sectoral economic costs and benefits of ghg mitigation - IPCC

Renewable Energy
- the socio-institutional context and structural factors, which are often analysed as being
incorporated in National Systems of Innovation with strong characteristic features (Lundvall).
The direction of TC: inducement factors to deterministic and reversible changes
While in the two previous approaches the direction of TC is either purely exogenous or
endogenous to the process of innovation, the inducement theory tries to assess the role of factors
which are both exogenous to the technological system considered and endogenous to the
economic system as a whole. Particularly, the “Demand-Pull” vs. “Supply-Push” controversy has
been dealing with the identification of the factors explaining the direction of TC. On one hand
Schmookler (1966) emphasised the role of demand (market size and growth) as the key
inducement factor for innovation. On the other hand, “Supply-Push” theories advocate the
importance of either the relative abundance or scarcity of the relevant factors of production, or of
the available sets of technological opportunities in the dominant direction of technological
progress.
In the “Supply-Push” perspective, public policies - be they R&D expenditures, or “market
access”, or any type of regulatory policy - may have decisive impacts on TC. Very few attempts
have been performed in order to analyse, in a theoretical perspective, the design, implementation
and impacts of TC inducement measures in a public policy perspective.
It thus appears from this review of the literature that most of the concepts and mechanisms
analysed in the existing literature on technical change have their relevance and that most of the
on-going controversies seem to derive from the relative importance attributed to different
phenomenon by different authors. In the same way that the circular scheme proposed by
Rosenberg allows to supersede the “Demand-Pull” vs. “Supply-Push” controversy, some
progress could probably derive from Ruttan’s proposal to combine the “induced TC” perspective
with the “path-dependency” perspective, while also taking into account the public policy issue
(Ruttan, 1996).
“There remains however the need for a more complete integration of the theory of induced
innovation and of the theory of path-dependent technical change with the theory of incentive
compatible institutional design. […] The incentive compatibility problem has yet not been solved
even at the most abstract theoretical level. It represents however, a missing link in the effort to
harness induced technical change and path-dependent technical change theories to confront the
problem of environmental change.”
The two following sub-sections successively address, in a more empirical perspective, the key
inducement factors and path-dependent features of TC for energy technologies.
2.2. Inducement factors: a brief review of past energy R&D policies of major industrialised
countries
R&D expenditure stimulates technology improvement and today’s technology dynamics depend,
to a large extent, on accumulated scientific and technological knowledge. In the energy sector,
public R&D budgets increased considerably in the early seventies, as an answer to the challenges
posed by the oil shocks. Although the results of these large public energy R&D (PERD)
programs have been mixed, it is important, in order to understand current and future energy
technology dynamics, to characterise the effort and the stock of knowledge accumulated during
the past twenty five years.
This sub-section aims at giving a consistent description of past PERD spending in the G7
countries. Budgets are first analysed on a year by year basis in order to identify trends and
structural changes. Cumulative public research is then examined for a set of key technologies,
and is considered as a “proxy” for accumulated knowledge for each group of technologies.
110