An Economic Perspective on Technological Transitions Related to Energy and Climate Change, with a Case Study of the UK

The paper discusses the concept of technological transitions and theories of how they might come about. It then relates this concept to current policy concerns about climate change and energy and presents research results about what a low-carbon energy system might look like and how it could be achieved. It then briefly explores the policy implications and possible macro-economic costs of moving to a low-carbon energy system. Technological transitions are relevant to climate change and energy because the energy system is a major technological system in society, and to reduce its carbon emissions dramatically, as is required if dangerous anthropogenic climate change is to be avoided, will require a full technological transition. There are many low-carbon technologies with the potential for large-scale deployment. Simulations suggest that the decarbonisation of the electricity system, involving any or all of carbon capture and storage, nuclear power and renewables, with increasing use of electricity in the residential and transport sectors, will be required. There may also be a role for bioenergy and hydrogen. In all cases strong public policies will be required to achieve large cuts in carbon emissions, involving carbon pricing, technology support and removing barriers to lifestyle and behaviour changes. Currently, while many different policies have been implemented, they have not been strongly enough applied to achieve sustained emissions reduction. Most models suggest that the macroeconomic costs of substantial cuts in carbon emissions are relatively small (1-4% GDP by 2050) compared to the costs of unabated climate change. However, the political costs of implementing the required policies may mean that politicians are unable in practice to prevent runaway climate change.