Learning-by-doing, Learning Spillovers and the Diffusion of Fuel Cell Vehicles

Fuel cell vehicles (FCVs) running on hydrogen do not cause local air pollution. Depending on the energy sources used to produce the hydrogen they may also reduce greenhouse gases in the long-term. Besides problems related to the necessary investments into hydrogen infrastructure, there is a general notion that current fuel cells costs are too high to be competitive with conventional engines, creating an insurmountable barrier to introduction. But given historical evidence from many other technologies it is highly likely that learning by doing (LBD) would lead to substantial cost reductions. In this study we implement potential cost reductions from LBD into an existing agent based model that captures the main dynamics of the introduction of the new technology together with hydrogen infrastructure build up. Assumptions about the learning rate turn out to have a critical impact on the projected diffusion of the FCVs. Moreover, LBD could imply a substantial first mover advantage. We also address the impact of learning spillovers between producers and find that a government might face a policy trade off between fostering diffusion by facilitating learning spillovers and protecting the relative advantage of a national technological leader.