Delhi Sustainable Development Summit 2002
Ensuring sustainable livelihoods:
challenges for governments, corporates, and civil society at Rio+10
8 - 11 February 2002, New Delhi

Technological Leapfrogging: the Lure and the Limits
Nebojsa Nakicenovic
Project Leader, Transitions to New Technologies, International Institute for Applied Systems Analysis, Austria

Technological change in energy, mobility and information systems

The provision of affordable and clean energy, mobility and information services is essential for development and the eradication of poverty in the world. New technologies are needed to meet both of these needs. Generally, technological change improves performance, and lowers the costs and adverse environmental impacts of human activities at all scales, from local to global. For example, most of the two billion people without access to modern energy services, such as those provided by electricity, live by relying on traditional practices. In the case of energy, traditional practices often result in high-levels of indoor air pollution and high adverse environmental impacts in general, extremely low conversion efficiencies and very poor supply reliability. The lack of purchasing power and appropriate infrastructures, compounded by low demand densities, lead to insufficient adoption levels of the new technologies needed for a transition towards a more sustainable development path.

The diffusion of new technologies is thus central to achieving the improvements necessary in these areas and in providing essential services to the needy, as well as improving the quality of life in the more affluent parts of the world. The diffusion of new technologies and access to them at affordable costs is therefore a key determinant of economic development and is essential for raising standards of living and easing humanity’s burden on the environment.

Technological change is a complex process that is associated with many uncertainties. Because technological progress is a result of human ingenuity, it is also a human-made resource that is renewable and cumulative — as long as it is nurtured. Opportunities need to be perceived and entrepreneurial spirit must exist to pursue them. But nurturing comes with a price: innovation, especially the commercialization of novel technologies and processes, requires continual investments of effort and resources in research, experimentation, development and demonstration (RD&D). Technology diffusion, in turn, depends on both RD&D and learning by doing, which is a cumulative process. Small and incremental changes can be amplified into fundamental ones as new, successful technologies become adopted and diffuse replacing the older alternatives.

Some of the advanced energy technologies—such as hydrogen production, distribution and end use—represent radical changes that are not likely to result from incremental improvement of current technologies. Facsimile did not evolve from a telegram or a letter, nor did trains evolve from stagecoaches. The replacement of traditional by modern technologies is equally a radical technological change. This is especially the case with new information and telecommunications systems.

There are two basic forms of technological change. The first involves incremental and gradual changes that reduce costs and improve performance. The second is more radical and revolutionary and involves the introduction of completely new technologies compared with prevailing practices. One example of a gradual change would be the improvement of conventional copper-wire telephone connections by replacing analog with digital switching systems; a more radical change would be the introduction of cellular phones. Both kinds of technological change are really social learning processes that require learning to deal with the new and untried. Especially the adoption of radical technologies often involves deep changes in hardware, "orgware" and often also in human relations

Generally, it is not possible to forecast future technological "winners" or "losers". Technological change is a complex process associated with many uncertainties. Its future course is inherently uncertain and thus unpredictable. The very fact that it is virtually impossible to anticipate specific future technological change to any degree of specificity, and discovering new and demonstrating unanticipated possibilities is often what attracts the curiosity of researchers and innovators. Thus, risk and opportunity are the joint features of technological change that render the process inherently unpredictable. This is an important reason why programs directed at promoting technology diffusion need to consider a range of alternative developments rather than attempting to dictate a particular direction of change. They need to capture a wide spectrum of developments in order to promote the areas of opportunity and possibilities of materialization of different energy alternatives.

Another important feature of technological change as a social learning process is that it is cumulative. Small and incremental changes can be amplified into fundamental ones as new, successful technologies become adopted and diffuse replacing the older alternatives. Thus, the distinction between incremental and radical innovations is not always clear or sharp. For example, new technologies are often more costly and inferior in many ways compared to the older and more "mature" or traditional alternatives that dominate the market. Another barrier to adoption, especially for those who lack adequate purchasing power, is that even new technologies with lower expected costs require unaffordable upfront investments However, new technologies often improve as experience is gained by producers (learning-by-doing) and consumers (learning-by-using). Costs and environmental impacts are reduced. Generally, performance improves. Such gradual and persistent improvements are sometimes correlated with cumulative experience and are referred to collectively as "increasing returns". Empirical relationships between performance improvement or costs reduction with increasing cumulative output or capacity are called "experience" or "learning" curves in the literature. Technological learning in the case of energy systems reaches cost decreases of up to 20 percent per doubling of installations or some other index of cumulative experience. In contrast, in the case of DRAMS (dynamic random access memory systems) the costs declined at about 30 percent per doubling of cumulative production.

History teaches that technological change is a relatively slow process. It takes up to half a century to replace energy, mobility and information infrastructures and equipment through natural obsolescence, and perhaps between half to a third that time for end-use devices such as stoves, vehicles and telephones. The question is whether the rapid technological change in information and communication technologies over the last decades is in line with this historical experience or whether it represents the beginning of the new technological dynamics characterized by a more rapid diffusion process. The empirical evidence indicates little evidence for such acceleration of technological diffusion processes.

The concept of leapfrogging implies faster rates of technological change but necessarily also faster diffusion processes. Leapfrogging involves skipping many if not most of the rungs in the historical development "ladder". The idea is not to repeat all the development stages of the now more affluent countries but to directly adopt more advanced technologies. Clearly, a very desirable development strategy but also very difficult to achieve given the evidence that even the diffusion of new information and telecommunication technologies is in line with the historical experience. In practice, there needs to be a balanced portfolio of options from near-term and incremental changes, that might be implemented at a faster rate, to the very long-term and radical transitions to the highest technological "rungs".