Competitive Diffusion and Sustainability Transitions: The Case of Plastics Recycling Technologies

Climate change calls for a transition to a more sustainable economy. Incumbent technologies pose a barrier to the diffusion of innovative solutions. Furthermore, the benefits of novel sustainable practices, such as recycling, can be offset by the adoption of obsolete polluting technologies. Understanding the mechanism of competitive diffusion is crucial for designing policies that favour promising but underdeveloped technologies. We propose an agent-based model where adoption occurs in a social network by word-of-mouth, in a percolation framework. We study how learning affects competitive diffusion and find that small differences in technologies' costs lead to large differences in their diffusion sizes. In addition, increasing the number of early adopters can back-fire and hinder overall diffusion. We calibrate the model to data on plastic waste recycling, where alternative solutions such as mechanical and physical/chemical technologies compete for a new market. Green public procurement, tax exemption and R&D boost are implemented for triggering sustainable transitions. The direction of technical change is discussed, as well as the role of policymakers in creating a shift in the plastic value chain.