Energy and Economic Growth: Why we need a new pathway to prosperity Prof. Tim Foxon Professor of Sustainability Transitions SPRU – Science Policy Research Unit University of Sussex, UK Presentation to Exergy Economics Workshop, University of Sussex, 13-15 July, 2016

Outline Sustainability transition challenge Different approaches to understanding long-term systems change Green as a direction for innovation policy Coevolutionary approach Future research plans

Sustainability Transition A transition to an economy and society that delivers enhanced human wellbeing and social equity whilst remaining within planetary boundaries Need for systems change from current unsustainable systems of production and consumption Questions: What can we learn from long-term view of past systems change? What theories and approaches have been used to conceptualise systems change? What is the role of energy provision in past waves of economic growth?

Understanding transitions Socio-technical transitions approach: Coevolutionary dynamics Focus on socio-technical regime change and radical innovation Multiple actors involved in bringing about systemic change Social movements can play an important role Long-term view Coevolutionary approach: Coevolution of ecosystems, technologies, institutions, business strategies and user practices (Foxon, 2011) Draw on insights on systems change, path dependency and lock-in from evolutionary economics Draw on insights on energy and material dependence of economies from ecological economics

Ecological economics model of the economy

Techno-economic paradigm change Carlota Perez (2002): Long waves/surges of economic growth 5 surges, starting with industrial revolution Each driven by a new technological/organisational innovation, which becomes cheap and creates spillovers to new uses and new technologies Initial financial investments lead to a bubble, then a turning point, after which productive investment leads to growth era Full benefits are realised when institutions co-evolve to enable benefits of new technologies to be realised ‘Green’ as the new direction for implementing ICT surge (Mazzucato and Perez, 2014)

Source: Schot, Foxon and Langer (2016), SPRU Working Paper

Green as new direction for innovation “Reverse the energy- and materials intensive model inherited from mass production” (Mazzucato and Perez, 2014) Prescriptions for a reorientation of production: a mission-oriented approach to shaping and creating markets to address societal challenges; a reorientation of investment and finance towards value-creating projects in the real economy rather than financial speculation; taxation that rewards long-run investment rather than value extraction Role of consumption: circular economy/sharing economy ideas

Great Transformation Karl Polyani (1944): Origins and collapse of late 19th/early 20th century ‘free market’ economy Argues that ‘self-regulating free market’ was created by state action, based on classical economic theories Markets for labour, land and money create impacts, e.g. unemployment, overexploitation of resources and financial bubbles Further state action is needed to mitigate the negative social consequences of these impacts Clear parallels to recent financial crisis Economy is embedded in social relations

Collapse of complex societies Joseph Tainter (1988): As societies get more complex, they face higher energy and organisational costs and diminishing returns This typically leads to social unrest and collapse of society to a much lower level of complexity and energy use, e.g. Roman Empire Jared Diamond (2006): Emphasised societies overrunning ecological constraints, leading to reduction in food supply and collapse, e.g. Easter Island Links to declining ERoEI (Hall et al.): As energy resources are exploited, net energy delivered declines Renewable sources may have lower ERoEI (still debated) Role of consumption: Expectations raised of high levels of consumption that can’t be met

Coevolutionary approach Examine systems change in terms of mutually coevolving systems: Ecosystems, technologies, institutions, business strategies and user practices Through causal interactions between these systems, examine: Dependence of systems on natural ecosystems, through flows of energy and materials How techno-economic systems become locked-in, and how this lock-in was overcome How patterns and expectations of consumption were created Sustainability perspective: Need to conceptualise benefits in terms of human wellbeing and quality of life, rather than purely economic growth

Coevolutionary interactions Source: Foxon(2011), Ecological Economics

Energy and Economic Growth: Why we need a new pathway to prosperity Book proposal accepted by Routledge (Earthscan) Examine past long waves of energy-industrial change, from Industrial Revolution to ICT Implications for economic development: Role of cheap fossil fuel energy in enabling these long waves Implications for a sustainable low carbon transition What this tell us about what current society needs to do to achieve a peaceful transition to a system based on renewable sources, but lower levels, of energy use and lower, but more equitable, levels of consumption