GREEN GROWTH: FROM RELIGION TO REALITY - Sustainia

Chapter 115 For a complete discussion ofthe process of the revolution andits implications for firm strategies,see John Zysman and Abe Newman,eds "How Revolutionary wasthe Digital Revolution" (Stanford:Stanford University Press, 2006).16 In some cases, advocates makethis analogy quite explicitly. See,for instance, the internet-energyanalogy made by Randy Katz andco-authors in Katz, et al (2011)“An Information-Centric EnergyInfrastructure: the Berkeley View”Journal of Sustainable Computing1(1) 1-17.in the mid-1980s, private innovation was again facilitatedby public action, this time in the realm of standards-setting.Rapid growth in ICT depended on the interoperabilityof a range of devices. Absent standards, the largepositive network externalities of the internet might nothave materialized. Indeed, a network model along thelines of first-generation firms like AOL or Compuservemight have led to competition over network access ratherthan product features. Instead, the early emphasis ofDARPA and the NSF on an open, redundant, standardsbasednetwork and, in particular, TCP-IP led to what becamethe Internet. Coupled to antitrust restrictions oncontrol of telecommunications networks, those standardsenabled a range of new competitors—from CiscoSystems to Microsoft to Google—to enter markets controlledby AT&T and IBM, disrupt them, and generatetransformative innovation.Those innovations, in turn, drove a series of investmentbooms in the 1980s, 1990s, and 2000s. In mostcases, the investment in ICT technologies themselveswere only a part of the overall investment in the newpossibilities for business activity they created. The transformationof supply chains, for instance, merged the informationmonitoring capacity of ICT with fundamentaltransformations in the production processes and managementstructures of major firms. Those changes wouldnot have been possible without ICT, but were neverthelessinnovations in and of themselves.15 As noted above,this symbiosis between ICT-sector innovation and innovationin the broader economy drove a virtuous cycle ofinnovation, demand, and investment that sustained repeatedand rapid waves of ICT-driven economic growth.We can distill this history to five important points:1. The ICT revolution built new industries, and latertransformed older ones2. The early construction of that industry was heavilyunderwritten—both financially and structurally—bythe public sector, chiefly the United States DefenseDepartment and the National Science Foundation3. Regulatory intervention ensured that legacy marketplayers could not use dominant market positions tolimit competition through control of either technologicalstandards or network access4. The economic value of the ICT transformation camefrom both the networks themselves, the products theyenabled, and the processes that they transformed5. And the ICT revolution sustained itself because digitaltechnologies meant that existing tasks could be donemore cheaply and more effectively, and new valueaddedtasks could be envisionedWe would emphasize the point that, for the most part,the ICT revolution created entirely new industries. Mostof the infrastructure that the revolution required hadno real predecessor: the capabilities of the PC so overwhelmedthose of the typewriter or adding machine thatthey are almost not comparable. As such, the industryfaced few legacy barriers to entry. That lack of barrierscreated the latitude for experimentation, permitting thestructure of the network to evolve free of constraintsfrom legacy systems requirements. As we shall see, thiscondition, so important to the progress of the ICT revolution,is not reproduced for energy systems.Thus the ICT revolution was predominately a systemstransformation, in two senses. First, it marked a transformationof markets in order to support the developmentand diffusion of information and network technologies.Second, it generated massive spillover benefits by transformingthe possibilities for economic activity in thebroader economy. The economic growth generated bythe ICT revolution was at the very least equally distributedbetween the ICT sector and the broader economy.Achieving this kind of transformative growth requiredboth the private investments in new technologies andbusiness models, and public support for open, competitive,standards-based markets in which those investmentscould thrive.5: Challenges to green growth:employment, mercantilism, and the limitsto systems transformationThe core of the green growth argument suggests that theenergy systems transformation described in section 3can drive the same kind of economic transformation thatICT wrought.16 To date, however, neither policymakersnor policy analysts have paid attention to whether theconditions that made ICT into a revolutionary technologyare also present in the transformation to a low-carbonenergy system. Instead, most of the emphasis has concentratedon near-term benefits from jobs or capture ofexport markets for so-called “green” goods.This lack of scrutiny poses serious problems not leastbecause of the differences between ICT and energy thatbecome apparent upon even cursory examination ofthese two systems transformations:1. Unlike ICT, the energy system in the advanced countriesis fully built-out, and new capacity will only beadded slowly. Consequently, new approaches to energymust be implemented by retrofitting the existingsystem.2. That retrofit must occur while preserving an uninterruptedsupply of energy to the economy.3. Both the public and private sector have limited resourcesrelative to the scale of investment requiredcompared with the initial era of semiconductor andICT innovation4. In many countries, certainly the US, the networks belongto a diverse set of owners operating in many differentregulatory jurisdictions, frustrating attempts toenforce interoperability for new grid capabilities andopen access for new technologies and market players.5. The investment horizons don’t support rapid adoptionor iterated innovation. Investments in ICT depreciatedover months or years, creating consistent demandGreen Growth: From religion to reality 9