A stable climate or economic growth?

The 2015 UN Paris Agreement reinforced and declared compatible the two goals of avoiding dire climate change and maintaining global economic growth, and it specified that technological innovation is ‘critical’ to this joint achievement. Unfortunately, any confidence that near-term global economic growth is consistent with a stabilized climate is severely undermined by empirical evidence. Despite the rapid increase of alternative energies in recent decades, global GDP growth continues to require burning greater quantities of climate-destabilizing fossil fuels. The dim outlook for sufficiently reducing CO₂ while maintaining economic growth is underscored by global data and Germany specific data on the decoupling of GDP from CO₂. This paper summarizes pertinent climate science, substantiates the dependence of economic growth on fossil fuels, and uses the Kaya identity to demonstrate the unfavorable prospects for reducing CO₂ while maintaining GDP growth.     

The industrial life cycle of wind energy electrical power generation: ARI methodology modeling of life cycle dynamics

This innovation assessment addresses the factors that have influenced the exceptionally lengthy industrial technology life cycle of wind electrical power generation since its inception in the late 19th Century. It then applies the recently developed Accelerated Radical Innovation (ARI) Model to understand the dynamics of this innovation compared to those of other major 18th-20th Century innovations.Despite market pull in the late 19th Century to link small DC electrical generators with hundreds of thousands of existing wind mills used for mechanical water pumping, several factors prevented this from happening. These include the intermittent nature of wind electrical generation requiring low cost battery storage and DC-AC conversion, and the shift in the 1890s from DC to superior AC electrical generation making possible economies of scale for delivering AC electricity long distances over the grid from large hydroelectric and coal fired plants. As a consequence, wind generated electricity remained primarily a technological development until the first energy crisis in the 1970s.Development of an extensive science and technology base for wind turbine dynamics, and deployment since 2000 of commercial scale wind turbines (> 1MW) have elevated wind electrical power generation to commercial practicality, as described in two earlier papers by the authors applying technical cost modeling and experience curve projections of cost of energy (COE) to explore the economic viability of large scale wind electricity generation.. Strongly promoted by wind energy communities of practice in Europe, North America and Asia, normative COE projections suggest that by 2020 wind electrical power will be cost competitive, without tax incentives, with electricity from conventional fossil and nuclear fuel sources.Overcoming technological, business, market, societal, networking and political hurdles to date has required 120years of development to establish wind electricity generation as a breakthrough innovation with the capability to capture 20% of the world electricity market by the mid-to-late 21st Century. Further growth and maturation is expected to continue to 2100, corresponding to a projected ≅ 210year overall industry life cycle at market saturation. This finding has profound implications for innovation theory and practice, since the length of this life cycle exceeds by a factor of ≅ 4 the average life cycle diagnosed for five industrial revolutions and four key 20th Century innovations. The new ARI model provides a holistic approach to understanding the dynamics of the industrial technology life cycle for a wide variety of radical innovations as well as wind electrical power.     

能源回报趋势对我国经济增长的影响分析

随着开采难度的增加,化石能源生产过程中的能源消耗量不断增长,可供于经济社会能够真正使用的净能源量也随之变动,这将对我国的经济增长产生不可估量的影响。基于此,本文从"净能源"角度提出化石能源供应净量的概念,并预测至2025年我国化石能源产量、净进口量、生产过程中的消耗量;进而,将取得的重要参数和预测数据应用到能源型生产函数中,通过Lingo软件模拟出化石能源供应净量的变动对我国经济增长的影响,计算得出:在基准情景下,我国GDP增速呈逐步放缓的趋势,2011-2015年间为9.26%,2016-2020年间为6.01%,2021-2025年间为4.29%,目前正处于高速增长阶段过渡到中速增长阶段甚至是低速增长阶段的新时期。     

Towards a Disequilibrium Theory of Endogenous Economic Growth

This paper discusses the need for a new approach to economic growth theory. The standard theory of growth-in-equilibrium driven by exogenous, uncaused, productivity gains has an implication that is both unjustified and perverse from a policy perspective: that government intervention of any kind can only introduce constraints and reduce option space, thus decreasing potential growth. It is argued that growth theory should (1) acknowledge the importance of natural resources, especially fossil fuels, as a driver of past and present economic growth, (2) incorporate an explicit recognition that growth is a consequence of technological innovation, especially radical innovation, that often responds to natural resource scarcities or other societal needs and (3) explicitly reflect the fact that the important (i.e. scarce) factors of production in economics can and do change over time, i.e. from a rural ‘cowboy’ economy of the past to an urbanized ‘spaceship’ economy of the future. In short, it should reflect the fact that ‘necessity is the mother of invention’. The first and third of these modifications have been proposed before, but not in combination. The third seems to be new.     

中国资源利用与经济增长间关系的解耦分析——基于国内资源开采使用量

用解耦指数法对基于国内资源开采使用量的中国资源利用与经济增长之间的关系进行了解耦分析。结果显示:1980—2007年中国资源利用与经济增长之间总体上处于相对解耦状态;生物质资源的解耦指数最大,且与经济增长的解耦关系稳定;矿物资源的解耦指数最小,且与经济增长的解耦关系不稳定;"十五"期间,重化工的加速发展使得化石资源和矿物资源与经济增长都处于耦合状态。由此认为:应重视加强矿物资源的管理;对于中国而言,达到较高的相对解耦状态是目前更具现实意义的目标。     

Fossil Fuel Subsidy Reform,Rent Management and Political Fragmentation in Developing Countries

Over the last decade, pressure to reduce subsidies for energy (especially fossil fuels) in developing countries has mounted, but reform is politically controversial. The debate on reform is dominated by a liberal narrative that employs an understanding of energy subsidies as political rent, based on public choice theory. Here, it is argued that this approach takes too static and limited a view of rent, and that engagement with theories of the state in the development process suggests a more dynamic view. The degree of centralisation of political power is also argued to be a key factor in the use and reform of subsidy. This application of the framework is then illustrated in the case of Indonesia. Finally, implications for reform strategies are drawn out.     

A decomposition analysis of CO2 emissions in the United States

This article decomposes the growth in US CO₂ emissions by state. Using the Logarithmic Mean Divisia Index (LMDI) method, we account for CO₂ emissions change in each state between 1990 and 2004. The change is decomposed into five effects: (a) emissions per unit of fossil fuel; (b) share of fossil fuel in total energy consumption; (c) energy intensity; (d) gross state product per capita and (e) population. Results show that for the past 15 years gains in the efficiency of energy use in the economy, the lowering share of fossil fuels in total energy consumption and lowering of emissions intensity of fuels all contributed to offsetting the effect of Gross Domestic Product (GDP) per capita and the population growth in carbon emission across the US.     

长波理论、创新与中国经济周期分析

在熊彼特看来,创新是经济繁荣的唯一原因。本文通过对英国技术创新和经济增长历史数据的分析,发现技术创新与经济增长之间有相互决定、相互影响的关系。按照这一发现,通过研究中国目前的经济增长和技术创新情况,本文认为,中国目前正处在创新高涨、潜在增长率下滑的阶段,虽然经济增速在短期内会放缓,但技术创新在未来5～10年内对经济会有拉升作用。除了加大研发投入,中国提高潜在增长率的关键是加快经济体制改革,为创新营造良好的环境,增强市场配置资源的作用。     

The Helios strategy: An heretical view of the potential role of solar energy in the future of a small planet

Over the next hundred years there must be a worldwide transition from reliance on fossil fuels to the use of some combination of long-term and abundant primary sources for the production of heat, electricity, and synthetic fuels. The rate at which such options can be developed and employed, as well as the maximum rate at which they can provide energy at a sustained rate, will place important constraints on the rate and limits to growth of other human activities. It is generally argued that only the fission option, in the form of the fast-breeder and high-temperature reactors, can provide the energy required for a livable world, particularly if this means a world of 10 billion people living at the present energy level of Western Europe. However, a careful examination indicates that the use of solar energy, through a menu of technological options, can provide the needs of a world at this scale of energy use, and that this can be accomplished within the constraints of land availability and requirements for energy, materials, and labor. No scientific breakthroughs are required, although a number of these would be helpful, but very substantial engineering advances are required, and the transition of such a world-wide system would take no less than a century. However, the feasibility of such large-scale use of solar energy will substantially alter those aspects of the “limits to growth” discussions in which future growth strategies are constrained by available and acceptable energy alternatives. This paper outlines a global solar-energy system considered feasible for more than 10 billion people living at 5 kW per capita.     

Market Power with Interdependent Demand: Sale of Emission Permits and Natural Gas from Russia

With implementation of the Kyoto Protocol, Russia will most likely be able to exert market power in the emission permit market. But, as Russia is also a big exporter of fossil fuels, the incentives to boost the permit price may be weak. However, a significant share of Russia’s fossil fuel exports is natural gas. If a high permit price boosts the demand for natural gas through substitution from more polluting fuels and thus increase gas profits, this may increase the incentives to exert monopoly power in the permit market. Moreover, a large fossil fuel exporter may use its market position to influence the effective demand for permits. Hence, the relationship between permit income and fossil fuels exports runs in both directions. In this article, we explore the interdependence between the revenues from permit and fossil fuel exports both theoretically and numerically. A computable general equilibrium model suggests the fact that Russia as a big gas exporter has small effect on the incentives to exert monopoly power in the permit market. Moreover, Russia’s monopoly power in the permit market has a small, but non-negligible impact on the optimal level of Russian gas exports.     

Economic emergence: An evolutionary economic perspective

The standard neoclassical approach to economic theorising excludes, by definition, economic emergence and the related phenomenon of entrepreneurship. We explore how the most economic of human behaviours, entrepreneurship, came to be largely excluded from mainstream economic theory. In contrast, we report that evolutionary economists have acknowledged the importance of understanding emergence and we explore the advances that have been made in this regard. We go on to argue that evolutionary economics can make further progress by taking a more ‘naturalistic’ approach to economic evolution. This requires that economic analysis be fully embedded in complex economic system theory and that associated understandings as to how humans react to states of uncertainty be explicitly dealt with. We argue that ‘knowledge,’ because of the existence of uncertainty is, to a large degree ‘conjectural’ and, thus, is closely linked to our emotional states. Our economic behaviour is also influenced by the reality that we, and the systems that we create, are dissipative structures. Thus, we introduce the notions of ‘energy gradients’ and ‘knowledge gradients’ as essential concepts in understanding economic emergence and resultant economic growth.     

World natural gas endowment as a bridge towards zero carbon emissions

We use a global energy market (GEM) model to show that natural gas has the potential to help stabilize global carbon emissions in a span of about 50–100 years and pave the way towards low and zero carbon energy.The GEM provides a close fit of the global energy mix between 1850 and 2005. It also matches historical carbon and CO₂ emissions generated by the combustion of fossil fuels. The model is used then to forecast the future energy mix, as well as the carbon and CO₂ emissions, up to the year 2150.Historical data show relative decarbonization and an increase in the amount of hydrogen burned as a percent of fossil fuel use between 1850 and 1970. The GEM indicates that with a larger contribution of natural gas to the future energy market, the burned hydrogen percentage will increase. This decarbonization will help to advance economic and environmental sustainability.     

我国天然气发展问题与对策思考

21世纪将是人类重视生态环境,清洁利用化石燃料的时代,一个广泛利用天然气和电力、可再生能源的时机已经成熟.天然气是一种优质、高效、清洁的化石燃料,在所有化石能源中碳排放系数最低.气候变化已经成为我国面临的最大压力,发展天然气工业是我国低碳能源中期目标的战略核心.本文将分析我国天然气发展的现状与问题,并预测未来我国天然气发展的广阔前景.     

Input versus output taxation in an experimental international economy

This paper presents the results of a policy oriented macroeconomic experiment involving an ‘international’ economy with a relatively small ‘home’ country and a large ‘foreign’ country. It compares the economic performance of two alternative tax systems: a wage tax system and a sales-tax-cum-labor-subsidy system. The two systems are applied to the small country, while the wage tax system always obtains in the large country. The main result is that the sales tax system outperforms the wage tax system, using standard economic indicators. Moreover, it turns out that under the sales tax system economic activities appear to be moving toward the ‘better’ of two theoretical equilibria. It is argued that producers’ reluctance to incur costs up-front while being uncertain about product prices can explain these results. Several pieces of evidence are provided to support this claim. The results strongly suggest that behavioral aspects should be taken into account also in applied macroeconomic models.     

Private bureaucracies,organizational efficiency,and Australia's manufacturing trade structure: a comparison with Japan

This study tests the hypothesis that use of in-house information services, which are approximated by the relative size of private bureaucracies or the ‘management sector’, is a statistically significant determinant of Australia's manufacturing trade structure. Large private bureaucracies are a feature of industrialized economies. Their growth, and concomitantly huge resource use, suggest that informational and organizational efficiency have become of paramount importance for economic development. However, variables trying to capture these phenomena are neglected in mainstream trade analysis. The study is conducted for a cross-section of Australian industries and the results are compared with those obtained from a similar study for Japan. The empirical results confirm the importance of private bureaucracies as a trade determinant. Moreover, they seem to dominate some major conventional factors. In the Australian case, the new variables capture an increasingly important aspect of ‘human capital’, i.e., its potentially inefficient use due to lack of organizational innovation. Comparison with Japan indicates major structural weaknesses of Australian manufacturing which hinder the development of a revealed comparative advantage and exports. The paper also comments on the controversial debate concerning Australia's current account deficit, and on the broad implications of the study's findings for economic policy. It concludes with suggestions for further research.     

Speculation-led economic development: a post-Keynesian interpretation of financial liberalization programmes in the Third World

The paper presents a post-Keynesian interpretation of the consequences of financial liberalization (FL) programmes in less developed countries (LDCs). The interpretation advanced here incorporates the new-Keynesian concepts of adverse selection and credit rationing into a post-Keynesian framework. It is argued that FL can lead to a particular kind of development, ‘speculation-led economic development’, which is characterized by a preponderance of risky investment practices and shaky financial structures. In addition, FL is likely to induce an increase in directly unproductive profit-seeking activities, a greater likelihood of financial crises, a misallocation of credit and, ultimately, diminished rates of real sector economic growth. Given the likelihood of these outcomes (as well as their realization in LDCs that have implemented FL), FL programmes are argued to be a poor foundation for stable and sustained real-sector economic growth, especially in the context of resource-scarce LDCs.     

Renewable Energy Policies and Technological Innovation: Evidence Based on Patent Counts

This paper examines the effect of environmental policies on technological innovation in the specific case of renewable energy. The analysis is conducted using patent data on a panel of 25 countries over the period 1978–2003. We find that public policy plays a significant role in determining patent applications. Different types of policy instruments are effective for different renewable energy sources. Broad-based policies, such as tradable energy certificates, are more likely to induce innovation on technologies that are close to competitive with fossil fuels. More targeted subsidies, such as feed-in tariffs, are needed to induce innovation on more costly energy technologies, such as solar power.     

Cutting costs of catching carbon—Intertemporal effects under imperfect climate policy

We use a two-period model to investigate intertemporal effects of cost reductions in climate change mitigation technologies for the power sector. The effect of cost reductions for CCS depends on how carbon taxes are set. If there is no carbon tax in period 1, but an optimally set carbon tax in period 2, a CCS cost reduction may reduce early emissions. Such an innovation may therefore be more desirable than comparable cost cuts related to renewable energy. The finding rests on the incentives fossil fuel owners face. If future profitability is reduced, they speed up extraction (the ‘green paradox’), and vice versa.     

HAYEKIAN ECONOMIC INFRASTRUCTURE AS A FOUNDATION FOR SUSTAINED PROSPERITY

Rather than debate whether technical advances have created a ‘new economy’, economists should focus on the more interesting and useful question: How do we create the sort of environment in which innovation and the productive use of new technology thrive, thereby creating economic prosperity? Such an environment is the product of government laying the appropriate infrastructure, manifested in the culture of the institutions it supports. This article discusses the features governments must incorporate into their institutions in order to build an economic infrastructure that promotes prosperity.     

Legacy sectors: barriers to global innovation in agriculture and energy

The US national innovation system has a dual structure: part suited to rapid innovation, and part stubbornly resistant to change. The complex, established ‘Legacy sectors’ that resist change, particularly disruptive innovation, share common features that obstruct the market launch of innovations, over and above the ‘valley of death’ and other obstacles that have been the traditional focus of innovation policy. Innovations in Legacy sectors must penetrate a well-established and well-defended technological/economic/political/social paradigm that favours existing technology, characterised by (1) ‘perverse’ subsidies and price structures that create a mismatch between the incentives of producers and broader social goals, such as environmental sustainability, public health and safety, and geopolitical security; (2) established infrastructure and institutional architecture that imposes regulatory hurdles or other disadvantages to new entrants (3) market imperfections beyond those faced by other innovations: network economies, lumpiness, economies of scale, split incentives, needs for collective action, and transaction costs (4) politically powerful vested interests, reinforced by public support, that defend the paradigm and resist innovations that threaten their business models (5) public habits and expectations attuned to existing technology and (6) an established knowledge and human resources structure adapted to its needs. Beyond these obstacles, more socially desirable technologies that are driven by environmental or other non-market considerations must overcome the lack of agreed replacement standards against which putative alternatives can be judged. We have developed a new, integrative analytic framework for categorising the obstacles to market launch faced by Legacy sectors, and earlier applied this method to energy, health delivery, the long-distance electric grid, building, and air transport. In energy especially, the requirement for innovation is sufficiently urgent that large-scale domestic and collaborative international research should take place even at the cost of possible competitive disadvantage and even if it is some time before the USA adopts carbon charges and thereby puts pressure on the prevailing paradigm of fossil fuel use. We now extend this method to sustainable agriculture. American paradigms in agriculture and in energy are exported worldwide, delaying the development and spread of needed innovations that are not consistent with them. Foreign manufacturers wishing to enter US markets must suit their products in these sectors to American paradigms, while American exports of technology may be insufficiently cost conscious or respectful of environmental sustainability. Developing countries are technology takers and suffer from asymmetric innovative capability. They need to choose sources of technology best suited to their situation. India and China constitute new competitive threats, but also represent ‘innovative developing countries’ that have large domestic markets in which they are launching innovations aimed at their lower income populations.