Evolutionary economics and environmental policy: survival of the greenest

E E

Evolutionar y

Economic s an d

Environmenta l Polic y

Surviva l o f th e Greenes t

Jeroe n C.J.M . va n de n Berg h

Alber t Fabe r

Annemart h M . Idenbur g

Fran s H . Oosterhui s

NEW HORIZONS IN INSTITUTIONAL AND EVOLUTIONARY ECONOMICS

Evolutionar y Economic s an d Environmenta l

Polic y

NEW HORIZONS IN INSTITUTIONAL AND EVOLUTIONARY

ECONOMICS

Series Editor: Geoffrey M. Hodgson

Research Professor, University of Hertfordshire Business School, UK

Economics today is at a crossroads. New ideas and approaches are challenging the

largely static and equilibrium-oriented models that used to dominate mainstream

economics. The study of economic institutions - long neglected in the economics

textbooks - has returned to the forefront of theoretical and empirical investigation.

This challenging and interdisciplinary series publishes leading works at the fore￾front of institutional and evolutionary theory and focuses on cutting-edge analyses of

modern socio-economic systems. The aim is to understand both the institutional

structures of modern economies and the processes of economic evolution and devel￾opment. Contributions will be from all forms of evolutionary and institutional eco￾nomics, as well as from Post-Keynesian, Austrian and other schools. The overriding

aim is to understand the processes of institutional transformation and economic

change.

Titles in the series include:

Institutional Economics and the Formation of Preferences

The Advent of Pop Music

Wilfred Dolfsma

Globalization. Economic Development and Inequality

An Alternative Perspective

Edited by Erik S. Reinert

Institutions, Money and Entrepreneurship

Hayek's Theory of Cultural Evolution

Edited by Jiirgen G. Backhaus

Productivity, Competitiveness and Incomes in Asia

An Evolutionary Theory of International Trade

Hans-Peter Brunner and Peter M. Allen

The Hardship of Nations

Exploring the Paths of Modern Capitalism

Edited by Benjamin Coriat, Pascal Petit and Genevieve Schmeder

An Economic Analysis of Innovation

Extending the Concept of National Innovation Systems

Markus Balzat

Evolutionary Economics and Environmental Policy

Survival of the Greenest

Jeroen C.J.M. van den Bergh, Albert Faber, Annemarth M. Idenburg and

Frans H. Oosterhuis

Evolutionar y

Economics and

Environmental Policy

Surviva l o f th e Greenes t

Jeroen C.J.M. van den Bergh

Faculty of Economics and Business Administration, and

Institute for Environmental Studies, Free University, Amsterdam

Alber t Fabe r

Netherlands Environmental Assessment Agency, Bilthoven

Annemart h M . Idenbur g

DHV Group, Amersfoort, formerly, Netherlands Environmental

Assessment Agency, Bilthoven

Fran s H . Oosterhuis

Institute for Environmental Studies, Free University, Amsterdam

NEW HORIZONS I N INSTITUTIONAL AN D EVOLUTIONARY

ECONOMICS

Edward Elgar

Cheltenham, U K • Northampton, MA, US&

© Jeroen C.J.M. van den Bergh. Albert Faber, Annemarth M. Idenburg and

Frans H. Oosterhuis 2007

All rights reserved. No part of this publication may be reproduced, stored in

a retrieval system or transmitted in any form or by any means, electronic.

mechanical or photocopying, recording, or otherwise without the prior

permission of the publisher.

Published by

Edward Elgar Publishing Limited

Glensanda House

Montpellier Parade

Cheltenham

Glos GL50 1UA

UK

Edward Elgar Publishing, Inc.

William Pratt House

9 Dewey Court

Northampton

Massachusetts 01060

USA

A catalogue record for this book

is available from the British Library

Library of Congress Cataloguing in Publication Data

Evolutionary economics and environmental policy : survival of the greenest /

Jeroen C.J.M. van den Bergh — [et al.].

p. cm. — (New horizons in institutional and evolutionary economics)

"This book is the result of a joint effort of the Netherlands

Environmental Assessment Agency, the Faculty of Economics and Business

Administration of the Free University (Vrije Universiteit) in Amsterdam, and

the university's Institute for Environmental Studies."

Includes bibliographical references and index.

1. Energy policy—Netherlands—Case studies. 2. Energy policy—

Environmental aspects. 3. Evolutionary economics. 4. Environmental

policy—Netherlands. 5. Sustainable development—Netherlands. I. Bergh,

Jeroen C.J.M. van den, 1965—

HD9502.N42E89 2007

333.701—dc22 2006022405

ISBN 978 1 84542 955 3

Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall

Content s

List of figures vii

List of tables viii

List of boxes ix

Preface x

1 Introduction 1

2 Evolutionary economics 3

2.1 Evolutionary thinking 3

2.2 A brief overview of ideas and concepts within evolutionary

economics 6

2.3 Evolutionary growth theory 15

2.4 Key concepts in evolutionary economics 19

2.5 Integration of the evolutionary concepts 33

3 Environmental policy and transition management from an

evolutionary perspective 37

3.1 Introduction 37

3.2 Evolutionary-economic analysis of environmental policy

and management of natural resources 42

3.3 An extended level playing field 45

3.4 Case study: energy supply as a complex and evolving system 49

3.5 The role of the government 51

3.6 Bounded rationality 53

3.7 Diversity and scale combined: from local to international 59

3.8 Conclusion 60

4 Evolutionary policy for energy innovations 69

4.1 Introduction 69

4.2 Policy and advisory documents 69

4.3 Energy policy 71

4.4 Innovation policy 77

4.5 Evolutionary-economic analysis of energy and innovation

policy 85

4.6 Conclusion 99

V

vi Evolutionary economics and environmental policy

5 Case studies 102

5.1 Introduction 102

5.2 Fuel cells 103

5.3 Nuclear fusion 115

5.4 Photovoltaic energy (PV) 122

5.5 Implications of the case study findings 136

6 Summary and conclusions 140

6.1 Brief summary 140

6.2 The policy framework offered by evolutionary economics 140

6.3 Implications for environmental policy and transition

management 142

6.4 An evolutionary-economic evaluation of current Dutch

energy innovation policies 145

6.5 Evolutionary concepts applied to specific energy

technologies 148

6.6 Main policy conclusions 149

Notes 151

References 154

Glossary 167

Index 171

vi