Modelling complex systems of heterogeneous agents to better design sustainability transitions policy

This article proposes a fundamental methodological shift in the modelling of policy interventions for sustainability transitions in order to account for complexity (e.g. self-reinforcing mechanism arising from multi-agent interactions) and agent heterogeneity (e.g. differences in consumer and investment behaviour). We first characterise the uncertainty faced by climate policy-makers and its implications for investment decision-makers. We then identify five shortcomings in the equilibrium and optimisation-based approaches most frequently used to inform sustainability policy: (i) their normative, optimisation-based nature, (ii) their unrealistic reliance on the full-rationality of agents, (iii) their inability to account for mutual influences among agents and capture related self-reinforcing (positive feedback) processes, (iv) their inability to represent multiple solutions and path-dependency, and (v) their inability to properly account for agent heterogeneity. The aim of this article is to introduce an alternative modelling approach based on complexity dynamics and agent heterogeneity, and explore its use in four key areas of sustainability policy, namely (1) technology adoption and diffusion, (2) macroeconomic impacts of low-carbon policies, (3) interactions between the socio-economic system and the natural environment, and (4) the anticipation of policy outcomes. The practical relevance of the proposed methodology is discussed by reference to four applications: the diffusion of transport technology, the impact of low-carbon investment on income and employment, the management of cascading uncertainties, and the cross-sectoral impact of biofuels policies. The article calls for a fundamental methodological shift aligning the modelling of the socio-economic system with that of the climatic system, for a combined and realistic understanding of the impact of sustainability policies.

The effectiveness of policy on consumer choices for private road passenger transport emissions reductions in six major economies

The effectiveness of fiscal policy to influence vehicle purchases for emissions reductions in private passenger road transport depends on its ability to incentivise consumers to make choices oriented towards lower emissions vehicles. However, car purchase choices are known to be strongly socially determined, and this sector is highly diverse due to significant socio-economic differences between consumer groups. Here, we present a comprehensive dataset and analysis of the structure of the 2012 private passenger vehicle fleet-years in six major economies across the World (UK, USA, China, India, Japan and Brazil) in terms of price, engine size and emissions distributions. We argue that choices and aggregate elasticities of substitution can be predicted using this data, enabling to evaluate the effectiveness of potential fiscal and technological change policies on fleet-year emissions reductions. We provide tools to do so based on the distributive structure of prices and emissions in segments of a diverse market, both for conventional as well as unconventional engine technologies. We find that markets differ significantly between nations, and that correlations between engine sizes, emissions and prices exist strongly in some markets and not strongly in others. We furthermore find that markets for unconventional engine technologies have patchy coverages of varying levels. These findings are interpreted in terms of policy strategy.

Complexity, economic science and possible economic benefits of climate change mitigation policy

Conventional economic analysis of stringent climate change mitigation policy generally concludes various levels of economic slowdown as a result of substantial spending on low carbon technology. Equilibrium economics however could not explain or predict the current economic crisis, which is of financial nature. Meanwhile the economic impacts of climate policy find their source through investments for the diffusion of environmental innovations, in parts a financial problem. Here, we expose how results of economic analysis of climate change mitigation policy depend entirely on assumptions and theory concerning the finance of the diffusion of innovations, and that in many cases, results are simply re-iterations of model assumptions. We show that, while equilibrium economics always predict economic slowdown, methods using non-equilibrium approaches suggest the opposite could occur. We show that the solution to understanding the economic impacts of reducing greenhouse gas emissions lies with research on the dynamics of the financial sector interacting with innovation and technology developments, economic history providing powerful insights through important analogies with previous historical waves of innovation.

The dynamics of technology diffusion and the impacts of climate policy instruments in the decarbonisation of the global electricity sector

This paper presents an analysis of climate policy instruments for the decarbonisation of the global electricity sector in a non-equilibrium economic and technology diffusion perspective. Energy markets are driven by innovation, path-dependent technology choices and diffusion. However, conventional optimisation models lack detail on these aspects and have limited ability to address the effectiveness of policy interventions because they do not represent decision-making. As a result, known effects of technology lock-ins are liable to be underestimated. In contrast, our approach places investor decision-making at the core of the analysis and investigates how it drives the diffusion of low-carbon technology in a highly disaggregated, hybrid, global macroeconometric model, FTT:Power-E3MG. Ten scenarios to 2050 of the electricity sector in 21 regions exploring combinations of electricity policy instruments are analysed, including their climate impacts. We show that in a diffusion and path-dependent perspective, the impact of combinations of policies does not correspond to the sum of impacts of individual instruments: synergies exist between policy tools. We argue that the carbon price required to break the current fossil technology lock-in can be much lower when combined with other policies, and that a 90% decarbonisation of the electricity sector by 2050 is affordable without early scrapping.

An age structured demographic theory of technological change

At the heart of technology transitions lie complex processes of social and industrial dynamics. The quantitative study of sustainability transitions requires modelling work, which necessitates a theory of technology substitution. Many, if not most, contemporary modelling approaches for future technology pathways overlook most aspects of transitions theory, for instance dimensions of heterogenous investor choices, dynamic rates of diffusion and the profile of transitions. A significant body of literature however exists that demonstrates how transitions follow S-shaped diffusion curves or Lotka-Volterra systems of equations. This framework is used ex-post since timescales can only be reliably obtained in cases where the transitions have already occurred, precluding its use for studying cases of interest where nascent innovations in protective niches await favourable conditions for their diffusion. In principle, scaling parameters of transitions can, however, be derived from knowledge of industrial dynamics, technology turnover rates and technology characteristics. In this context, this paper presents a theory framework for evaluating the parameterisation of S-shaped diffusion curves for use in simulation models of technology transitions without the involvement of historical data fitting, making use of standard demography theory applied to technology at the unit level. The classic Lotka-Volterra competition system emerges from first principles from demography theory, its timescales explained in terms of technology lifetimes and industrial dynamics. The theory is placed in the context of the multi-level perspective on technology transitions, where innovation and the diffusion of new socio-technical regimes take a prominent place, as well as discrete choice theory, the primary theoretical framework for introducing agent diversity.

On the global economic potentials and marginal costs of non-renewable resources and the price of energy commodities

A model is presented in this work for simulating endogenously the evolution of the marginal costs of production of energy carriers from non-renewable resources, their consumption, depletion pathways and timescales. Such marginal costs can be used to simulate the long term average price formation of energy commodities. Drawing on previous work where a global database of energy resource economic potentials was constructed, this work uses cost distributions of non-renewable resources in order to evaluate global flows of energy commodities. A mathematical framework is given to calculate endogenous flows of energy resources given an exogenous commodity price path. This framework can be used in reverse in order to calculate an exogenous marginal cost of production of energy carriers given an exogenous carrier demand. Using rigid price inelastic assumptions independent of the economy, these two approaches generate limiting scenarios that depict extreme use of natural resources. This is useful to characterise the current state and possible uses of remaining non-renewable resources such as fossil fuels and natural uranium. The theory is however designed for use within economic or technology models that allow technology substitutions. In this work, it is implemented in the global power sector model FTT:Power. Policy implications are given.

On the changeover timescales of technology transitions and induced efficiency changes: an overarching theory

This paper presents a general theory that aims at explaining timescales observed empirically in technology transitions and predicting those of future transitions. This framework is used further to derive a theory for exploring the dynamics that underlie the complex phenomenon of irreversible and path dependent price or policy induced efficiency changes. Technology transitions are known to follow patterns well described by logistic functions, which should more rigorously be modelled mathematically using the Lotka-Volterra family of differential equations, originally developed to described the population growth of competing species. The dynamic evolution of technology has also been described theoretically using evolutionary dynamics similar to that observed in nature. The theory presented here joins both approaches and presents a methodology for predicting changeover time constants in order to describe real systems of competing technologies. The problem of price or policy induced efficiency changes becomes naturally explained using this framework. Examples of application are given.

Quantum oscillations in the anomalous phase in Sr3Ru2O7

We report measurements of quantum oscillations detected in the putative nematic phase of Sr3Ru2O7. Significant improvements in sample purity enabled the resolution of small amplitude dHvA oscillations between two first order metamagnetic transitions delimiting the phase. Two distinct frequencies were observed, and their amplitudes follow the normal Lifshitz-Kosevich profile. The Fermi surface sheets seem to correspond to a subset of those detected outside the phase. Variations of the dHvA frequencies are explained in terms of a chemical potential shift produced by reaching a peak in the density of states, and an anomalous field dependence of the oscillatory amplitude provides information on domains.