Governance, Innovation and the Transition to a Sustainable Energy System: Perspectives from Economic Theory
By: Matthew Lockwood
EPG Working Paper: 1305
This paper reviews basic ideas in economic theory about the governance of innovation, with applications to debates in innovation in sustainable energy. The aim is to extract a few broad issues to frame comparative analysis and the analysis of change. The review is motivated by the relevance of economic theory to innovation policy, by the fact that economics remains the dominant language of policy makers, and by gaps between the economic treatment of innovation in policy and that in economic theory. Much of the debate about low-carbon energy innovation focuses quite narrowly on innovation policy. This is important, and is discussed in the first part of the review. However, some of the more interesting insights about innovation in economics come from consideration of the wider context for innovation. In particular, there are important literatures on market structure and innovation, on increasing returns and technology adoption, and on institutions and innovation. The paper concludes with a research agenda for understanding differential comparative performance in innovation in sustainable energy, and for how to accelerate such innovation in the UK.
Keywords: Economic theory, sustainability, institutions, innovation, governance, lock-in
Date: July 2013