Influencing high-level, strategic decision-making towards a sustainable, low-carbon economy

Posted on June 28, 2011 by admin

Julian Darley

Decision-making at a global level is governed by both economic and non-economic factors. If the new systems required to deal with climate change effectively are to be introduced, and a sustainable, low-carbon economy established, more knowledge of the non-economic factors will be required.

The world has changed a lot since 2008. America now has a president who is deeply concerned about climate change, the environment and renewable energy. China is showing much greater awareness of these issues and so are many smaller economies. The world economy is going through an extraordinary phase of contraction which, while both alarming and destructive, is also generating new and unexpected opportunities for change.

Across the world many thinkers are working on economic, social and policy frameworks designed to address carbon emissions, fuel insecurity and a host of environmental problems. These problems of sustainability are being confronted by scholars in an ever greater range of disciplines and analytical streams, from many of the physical sciences through to the social sciences of risk, organisational theory, decision science, behavioural economics, ecological economics, econophysics, game theory, choice theory, management science, leadership research, sociology, anthropology, social psychology, evolutionary psychology, cognitive neuroscience, cultural research, and political science. Research approaches include both quantitative and qualitative techniques, scenario building, modelling, systems analysis, and increasingly frequently, combinations of different techniques and disciplines.

On this reading, the world should therefore be well on the way to a sustainable low-carbon economy. In reality, many of the government policies and industrial strategies being discussed and developed, no matter how well backed up by economic, physical and social evidence, remain calls and exhortations rather than action. They are all too rarely turned into government mandates and business plans. There are exceptions to be sure, but these still tend to be isolated, and we won’t know for some time whether the economic crisis will stall these efforts.

Increasingly there is a palpable sense of frustration in some corridors of power. We know at least some of the measures we should take, but at every level, from the individual to the institutional, we see that the right action is not taking place, either at the scale or speed that is needed. Often we are still going in the wrong direction, and even when we are not, as the International Energy Agency points out, we must consider non-economic barriers concurrently with more conventional economic factors [6].

Getting ‘there’ from ‘here’

The question that comes through powerfully from these considerations is how do we get ‘there’ from ‘here’? In other words, what are the obstacles to developing a sustainable, low-carbon economy and what are the conditions that could enable such an economy?

Unless we actively and deliberately discover how to remove the obstacles and create the enabling conditions, we risk a continuation of decades of difficulties that policy researchers and sustainable business strategists have had in seeing good ideas turned into action. Civil society finds similar frustrations. Over a number of years, many people have witnessed the burnout that so often happens when good intentions at the citizen level are carried out largely in isolation from government and business.

Closing the ‘sustainability gap’

It is hard to avoid the conclusion that without high-level action, vital civil society efforts will continue to be stranded. It is arguable that the efficacious, long-term involvement of citizen and consumer may in reality depend, however ironically, on ‘sustainable’ high-level decision-making. There is of course a reciprocity in the sense that high-level decision-making is not sustainable in any sense without the active agreement and participation of civil society.

Even as civil society has tended to have an uneasy relationship with power (be it corporate or political), so business is often not sure of what government is going to do, on the one hand, and on the other, government has tended to reduce its policy levers to market mechanisms, correlating with, though not necessarily caused by, the rise of public choice.

There are now many reasons why the relationship between those primarily engaged in supply-chain decision-making (business) and those primarily engaged in setting the direction of society (government) need to develop a different and more reflexive relationship—one that can begin to close the ‘sustainability gap’ [1]. That already complex relationship will also need to engage and keep civil society involved. The rising new tools of social media (particularly instant broadcast platforms such as Twitter) seem set to play a new and fascinating role in future relationships and engagement between the different sectors of society.

Democracy

Even if government, business and civil society do engage with each other in ways that we have not often witnessed yet, there are important questions about the potential to create a sustainable economy within a democracy. Although there are clearly special difficulties for democracies in addressing energy security and climate change, the problematic can be framed in the positive light of the dynamic possibilities of ‘path creation’. 

More specifically, on the one hand, in democratic systems, there is bound to be competition at every level, meaning that ‘pure strategies’, such as green blueprints, tend not to fare well. On the other hand, dynamic strategies, which feature continual adjustment and frequent decision-making, are likely to be essential in a sustainable economy and will likely be much easier to foster in a democracy than in other political systems, which tend to discourage citizen innovation and be more centralised.

Innovation will be vital—and challenging—in terms of sustainable decision-making, most likely at every level. There is far more literature on business innovation than either political or civil society innovation – it is possible that the latter could learn from the former. How different kinds of innovation are perceived by high-level decision-makers and wider society will become an important factor in how different groups engage, accept or reject sustainable policies.

Against the hope of dynamic strategies there will be opposition from actors who prefer the status quo and there will be manifestations of path dependency and ‘lock-in’. Since surely we all have an interest in discovering what can influence decision-making towards sustainability (not just what is blocking it), it will be important to investigate attitudes to and possibilities of path creation, which is an emerging positive response to policy-technology ‘lock-in’ [9].

This leads to another key question: what influences or can influence high-level decision-makers towards a sustainable, low-carbon economy? This question focuses attention on key decision-makers in the economy, such as those running fossil-fuel and renewable-energy companies, and politicians in departments dealing with energy and climate.

The Feed-in Tariff lens

To say anything usefully specific about the question of influence, however, one must the narrow the scope. For this essay, consideration will be given to national experiences with the Feed-in Tariff (FIT). FIT is a ‘policy mechanism designed to encourage the adoption of renewable energy sources and to help accelerate the move toward grid parity’ [13]. Generally, looking at FIT adoption allows some exploration of certain vital parameters (in particular risk) and the drawing of some larger conclusions about society, sustainability and decision-making. Here, and in brief, using the FIT lens, I shall focus on some interesting factors in decision-making and make some tentative observations based on or drawn from existing literature.

Proponents of FIT claim that it has been dramatically successful, and many nations that have adopted it have higher penetrations of solar renewable energy generation than those that haven’t [10]. However, this is not the issue of most help in understanding and developing decision-making for sustainability; the real question is: why is a new and important policy, such as FIT, so much easier to introduce in some nations than in others?

Furthermore, using FIT as a case study can offer the possibility of including, in greater or lesser detail, some of the most intractable decisions now before us, including how we can shift from an economy dominated by an oil-based transport system to a renewable electricity-based system.  

FIT also encourages the study of the cultural dimensions that may be some of the most significant non-economic factors influencing high-level decision-making. For instance, Hofstede [5] alludes to the possibility that nations with a high MAS (Masculinity) Index combined with high levels of individuality find collective decisions for the common good very challenging. This may be in part because liberal economics is built on privileging means over ends. Certainly, in most of the Anglophone world, despite early beginnings in California, FIT has not (yet) been adopted and implemented. This may be changing; for instance, the Department of Energy and Climate Change in the UK announced in October 2008 that it will bring in FIT. However, it will remain the case that nations like Germany are far in advance of Britain and the USA in developing a renewable-energy industry, and understanding why this is so could shed light on better decision-making in future.

Path dependency

I mentioned path dependency. This can be split into physical and policy path dependencies. An example of a physical path dependency is that of the conventional power industry, which has built an enormous physical infrastructure, including the transmission grid with its associated control systems and power generation units, which until the advent of wind power have usually been very large centralised objects. FIT is an example of a policy path dependency, though one imagines it could in extremis be revoked (if there were a war or some other cataclysm). Nevertheless, for practical purposes a 20-year legally binding FIT is an example of a path that cannot easily be changed and is going to enable or disable many other major decisions. There are many other vital but occluded factors in current decision-making, including historical, business and geographical factors, which may also create path dependence.

Path dependence can shed light on complex interlocking mechanisms. Two quite different examples are Prohibition in the US and the advent of collateralised mortgage obligations. Both developments have had extraordinary unintended consequences, from the growth of the Mafia to the recent financial crisis. Though not as dramatic, the development of a certain type and layout of power grid can of course have short- to medium-term benefits, but in the long run, if the grid is not flexible, as conditions change, a nation may be left with problems not dissimilar in scale to the two rather unfortunate examples just mentioned.

FIT is also an example of the kind of long-range policy making that is surely to be considered vital in combating climate change [3]. Thinking long term is also clearly indispensable for national and international energy policy, and FIT may be an example of how energy policy, as opposed to climate change policy, could be an easier pathway to the twin goals of energy security and carbon reduction.  

FIT is not only a significant long-term policy with energy and climate implications, but it may also shed light on other long-term strategic policy-business problematics with inter-national dimensions, such as cultural dimensions. Germany, for instance, has some measurable cultural similarities with the US and UK, but also some major differences, along with major differences in terms of their economic systems.

Cultural dimensions are important for any long-term policy designed to combat climate change and enhance energy security. FIT is therefore a good example to examine, since it requires government to create the long-term conditions that then allow business to create the supply chain in reality. But government can create these conditions only if the public participates and accepts higher power charges, and by implication is willing to balance long-term benefit against short-term cost. Any future study on this issue would also have to consider FIT in different economies and cultures, as this offers the possibility of examining different long-term reflexive government-business relationships, with the public’s attitude measurable both at the ballot box and by survey. We already know that some nations are much more willing to think long term than others; the question that needs to be answered in detail for different nations is why and what, if anything, can be done about it. This is one of the key questions for future research.

Risk

FIT does not present an issue of dramatic, sudden or catastrophic risk, the kind that, in some ways, humans find easier to comprehend. It is not the sort of policy that is likely to elicit great fear even though it may be disliked by some with certain economic or other beliefs.  FIT may be compared with nuclear power, which certainly evokes strong emotions and offers a much larger risk profile. Nuclear power is slated to undergo a major renaissance. It would be interesting indeed to explore a scenario in which nearby residents were offered a nuclear power station versus a wind farm. With nuclear power now very much part of the debate on climate change and energy security, such a comparison is no longer of merely academic interest.

Conclusions

Although specific research on how to create the conditions for and actually influence high-level, strategic decision-making for a low-carbon economy remains to be undertaken, some provocative conclusions can be drawn now in addition to the suggestions already made. 

The key contention here is that there may be some non-economic factors which are more important than economic factors in strategic decision-making. If so, far more attention should be paid to non-economic factors than appears to be the case at the moment. A summary of these factors follows.

Path dependency and lock-in often severely constrain what a government or business can do to make major or sudden change in policy or product. It is true that Roosevelt famously switched the US auto industry from cars to planes and tanks practically overnight, but that was in the face of the type of threat that homo sapiens knows how to deal with — an external attack. Whether President Obama will be able to do something similar — for instance turning Detroit into a hub of wind turbine manufacture and electric car production — remains to be seen and, given the difficulties he faces, looks unlikely. If major change is to become feasible or acceptable to decision-makers and/or the public, either climate change or energy security will have to seem far greater threats than they do now.

There are a number of often interlocking cultural factors that make long-term decision-making for a distant benefit difficult, such as, societies that

  1. favour the individual over the collective;
  2. attenuate the idea of the common good;
  3. stress means over ends, in effect being unwilling to discuss the good whether it be common or personal;
  4. stress competition as a very high virtue;
  5. promote aggression as an acceptable way to solve problems and an aggressive attitude as a preferred modus operandi.

Attitudes to risk, innovation, entrepreneurialism, fairness, justice and economic polarisation also have a vital effect in enabling or disabling strategic and long-term decision-making. The level of democratic participation and engagement may play a significant role in many ways, including in the ability of policymakers to deploy policies known to be effective but only if the public is engaged at a very granular level, such as by direct personal contact with someone representing a government agency operating a particular policy.

Increasingly, it appears that much will depend on human psychology, at the individual, group and societal levels. Nowhere is this more true, perhaps, than in the matter of leadership, which is closely related to decision making. New work on leadership, informed by recent advances in the understanding of how evolution has shaped human and primate psychology, may offer powerful tools in comprehending why good decision-making is so hard to do and so hard to enact [12]. It is emerging that there are core contradictions between the kinds of leadership that we have evolved to accept (and are able to offer) and the conditions of work and decision-making we have created in late industrial society.

We evolved in quite flat, small societies where leadership was often distributed according to performance: the best hunter led hunting, an elder would administer justice and peacemaking, and so on. There should be no illusion that this was utopia; conflicts, often leading to homicide, abounded. It is only to say that we found evolutionary advantage with a very different kind of leadership from the kinds we are now usually faced with. There are several further factors compounding our difficulties with modern leadership—and by implication decision-making—including, ironically, that leadership by prestige (akin to leadership by performance), which can be a more acceptable leadership mode, may find itself in competition with and overwhelmed by leadership by dominance, or aggression, to put it more crudely.

These leadership contradictions appear to be so legion that it is not clear that it will be possible to implement many strategic decisions for sustainability without understanding these factors and putting in place some measures to ameliorate the more difficult conditions. The same can be said for the kinds of cultural factors mentioned here. They too could doom efforts to create a sustainable economy, though it is possible that cultural factors may be more malleable, at least in theory, than evolutionary factors, such as our propensity for certain kinds of leadership and our concomitant willingness to follow or not.

It may seem daunting that not only do we face the prospect that much of the low-carbon, physical infrastructure of the 21st century will need to be different from that of the high-carbon 20th century, but also that we will need to make major societal and cultural adjustments. Approached in the right way, however, these challenges could become opportunities to develop conditions to which human beings are better adapted and in which they might actually flourish and be happier. Right now, this may not seem the most likely path, and clearly some pathways are locked in, at least for the moment. But there are new pathways opening up, and sometimes the demise or contraction of a system (such as the conventional car industry) can allow something much better to be developed to replace it. Armed with careful research and appropriately prepared, we could influence decision-making in meaningful ways that effect meaningful change. That is something devoutly to be desired and clearly possible – if not yet obviously probable.

Endnotes

  1. Ekins, Paul (2000) Economic Growth and Environmental Sustainability: The Prospects for Green Growth. London: Routledge.
  2. Ekins, Paul, Sandrine Simon, Lisa Deutsch, Carl Folke, and Rudolf De Groote (2003) “A framework for the practical application of the concepts of critical natural capital and strong sustainability.” Ecological Economics Volume 44, Issues 2-3, March 2003.
  3. Giddens, Anthony (2009) The Politics of Climate Change. London: Polity.
  4. Heap, Shaun Hargreaves, M Hollis, B Lyons, R Sugden, A Weale (1992) The theory of choice: a critical guide. Oxford: Blackwell.
  5. Hofstede, Geert (2001) Culture’s consequences: Comparing values, behaviors, institutions and organizations across nations. London: Sage.
  6. Frankl, Paolo (2008) Deploying Renewables: Lessons learnt from IEA RE Policy Analysis. Paris: IEA REMAP Conference. 16 December 2008.
  7. Jackson, Tim (2005) Motivating Sustainable Consumption: a review of the evidence on consumer behaviour and behavioural change. London: Policy Studies Institute.
  8. Jackson, Tim (2009) Prosperity Without Growth. London: Sustainable Development Commission.
  9. Stack, Martin & Myles P. Gartland (2003) “Path Creation, Path Dependency, and Alternative Theories of the Firm.” Journal of Economic Issues Vol. XXXVII No. 2, June 2003.
  10. Mendonca, Miguel (2007) Feed-in Tariffs: Accelerating the Deployment of Renewable Energy London: Earthscan.
  11. Stern, Nicholas (2008) The Economics of Climate Change. American Economic Review: Papers & Proceedings.
  12. Van Vugt, Mark, Robert Hogan and Robert Kaiser (2008) “Leadership, Followership, and Evolution: Some Lessons From the Past” American Psychologist April 2008.
  13. Grid parity, is ‘the point at which alternative means of generating electricity is equal in cost,
    or cheaper than grid power’.
    - Wikipedia: http://en.wikipedia.org/wiki/Feed_in_tariff (accessed 2 September, 2010.

Featured image: More questions. Author: Chris Baker. Source: http://www.sxc.hu/browse.phtml?f=view&id=1238452

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