Path Dependence & Lock-in - Agriculture & Climate Change #1: Investment


Path dependence explains how, although a technology or regime may be flexible and adaptive when it first develops, fixed pathways become established over time because future capital returns are positively correlated with present investments. Systems, technologies and societies whose capital or institutional investments, or cultural identities, have evolved along certain paths find that there are high costs involved in switching away from them - and can be considered ‘locked in’. Not only does lock-in make it difficult for (particularly industrialised) agriculture to mitigate climate change, it also constrains agricultural adaptation to climate change. This is particularly important in developing countries which are generally most vulnerable to climate change, and therefore most in need of effective adaptation. It is not only a central issue for food production, but for economic development in general, since agriculture is one of the main drivers of economic growth, particularly in developing countries (see Our Planet, UNEP 2006).

This is the first of a series of three blog posts considering three manifestations of lock-in which restrict climate change adaptation in agricultural systems, ‘investment lock-in’, ‘cultural lock-in’, and (a sort of inverse lock in) ‘ innovation lock-out’.

Investment lock-in occurs when certain political and/or financial interests are associated with an investment in a certain system or approach, which inhibit future system changes - often because those changes will likely result in unacceptably low levels of political or financial return in the near term. This could either be due to the removal or reduction of the productivity of the old system, the upfront cost associated with the change, the time lag in the productivity of the new system meeting that of the old system, or a combination of the three. For example, the investment of industrialised agricultural systems in machinery which relies on fossil fuel energy sources makes them unlikely to switch to adaptive or mitigative technologies, such as machinery which can run on biodiesel. Overall, it acts to inhibit switches to new systems - even those in which, once investments had been made, would yield higher returns than the existing system: the existing technology ‘need not be the superior technology’ (Cowan and Gunby, 1996, p.521).

Clearly, this lock-in to certain agricultural systems and infrastructures presents major challenges for climate change mitigation and adaptation. Industrial agriculture (which is infrastructure and investment heavy) ‘contributes significantly to global warming, representing a large majority of total agriculture-related GHG emissions’ (Lin et al. 2011, p.1), and any investment in equipment or infrastructure narrows the range of future adaptation options. Organisations with significant investment in industrial agricultural equipment may lobby politicians to sustain high carbon systems to see continued return on their investment. This difficulty led Fiona Harvey, writing for the Guardian (2011), to observe, ‘Anything built from now on that produces carbon will do so for decades, and this “lock-in” effect will be the single factor most likely to produce irreversible climate change’.

Investment lock-in can be seen in the use nitrogen fertilisers to increase soil productivity. These add directly to GHG nitrogen emissions and also contribute to soil degradation, which reduces the flexibility and adaptive capacity of cropping systems and releases stored carbon. Many industrialised agricultural methods are now locked into the use of nitrogen fertilisers: the soils are too poor to survive without them and restoring the natural nutrient content of the soils and moving towards conservation agriculture would be a long and expensive process.Non-capital investments can also contribute to lock-in to high emissions systems. Land that has been flooded for rice production (which contributes significantly to emissions of the greenhouse gas methane) for example in South East Asia, may be very difficult and expensive to drain to accommodate less greenhouse gas intensive crops even if that were commercially viable. Add to this the fact that consumers in the region are used to buying rice, that it makes up a large part of their diet and culture, and strong path dependence and lock-in effects can be seen at work. This consumer preference lock-in is an example of a cultural, rather than investment-driven, form of lock-in - the subject of the second blog post in this series.

Thanks to Kalexanderson for the photo.

Business, social change, technology, and sustainable development - and the bits in between.
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