The wider context plays an important role in shaping technological change and hence in determining the feasibility of GHG mitigation. There are several important elements or dimensions of the context for technological change:
Of these dimensions, most attention has been paid in the literature, including the SAR, to the role of markets and legal systems. Existing market and legal incentives can pose barriers to some kinds of technological change, as discussed in later sections of this chapter. Changes in the market and legislative context can also provide opportunities for innovation. For example, the need to address local pollution through government regulations may stimulate innovation that can contribute to GHG mitigation. Porter and Van der Linde (1995a) argued that environmental regulation of industries could also promote their competitiveness through accelerated innovation, although this has been disputed by Palmer et al. (1995), who argues that most evidence is that regulation, as historically practised, has not fostered competitiveness, and has encouraged innovation only narrowly aimed at regulatory compliance (Berman and Bui, 1998; Xepapadeas and de Zeeuw, 1999).
The effects of physical infrastructure have been less studied, being harder to measure than those of prices and regulations. Infrastructure often acts as a constraint on changes in technology and behaviour: existing road systems and settlement patterns in many countries tend to encourage car dependency; the existing supply networks for domestic and transport fuels make it difficult for individual households or firms to adopt alternatives. In this chapter, the role of infrastructure is considered in relation to buildings, transport, and energy supply (see Sections 5.4.1 to 5.4.3).
The social capital passed on from generation to generation offers an opportunity for diffusion of GHG mitigation technologies in traditional and modern societies alike. Societies in which trust and civic co-operation are strong have significant positive impact on productivity, especially human capital productivity, and provide stronger incentives to innovate and to accumulate physical capital. More investment in consultation and participation of the local population in decision making about GHG mitigation technologies contribute both to information sharing, to building trust, and civic co-operation. The former may contribute to changes in beliefs, norms, and values if participants are convinced that they are better off after effecting the change (Gibson et al., 1998).
Reliance on market mechanisms alone, without an appropriate institutional framework that performs a co-ordinating function among sectors, is inadequate and may be destructive of social capital. Policy attention to learning by doing, and network externalities, together with policy stability and enforcement favour the diffusion of GHG mitigation technologies.
Addressing the last three dimensions listed above thus involves understanding human psychology, relationships, communities, institutions, and the process through which social norms and decisions are established. These aspects of climate mitigation are addressed in Sections 5.3.6 and 5.3.8 of this Chapter.
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