Climate Change 2001:
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5 Barriers, Opportunities, and Market Potential of Technologies and Practices

5.1 Introduction

The transfer of technologies and practices that have the potential to reduce GHG emissions is often hampered by barriers12 that slow their penetration. The opportunity13 to mitigate GHG concentrations by removing or modifying barriers to or otherwise accelerating the spread of technology may be viewed within a framework of different potentials for GHG mitigation (Figure TS.7). Starting at the bottom, one can imagine addressing barriers (often referred to as market failures) that relate to markets, public policies, and other institutions that inhibit the diffusion of technologies that are (or are projected to be) cost-effective for users without reference to any GHG benefits they may generate. Amelioration of this class of "market and institutional imperfections" would increase GHG mitigation towards the level that is labelled as the "economic potential". The economic potential represents the level of GHG mitigation that could be achieved if all technologies that are cost-effective from the consumers' point of view were implemented. Because economic potential is evaluated from the consumer's point of view, we would evaluate cost-effectiveness using market prices and the private rate of time discounting, and also take into account consumers' preferences regarding the acceptability of the technologies' performance characteristics.

Of course, elimination of all these market and institutional barriers would not produce technology diffusion at the level of the "technical potential". The remaining barriers, which define the gap between economic potential and technical potential, are usefully placed in two groups separated by a socio-economic potential. The first group consists of barriers derived from people's preferences and other social and cultural barriers to the diffusion of new technology. That is, even if market and institutional barriers are removed, some GHG-mitigating technologies may not be widely used simply because people do not like them, are too poor to afford them, or because existing social and cultural forces operate against their acceptance. If, in addition to overcoming market and institutional barriers, this second group of barriers could be overcome, what is labelled as the "socio-economic potential" would be achieved. Thus, the socio-economic potential represents the level of GHG mitigation that would be approached by overcoming social and cultural obstacles to the use of technologies that are cost-effective.

Finally, even if all market, institutional, social, and cultural barriers were removed, some technologies might not be widely used simply because they are too expensive. Elimination of this requirement would therefore take us up to the level of "technological potential", the maximum technologically feasible extent of GHG mitigation through technology diffusion.

An issue arises as to how to treat the relative environmental costs of different technologies within this framework. Because the purpose of the exercise is ultimately to identify opportunities for global climate change policies, the technology potentials are defined without regard to GHG impacts. Costs and benefits associated with other environmental impacts would be part of the cost-effectiveness calculation underlying economic potential only insofar as existing environmental regulations or policies internalize these effects and thereby impose them on consumers. Broader impacts might be ignored by consumers, and hence not enter into the determination of economic potential, but they would be incorporated into a social cost-effectiveness calculation. Thus, to the extent that other environmental benefits make certain technologies socially cost-effective, even if they are not cost-effective from a consumer's point of view, the GHG benefits of diffusion of such technologies would be incorporated in the socio-economic potential.

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