How to accelerate the transition to green technologies? Agent-based macroeconomic analyses of diffusion processes and co-evolving technological capabilities

In this talk, I present selected insights from a series of transition studies using a (green) technology extension of the macroeconomic ABM Eurace@unibi.

Path dependence of technological change is one explanation for sluggish diffusion of green technologies. Firms acquire capital that differs by technology type and build up type-specific technological know-how needed to use capital efficiently.
Path dependence emerges from cumulative knowledge stocks manifested in the productivity of supplied capital and firms’ capabilities. Increasing returns arise from induced innovation feedbacks and learning by doing. Relatively lower endowments with technological knowledge are a barrier to diffusion for new technologies.
Radical innovation differs by technology type and pre-existing knowledge may be imperfectly transferable across types.

I show how the evolution of relative knowledge explains different shapes of diffusion curves. I address the implications of cross-technology transferability of skills for firm-level technology adoption and its consequences for emergent pathways of transition.
It is shown that a high transferability of knowledge can have ambiguous effects. It may accelerate technology diffusion initially but comes with the cost of technological stability and specialization in the long run.
For firms, it is easy to adopt new technology, but also easy to switch back to the incumbent type. Technological instability can be macroeconomically costly.

Policy may alter the external conditions of the technology race.
In an experiment, it is shown how different market-based instruments can be used to speed up and stabilize a transition process. Taxes and subsidies perform differently conditional on the characteristics of technologies.
The results and theoretical approach can be generalized to other technologies (e.g. digitization).