Abstract
As climate and energy issues continue their inexorable rise up policy agendas worldwide, there seems to be at least one core fact upon which almost everyone agrees: that the development and diffusion of low carbon technologies will be central to stabilizing the climate over the 21st Century. However, innova tion is something that economists have long debated as an exceptionally complex area for economic theory. Like a river, technology collects ideas from myriad sources. Under the force of gravity—the pull of market demand—technology can harness these ideas, through many tributaries of intermediate technologies, into viable products. The continuing advance of ideas in all walks of life, which help to flow into making an improved product, forms a general 'autonomous' advance. From a specific technology perspective it just happens; from a modeling perspective this is 'exog enous' technological change, built in by assumption. Yet one feature of economic systems is the increasing pace with which the technology terrain evolves. Starting to understand and represent these forces is the domain of endogenous theories and models of innovation. The broad literature identifies several forces at play. Seeking new markets, industry itself makes strategic decisions about -where and how hard to try and break through barriers in the terrain, how
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