Scandinavian Working Papers in Economics

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

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

Urs Steiner Brandt () and Gert Tinggaard Svendsen ()
Additional contact information
Urs Steiner Brandt: University of Southern Denmark, Postal: Department of Environmental and Business Economics, University of Southern Denmark, Niels Bohrs Vej 9 - 10, DK-6700 Esbjerg,
Gert Tinggaard Svendsen: Department of Economics, Aarhus School of Business, Postal: Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

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 EU’s 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 EU’s renewable energy systems.

Keywords: Political economy; switch point; first mover advantage; wind turbine industry; greenhouse gases; Kyoto Protocol; EU

JEL-codes: H20; H40; Q28

22 pages, May 26, 2004

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