregory C. Unruha,�, Javier Carrillo-Hermosillab
aInstituto de Empresa, Serrano, IE, Madrid de Molina 12, 105—Madrid 28006, SpainbInstituto de Empresa, Castellon de la Plana, 8—Madrid 28006, Spain
OOF
Abstract
This paper extends the arguments surrounding carbon lock-in elaborated in Unruh (Energy Policy 28 (2000) 817; 30 (2002) 317) to
countries currently undergoing industrialization. It argues that, for numerous reasons, industrializing countries are unlikely to
leapfrog carbon intensive energy development. On the contrary, carbon lock-in may be globalizing and could further constrain
climate change mitigation options. It is then argued that many policy recommendations ignore carbon lock-in, possibly limiting their
potential for successful implementation. The paper then discusses four policy approaches that appear to have advantages given lock-
in conditions. It is recognized, however, that relative ease of implementation does not necessarily equate with superiority. Instead, it
is merely a path dependent outcome of past development decisions. Pursuing policies on the basis of relative implementation ease
may help address the issue of climate change, but could also result in sub-optimal outcomes along other dimensions of sustainable
development.
r 2004 Published by Elsevier Ltd.
Keywords: Carbon lock-in; Leapfrogging; Developing economies; Technology transfer; Climate policy
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UNCORRECTED1. IntroductionA climate policy paradox exists. On the one handthere is substantial scientific consensus that climatechange is a real and present threat to humans and otherspecies uniquely adapted to current climatic conditions(IPCC, 2001). There is also a growing body of anecdotalevidence that climate change is already underway (Mannet al., 1998; WMO, 2003; Comiso, 2002; Caldeira andWickett, 2003; Beaugrand et al., 2002; Dickson et al.,2002). On the other hand there is evidence thattechnologies exist which can lower the carbon intensityof economic activity in a cost effective manner (NETL,2003; Harmelink et al., 2003; Anderson et al., 2000;Rohm, 1999; DeCanio, 1998; Union of Concerned
Scientists and Tellus Institute, 1998; Bernow et al.,1998; Koomey et al., 1998; Interlaboratory Working
Group, 1997; Alliance to Save Energy et al., 1997;Krause, 1996; Lovins, 1991; Sant, 1979). These technol-
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e front matter r 2004 Published by Elsevier Ltd.
pol.2004.10.013
ing author. Tel./fax: +34 915689619.
ess: [email protected] (G.C. Unruh).
Pogies include energy efficiency innovations as well assome renewable energy applications and their existenceappears to present a win-win, no regrets opportunity forpolicy makers to act on climate concerns (Johansson etal., 1993; Goldemberg et al., 1988). Herein lies theparadox. If such technologies exist, are cost effectiveand help minimize climate-forcing emissions, why aren’tthey diffusing more rapidly? Furthermore, why aren’tgovernment policies to promote them, about whichthere is substantial scientific and social consensus, moreaggressive or effective?
A reasonable explanation for this paradox is thatthere are barriers or inertia in the systems responsiblefor climate forcing emissions that constrain apparentlyrational choices on the part of economic and politicalactors. Previous articles (Unruh, 2000, 2001, 2002) havehypothesized that the paradox is a result of carbon lock-
in, a condition that has arisen through the historicdevelopment path followed by industrialized countries.The technological infrastructures responsible for thebulk of industrialized country carbon emissions—
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CORRECTED
electric power and automobile based transportation—can be considered techno-institutional complexes (TIC), aconcept which encompass the large physical infrastruc-tures themselves and the managing organizations,institutions and cultural practices that build andperpetuate them (Unruh, 2000). Previous articles haveargued that TIC emerge through a path dependentprocess driven by increasing returns to scale, which canfoster the emergence of numerous sources of quasi-irreversibility or lock-in. The TIC Framework hypothe-sizes that coupled, co-evolution among physical tech-nologies and social institutions is responsible for therelative stability of the system. While elements of thehypothesis are supported by a broad body of theoreticaland empirical work (Degreene, 1981, 1991, 1994;Williams and Edge, 1996; Yelle, 1979; Dutton andThomas, 1984; Alchian, 1963), and the framework hasbeen recognized as applicable in different nationalcontexts (Foxon, 2002, 2003), it must be treated, notas an established theory, but as a tool for organizingpolicy analysis within the context of large energy-basedsystems.
Experience shows that no technological systemremains in place indefinitely (Abrahamson and Rosen-kopf, 1997; Ruttan, 1997; Witt, 1997; Grubler, 1990;Ausubel, 1989) and in the presence of increasing returnsthere is always the potential that new innovations willdisplace currently dominant technologies. Recent agent-based simulation modeling pursued by the authors1 hashelped to clarify the role of increasing returns in theestablishment and displacement of technological inno-vations. The modeling supports the intuition thatincreasing returns can act as double-edged sword:driving innovations toward market standardizationand lock-in, while simultaneously holding out thepotential to destabilize the lock-in condition by theemergence of a new technologies. In the case of climatechange, in fact, researchers have asserted that renewabletechnologies may be on the verge of just such a marketaltering tipping point (Lovins and Heede, 1990; Lovins,1997; Lovins and Lehmann, 1999; Flavin and Dunn,1997; Flavin and O’Meara, 1998). While previousarticles have argued that carbon lock-in inhibits alter-native innovations from obtaining critical market mass,it is recognized that carbon lock-in only delays aninevitable technological transition (Unruh, 2000, 2002).The delay may be on the timeframe of decades (Rogers,1995), however, and its importance will ultimately
UN1Carrillo & Unruh, Stability and Change in Technological Networks
and Carrillo & Unruh, Technology Diffusion, Standardization and
Change: An Integrated Evolutionary Approach are currently under
review, however copies of the working papers can be obtained from the
authors. See also Carrillo (2003) Tecnologia Y Medio Ambiente: Una
Aproximacion Evolutiva al Cambio Tecnologico Sustentable. Tesis
Doctoral, Universidad de Alcala, Departamento de Fundamentos de
Economia e Historia Economica.
OOF
depend upon the capacity of biogeochemical cycles toabsorb increasing atmospheric concentrations of carbondioxide without unwanted climate disruption. If we arenearing these limits, then carbon lock-in could pose animportant social challenge.
This paper extends the arguments surrounding carbonlock-in to the question of countries currently undergoingdevelopment of their economies and national energyinfrastructures. Analysts predict that the bulk of futureenergy demand growth will occur in these countries(WEO, 2002) and the implications for the global climatewill be important. It has been claimed, however, thatdeveloping countries can potentially ‘‘leapfrog’’ indus-trial country experiences and move directly to low orzero carbon energy systems. Leapfrogging, in essence,allows developing countries to skip over the historicdevelopment phases that industrial countries havepassed though and move directly to state-of-the-sciencetechnologies. This assertion is challenged here and it isargued, instead, that developing countries are likely tofind themselves subject to carbon lock-in much like theirindustrialized neighbors. The following sections discussthe applicability of the leapfrogging hypothesis toenergy technology and then review selected barrierscreated by existing technology transfer mechanisms. Thefinal section of the paper integrates the arguments madein this article with those in previous papers to assess thepolicy implications.
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PR2. Avoiding carbon lock-in through technological
leapfrogging
Industrialized countries are subject to carbon lock-inbecause of their highly evolved TIC. In contrast,researchers have asserted that developing countries havean opportunity to avoid carbon lock-in because theyhave not yet built out their national energy infrastruc-tures. Their late comer status theoretically allows thesecountries to ‘‘leapfrog’’ straight to superior climatefriendly technologies and infrastructures (Goldemberg,1992, 1997, 1998; Murphy, 2001; Wallace, 1996; Tolbaand Rummel-Bulska, 1998; Loucks, 2002). This is animportant issue because, by some estimates, 70% ormore of future energy demand is expected to be indeveloping countries (WEO, 2002). The issue of whatconstitutes ‘‘energy leapfrogging’’ has been consideredin detail by Gallagher (2004). For the subsequentdiscussion, this article will consider climate-relevant
leapfrogging as the adoption of zero emission technol-ogies. This is because the combined goals of stabilizingCO2 concentrations at a doubling of pre-industrial levels(560 ppm), while simultaneously allowing a worldpopulation of 8–10 billion to share in this emissionsrate, will require the diffusion of effectively zero-emissions technologies or solutions (Lackner et al.,
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2Research by Gallagher (2004) shows in the case of technology
transfer from the US to China, that leapfrogging is only a potentiality,
and the existence of superior technologies does not necessarily mean
they will be transferred to developing countries.
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1998). At present, however, there is little evidence thatclimate relevant energy technology leapfrogging isoccurring. Zero carbon renewable energy technologies,including geothermal, wind, solar and tide, currentlyaccount for less than 1% of the world electricityproduction (IEA, 2003). Despite this, the leapfrogginghypothesis offers an attractive policy opportunity tohelp limit carbon lock-in to already industrializedcountries.
Because there is little evidence of leapfrogging in theenergy sector, we must rely on other sectors to provideanalogues for comparison. The telecommunications
sector is frequently referenced by academics and themedia as a successful case of technological leapfroggingby developing countries (Singh, 1999; Miller, 2001). Inthis case, a set of countries have passed over the historicindustrial country approach of installing costly landlinetelecommunications networks and instead have moveddirectly to cellular telephony. The reason for thistransition according the International Telecommunica-tions Union is that ‘‘It is easier to start from scratchthan to have a transition period where there are old andnew technologies that need to be brought togethery Infact, the only countries with 100 percent digital net-works tend to be developing countries’’ (IHT, 1999). Atouted example of leapfrogging success is China, whichin 1999 became the country with the largest number ofcellular telephone users, beating out industrializednations like the US and Japan (ITU, 2003). Othercountries such as India, Indonesia, South Africa andMexico are largely skipping over traditional telephonenetworks in favor of cellular communications technol-ogies (Gray and Sanzogni, 2004).
A number of parallels between mobile telephony andzero emissions distributed energy generation technolo-gies, which include solar, wind turbines and potentiallyfuel cells, indicate that there may be similar opportu-nities for developing countries to experience leapfrog-ging in energy technologies. Both cellular anddistributed energy technologies can be built largelywithout a physical network of wires and other long-distance transmission assets (Huber et al., 1992). Bothtechnologies are also modular, allowing capacity to beeffectively expanded as demand increases. They can beinstalled quickly and can cover geographically challen-ging or remote areas where the ‘‘user density’’ is low.These and other similarities could theoretically allowenergy infrastructure developments to follow a similarpattern as cellular telephony.
However, while the parallels seem to indicate energytechnology leapfrogging is possible, the example ofcellular telephony leapfrogging needs to be criticallyreviewed for its applicability to current energy situation.One of the keys to the rapid adoption of cellularnetworks by developing countries appears to be the factthat the technology had been substantially developed,
PROOF
refined and commercialized by industrial countriesdecades before the developing country investments.Analog cellular telephony was invented in AT&T’s BellLaboratories in 1947 and was derived from Marconi’s1897 radio transmission technology (Agar, 2003). Thefirst cellular phone system was built in Japan in 1979and was followed by large scale deployment in the USand Europe during the 1980s. Extensive adoption inindustrial countries moved the technology into a periodof self-sustaining growth, resulting in accumulatedtechnological learning that has reduced uncertaintyand costs, while increasing reliability and service quality.Market expansion has also fostered the growth ofnumerous experienced vendors such as Motorola,Nokia, Ericsson, Toshiba, NEC and Samsung thatmanufacture, install and manage cellular systems. Someof this technology, like handsets, are commodityproducts which are mass produced in developingcountries themselves. The accumulated learning andrefinement, generated within industrial countries, hasbeen a key factor facilitating the rapid transfer todeveloping countries.
Except for possibly wind turbines, distributed energytechnologies have not yet experienced large scaleadoption or commercialization and are a long way frombecoming mature commodity products. In fact, it can beargued that their potential development and adoption iscurrently being impeded in industrialized countries bythe condition of carbon lock-in. The mobile telephonycase points instead to conditionality: leapfrogging
appears possible when the technological leaders, which in
most cases are industrial countries, have already devel-
oped and deployed the technology successfully. Thisshould not be a controversial assertion as analysts havelong argued that developing countries lack the capacityfor autonomous technological development and remaindependent on industrial countries for their technology(Duchin et al., 1995).2 Unfortunately, large scale climaterelevant leapfrogging appears unlikely in the near term,a fact that creates important challenges for globalclimate policy development.
3. The transfer of carbon lock-in?
While leapfrogging directly to a zero-carbon economyis not readily supported by the telecommunicationsexample, there are other reasons to question whetherrapidly industrializing developing countries like Chinaand India will escape carbon lock-in. These countrieswill continue building energy and transportation infra-
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structures over the coming decades, relying heavily onmultinational corporations for the required technologi-cal capital (European Commission, 2003). While tech-nological transfer is a complex process influenced bymany stakeholders (Metz et al., 2000; Martinot et al.,1997), the types of energy capital transferred hashistorically depended strongly on (1) capabilities oftechnology vendors, (2) the preferences of the organiza-tions financing development projects and (3) the hostgovernment development policies (Chatterji, 1990;Rosenberg and Fritschtak, 1985).3 If we examine theseinfluences on the transfer of energy technologies we canfind additional challenges for leapfrogging in the nearterm.
Most energy technology available for transfer is in thehands of large, profit-driven multinational corporations(Bertin and Wyatt, 1988). In the case of the powersupply equipment sector, the industry’s increasingreturns driven, winner-takes-most dynamic has lead toa consolidated, oligopolistic market dominated by ahandful of transnational giants (Sagar and Holdren,2002). The nature of supplying large technologicalsystems tends to favor enterprises large enough todeliver complete packages of capital, expertise, man-power and financing. The core competencies of thesecompanies reside in supplying relatively standardizedhydrocarbon-based technology packages and projectsthat can be adapted to local conditions. Logically, suchfirms have a preference for marketing their existingprofitable technologies rather than pushing for theadoption of alternatives. In fact, organizational studieshave shown that large established companies are oftenincapable of commercializing alternative technologiesthat can make their current products obsolete (Ven deVen, 1986; Leonard-Barton, 1992; Christensen, 1997).Issues surrounding the transfer of intellectual propertyrights (IPR), especially to countries where legal frame-works may not provide strong protection, can furtherinhibit transfer (Safarain et al., 1987). Thus currenttechnology vendors should not be expected to facilitateleapfrogging.
The way in which infrastructure development indeveloping countries is financed also creates challenges.Financing comes largely from three sources: the publicsector, the private sector and bi/multilateral institutions(World Bank, 2000). Historically, most power infra-structure has been funded from government budgets orgovernment sponsored borrowing. However, with pri-vatization and the shrinking of deficit spending, privatefinancing is taking on an increasingly important role(Martinot et al., 1997). In general, private financing forenergy projects needs to compete with alternative
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1113The technology transfer literature is immense and may other
variable have been identified. See Reddy and Zhao (1990) and
Martinot et al. (1997) for literature reviews.
PROOF
investments and is evaluated on the basis of relativeexpected returns. Recent global economic growth hasincreased the competition for private capital and hasdriven up expected rates of return raising the investmenthurdle for development projects. Currently the energyinvestments that provide the highest rates of return, andare thus most attractive to private lenders, are extractionprojects that generate oil and hydrocarbon products forexport to industrialized countries (WEC, 1997). Non-export energy investments, in contrast, face importanthurdles and nontraditional, carbon-saving technologiesare often the most handicapped. Private lenders are riskaverse and require returns within a relatively shortperiod of time, something which biases private fundsaway from carbon saving technology investments(Grubb, 1994). Thus, barring market changes, privatefinancing is unlikely to be a strong motivator of energytechnology leapfrogging.
Multilateral banks and export credit lending andinvestment insurance agencies (ECAs) also play aninfluential role in financing developing country energyprojects (Philips, 1991; Baum and Tolbert, 1985). Whilesome of these institutions have begun investing inalternative technologies, their policies in general con-tinue to favor traditional, albeit ‘‘cleaner’’, fossil fuelenergy projects. One analysis estimated that 40% ofmultilateral institutional investments have gone tosupport fossil fuel power plants and oil and gasdevelopment (Maurere and Bhandari, 2000). Theemphasis on profitable projects should not be surprisingonce it is recognized that, despite being publiclysupported, multilateral funding agencies are fundamen-tally banks that must respond to market pressures andhave their loans repaid. This reality will likely create acontinued preference for established, carbon-basedenergy installations, even as these institutions experi-ments with limited funding of carbon-saving projects.
Finally, the policy of the importing host country playsan influential role in the process of technology transfer(Chatterji, 1990; Reddy and Zhao, 1990). Manycountries, especially in Asia, are promoting rapid
industrialization through the adoption of policies,regulatory frameworks, and development strategies thathave proven successful in industrial countries. Animportant element of this development approach is theaccelerated construction of key industrial infrastruc-tures, like energy and transportation networks. In thiscontext, fossil fuel-based energy technologies appear tobe proven, low relative cost solutions that can respondto the demands of rapid industrialization and quicklyprovide needed power. However, adoption can becomea path-creating choice that can set a positive feedbackcycle in motion leading to ongoing reinvestment in fossilfuel based energy technologies. Rapid growth fostersincreases in industrial capital that can quickly escalatedemands for energy, a situation that has lead to
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Deg
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Fig. 1. Policy proposals that address centralized CO2 emission
sources. This figure maps proposed policy solutions that can address
centralized emission sources like electric power plants. CCS=carbon
capture and storage. CCR=carbon capture ready. SNM=strategic
niche management.
G.C. Unruh, J. Carrillo-Hermosilla / Energy Policy ] (]]]]) ]]]–]]] 5
shortages of power in many industrializing countries(Yardley, 2004). However, unreliable power can deterinvestment and can put industrialization efforts injeopardy. Governments thus face increasing pressureto rapidly expand power generating capacity to meet therising demand created by the original industrializationpolicies. This positive feedback process will likely favorongoing and expanding investments in readily availablefossil fuel-based technologies.
If the above reasoning is accepted, then leapfrogginglike that seen in the telecommunications sector isunlikely to play a major near term role in energydevelopment. A general rule may be that latecomers cancatch up and adopt established, even state-of-the-arttechnologies, but they usually do not surpass thetechnological leaders. If climate relevant leapfroggingrequires the rapid diffusion of zero carbon energytechnologies, then leapfrogging should not be expectedto play a major role in the near future. Instead, rapidlyindustrializing countries may prefer proven ‘‘off-the-shelf’’ prosperity they see created by the growth ofindustrial country TIC. Successful replication could beseen as a ‘‘low risk’’ path to create wealth, jobs andeconomic growth which are desperately needed indeveloping countries. While the diffusion of renewableenergy technologies would certainly be helped byadoption in developing countries, and could even someday become disruptive innovations in advanced coun-tries themselves (Hart and Christensen, 2002; Prahaladand Hart, 2002), this seems unlikely to occur beforemany industrializing countries find themselves in asituation of carbon lock-in.
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4As observed by Robert Socolow at the Columbia University
Carbon Roundtable, Fall 2001.5We credit London School of Economics researcher Richard Perkins
with coining this term.
UNCORRECTE4. Policy implications
The bourgeoisie, by the rapid improvement in allinstruments of production, by the immensely facili-tated means of communications, draws all, even themost barbarian, nations into civilizationyIt compelsall nations, on pain of extinction, to adopt thebourgeois mode of production; it compels them tointroduce what it calls civilization into their midst,i.e., to become bourgeois themselves. In one word, itcreates a world after its own image.
(Karl Marx and Friedrich Engels, The CommunistManifesto, February, 1848).
Marx was wrong about a great deal, but many of hisinsights into the functioning of capitalist economicdevelopment and globalization resonate today. Theprocesses of technology transfer and the policies ofrapid industrialization appear to favor the adoption ofexisting, proven fossil fuel based energy and transporta-tion systems by developing countries. Despite thegradual decarbonization of industrial economies (Naki-cenovic, 1996), carbon, like the state, is not withering
PROOaway.4 At least not at a rate that can guaranteeunwanted climate disruption can be avoided. Instead,it has been argued that carbon lock-in may becomeglobalized and that large developing countries, if theyare successful at rapid industrialization, they willbecome ‘‘carbon copies’’5 of their industrialized neigh-bors. This section of the paper intends to integrate theobservations made in this paper with those made inprevious articles (Unruh, 2000, 2002) in order toconsider the larger implications for global climatepolicy.
Specifically, this section reviews four existing climatepolicy proposals from the perspective of techno-institu-tional lock-in. These proposals include strategic niche
management, carbon capture and storage, capture-readydesigns and air capture of carbon dioxide. The followinganalysis differentiates the proposals along three dimen-sions, which are presented in Figs. 1 and 2. First, thispaper has identified the ‘‘degree’’ or ‘‘intensity’’ oftechno-institutional lock-in experienced by a givencountry as important, basically differentiating betweenindustrialized and developing countries. This distinctionis illustrated along the Y-axis of Figs. 1 and 2. Second,Unruh (2002) categorized policy options by howdisruptive they are to preexisting dominant systems.
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Fig. 2. Policy proposals that address decentralized CO2 emission
sources. This figure maps proposed policy solutions that can address
decentralized or dispersed emission sources like automobiles or
aircraft. SNM=strategic niche management. AC=air capture.
G.C. Unruh, J. Carrillo-Hermosilla / Energy Policy ] (]]]]) ]]]–]]]6
UNCORRECTED
The most disruptive options, termed discontinuity,
require the replacement of entire systems with analternative climate friendly infrastructure. Continuity
approaches, in contrast, are less disruptive and seek themodification of select components while maintaining theoverall system architecture. Finally, the least disruptivealternatives are end-of-pipe (EOP) approaches, whichmake no change to the system, but treat offendingemissions. This dimension, which represents the degreeof system disruption, is represented in the figures alongthe X-axis. Finally, separate figures have been generatedfor the two TIC in question—automobile-based trans-portation and electricity generation. This is importantbecause electricity generation generally constitute cen-
tralized emission sources (power plants) while auto-mobile-based transportation are decentralized ordispersed sources. This distinction obviously conditionsthe applicability of any potential technological solu-tions. The following sections discuss the proposals inorder from most to least disruptive to existing techno-logical systems.
For the reasons discussed below, these approachesappear to be viable given the carbon lock-in argumentsmade in this and previous articles. However, while thesepolicies may exhibit a relative ‘‘ease’’ of implementationwhen compared with other alternatives, this in no wayimplies that they are superior. Climate change can beviewed as, not only an issue of energy technology, butalso as a problem within the larger context of sustain-able development. While the policies discussed in thissection may help alleviate climate change, it is possible
PROOF
that they could exacerbate other sustainability problemssuch as local pollution, urban sprawl, global inequity,resource depletion or other such concerns.
4.1. Strategic niche management: a discontinuity
approach
Discontinuity entails path breaking or radical innova-tions (Garud and Peter, 2001) that make current systemsobsolete. strategic niche management (SNM) is a policyapproach that seeks to foster such market transforminginnovations. The SNM concept was elaborated in thelate 1990s dominantly by Dutch investigators (Rip,1992; Schot, Hoogma and Elzen, 1994) and is defined asa process oriented towards creating and managingspaces in which a new technology can be used anddeveloped (Weber, Hoogma, Lane and Schot, 1999).These ‘‘protected spaces’’ allow for the initial experi-mentation and learning about technological character-istics, systemic needs, market demands andorganizational and institutional dependencies neededto usher an innovation to the point of self sustaininggrowth. In theory, SNM can be effective in bothtransportation and power sectors, and thus appears onthe right-hand (discontinuity) side of both Figs. 1 and 2.
A frequently cited example of successful nichedevelopment is the Danish wind turbine industry, whichinitially emerged among a small group of activists andgrassroots innovators in the 1970s (Kemp et al., 2001).Networks of hobbyists and small manufactures builtknowledge and experience about turbine design andproduction that resulted in substantial improvements inperformance. Furthermore, lobbying by these groupsfostered government support in the form of regulatorychanges and ministerial investments in turbine R&D. Asthe market for wind energy expanded, Danish firmswere well placed to participate in, and indeed facilitate,global growth of the industry. As a result the Danishwind energy industry is the current world leader,commanding 50% of the global market and generatingover $3 billion (US) annually.
The assertion is that similar SNM efforts couldprovide other zero-carbon and renewable energy tech-nologies with the ‘‘breathing space’’ that facilitates theirnurturing to an increasing returns tipping point. Animportant consideration for systemic energy technolo-gies, however, is that the niche allow for the full systemto be developed and evaluated. For energy technologies,niches must permit development, experimentation andlearning about both component technologies and theirsystemic interdependencies. An SNM approach for fuelcell systems, for example, could seek large enough nichesin bus or fleet vehicles where predictable travel paths,itineraries and centralized fuelling infrastructure allowfor the testing of complete systems. Similarly, withoutexplicitly acknowledging the SNM concept, Farrell et al.
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(2003) argue that marine uses could serve as a niche forhydrogen technology development, a suggestion thatparallels Thomas Edison’s use of ships for his firstelectric lighting system.
There are theoretical and empirical reasons to believethat the SNM policy approach can be implemented,even in the face of carbon lock-in. On the one hand,research shows that established companies controllingdominant designs tend to consider niche marketsinsignificant (Christensen, 1997). This is because largeenterprises require large markets to generate the growthexpected by shareholders and to support existing coststructures. Niche markets cannot meet these needs,implying that SNM initiatives are likely to be seen asnon-threatening to powerful TIC interests. On the otherhand, because they don’t threaten politically importantconstituencies, governments could find fostering nichemarkets politically attractive. SNM policies couldprovide a response to political pressure for action onclimate change, justified on the grounds that the socialand environmental benefits of climate change mitigationare undervalued by markets. Thus SNM policies appearviable even in the face of carbon lock-in.
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4.2. Carbon capture and storage: a continuity approach
While discontinuity approaches appear capable ofresponding over decadal time frames, it is possible thataction on climate change will be needed before SNM-fostered innovations can make a meaningful impact. Ifso, then continuity strategies must also be consideredpart of a larger policy response. Continuity, bydefinition, means operating, or making changes, withinthe constraints of the existing techno-institutionalframework. Continuity policies are ideally near-termapproaches, applicable within the current decade, withthe speed of implementation resting on the acceptance ofthe TIC structure and established development path.Ideally these approaches align the interests of currentlydominant corporations and government institutionswith the goals of climate change mitigation. In thisvein, journalist Ross Gelbspan once remarked that thepatents for renewable energy technologies should betransferred to the major oil and gas companies, reason-ing that this would align their economic interest withgoals of climate policy. Unfortunately, it is equallypossible that the corporate recipients of these patentswould delay their commercialization in order to max-imize profits from existing fossil fuel-based assets.However, the fundamental element of the proposal,seeking to align the interests of current TIC beneficiarieswith the goals of climate protection, provides theconceptual basis for continuity approaches. Instead ofgiving away renewable technology patents, however,incentives should ideally foment the natural inclination
PROOF
of dominant actors to preserve the value of their existingassets and competencies in the face of climate change.
One approach that could gain buy-in by powerful TICmembers are carbon capture and sequestration (CCS)strategies. These policy approaches—located in theupper right (continuity) quadrant of Fig. 1—are basedon a suite of techniques that capture, store and managethe carbon dioxide released by the use of fossil fuels(Lackner et al., 1998; Herzog et al., 1997, 2000). Forreasons of scale, most CCS recommendations focus onthe capture of CO2 emissions from centralized sources,such as electric power stations. While sequestrationoccurs naturally though biomass growth, industrialsequestration has only been practiced on a limited scale.Current sequestration efforts rely on the injection ofconcentrated CO2 streams into geologic formations,often to enhance resource recovery, but other sequestra-tion possibilities exist including deep ocean disposal ormineralization to carbonate (Herzog et al., 2000;Lackner et al., 1998). In order to be effective thecaptured CO2 has to be stored quasi-permanently andthere are still unanswered questions about the cost,safety, permanence and environmental impacts of thevarious sequestration alternatives.
If deemed practicable, CCS could become a con-tinuity strategy that preserves much of the existingpower infrastructure including grids, production facil-ities, transmission assets and end use technologies.Because it is easiest to capture concentrated streams ofcarbon dioxide at centralized power generation sites,only the generation components of the system aresubstantially altered, potentially leaving the remainingarchitecture largely in tact. Retrofitting existing plantsfor carbon capture appears to incur a substantial energypenalty and thus inflicts a possibly prohibitive economiccost. However, some analysts indicate that new plantdesigns can capture CO2 without an energy penalty(Herzog et al., 1997). An important initiative along theselines is the creation of zero emissions power plants thatconvert fossil fuels into carbon-free hydrogen (Lackner,2000), something that could facilitate a transitiontowards a hydrogen-based economy.
Is CCS viable given carbon lock-in? There are reasonsto think that CCS can foster a broad enough coalition ofinterests to permit the advance of policy initiatives. CCSappears to be of interest to fossil fuel energy companiesbecause it can preserve much of their existing invest-ments in technology, know-how and durable capital.Some corporate initiatives to develop CCS are alreadyunderway, such as the British Petroleum-sponsored CO2
Capture Project which brings together eight energycompanies for the joint development of capture tech-nologies. Similarly, the Zero Emission Coal Alliance
(now ZECA Corporation) assembles nine energy firmsand industry associations to commercialize CCS tech-nologies. CCS is proving attractive to governments as
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well, especially in the US under the Bush Administra-tion. The US Department of Energy and the US StateDepartment have lead in the creation of the ministeriallevel Carbon Sequestration Leadership Forum to fosterinternational cooperation and public-private partner-ships for the development of CCS. The US has furtherpledged US$1 billion to build FutureGen, a prototypecoal-fired plant with integrated CCS. The emergingpublic-private interest and cooperation around CCSindicates the potential to advance this approach in theface of carbon lock-in.
CCS faces criticism, as well, especially from envir-onmentalists who fault CCS on the basis of long-termsafety and the impacts of diverting investment awayfrom alternative renewable energy approaches. Theseare important concerns, but in some cases there is adeeper distrust of CCS and related solutions. In certainenvironmental discourses, the problem is that CCS doesnot get rid of fossil fuels, which to many critics is the realissue. Some of the environmental criticism could betempered by the fact that, if properly managed, CCScould represent a step toward the hydrogen economy, anidea that environmental groups tend to favor. Zeroemissions coal plants could be built to producehydrogen as the energy carrier, thus providing thesupply need to power a hydrogen economy. In this wayCCS could be framed as part of a bargain or politicaldeal among environmental groups advocating movestowards the hydrogen economy and current TICbeneficiaries seeking to maintain the value of theirassets and investments. Such a consensus could go along way in advancing climate protection policies in theface of carbon lock-in.
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approach
CCS will be developed in advanced countries for anumber of reasons including technological capability,societal pressures and government directed R&Dprograms. If carbon lock-in globalizes, however, thetransfer of these solutions to developing countries willbecome increasingly important. Over the next threedecades the amount of coal generated electricity isestimated to double, and approximately three-quartersof the new capacity (over 1000GWatts) is expected to bebuilt in industrializing countries like China and India(WEO, 2002). If these facilities are built as traditionalcoal fired power plants they will become locked-inelements of national TIC and their climate impact willbe significant. Given this reality, a rational approachwould be to invest in options that provide for futureflexibility in adopting CCS by these installations. Suchan approach could be what Natural Resources DefenseCouncil policy expert David Hawkins calls carbon
capture-ready designs (CCR).
PROOF
CCR relies on pre-investment to build CCS-readyfacilities that can accept the future installation of carboncapture and sequestration technology, which maintain-ing the option of rendering plants carbon neutral in thefuture. This option is represented in the upper left-hand(continuity) quadrant of Fig. 1. An initial study on thecost to build capture ready plants estimated anincremental increase of 9% in the construction cost ofa 100GW plant (Hawkins, 2003). If this is correct, thena global investment of over US$100 billion may berequired over the next three decades to provide themarginal cost for CCS enabled capacity in industrializ-ing countries. Funding these marginal costs would be animportant challenge and would most likely requireinternational cooperation. Assuming interest in pursu-ing CCR, vehicles for cooperation could include existinginternational organizations or the creation of a newagreement dedicated to addressing the problem specifi-cally.
Is such an approach viable given carbon lock-in?Again, it is a continuity approach that could potentiallyalign public and private interests, possibly through aninternational mechanism designed to fund the requiredincremental costs. There are obviously precedents forsuch funding. The Global Environment Fund (GEF),founded after the 1992 Earth Summit, provides incre-mental funding needed to mitigate environmentalexternalities from development projects. Despite theproblems with implementation, the GEF has dispersed$4.5 billion overall and funded 61 energy projects(Martinot et al., 1997). Similarly, Articles 6 and 12 ofthe Kyoto Protocol established joint implementation(JI) and the clean development mechanism (CDM) tohelp developing countries foster reductions in green-house gas emissions. These mechanisms are still evol-ving, but they could provide a vehicle to facilitateinternational cooperation in CCR investments. Alter-natively, a purpose-specific mechanism could be devel-oped along the lines of the Multilateral Fund (MF),established in 1991 under the Montreal Protocol onSubstances that Deplete the Ozone Layer. The MF wasdesigned to help developing countries eliminate ozone-depleting substances under the protocol timetable.Climate policy makers may find an agency focusedspecifically on funding carbon capture ready invest-ments could streamline consensus building and agencyoperations.
4.3. Air capture of carbon dioxide: an end-of-pipe
approach?
CCS, the construction of CCR power plants and thepromotion of niche markets for carbon-free energytechnologies are policies that appear feasible and couldset the world on a path towards climate neutral energy.However, these solutions only deal with future emissions
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and do not address the CO2 already in the atmosphere,or the possible changes already underway. It may bethat past carbon emissions have already set in motionunwanted climate change that will require a policyresponse. Dealing with already emitted carbon willrequire capturing and sequestering CO2 from the air.Currently, biomass sequestration is the only practicalform of air capture, but researchers from ColumbiaUniversity, Los Alamos Laboratories and Carnegie-Mellon University have theoretically demonstrated thefeasibility of the industrial capture of CO2 from theatmosphere. Such a technological option could beconsidered the ultimate end-of-pipe solution to theclimate problem and holds the potential to alter thepolitical debate surrounding climate policy. Because ofair capture’s (AC) ability to address decentralizedsources it is located in left-hand (continuity) side ofFig. 2, however, AC can theoretically deal with all CO2
emissions regardless of the source.AC researchers envisage a system based on a series of
collectors, approximately the size of windmills, strategi-cally located near carbon sequestration sites. Thesecollectors could take the form of football goalposts withhorizontal slats (like Venetian blinds) strung betweenthe posts. A strong alkali, such as calcium hydroxide,would pull CO2 out of the air flowing over the collector,capturing it for subsequent sequestration (Lackner,2000). Theoretically, the atmospheric concentration ofCO2 is high enough to make collection sufficientlyefficient to capture more CO2 than is released by theenergy needed to run the process. Research has movedinto the engineering design and demonstration phase(Lackner et al., 1999) and while preliminary costestimates are high, they do not appear to be prohibitive(Keith et al., 2003). Operating costs are concentrated inthe regeneration of the sorbent, but the analysts arguethat they are likely to come down as better sorbents andtechniques are developed.
If indeed feasible, there are several factors that couldmake the approach practicable in the face of carbonlock-in. The technology is scalable and could be triedfirst in low cost, low risk pilot plants. If successful, ACcould be scaled up to nearly any level of removaldeemed necessary. Capture facilities could be locatedanywhere in the world, presumably close to the mostcost effective disposal sites. Perhaps most importantly,however, is the fact that air capture can deal with bothcentralized (stationary) or dispersed (mobile) sources,allowing the continued operation of existing systemswithout disruption (Lackner, 2000). This would permitexisting transportation and electric power TIC to berendered carbon neutral without major changes, thusavoiding many of the barriers created by carbon lock-in.Furthermore, the construction of a parallel, independentair capture infrastructure avoids ‘‘contrivances’’ orinefficient alterations of existing systems, allowing both
PROOF
the energy and capture systems to be simultaneouslyoptimized.
Thus, from a path dependent perspective, there areadvantages in pursuing air capture. There may also bepotential advantages from a political and institutionalperspective. It is possible, for example, that AC could bemade consistent with established principles of interna-tional environmental law. First, it could be madecongruent with the Polluter Pays Principle by requiringindustrialized countries, which have liberated most ofthe anthropogenic carbon dioxide now in the atmo-sphere, to pay for the mitigation of the atmospheric‘‘pollution’’ they have created. Building systems toremediate the atmosphere could provide a vehicle tomeet this requirement. Industrial countries might alsomore readily accept the responsibility of ‘‘cleaning up’’past emissions than demands that they alter theircurrent development path and associated life styles.Furthermore, the 1992 United Nations Framework
Convention on Climate Change also calls for industria-lized countries to take the lead in resolving the problem,something that could be demonstrated by remediatingtheir past climate ‘‘pollution.’’ This might also be seen asa ‘‘fair’’ international solution to the climate problem asindustrial countries become responsible for removing allor part of the carbon dioxide they have historicallyreleased, providing developing countries with theopportunity to increase energy use to meet theireconomic development needs. However, by makingfossil fuels climate neutral, AC is also likely toexacerbate carbon-based path dependency and intensifythe lock-in of fossil fuels in the near term. Clearly,because air capture allows the industrial closure of thecarbon cycle, it is quite a disruptive technology and idea.Yet it should also be seen as an important change inhuman environmental management, a point expandedupon below.
5. Conclusion
It has been asserted that industrial countries arelocked into a carbon economy and that the rest of theworld may follow in the same path. If climate change isdecades off, then we may be able to wait for a renewableenergy economy to emerge with out intervention. But ifunwanted climate change is already underway, then itappears we will need to make sure that the ‘‘sustainablecarbon economy’’ is not an oxymoron. The approachesin the preceding section have elements that facilitatetheir implementation in the face of carbon lock-in.However, just because they may face less relative inertiadoes not mean they will be easy to implement.Furthermore, there are other interesting policy ap-proaches which have not been discussed, even thoughthey could provide reasonable solutions to the climate
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problem and it is recognized that the relative ease ofimplementation does not necessarily equate with desir-ability.
One of the options, CO2 capture from air, couldconceivably be a source of intense debate. Becausecarbon capture permits the industrial closure the carboncycle, it is the only solution that allows us to remediatethe atmosphere. Such a technology, however, bringsimportant challenges. While carbon capture is techno-logically a continuity approach, it may be quitedisruptive from the perspective of our species’ sharedexistential and philosophical schema. We have beenunconsciously ‘‘controlling’’ climate variables for a verylong time,6 but these impacts have largely been theunintended consequences of our technological designsor involuntary outcomes of human activity. By under-taking carbon capture, humans take control of a majorclimate variable, consciously and voluntarily. Ourpotential ability to turn the global thermostat up anddown at will could create existential questions abouthumankind’s relationship vis-a-vis the natural world,questions that could form the basis of philosophicaldebate for the next several decades.7 But it also has apractical implication, in that we do not know how to runa climate, let alone manage the huge number ofassociated systems variables likely to be impacted byclimate change. Our fiddling with the global thermostatwill inevitably be misguided—because we have scarcescientific basis to guide us—and could lead us into evengreater ecological danger than we currently face.
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Allen and Starr, 1982; Anderson and Tushman, 1990;Arthur, B., 1994, 1983, 1988, 1989, 1990, 1994a, b;Baumol and Oates, 1988; Button and Pentecost, 1999;CETC, 2001; Cooper and Schendel, 1976; Cowan, 1990;Cowan and Gunby, 1996; Cowan and Hulten, 1996;Davies, 1996; Economides, 1996; Farrell and Saloner,1986a, b; Grubler, 1990; Henwood, 1998; Islas, 1997;Katz and Shapiro, 1985, 1986a, b; Keeler and Ying,1988; Krueger, 1974; Leiserowitz, 2003; Lowi, 1979;Menanteau, 2000; Mesarovic et al., 1970; Morgan andDowlatabadi, 1996; North, 1981, 1990; Parmesan andYohe, 2003; Pierson, 2000; Rosenberg, 1976; Rothmanand Robinson, 1997; Simon, 1957; Smith, 2003;Williamson, 1975; Williamson, 1985, 1997; Winston,1991.
1096Recent studies indicate the impacts of the agricultural revolution,
which predates the fossil fuel-based industrial revolution by 8 to 10
thousand years, can be detected in the climate records (Ruddiman,
2003).7Allenby (2002) begins this debate.
PROOF
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