Technological change, industry structure and the environment

Abstract The patterns of production and trade arising from technological changes will have important implications for the future state of the environment, especially concerning greenhouse gas emissions (GHGs). This paper is an output of the UK Tyndall Centre's E-Tech project which is seeking to construct an Economy-Energy-Emissions model that incorporates what is known about the evolution of technologies and their locational implications over timescales for 5 to 100 years. The paper takes further the comments of the IPCC (2000) 'Special Report on Emissions Scenarios' (SRES) that "Economists and others who study technological change have developed models that take a variety of dynamics into account… Some models focus on technologies themselves, for example, examining the various sources of "increasing returns to scale" and "lock-in"… Other models focus on firms and other decision-makers, and their process of information assimilation, imitation, and learning… Few of these dynamics, apart from "increasing returns to scale", have been applied to the projection of GHG emissions from the energy sector" (p.141). In attempting to incorporate insights from theories on the dynamics and evolution of technologies, there are important points to make about: the emergence, development and decline of different sectors/industries, the location of industry and patterns of trade. The concept of technology we use (as does SRES) is not one where firms and countries can produce and use innovations by dipping freely into a general "stock" or "pool" of technological knowledge. Rather, innovation activities should be seen as firm-specific, local and cumulative. These processes -change in main branches of production, shifts in geographic structure of production and trade -have important effects on the environment through emissions from production and transportation, which will differ by country and region. The paper describes a method in which the different sectors of the economy can be evaluated on their likelihood of being affected by those 'pervasive' technologies that might change the level of GHG-emissions in the sectors in two time periods: 2000-2020 and 2020-2050. Sectoral classification is based on Pavitt's taxonomy of sectors as modified to include service sectors by Miozzo and Soete. We report the first results of the application of the method, examining both the likely impacts and the regional implications of those impacts of three technologies -Information Technology, Biotechnology and Nanotechnology -that are likely to have the most pervasive influence over the next 50 years