In the year 2000, Gregory C. Unruh authored a research paper titled ‘Understanding carbon lock-in’ in which he introduced the term ‘carbon lock-in’ to highlight that the industrial economies of the world have been locked in into a fossil fuel based system. He emphasised that carbon lock-in creates persistent market and policy failures which inhibit the diffusion of carbon saving technologies. The current article is a review of this research paper to analyse the problem of carbon lock-in being faced by the Indian economy with a focus on the transportation sector. The article makes an attempt to provide directions to help the transportation sector to escape the carbon lock-in and transition towards the path of green growth.
Emissions of carbon dioxide in the world
A number of countries in the ‘global north’ are industrialized and have achieved high levels of economic growth, while most countries in the ‘global south’ are still lagging behind and trying to ‘catch up’ with the developed countries. However, the high level of economic growth in the developed countries has come at the cost of huge impact on the environment and climate change. This accelerated growth has been propelled by an increased demand for energy. Hence, the global demand for energy has risen exponentially since the first industrial revolution of 1760 and so has the emission of carbon dioxide emissions. According to the Intergovernmental Panel on Climate Change (IPCC) report, the annual emission of carbon dioxide has witnessed a fourfold increase from 8.98 GtCO2 to 37.15 GtCO2 between 1959 and 2018 .
Carbon dioxide being one of the Green House Gases (GHG) has led to the warming of the atmosphere thereby causing several changes in the environment like melting of the glaciers, rise in sea level, frequent catastrophic events and forest fires. The threat of rising levels of carbon dioxide was realised by the international community during the 1950s and since then there have been several agreements and decisions to constitute laws and institutions to address the threat (United Nations Climate Change 2020). The first key international agreement organised by the United Nations Framework Convention on Climate Change (UNFCCC) to cut down carbon dioxide emissions was held in Kyoto, Japan in 1997. The participating countries agreed to reduce their emissions by an average of 5 percent by 2012 below the 1990 level . The major industrial economies of the world failed to achieve the target because the existing technologies, institutions and behavioural norms are locked in into the consumption of fossil fuels referred to as carbon lock-in (Unruh 2000). Experiencing some of the threats posed by climate change in the last decade, the member countries of UNFCCC including India decided to increase the market share of renewable energy by 20 percent during the Paris Agreement held in 2015 to restrict the increase of global temperatures below 2 degree celsius compared to pre-industrial level .
Carbon lock-in in the transportation sector
In India out of the several sectors, the transportation sector is one of the key sectors which has been locked in into the system of high carbon emission.
Unruh highlights the industrial economies have been locked in into the fossil fuel-based systems through a process of technological and institutional co-evolution also termed as carbon lock-in. This carbon lock-in leads to persistent market and policy failures that can inhibit the diffusion of carbon saving technologies. Thus he introduced a conceptual framework, Techno-Institutional Complex (TIC) to understand these systematic interactions among the technologies and institutions which has led to carbon lock-in (Unruh 2000). This conceptual framework can be used to analyse the transportation sector in India.
The automobile sector in India has grown exponentially after the opening up of the economy in 1991 (Miglani 2019). Currently, India has the world’s fifth largest car sales and this is expected to grow with rising incomes and rapid urbanisation, resulting in strong implications for oil demand. The major car manufacturers in India have been engaged in internal combustion engine cars as the dominant design model which runs on fossil fuels. One would argue that these leading firms should have invested resources in developing alternative designs which are less carbon intensive. However, this did not happen since the growth of these firms created complex networks of co-specialised, interdependent and complementary assets (Bell and Pavitt 1993) like fuel stations, product supply chain systems etc. which grew further with the growth of the automobile firms. Given these interdependencies, the firms did not want to take the risk of investing in new technologies. Moreover, they did not want to make risky investments since that would impact the financial growth of the firm (Unruh 2000). Unruh also highlights that dominant design leads to industry shakeout where producers of alternative design are forced out of the business. Thus, major automobile companies in India preferred to produce automobiles running on fossil fuels like petrol and diesel thereby locking itself in the carbon intensive emission system.
Measures to unlock the carbon lock-in in the transportation sector
Government intervention can play a crucial role in order to address the challenge of carbon lock-in in the transportation sector. This can be done by creating alternative incentive structures, or ‘rules of the game’ to which firms have to adapt their strategies (Unruh 2000). These incentives have to be created both for end users and manufacturers. In the case of India’s automobile sector, the government needs to take policy measures for promotion of low emission vehicles or Electric Vehicles (EV). Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme launched by the Government of India aims to achieve 30 percent EV penetration by 2030. The scheme provides incentives to consumers (end users) to purchase electric vehicles at subsidised rates. However, charging stations are still a point of contention among policy makers and the end users. The government has tried to address this issue in its renewed policy, FAME II by sanctioning 2,636 charging stations across 62 cities although there is still a huge gap to be filled. Thus, in order to fill that gap the policy should focus on providing opportunities to start-ups to come up with innovative solutions to address the issues of availability of charging stations in order to facilitate the faster adoption of EV. The policy also needs to focus on creating incentive structure for these start-ups because when the firms have achieved economies of scale they focus on process innovation rather than on product innovation (Unruh 2000). This will help in bringing down the overall cost of technology and thus would be helpful in diffusion of low emission technology among the masses.
India being one of the major emerging economies of the world is facing the challenge of carbon lock-in since all the institutions and systems have been built around the fossil fuel based systems which over the time have become rigid to any change. However, India can ‘partially’ escape this lock-in by focusing on innovation in the transportation sector and simultaneously fostering economic growth and development.
Bell, Martin, and Keith Pavitt. 1993. “Technological Accumulation and Industrial Growth: Contrasts between Developed and Developing Countries.” Industrial and Corporate Change 2 (1): 157–210. https://doi.org/10.1093/icc/2.2.157.
Miglani, Smita. 2019. “The Growth of the Indian Automobile Industry: Analysis of the Roles of Government Policy and Other Enabling Factors,” 439–63. https://doi.org/10.1007/978-981-13-8102-7_19.
Unruh, Gregory C. 2000. “Understanding Carbon Lock-In.” Energy Policy 28 (12): 817–30. https://doi.org/10.1016/S0301-4215(00)00070-7.