Socio-technical transitions towards sustainability: Dynamics and policy implications Professor Frank Geels SPRU, University of Sussex 12 th International Conference on Industrial Technology Innovation (‘Heading towards a sustainable future’) Taipei, Taiwan, August 2011

Structure 1. Introduction 2. Multi-level perspective 3. Policy implications (and dilemmas) 4. Relevance for Taiwan 5. Concluding comments

1. Introduction: Green growth and green economy are hot topics

Green growth/economy entails “systemic changes across the entire economy” (OECD, 2011: 16) “fundamental rethinking of our approach to the economy” (UNEP, 2011: 38) “business as usual would consign us to gradual decline” and that “it is the time to the bold and ambitious” (Europe 2020 Strategy)

(Radical) innovation is crucial. But green growth reports traditional economics. 1) Neo-Keynesian: a) Increase public and private investments in green technology b) Environmental regulation 2) Neo-liberal: prices and incentives ( Carbon tax, cap-and-trade, subsidies, fiscal policies)

Conceptual problem: Reports remain outside green growth: Inputs (R&D investments) Context (framework conditions + incentives)  Poor understanding of radical innovation  No explicit innovation policy, industry policy

Goals 1. Develop better understanding of radical innovation and (socio-technical) transitions 2. More specific policy proposals

2. Multi-level perspective on transitions Focus on socio-technical systems

Organizational field-analysis

Multi-level perspective

Regime: Lock-in, path dependence Economic: a)vested interests b)sunk investments (competence, infrastructure) c)scale advantages, low cost Social: a)cognitive routines make ‘blind’ (beliefs) b)alignment between social groups (‘social capital’) c)user practices, values and life styles

Politics and power: a)Opposition to change from vested interests b)Uneven playing field + policy networks Analytical problem: How to overcome lock-in?

Protection from mainstream market selection Nurturing of ‘hopeful monstrosities’ (Mokyr) Carried by entrepreneurs and small social networks Niches for radical innovation

Socio-technical landscape Exogeneous backdrop of action Heterogeneous

3. Policy implications and dilemmas Two-pronged strategy: 1)Niche-level: Stimulate radical innovation 2) Pressure on regime: taxes, regulations, incentives

1) Strategic Niche Management (SNM) Radical innovations deviate from regime, and are often pioneered by -engineers/inventors/pioneers -entrepreneurs/start-up firms Niches are ‘protected spaces’ that nurture radical innovations They help radical innovations bridge the ‘valley of death’

Crossing the valley of death

Niches nurture novelties when they cannot (yet) compete on mainstream markets

InventionInnovationTime lag (years) electronic digital computers float glass fluorescent lighting helicopter jet engine magnetic tape-recording radar radio synthetic detergents television transistor zipper Time lag between invention and innovation (Clark et al, 1981)

Niches are initially unstable and fragile. They protection or support from: -Government subsidies -Special users (willing to accept teething problems) Niches are carried by concrete R&D projects, demonstration projects

Innovation programs should manage a portfolio of projects: - sharing of knowledge between projects - articulation of best practices, search heuristics

Green innovation programs should address interactions between: 1)Visions, expectations: a) set direction, b) attract attention and funding 2)Learning processes (technology, user practice, policy, infrastructure) 3)Network building: diverse stakeholders. Incumbent firms and new entrants.

Dynamic model of niche development

Green growth required multiple types of policy instruments Top-down (command-and- control) Market model (bottom up) Policy networks and processes Strategy Regulations specify what actors should do Provide incentives for rational actors Modulate ongoing processes Foundation scientific disciplines Classic political science Neo-classical economy Sociology, innovation studies, neo-institutional political science Governance instruments Formal rules, regulations and laws Financial incentives (subsidies, taxes, feed-in-tariffs) Learning processes, network management through seminars and strategic conferences, experiments, vision building at scenario workshops, public debates

Policy mix differs around world (varieties of capitalism) Liberal Market Economies (LME): USA, UK, Canada, Ireland, New Zealand, Australia. Coordinated Market Economies (CME): Germany, Denmark, Netherlands. State-influenced Market Economies (SME): France, Spain, Italy, Korea, Taiwan, Japan. Green growth leaders from CME and SME

4. Relevance of green growth for Taiwan? Taiwanese economic miracle ( )

But problems since late 1990s

Green growth as next phase in Taiwan’s innovation policy? 1. labour-intensive exports (1960s): textiles 2. capital-intensive sectors (1970s-1980s): ship- building, heavy and chemical industries 3. technology-intensive sectors (1990s): electronics, IT, machinery, biomedical and advanced materials, energy and resources, civil aerospace. 4. Green technologies ???

Current green growth leaders Germany, e.g. world-leading solar PV industry Denmark, e.g. world-leading wind turbines Korea: aggressive green growth plan China: Green export-oriented Five Year plan

5. Concluding comments Green growth attracts much attention Taiwan could strategically position itself regarding other countries And implement smart innovation policy Two deviations from 1960s economic miracle: 1)‘Catch up’ differs from uncertain future 2)Changes in Taiwan’s governance structure

1) Catch-up to technology frontier has a clear direction. Strong state implements vision. Green growth is open-ended and can follow many paths.  Vision-building should be interactive  Need portfolio management  Innovation management through trial-and- error (more evolutionary such as SNM)

2) Taiwan changed from authoritarianism to democracy (1980s, 1990s) Traditional top-down style no longer works Green economy requires different governance: -More collaboration between state and industry (CME?) -Public support from civil society and citizens  SNM as model for collective learning and vision building  Taiwan is well-placed because of sector-specific consultation bodies, agencies and research institutes (ITRI)