Imagining Transitions

Another important lesson from past energy transitions is that incumbent energy sources and energy services do not fade away just because their competitive edge is lost. Under certain conditions, they react to and counter the competitive threat. To defend their profit margins, businesses fight back and set in motion a new cycle of investments aimed at furthering efficiency, seizing new markets, and reacquiring leverage. Dubbed the “last gasp” in the techno-economic literature, older technologies try to capitalize on competitors’ innovations either by copying and adapting them, making hybrid products that ensure a foothold in new markets, or further specializing them in applications best suited to the older technology. The recent evolution of car makers into hybrid vehicle producers, for instance, is driven by the intent to safeguard sunk investments in the long-established internal combustion engine manufacturing technology by adding the electric drive to oil-fueled powertrains. Thus, the incumbent oil-based technology seizes a strategic position in future markets and can adapt flexibly to the changing oil prices: users may opt either for a standard “hybrid-electric vehicle” in which the internal combustion engine works as the primary system with an electric motor supporting the main motor or covering short distances, or a “plug-in hybrid-electric vehicle” in which the primary power system comes from a rechargeable battery while a small on-board internal combustion engine works primarily to boost this recharging process.

Gallery 3: Imagining transitions

From a long-term perspective, energy transitions are sustained by economic structures, specifically by the dynamics of relative prices. It was no accident that both the upswing in energy prices that marked the oil crisis of the 1970s and the escalation of oil and natural gas prices in 2004 provided a decisive push to conservation policies, renewable energy applications, and new technologies for fossil fuel exploration and extraction. A demand-side response to climate change has been to foster the low-carbon transition with carbon pricing programs such as emissions trading (a cap on aggregate emission levels) or carbon taxation (a tax levied on the price of carbon). This path has been hampered, however, by several problems, some stemming from the limited geographic scope of the initiatives, the diversity of targets, and the complicated revision of guidelines. In all probability, the transition towards a low-carbon economy will require a mix of policies on the demand side (prices and user habits) and on the supply side (fostering innovation). 

Environmental thinking brings the debate about alternative futures to the fore. Individuals have long shown great ingenuity in envisioning positive global outcomes. Humans' ability to meet this challenge depends on the capacity to look ahead and imagine feasible outcomes.