Scandinavian Working Papers in Economics
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Department of Economics, Aarhus School of Business, University of Aarhus Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus

No 04-2:
Switch Point and First-Mover Advantage: The Case of the Wind Turbine Industry

Urs Steiner Brandt () and Gert Tinggaard Svendsen ()

Abstract: Why has the EU been so eager to continue the climate negotiations? Can it be solely attributed to the

EU feeling morally obliged to be the main initiator of continued progress on the climate change

negotiations, or can industrial interests in the EU, at least partly, explain the behaviour of the EU? We

suggest that the individual member countries in the EU, such as Germany and Denmark, have a

rational economic interest in forcing the technological development of renewable energy sources to

get a first-mover advantage. Here, the Kyoto Protocol, which imposes binding greenhouse gas

reductions on 38 OECD countries, implies that, as a first-mover, the EU will potentially sell the

necessary new renewable technologies, most prominently wind mills, to other countries. In the latest

EU proposal made in Johannesburg, the EU pushed for setting a target of 15% of all energy to come

from sources such as windmills, solar panels and waves by 2015. Such a political target level would

further the EUís interests globally, and could suggest, in economic terms, why the EU eagerly

promotes greenhouse gas trade at a global level. In contrast, the US has left the Kyoto agreement to

save the import costs of buying the EUís renewable energy systems.

Keywords: Political economy; switch point; first mover advantage; wind turbine industry; greenhouse gases; Kyoto Protocol; EU; (follow links to similar papers)

JEL-Codes: H20; H40; Q28; (follow links to similar papers)

22 pages, May 26, 2004

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