THE INSTITUTIONALISATION OF CORPORATE ACTION ON CLIMATE CHANGE IN THE SWEDISH ELECTRICITY INDUSTRY
Steven Sarasini
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ISBN 978-91-7473-163-7 Copyright © 2011 Steven Sarasini Research Policy Institute, School of Economics and Management Lund University 2011
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Abstract
This thesis utilises qualitative methods to examine what drives / impedes corporate action on climate change in the Swedish electricity industry. Reasoning from new institutional theory, this thesis examines the role of institutional logics as a determinant of corporate actions. Institutional logics are shared cognitively institutionalised structures that are thought to limit individuals’ capacity for free and autonomous action. Theoretically the thesis examines the concept of agency vis-à-vis the ability of organisational actors to perform institutional work on institutional logics. The thesis shows that public policy is the most important driver of corporate action on climate change from a company perspective, despite the fact that Swedish electricity companies operate in a liberalised market context. It also shows that corporate action on climate change is part of a broader institutional change project that seeks to bring about a transition to more sustainable means of electricity production. The change project is part of a programme of ecological modernisation, which is described here as a hybrid logic in that it combines traditional institutional orders such as government, the private sector and science and technology as a means to mitigate transboundary environmental problems. The thesis concludes that a range of organisational actors collectively participate in the ongoing modification and transformation of the hybrid ecological modernisation logic via a process of communicative interaction. The thesis analyses these findings in terms of their implications for Swedish research policy.
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Acknowledgements
I would like to express particular thanks to the following people for their assistance and support during the time it took to produce this thesis: Merle Jacob, Eva Bäckstrand, Mikael Klintman, Josef Pallas, Johannes Stripple, Lars Coenen, Thomas Hellström, Björn-Ola Linnér, Mathias Friman and the staff of Research Policy Institute, CIRCLE and CSPR. I would also like to thank my friends and family for their unconditional support during the last four years. This thesis was produced with the help of funds from the Swedish Research Council for Environment, Agricultural Sciences and Spatial Planning (FORMAS).
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Glossary of terms
CCA
Corporate Action on Climate Change
CCS
Carbon Capture and Storage
CHP
Combined Heat and Power
CO2
Carbon Dioxide
CoP
Conference of the Parties to the UNFCCC
CPA
Corporate Political Action
CSR
Corporate Social Responsibility
EC
European Commission
ECS
The Swedish Electricity Certificate Scheme
ENGO
Environmental Non-Governmental Organisation
EU ETS
EU Emission-Trading Scheme
GDP
Gross Domestic Product
GHG
Greenhouse Gases
IPCC
Intergovernmental Panel on Climate Change
LCA
Life Cycle Analysis
NGO
Non-Governmental Organisation
NIT
New Institutional Theory
OECD
Organisation for Economic Co-operation and Development 5
R&D
Research and Development
RBV
Resource-Based View
RD&D
Research, Development and Demonstration
RDT
Resource Dependency Theory
RES-E
Renewable Sources of Electricity
SERO
The Swedish Association of Small Electricity Producers
SSNC
The Swedish Society for Nature Conservation
Swedenergy
The Swedish Electricity Industry Association
TWh
Terawatt hours
UN
United Nations
UNDP
United Nations Development Programme
UNFCCC
United Nations Framework Convention on Climate Change
WTO
World Trade Organisation
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Contents
Abstract ............................................................................................. 3! Acknowledgements ........................................................................... 4! Glossary of terms .............................................................................. 5! Contents ............................................................................................ 7! 1. Introduction.................................................................................... 8! 2. Choice of Theory ......................................................................... 15! 2.1 Theoretical alternatives ...............................................................15! 2.2 Factors that influence corporate action on climate change .........22! 2.2 New institutional theory ...............................................................27! 2.3 Institutional logics ........................................................................29! 2.4 Defining institutions and institutional logics .................................32! 2.5 Agency ........................................................................................38!
3. Research design and method...................................................... 45! 3.1 Doing institutional work on institutional logics .............................49! 3.2 Methods ......................................................................................51!
4. Summary of findings.................................................................... 54! 5. Conclusions ................................................................................. 61! References ...................................................................................... 75! Appendix.......................................................................................... 92!
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1. Introduction
Climate change is currently one of the world’s most salient environmental issues. Power generation (primarily from the combustion of fossil fuels) accounts for around a quarter of greenhouse gas emissions around the globe (IPCC 2007), which highlights the role of the energy industries as a major part of the climate problem. The extent to which the energy industries constitute part of the solution to the climate issue depends, in part, on the ability of electricity producing companies to switch to more sustainable means to produce and supply energy. Examining what drives or impedes corporate action on climate change is thus a key policy issue. Swedish electricity production differs from most OECD countries in that it is almost entirely free from carbon emissions, and Sweden is often regarded as belonging to a group of countries dubbed environmental leaders or pioneers (Nilsson 2005; Reiche and Bechberger 2004; Petterson and Söderholm 2009). One could thus argue that Swedish electricity production may provide valuable clues as to how the climate issue can successfully be resolved on a broader scale. Hence this thesis seeks to address the following question: What are the main drivers and impediments of corporate action on
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climate change in the Swedish electricity industry? Despite its low emissions, climate change is a highly salient issue in the Swedish electricity industry. This particularity seems almost counter-intuitive if one considers the fact that the broader debate on climate change mitigation has often focused on the macroeconomic costs and those to individual companies of switching to cleaner means of production. However, this traditionalist view stands in contrast to revisionist approaches which argue that environmental protection can assist in both making proactive companies more profitable and in boosting industrial competitiveness via innovations of environmentally benign products and processes (e.g. Porter and van der Linde 1995; Carrilla-Hermosilla et al. 2009). Swedish energy policy takes a revisionist stance and pursues an innovation-based strategy that it hopes will give Sweden a leadership role internationally vis-à-vis climate mitigation. The main empirical finding of this thesis is that energy policy is the most important driver of corporate action on climate change. In particular, corporate action on climate change in the Swedish electricity sector is most strongly influenced by two policy instruments – the EU emission-trading scheme and the Swedish electricity certificate scheme. The introduction of these two schemes has radically reshaped the economics of electricity production in the context of a liberalised market. By redistributing financial capital from electricity consumers to producers, the schemes, among other 9
things, provide economic incentives for companies to invest in a range of practices and technologies that are generally considered to be ‘climate-friendly’. This shift towards a market-based governance model implies a more delimited role for the government in steering climate-related investments. Given the increased responsibility for investments in the development and adoption of new energy technologies now granted to the private sector, it is feasible to raise the question as to whether this sector is in fact capable of fulfilling Sweden’s energy policy objectives. The finding that energy policy is the main driver of corporate action on climate change does not comprise the entire story of this thesis. The contrasts between the traditionalist and revisionist approaches described above illustrate the importance of examining drivers of corporate action in terms of the ideas and rationales that guide practitioners’ thinking on the climate issue along with the range of other factors that influence corporate behaviour. Research on corporate
environmentalism
has
utilised
various
theoretical
perspectives to show that the range of factors that can influence corporate behaviour is quite broad. Until now research has utilised new institutional theory (Hoffman and Ventresca 1999; Bansal and Roth 2000; Levy and Kolk 2002; Levy and Rothenberg 2002), stakeholder theory (Fineman and Clarke 1996; Buysse and Verbeke 2003; Delmas and Toffel 2004); the resource-based view of the firm (Hart 1995; Sharma and Vredenburg 1998; Christmann 2000),
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supply chain management (Handfield et al. 2005), neo-Gramscian theory (Levy and Egan 2003), and strategic management (Nehrt 1996; Hoffman 2002a). Further, Kolk and Pinkse (2007) argue that the resource-based view, supply chain, stakeholder and new institutional theories are required to fully understand corporate action on climate change. These approaches demonstrate that some of the factors which influence corporate environmentalism are internal to companies, such as organisational competences and human resources whereas others are part of the external business environment and include public policies, regulations, industry trends and culture. Reasoning from new institutional theory (NIT), this thesis employs the concept of institutional logics to investigate what are the determinants of corporate action on climate change in the Swedish electricity industry. One of the cornerstones of new institutional theory is that it examines to the rationales of organisational behaviour, specifically where organisations act in a manner that cannot be accounted for by traditional conceptions of rational behaviour
(Greenwood
et
al.
2008).
Instead
of
depicting
organisational behaviour as the result of individually autonomous action, a central hypothesis is that rationales and interests are contingent upon broader institutional logics. Logics are themselves defined as dually material and symbolic entities that provide stability to the central institutions of Western society (Friedland and Alford 1991). When these entities combine and become shared cognitively
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held beliefs and values they acquire the stability and persistence of institutions. NIT studies typically examine the emergence of institutions as cognitive entities in the context of relational spaces (organisational fields) (Scott 2007; Wooten and Hoffman 2008). The logics approach directs attention to socially constructed systems of meaning that pervade the organisational field and seeks to examine and understand rationales that underpin organisational behaviour. In particular, NIT argues that institutions constitute actor rationality. By refuting the notion of individual actor rationality, and by depicting institutions as primarily cognitive phenomena, NIT is essentially a theory with no place for free and autonomous thought, which limits opportunities for actor-led institutional change (Hardy and Maguire 2008). Holm (1995, p. 398) summarises this problem by posing the question: “How can actors change institutions if their actions, intentions, and rationality are all conditioned by the very institution they wish to change?”. This ‘paradox of embedded agency’ (Seo and Creed 2002) has been the source of much recent work that seeks to reintegrate agency into NIT. The central theoretical issue this thesis seeks to address is related to the concept of agency. Institutions do not just appear from nowhere and individuals and organisations are undoubtedly complicit in their construction, modification and maintenance. By examining the rationales for corporate action on climate change this thesis addresses the extent to which organisational actors interact with 12
institutions and in doing so illustrates a way that institutional change – which is a key requirement for tackling the climate problem – can be brought about. The main theoretical argument is that institutions (as manifest in norms, rules, laws, policies, etc.) do condition organisational actors but that change is brought about via collective agency. Organisations, or more specifically the individuals within them, are capable of creating, maintaining and disrupting institutions but only in a collective manner. This means that whilst this thesis refutes the notion of individual actor autonomy, it nonetheless acknowledges that corporate action is a social phenomenon and it affords actors the ability to partake in the process of collective institutional work. More specifically, the process via which institutions change that is illustrated here is one of communicative interaction, where members of an organisational field seek to influence the manner in which companies behave in relation to the climate issue by prescribing ‘appropriate’ action frames. Whilst not all actors command the resources necessary to instigate change, the process of communicative interaction elucidates a recursive relationship between actions and institutions at the field level. This thesis utilises a qualitative methodology composed of semistructured interviews, document analysis and literature review. The thesis is structured in two main parts. The present part outlines the main questions and theoretical issues that the thesis addresses. The second part of the thesis is an appendix that is comprised of the four
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papers that form the main body of work. This section is divided into five sections of which this is the first. The next section outlines the theoretical framework of the thesis and section three discusses methodological aspects of the research design. The theoretical and methodological arguments presented in these sections apply to the thesis as a whole and thus tend not repeat that which is already stated in the individual papers. Hence there are some concepts that are introduced in the papers that do not appear in the sections below. Section four consists of a summary of the main findings of the thesis, which are discussed in the fifth and concluding section.
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2. Choice of Theory
This thesis utilises and seeks to make a theoretical contribution to new institutional theory (NIT). NIT was chosen because of its richness as a theory of organising compared to other theories that have been used to examine corporate environmentalism. This section motivates this choice by first comparing alternative theoretical approaches and then by providing a more detailed outline of the concepts that are examined throughout the thesis.
2.1 Theoretical alternatives Scholarly work on corporate environmentalism has been conducted from a range of theoretical perspectives including NIT (e.g. Hoffman and Ventresca 1999; Bansal and Roth 2000; Levy and Kolk 2002), stakeholder theory (e.g. Fineman and Clarke 1996; Buysse and Verbeke 2003; Delmas and Toffel 2004), the resource-based view of the firm (e.g. Hart 1995; Sharma and Vredenburg 1998; Christmann 2000), supply chain management (e.g. Handfield et al. 2005), neo-
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Gramscian theory (e.g. Levy and Egan 2003), and strategic management (e.g. Nehrt 1996; Hoffman 2002a). As regards climate change, and to the extent that companies have shifted from oppositional to market-oriented strategies, Kolk and Pinkse (2007) argue that the resource-based view, supply chain, stakeholder and new institutional theories are useful in explaining corporate action on climate change. These theoretical perspectives and corporate social responsibility are considered below in terms of their potential contributions to the aims of this thesis. A commonality between supply chain management, the resourcebased view, stakeholder theory and to an extent corporate social responsibility is that these perspectives offer ways to understand how climate change can be translated into a series of strategic management initiatives. Companies that are internally motivated1 to act on climate change may thus behave in the manner described by these theories. For example, the supply chain perspective elucidates cases where companies engage with their supply chains to perform life-cycle analyses of their products (Tan and Zailani 2009),
1
Internal motivations are analytically distinct from external drivers in that the former refer to instances where corporate decision makers actually want to improve environmental performance in contrast with situations where they are subject to pressures from the external business environment (see Okereke 2007).
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implement environmental management systems to monitor suppliers’ environmental performance (Handfield et al. 2005), or manage the use of products via information campaigns directed at consumers (Kolk and Pinkse 2007). Similarly, the resource-based view of the firm (RBV) shows how companies can utilise environmental problems to boost competitive advantage via pollution prevention, product stewardship and sustainable development strategies (Hart 1995; see also Porter and van der Linde 1995; Wagner et al. 2002; Wagner and Schaltegger 2003; Wagner 2005). From the RBV perspective, responses to climate change are responses to innovation opportunities linked to waste reduction and product stewardship that can help a company to differentiate itself from rivals vis-à-vis environmental
products;
to
reduce
costs
via
efficiency
improvements; and to develop competencies that are useful for a low-carbon economy. Since Milton Friedman’s (1962, p.60) claim that “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits…”, much research on corporate social responsibility (CSR) has focused on making the business case for corporate engagement with a range of societal issues. A great deal of CSR research has thus focused on the relationship between corporate social versus financial performance and has sought to deconstruct the notion that improvements in the former come at the expense of the latter (see Margolis and Walsh
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2003; Orlitzky et al. 2003). Hence the CSR perspective is useful for distinguishing between profitable responses to climate change (which companies are presumably internally motivated to pursue) and symbolic ones (which companies are externally driven to pursue in order to maintain legitimacy and corporate image). The aforementioned perspectives are useful for showing how companies can take advantage of opportunities to implement measures that are linked to climate change and which enhance competitive advantage and/or profitability. They are less useful in illustrating why companies may act on environmental issues, especially when the main drivers are part of the external business environment. For instance, only a few studies from the supply chain perspective have addressed the external drivers of corporate action to promote environmental sustainability (e.g. Handfield et al. 1997; de Bakker and Nijhof 2002; Tan and Zailani 2009). These studies find that less vertically integrated companies are more likely to implement supply chain measures because of a lack of discretion regarding suppliers’ environmental performance (Kolk and Pinkse 2007), or because of the increasing importance of environmental risks (Handfield et al. 2005). Similarly, the CSR perspective provides few clues as to why companies should engage with societal issues since research is primarily of an evaluative nature. CSR scholars typically make normative and/or instrumental statements by considering the risks of 18
‘bad’ CSR practices, such as damage to corporate reputation (e.g. Aman 2000; Cropanzano et al. 2004); the effects of environmental responsibility on corporate brands (e.g. First and Khetriwal 2008); or with corporate efforts to divert attention from illegitimate core operations via ‘decoupling’ strategies (e.g. Weaver et al. 1999). Some CSR scholars have examined why firms pursue CSR initiatives (e.g. Aguilera et al. 2007), though the latter line of enquiry is in an embryonic stage having emerged only recently. CSR does take inspiration from stakeholder theory to examine initiatives from an instrumental and/or normative perspective (Clarkson 1995; Aguilera et al. 2007) but as an explanatory framework CSR is not particularly useful compared to other theories. The RBV is a key theoretical perspective employed in research on business strategy. The RBV focuses on firm-specific factors to explain heterogeneity and the way that companies utilise unevenly distributed financial, physical, human and organisational resources and capabilities to maintain competitive advantage (Barney 1986; 1991; Teece 1986). As regards corporate environmentalism Sharma and Vredenburg (1998) found evidence that companies from the Canadian oil and gas industries with proactive environmental strategies were able to develop unique capabilities associated with stakeholder management, higher-order learning and continuous innovation. Christmann (2000) theorised that the effects of ‘best’ environmental management practices depend on climate change
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being perceived as an opportunity to innovate and increase operational efficiency, or as an opportunity to develop new products via technological or organisational changes that provide cost or differentiation advantages. In order for firms to establish sustainable development strategies, for instance, Hart (1995) argues that it is critical that the “environmental voice is heard”, yet is vague in terms of how this may actually occur. Among the RBV studies that do take factors in the business environment into account are Kolk and Pinkse (2007), which argues that competitors can pose threats to market incumbents by developing new technologies that take advantage of the innovation opportunities that climate policies provide. Similarly Porter and van der Linde (1995) argue that stringent environmental regulation is central to the ‘win-win’ combination of economic competitiveness and environmental betterment. And Reinhardt (1998) shows that competitive advantage from product differentiation is contingent upon government regulation, industry structure, product markets, and consumer willingness to pay for products of higher environmental quality. However, these dimensions of the external business environment are black-boxed in the sense that examining reasons for corporate action on climate change from this perspective leads to additional
why-questions
regarding
the
context
in
which
environmental regulation is established and implemented, for example, that are better described using NIT.
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Stakeholder theory arguably offers a more socially contextualised understanding of corporate strategies. It has three main usages – as a descriptive, instrumental or normative framework (Donaldson and Preston 1995). As a descriptive framework stakeholder theory seeks to understand the way that organisations and strategies are linked to the external business environment via relationships with salient stakeholders. Managers perceive certain stakeholders as more salient than others according to, for example, the resources that they control (Jawahar and McLaughlin 2001) or because of the power, legitimacy and urgency of stakeholders and their claims (Mitchell et al. 1997). Some stakeholder theorists regard the natural environment as a potential stakeholder (e.g. Mitchell et al. 1997) although it requires mobilisation by governments or environmental organisations (Rowley 1997; Frooman 1999). Kolk and Pinkse (2007) argue that a range of stakeholders including governments, investors, suppliers and customers have succeeded in influencing companies vis-à-vis the climate issue, and that managers seek to anticipate stakeholders that may become salient in the future. Stakeholder theory has also been used to examine the links between managerial perceptions of salient stakeholders and the degree to which companies commit to environmental improvements (Henriques and Sadorsky 1999). Managerial perceptions of stakeholder salience are further dependent on a range of company-specific factors such as a company’s environmental track record (Delmas and Toffel 2004) or the level
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and types of scrutiny experienced by an industry or individual company from campaigners, for instance (Fineman and Clarke 1996). Stakeholder theory would thus make a contribution lacking in those theories described above by showing how corporate action on climate change results from relational aspects of organisational practices. From this perspective corporate action is seen as a response to stakeholders, whose salience and urgency are socially constructed entities (Freeman 1984). However, and even though stakeholder theory has progressed beyond explanations of corporate strategy as simply ‘resulting from stakeholder interests’ (Donaldson and Preston 1995), there are many attributes of issue and stakeholder salience that are glossed over by empirical studies. Stakeholder theorists have not taken social constructionism seriously, for instance, and do not provide many clues as to why actors have certain interests or pursue certain influence strategies. Exactly why certain stakeholders are salient at any given time is thus still unclear.
2.2 Factors that influence corporate action on climate change Before the argument for choosing NIT is fully laid bare, it is important to consider what is already known about factors that influence corporate action on climate change (hereafter CCA). Research on this topic has utilised different theoretical approaches to 22
elucidate reasons, factors and mechanisms that exist at multiple levels of analysis. One key factor is public policy, which is widely acknowledged to be an important driver of CCA. By providing economic incentives to reduce emissions, climate and energy policies can incite companies to take what appears to be rational economic action on climate change (Skjærseth and Skodvin 2001; Dunn 2002; Boiral 2006; Bradsher 2006; Donnelly 2007; Jones and Levy 2007; Okereke 2007; Pinske 2007). Moreover, companies that seek to manage economic risks and take advantage of innovation opportunities linked to climate change, public policy or their vested interests in terms of existing capital stock and competences (Abernathy and Clark 1985; Henderson and Clark 1990; Kolk 2000; Levy and Newell 2000; Reinhardt 2000; Rugman and Verbeke 2000; Kolk and Levy 2001; Skjærseth and Skodvin 2001; Hoffman 2002a; Levy and Egan 2003; Boiral 2006; Victor and House 2006; Jones and Levy 2007; Pinske 2007) behave in a similar manner given that such action can be considered as strategic attempts to maximise profits. It would thus appear that a suitable theory should be capable of explaining expedient corporate behaviour based on traditional bottom-line profit maximisation and strategising. However, this type of behaviour is ontologically different to corporate political action that is influenced by ideology or some other discursive entity. There are studies which show that corporate arguments regarding the
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suitability of climate policy (or its existence at all) are contingent upon broader political factors or culture (Kempton and Craig 1993; Levy and Newell 2000; McCright and Dunlap 2000; Levy and Kolk 2002; Levy and Egan 2003). Other research suggests that nationally based sociocultural expectations and politico-institutional factors shape business strategies (e.g. Levy and Newell 2000; Levy and Kolk 2002). Whereas culture can be thought of as a ‘resource’ that guides companies’ attempts to influence public policy, it can also be seen as a factor that influences the manner in which a range of stakeholders frame the public discourse on climate change, which in turn influences corporate behaviour (Kempton and Craig 1993; Casten 1998; Romm 1999; Levy and Newell 2000; McCright and Dunlap 2000; Levy and Kolk 2002; Levy and Egan 2003; Jones and Levy 2007). Hence whilst it could be argued that using culture as a ‘resource’ represents efforts to manage climate change strategically, most studies allude to differences in values, beliefs and principles that guide and influence corporate behaviour and thus bring the notion of individually rational action into question. Seen this way, certain aspects of CCA seem to be socially and/or culturally defined. A factor that appears to fall between the two perspectives described above (individually versus socially defined rationality) is corporate legitimacy. In practice companies must vie for legitimacy with a range of stakeholders, both internal and external. A legitimate climate strategy is seen to bode well for influence in policymaking
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spheres; with consumers and product marketing; with employees, investors and shareholders; and with environmental groups and the media (Boiral 2006). Legitimacy is an important concern particularly for large companies with a history of public scrutiny (Bruno 2000; Buchan 2001; Kolk and Levy 2001; Skjærseth and Skodvin 2001; Levy and Kolk 2002). Companies may thus vie for legitimacy in a strategic manner (e.g. to raise standards for competitors or to mitigate the risk of consumer boycotts); but legitimacy is socially derived, which raises further questions about the notion of individually rational action. The notion of individually rational action seems more erroneous if one considers other factors that influence CCA. First, perceptions of risks and opportunities associated with climate change vary between industry sectors (Dunn 2002). Companies from the same industry are likely to adopt similar practices and environmental standards, partly because they experience similar economic and technological constraints, but also because they seek to reduce uncertainty collectively (Hoffman 1999; Levy and Kolk 2002; Milstein et al. 2002; Pinkse 2007). It is widely known that collective action poses problems for individual actor rationality (Barnes 1995). Second, the fragmented state of global climate policy implies that variations also exist within some global industries, such that geography plays a role (Dunn 2002). Some scholars have argued that divergent regulatory contexts reflect varying national economic and 25
industrial interests and that national policy responses to climate change depend at least in part on a country’s ‘structural dependence on capital’ (Levy and Egan 1998; Levy and Kolk 2002). National regulatory responses to climate change are strongly influenced by structural dependence, which is blatantly obvious if one considers the national
stances
of
oil-producing
countries
during
climate
negotiations (see Grubb et al. 1999). It makes sense that countries with energy-intensive industries are unlikely to introduce regulation that raises energy costs for those industries, especially where they are of significance to the wider economy. In sum, the factors that directly or indirectly influence corporate action on climate change have varying ontologies. A key issue seems to be that notions of individual actor rationality are sometimes valid (in the way that companies respond to public policy, for instance) but sometimes brought into question by factors that are inherently political, cultural, situational or – to use a broader term – social. However, whilst the term ‘social practices’ can be used to refer to a range of factors that influence CCA, other factors that influence corporate action on climate change such as natural resource endowments and incumbent technologies for producing electricity are of a different ontology. These two problems (one based on rationality and the other ontology) imply that a theoretical framework is required that 1) can account for reasons, factors and mechanisms with varying ontologies; and 2) examines rationales and
26
logics for corporate action. For these reasons this thesis examines corporate action on climate change by utilising a branch of NIT entitled institutional logics.
2.2 New institutional theory NIT was chosen 1) because it can account for factors that influence CCA with varying ontologies and which exist at multiple levels of analysis; and 2) because it provides a richer, more contextual understanding of organisational behaviour compared to theories that depict corporate behaviour as only resulting from sovereign, individually autonomous action. When NIT emerged in the 1970s, the dominant organisational theories were structural-contingency theory, resource-dependence theory, and the behavioural theory of the firm, which all depicted organisational behaviour as a result of “agentic actors responding to situational circumstances” (Greenwood et al. 2008, p.3). At this time the main relationship between organisations and their external environment was seen to be causal – organisations sought to adapt to a given rational assessment of their ‘technical/market setting’ in an autonomous and intentional manner. NIT however emphasises the social context within which decisions are made, and more specifically the way that decisions are shaped by institutional factors. One of the cornerstones of NIT is that individuals and organisations are not autonomous agents that act according to individual rationality. Rather, one of the central 27
questions asked by NIT is “why and with what consequences do organizations exhibit particular organizational arrangements that defy traditional rational explanation?” (Greenwood et al. 2008, p.31, emphasis original). Similarly, DiMaggio and Powell (1991, p.8) argue that NIT: “…comprises a rejection of rational-actor models…a turn toward cognitive and cultural explanations, and an interest in properties of supraindividual units of analysis that cannot be reduced to aggregations or direct consequences of individuals’ attributes or motives”. NIT thus sees individually autonomous action as problematic (see also Meyer et al. 1994) and redefines actor rationality using a more sociological
depiction
of
institutions,
where
organisational2
behaviour is situated within a socially constructed institutional environment, or field, that constitutes various types of social phenomena. NIT takes inspiration from Bourdieu (1977) who conceptualised social fields as “external to any particular actor, but also exist as subjective, internalized mental elements” (Scott 2007,
2
From an NIT perspective, the term organisation is broad and applies to different organisational levels e.g. the company as an organisation or a field of organisations. The main use of the term here is in consideration of a company as an organisation that exists in a relational space with other organisational actors, or organisational field.
28
p.42) in order to focus attention on the ‘internalization of cultural rules’. In their refutation of autonomous and individually rational behaviour, new institutional theorists have instead outlined a cultural-cognitive theory of organisational behaviour that draws upon cognitive theory, culture theory, ethnomethodology and the phenomenological approach of Berger and Luckmann (1967) (Scott 2007). From culture theory, the symbolic definition of culture that includes values, ideas, feelings and intentions is most influential to NIT, and is similar to discursive theories that depict social reality to be shaped by socially constructed meaning systems. Similarly, phenomenology sees culture as a symbolic, or semiotic, system and emphasises the way that collective systems of meaning are established around cultural symbols – again similar to discursive approaches. In this vein Scott (2007, p.39) argues that organisational behaviour “is shaped not only by attention to rules and the operation of norms, but also by common definitions of the situation and shared strategies of action”. The socially constructed collective system of meaning that, according to NIT, provides ‘common definitions’ of appropriate corporate action on climate change is examined here using the concept of an institutional logic.
2.3 Institutional logics By questioning the notion that organisations are individually rational this thesis examines whether institutional factors can explain 29
corporate action. To make this shift requires that the main research question addressed by this thesis (What drives / impedes corporate action on climate change in the Swedish electricity industry?) be restated as: How do institutional logics influence corporate action on climate change? This section reviews existing research to describe the manner in which logics influence organisations. Friedland and Alford (1991, p.248) inaugurated the term institutional logic by describing five central institutional orders in Western societies (capitalist markets, the bureaucratic state, democracy, the nuclear family and Christian religion) as sets of activities and the meanings that are given to them: “Each of the most important institutional orders of contemporary Western societies has a central logic – a set of material practices and symbolic constructions – which constitutes its organizing principles and which is available to organizations and individuals to elaborate. The institutional logic of capitalism is accumulation and the commodification
of
human
activity. That
of
the
state
is
rationalization and the regulation of human activity by legal and bureaucratic hierarchies. That of democracy is participation and extension of popular control of human activity. That of the family is community and the motivation of human activity by unconditional loyalty to its members and their reproductive needs. That of religion, or science for that matter, is truth, whether mundane or
30
transcendental, and the symbolic construction of reality within which all human activity takes place.” The main hypothesis within this field is that logics have constitutive power across a broad spectrum of organisational life. Logics constitute power relations, norms and values, actors’ beliefs, motives, social identities, interests and agency (March and Olsen 1989; Thornton and Ocasio 1999; Glynn 2000; Lounsbury et al. 2003; Lounsbury and Ventresca 2003; Rao et al. 2003; Breiger and Mohr 2004; Glynn and Lounsbury 2005; Luo 2007). They structure incentives and sanctions, legitimise specific personal goals, and depict appropriate behaviours, attitudes and solutions to problems (March and Olsen 1989; Friedland and Alford 1991; Ocasio 1997; Rao et al. 2003; Luo 2007). In short, institutional logics provide meaning to various aspects of social life and constitute rationality: “Institutional logics define the norms, values, and beliefs that structure the cognition of actors in organizations, and provide a collective understanding of how strategic interests and decisions are formulated” (Thornton 2002, p.82). Whilst it may still appear to exist, individual actor rationality is restated in the sense that strategic and instrumental behaviour is considered against the contingency of institutional settings. Rationality is seen from the institutional rather than the individual level. Where companies seek to maximise profits or improve competitive advantage, for example, it can be argued that
31
capitalist markets – one of Friedland and Alford’s (1991) five institutional orders – comprises the dominant logic. Hence from this perspective, decisions to engage in certain practices and activities are contingent on higher order institutional logics that legitimate certain organisational forms and condemn others (Scott 1994; 2007; Hoffman 2001: Djelic and Quack 2008; Greenwood et al. 2008). This implies that the range of practices established by companies in relation to climate change (e.g. developing ecoinnovations, reducing emissions and corporate political action) is legitimised by institutional logics. In light of such a bold claim it is important consider exactly what comprises an institutional logic, and in particular why logics have the capacity to constitute things like actor rationalities and so on. The next section thus focuses on defining institutions and institutional logics.
2.4 Defining institutions and institutional logics Few new institutionalists actually attempt to define the concept of an institution, despite numerous calls to clarify the use of institutional terminology (e.g. Greenwood et al. 2008; Thornton and Ocasio 2008). This is nothing new. Hughes (1936, p.180) argued that there is such a broad range of uses of the term ‘institution’ that it appears that the only commonality is some notion of “relative permanence of a distinctly social sort”. Without a lucid definition of institutions, 32
there is a risk that all that structures organisations be regarded as ‘institutional’. Whilst the resolution of this issue is beyond the scope of this thesis, distinguishing between what is meant by institutional is nonetheless essential for lucid explanations of factors that influence CCA. For brevity, then, institutions are defined here as having the following qualities. Given that NIT finds individual autonomy or rationality problematic, a distinguishing feature of institutions is that they comprise rule-like features that are held socially and which are sometimes experienced as ‘forces’ (March and Olsen 1989; Jepperson 1991; Sahlin and Wedlin 2008). Institutions are formal rules, procedures and norms, but also “the symbol systems, cognitive scripts and moral templates that provide ‘frames of meaning’ to guide human action” (Hall and Taylor 1996, p.947; see also March and Olsen 1989; Djelic and Quack 2008;). Collectively these elements could be described as socially constructed ‘rules’ that shape perception and interpretation – they constitute actor rationalities. However, the rule-like features of institutions should not be viewed separately from the actors, activities and behaviours they depict as legitimate – institutions also encompass “routines, procedures, conventions, roles, strategies, organizational forms, and technologies around which political activity is structured” (March and Olsen 1989, p.22). NIT divides institutions into two realms – the (material) realm of action, which is intertwined with (symbolically) institutionalised 33
rules. The two realms are deemed ‘mutually constitutive’ (Meyer et al. 1994), or dual. This is because whilst institutions may be experienced as “external to the consciousness of individuals” (Jepperson 1991, p.143) they are in actuality internalised in that they structure cognition (Berger and Luckmann 1967). Attention to cognitive factors is what distinguishes NIT from other institutional approaches (Scott 2007). Another feature is that institutions are self-reinforcing and have a degree of permanence (Jepperson 1991). Organisations, for instance, are thought to be cognitively embedded in socially constructed meaning systems of which culture is a part and makes institutions resistant to change (Giddens 1986; Meyer et al. 1994). The persistence of institutions is said not to depend “upon recurrent collective mobilization…repetitively engineered and reactivated in order to secure the reproduction of a pattern” (Jepperson 1991, p.145; see also Djelic and Quack 2008). Rather institutions are sustained by routines, not collective intervention or action, such that their persistence is relatively autonomous. Characterising institutions as self-activating poses problems for considering entities such as public policy, whose enforcement requires intervention, as institutional. A similar problem applies to Scott’s (2007) inclusion of regulatory factors as one of three institutional ‘pillars’ (the other two being normative and cognitive). The regulatory pillar includes mechanisms that coerce certain 34
organisational forms and practices and has been interpreted by scholars such as Hoffman (2002b) to include entities such as public policy. Regulatory institutions thus allow for expedient and selfinterested actions in a manner similar to those of the self-regarding individually rational actor mentioned in previous sections – the main difference being that rationality is defined at the institutional rather than the individual level. However, some scholars have claimed that studies which examine public policy and regulation from a new institutional perspective are misguided, and argue that resource dependency theory (RDT) is a more appropriate framework for attending to such factors (e.g. Phillips and Malhotra 2008; Thornton and Ocasio 2008). Scott’s inclusion of regulatory elements as institutional is subject to debate given that NIT typically emphasises institutions as taken-for-granted or cognitive phenomena. Whilst research from the RDT and NIT perspectives does typically attend to material versus symbolic conditions of organisational environments respectively, the notion that NIT cannot examine public policy and regulation as institutional is slightly misguided. This is because despite the fact that institutions are primarily depicted as cognitive phenomena, they are “sometimes encoded in laws” (Greenwood and Suddaby 2006, p.29) or in prescriptive symbolic systems (Glynn and Lounsbury 2005) that comprise “assumptions, values, beliefs, formal and informal rules” (Chung and Luo 2008, p.768). Cognitive institutions can underpin regulative and
35
normative phenomena that supply companies with “organizing principles that govern the selection of technologies…[and] shape and constrain the behavioral possibilities of actors” (Lounsbury 2002, p.255). Hence the extent to which corporate responses to public climate and energy policies can be considered institutional depends on the extent to which these policies are embedded in or imbued with symbolic and cultural elements of the institutional context in question. This issue is addressed in article two of this thesis and is taken up again in section four. Institutional logics have the same qualities as institutions but focus is mainly on the dualistic relationship between symbolic and material practices. For example, and similar to Friedland and Alford (1991), Galvin (1999, p.4) defines institutional logics “an array of material practices and symbolic constructions that constitute organizing principles guiding activity within a field”. The term ‘symbolic’ refers to the way that ‘material’ objects, entities, activities or practices are conceptualised and attain meaning institutionally. However, whilst NIT scholars argue for some sort of duality, they tend to emphasise the symbolic dimensions of logics over the material because of the focus on cognitive institutional elements. Definitions of logics as “tacit, deep level frameworks” (Breiger and Mohr 2004, p.18); “higher order belief systems that shape cognition and action” (Glynn and Lounsbury 2005, p.1032); “systems of social categories” (Breiger and Mohr 2004, p.18) and “taken-for-granted, resilient
36
social prescriptions” of appropriate and accepted organisational forms (Greenwood and Suddaby 2006, p.28) make this point clear. By arguing for a dualistic examination of material and symbolic entities, the logics approach appears to be so encompassing that there is little that escapes institutional explanation. For example, the range of material entities that can influence CCA includes, among other things, public policy, technology and natural resource endowments. These entities are intertwined with symbolic aspects of logics in that the public discourse on climate change, for example, assigns a quality of ‘appropriateness’ to some technologies and natural resources vis-à-vis electricity generation, and entities like climate policy become idealised in that they are linked to other socioeconomic goals. Despite its apparent breadth, the logics approach is adopted here to elucidate the way that the climate issue challenges the legitimacy of technologies, activities and practices related to electricity production, and how the main legitimating ideas regarding electricity production are subject to change over time. This occurs as new issues emerge and decline that challenge the incumbency of the material aspects of electricity generation, despite the fact that the latter are difficult to change. When scholars use the term ‘institutional lock-in’ (e.g. Unruh 2000) to describe such difficulties, they are referring to the fact that large technical systems like electricity, or automobiles, are supported by a range of institutional factors that hinder change to technological aspects such
37
as the petroleum-based internal combustion engine or nuclear power. What is often overlooked in these accounts is that technologies face new challenges over time as, in the case of electricity production, environmental issues emerge and decline with the effect that perceptions of legitimate means to generate electricity change over time. The recent disaster in Japan is a case in point. The important point is that one must consider the way that previously salient issues have shaped perceptions and ideas about the way electricity should be produced in order to understand the factors that underpin corporate action on climate change. Whilst technologies such as nuclear power seem quite permanent, perceptions of it as an appropriate means to generate electricity are subject to quite radical changes as events like Chernobyl are translated into issues that appear to require urgent attention. And like the technologies, certain ideas that emerged in tandem with previously salient issues can remain to the effect that they shape the manner in which new issues such as climate change are framed. Hence in order to understand the factors that underpin corporate action on climate change it important to consider the effects of history. The logics approach affords such analysis by elucidating the way that the symbolic dimensions of institutions are changed or modified over time.
2.5 Agency A common criticism of new institutional theory relates to its inability 38
to account for agency and institutional change. The main reason for this shortcoming is the emphasis on passive conformity in new institutional research where individuals and organisations are sometimes depicted as ‘cultural dopes’ (Glynn and Lounsbury 2005). By refuting the notion of individual actor rationality and by depicting institutions as primarily cognitive phenomena, NIT is essentially a theory with no place for free and autonomous thought. The cognitive quality of institutions thus limits opportunities for actor-led institutional change (Hardy and Maguire 2008). Holm (1995, p.398) summarises this problem by posing the question: “How can actors change institutions if their actions, intentions, and rationality are all conditioned by the very institution they wish to change?”. This ‘paradox of embedded agency’ (Seo and Creed 2002) has been the source of much recent work that seeks to reintegrate agency into NIT. To attend to the agency problem scholars have created the notion of ‘institutional entrepreneurs’ – actors who see new institutional frameworks as an opportunity to realize ‘highly-valued interests’ and which have the resources necessary to initiate institutional change (DiMaggio 1988). Institutional entrepreneurs are actors who either transform existing institutions or create new ones (Maguire et al. 2004; Garud et al. 2007) and can be individuals, organisations, or collectives (Fligstein 1997; Garud et al. 2002; Greenwood et al. 2002; Maguire et al. 2004), though research has most commonly
39
focused on organisations that singularly bring about change. The literature on institutional entrepreneurship has bloomed in the past decade and has provided various insights (see Battilana 2006 for a review). However, depicting actors as having ‘highly-valued interests’ suggests that NIT has merely reverted to the notion of individual actor rationality to resolve the agency problem. Furthermore, a key aspect of institutional change is commonly overlooked in studies of institutional entrepreneurship. Whilst institutional entrepreneurs may appear to lead change, the definition of institutions as shared, socially constructed systems of meaning means that change is always a collective endeavour. Whilst some studies do allude to ‘field enabling conditions’ (Greenwood and Hinings 1996; Lawrence 1999; Seo and Creed 2002; Dorado 2005), depicting actors as being singularly capable of instigating change in this way seems analytically flawed. This brings us squarely to the theoretical problem that this thesis seeks to address. If institutions operate as shared cognitive phenomena that constrain free and autonomous action, what can be said of agency? To address this problem this thesis looks to a more recent development in NIT that focuses on instantiations of agency that are overlooked in research on institutional entrepreneurship. Institutional work refers to “the purposive action of individuals and organizations aimed at creating, maintaining and disrupting institutions” (Lawrence and Suddaby 2006, p.215). Rather than
40
focusing on actions of actors that singularly and radically transform institutional arrangements, institutional work adopts a practice perspective to examine “the practical work of actors in relation to institutions” (Lawrence et al. 2009, p.2) that supports creation, maintenance and disruption, and which affords space to the possibility of collective agency. Without the collective work of actors in maintaining institutional arrangements, for instance, it is unclear why institutions endure rather than collapse given a natural tendency towards entropy (Zucker 1988). Examining such types of action is thus key to a better understanding of how institutional change is implemented, modified and adopted by a broader set of actors. By focusing on agency in this way this thesis enters a long and persistent debate within the social sciences that is commonly referred to as the structure-agency problem. However by arguing that institutions as shared cognitive phenomena are the main entities that influence corporate action, there is no need to entertain the notion of a dichotomy between agency and structure. In fact there is no need for the latter term at all when it is used in the sense of an external structure that constrains free and autonomous thought. Put differently, structures are not “real objects with intrinsic powers” (Barnes 2000, p.24). By depicting institutions as shared cognitive, structures NIT is in reality a theory of the collective mind.
41
This is apparent if one considers the way scholars speak of the relationships between institutions and actions. Broadly speaking two types of relationships between actions and institutions are thought to exist. First is the notion of a duality between actions and institutions where the latter simultaneously enable and constrain actions that in turn recursively constitute institutions. Scholars that adhere to this field include Zucker (1977) and DiMaggio and Powell (1983) who each drew on Berger and Luckmann (1967) to depict institutions as “socially constructed templates for action, generated and maintained through ongoing interactions” (Barley and Tolbert 1997, p. 95). From this perspective action is central to institutional persistence because institutions are embedded in actors’ conceptions of wellestablished routines and activities whose repetition over time leads to shared cultural-cognitive understandings. Institutions thus endure because alternatives are literally unthinkable. Second is the notion that institutions exist as external pressures or constraints that either sanction or prescribe appropriate organisational actions (e.g. Meyer and Rowan 1977). From this perspective action could be renamed ‘reaction’ or ‘response’ since actors are more consciously aware of institutional structures, and institutions endure because actors seek to evade the sanctions that disobedience entails. These two perspectives reflect in part the contrast between the institutions as cognitive and regulative/normative phenomena mentioned earlier. At its core,
42
however, NIT is clearly a theory of the way that cultural-cognitive phenomena influence action. Barley and Tolbert (1997) argue that neither of the abovementioned camps has sufficiently examined the manner in which institutions influence actions, and vice versa. The field of institutional work attempts to resolve this issue via the assumption that “institutions are the product (intentional or otherwise) of purposive action” (Lawrence and Suddaby 2006, p.216). The concept of institutional work is useful for examining the relationship between actions and institutions. Stating that action is purposive – whether intentional or not – means that actors need not behave as cultural dopes. Instead there is the possibility that actors are to varying degrees capable of pursuing activities in a reflexive, consciously-aware manner that serves to alter institutions (Lawrence et al. 2009). A balanced view would thus be to accord individuals and organisations with at least the potential to act with agency. However, as hinted at above, treating agency as a unidimensional property of action in an institutional context is problematic because it treats agency as a static individual attribute, ignoring its dynamic and relational dimensions (Battilana and D’Aunno 2009). To reiterate, since shared systems of meaning institutions are created and maintained socially, any depiction of agency must account for change among collectives. Hence any valid argument regarding agency must account for that social interactions that are inherent to 43
institutional changes. Rather than attributing agency to some essential quality of an individual or organisation, this thesis follows Barnes (2000, p. 92) who defines agency in terms of “free action as the social action of mutually accountable and susceptible agents, and the associated voluntaristic discourse as the medium through which such agents affect each other”. As an interactionist Barnes makes a case for collective agency where responsible agents (i.e. those which are mutually accountable and susceptible) influence one another through communicative interaction and come to agreements based on shared language, knowledge and culture. According to Barnes entities like institutions persist because of continuing social relations, but are also subject to continual change by agents through interactions. Barnes’ account is entirely compatible with the notion of collective agency outlined in studies of institutional work. Furthermore, it directs our attention to gradual yet substantive processes of institutional change and development that are overlooked by studies on institutional entrepreneurship. It provides a theory of agency that is not unnecessarily abstract and which is thus possible to evaluate given its focus on communicative interactions between members of an institutional system. And it centres our attention on how members communicate based on shared understandings, bodies of knowledge, or in the case of this thesis, ideal elements of institutional logics.
44
3. Research design and method
Barley and Tolbert (1997) outline a recursive model of the relationship between actions and institutions. The model shows that whilst institutions constrain actions, when viewed over time actions maintain and reproduce or modify and change institutions. The epistemological consequence is that empirical studies should ideally include longitudinal data that examines actions over a period that is sufficiently long that one can observe their institutional effects. In their words, this is a ‘formidable task’, given that “archival material will rarely contain the detailed data necessary for documenting the link between everyday acts and the creation of and institution”, and since “an enormous amount of luck or prescience are required to recognize an emerging institution and then gather data on relevant, ongoing actions and interactions” (p. 100). Nevertheless, this thesis seeks to glean insights from archival data into the relationship between actions and institutions. More specifically, this thesis examines agency (via the concept of institutional work) by examining the construction and modification of institutional logics. Particularly article one adopts this approach given its longitudinal 45
analysis of the institutionalisation of the climate issue during the period 1970-2009. Otherwise this thesis utilises the temporally based notion of agency outlined by Emirbayer and Mische (1998) that underpins the concept of agency in studies of institutional work. For instance, by examining the discursive framing of Swedish climate policy, paper two reveals how the Swedish government utilises, among other things, Sweden’s track record of low emission electricity production to legitimate a present- and future-oriented ‘proto’-institution. It may appear that the parts of the thesis that explicitly address institutional work (articles three
and
four)
predominantly
adopt
the
abovementioned
‘unidimensional’ approach in the sense that they examine corporate action in its institutional context. To an extent these pieces are synchronic. However their main purpose is to provide a snapshot of how companies contribute to institutional change and development in via routines and ‘normal’ practices. These articles thus consider corporate action against the exigencies of institutional logics at a given point in time. However the broader view is not one of institutional stasis – logics are seen here as dynamic entities whose character is subject to gradual yet continuous change and modification over time. In sum this thesis comprises a collective case study (Stake 1994) that focuses on the following single case studies. The first case is a longitudinal study that traces the emergence of an organisational 46
field of actors that interact with Swedish electricity companies in conjunction with the climate issue. The study traces the emergence of proto-institutions and the development of institutional logics in the field over a period of four decades during which the climate issue has become increasingly salient. The second case study utilises critical discourse analysis to examine the way climate change mitigation has been framed as an element of Swedish energy policy; and the third and fourth cases examine how climate change is manifest in a range of firm-level drivers of corporate actions. These cases were selected to provide a holistic understanding of the way that the climate problem is manifest institutionally in the organisational field in question, where the boundaries of the latter were identified empirically and inductively. The main methodological weakness of the first two papers is that they are primarily substantive, not processual. Given the breadth of the period covered by the first paper, for instance, it was not possible to examine in depth the processual social construction of exogenous events. Similarly, the second paper is substantive rather than processual. That is, it examines policy discourse in terms of its textual content and does not focus on lobbying processes, for instance, that shape and influence policy according to constituents’ interests. The study’s findings thus rest on the assumption that certain textual elements of the policy discourse reflect the social context within which policy is designed and constructed. These
47
studies seek to alleviate this problem by triangulating between sources that in combination provide a rich dataset. This problem is further alleviated in that the third and fourth papers examine institutional work as a process instantiated in everyday corporate routines and practices. Thus whilst the entire institutionalisation process is not examined, papers three and four do at least provide insights as to how actions can influence institutions in a processual manner. In fact, the long-term nature of the change project that climate mitigation entails means that it provides an opportunity to study institutional change as it unfolds rather than in hindsight, and can potentially provide valuable insights into the structure-agency problem at a range of analytical levels. Papers three and four are however limited by the fact that by addressing ‘drivers’ of corporate action, the analysis is more geared towards examining external rather than internal factors that influence strategy. This is in part a methodological issue related to the overall focus on electricity production as an industry. In order to ensure comprehensiveness it was necessary to interview a broad number of respondents, which in turn reduced the extent to which analysis focused on individual companies’ experiences with renewable technologies, for example, and factors such as company size, corporate cultures, core competences, and so on that undoubtedly influence strategy. As climate change becomes more of an issue for strategic management, these are useful avenues for future research.
48
At each of these three overlapping empirical sites there is consideration of material and symbolic institutional factors in that analysis gives attention to both discursive and non-discursive entities. A key relationship between these elements is examined – particularly the way that non-discursive entities (such as natural resource endowments, technology, policy instruments and so on) become part of institutional logics. In order to operationalise this analysis it was at times important to consider organisational fieldlevel dynamics and at others organisations such as governing bodies, companies, industry associations and environmental organisations. From the outset this multi-level analysis may seem confusing. However, the organisational field concept is utilised here as an analytical lens as a means to examine institutional arrangements that may influence CCA. Each of the organisations considered are field members whose actions influence the development of logics linked to CCA. Organisational fields are the relational spaces where communicative interactions between members take place in a manner that both influences corporate action on climate change and that which can modify institutional logics.
3.1 Doing institutional work on institutional logics This thesis identifies ecological modernisation as the main hybrid institutional logic that is linked to Swedish electricity production. In 49
its simplest form, ecological modernisation prescribes the utilisation of science and technology as drivers of sustainable growth and a central role for the private sector directed by strong government interventions vis-à-vis ‘smart’ regulations (e.g. carbon taxes, emission trading) (Mol and Sonnenfeld 2000). These three elements combine to spur the greening of industry narrowly via technological fixes (Huber 1982; Huber 1984; Huber 1985) or, more broadly, via Schumpeterian
technology-induced
social
change
(Mol
and
Spaargaren 2000). Ecological progress is thus made via incremental (cleaner) or radical (clean) eco-innovations (Jänicke 2008) that from a
business
perspective
combine
improved
environmental
performance with financial benefit because of cost-savings generated by reduced waste and emissions, or from the marketability of green products (Porter and van der Linde 1995). The ultimate goal of ecological modernisation is sustainable development (Dryzek 2007). The papers that comprise the empirical body of this thesis each show how organisational field members perform institutional work in that they attempt to create, maintain or disrupt aspects of this hybrid logic. Since institutional logics are defined as dually material and symbolic entities, field members can select from a range of strategies to perform institutional work. Most forms of institutional work relate in some way to the technologies and fuels that are used to generate electricity. Where field members seek to create new ways to generate electricity or maintain / disrupt existing ones, for instance, they
50
engage in institutional work. However field members may engage in other forms of institutional work that are related to the ecological modernisation logic. They may, for instance, seek to create, maintain or disrupt energy policy, seek to influence the actions of electricity producing companies or make prescriptive statements about technologies and fuels for electricity production that are directed towards policymakers or the industry as a whole. By utilising the organisational field concept as a relational space this thesis examines how field members have sought to perform institutional work on different aspects of the ecological modernisation logic via a range of communicative interactions.
3.2 Methods This
thesis
utilises
qualitative
methods
(interviews
and
document/textual analysis) to gather data from a range of sources. Instead of repeating what is stated in the method section of each journal article, this section justifies the selection of these methods and explains their use. Qualitative methods are a more suitable means to produce data on rationales and logics for corporate action on climate change. The reasons for this are well documented – namely that qualitative methods are more useful for examining subjective understandings, values, beliefs and opinions in a contextually rich manner (Marshall and Rossman 2010). The thesis relies on multiple sources of 51
evidence to examine these phenomena. Interviews are useful in gauging field members’ beliefs, values and understandings (Punch 2005) related to the climate issue. This thesis utilises semi-structured interviews in order to bestow respondents with the opportunity to speak freely and openly about their opinions and beliefs in a manner that avoids fragmentation. Admittedly, surveys or questionnaires may have allowed respondents to voice opinions in the absence of the influence of an interviewer. However surveys would have imposed homogeneity onto the organisational field – they are hampered by the fact that they impose predetermined meanings onto the subject. Whilst interviews are not entirely free from this problem there is at least the opportunity for respondents to disagree with the manner in which questions are framed and elaborate on views that transcend the scope of the interview protocol. Surveys do not allow for interpersonal contact whereas interviews provide the opportunity to judge subjectivity via body language, tone of voice and so on. By recording and transcribing interviews it is possible to compare them to other sources of textual data, including public policy documents, corporate annual reports, company websites, industry journals, news items and a range of reports and position papers from the
carbon
disclosure
project,
environmental
organisations,
electricity companies and industry organisations. As a general rule I coded and analysed the textual sources of data for each paper in the manner described by Punch (2005), initially using numerous labels
52
and tags to summarise content. I then reduced the codes to a series of categories that, at a higher level of abstraction, allowed for comparison between cases and within the context of each case. I then identified and compared higher order categorisations with theoretical propositions from academic literatures. Higher order categorisations were essential for examining rationales for corporate action on climate change in terms of institutional logics.
53
4. Summary of findings
The four articles in this thesis may be read as treating two groups of themes. The first theme relates to the development and modification of institutional logics in the field of Swedish electricity production and the second focuses on corporate action in relation to these logics. This section summarises the main findings of the thesis in relation to the questions posed in previous sections. The first article, entitled The institutionalisation of What? Corporate action on climate change in the Swedish electricity industry is a longitudinal study that examines the endogenous impacts of a range of exogenous events between 1970 and 2009. Following exogenous events, the industry has debated several issues since 1970. The overall result is a sense among field members that Swedish electricity production must undergo a transition to more sustainable energy sources, though the exact meaning of ‘sustainable’ has been subject to much debate. These debates have resulted in the entrenchment of four institutional logics: economic efficiency, transboundary environmental protection, science and technology, and government, which, when taken together, comprise a programme of ecological modernisation. The latter, whilst usually described in the 54
literature
as
a
discourse,
has
undergone
at
least
partial
institutionalisation in the field and is thus described as a hybrid institutional logic. The main theoretical argument of the paper is that exogenous events or shocks can be important catalysts in the process of endogenous institutional change and development. The study shows that exogenous events can set in motion processes of institutional change whereby actors make use of the institutional leftovers (detritus) from previously salient issues to construct frames for corporate action visà-vis new issues as they emerge. Hence as events are transformed into salient issues, institutional logics are modified and undergo continuous development. The paper also shows that exogenous events are not transformed into issues in an institutional vacuum, since field members’ perceptions are influenced by existing logics and the paper thus argues that a recursive relationship between institutions and actions exists. Actors are accorded agency to the extent that they select from institutional detritus to devise legitimate strategies or prescriptions of appropriate corporate action. The paper argues that field-level contestations regarding the efficiency of climate and energy policy, appropriate technologies, fuels and organisational practices are the outcome of this recursive process. Whilst influenced by prevalent logics, field-level contestations are the communicative events that can transform them and reflect the inclination in this thesis to treat agency as a social phenomenon.
55
The second article, entitled Constituting leadership via policy: Sweden as a pioneer of climate change mitigation, examines the way that the Swedish government frame Swedish and European energy policies as a driver for CCA. The study utilises qualitative methods to analyse both the content and objectives of public policy between 1991-2009. The Swedish government, which is a powerful field member, is thus examined as regards its role in framing the climate issue where the texts analysed in the study are further instantiations of the communicative interactions that can transform institutions. The study shows that the government draws on the ecological modernisation logic to outline ambitious and partially unilateral policies that are linked to a range of socioeconomic objectives besides environmental protection. Focusing on textual analysis in this way reveals much about how much agency governments can act with when designing public policy. The Swedish government is able to outline ambitious plans based on a range of situational factors. These include Sweden’s natural resource endowment; her existing means to supply electricity, economic structure, scientific and technological competences; and her role and position as regards foreign policy. The Swedish government idealises these non-discursive factors and utilises them as rhetorical devices to legitimate a strategy that resonates with Sweden’s cultural-cognitive self-image. Non-discursive elements thus have the potential to enable certain discursive utterances and can
56
furnish actors with the opportunity to transform institutions. However, the study shows that non-discursive factors can also act as constraints. For instance, one of the main constraints is the fact that the global climate policy regime is fragmented, with only some regions subject to stringent regulatory frameworks. The importance of export-oriented energy-intensive industries to the Swedish economy means they are largely exempt from the pseudo-taxes that modern climate policies entail whereas the domestic sector is comparatively overburdened. This is presumably the outcome of other communicative interactions, such as industry lobbying, that are beyond the scope of the paper. The overall implication is that tackling climate change is only attractive when it is not detrimental to Swedish industrial competitiveness. In terms of institutional logics, leadership as regards environmental protection is constrained by the logic of economic efficiency. The remaining two articles examine what drives CCA from the perspective of individual companies. By focusing on drivers of market and nonmarket strategies, these studies examine the linkages between corporate action and the institutional logics identified in the first two articles. Since the climate issue has been framed as a change project – that is, corporate action on climate change is broadly depicted as a significant driver of the transition towards sustainable energy supply and use – corporate action is treated as a form of institutional work. Here actions that are driven by public policy, for
57
example, are not only seen as an outcome of the incentives that policy provides but also a means of consolidating the change project that policy sets out to achieve. Hence rather than performing evaluations in terms of sustainability criteria, these studies examine corporate action as a means to create, maintain or disrupt institutional logics. The third article, entitled Policy and corporate climate action in the Swedish electricity sector examines policy as a driver of and/or impediment to corporate climate action in comparison to other possible
determinants
including
stakeholder
pressures
from
environmental organisations and consumers. The paper finds that the economic incentives provided via two policies are the most important driver of CCA. Consumer pressures, whilst not insignificant, constitute a driving force primarily when they are manifest
via
the
market
as
economic
incentives
whereas
environmental organisations cannot harness the resources necessary to impose comparable influence. Whilst these findings may not be surprising
from
a
strategic
management
perspective,
their
connotation is significant in that by pursuing strategies that are dependent on public policy, companies behave in a self-regarding economically rational manner that appears to clash with the central tenets of NIT. However if one considers the linkages between institutional logics and corporate action, the study corroborates the view that institutions define ‘what is rational and what is not’. Put
58
differently, the study’s findings reaffirm that the ecological modernisation logic ‘governs’ environmental protection within the sector in that by responding to the incentives created via public policy, companies subscribe to the institutional project established by the Swedish government and reinforce and maintain the norms and values that are embedded in policy instruments. Specifically, these norms and values pertain to the use of science and technology as a partial resolution to the climate issue where policy facilitates a particular programme of environmental protection that, among other things, maintains the status quo vis-à-vis government-industry relations. Hence when seen from this broader perspective, CCA is a central component of the institutional change project that the field seeks to achieve. Companies are thus key agents in the change process, but agency must be regarded in terms of the collective rather than something inherent to individuals or individual organisations. The final paper, entitled Institutional work and climate change: Corporate political action in the Swedish electricity industry, examines drivers of nonmarket strategies vis-à-vis attempts by companies to influence public policy. Theoretically, the paper examines the relationship between drivers of CPA from institutional and resource dependency perspectives. The main findings are that the most politically active companies are those which perceive risks associated with the financial resources directed via public policy. CPA was thus pursued as a means to manage external resource
59
dependencies. However, the study also shows that even where respondents experience significant risks associated with external resource dependencies, they voiced criticism that are described in terms of three categories for environmental policy evaluation – efficiency, effectiveness and equity. This suggests that shared industry norms, values and expectations (i.e. cognitive institutional factors) guide the management of resource dependencies. Regardless of the choice of whether they would maintain or refute policy instruments, companies’ appraisals of policy all converged on these criteria. Hence the study shows that companies share a body of knowledge that is key to attempts to shape regulations in processes of institutional work, and that these cognitive elements guide the maintenance and disruption of regulative institutional counterparts. By elucidating the shared body of knowledge upon which industry appraisals of policy instruments rest, the study again alludes to the notion of agency as a collective attribute that is manifest in communicative interactions, this time in the form of corporate attempts to influence policy design.
60
5. Conclusions
The main finding of this thesis is that from a company perspective, public policy is the most important driver of corporate action on climate change. In particular, and despite market liberalisation, this thesis shows that market forces alone cannot provide the incentives required to tackle climate change or ensure the construction of a sustainable electricity supply. Rather, the main drivers of CCA are the incentives provided via two market-based instruments – the EU emission-trading scheme and the Swedish electricity certificate scheme.
These
schemes
have
radically
reshaped
electricity
production in that they 1) provide incentives for companies to invest in renewable sources of electricity and phase out any fossil fuels that remain in the energy mix; 2) assist in the generation windfall profits for electricity producers (see also Hoffmann 2007; Jacobsson 2008); and 3) encompass a shift towards a more decentralised governance model where investments in new energy technologies are increasingly the responsibility of the private sector. These outcomes form the basis of two contributions to research policy that this thesis seeks to make.
61
Firstly, given their newfound responsibilities it is necessary to address whether electricity producers make investment decisions that will ensure the sustainability of electricity supply in the long term. Historically, Swedish science and technology policy for renewable sources of electricity has been notoriously weak in stimulating technological diversity, focusing mainly on large scale applications of wind and solar power in comparison to countries with lead markets such as Germany and Denmark (Jacobsson and Bergek 2004). The main reason for focusing on large-scale applications is that renewable technologies have commonly been judged on their capacity to replace nuclear power plants (Bergek and Jacobsson 2003). Given the shift towards a new model of governance described above, the issue at stake is thus whether private sector investments adequately stimulate technological diversity in the context of the two market-based instruments in question. This is especially significant if one considers the ambitions of Swedish energy policy to lead-byexample internationally by establishing new markets for innovative technologies that both reduce emissions and generate welfare and economic development. Whilst market-based instruments are believed to provide incentives for companies to ‘go beyond compliance’ and thus stimulate innovations of new products and processes, there is little empirical evidence of the actual effects of the two schemes’ impacts on innovation. As regards the impacts of the EU ETS, it seems that
62
electricity producers are mostly geared towards innovative activities that do not threaten existing competences and technology portfolios (Hoffmann 2007; Schneider et al. 2009). The ETS has encouraged investments in new power plants; in retrofitting existing plants; and to varying degrees in innovative activities (RD&D) related to renewable technologies, energy efficiency and carbon capture and storage technologies (Hoffman 2007; Rogge and Hoffman 2010). Whilst some of these innovations are of a radical rather than incremental nature, the largest investments are typically made by incumbents that rely heavily on coal and thus invest in RD&D in carbon capture and storage technologies to allow for further investments in coal-fired power, which may jeopardise long term emission reductions and result in lock-ins to existing technological trajectories (Schneider et al. 2009; Rogge and Hoffman 2010; Rogge et al. 2011). Furthermore, current carbon prices are currently too low to encourage a shift towards fuels such as natural gas, which further suggests a significant role for coal-fired power (Rogge et al. 2011) and renewed enthusiasm for nuclear power (Rogge and Hoffman 2010). A quick perusal of Vattenfall’s R&D investment activities exemplifies these points – despite a considerable increase since the mid 2000s, over seventy percent of Vattenfall’s investments in R&D (which nonetheless totalled a meagre quarter of a percent of total annual turnover in 2008) are directed towards CCS and nuclear
63
technologies. Ten percent of R&D investments were directed towards renewable technologies and only two percent towards ‘new technologies’ (Vattenfall 2009). Together these findings suggest that governments have an important role to play in stimulating technological diversity as the private sector seems to display a tendency to invest in RD&D geared towards existing portfolios and competences (see also Söderholm and Strömberg 2003). Moreover, the fact that private sector is also limited by the lack of stringency and predictability of the ETS, which is currently planned until 2020, implies that governments must ensure that RD&D policies for renewable
sources
technological
of
diversity
electricity required
to
adequately meet
stimulate
long-term
the
climate
objectives. Whilst most research on the innovative effects of the ETS apply to the German electricity industry, which is much more reliant on fossil fuels than the Swedish electricity industry, future electricity demand in Sweden is unlikely to be met by investments in nuclear and hydropower, which makes the adoption of fossil fuels versus renewable sources of electricity a key issue (Petersson and Söderholm 2009). Since the EU ETS alone does not encourage the adoption of renewable sources of electricity (Pettersson and Söderholm 2009; Rogge et al. 2011) additional policies are required to create markets in renewable technologies, which brings us
64
squarely to the issue of how well renewable energy policy stimulates technological diversity. Again the empirical evidence is rather thin. The Swedish ECS was designed to encourage cost-efficient investments in renewable sources of electricity in a manner that would relieve the government of its financial responsibilities vis-àvis the adoption of renewable technologies. However the cost efficiency of the ECS is questionable given that it generates windfall profits for electricity producers that can claim rents for plants that are already profitable (Bergek and Jacobsson 2010). Whilst this may be a teething problem in that the government must allow companies to pass on opportunity costs in this way in order to generate market liquidity, the overall cost includes a potential loss of legitimacy for the scheme and renewable technology (Söderholm 2008). Furthermore, the scheme fails to stimulate investments in RD&D in energy technologies (Bergek and Jacobsson 2010). Given that the ECS comprises a market for renewable energy certificates, companies are encouraged to invest in adopting the cheapest and most mature RES-E options, which can impede other aspects of the innovation process. Whilst there is in principle nothing flawed in this feature of the scheme, it does reiterate the need for the Swedish government to make investments that will stimulate the technological diversity required to meet renewable energy policy targets, especially if nuclear power does not have a future in the long-term. Although the government has recently made significant investments in energy 65
RD&D programmes, these are of a short-term nature that further raises questions about the fact that companies generate significant profits at the expense of consumers (Bergek and Jacobsson 2010). A useful amendment to the scheme would be that companies are required to direct profits generated via the ECS towards RD&D in renewable technologies. This thesis makes a second contribution to research policy by considering the implications of the way that members of the organisational field associated with electricity production interact on the climate issue. This thesis elucidates processes whereby field members debate and contest solutions to the climate issue in a collective and communicative manner and characterises these debates and solutions in terms of a hybrid institutional logic entitled ecological modernisation. The logic itself is manifest in a range of shared understandings related to the means to tackle the climate problem and in a range of social practices and material aspects of electricity production (public policy, technology, natural resource use and so on). The governance model mentioned above, where electricity companies are given more freedom and responsibility to act in the context of liberalised markets (albeit within the constraints of market-based policy instruments) is the focal point here. In particular, the following paragraphs focus on the discursive components of this ecological modernisation form of governance. Seen as a body of knowledge, the question is whether ecological
66
modernisation as it is currently implemented can bring about sustainable electricity production. Christoff (1996) distinguishes between two forms of ecological modernisation. The weak form is characterised as economistic, selfserving, technocratic and narrowly technological whereas the strong form is ecologically founded, a harbinger of morally guided institutional changes and open to deliberation among a broad range of stakeholders. As regards Swedish electricity production, the manner in which climate change is debated among field members and the solutions proposed to tackle the climate problem represent a form of ecological modernisation closer to the weak end of Christoff’s spectrum. Swedish energy policy, for instance, is designed to resolve the climate issue insofar as it does not impinge on the competitiveness of export-oriented industries. It is also an innovation-based strategy that focuses heavily on technological solutions and is silent as regards the prospect of consumer lifestyle changes. In broader field-level debates natural resources are discussed in terms of their ‘climate friendliness’ and the debate is silent on the relationship between ecology and the economy. In fact the entire public discourse on climate change mitigation reduces nature to (commodified) atmospheric concentrations of greenhouse gases, emission targets and damage limitation, and is thus conspicuously
technocratic
and
anthropocentric.
Moreover,
government and industry dominate debates on Swedish electricity
67
production, leaving little room for the Third sector with the result that equity is commonly discussed as it applies within and between countries and industry sectors. The principle of equity as it is put forth in this debate is thus very narrow.
Whilst
the
consumer
collective
are
comparatively
overburdened in the current market-based governance model they are at least afforded a seat at the negotiating table (via public policy consultations, for instance). But field level debates are silent on the types of equity put forward in discourses on sustainable development. Whilst field members may argue that consideration of inter- and intragenerational equity is the responsibility of higher order organisations such as the EU of the UN, this type of argument is a normal element of the everyday discourse on responsible action (Barnes 2000). In this frame individuals commonly relinquish accountability for their actions by positing institutional flaws as the source of the problem. But this type of argument ignores the agency with which individuals act as part of a collective (see below) and the fact remains that the field in question pursues a narrow form of international leadership based on national and economistic rationales. This has the implication that research policy, as an academic field that focuses on the politics of knowledge and its utilisation, can play a role in firstly elucidating the limitations noted above and secondly in terms of seeking to influence the way debates on climate change and energy are framed such that sustainable development is 68
embraced not ignored. Given that the Swedish government is aiming for international leadership on climate change mitigation, it also implies that field-level debates would benefit from being broadened to include sustainability criteria rather than focusing on the narrow form of ecological modernisation that presently appears to be the only game in town. A good starting point would be to redress the relationship between humans and nature vis-à-vis the climate problem in less of a dualistic sense. Debates on biodiversity in Sweden have already achieved much more here and the public discourse on energy would undoubtedly gain from at least considering the basic tenets of deep ecology (see Naess 1973; Devall and Sessions 1985; Taylor 1986), however unthinkable that currently may be. A useful policy measure would be to distribute resources in a manner that encourages a more involved Third sector in debates on electricity supply. Finally, this thesis makes a contribution to new institutional theory by elucidating the manner in which institutions are modified and changed by field members in a collective and communicative manner. Whilst from a company perspective corporate action on climate change appears to be focused on the management of externally controlled resources, the empirical findings of this thesis show that resource dependency theory cannot fully account for the reasons and factors that both enable and constrain CCA and that institutional logics play a significant role. Closer inspection of the
69
Swedish public discourse on climate change reveals that Sweden’s leadership is enabled by a range of discursive and non-discursive factors such as previous emissions reductions that have resulted from the implementation of stringent carbon taxes; natural resource endowments;
extant
technologies
for
electricity
generation;
renewable energy potentials; and various cultural factors that facilitate a narrative on international environmental leadership. Politicians utilise these factors to legitimise more stringent climate policies. Hence, and despite the fact that EU member states are subject to the same policy regime, climate change undergoes a process of translation at the member state level as it is implemented via policies that reconfigure the external business environment. As this process occurs aspects of culture, industry-wide norms and broader social expectations – the stuff of NIT – become embedded in climate and energy policies. This is how logics influence action – by influencing the way field members think about a range of nondiscursive factors that are central to companies’ actions on the climate issue. However, the policymaking process also represents one instantiation of collective agency whereby a range of actors interacts in a communicative manner to shape regulatory institutions. Because of the influence of logics, communicative interaction does not freely alter institutions. Rather, there exists a relationship between logics and actions that is both dynamic and recursive. That is, every action
70
occurs in an institutional context where action is based on cognition, but actions have the potential to create new institutions or maintain and disrupt existing ones. This occurs regardless of whether individuals are cognizant of the institutional effects of their actions (one could question quite feasibly whether homeowners are aware of the fact that they may reinforce the logic of ecological modernisation every time they pay their electricity bills). This nonetheless supports the notion that individual actions are essentially social, that agency vis-à-vis action is collective, and that rationality is a social not individual construction – regardless of how knowledgeable individuals may be of the consequences of their actions. The finding that field members do not follow individually autonomous rationales in tackling climate change has implications for the public discourse on responsible action. Whilst industry and the government are often held responsible for the types of action in question here, consumers are seldom cited as even part of the problem despite their complicity, even if the majority do remain passive. One way of resolving this issue is to encourage individual consumers to take more responsibility for their electricity consumption
whilst
providing
information
on
what
their
consumption habits may entail. Two suggestions spring to mind. The first is to provide incentives for cooperative ownership of electricity production. Wind-power cooperatives have been established in Sweden despite the fact that they clash with the centralised model of
71
electricity production. Whilst levels of electricity production from cooperatives are currently very low, there are long waiting lists of environmentally conscious consumers that are willing to purchase shares in cooperatively owned wind turbines, especially since they provide electricity at a fixed rate which is lower than that of the conventional electricity retail market. One obstacle is the initial capital cost, so the government could provide loans at favourable rates in order to boost cooperative ownership. The second suggestion is to create a policy to encourage small-scale electricity production. This would not only encourage consumers to take individual responsibility for their electricity consumption, it could also create a niche market for small-scale wind power – a market that is currently at the fluid/formative stage in Sweden with numerous
competing
models
(Energimyndigheten
2010).
Government support for small-scale electricity production exists in the UK, and would have the benefit of 1) providing a secure electricity supply to rural homeowners that are susceptible to lengthy power cuts during storms and 2) establishing a lead market based on Swedish technology that is genuinely exportable. Consumers could also be encouraged to invest in small-scale turbines in developing countries in order to offset emissions from transport, for instance, in a manner that supports the equity principle as defined in sustainable development discourse.
72
Given that empirical analyses of the innovative impacts of marketbased instruments such as emission trading and tradeable green certificate schemes are so scarce, a useful direction for future research would be to examine these effects more thoroughly – especially since innovation appears to be such a central feature of Western climate and energy policies. Whilst the benefits of an innovation-based strategy to mitigate climate change are rather obvious in that no major or radical institutional changes are required, whether or not innovation can actually deliver such results is still an open question – particularly in the context of a fragmented global climate policy regime with an uncertain future. This thesis demonstrates that public policy is key to corporate action on climate change, but future research could also seek to examine cases where innovation is driven by other factors. A useful theoretical direction for such research may be to combine new institutional theory with the resource-based view of the firm or the innovation systems approach to show how divergent institutional contexts influence the development of technologies and competences that are useful for tackling the climate issue. In particular, it may be useful to compare the model of ‘deregulatory ecological modernisation’ adopted by countries such as the US and Australia that have historically deflected from the UN process (McGee and Taplin 2009) with that of European countries to examine the extent to which different market-
73
liberal approaches influence different stages of the innovation process.
74
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The institutionalisation of What? Corporate action on climate change in the Swedish electricity industry Steven Sarasini Under review by Organization Studies Abstract This study utilises qualitative methods based on analysis of historical documents to trace the longitudinal emergence of a range of issues that have challenged the legitimacy of the Swedish electricity industry between 1970 and 2009, with a primary focus on climate change. The study examines how exogenous shocks and events have set in motion processes of endogenous institutional change that have culminated in a set of institutional arrangements that presently serve to legitimate corporate action on climate change in the industry. The study shows how the wax and wane of various issues has left behind sets of partially institutionalised ‘detritus’ that are currently used by field constituents to construct strategies and depict appropriate corporate action on the climate issue. Institutional detritus are found to be a means for field constituents to act with agency to shape an evolving hybrid institutional logic described here as ecological modernisation. Although the logic itself appears resistant to change in that it structures cognition, actors can choose to utilise institutional detritus to express divergent views such that the remnants of previously salient issues are a potential source for institutional change. Attempts to frame corporate responses to climate change are thus aligned with institutional logics but diverge according to the use of institutional detritus in strategising. 1. Introduction One of the contemporary issues addressed by neoinstitutionalist (NIT) scholars relates to how institutions develop and change over time. In order to explain processes of institutional change and development, NIT scholars have invented the concept of an institutional entrepreneur to describe actors that see new institutional frameworks as an opportunity to realise ‘highly-valued interests’ and have the resources necessary to initiate institutional change (DiMaggio 1988). However, most studies
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of institutional entrepreneurship focus on how radical changes are instigated by single individuals / organisations and have tended to ignore how institutions change gradually and/or as a result of collective action (Lawrence and Suddaby 2006; Lawrence et al. 2009). Furthermore, whilst several studies have shown how exogenous events or shocks can bring about institutional change (e.g. Meyer 1982; Meyer et al. 1990; Fligstein 1991; Hoffman 1999; Thornton and Ocasio 1999), the way that factors endogenous to the field come into play when such events occur is an under-researched topic (Schneiberg 2007). This is because events are typified as the first step in a sequential and linear model of institutional change, where disruption is followed by the deinstitutionalisation of existing practices and the diffusion of new ones (Munir 2005). Hence studies of event-induced institutional change have tended to obscure the role of competing ‘candidates for institutionalisation’ (Zietsma and McKnight 2009) that either challenge existing institutional arrangements or those that come to dominate a particular organisational setting as part of a change project. By examining the institutionalisation of corporate action on climate change in the Swedish electricity industry from 1970 – 2009, this study seeks to address these gaps by focusing on the way that institutional ‘detritus’ are utilised by various actors that seek to influence Swedish power companies. The industry has faced a range of issues other than climate change during the last four decades, some of which acquired more salience than others. The main argument here is that although the importance of some of these issues has waxed and waned over time, their emergence nonetheless shaped and influenced the dominant institutional logic related to Swedish electricity production and that institutional detritus (i.e. remnants of institutional arrangements associated with issues that the field has faced over time) are today used in attempts to construct field frames for corporate action on the climate issue. Hence in order to understand the emergence of climate change as an issue that requires corporate action within this industry it cannot be viewed separately from previously salient issues. This paper consists of six sections of which this is the first. Section two presents briefly the history of Swedish electricity production until 1970 and outlines the key conceptual arguments that are addressed by the study. Section three describes the method for the study and results are presented in section four. Section five discusses the study’s major findings and outlines the major features of the
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institutional logics that ‘govern’ the field of Swedish electricity production. The main theoretical contributions are presented in section six. 2. Background and theoretical considerations Electricity production in Sweden began to take its current industrial form following the creation of state-owned Vattenfall in 1909. Hydropower, as utilised by power companies and industry, was initially the main source of electricity but rising demand meant that the need for alternative energy sources became a salient issue during the 1950s (Kåberger 2002). During this period, district heating became a viable alternative to domestic furnaces and municipal companies producing both district heating and electricity were established in cities and large towns (Löfstedt 2001). These developments threatened monopolies held by larger utilities, which responded by seeking new sources of cheap electricity, and given growing opposition to large-scale hydropower, large utilities shifted their attention to nuclear power. In order to meet growing demand, and with the backing of major utilities, in 1956 the government decided that nuclear power would underpin future growth of the Swedish economy (Nordhaus 1997) and twelve nuclear reactors were built between 1972 and 1985. Ten remain today such that nuclear and hydropower currently supply around 85% of Swedish electricity (see figure one). A more recent trend within the industry is the growth of renewables other than large-scale hydropower during the last decade.
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Figure 1: Swedish electricity supply 1972-2008 (source IEA 2011).
Figure one suggests that Swedish electricity production has undergone few changes since the construction of the last nuclear power plant in 1985. However, the 1970s “marked the start of a long and intense debate over the future course of energy system development in Sweden” (Nilsson et al. 2004). Since this period the industry has faced numerous issues that for the most part acquired salience because of events that occurred outside the organizational field. For example, in 1980, following the Three Mile Island incident, the Swedish public decided via national referendum that nuclear power is not a long-term option. Despite the fact that only two reactors have hitherto been shut down, Vedung (2001) argues that the politics of Swedish electricity production cannot be understood without considering the debates on nuclear power. A similar argument is made here. Given that Swedish power companies are dependent on only a small fraction (less than five percent) of fossil fuels for electricity generation, the current industry focus on climate change seems counterintuitive. The main argument of this paper is that one cannot make sense of why climate change is such a salient issue without considering the interplay of various issues that the industry has faced in the past and, in particular, the way institutional detritus is used to construct frames for corporate action. Schneiberg (2007) highlights two approaches to dealing with institutional change that create a common problem. An ‘evolutionary’ approach focuses on internal structures and shows how action is constrained by the path dependent nature of social change, such that “changes which seem radical or discontinuous, on closer examination, [are] really just incremental transformations, extensions or elaborations of established logics” (50). By contrast the ‘crisis’ approach argues that history is littered with discontinuities brought about by exogenous events or shocks. Shocks can serve to raise consciousness within a particular field, and can allow actors to disembed themselves from cognitive institutional constraints to seek change (see also Seo and Creed 2002). Several examples (e.g. Meyer 1982; Meyer et al. 1990; Fligstein 1991; Hoffman 1999; Thornton and Ocasio 1999) show that shocks set in motion radical changes as awakened actors contest the qualitative aspects of institutional logics. The problem these approaches create is that the evolutionary approach, via the notion of path dependence, denies the possibility of fundamental institutional change because of the constraining
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influence of historical context. In contrast, the crisis approach allows for fundamental change but denies the importance of path dependency. Schneiberg (2007) adopts an internal structuralist approach to examine the way that organisational fields are littered with ‘flotsam and jetsam’, that is “social, cultural and organizational fragments of ‘paths not taken’, more or less developed systems of alternative institutional orders, and institutional possibilities previously assumed to have been abandoned or foreclosed” (52). By adopting such an approach, Schneiberg focuses on how flotsam and jetsam – which have otherwise been described as ‘institutional detritus’ (Zietsma and McKnight 2009) – create possibilities for endogenous change and development by providing actors with opportunities to revive incomplete, or dormant, institutional projects. Despite its worth, this approach ignores the possibility that external factors such as shocks may also play a role. This study addresses this gap by combining internal and external structuralist approaches to examine the possibility that exogenous shocks set in motion endogenous processes of change. A central matter here relates to how institutional detritus come into play when new issues emerge (following exogenous shocks or events) that could potentially challenge the legitimacy of the dominant institutional order. Another relates to how issues that emerged and regressed at different points in time have served to modify institutional logics. In order to address these issues this paper examines the relationship between three concepts from NIT in addition to institutional detritus – field frames, proto-institutions and institutional logics. The field frame concept was introduced to NIT by Lounsbury et al. (2003) to describe discursive entities “that provide order and meaning to fields…[and] deem some practices as more appropriate than others” (77). Field frames differ from logics in that frames are endogenous to the field and thus subject to active contestation whereas logics, which are exogenous to actors, are more immune to such debates. Hence as issues arise following external shocks, actors likely endorse frames in order to influence the field in question rather than seeking to change logics. Seen this way, organisational fields are restated as centres of dialogue, discussion and debate that lead to the social construction of field frames to tackle issues that emerge, grow and decline (Hoffman 1999). The way actors frame responses to events and shocks has otherwise been described as theorisation (Greenwood et al. 2002),
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which is a key process in turning an event into an issue for the field (Munir 2005). Focusing on how events are transformed into frames thus entails a more complex model of institutional change that depends in part on field level debates. In this vein, some studies that examine the institutionalisation of environmental protection show how frames are contested and how “logics and ideologies compete for meaning and legitimacy” (Hoffman and Ventresca 2002: 21). For instance, Hoffman (1999) shows how new constituents (government, industry, non-government organisations (NGOs) and insurance companies) entered the field and, over time, framed and reframed environmental issues in technological, regulatory, and managerial terms in the US chemical industry. Similarly, Hoffman and Ventresca (1999) examine how regulatory processes, educational curricula, operational routines and international regimes influenced the framing of environmental issues as economic threats or opportunities in the US. And Morrill and Owen Smith (2002) show how field members sought to mobilise different narratives (technocratic, pluralistic and communitarian) as collective action frames that constitute varying ways to perform environmental conflict resolutions during the 1960s and 70s. These studies indicate that by seeking to influence field frames, field members espouse discursive candidates for institutionalisation. However, given their discursive or ideal ontology, there is no guarantee that any particular frame will fully undergo a process of institutionalisation. Whilst remainders of field frames that did not undergo any degree of institutionalisation cannot in principle be regarded as institutional, field constituents may nonetheless recall previously salient issues to try to frame new issues as they emerge. Seen this way frames can be regarded as a form of institutional detritus. When field frames are at least partially transmuted into institutions, however, they are likely to remain as institutional detritus if the issue in question declines, or if another issue takes its place. Electricity supply can be regarded as a Large Technical System that demonstrates inertia because of vested interests, sunk costs, protracted investment cycles (Hughes 1983) and other institutional lock-ins (Unruh 2000; Foxon 2007). The lifetime of a conventional nuclear power plant, for example, is somewhere around four decades. It is thus unlikely that strategies (field frames) to tackle issues will undergo a full process of institutionalisation unless an issue remains salient for a long period.
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However if new issues arise and dominate the field, the detritus of previously salient issues, assuming some development beyond that of a field frame, is likely some sort of embryonic or ‘proto’ institution that was not fully implemented. Proto-institutions are “practices, technologies, and rules that are narrowly diffused and only weakly entrenched, but that have the potential to become widely institutionalized” (Lawrence et al. 2002: 283). Hence in addition to field frames, proto-institutions are another form of institutional detritus that have not fully undergone a process of institutionalisation. That is to say, they may or may not diffuse within fields and “coalesce into shared practices and logics” (Zietsma and McKnight 2009: 153). Following this reasoning, the combination of internal and external structuralist approaches in such an industrial context requires that one considers the way new issues that emerge in relation to the institutionalisation of solutions to older problems. The arrows marked ‘a’ and ‘b’ in figure two show how issues can punctuate incomplete change projects, leaving behind institutional detritus. The arrow marked ‘c’ represents the emergence of a new issue following the full institutionalisation of a response to a previous problem, and whose detritus is thus found as a changed institutional logic. Put differently, by this stage field frames have discursively entered the repertoire of templates that partially comprise institutional logics (Hardy and Phillips 1998; Phillips et al. 2004; Phillips and Malhotra 2008), such that events are part of a developing narrative rather than exogenous and singular occurrences (Munir 2005).
Figure 2: endogenous realignment following exogenous shocks (Source: author)
Finally, one outcome of attempts to frame issues is a system of classification. When the organisational field in question comprises an industry, negotiation between field members can result in, for example, the emergence of new categories of products (Porac et al. 2002; Lounsbury and Rao 2004) or producers of certain types of products (Porac et al. 1995). A range of new categories and
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classifications has accompanied the institutionalisation of the environment. Eco-labelling schemes classify products in terms of their environmental credentials and introduce new quality criteria to allow consumers to judge the value of those products in ecological terms. Similarly, organisations such as the Carbon Disclosure Project provide criteria for institutional investors to judge the long-term commercial viability of publicly floated companies based on their strategies for reducing carbon emissions. Environmental organisations also seek to evaluate corporate ecological performance and are often keen to make their opinions regarding socially irresponsible companies heard. Whilst a range of studies examine how market strategies and organisational practices / forms are influenced by broader institutional logics (e.g. Haveman and Rao 1997; Thornton and Ocasio 1999; Bhappu 2000; Gumport 2000; Thornton 2001, 2002; Lounsbury 2002; 2007; Moorman 2002; Chung and Luo 2008), little attention has been given to the way that “existing category schemes…get reconstituted” (Lounsbury and Rao 2004; exceptions include Glynn and Lounsbury 2005). This study examines the constitution and reconstitution of categories and classifications by examining the relationship between institutional logics and attempts to frame issues and their solutions. The way issues are framed following exogenous shocks is at least partially dependent on the logic that dominates the field at that particular moment. As new environmental issues emerge, the way they are perceived by constituents is likely influenced by logics since the latter provide “interpretive schemes that fundamentally guide perception” (Glynn & Lounsbury 2005). Whilst categorisations provide stability to market exchanges (White 1981; Lounsbury and Rao 2004), the categorisations themselves likely reflect the logics that govern the field in question because logics structure cognition. Hence despite the fact that logics are exogenous to actors, they may be manifest in actors’ attempts to frame issues via the various strategies they advocate. Examining categorisations in terms of content and the manner in which they change over time is thus a means to understand the influence of the way exogenous events and shocks restructure cognition within the field by setting in motion endogenous processes of institutional change and development vis-à-vis changed or modified logics.
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3. Method This study comprises a qualitative content analysis of a trade association journal entitled ‘Electricitets Rationella Användning’ (the rational use of electricity – hereafter ERA) and academic literature to examine the issues that have influenced Swedish electricity production from 1970-2009. ERA was chosen because it has existed for over 80 years and has the largest readership among industry journals in the Swedish electricity sector. ERA’s coverage is thus likely to focus on the major issues faced by electricity suppliers and to reflect dominant industry views of these issues. Industry media is thus not treated as an ‘objective forum’ that reports on issues social facts (Lounsbury and Rao 2004). Rather, the way that ERA frames issues is likely a negotiated outcome that results from debates and contestation between field members. ERA is itself a field member, whose role is significant as regards the dissemination of field frames that can “shape the symbolic environment of industries at the superstructural level” (Lounsbury and Rao 2004; see also Fombrun 1996). Although ERA is the type of field-level organisation that has received little attention in neoinstitutional analyses (Baum and Powell 1995; Pollock and Rindova 2003; Lounsbury and Rao 2004), this study does not examine its role in shaping cognition within the organisational field. However, it is noted that industry media is unlikely to report on field frames that challenge the incumbent industry view (Lounsbury and Rao 2004). This may especially be the case given that ERA is published by an industry association, since the latter is likely dominated by major industry players. In fact, on closer inspection ERA does not report on the actions of environmental organisations (ENGOs) in a comprehensive manner (with the exception of the Swedish Society for Nature Conservation), despite the fact that ENGOs seek to influence the field of Swedish electricity production. Hence in order to obtain a more comprehensive understanding of the various issues faced by the field (and subsequent responses) this study examines academic literature that focuses on Swedish energy production and includes analysis of ENGO strategies that focus on climate change and Swedish electricity production via document analyses of reports, online data sources and in-depth interviews with two NGO representatives.
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ERA was examined during the period 1970-2009. 1970 was chosen as a start date as 1) it is arguably the decade during which environmental issues started to emerge; and 2) the 1970s “marked the start of a long and intense debate over the future course of energy system development in Sweden” (Nilsson et al. 2004). Focusing on this period thus provided the opportunity to examine the emergence of the climate as an issue for Swedish electricity supply in relation to other environmental and socioeconomic issues that have shaped institutional arrangements from a longitudinal perspective. Historical documents were chosen over other types of qualitative methods such as interviews because an analysis of a codified historical archive is less likely to risk false or partial reconstructions of the past. On the contrary, historical archives allow for analysis of issues in terms of codified language and symbolic systems of meaning that prevailed as they emerged. Qualitative rather than quantitative analysis was preferred because of the nature of the concepts described in section two. Identification of frames and logics, for instance, requires methods that identify the implicit or latent meaning of the text in question, especially since logics are exogenous to the actors in question. One major weakness of this method, however, is that it is primarily substantive rather than processual. That is, it focuses on the outcomes of field level debates in terms of content rather than the actual processes that lead to the social construction of field frames and modifications to institutional logics. Whilst a processual approach would perhaps have gleaned more substantive findings, it would not have possible due to the historical focus of the study. This is part of a broader problem of studying the process of institutionalisation diachronically – a large amount of foresight and luck is needed in selecting cases given the process itself usually unfolds during a period of several decades (Barley and Tolbert 1997). 4. Results Issue 1 (1970 – 1990): Energy security and the need to reduce foreign oil dependency Before 1970 Swedish energy policy focused mainly on providing cheap and abundant energy supplies that would underpin growth in manufacturing (Lindmark and Andersson 2010). This trend was exacerbated by the oil crises in 1973 and 1978, which accentuated the need to reduce dependence on foreign oil given the macroeconomic risks associated with price shocks (Wickman 1988). The
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dominant logic was based on the importance of cheap and sustainable energy for the Swedish economy and industrial competitiveness, described here by the term economic efficiency. ERA’s coverage reflects the importance of this logic. During the 1970s, ERA focused mainly on how Sweden would reduce its oil dependency. The introduction of alternative energy sources such as nuclear, wind, geothermal, peat, biomass, waste, coal and natural gas and solar energy (ERA 1974:31), alongside energy-saving measures (the possibility of electricity rationing was discussed in 1979) were all perceived solutions. However, the industry implemented little in the way of renewable sources of electricity (RES-E) until the start of the 1990s. Until this point public policy focused on research, development and demonstration (i.e. invention) of RES-E rather than their implementation (diffusion) (Nilsson et al. 2004; Åstrand and Neij 2006). Notwithstanding, 1973 marked a turning point in terms of national energy-related carbon dioxide (CO2) emissions – between 1970 and 1990 there was a 40% decline (see figure two). There were several drivers of declining emissions, many of which were initiated following the oil crises. The expansion of nuclear power in this period enabled a decline in the use of oil-fuelled electricity generation (Wickman 1988). Rising oil prices (Östblom 1982; Wickman 1988) and increased energy taxation (Lindmark and Andersson 2010) served to promote the substitution of electricity for oil in manufacturing. Technological changes in export-oriented energy-intensive industries and structural changes to the economy also played a role (Östblom 1982). Overall, ‘conservation and conversion processes’ were driven mainly by oil prices, but were augmented by changes in energy policy (Wickman 1988). Policies that were initiated during the 1970s include an oil substitution fund, investments in biomass and district heating, and energy saving programmes in the industrial and domestic sectors (Lindmark and Andersson 2010; Wickman 1988). Hence between 1970-1985, Sweden’s oil consumption decreased by a third (Nilsson et al. 2004). CO2 emissions thus declined because of strategies that did not focus on climate change and can thus be regarded as part of an ‘unintentional climate policy’ (Lindmark and Andersson 2010).
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ERA is referenced as follows: ‘ERA year: edition’.
11!
In the context of concerns for energy security, ERA repeatedly advocated the increased use of electricity as a potential solution to oil dependency (ERA 1977:11). ERA also backed conservation and conversion by reporting extensively on government strategies that sought to develop alternative sources of energy that would benefit the electricity industry. In 1977, for example, ERA welcomed a proposal by the Swedish Delegation for Energy Research which stipulated that the government spend over EUR90 million on energy-related research, a large proportion of which was to be allocated to research on biofuels, peat, nuclear energy, waste heat, wind energy and energy-saving measures (ERA 1977:11). At this stage the dominant industry view was supportive of the role taken by the government following the oil crises, assumedly because investments in RES-E would benefit the industry in the long-term, especially if electricity was to replace oil in the Swedish economy. Event/shock
Issue
Logic
New practices
Detritus
Oil crises
Energy
Economic
Energy
Interventionist role for nation state
security
efficiency
conservation
during crises
and conversion Economic
efficiency
via
renewable
Declining CO2
energy (long-term) and nuclear power /
emissions
energy saving (short term) ‘Unintentional’ climate policy
Table 1: institutional responses to the oil crises.
Issue 2 (ca. 1973 onwards): The proliferation of transboundary environmental risks and the politicisation of nuclear power A number of environmental issues began to emerge in the 1970s. Whilst previously salient environmental issues were on a local scale (e.g. local air pollution resulting from oil-based heating systems), the impacts of electricity production vis-à-vis transboundary environmental issues such as acid rain, climate change and the ozone problem started to gain attention and in the mid 1970s, and a vociferous debate on the future of Sweden’s nuclear capacities took hold of Swedish politics. In 1972 the first nuclear plant was completed and the Association of Swedish Power Companies announced plans for 24 reactors by 1990, which gained full support from all the political parties (Löfstedt 2001). However in 1972 the Swedish Centre Party opposed nuclear power in order to gain political leverage
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against the incumbent Social Democrats. This strategy eventually paid off as the Centre Party managed to wrestle power from the Social Democrats for the first time in nearly half a century in 1976 (Lönnroth et al. 1980; Nohrstedt 2008). The Social Democrats responded in 1979 by calling for a national referendum on nuclear power following the Three Mile Island accident. The referendum took place in 1980 and the Swedish public voted for nuclear power to be phased out by 2010, despite the fact that supporters regarded it as the only alternative to foreign oil dependency (Lönnroth et al. 1980). The vote stipulated that in order to reduce oil dependency, a maximum of 12 reactors would be built and eventually be replaced by RES-E, although by this stage protecting Sweden’s remaining undammed rivers had also become a political issue (Wickman 1988; Kåberger 2002; Wang 2006; Michanek and Söderholm 2009). Since other RES-E were at the time deemed commercially unviable, the phase-out strategy also included further RD&D and energy conservation measures. Since 1980, decisions regarding the date for nuclear phase-out have been made and unmade several times. At various instances political parties have used the nuclear issue expediently. In 1986, for example, following the ‘institutional crisis’ that ensued the Chernobyl incident, the again incumbent Social Democrats pledged to decommission two reactors by 1996 (Nohrstedt 2008). However in 1990 the Social Democrats and the Communist party agreed to reschedule the beginning of the phase-out beyond 19962. The result of these and numerous other political meanderings (see Löfstedt 2001 for a comprehensive overview) is that only two nuclear reactors have been shutdown to date. Notwithstanding, the way that political parties have debated nuclear power is in terms of command and control regulation (i.e. enforcing bans), whose legitimacy is derived from the notion that there is some sort of acute nuclear risk. This reaffirms and reconstitutes the interventionist role of the nation state during crises that was established following the oil crises. Despite political uncertainty, companies have continued to invest in incremental changes to nuclear technologies and existing plants are expected to operate for at least another four decades (Michanek
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The Social Democrats, historically Sweden’s largest political party, have demonstrated an inconsistent stance over nuclear power (Nohrstedt 2008), which reflects the broader political uncertainty that has historically surrounded the issue.
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and Söderholm 2009). Opposition has also declined to the extent that a majority of the Swedish public now supports the continued use of nuclear power (Hedberg and Holmberg 2009). The current rightwing Alliance government has ruled that utilities may refurbish existing plants in the most recent attempt to nullify the phase out (Prop. 2009/10:172). Given current levels of taxation and subsidisation related to fossil fuels and RES-E, nuclear is currently one of the cheapest options for investment in electricity production (Michanek and Söderholm 2009). Especially energy intensive industries have been supportive of nuclear power (Nilsson et al. 2004; Wang 2006) and have often played a key and expedient role during energy policy formulation given the potential for nuclear power to facilitate low costs and protect industrial competitiveness (Kåberger 2002; Nilsson et al. 2004). In fact, supporters of nuclear power have repeatedly emphasised its importance to the economy and drawn attention to other environmental problems (acid rain, the ozone problem, climate change) that would intensify if Sweden had to produce more electricity from fossil fuels (Nohrstedt 2008). Nuclear phase out is thus dually constrained by the economic efficiency and environmental protection logics. The closure of two reactors in Barsebäck (in 1999 and 2005) was not solely the result of Swedish domestic politics. The proximity of the plant to Copenhagen resulted in Danish opposition to Swedish nuclear power. Danes’ concerns about the risks of a nuclear accident were to such a degree that the Danish parliament passed a bill for the closure of Barsebäck in 1986. Antinuclear sentiments were riled in Denmark by the mass media, environmental organisations and politicians to the extent that “the debate escalated into a political showdown which was only peripherally about nuclear power, but on Swedish-Danish relationships, indicative of the social amplification of [a] risk paradigm” (Löfstedt 1996: 694). Whilst the debate focused on nuclear safety, there was a strong undercurrent of opposition towards centralised governance (Michanek and Söderholm 2009). The wider consequence of political, social, technical, economic and institutional uncertainties related to the nuclear issue was that “Swedish society [felt the need to] start on a transitional path, without having a clear consensus where to go” (Lönnroth et al. 1980). ERA framed the national referendum on nuclear power further in terms of increased pressure to find alternative energy sources. The solutions dubbed to have the best potential to ensure a secure supply
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were to reduce energy use in the traditionally energy-intensive industry sectors (pulp and paper, iron and steel industries) (ERA 1984:9); further expansion of hydropower (ERA 1983:1); and increased use of coal-fired power (ERA 1985:1). Coal was also billed as a useful replacement for oil in an international context (ERA 1982:11) at a time when the link between acid rain and coal combustion was well known (ERA 1985:8). Carbon dioxide emissions received occasional press (e.g. ERA 1980:1), but since uncertainties prevailed regarding scientific understandings of global warming, it was not considered a serious issue for the industry. By promoting energy savings and the use of coal and hydropower, the industry framed the nuclear issue in terms of the economic efficiency logic in order to protect its own interests. Coal and hydropower were the cheapest means to generate electricity, and by promoting the use of coal as a replacement for oil, the industry prioritised energy security over environmental protection in order to ensure profitability, despite the fact that the environmental risks of coal-fired electricity were becoming increasingly known. Event/Shock
Issue
Logic
New practices
Detritus
Three-Mile
Transboundary
Economic
Planned
Energy conservation and conversion
Island
environmental
efficiency
nuclear phase-
incident
risks
(dominant)
out
Need
for
a
transition
vis-à-vis
electricity supply Chernobyl
Environmental
accident
protection
Political, social, technical, economic and institutional nuclear uncertainty
(secondary) Mobilisation of
Emergence
anti-
of
energy-related
transboundary environmental risks
nuclear sentiment in
Command and control regulations
Denmark Politicisation of electricity supply
Table 2: institutional responses to the emergence of transboundary environmental risks.
Issue 3 (1990 – 1995): Climate protection enters Swedish energy policy Whilst the debate on nuclear power effervesced a range of other environmental issues started to receive attention in Sweden, including climate change. Given that Swedish climate policy was not established until the start of the 1990s, ERA provided sporadic coverage on the climate issue prior to
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this point. Following the 1972 Stockholm Conference, for instance, ERA reported that the UN had mandated research to investigate the long-term consequences of air pollution on the world’s climate. The World Meteorological Organisation was given the responsibility of examining these effects, and climate change was framed as an international policy problem (ERA 1973:4). Reports linked global warming to energy supply despite the fact that scientific uncertainties prevailed regarding the impacts of fossil fuel combustion. For example, CO2 emissions were seen to enhance global warming whereas particle emissions were thought to have the opposite effect. The long-term consequences of fossil fuel combustion were thus depicted as unknown (ERA 1973:12). During the 1970s ERA reported on the possibility of regulation following a government inquiry into the environmental costs of industrial activities in 1978 (ERA 1978:8). Whilst ERA’s coverage suggested that policy instruments be used to create economic incentives for environmental protection, it did not include details of which environmental issues were to be considered in the inquiry, suggesting that industry regarded regulation as a remote possibility. During the 1980s environmental issues climbed the Swedish political agenda. In their response to the Chernobyl accident the Social Democrats sought long-term energy policies that would simultaneously decommission nuclear power, protect unexploited rivers and tackle climate change (Nohrstedt 2008). In 1990 a ban that ruled out any further expansion of large-scale hydropower was established and previously salient logics, namely economic efficiency and environmental protection were together with welfare creation expressed as explicit energy policy objectives (Fischer and Berglund 1994). Part of this renewed policy thrust was to restate the 2010 nuclear phase-out and to implement a crosssectoral CO2 tax to tackle climate change. However, in light of fears that environmental protection would conflict with other energy policy objectives (economic efficiency and welfare creation), tax exemptions were granted to export-oriented energy intensive industries and electricity producers such that the domestic sector was overly burdened. During this period climate change became a key issue such that coal as a potential replacement for nuclear power was effectively ruled out (Nilsson et al. 2004). Attention instead shifted to the next cheapest option – natural gas (Fischer and Berglund 1994), and some investments were made in gas infrastructure on the southwest coast of Sweden (Hernández
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Ibarzábal 2009). However RES-E and energy conservation again took centre stage. In addition to the CO2 tax, the 1991 energy bill established further investments in RD&D, an energy efficiency programme and direct subsidies for capital investments in RES-E (Nilsson et al. 2004; Åstrand and Neij 2006). The CO2 tax did not favour wind power, however (since electricity producers were exempt from the tax), and between 1990 and the early 2000s uncertainty shrouded investments in RES-E given piecemeal subsidisation policies (Åstrand and Neij 2006; Wang 2006). Notwithstanding, the CO2 tax contributed to further emission reductions via fuel switching (mainly oil-to-biomass) in district heating systems (Nilsson et al. 2004). Unsurprisingly, ERA increasingly framed climate change mainly as a policy issue during the 1990s, focusing on CO2 taxation. ERA reported on various issues related to the Swedish CO2 tax, including the fact that it constituted a disincentive for ‘efficient’ combined heat and power (CHP) production (ERA 1997:12) and that it may lead to the relocation of energy intensive industries in foreign locations (ERA 1993:4). The latter problem was seen to arise from the fact that Sweden had taken a unilateral approach to reduce emissions. Calls were made for similar measures in the entire Nordic region to ensure fair competition, especially since CHP was priced out of the market (ERA 1997:12). In 1997 Swedish industry made an official complaint to the European Commission after the Swedish government proposed to double the carbon tax (ERA 1997:1-2). Although their appeals were unsuccessful, at this stage the industry was resistant to state intervention and sought to protect its interests by again framing arguments in terms of the economic efficiency logic. The industry sought to stave off regulation by emphasising risks to industrial competitiveness. Given concerns for Sweden’s unilateral approach, numerous articles in ERA reported on attempts by the European Commission to establish a CO2 tax that would create economic incentives to stabilise emissions at 1990 levels by 2000 following the stipulations of the UN Framework Convention on Climate Change (UNFCCC), which was signed by the EU in 1994. The introduction of a European CO2 tax was depicted to hinge on similar developments in the US and Japan (ERA 1993:4, 6-7), and was billed as support for natural gas, hydropower and renewable sources of energy (ERA 1993:11). In 1994 the EU decided against the measure, proposing instead to utilise extant energy taxation
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instruments to meet UNFCCC targets (ERA 1994:9). During the 1990s ERA was still ambivalent about the science of global warming and the extent to which it is caused by human activities. The first full-page spread that focused on the EU carbon tax also referred to the ‘so-called greenhouse effect’ as the main environmental motivation for the instrument (ERA 1992:12). Previous reports suggested that the industry accepted both the science of global warming following the publication of the first IPCC assessment report and calls from the from the scientific community to reduce carbon emissions by 20% by 2000 (e.g. ERA 1990:12). However these reports were vague as regards the implications of tackling climate change for Swedish electricity production and merely sought to restate support for energy conservation measures (e.g. ERA 1991: 12). In 1993, an article entitled ‘What greenhouse effect?’ reiterated that increased global mean-temperatures could be the result of natural processes rather than human activities (ERA 1993:9). The article raised concerns related to various scientific uncertainties and called for further research on the global climate prior to instigating measures to reduce carbon dioxide emissions. Hence despite the fact that climate protection had undergone further institutionalisation in Sweden via the introduction of carbon taxation, ERA’s coverage suggests that the industry had not yet taken climate change seriously. Event/shock
Issue
UNFCCC
1991 bill
energy
Logic
New practices
Detritus
Economic
Ban on further
Energy conservation and conversion
efficiency
exploitation
of
large rivers for Environmental
Command and control regulations
hydropower
Economic policy instruments
Carbon taxation
Scientific uncertainty re climate change
Increased use of
Internalisation of market externalities
biomass
i.e. environmental problems
protection Welfare creation
Table 3: institutional responses to the regulatory changes vis-à-vis climate change.
Issue 4: (1996 – 2005) The marketisation of electricity production During the late 1980s the issue of deregulation of the electricity industry climbed the Swedish political agenda and resulted in market reform in 1996. Deregulation removed barriers to electricity trading via the dissolution of network monopolies with the intention of stimulating competition in order to lower
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the price of electricity; introducing profit maximisation as a driver for electricity production; and improving the dynamic efficiency of the system as a whole (Midttun 1996; Högselius and Kaiser 2010). Deregulation required the creation of a Nordic electricity market and a government agency entitled ‘Svenska Kraftnät’ to manage the national grid; the transformation of Vattenfall from a commercial government agency into a state-owned shareholder company; and the separation of utilities into production and retail units. Initially large utilities saw deregulation as a threat to existing monopolies (Högselius and Kaiser 2010), whereas smaller companies saw an opportunity to gain access to central markets and were supportive of the reform (Midttun 1996). Part of the drive for deregulation was the recession that followed the Swedish currency crisis in the early 1990s, which paved the way for comprehensive neoliberal reforms and EC membership as part of a new Swedish growth strategy (Nordhaus 1997; Midttun 1996; Högselius and Kaiser 2010). Reform was also influenced by market reforms in the UK and Norway, and the opportunity to utilise economic instruments for environmental protection (Midttun 1996; Högselius and Kaiser 2010). The reform encompassed a redefinition of electricity production “from a primarily technical to a primarily economic issue” (Midttun 1996: 54) such that the logic of economic efficiency gained centre ground. Another consequence of the reform was decentralisation – decision-making regarding technologies for electricity generation was shifted from the government to utilities, suggesting that the government at least partly relinquished its interventionist role and the need for command and control regulation. Since companies are now required to operate under more competitive circumstances, Midttun (1996) argues that reform was part of a covert strategy by Sweden’s technocratic elite (including Swedish industry) that regards nuclear phase-out as an irrational strategy and that deregulation effectively rescinded the decision to phase out nuclear power given the lack of commercially viable non fossil-fuel alternatives. The economic efficiency logic thus reasserted itself once again albeit in a modified form given the new focus on market-based electricity supply.
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Deregulation was covered extensively by ERA during the 1990s. ERA focused on EU proposals to harmonise European energy markets, which included the free transmission of natural gas using monopoly-owned pipelines. Given the commercial attractiveness of natural gas, the industry framed it as a substitute for nuclear power and foreign oil dependency (ERA 1995:12). Vattenfall was particularly in favour of European market liberalisation given the possibility of expanding into the German electricity market (ERA 1996:10). EU harmonisation was thus seen as an economic opportunity by the Swedish electricity industry. However, given larger utilities’ opposition to the Swedish reform, ERA reported on its potentially negative impacts, namely that power companies that are forced to compete on price are likely to invest in the cheapest energy sources, which would have negative effects for the environment, resource use and energy security (ERA 1994:8). Investing in the cheapest options was also perceived to reduce the likelihood of a ‘robust and flexible’ energy supply that could actually increase prices in the long-term due to increased reliance on electricity imports. ERA thus framed its arguments in terms of economic efficiency and environmental protection, using the energy security issue to argue for long-term, coherent and politically stable policy instruments that would ensure that ‘sustainable’ renewable energy sources such as wind turbines could compete with fossil fuels (ERA 1996:8). Wind power was thought to be a commercially attractive option if traditional energy sources were made to bear their ‘environmental costs’. ERA thus sought to frame environmental protection under the banner of economic efficiency. ERA’s increased focus on environmental protection is not unusual if one considers another consequence of deregulation. Following the reform electricity retailers started to establish contracts with commercial consumers based on life-cycle analyses (LCA) of electricity production (Kåberger and Karlsson 1998). The reform meant that retailers could start to label electricity according to its source and thus sign contracts with environmentally conscious consumers to ensure that their consumption is balanced by production in RES-E. Hence the reform, via labelling, provided a stimulus for LCA and environmental management systems (Kåberger and Karlsson 1998). The most popular label, entitled Bra Miljöval (‘good environmental choice’), was introduced by the Swedish Society for Nature Conservation (SSNC) in 1996 (Kåberger 2003).
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Hence following the reform ERA started to focus on ‘green electricity’ and depicted eco-labels as an opportunity for consumers to request environmental data and thereby place demands on companies to become more environment-friendly (ERA 1997: 1-2). Part of the stimulus was “customers, owners and other stakeholders [that] put increasing pressure on companies’ environmental work” (ERA 2000:12). Hence ERA increasingly sought to brand the industry as a producer of “environment-friendly electric power” (ERA 2001:8), and reported extensively on ‘green consumerism’, eco-labelling, LCA, environmental management via ISO14001 certification and environmental reporting (ERA 1994: 9; ERA 1998:3; ERA 1998:8; ERA 2004:11). By this stage the logic of environmental protection had gained importance and similar to economic efficiency, had too become market-based. The two logics had become intertwined. The industry’s focus on environmental protection during the 1990s was part of a wider societal shift that was reflected by the appearance of new concepts such as ‘sustainability’ and ‘ecological modernisation’ in public and political discourses on energy. The focus on sustainability followed the publication of the Brundtland report and the 1992 Rio conference. In 1996, pursuit of an ‘ecologically sustainable society’ became a central objective for the Social Democrats, who dressed environmental policy in culturally-familiar rhetoric (e.g. by endorsing a ‘green welfare state’) (Lundqvist 2000). Following deregulation, the onus was on politicians to legitimate environmental protection without forgetting the importance of economic efficiency. The combination of these two often contradictory logics was made possible via the notion of ecological modernisation, which promises that environmental sustainability goes hand-in-hand with economic development (see Mol and Sonnenfeld 2000; Dryzek 2005; Huber 2008; Jänicke 2008). During the 1990s the Social Democrats espoused these logics by advocating “resource-saving and resource-efficient technology…[as] an engine for growth and jobs”, encapsulated in economic policy instruments, green public procurement and publicly funded “environment and resource-related research…directed at finding eco-technological solutions” (Lundqvist 2000: 23). Ecological modernisation can thus be considered a hybrid logic in this particular context – it had become more than a discursive entity in it was manifest in a range of institutional arrangements.
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Given its focus on policy-driven change that benefits the environment and the economy, ecological modernisation directs attention to the efficiency of policy instruments in terms of dynamism and cost. After the mid 1990s ERA’s coverage reflected the incumbency of the ecological modernisation logic. For example, in conjunction with the EU drive for renewable energy, the Swedish electricity certificate scheme (ECS) was introduced to replace existing subsidies for RES-E. Prior to the scheme’s introduction, ERA repeatedly called energy from RES-E ‘green electricity’ (e.g. ERA 1999:4; 1999:5; 2000:4; 2000:5; 2000:6-7), and coal and oil were increasingly depicted as commercially unviable following studies that demonstrated their external (environmental) costs (ERA 2001: 9). The ECS was thus nicknamed the ‘green certificate system’ (ERA 2002:4). ERA reported that the scheme would stimulate the development and implementation of RES-E in a cost-efficient manner, create a ‘competitively neutral’ level-playing field for market players and facilitate international harmonisation of RES-E schemes (ERA 2000:9). ERA voiced its approval of these objectives and the scheme was seen to align well with industry expectations regarding the way subsidies should be provided. In 2002, for example, the editor of ERA led with an opinion piece entitled ‘market-based instruments – yes please!’ (ERA 2002: 5). The industry favoured the ECS because it provides more certainty for investments than previously piecemeal subsidies, and thus encompassed a more concrete economic opportunity. However, concerns were raised regarding the unilateral approach that the ECS entailed, as without international participation the scheme’s market liquidity was seen to be questionable, which could threaten its dynamic efficiency (ERA 2002:9). The scheme was debated further with regard to the assumption that it would increase prices to consumers (ERA 2002:10), again reflecting the prominence of the economic efficiency logic. Notwithstanding, the scheme’s introduction encompassed a shift in modes of governance, as the state would intervene using market-based policy instruments. The scheme also served to make RES-E a strategic priority for electricity producers. A second way in which ERA’s coverage reflects the logic of ecological modernisation is linked to European climate policy that sets binding targets to reduce emissions via another market-based instrument – the EU emission trading scheme (ETS). The EU Emission Trading Scheme (ETS) was
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established in 2005 as one of the so-called ‘flexible mechanisms’ of the Kyoto Protocol (Directive 2003/87/EC) which encompasses an 8% reduction target for the EU. It is a cap-and-trade system that is designed to facilitate CO2 reductions via free trade of emission permits. Discussions regarding emission trading coincided with the first EU Green Paper on the ETS in 2000 (COM 2000:87). Prior to the introduction of the ETS, ERA reported on the success of the US sulphur dioxide trading scheme (ERA 2000:4). ERA was in favour of the ETS since it would encompass regulatory harmonisation of the energy sector, although raised electricity prices were a cause for concern (ERA 2000:5). Emission trading was depicted as a cost-efficient instrument that would make climate change “a central element in the drive for globally sustainable development” (ERA 2000:5). It was also welcomed by industry and preferred to a tax, since it provides economic opportunities for ‘environmentally-efficient’ firms who can sell permits to other market actors (ERA 2000:5). Similar to the ECS, the ETS represents a huge economic opportunity to the Swedish electricity industry given its low emissions, although the opportunity to reap profits is again hamstrung by the economic efficiency logic. ERA’s coverage reflects the fact that the logics of environmental protection and economic efficiency were manifest in its consideration of market-based policy instruments. Shock/Event
Issue
Logic
New practices
Detritus
Electricity market
Marketisation of
Economic
Nordic electricity
Energy
reforms in UK
electricity supply
efficiency
market
conservation and
Environmental
Eco-labels, LCA,
protection
and ISO
conversion
/Norway and proposed EU market
certification
harmonisation
Welfare creation
1992 currency crisis
Market-based
1996 deregulation
Smart regulation Market competition
Investments in RES-E
interventions
Environmental management
Market-based 1996 European RES-E policy
(NB: all repackaged under the rubric of ecological
1997 Kyoto
policy instruments
Scientific uncertainty re
Binding targets
climate change
modernisation) Notion of ‘green
Protocol
electricity’ Table 4: institutional responses to the marketisation of electricity supply.
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Period 5: (2006 – present) the proliferation of corporate action on climate change Despite ERA’s comprehensive coverage of the climate problem in conjunction with the events and issues hitherto described, climate change did not receive ubiquitous attention until the end of 2006. The volume of articles that focus either entirely on the climate issue or make references to it increased enormously during the last three years. Its increased salience coincided with the publication of the Stern report, whose principal message (that without immediate action the costs of tackling climate change could escalate to 5-20% of global GDP in 2050) was reinforced by ERA in a full-page spread (ERA 2006:12). The Stern Report thus reinforced the need to act on climate change because of the logic of economic efficiency. During this period, ERA also reported on EU proposals to launch its ‘202020’ energy/climate package, which entails a 20% reduction of greenhouse gases; 20% use of renewable energy sources and 20% reduction in energy consumption by 2020. The EU also stated that new coal-fired power plants should not release carbon dioxide after 2020, providing impetus to carbon sequestration technologies (ERA 2007:1). Hence the policy-driven programme of environmentally benign technology change encompassed by ecological modernisation was given a further boost. ERA noted that the 2020 targets were welcomed by the Swedish government (ERA 2007:2) and Vattenfall revised its previous RES-E target upwards to 10TWh of new renewable energy by 2016 (ERA 2006:67), suggesting that policy developments provided economic opportunities that were welcomed by the industry as a whole. The current salience of the climate issue is reflected by the fact that ERA’s reports are seldom exempt from considerations of climatic impacts. This is mainly a qualitative change that reflects the manner in which industry constituents are now cognizant of the need for climate action. It also reflects the fact that whilst companies are keen to take advantage of the economic opportunities provided by marketbased instruments, they must legitimate their investments by demonstrating some potential for climate protection. Advocates of nuclear power, for example, argue for its potential to reduce CO2 emissions (e.g. ERA 2007:3). Similarly, in 2006, Varberg Energy inaugurated two new small-scale hydropower turbines and announced that “every small hydropower plant contributes to the production of clean electricity and reduced emissions” (ERA 2006:12). And Gothenburg Energy announced that its new
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gas-powered CHP plant “replaces electricity produced via Danish and German coal-fired plants and thus reduces carbon dioxide emissions by 500,000 tons per year” (ERA 2006:12). During this period ERA also framed climate change as an innovation opportunity for the electricity industry, by raising new possibilities for electricity in society such as electrification of the transport sector, for example (ERA 2007:3). ERA emphasised the potential of electricity hybrid automobile technology, which is seen to be more efficient and less carbon-intensive than petroleum-driven motors (ERA 2007:3) – especially if electricity is produced from carbon-free sources (ERA 2007:4). ERA reported extensively on wind-power during the last two years, following a wave of new investment: “A trend has emerged…never before have so many large projects been presented, and there is a feeling of Klondike and gold rush in mountainous regions. New wind maps open totally new areas and actors talk as if they have found a completely new energy source” (ERA 2007:1). ERA thus depicts a general feeling of change and expansion: “Swedish electricity production is on its way into a new era” (ERA 2007:4). The positive spin of ERAs coverage is likely a result of the fact that the industry is benefitting economically from the introduction of market-based instruments that direct financial resources from electricity consumers into the hands of power companies. However not all consumers are treated equally, as tax exemptions are given to energy intensive industries subject to international competition, which again reflects the economic efficiency logic. The latter also appears to influence in nonmarket climate strategies in the electricity industry. For example, Vattenfall published a ‘climate map’ which describes global emission reduction potentials and costs for all industry sectors and simultaneously launched the ‘3C initiative’ – an international industry lobby network in favour of a global, long-term emission trading instrument that sets global price for carbon dioxide emissions (ERA 2007:1). Whilst the initiative may appear to voice industry concerns for environmental protection, it also emphasises industry concerns for a loss of Sweden’s industrial competitiveness (which would result in diminished electricity demand) if climate policies create an unlevel playing field. In the eyes of the industry, climate policy must find a balance between environmental protection and economic efficiency.
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Events
Issue
Logic
New practices
Detritus
2005 EU ETS
Comprehensive recognition of need for climate action
As above
As above
As above
2006 new European targets
Investments carbon sequestration wind power
2006 Stern Report
in and
Table 5: institutional responses to the regulatory changes vis-à-vis climate change
4.1. Proto-institutions and alternative frames The industry view presented in the previous sections is of course one framing of potentially many. The emphasis on public policy in ERA’s coverage of the various issues faced by the Swedish electricity industry suggests a significant role for the government in framing corporate action. Yet the government is not the only actor that seeks to influence Swedish electricity production. Despite the fact that ENGOs have not featured significantly in ERA’s coverage, perusal of their literature suggests that they seek to exert pressures on Swedish energy companies by making specific demands as to how the climate issue should be tackled. To the extent that their strategies shape public opinion, or to the extent that they succeed in lobbying activities, ENGOs introduce further prescriptive dimensions to the climate/energy debate that in some cases diverge from those of the Swedish government. In doing so, ENGOs utilise the institutional detritus of previously salient issues to legitimate their strategies. The same applies to the Swedish government. Appraisals of Swedish energy policy are often replete with terms such as pioneer, leader or forerunner (e.g. Lundqvist 1997; Nilsson 2005; Reiche and Bechberger 2004; Petterson and Söderholm 2009) given the willingness to experiment with novel policy instruments (Uba 2010). The Swedish government has in fact espoused a view that builds on ecological modernisation and which has the objective of maintaining Sweden’s international reputation as a pioneer and to lead by example on climate change mitigation (Sarasini 2009). The introduction of policy instruments to fulfil this objective suggests that the government’s strategy has reached a level of institutionalisation beyond that of field frames. Yet the need for regulatory mechanisms that can stimulate emission reductions and investments in RES-E suggests that the strategy has not been fully realised – hence the need for
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corporate action. As regards climate change, the pioneer frame has developed into a proto-institution whose currency is rooted in a history or culture of leadership vis-à-vis other environmental issues (Kronsell 1997). The manner in which the Swedish government utilises reputation and culture is representative of the way that institutional detritus is used to legitimate and frame a particular course of action. The policy discourse on climate change also draws on other forms of institutional detritus such as Sweden’s ‘track record’ (cf. Sweden’s ‘unintentional’ climate policy) in reducing emissions and the use of carbon taxation to spur fuel switching (Sarasini 2009). The Swedish branch of the World Wide Fund for Nature (WWF) endorses an innovation/technology based strategy that is strikingly similar to that of the government (WWF 2009), and whilst the industry itself feels overburdened vis-à-vis climate and energy policies, ENGOs use the forerunner detritus to lobby the government for more stringent targets (e.g. FOE 2009a). ENGOs are also in favour of the conservation and conversion, though there are ways in which ENGOs seek to frame solutions to the climate issue that diverge with that of the industry, again by utilising institutional detritus. Generally, ENGOs construct frames that categorise and classify existing practices related to electricity supply. For example, the notion of ‘green electricity’ is contested by the Swedish branch of Friends of the Earth (FoE), which lobbied against claims that natural gas and peat are ‘green’ fuels in a campaign entitled ‘Greenwash in Climate Policy’ (FOE 2009b) and refutes the idea of climate mitigation via nuclear power since it is ‘too risky’ (FOE 2009c). Similarly, Greenpeace lobbies against carbon sequestration technologies (CCS) and nuclear power, labelling them as ‘false solutions’ to the problem of climate change (Greenpeace 2009a). Greenpeace also refutes the use of non-renewable energy sources including nuclear power and has developed a strategy for a ‘climate-friendly Nordic region’ whereby all Scandinavian nuclear plants are decommissioned and replaced with decentralised RES-E systems (Greenpeace 2009b; 2009c). And the Swedish Society for Nature Conservation (SSNC) also seeks to reduce the impacts of renewable electricity production on biological diversity via ecolabelling (SSNC 2009a). This means that the SSNC opposes any further expansion of hydropower (despite the fact that it is certifiable via its Bra Miljoval label), and the construction of wind turbines where they “threaten the high value of nature” (SSNC 2009b).
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ENGOs thus combine institutional detritus related to nuclear power, the concept of green electricity and eco-labels to influence electricity production via the government and the reformed electricity market in a manner that diverges partially from the incumbent industry view. Greenpeace epitomises this approach in that it produces an annual report that ranks electricity companies in terms of their renewable portfolios entitled Så miljövänliga är elbolagen (How environment-friendly are the electricity companies?) (Greenpeace 2009d) and concurrently describes Vattenfall as ‘Sweden’s biggest climate villain’ based on its use of nuclear power in Sweden and coal in other parts of Europe (Greenpeace 2009e). 5. Discussion This study shows how exogenous shocks can set in motion processes of endogenous institutional change. Seen from a longitudinal perspective, the legitimacy of Swedish electricity production has been challenged by a range of issues whose framing has left behind sets of institutional arrangements (frames and proto-institutions) that can be described as institutional detritus. Shocks led to the proliferation of issues that came to dominate an industry setting and warranted responses from a broad range of constituents. In some instances new issues amplified institutional responses to previously salient problems whereas in others detritus disappeared from the dominant industry view. The proliferation of energy security following the 1970s oil shocks, for instance, amplified a previously existing logic of economic efficiency and provided a window of opportunity for the Swedish government to finance the rapid growth of a nuclear power industry, alongside various policies and programmes that sought to promote the development of RES-E and stimulate more efficient use of energy in various sectors of the economy. The economic efficiency logic has remained as institutional detritus that has in turn influenced the way that other issues have been framed within the industry. The issue of nuclear phase-out, for example, has repeatedly been framed in tandem with other environmental issues that limit any further expansion of hydropower or use of fossil fuels in such a manner that RES-E are the only feasible replacement. Whilst biomass has increasingly been used as a fuel for energy supply, investments have been contingent upon its commercial viability in comparison to oil and only partly on government subsidies. Similarly, the deadline for nuclear phase-out has
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repeatedly been influenced by the commercial viability of renewable energy technologies whose expansion relies also on government interventions vis-à-vis RES-E policy. Overall, the study shows that the manner in which corporate action on climate change has been framed and institutionalised by the industry is largely reliant on the detritus left behind following previously salient issues. The emergence of transboundary environmental risks from the 1970s onwards, the ‘unintentional’ climate policy that followed the oil crises, and the marketisation of electricity supply have left in their wake institutional detritus that are key to the presently dominant framing of corporate action on climate change as resolvable via stringent market-based government interventions that seek to bring about further conservation and conversion within the industry. However if one compares the practices of conservation and conversion that dominated between the 1970s and the 1990s with those of today it becomes clear that institutional changes have occurred. The government has retained its interventionist role but a shift has occurred towards a more neoliberal market-based approach to policy from the previous command and control regime. The key to this change was deregulation, which also stimulated a shift towards environmental management within the industry. Overall, the rise and decline of issues has led to the construction of a hybrid institutional logic that combines logics of economic efficiency, an interventionist role for the government, protection against transboundary environmental risks and, more recently, the promise that leadership on these issues brings with it the added benefit of welfare creation and industrial competitiveness (see table six). Economic efficiency
Cheap and abundant electricity Long term sustainability (i.e. based on renewable domestic resources) Key to socioeconomic objectives (industrial competitiveness and welfare generation) Cost efficiency via market-based supply and energy saving
Environmental
Protection against transboundary risks
protection
Some risks (e.g. climate change) more important than others (e.g. nuclear) Use of market-based policy instruments Public-private governance Climate translated into an economic entity
Science and
Adequate to warn against environmental risks?
technology
Key to development of RES-E Innovation key to government objectives (climate protection, industrial
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competitiveness and welfare creation) Government
Neoliberal approach to climate/energy policy Decentralised decision making via use of market-based policy instruments
Table 6: the logics that underpin corporate action on climate change in the Swedish electricity industry!
These logics currently influence field members’ attempts to frame the climate issue according to their own strategic goals. Furthermore, field members varyingly utilise institutional detritus in attempts to influence the framing of corporate action on climate change. The Swedish government, for instance, legitimates stringent policy measures by referring to Sweden’s record in reducing emissions and her historical role as an environmental pioneer. Similarly, environmental organisations varyingly seek to outlaw certain practices by using institutional remnants of previously salient issues, such as nuclear phase-out, the ban on hydropower and the use of certain fuels / technologies for electricity production. Furthermore, despite the fact that field member strategies vary, it is quite clear that these organisations are merely contesting different forms of ecological modernisation. Their strategies are thus limited by the bounds of institutional logics. However, institutional detritus provide the means to contest, frame and debate the issue of corporate action on climate change in a more active and strategic manner. This becomes obvious if one considers the fact that renewable technology – a mainstay of ecological modernisation – has repeatedly been proposed as solution to different issues; the oil crises, nuclear phase-out, and now climate change. Since the technologies and fuels used for Swedish electricity production have not undergone much change since 1985, one could argue that the industry has not undergone any major institutional changes. However, the statement that: “Since 1975 Sweden’s overall energy policy objectives have been secure energy supply through an increase of domestic and preferably renewable sources of energy under conditions that do not jeopardise Sweden’s international competitiveness” (Nilsson et al. 2004, p. 72) does not encompass the entire story. If one considers the range of issues the industry has faced it becomes clear that the dominant legitimating idea related to Swedish electricity production has changed repeatedly over time. Following the 1970s oil crises the dominant logics were economic efficiency and government interventionism to ensure energy security. Since this period environmental protection and welfare creation have been added as components of the dominant institutional logic.
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This logic, described here in terms of ecological modernisation, marries two traditionally conflicting logics – namely economic efficiency and environmental protection – in more revisionist terms via the use of environmentally benign technology harnessed by the dynamism of regulated markets. 6. Conclusion This paper makes the following theoretical contributions. First, by examining endogenous processes of institutional change that follow exogenous shocks, the study shows that path dependency is not an altogether defunct concept given models of discontinuous change that are inherent to external structuralist approaches. By the same token, nor is it the case that history is adequately described by periods of equilibrium punctuated by shocks that induce radical changes. Whilst exogenous shocks direct field members’ attention to new issues, existing logics shape perception and thus influence members’ attempts to frame resolutions to problems. In this way exogenous shocks have the potential to initiate change but the full institutionalisation of change projects is limited by existing logics and issues and, not least, the untimely arrival of new issues which pose similar problems for the field. When new issues emerge in this way, solutions to previous ones can be obscured from view and either become institutional detritus or are forgotten altogether. This brings us to a second contribution regarding the process of institutional change. Even after issues have declined because they are either resolved or replaced by new issues, institutional detritus in the form of field frames and proto-institutions can be used actively and strategically by field members to frame resolutions to subsequent problems. As regards agency, then, it would appear that actors utilise institutional detritus to construct frames for action that they then try to impose upon the field. The way actors select between different forms of detritus is an active choice that is key to the transformation of an event or shock into an issue and represents the way that endogenous factors interact with exogenous events. Seen this way, agency, though constrained by previously salient issues, is what links internal and external structuralist approaches. More specifically, as new issues emerge the process of framing and reframing, and the process whereby frames undergo at least partial institutionalisation serves to modify the overarching institutional order by adding new logics and
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altering conceptions of existing ones. Hence to a degree this study reveals some of the processes that underpin recursive models of institutions and actions by showing how field member strategies influence and are influenced by events, institutional detritus and institutional logics. A third contribution is that this study has further elucidated the relationship between field frames and institutional logics. Lounsbury et al. (2003) claimed that field frames are more malleable elements of the institutional landscape in that a frame “has the durability and stickiness of an institutional logic, but akin to strategic framing, it is endogenous to a field of actors and is subject to challenge and modification” (72). This study corroborates these claims, but by focusing on the interplay between institutional detritus, field frames and proto-institutions it also suggests that the construction of field frames is a first step towards institutional change. Further research could thus do more to elucidate the way that field frames are constructed following active political contestation between field members as a means to gauge agency in the context of the constraints of institutional logics. Whilst most studies on institutional logics focus on contestations between constituents of divergent logics (e.g. Thornton and Ocasio 1999; Bhappu 2000; Glynn 2000; Thornton 2001, 2002; Lounsbury 2002, 2007; Haveman and Rao 2007; Marquis and Lounsbury 2002, 2007; Chung and Luo 2008), this study shows that where logics meet in a more harmonious manner contestations occur at the subordinate level of field frames. Seen from a field-level perspective, this raises the question of whether actors actually need to disembed themselves from institutional constraints to become change agents, even in the presence of exogenous shocks that threaten the legitimacy of existing practices and technologies. This elucidates a significant limitation of this study – namely that by focusing on the organisational field in a substantive way it does not examine micro-level processes that have contributed to the institutionalisation of corporate action on climate change. Examining managerial rationales for corporate action, for instance, would provide a fuller understanding of the process of institutionalisation. Such studies may benefit by using the concept of institutional work, which adopts a practice perspective to examine the intentionality of actions that seek to create, maintain or disrupt institutions (Lawrence and Suddaby 2006; Lawrence et al. 2009). For a comprehensive understanding of the interplay between the field and micro levels, such a focus should be extended to all field
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member organisations that seek to influence the framing and institutionalisation of a particular issue. This would provide further insight as regards the recursive relationship between actions and institutions that underpins the concept of institutional work (Lawrence et al. 2009). However, as Barley and Tolbert (1997) note, the ex ante selection of longitudinal studies requires great insight and luck as researchers must essentially foresee the institutionalisation process before it unfolds. Here the issue of climate change may prove useful given the long-term nature of the problem and its proposed solutions. Climate policies that focus on mitigating the problem via decarbonisation focus on timescales of several decades. Assuming that the issue remains highly salient and that the problems in reaching some sort of global consensus on mitigation is achieved, climate change may provide the opportunity to conduct comprehensive research on the relationship between actions and institutions at multi-levels of analysis across a range of societal sectors. References Barley Stephen .R. and Pamela S. Tolbert 1997 ‘Institutionalization and Structuration: Studying the Links between Action and Institution’. In Organization Studies 18/1: 93-117. Baum, Joel A.C. and Walter W. Powell 1995 ‘Cultivating an Institutional Ecology of Organizations’. American Sociological Review 6/0: 529-38. Bhappu, Anita D., 2000 ‘The Japanese Family: An Institutional Logic for Japanese Corporate Networks and Japanese Management’. Academy of management Review 25/2: 409–415. Chung, Chi-Nien and Xiaowei Luo 2008 ‘Institutional Logics or Agency Costs: The Influence of Corporate Governance Models on Business Group Restructuring in Emerging Economies’. Organization Science 19/5: 766–784. DiMaggio, Paul J. 1988 ‘Interest and Agency in Institutional Theory’. Lynne G. Zucker (ed) Institutional Patterns and Organizations: Culture and Environment. Ballinger Pub. Co. Dryzek, John 2005 The Politics of the Earth: Environmental Discourses (2nd edn). Oxford University Press: Oxford.
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Paper 2
Mitig Adapt Strateg Glob Change (2009) 14:635–653 DOI 10.1007/s11027-009-9188-3 ORIGINAL ARTICLE
Constituting leadership via policy: Sweden as a pioneer of climate change mitigation Steven Sarasini
Received: 2 February 2009 / Accepted: 23 July 2009 / Published online: 13 August 2009 # Springer Science + Business Media B.V. 2009
Abstract This paper examines Sweden’s role as a pioneer in mitigating climate change. Critical discourse analysis of climate and energy policy unveils Sweden’s ambition to ‘leadby-example’, by virtue of a win–win combination of economy and environment via stringent regulations and an early-mover strategy on eco-innovations. The extent of the unilateral approach is constrained by concerns for the competitiveness of energy-intensive industries and a persistent debate on the fate of Swedish nuclear power. Whilst Sweden has made significant demonstrative progress in reducing emissions and introducing renewable energy sources, these issues may limit her role as a pioneer in years to come. Keywords Climate policy . Pioneers . Ecological modernisation Critical discourse analysis . Sweden
1 Introduction In OECD1 countries, climate and energy policy are inextricably linked because of the international consensus that climate policy should focus primarily on mitigation. The link between climate and energy is central to climate policy because in order to achieve mitigation OECD countries must change their energy sources, due to the fact that the majority of extant greenhouse gas (GHG) emission results from the combustion of fossil fuels to generate energy. Approximately half of Sweden’s primary energy is supplied by renewable sources (Ds 2005:55) and energy generation in the electricity and district-heating sectors is almost entirely free from carbon emission. Seen from the perspective of most other OECD countries that are simultaneously grappling with the challenges of energy insecurity and climate change, the proportion of renewable to fossil fuel energy sources in Sweden’s portfolio may be described as an enviable situation.
1
Organisation for Economic Cooperation and Development.
S. Sarasini (*) Research Policy Institute, Lund University, MNO-huset, Sölvegatan 16, 22100 Lund, Sweden e-mail:
[email protected]
636
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Sweden has become known internationally as a lead or ‘pioneer’ nation on a range of environmental issues by ‘leading-by-example’ and by coupling stringent environmental standards to high levels of welfare and economic growth (Lundqvist 1997). Generally, policymakers tend to adopt policies that have already been proven by other countries. Hence taking the lead in any policy area and in environment in particular is an important strategic advantage. Other things being equal, laggard countries tend to follow the examples set by pioneers, such that taking the lead allows one to set standards rather than to adapt to extraneous political structures. This is particularly true for countries that are parts of regional and/or supranational entities such as the European Union (EU). Taking the lead is a challenging task in itself but sustaining a leadership advantage can be problematic over time. The United States (US), for instance, was widely regarded as an international leader on national policies for environmental protection in the 1970s (Andrews 1997). However, despite significant environmental reform and an initial period of progress, environmental politics in the US has become locked into a regime of adversarialism between the environmental movement and industry that has limited progress in environmental management. During the recent Bush administration, the US rejected the Kyoto Protocol due to fears for its economy, and by dissenting from the majority at international climate negotiations (Christoff 2008) the US is now widely regarded as a laggard in mitigating the causes of climate change. By contrast, the EU has embraced the notion of sustainable development and is pursuing leadership on climate change mitigation that raises standards for member states and has implications for countries that strive for environmental leadership. This study utilises critical discourse analysis to examine the way that Swedish climate and energy policies attend to the emergent issue of climate change in the context of EU developments and potentially conflicting interests regarding environmental protection, industry and economic development. It seeks to examine how Sweden builds on its pioneer role and describe weaknesses in the current approach, in a manner that may be useful for future policy in Sweden and abroad. The paper consists of five sections of which this is the first. Section 2 describes the literature on environmental pioneer countries and the method for the study. Section 3 provides a background to Swedish climate and energy policy and developments in the electricity and district heating sectors. The main findings of the study are presented in Section 4 and discussed in Section 5.
2 Environmental pioneers in a globalised economy Countries that lead on environmental protection must overcome the issues faced by environmental laggards. Manheim (2009) cites several reasons for the current predicament of the US, including a long history of political partisanship; overly complex command and control regulations that have resulted in litigiousness; adversarialism and a lack of communication between environmental organisations and industry; politicisation of environmental authorities; isolation of social and natural scientific research from wider societal issues; NIMBYism; misinformed citizens; and a loss of social cohesion and social responsibility since the post-war period. The literature on environmental pioneers provides some clues on how to circumvent these problems. Environmental pioneer countries typically place strong emphasis on environmentally benign technology. By instituting stringent environmental standards as a driver for environment-friendly ‘eco-innovations’, pioneers reap first-mover benefits that can stimulate the competitiveness of national industries as depicted by the Porter hypothesis
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(Porter 1991; Porter and van der Linde 1995). Technologies relevant to electricity generation and district-heating that may facilitate a pioneering approach to mitigating climate change include wind-, wave-, solar- and hydro-power; carbon sequestration (CCS); biomass; combined heat and power (CHP); hydrogen fuel cells; and energy efficiency technologies. By creating lead markets for these technologies, pioneers are able demonstrate the feasibility of a win–win combination of environment and economy. Examples include Denmark in terms of wind power and Japan for photovoltaic cells. The ‘demonstration effect’ is valuable as follower countries are likely to adopt similar measures (Jänicke 2005; Huber 2008). The benefits are both commercial and political, as 1) diffusion of eco-innovations is likely to flow from industries in leader countries to their laggard counterparts whereby the former profit from patents and licenses; and 2) laggards are likely to implement regulatory frameworks and institutional practices established in pioneer countries, such that the latter are not required to adapt to extraneous policy frameworks. Pioneers tend to adopt strategic practices to stimulate the diffusion of technological/political innovations beyond national borders. These include building alliances with strategic partners in international policy fora such as the EU (Liefferink and Skou Andersen 1998) and with countries with emerging demands for eco-innovations (Jänicke and Jacob 2004). Within the EU pioneers set the policy agenda following strong national engagement on environmental issues (Liefferink and Skou Andersen 1998). Since the EU is pursuing global leadership on emission reduction, pioneers that set the EU climate policy agenda may potentially influence climate policy globally. As regards climate change strategic partners are likely to be countries with large or emerging markets for renewable energy technologies. Pioneers usually have a high degree of economic development, a highly educated population and well-developed institutions (Jänicke 2005). Fiscal resources can facilitate high levels of R&D expenditure that are important for technology-led environmental policy. Education increases environmental awareness among citizens, acceptance for public spending, demand for eco-innovation and a competent workforce. EU membership is another useful criterion for leadership as the EU Treaty guarantees high environmental protection for member states and harmonised environmental policies (Jänicke 2005). EU membership also provides a platform to export policy innovations. Pioneers can gain international visibility by developing competences to deal with environmental issues, especially if the issue in question has become an element of the competition for innovation, as is arguably the case for climate change. An initial stimulus for developing such competences is stringent regulation—the most important precondition for eco-innovation (Huber 2008). Climate change pioneers are likely to be countries that have a history of supply-led renewable technology policy coupled to ambitious targets to increase renewable energy supply and reduce GHG emissions. Pioneers typically define environmental policy and sustainable development via innovation policy and ecological modernisation (Huber 2008). Ecological modernisation prescribes a central role for science, technology and market mechanisms to abate pollution (Mol and Sonnenfeld 2000). The private sector plays a key role in implementing renewable technology ‘fixes’ to environmental problems (Huber 1982, 1984, 1985). ‘Smart’ regulation promotes a business climate redirected by incentives for renewable technology. Fiscal measures such as pollution taxes and market-based instruments such as emission trading are recognised for their flexibility, cost-efficiency and ability to stimulate market competition. Eco-efficiency standards, product labelling and green procurement are also useful. ‘Command and control’ (administrative) instruments are deemed cumbersome, costly and outdated. Technology-neutral instruments such as performance standards are preferred, for
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example, over best available technology policies. Pioneers are likely to benefit from coherent and long-term regulative frameworks to reduce the risks of investing in renewable technology (Jänicke and Weidner 2002). This is particularly the case for the energy sector since investments are made on a long-term basis spanning decades. 2.1 Method The empirical object of this study is the mitigation of climate change in the electricity and district-heating sectors. These sectors are often referred to collectively and are subject to policies separate from the transport, industrial and domestic sectors. The latter are excluded from the study. The paper focuses on arguments, framings, conceptualisations and representations advanced by policy that may be perceived as credible and legitimate ways of tackling the climate issue. Given the problems faced by policymakers in constructing credible responses to environmental problems, the use and configuration of concepts that satisfy diverse interests is of central importance. Critical discourse analysis is a useful approach as it claims that discourse exists in a dialectical relationship with other elements of social practice (Jørgensen and Phillips 2002). This means that discourse has the power to reshape the structures that guide social practices but is also shaped by non-discursive phenomena. Whilst climate policy aims to reduce emissions and restructure the economy, non-discursive phenomena such as natural resource endowments, technology, vested interests, cultural factors and so forth influence and shape policies for tackling the climate issue. The latter both constrain and enable the level of ambition in climate policy. For the purpose of this study, critical discourse analysis is a useful means to examine the manner in which policy seeks to balance diverse factors and interests that may otherwise retard a pioneering approach to mitigating climate change. Dryzek (2005) describes environmental discourses in terms of four salient features: basic entities recognised or constructed by the discourse; assumptions made regarding natural relationships; agents and their motives constituted by the discourse; and key metaphors/ rhetorical devices that are employed to provide coherence. Various textual representations were analysed using Dryzek’s framework to note the key and salient features of Swedish climate and energy policy. Sources comprised policy documents, political debates, speeches and academic literature. Additionally, a monthly newsletter detailing policy-relevant information and press items entitled ‘Klimataktuellt’ (Climate news) published by the Swedish Environmental Protection Agency (Naturvårdsverket) was analysed during the period 2006–2008. These texts were analysed in terms of their manifest (elements stated explicitly) and constitutive (elements referred to implicitly) statements prescribing a suitable course of action (Fairclough 1992). 2.2 Limits of the study Fairclough (1992) describes discursive practice (the production and consumption of texts such as policy) as one type of social element that reproduces society and contributes to its transformation. By focusing on the production dimension this study does not elicit the manner in which policy texts are received and digested by constituents and hence does not examine whether the course of action constituted by policy discourses is adopted by subjects. Put differently, the study does not examine the implementation of climate policy, and thus does not consider the possibility that actors may choose a different course of action (i.e. display agency) to that prescribed by policy (a structuring entity). Furthermore, discourse analysis is a subjective task such that the findings this study are constrained by
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the (bounded) rationality of the researcher. To reduce this shortcoming I conducted five informal interviews: three with government representatives, one with Sweden’s leading representative in climate negotiations and one with a Swedish professor from the International Institute for Environmental Economics at Lund University.
3 Background Sweden is a wealthy country, ranked 13th in terms of GDP2 per capita and sixth on the human development index (UNDP 2005). Its energy sector has undergone various structural changes during the last century. Following the substitution of coal for wood in the 1910s (Kander 2002) dependency on oil increased and it was the dominant energy source in the 1950s (Nilsson et al. 2004). The huge expansion of hydropower, which culminated in the 1960s, was a major factor in establishing a national electricity grid (Kaiser 1992). Sweden became a nuclear power in the post-war era, commissioning twelve reactors in the period 1972–1985. Energy security became a major national policy goal in the wake of the 1970s oil shocks because national industrial competitiveness in Sweden was largely dependent on traditionally low energy prices (Kronsell 1997; Silveira 2001). Price volatility was perceived as a threat to employment and general welfare of citizens. The initial policy proposal was a supply-led transformation of the energy market via support for research, development and demonstration (RD&D) in renewable technology and energy efficiency (Nilsson et al. 2004). Sweden has succeeded in halving emissions of greenhouse gases from electricity and district heating since the 1970s (Proposition 2005/06:172). Electricity supply is almost entirely carbon-free, owing largely to the fact that nearly all of Sweden’s electricity is generated from hydro- and nuclear-power. After the oil crises, Swedish heavy industry declined as a result of fierce international competition. Since the 1980s structural changes to the economy have occurred, including the emergence of light industry sectors such as microelectronics. Together these developments have resulted lower final energy consumption and fewer emissions (Kander 2005). In 1980 a referendum decided that nuclear plants should be decommissioned by 2010 due to safety concerns. Following the momentum gained in the 1970s, long-term goals for decreased oil-dependency, energy efficiency and renewable energy were re-established to compensate for the loss of nuclear capacity (Kaiser 1992). Despite the referendum, and much political debate, only two reactors have hitherto been decommissioned. In March 2009, the government decided to dissolve plans to decommission the ten remaining nuclear reactors and allow for existing installations to be rebuilt when they reach the end of their economic lifecycles (Proposition 2008/09:162 (2009)).3 The 1990s was a period of major institutional changes in the energy sector. In 1996 electricity markets were reformed allowing for international trade of electricity as a commodity in the Nordic region and some northern European countries. Regulatory reform was initiated with the expectation that private rather than public capital would be used to 2
Gross Domestic Product. Swedish policymaking consists of a seven-stage process whereby a political issue (referenced in this paper as ‘Dir’) is first subject to a public inquiry (referenced as ‘SOU’ or ‘Ds’). The inquiry is then opened for public consultation whereby all interested parties are able to comment. The government then publishes a proposal (referenced as ‘Prop’), which is then discussed in parliament. A further document is produced that details parliamentary discussions and conclusions (referenced as ‘bet’) before laws and legislation are formally adopted.
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develop infrastructure and that previously state-owned power companies would become subject to competition (Silveira 2001). In 1997 Sweden outlined international objectives that reiterated traditional approaches to energy policy (Proposition 1996/97:84 (1996); bet. 1996/97:NU12). National and international strategies for reducing emissions were to take stock of industrial competitiveness, employment and welfare via cost-efficient measures. At this early stage international cooperation was incorporated into national policy via the joint implementation (JI) mechanism outlined in the UNFCCC4 (1992). Sweden pioneered JI via energy projects in Baltic and Eastern European countries. In 2001 plans to develop a safe, efficient and environment-friendly energy supply based increasingly on renewable sources were again reiterated (Proposition 2001/02:143 (2001); bet. 2001/02:NU17). Part of the current stimulus for renewables is the expectation that decommissioned nuclear plants will be replaced with imported natural gas, which would imply more carbon-intensive electricity generation and reduce energy independence. These developments were accompanied by an early-mover strategy on climate change mitigation. Sweden’s first climate policy decision was in 1988 and appealed for an immediate stabilisation of carbon dioxide emissions (Proposition 1987/88:85 (1987)). Sweden began to incorporate concerns for climate change into energy policy in the early 1990s having instituted a range of relevant policy initiatives prior to this such as energy taxes. The most important political instrument for reducing carbon emissions to date is the carbon tax, introduced in 1991 (Kander 2005). Other factors that have contributed to reduced emissions include increased oil prices (STEM 2008) and range of investment policies to provide grants to homeowners to convert from oil-fired heaters to biomass boilers, heat pumps or district heating networks (Ds 2001:71). The carbon tax is regarded as stringent (i.e. it makes carbon emission expensive) and helped to decarbonise the districtheating sector via fuel switching (from oil to biomass or electricity) (Energiupptakt 2008). Carbon taxes were intended to consolidate Sweden’s tradition of ‘leading-by-example’ in environmental policy (Kronsell 1997). However, failure to instigate comparable actions abroad (Skou Andersen and Liefferink 1997) led to a lowering of taxes in 1993. Concerns for the competitiveness of energy-intensive industry and the risk of sanctions following the possibility that taxes may contradict international trade laws were key drivers of the reform (Sterner 1994). Following the establishment of a committee on industrial energy taxation in 1991, energy taxes were abolished for energy-intensive industry, to benefit production and employment levels. Energy-intensive industry received a total exemption from energy tax and a 75% reduction in from carbon tax, financed by private consumers (Sterner 1994; Kronsell 1997). Part of the drive was the need to harmonise taxes with EU legislation. This was not the first such occurrence—in the 1970s a law was passed on tax cuts for energyintensive industries facing international competition (Sterner 1994). In spite of differential tax rates, Swedish climate policy has continued to develop in an ambitious way. Sweden was one of the first nations to outline a national climate strategy for mitigation in 1988 and the government outlined a more comprehensive climate program following the UNFCCC in 1992 (Proposition 1992/93:179 (1992); bet. 1992/93:JoU19). Sweden was one of the few countries that stabilised emissions at 1990 levels by 2000. As part of its Kyoto engagement Sweden adopted a 4% reduction target for 2010 compared to 1990 levels—without uptake from sinks or the use of flexible mechanisms (Proposition 2001/02:55 (2001); bet. 2001/02:MJU10). The target entails a ‘beyond compliance’ strategy
4
United Nations Framework Convention on Climate Change.
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since the common-but-differentiated responsibility5 logic of the Kyoto agreement actually allowed Sweden, had it so desired, to increase its emissions by 4%. Swedish emissions have decreased by 9% since 1990, largely as a result of the carbon tax. Sweden’s economy grew by 44% during the same period. Emissions are presently 5.32 tons per capita, significantly below the OECD average of nearly 11 tons (OECD 2008). Following Sweden’s long history of research in renewable energy technologies, it is regarded to be at the forefront as regards research competence in biofuels, heat pumps and solar cells (Nilsson et al. 2004). The Ångström laboratory at Uppsala University is reputed to be a world leader in thin film technologies for photovoltaics (Nilsson et al. 2004). The main priorities for Swedish renewable energy policy are hydropower, biofuels, wind and solar technologies (Gan et al. 2007). Large-scale hydropower is currently at its maximum legislative limit, generating nearly half of the country’s electricity (Gan et al. 2007). Biofuels play a significant role in the district-heating sector as a result of strong growth since the 1980s (Nilsson et al. 2004) and there is about 80 terawatt hours of unused potential (SEA 2001, 2008). There are also large wind and solar capacities, although solar power is subject to seasonal variations and is thus less desirable given that potentials are lowest at times of peak demand (during winter). Sweden has also made progress on energy efficiency measures, especially in energy intensive industries, which are now among the most energy efficient in the world (SEA 2008). Vattenfall, a Swedish state-owned multinational energy company, is attempting to place itself at the leading edge of carbon sequestration technologies and launched the world’s first CCS pilot plant in Germany in May 2008. Historically Sweden has established various state-led renewable energy programmes and currently invests in renewables at the regional and municipal level (via the KLIMP programme). Climate policies are supplemented with information and educational campaigns (such as the ‘klimat.nu’ campaign) to raise awareness among the general public and to provide guidance to municipalities and energy-intensive industry on energy efficiency measures. The programme for energy efficiency (PFE) includes public procurement of technology and energy labelling of products. Renewable electricity is labelled via various environmental labelling schemes and incentives for its wider implementation are promoted by an electricity certificate (quota) system. Sweden also has an environmental code prescribing best available technology measures and the objective of ‘reduced effect on the climate’.
4 Results Targets for reducing emissions are defined partly by way of Sweden’s membership in the EU. The EU has specified a unilateral short-term target of reducing emissions by 20% by 2020, compared to 1990 levels. This target may be increased to 30% if other major polluting countries make similar commitments (COM 2008). The EU is willing to pursue a first-mover strategy but only as long as industrial competitiveness is not excessively compromised. Sweden’s national target for 2020 is to reduce emissions by 38%, compared 5
Parties to the Kyoto Protocol are subject to ‘common but differentiated responsibility’ set out by the UNFCCC. The Convention stipulates that developed countries should take the lead in mitigating climate change by establishing quantifiable national targets for emission reduction (UNFCCC 1992). Individual country targets depend on their historic record in reducing emissions and their economic capacity to do so in the future.
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to 1990 levels (SOU 2008:24 (2008)). In the longer term Sweden aims to reduce emissions by 75–90% by 2050, and in 2100 Swedish emissions should be ‘almost zero’ (SOU 2008:24 (2008)). Sweden refers to its ‘global responsibility’ to stabilise atmospheric concentrations of greenhouse gases, reflecting the common-but-differentiated responsibility logic of the UNFCCC (1992). The EU has also established targets to increase the share of renewable energy in energy use to 20% and to improve energy efficiency by 20% by the year 2020 (2006/32/EC (2006)). Sweden has made commitments to increase its use of renewables from 40 to 49% by 2020 and to increase energy efficiency by 9% by 2016, in comparison to the period 2001–2005. The possibility of exceeding EU targets is seen as an ‘enormous opportunity’ (Energiupptakt 2008). The main instrument for mitigating climate change within the EU is the emission-trading scheme (EU ETS), launched in 2005. Sweden is supportive of the EU ETS and is lobbying for 1) a broader, more comprehensive market that includes more sectors6 and greenhouse gases and that is linked with other schemes internationally; 2) a cap at the EU level rather than at the current member-state level with more restrictive targets; and 3) auctioned rather than grandfathered rights to pollute (Rapport 2007:03 (2007); SOU 2008:24 (SOU 2008); Dir 2001:2001:56 (2001); SOU 2003:60 (2003); SOU 2005:10 (2005)). A broader trading scheme is perceived to encourage more comprehensive emission reductions and generate a better investment/business climate (SOU 2008:24 (2008)). Stricter caps are seen to benefit the development and commercialisation of low-carbon technology (Rapport 2007:03 (2007)). Swedish policy indicates that surplus permits generated via the EU ETS are to be partially sold, to generate revenues for further climate measures; and partially annulled, to reduce emissions to a greater extent (SOU 2008:24 (2008)). These prescriptions are also made to limit windfall profiteering that has occurred since carbon trading began. Furthermore, policy stipulates that credits generated by the flexible mechanisms7 should only be supplementary to domestic emission reductions to ensure that Sweden does not simply ‘buy’ its compliance via the carbon market (Proposition 2001/2:55 (2001)). The fact that these measures imply higher costs of mitigation reflects Sweden’s climate ambitions. A case in point is the fact that Sweden is considering combining the EU ETS with the existing carbon tax to ensure high levels of abatement (Dir 2001:2001:56 (2001); SOU 2003:60 2003; SOU 2003:120 (2003); Proposition 2003/04:132 (2003)). There are fears that the EU ETS could be costly for European industry, and that it may curtail growth and employment goals (ITPS 2008). Yet these appear to be subordinate to the vision of environmental betterment: “We will utilise the market economy’s dynamic ability. It has an unbeatable capacity to drive change and development” (Energiupptakt 2008). Risks to competitiveness are downplayed by the notion that “Sweden is already in the best class as regards environment” (Energiupptakt 2008). The overarching aim of Swedish climate policy is summarised on the government’s website as follows: “The main objective of Swedish climate policy is for Sweden to be a leading example of a modern, environment-friendly society based on renewable resources, such that economic growth can be pursued in harmony with the planet’s climate restraints” (Regeringen 2009).
6
The Swedish government is in favour of including parts of the transport sector such as aviation and shipping in the EU ETS, and would like to investigate the possibility of either including road transport in the existing ETS or developing a parallel trading system if necessary. 7 The so-called ‘flexible mechanisms’ (Joint Implementation and the Clean Development Mechanism) were introduced as part of the Kyoto Protocol to supplement emission trading. The flexible mechanisms allow parties to invest in emission reduction schemes in foreign countries such that the credits generated count towards domestic emission reductions.
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However, Swedish climate policy is not impervious to concerns for industrial competitiveness. Unilateral action is limited by the problem of ‘leakage’. Leakage refers to the concern that energy-intensive sectors will suffer competitive losses because of overly stringent national climate regulations. Industry lobbyists are worried that carbon-intensive production will simply move to locations with more relaxed standards—a concern that is reflected by policymakers. For example, in considering the cross-sectoral equity of carbon taxes: [A] carbon dioxide tax should be uniform for all sectors and should comprise the entire economy. In practice it has been difficult to maintain a uniform rate since the tax influences competition. Sectors that are subject to international competition, where production can be performed in several countries and with significant energy costs (such as Swedish energy-intensive industry), justify a lower tax-rate. One should even consider that a tax resulting in transfer of activities to countries with lower standards might produce negative environmental effects. Competition and environmental outcomes must be considered against loss of welfare and domestic emission reductions that the tax entails. Swedish carbon taxes should therefore be differentiated to a certain extent (Rapport 2007:03 (2007)). As regards the EU ETS, concerns for competitiveness and economic development come into play in the following ways. First, besides abatement, cost-efficiency is regarded as perhaps the most important criterion for emission trading to fulfil. The ETS is thought to guarantee cost-efficiency, particularly for energy-intensive industry, by taking advantage of differential marginal abatement costs in different sectors and locations (SOU 2003:60 (2003); SOU 2003:120 (2003); SOU 2004:62 (2004)). Sweden’s intention to lobby for a broader and more comprehensive trading system is driven by environmental concerns but is also guided by the logic that a more comprehensive scheme, in terms of gases, sectors and countries, will drive down abatement costs (SOU 2003:60 (2003); SOU 2004:62 (2004); SOU 2008:24 (2008)). Second, policy discussions regarding the particulars of ET8 and its interaction with existing domestic instruments (such as the carbon tax, the environmental code and the electricity certificate scheme) demonstrate concern for WTO9 trading rules and EC10 competition legislation (Dir 2001:2001:56 (2001); SOU 2003:120 (2003); SOU 2004:62 (2004)). In particular the debate regarding the retention of the carbon tax for sectors affected by ET would imply more stringent regulation than for member states without similar taxes. Third, there are concerns for the cross-sectoral equity of the ETS, particularly as regards the inclusion of aviation, transport and domestic sectors (SOU 2008:24 (2008)) and between income groups, different types of companies, and regions (SOU 2003:60 (2003)). In terms of allocation principles, auctioning rights to pollute is regarded as preferable to the ‘grandfathering’ method utilised during the first phase of the EU ETS, whereby permits were given out for free. Notwithstanding, energy-intensive sectors are to be grandfathered permits during the second phase of the scheme (between 2008–12), with the exception of the steel industry whose allocations will be determined by international benchmarks (Proposition 2005/06:184 (2005)). Sweden is in favour of auctioning 10% of permits in the post-2012 scheme but prefers that revenues are recycled to reduce distortion of competition (SOU 2005:10 (2005)).
8 9
Emission Trading. World Trade Organisation. European Community.
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In sketching out plans to establish ET in Sweden, the government originally proposed that allocations should be based on historical emissions data for the affected sectors. This was opposed by energy-intensive industries, who preferred allocations to be based on benchmarking relative to international competitors (SOU 2003:60 (2003)). The same actors elicited fears for international competitiveness given that the trading scheme would result in increased electricity prices and since the EU ETS ‘bubble’ only affects a proportion of global industry competitors (SOU 2003:60 (2003)). Moreover, unilateral action is perceived to be limited by 1) Sweden’s small contribution to global emissions, such that beyond compliance measures do not have any significant effect if major emitters are laggards; and 2) risks of leakage (Rapport 2007:03 (2007)). Hence the government has the expectation of equitable international climate policies that minimise these risks: Every molecule of greenhouse gas that is released into the atmosphere implies the same risk regardless of whether it comes from a taxi in Stockholm, the US steel industry or a power station in Delhi. This means that everyone must share the responsibility (SOU 2003:60 (2003)). As regards a post-Kyoto agreement, Sweden is set to play a central role since the forthcoming Copenhagen Conference of Parties (CoP) will take place during Sweden’s EU presidency in 2009. Historically, Sweden has acted as a ‘proactive instigator’ in international climate negotiations (Kjellén 2007) and seeks to pursue this role in Copenhagen. In preparation for the CoP, members of the current administration have engaged in and convened informal talks with foreign representatives from the USA, Japan, China and India and have participated in various informal negotiations during the last 2 years. The government alludes to an approach that is sensitive to impacts on other nations, in order to facilitate the new agreement: Discussions with [Indian] government representatives will provide opportunities to understand the Indian perspective regarding climate negotiations, and to express what we hope to achieve in 2009, when Sweden holds the EU presidency and we will sign a global climate agreement (Carlgren 2008a). During the last 2 years the Swedish environment minister, Andreas Carlgren, has met with various international environmental organisations, the UNDP,11 the WTO, the World Bank, with counterpart environmental ministers and within various sectors of the EU to discuss climate change. International lobbying is central to the Swedish strategy: “We in Sweden shall do all we can to save the world’s climate, but we can’t save the world’s climate in Sweden. Climate destruction is a global threat that requires a global response” (Carlgren 2008c). Sweden’s imperative is to 1) demonstrate that it is the present generation’s challenge to protect the planet from ‘climate destruction’; 2) show partners in other countries that Sweden is serious on climate change; and 3) push for a global postKyoto climate agreement. Renewable energy technology is a key component of climate mitigation policy. Renewable energy and energy efficiency measures are supported via public investments in RD&D. The instruments mentioned in Section 3—the carbon tax, the electricity labelling scheme, the local investment programme, the awareness-raising scheme and the electricity certificate scheme function alongside the EU ETS to promote a wider deployment of renewable energy technologies. The certificate scheme is the principal policy instrument for stimulating growth in renewable energy supply. It was introduced in 2003 with the aim of 11
United Nations Development Programme.
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introducing 10 terawatt hours of new renewable electricity supply. It imposes a quota obligation on electricity retailers, whereby a certain proportion of the electricity they sell must be produced from renewable sources. Energy producers generate certificates for each megawatt hour of renewable electricity they produce. Certificates are tradable commodities such that the scheme comprises market-based support to investments in wind power, solar energy, geothermal energy, biomass and small-scale hydropower. Refurbishment of existing hydropower also generates certificates. The scheme was recently extended to 2030 to provide a more coherent long-term framework for private investors and the target was increased to 17 terawatt hours by 2016 (Proposition 2005/06: 154). Renewable technology is referred to as “one of the most prominent weapons against environmental degradation” and is central to the lead-by-example objective of Swedish climate policy: “Opportunities exist...to demonstrate one of the world’s best examples of a rich, technically advanced and industrially prosperous country, which manages to live completely in harmony with Earth’s climate and environmental limits” (Carlgren 2008c). Leading by example requires a first-mover strategy on renewable technology: “Sweden should continue to be a forerunner...by staying at the cutting edge, Sweden can contribute to technology development and diffusion” (SOU 2008:24 (2008)). Private sector investment in renewables is encouraged, spurred by the notion that a first-mover strategy will reduce overall abatement costs. Policy even offers guidelines on technologies that will be useful for reducing emissions in years to come (SOU 2008:24 (2008)). Ministers endorse this approach: “renewable energy, biofuels and energy efficiency. They are three areas that we will return to many times when we create the climate and energy policies of the future” (Energiupptakt 2008). Expansion of renewable technology is commonly linked to wider policy objectives such as industrial competitiveness, strong economic growth, energy security, job creation and sustainable development (e.g. SOU 2008:24 (2008); ITPS 2007; Energitinget 2007; Energiupptakt 2008). Job creation is the central narrative of the current administration. Hence the Swedish trade and industry sector links renewable technology to an improved business climate via ‘eco’-entrepreneurship that can create employment opportunities. For example, climate change has been linked to the Lisbon strategy, such that stringent policy can both stimulate growth and create jobs (EC 2008). Private sector engagement is important for the fulfilment of these objectives (IEA 2008). The EU climate and energy package is taken to be part of an industrial ‘climate revolution’ (SEC 2006). For example, EU leadership is referred to as ‘historic’ such that “...it is now possible to invest aggressively in environmentally sustainable solutions. There have been fascinating developments in recent months. [Environmental] issues have arisen in corporate boardrooms” (Alterå 2007). Prime minister Reinfeldt and European Commission president Barroso dubbed climate change a ‘profit machine’ and praised the EU’s first-mover strategy following reports that the global market for climate-friendly energy technology is predicted to be worth USD300 trillion in 2050 and may employ 25 million workers (Svenska Dagbladet 2008). The potential to profit from renewable technology is believed to transcend EU borders. The Swedish government has established partnerships with emerging markets in the US (particularly California), Canada, Japan, India and China. The motivations for international partnerships are 1) to profit from Swedish R&D in renewable technology via exports; 2) facilitate collaborative research; and 3) help poorer countries onto more sustainable development paths. For example, the Swedish centre for technology (CENTEC) was inaugurated in Peking to help derive market demand for Swedish renewable technology and competences and boost poverty alleviation. Similarly, relations with India facilitate
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collaborative research and help “Swedish environmental technology companies make ties with and sign contracts for the growing market for environmental technology in India” (Carlgren 2008b). Back in China, the Swedish energy authority has funded projects via the clean development mechanism of the Kyoto protocol including a 900-megawatt wind project (STEM 2008). Moreover, policy elites are keen to emphasise that renewable technology can act a vehicle for sustainable development: “Today we see an increase in combined heat and power (CHP) and wind power. We will presumably also see more solar power, wave power and other renewable production technologies—energy sources that can benefit the poor part of the world” (Energiupptakt 2008). The private sector seems to be on board, as 700 Swedish companies are reported to be marketing environmental technologies abroad (Utrikesdepartementet 2008). International eco-entrepreneurship is encouraged on the basis of sound reputation: “Sweden may be a small country but we have a key role in the global climate and energy debate. We are honoured that the American foreign minister chooses to emphasise Sweden as an example regarding the transition to green energy” (Olofsson 2008). Notwithstanding, there is an ongoing debate in Sweden regarding nuclear decommissioning that is said to have consequences for renewable energy expansion. Despite the 1980 referendum decision to phase out nuclear power and replace it with ‘ecologically sustainable’, renewable sources of energy, political complications have led to the shutdown of only two reactors to date. A lack of political consensus and commitment issues from the perception of negative impacts on industrial competitiveness, and has influenced renewable energy policy considerably (Gan et al. 2007; Wang 2006). Uncertainty regarding the effects of increased electricity prices meant that decisions for the phase-out were repeatedly made and unmade during the 1990s (Nilsson et al. 2004). In 1997 the government abandoned the 2010 target (Proposition 1996/97:84 (1996)) and following their election in 2006, the current administration decided not to make any further decisions on nuclear shutdown until after the next election in 2010. In March 2009, the government decided to dissolve plans to decommission the ten remaining nuclear reactors and allow for existing installations to be rebuilt when they reach the end of their economic lifecycles (Proposition 2008/09:162 (2008)). Wang (2006) cites a number of factors as influencing indecision on nuclear power. First, Sweden has a tradition of low energy prices that are perceived as important for economic growth—especially due to the significance of export-oriented energy-intensive industries. Following the liberalisation of the electricity market in 1996, prices initially decreased further. Energy-intensive industry is supportive of nuclear power and some companies are interested in constructing their own nuclear plants. Second, and despite liberalisation, a few companies with large market shares dominate the electricity market. These companies all have significant vested interests in nuclear capacity. Third, a lack of consistent political commitment has meant that non-state actors (companies and research institutions) have had to shoulder the burden of transforming the energy system. Fourth, the sufficiency and low cost of electricity from incumbent nuclear- and hydropower systems implies that it is nonsensical for electricity companies to invest in renewable capacity from an economic point of view. Finally, it is deemed pointless to decommission nuclear plants given that the most prominent environmental issue is climate change, and the electricity sector is for the most part already carbon-free. The current government is attempting to reframe the nuclear debate by suggesting that renewable energy supply should be constructed as a ‘third-pillar’ of electricity supply alongside existing nuclear plant (Energitinget 2007), raising the possibility of electricity exports. Despite the longevity of the emphasis on renewable energy, which dates back to the 1970s, growth in installed capacities is modest in comparison to, for example, Germany and
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Spain (Åstrand and Neij 2004). These countries boast returns to R&D investment up to five times greater than Sweden. Sweden’s progress in implementing photovoltaic cells is a case in point. Despite claiming the reputation of being a world-leader in photovoltaic R&D, Sweden lags market leaders, Germany and Japan, considerably. In 2005, installed capacities in these countries were 17.5 and 11. 1 watts per capita, respectively, compared to Sweden’s trivial 0.5 watts per capita (IEA 2006). The main hindrance to solar expansion is the lack of market initiatives that typify market leaders (Malmkvist and Adsten 2004). In terms of installed wind capacity, Sweden lags the market leaders (Denmark) considerably (Åstrand and Neij 2004), and does not have any major wind turbine manufacturers (Takeuchi 2003). Sweden’s original strategy was to pursue the development of large, two-bladed wind turbines, which in hindsight was rather pointless given that the three-blade model, developed in Denmark, emerged as the dominant design. As a result Sweden imports the majority of its wind turbines from its neighbour (Nilsson et al. 2004). A range of subsidies and demand-side instruments to spur the implementation of renewable capacity has been established since the 1990s. Investment subsidies, however, have been inconsistent, which has restricted investor confidence (Nilsson et al. 2004; Wang 2006; Gan et al. 2007). Renewable expansion is thus less than was initially desired. The electricity certificate scheme was originally planned for implementation between 2003– 2010. It was recently extended to 2030 to try and reduce uncertainty among investors. However, the scheme and the carbon tax are not applicable to energy-intensive industry. Nor does the carbon tax apply to electricity generation, based on the notion that 1) following market liberalisation, the tax would simply result in electricity imports from neighbouring countries; and 2) a tax on imports to compensate would be against EC competition rules (Helby 1998). The study’s overall findings are summarised in Table 1 below.
5 Discussion The literature on pioneers encourages nation states to relinquish protectionist environmental policies and instigate unilateral strategies based on stringent regulation that will boost industrial competitiveness via eco-innovations. The examples drawn from Swedish climate and energy policy debates that are presented in this paper align well with the pioneer narrative. Sweden is keen to follow a tradition of ‘leading-by-example’ on ecological issues by demonstrating technological leadership on climate change. Sweden is trying to benefit from competences in renewable technologies that have developed over many years, via exports to emerging markets. Policy constitutes a first-mover strategy that combines private sector engagement with technology-based climate mitigation. Domestically, Sweden’s record of reducing emissions and its electricity and districtheating sectors has relied heavily on renewable sources. These trends buttress the ‘demonstrative effect’ argument in Swedish climate policy that enables it to pursue a pioneering role. Furthermore, Sweden has instituted ambitious targets for emission reduction and renewable energy supply relative to other OECD countries and pursues a pioneering role within the EU (and beyond) regarding targets and negotiations for a postKyoto international agreement. By instituting a stringent carbon tax and a range of technology-neutral market-based instruments, and by lobbying for a more comprehensive emission trading framework, Sweden is ahead of the game as regards ‘smart’ and stringent regulation as prescribed by the literature on ecological modernisation and environmental pioneers. By integrating climate policy ambitions with wider political objectives—namely
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Table 1 The Swedish climate and energy policy discourse Central concepts
Porter hypothesis Ecological modernisation Sustainable development Schumpeterian social change
Non-discursive elements that shape and constrain climate policy discourse
Climate science provides sufficient evidence to legitimise mitigation Sweden’s reputation as an environmental pioneer Carbon free energy supply Natural resource endowment that favours renewable energy supply Uncertainty regarding nuclear power Economic importance of Energy-intensive industries Strong scientific and technological competences relevant to climate change mitigation Need for energy security EU as platform for member-led leadership
Agents and their motives constituted in discourse
Sweden as role model Stringent climate regulation Market-based instruments and economic incentives for private sector adoption of renewable energy technology International eco-entrepreneurship Renewable technology (hydro, wind, biomass, solar, wave) Energy efficiency measures Eco-innovation Sweden as proactive instigator in international climate agreements Global framework for reducing emissions International cooperation
Slogans and metaphors
The science is settled Win–win combination of economy and environment Lead-by-example Global responsibility Leakage Climate revolution Three pillars of electricity generation
job creation, industrial competiveness and improved welfare, the Swedish discourse on climate and energy constitutes a mandate to ‘lead by example’ via a climate-economy win– win combination, which is well aligned with the Porter hypothesis. Swedish ambitions to adopt a pioneering role in technology-led climate mitigation are built upon various nondiscursive historical factors such as the use of carbon-free sources in the development of its energy sector and a reputation as an environmental pioneer. Sweden’s natural resource endowment is also an important enabling factor. However the study shows that Sweden’s role as pioneer is limited by two factors. First, energy-intensive sectors are granted special status, historically and presently, in debates related to the stringency of regulations. The primary concern is that unilateral action will
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have a negative impact on industrial competitiveness for those industries active on global markets, due to geographically uneven levels of regulative stringency. Coupled to this are concerns for the environment, as adopting more ambitious standards in Sweden will presumably lead to emissions in countries with more lax standards, which is undesirable given the nature of climate change. Hence the storyline on ‘leakage’ serves to retard unilateral action. This representation of leakage is similar to the so-called ‘race-to-thebottom thesis’—something of an evil twin to the pioneer narrative. The central storyline is that global economic integration and removal of trade barriers compromise national autonomy as regards environmental regulation. In a globalised economy, it is thought that high-income countries are forced to compete with developing countries for capital and jobs (Levinson 1997). The former must therefore lower the costs of pollution as the latter lack stringent environmental standards, resulting in a ‘downward harmonization of regulatory standards’ (Hoberg 2001; Wheeler 2001). Here one cannot help but think of the Swedish tax reform in 1993 that resulted in a less stringent carbon tax based on concerns for industrial competitiveness. Race-to-the-bottom predicts a ‘regulatory chill’ issuing from concerns that nation states with stringent environmental standards are at risk of competitive losses, as manufacturers of pollution-intensive products are forced overseas (WTO 1999; Jänicke and Jacob 2004). In Sweden the problem of leakage is driven by fears for industrial competitiveness, job losses and economic decline—both historically and in the current debates on emission trading. This is somewhat ironic given the national advantages claimed for a pioneering approach. Race-to-the-bottom posits that the autonomy of the nation state is compromised by the political globalisation of environmental problems, and international trade agreements such as the WTO threaten to undo national efforts as they are deemed to provide unfair subsidies or reverse tariffs on trade (Daly 2000; Hoberg 2001). Debates on emission trading are certainly influenced by WTO legislation, but the extent to which Swedish national autonomy is compromised by the scheme is questionable. The debate regarding the possibility of retaining the carbon tax alongside the EU ETS involves the issue of ensuring higher levels of abatement than other member states. In this debate it appears that the pioneer argument has more currency than the race-to-the-bottom thesis. The latter may be weakened further if a post-Kyoto agreement is reached that levels the playing field for all sectors globally and furthermore, these competing discursive viewpoints have coexisted for some time and may be germane to the ambition to lead as a pioneer. The second factor that may retard environmental leadership relates to market leadership in renewable technologies. Whether Sweden maintains its role as a pioneer depends largely on whether its technological response to climate change is exportable. Indeed Sweden’s record in emission reduction is coupled to strong rates of economic growth and high levels of welfare, but is the current state of its energy sector enviable? Electricity generation is dominated by nuclear- and hydropower, and district heating has experienced significant growth in biomass. Most OECD countries appear to be sitting on the fence as regards nuclear expansion, which remains a sensitive political issue given the issue of nuclear waste and the perceived risk of terrorist attacks. Hydropower is widely diffused and is a useful solution for countries with large undammed rivers—not really the stuff of technological pioneers. On the other hand developments in biomass-related technologies, in addition to energy-efficiency solutions, undoubtedly support Sweden’s role as pioneer. There is major concern over efficient commercialization and profitability of Swedish renewable R&D efforts. Solar power provides a fraction of the final energy supply despite considerable investments made in solar photovoltaic R&D. Sweden has a similar record as regards wind turbines. Whilst it would naïve to put the blame on politics, the unrelenting
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issue of nuclear shutdown has undoubtedly played its part. Failing to reach consensus on whether to decommission nuclear reactors will perhaps not have a significant effect on the climate in years to come, as Sweden’s electricity sector is largely carbon-free. The main quandary is whether Sweden can actively pursue a renewable energy policy that enhances its role as a leader while delaying action on the nuclear power issue, which has retarded further investments in renewable energy. Although the incumbent government is trying to resolve this issue, there is still a large degree of uncertainty as regards the future of nuclear power. The current strategy to allow existing plants to be rebuilt may easily be reversed depending on the results of the next election. In my opinion, it is time to make a decision for the long-term. Acknowledgements This research was funded by the Swedish Research Council for Environment, Agricultural Sciences and Spatial Planning (FORMAS). Special thanks to three anonymous reviewers, five anonymous interviewees and to Lars Coenen, Lena Neij, Kristine Kern, Mikael Klintman, Eva Lövbrand and Merle Jacob for sharing your views on the study.
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Paper 3
Policy and corporate climate action in the Swedish electricity sector Steven Sarasini and Merle Jacob Under review by Environmental Politics Abstract This article investigates the role of policy as a driver and/or impediment to climate action among Swedish electricity producers. Previous research shows that corporate climate actions elsewhere are primarily driven by public policy and customer expectations. We find that policy is an important determinant of corporate strategy for Swedish electricity companies. This is primarily as a result of the stability for future investment provided by regulation as well as new market opportunities arising from this context. Electricity producers regard climate policy at the national and EU levels as significant factors for determining corporate strategy but EU level policy is seen as a more stable basis for future investment than national policy. Introduction Despite the growing consensus on the anthropogenic origins of climate change and an emerging policy portfolio based on the UNFCCC process, the map for the journey from this to climate action remains relatively uncharted. One of the most pressing issues has been how to translate the normative rules outlined in the Kyoto agreement into instruments and incentives that can be implemented at the national level. Reasoning from this, the present paper focuses on the role of policy in promoting corporate action on climate change in the Swedish electricity industry. Sweden is generally regarded as a pioneer country in environmental regulation and adopting environmentally friendly practices (Kronsell 1997) and has a history of low greenhouse gas emissions (since 1985). For these reasons, one may reasonably raise the issue that Swedish climate actions are hardly of interest since most countries are far from the status quo in Sweden. Alternatively, one may argue that because of Sweden’s current position, it is instructive to investigate to what extent policy facilitates or impedes corporate climate actions. The electricity industry is an important strategic player in the effort to promote climate actions nationally and globally because of the international and national policy focus on mitigation and because of the overall preference for market-based solutions such as carbon trading. The latter imply that understanding the interaction between policy and corporate action in the electricity industry is an important input for improving energy policy. The paper is structured in four parts plus the present section, which will introduce the issues to be
discussed and provide some background details that give the uninitiated reader some idea of the structure of the Swedish electricity market, energy consumption and some stylized facts about Swedish energy policy. Sections two and three will be a literature review and a description of the method respectively. Section four will be a presentation of the results. The paper will conclude with an analysis and discussion of the implications of the results. The energy industry is generally considered to be resistant and/or slow to change, partly because of its dependence on large-scale technical systems which require large investments and are subject to lock-ins. Large scale technical systems are comprised of many different elements (heterogeneity) and they often have emergent properties that is, they have effects that depend on the interaction between their different components. For instance, an electricity supply system only works if its different parts (its hardware, its software, and a host of arrangements legal, organizational, and economic) are carefully orchestrated. Last but not least the elements in large scale technological systems are shaped by the system of network relations within which they are located (Hughes, 1983). Thus, attempts to change aspects of the system such as the rules and regulations which embed it would have to be informed by knowledge of the system as a whole. Sweden’s electricity supply comes from a mixture of technologies with nuclear energy and hydropower representing 89%1. In addition, Sweden is home to one of Europe’s largest electricity suppliers. Despite Sweden’s relatively low dependence on fossil fuels (4%2 of Swedish electricity is fossil fuel powered according to IEA figures), climate is an important issue for Swedish electricity companies. This focus is in part policy driven both at the national and EU level. Nordic countries are seen as important strategic actors in the EU’s plans for increasing the share of renewables in the region’s energy consumption. There is reason to believe that corporate attention is also influenced by the policy framing of climate as a future business opportunity for the Swedish electricity industry. Three multinational actors, which together account for circa 90% of the market, dominate Swedish electricity production (Konkurrensverket 2008). The remaining 10% of the market is occupied by a heterogeneous mix of municipal energy companies and a handful of windpower cooperatives. Municipal energy companies are numerous and vary in terms of size
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Figure
calculated
from
IEA
statistics
for
Swedish
electricity
production
in
2008
http://www.iea.org/stats/electricitydata.asp. 2! This
is a contentious figure depending on the perspective taken, Dotzauer 2010 for instance argues
that there is “in practice no ‘carbon-free’ electricity production” in Sweden p. 702.
and portfolio. The majority produce combined heat and power and own local distribution grids and district heating infrastructure. They produce energy using a variety of fuels including hydro-, wind- and geothermal power and biofuels derived from local forests. In the wake of market liberalisation in 1996, previous national and local monopolies were dissolved to stimulate market competition and lower electricity costs for Swedish consumers. Deregulation has also resulted in the division of electricity companies into two categories – suppliers and retailers. Market liberalisation involved the creation of a new set of organisational actors (electricity retailers) and the expansion of the market from a national to a Nordic electricity retail market (‘NordPool’). The latter, taken together with the expansion of electricity distribution infrastructure, has increased trade between Scandinavian countries and continental Europe. The above has two significant implications in the context of the climate issue. First, it has attenuated the fragmented approach to emission reduction alluded to elsewhere (e.g. Dotzauer, 2010) given that increased electricity supply in Sweden from renewable sources, for example, entails decreased emissions in other parts of Europe. Second, deregulation means that Scandinavian electricity prices must absorb the costs of emissions elsewhere since, following the creation of a European carbon market, prices are set on the margin. By this we mean that the price of electricity is based on the ‘last kilowatt hour’ of electricity that is produced at any given time. Since that includes ETS allowance prices, the price to the Swedish consumer is higher than would otherwise be if: 1) the ETS did not exist and 2) if Swedish electricity was priced solely on the basis of the costs of production. The result of this arrangement is that the Swedish consumer inadvertently pays for fossil fuel combustion in neighbouring countries such as Denmark. This raises the question as to whether the current system does not in part sabotage its own aims by allowing electricity companies to charge all customers the same rate regardless of the source of the energy they consume. Regardless of the analytical frame one employs however, the electricity companies are clearly net beneficiaries of the system currently in use. Although deregulation has been profitable for Swedish energy companies, national policy – when coupled with the predicted implications of climate change – is an important determinant of future market opportunities. For example, one potential impact of climate change in Sweden is the possibility of more frequent storms, which are in turn a significant risk to distribution. Events of this type can be costly to energy companies since the Swedish government has legislated that customers are entitled to compensation for disruptions that last more than 12 hours, and that disruptions may not last more than 24 hours after 2011
(Proposition 2005/06:27). Additionally, the law implies that companies must replace overhead cables with more expensive underground ones. Furthermore, increased mean temperatures pose a threat to those companies that rely on water for cooling purposes and plants located in coastal areas are also susceptible to rises in sea levels (IAEA, 2003; Kopytko and Perkins, 2010). Increased precipitation is both a threat and an opportunity for hydropower because it on one hand threatens dam safety while on the other it provides opportunities to produce more hydropower. Changed weather patterns are also thought to create better conditions to produce wind-and wave-power and increase the production of biofuels. In summary, despite the fact that electricity companies are clearly thriving in the wake of the Kyoto agreement, there remain significant challenges to Sweden’s transition to a sustainable energy future. Drivers of corporate action and the role of policy Existing research identifies a number of reasons for firms to engage with the issue of climate change. Okereke’s (2007) distinction between ‘drivers’ and ‘motivations’ differentiates actions taken as a result of coercive pressures in the external business environment from internalised motivations. The literature on corporate action on climate change identifies relatively few drivers/motivations that are internal to companies, some of which are nonetheless linked to climate policy. Managerial viewpoints and personal values (Boiral 2006); “corporate histories of location and profitability, market assessments, degrees of centralization and the presence of climate scientists” (Kolk and Levy 2001, p. 502); and experiences with renewable technologies (Levy and Rothenberg 2002) fit this category. Companies that are heavily dependent upon fossil fuels are less likely to respond proactively because investments in renewable technologies encompass a radical shift from their core competencies (Abernathy and Clark 1985; Henderson and Clark 1990; Levy and Newell 2000; Skjærseth and Skodvin 2001; Levy and Egan 2003). Renewables are perceived to be more risky than fossil fuels given the lack of industry standards and dominant designs (Levy and Newell 2000). Following Birnbaum (1984) business management scholars have noted the importance of empirical studies of the impact of regulation on corporate action. Further, the nature and scale of investment required to promote technological change in the energy sector speaks for the hypothesis that policy may play a more decisive role. Others have shown that firms can act as regulatory stakeholders if they perceive their strategic interests to be substantively affected by the regulatory climate (Delmas and Toffel, 2004; Martin and Rice, 2010). The extant divergent theoretical perspectives from which the determinants of corporate action may be analyzed converge on regulatory action or policy as one factor (Sharma and Vredenburg
1998; Hoffman and Ventresca 1999; Delmas and Toffel, 2004; Handfield et al. 2005; Kolk and Pinkse, 2004). However, the problem of climate change may arguably be regarded as linked to practices that are so deeply entrenched in western industrialized societies that its solution would require institutional changes (e.g. Unruh 2000, 2002, Foxon 2002). For this reason, what drives and/or impedes business action on climate mitigation may be better understood from the standpoint of an institutional perspective. For the purposes of this paper we treat climate change mitigation as an institutional project, the aim of which is to decarbonise energy supply. This project will be complete if and when energy can be supplied with sustainable levels of emissions. Until then, decarbonisation is a change project that requires institutional arrangements to ensure that, among other things, the private sector invests in practices that lead to this final objective. With this in mind, and given that decarbonisation is in practice supported/hindered by public policy and a range of other relational practices (e.g. business engagement with stakeholders), this study adopts the view that the regulative, normative and cognitive phenomena that can drive or inhibit institutional change are central to the process of institutional work associated with decarbonisation. Following Zietsma and McKnight (2009) one may treat prescriptions of how Swedish electricity producers should act vis-à-vis the climate problem as proto-institutions. Put differently, these may “coalesce into shared practices and logics” that – when coupled with the diffusion of “new practices, rules, and technologies” – lead to the creation of new institutions. Whether this occurs depends in effect on the ability of proponents of protoinstitutions to contribute to a set of institutional arrangements that drive the types of corporate action on climate change they advocate. However, as Zietsma and McKnight (2009) note: “Where multiple proto-institutions have been proposed for the same purpose, it is not clear which proto-institution, if any, will become dominant”. It is thus important to consider the sets of institutional arrangements associated with each proto-institution and how these may influence corporate strategies. Lawrence and Suddaby (2006) outlined various strategies that may potentially be pursued by actors to alter the regulative, normative and/or cognitive bases of institutional arrangements. They refer to these strategies as “the purposive action of individuals and organizations aimed at creating, maintaining and disrupting institutions (institutional work)” (p. 215). For instance, one may argue that the state is itself engaged in institutional work when it deploys strategies such as stringent regulation and frames climate action as an economic opportunity. This type of institutional work is explicitly intended to alter conditions for energy suppliers on more than one level. Regulations not only coerce certain types of corporate action but also comprise a new set of norms for the industry and in part replace previous definitions of
energy security. The new regulatory frame is one element in a larger discourse which gives electricity companies a new identity as the harbingers of Swedish economic development and as climate saviours. Hence, and to the extent that the discursive elements of the government’s strategy are successful, they will have the effect of reconfiguring normative and cognitive institutional arrangements. One may contend that this type of analysis could also be applied to the strategic actions of environmental non-governmental organizations (ENGO). Greenpeace’s annual ranking, for instance, classifies Swedish energy companies in terms of their reliance on fossil fuels, thus separating the ‘good’ from the ‘bad’. Climate policy is arguably a more robust driver of change because it combines the coercive power of government (e.g. the threat of sanctions) and incentives such as the ETS to direct flows of financial resources. This mix of sanctions and incentives drives change by making it feasible for some practices to perish and alternatives (e.g. investments in renewables and emissions reduction) to emerge. That is not to say that ENGO strategies are not regulative in this sense – it may be the case that by shaping public opinion or by lobbying for government policy, ENGOs can indirectly coerce specific forms of corporate behaviour and action. Likewise, ENGOs can also have strong impacts on corporate behaviour by influencing consumer preferences. To the extent that Swedish electricity producers respond to the new institutional arrangements advocated in policy, investments in practices and measures associated with the climate problem have two key institutional effects. First, the practices and measures in question become infused with the symbolic elements of institutions that enable such actions. Second, they serve to reinforce and maintain the institutional arrangements that enable them. This supports the notion that “institutions are the product (intentional or otherwise) of purposive action”. However, there is of course the hypothetical possibility that electricity companies act as autonomous agents in light of institutional arrangements associated with the climate issue. For this reason it is important to consider the intentionality of their actions (Lawrence et al. 2009). The concept of institutional work suggests that actors are in fact not ‘cultural dopes’ (Glynn and Lounsbury 2005) as some new institutional theory scholars would have it, but are to varying degrees capable of pursuing activities in a reflexive manner that serves to constitute institutions (Lawrence et al. 2009). Although the concept of institutional work is promising in so far as it provides a tool which focuses on “concrete practices employed by actors in relation to institutions” (p.13), this aspect has hitherto been relatively underresearched. This study forays into this void by examining factors that electricity
companies perceive as important determinants of their willingness to pursue corporate climate action. Lawrence et al. (2009) ascribe agency to intentionality and outline three cognitive processes related to temporal orientations. Past-oriented intentionality is habitual and involves decisions based on previous actions and routines. From this perspective it is interesting to examine how managers relate to the past given the industry’s track record of relatively low emissions. It may be the case, for example, that what is currently regarded as corporate action on climate change is in actual fact the habitual repetition of routines and practices that were established at a point in time where climate was not the main driver. Notwithstanding, Lawrence et al. (2009) argue that past-oriented decision-making is intentional because “there are always multiple habits and routines to choose at any given moment” (p. 15). In the context of the electricity industry, it may be useful to attenuate this notion of multiple avenues from which to choose since past technological choices are circumscribed by a range of other factors which would suggest a more limited range of choices. Further, given the past, present choices may also be circumscribed by competences developed in the past. This is the point at which intentionality as conceptualised in institutional work would need to be supplemented with concepts such as path dependence or absorptive capacity developed in the context of technology management. The concept of path dependency suggests that previous choices e.g. technological choices will to some extent certain determine future choices in so far as they bring with them certain routines, competences, etc. (David, 1985). The notion of institutional work alludes to this when it suggests the existence of habits and routines, but given the nature of the electricity industry we feel that the open-endedness implied here may lead to an overestimation of the real choices facing actors. Thus it may be useful to bear in mind that the institutional work being performed in order to promote climate action is simply one part of a larger technological system which comprises the electricity industry. Present-oriented decision-making can be considered intentional given that managers must consciously deliberate over the range of conflicting institutional arrangements described previously. And corporate climate action is inherently future-oriented given that decarbonisation is a project that is set to operate for at least several decades. Thus by making investments in certain electricity technologies, for instance, managers must plan for a future with increased carbon constraints and potentially altered market dynamics. This will be successful to the extent that companies believe that their ‘environmental’ context is stable.
Method In order to assess to what extent policy drives corporate climate actions (CCAs) in the Swedish electricity market, we structured our study around interviews with electricity companies and document analysis. The study design was built on three factors identified in the literature as strong determinants of corporate action viz; public policy, customer preferences and ENGO campaigns. We collected information from a range of publicly available documents published in 2007 (2007 was chosen because it comprised the most uptodate documents available when data collection commenced) including annual reports, CSR reports, responses to the Carbon Disclosure Project (CDP) and other documents published on company websites. We identified a total of 36 electricity producers of varying size and from different locations in Sweden. The majority are municipal energy companies. Electricity is also produced by a handful of wind-power cooperatives, but three multinational energy companies produce around 90% of Sweden’s electricity. In total we conducted interviews with 35 respondents from industry associations, environmental organisations and electricity producers. We interviewed 20 of the 36 electricity producers identified. We did not interview policy officials since we collected data on this group from a previous study (Sarasini, 2009), which was used to make sense of the policy references in corporate reviews, and to inform some of the questions in the interview protocol that guide interviews with electricity producers. Respondents were asked a range of questions specific to company strategy, how the market functioned and general knowledge about the climate issue as it relates to their business areas. The interview data was recorded, transcribed and coded and the results are presented in the section below. We have anonymised the respondents’ remarks as much as possible and removed any references to corporate names. It is however so that the large multinational electricity companies are few in number and may still be identifiable despite our efforts. We have also used the interview data from environmental organizations mainly to orient ourselves and to help understand the interview data from the corporate side about their relationship with ENGOs. Results Most respondents accepted the notion of anthropogenically induced global warming without question. A few understood that there is a scientific debate regarding whether climate change is the result of human activity or natural phenomena, and some claimed that representations of climate science in the mass media are too narrow and one-sided. Yet even these respondents argued that the precautionary principle legitimates CCAs and that it is futile to debate the causes of global warming since it is such an important issue for wider society. The
following remark by one of our respondents may be regarded as representative of the general view expressed by all: “There is enough consensus to act, even if the entire scientific community does not agree. It is pointless to disagree with the majority of politicians or the public. It is better to see it as an opportunity to go forward and create business opportunities”. Respondents from multinational energy companies echoed this view but placed the emphasis on the need to reduce fossil-fuel dependency and increase energy efficiency as part of a general strategy to increase resource sustainability in view of expected increases in consumption because of predicted population pressure. One respondent from this group summarised this in the following way: “If you consider that the global population will increase from six to nine billion people within the next few decades, and that all the people would like to have Western standards of living – it is just not possible. We all have to adjust as the resources are inadequate”. Historically, public policy has been the main driver of investments in renewables and fuel switching. Respondents had difficulty in identifying exactly when climate change emerged as a strategic issue, although most stated the issue emerged at some stage during the 1990s and that it has become increasingly important ever since. In the 1990s companies began to discuss environmental issues and sustainable development became a strategic issue. During this period a carbon dioxide tax was introduced in Sweden to reduce carbon emissions and to provide incentives for investments in more sustainable resources such as biofuels. Together with increased oil prices these factors made investments in non-fossil fuel energy sources economically viable. Hence most municipal companies noted that the energy sector has progressed along a ‘climate-smart’ development despite the fact that climate change was not always the main driver: “20-30 years ago people used a lot of oil and wood in their homes for heating, which resulted in a polluted local climate. At the end of the 1970s we decided to focus on district heating systems to mitigate these problems. Back then the main environmental issue was local pollution, not climate change. The 1973 oil crisis also had a big impact. Because of these factors our strategy has always been based on what is now called green electricity – hydropower and biofuels. They are fundamental to our organisation. Our strategy has always been to work towards a sustainable society.” At present, the main regulatory drivers of CCAs are the EU emission-trading scheme (ETS), the Swedish electricity certificate scheme (ECS) and the Swedish carbon tax. Several
municipal companies noted that local energy plans and owner directives are also drivers of fossil-free energy production. Interviewees claimed that the ECS provides the greatest incentive to invest in renewable energy, and many have invested in wind power, combined heat and power (CHP), biofuels and refurbishment of hydropower plants. Respondents noted that the recent extension of the scheme until 2030 was an important policy signal for corporate strategic considerations: “We receive electricity certificates for 15 years, so they are included in investment plans. The price is 4 Eurocents per kilowatt hour so the scheme is very important for the viability of investments”. Compared with the ECS, the ETS also provides economic incentives to divest from fossil fuels. This is despite the fact that the incentives from this scheme are smaller and are perceived to be less stable over time because of market volatility. The ETS has also contributed to a price increase on the Nordic electricity market because prices are set on the margin, which is usually electricity produced from fossil fuels. The combination of these two instruments has significantly increased revenues for electricity production. According to one respondent: “Electricity certificates and emission trading have transformed revenues. Take, for example, our CHP plant. We receive around 10 Eurocents per kilowatt-hour we produce – 40% of that comes from electricity certificates and 20% from emission trading. These two instruments have reshaped the economics of electricity production in a very positive way”. Companies are expecting further increases in revenues as more interconnecting cables are built between the Nordic region and the EU, because Sweden’s portfolio contains less fossil fuels than the rest of mainland Europe. Another reported effect that depends partly on price increases is increased consumer demand for improvements in energy efficiency. Whilst not all consumers express such demands, those that do are otherwise motivated by the need to act on climate change in light of ethical concerns and/or, in the case of corporate customers, the need to reduce their own climatic impact. Some electricity companies offer energy efficiency services free of charge, which represent a new business opportunity for the electricity industry. Companies have thus spearheaded nationwide marketing and public service campaigns which are aimed at augmenting this demand. This marks a shift from the 1990s when companies feared that reducing consumption would decrease revenues. One respondent explained the thinking behind this shift in the following way:
“There is an economic opportunity tied to efficiency measures – I’m sure you have seen the McKinsey curve3. The major question is why these measures are not being implemented. Some customers manage it themselves whereas others require help, which provides us with a business opportunity. If we don’t do it someone else will, and we will lose market shares.” Several companies have established educational and awareness-raising activities that are linked to corporate brands. One of the three multinational suppliers is now running a national billboard campaign directed at residential customers. The main message in this campaign is to inform customers that they can save energy by shutting off their appliances when they are not in use rather than leaving them on standby. Activities such as the standby campaign reflect a moral and cognitive obligation to tackle climate change by disseminating information that can help customers to be more individually responsible. They have the additional advantage of allowing companies to market themselves as socially responsible. In addition to energy efficiency respondents reported that electricity companies were exploiting other types of new market opportunities such as experimenting with initiatives to build infrastructure (charging stations) for electric hybrid cars whereas others are investing in biogas production and distribution for transport purposes. Although these projects are in the test phase, they represent a strategic opportunity for utilities to move into new markets, as electric hybrids could entail an expanded role for electricity as an energy carrier. One of the three multinationals, for example, has a joint venture with Volvo cars to develop electric hybrid infrastructure. This heightened interest is stimulated by the fact that electricity companies foresee an increase in demand for electricity supply of around 10 TWh as a result of changes linked to climate actions. Generally, it is the multinationals that are pursuing diversified strategies whereas municipal companies have a much more limited focus. Multinationals’ strategies tend to involve a mix of R&D-based ventures directed at a range of renewable sources as well as other technological avenues. Municipal companies are more careful about future investment partly because of resource constraints. A respondent from one of the larger municipal companies argued that his company had invested in gas-fired technology and despite the fact that this is a fossil fuel based choice, it was a good strategic investment. He reasoned that:
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3!The
McKinsey Cost Curve shows that several measures required to reduce emissions to a sustainable
level are available at negative costs i.e. they would imply cost savings for companies (McKinsey 2008).
“Using gas means that we can specialise in gasification techniques in the long term and aim to replace natural gas with biogas. X is a very large city so it is not easy to provide energy based solely on biofuels. It would require a lot of transport on the roads to deliver biofuels. When we built the CHP plant, biofuels were not a realistic alternative whereas natural gas was”. Several companies referred to the EU’s ‘202020’ targets4 as providing a degree of certainty for investments in renewables and energy efficiency measures. The main regulatory risks reported by respondents were price fluctuations on ECS/ETS markets and the uncertainty regarding international climate policy after 2012. Multinational energy companies in particular perceive the latter as a risk to long-term investments. Another risk is the possibility that these instruments may be altered, replaced or even abandoned. The ECS is perceived as being more susceptible to change than the ETS. One of the interviewees expressed this in these terms: “One hopes that legislation is stable in the long-term. In that sense it is better if instruments function across borders, such as the ETS. Since it international it is more difficult to change and therefore poses fewer risks. To change it would mean a change at the EU level, which is very difficult, whereas changes to the ECS occur via the Swedish parliament, and can therefore occur very quickly”. Despite the fact that the electricity market was reformed in order to stimulate competition, provide cheaper electricity and to facilitate more informed modes of electricity consumption, respondents claimed that consumers have negligible impact on the way electricity is actually produced. This is partly due to consumer preferences and to the scale of the incentives created by labelling schemes compared to those created by public policy. Companies are subject to increased demand for renewable electricity and environmental data related to electricity production. Respondents were unable to classify customers in terms of their preferences for climate-friendly energy supply. The prevailing view was that an increasing proportion of corporate and private customers are expressing concerns for climate change. The corporate customers in this group are typically those that are trying to improve their own brands and market themselves as environment-friendly companies. Private individuals with similar preferences are usually concerned about the scale of the threat posed by climate change. However, electricity companies were of the view that even the most concerned consumers are unwilling to pay extra for electricity from renewable and that customers were more sensitive to price than quality:
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 4!See
http://ec.europa.eu/environment/climat/climate_action.htm. Cited 12 Jul 2010.
“Customers expect that we are proactive as regards environmental improvements. .... They want us to do things that are very obvious and visible, but they are not willing to pay for it. Many electricity companies promote eco-labelled electricity at a price to the customer of around a tenth of a Eurocent per kilowatt-hour. We receive four Eurocents per kilowatt-hour from the electricity certificate scheme, so what is the main driver? The subsidies from the state are the main driver. No customer is prepared to pay an extra three Eurocents per kilowatt-hour, absolutely no-one”. Although eco-labels do not provide sufficient incentives to invest in renewable energy supply, they do provide companies with credibility given that consumers are increasingly voicing concerns regarding climate change. A respondent from one of the three multinationals referred to the Swedish energy market as the ‘most advanced’ in terms of customer awareness and demand for proactive CCAs5. Most eco-labels are administered by non-corporate organisations, but one of the three multinationals in the Swedish market has performed its own life-cycle analyses of energy production in conjunction with the Environmental Production Declaration (EPD) method based on ISO 140256, which examines the overall environmental impacts of energy production. Eco-labelling does not result in increased investment in renewables. An important reason for this is that at present the Nordic supply of renewable electricity (200 TWh) outstrips demand. The corporate view is that demand is unlikely to exceed supply given that “some customers simply do not care about climate change or renewable electricity”. Continued investment in renewables is fuelled by the ECS and electricity retailers are legally obliged fulfil the quota established by the government. This means that customers are obliged to pay for investments via a quasi-tax/subsidy whose price is decided by the ECS market. Interviewees claimed that the majority of consumers do not understand the way the ECS works and as a result do not understand the irrelevance of eco-labels to promoting renewables. One respondent argued in the following way: “Personally I think that it is a bit fraudulent to sell eco-labelled electricity because it has no real effect in terms of greenhouse gases. A retailer with an environmental profile that sells eco-labelled electricity has no effect on the way that electricity is produced. It just means that the electricity sold to the rest of the customers will comprise more fossil generation. There is
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Eco-labels are a means of protecting corporate image and brands, helping to avoid consumer
boycotts. 6!See
http://www.environdec.com/pageId.asp?id=100. Cited 21 Jul 2009.
not much one can influence as a customer by purchasing eco-labelled electricity. People can soothe their consciences but they can’t do much for the environment.” The importance of public policy for CCAs means that companies seek mainly to appease the government rather than other stakeholders such as environmental organizations (ENGOs). Respondents from municipal energy companies reported very infrequent contact with ENGOs in general. The one exception to this rule was the Swedish Society for Nature Conservation (SSNC) which administers the Bra Miljöval (‘good environmental choice’) ecolabel. Greenpeace for instance produces a yearly ranking of electricity companies based on their installed renewable plant capacities. Most municipal energy companies approved of the ranking as they were graded highly on the list. However, some took issue with the fact that the ranking compares energy retailers and producers. Some retailers do not own any production capacity yet market themselves as ‘green’ given that they sell electricity produced from renewables that is purchased via the Nordic electricity market. This was regarded as unfair by companies which produce electricity, since they perceive themselves as taking larger responsibility for issues like climate change and energy security. Some companies also took issue with the fact that the entire portfolios of multinational energy companies were included in the ranking, given that operations in mainland Europe based on fossil fuels meant that they were graded in the ‘worst’ category compared to companies that operate only in Sweden. Greenpeace argued that there is no other way of compiling the ranking than to include all these different types of energy companies in the list. Very few municipal energy companies reported that ENGOs have a significant impact on the way electricity is produced. There was a notable exception where one company reduced its use of peat as fuel following criticism from the SSNC. Municipal energy companies generally regard ENGOs as influential actors in debates on climate change and energy, given that they tend to focus on larger organisations and on debates regarding Swedish and EU climate policies. Although most smaller companies can afford to remain passive towards ENGO activities, larger companies must take ENGOs seriously due to the negative publicity that they can create. Larger companies receive more scrutiny from the media and find it more difficult to maintain good relationships with customers than municipal energy companies and are more likely to be targeted by ENGOs. Hence the multinational electricity companies have formal contacts with the SSNC but also have more frequent contacts with a range of other ENGOs. However, multinationals often
find it difficult to meet the divergent expectations of ENGOs. A respondent from one of these companies expressed this in the following manner: “We try to communicate that it is not really possible to switch to renewables fully just yet.... The prices would skyrocket. Take Germany, for example. When gas prices were extremely high, some people couldn’t afford to pay their heating bills – and Germany is a developed country. As regards the SSNC – it is quite difficult to engage in a debate with them that considers local issues in a global context. They have strict criteria regarding biodiversityfriendly hydropower. If we choose to follow their criteria, we would have to decrease hydropower production to preserve local biodiversity in Sweden. The global implication is that we would have to import electricity from elsewhere, which would lead to higher emissions. We are much more in favour of the WWF approach as it advocates market solutions that will be valuable in the long-term”. A respondent from one of the other multinationals was more optimistic about the relationship with ENGOs: “Generally speaking, ENGOs do not attack us anymore because they can achieve much more by cooperating with us. They have changed their strategies since the mid-1990s. ENGOs are also very eager to cooperate with the Swedish government because of their role in the EU. We have common goals and the aim is to influence the EU and the rest of the world based on these common interests”. Whilst the main external driver of corporate climate actions is public policy, several companies claimed to be morally and ethically motivated to tackle the climate issue. We interviewed one such company which is the largest wind cooperative in Sweden. The project is motivated solely by climate change: “That is the only reason we are here. If Sweden’s three largest energy companies had done a good job of dealing with climate issues and been more committed to renewables then there would be no reason for us to exist”. Whilst all electricity producers claim to be motivated by climate change, wind cooperatives are a new organisational form that has emerged in conjunction with the climate issue. The company claims that it aims to empower electricity consumers by providing them with the opportunity to take individual responsibility for the climatic impact of electricity consumption. Profit and market share are not among the organisation’s priorities. The main motivation is that the transition to renewable energy is occurring too sluggishly:
“Society has been very slow in reacting to climate change and modifying energy production processes. ... We felt that the energy sector had not fulfilled the criteria set out in relation to the drive for a deregulated market, i.e. that it should work for wider society and for the needs of consumers. ....Electricity retailers all have the same product, available at Nordpool prices. ... I do not believe in the free market, at least not the greening of free markets, because our markets are too shortsighted. The energy sector needs to have a very long-term view. Public companies are always the best at dealing with issues like this”. Discussion and conclusion In summary, of the three potential determinants of corporate climate action examined, companies were unequivocal in their view that it is policy which has the most impact on their strategic choices. This is despite the fact that climate change is a very important environmental issue in Sweden and public awareness is high. The nature of policy impact is however multifaceted. Our results show that on the climate issue, electricity producers seem to favour international regulation rather than national. The reason outlined for this is that they perceived this to be more stable than national policy. This is an interesting result in several ways. The most significant of which is that it suggests that between the UN level where little progress seems to be made and the national level, there is a meso level at which norm creation and policy design converge. By this, we mean that multilateral organisations on the regional level may be able to play a more important role in the process of promoting climate action than the UN. The above may be an optimistic reading of the situation since Martin and Rice’s (2010) study of Australian business actors follows more closely the predictions of new institutional theory in that they appear to be taking a more defensive approach to national climate policy. On one hand, this may be explained by the fact that Swedish producers are operating in a multi governance regulatory climate where both EU and national authorities have legislative power. On the other, the findings may differ because Martin and Rice’s (2010) data is heterogeneous whereas our study is based on one sector which is central to climate action. One may also argue that the state’s strategy of framing climate change as a business opportunity is an important tactic for determining the appeal of climate action on the corporate level. However, based on the respondents’ arguments, it appears that the windfall of profits created by the combination of deregulation and ECS may be the most compelling explanation. The corporate perception of consumers’ willingness to pay should be attenuated with the fact that the current Nord Pool arrangement seems to be skewed to the corporate interest. It is also unclear to what extent the pricing strategy complements a pure regulatory approach. What is quite clear from this arrangement is that the institutional work being
conducted to enact the project of decarbonising energy supply is one in which policymakers are clearly bending over backwards to provide corporations with incentives to accept this project. Sweden’s policies in this regard are instructive given the nation’s historical role as a pioneer in environmental protection. Given Sweden’s membership in the EU it falls within a more general regulatory framework. Our study shows that while there are some national adjustments that have been made to the EU framework, the larger policy context provided by EU membership is an important factor in explaining the dominance of policy. Lastly, our study provides some insights regarding the concepts of intentionality and maintenance in institutional work. Climate change is currently the most important environmental issue faced by this industry sector. However, the corporate response seems to be quite dependent on policy leading the way. This is explained by the fact that regulation is creating the conditions for channelling considerable financial resources to and from companies. It is no surprise therefore that regulation is playing an important role corporate strategizing about the future. One may be tempted to characterise corporate action in this case as passive in so far as the companies appear to be merely responding to regulation. However, this response is quite rational under the circumstances since regulation is overwhelmingly good for business. Likewise, the response to consumers and ENGOs may be read as further evidence of the primary role of policy as a driver at the current time. By pursing a course of action that is largely dependent on public policy, companies partake in a dual process of institutional maintenance. Firstly companies engage in maintenance in the sense that they indirectly support and reinforce the norms, values and expectations embedded in public policy. Secondly, they contribute to stability in their own business sector by maintaining the balance of power between regulation and market. This approach may be robust in its ability to maintain the status quo but it is unclear whether it is able to promote or stimulate radical innovation. References Abernathy, W., and Clark, K., 1985. Innovation: Mapping the winds of creative destruction. Research Policy, 14 (1), 3–22. Birnbaum, P.H., 1984. The choice of strategic alternatives under increasing regulation in high technology companies. Academy of Management Journal, 27, 489–510. Boiral, O., 2006. Global warming: should companies adopt a proactive strategy? Long Range Planning, 39( 3), 315–330.
Delmas, M., and Toffel, M.W., 2004. Stakeholders and environmental management practices: an institutional framework. Business Strategy and the Environment, 13 (4), 209–222. Dotzauer, E., 2010. Greenhouse gas emissions from power generation and consumption in a Nordic perspective, Energy Policy 38, 701–704. Foxon, T.J. 2002. Technological and institutional ‘lock-in’ as a barrier to sustainable innovation. ICCEPT working paper, available from: www.imperial.ac.uk. Accessed 11 Feb 2011. Handfield, R., Sroufe, R., and Walton, S., 2005. Integrating environmental management and supply chain strategies. Business Strategy and the Environment, 14 (1), 1–19. Henderson, R.M., and Clark, K.B., 1990. Architectural innovation: The reconfiguration of existing product technologies and the failure of established firms. Administrative Science Quarterly, 35 (1), 9–30. Hoffman, A.J., and Ventresca, M.J., 1999. The institutional framing of policy debates: Economics versus the environment. American Behavioral Scientist, 42 (8), 1368–1392. Hughes, Thomas P. (1983), Networks of power: Electrification in Western society, 1880– 1930, Baltimore: Johns Hopkins University Press. International Atomic Energy Agency (IAEA) 2003. Flood hazard for nuclear power plants on coastal and river sites, Vienna, Austria: IAEA Safety Standard Series, IAEA. Kolk, A., and Levy, D., 2001. Winds of change: Corporate strategy, climate change and oil multinationals. European Management Journal, 19 (5), 501–509. Kolk, A. and Pinkse, J., 2004. Market strategies for climate change. European Management Journal, 22 (3), 304–314. Konkurrensverket 2008. Bryt upp samägandet inom kärnkraften 2008-09-12 (Dissolve the joint ownership of nuclear power) Dnr 500/2008. Available from: www.konkurrensverket.se. Accessed 17th Jan 2011. Kopytko, N., and Perkins, J., 2011. Climate change, nuclear power, and the adaptationmitigation dilemma, Energy Policy 39, 318–333. Kronsell, A., 1997. Sweden: setting a good example. In: Skou Andersen, M,. and Liefferink, D. (eds) European environmental policy: the pioneers. Manchester: Manchester University Press, 40–80.
Lawrence, T.B., Suddaby., R, and Leca, B., 2009. Introduction: Theorizing and studying institutional work. In Lawrence, T.B., Suddaby., R, and Leca, B., (eds) Institutional work: Actors and agency in institutional studies of organizations. Cambridge: Cambridge University Press. 1–28. Levy, D.L., and Egan, D., 2003. A neo-Gramscian approach to corporate political strategy: Conflict and accommodation in the climate change negotiations. Journal of Management Studies, 40 (4), 803–829. Levy, D.L, and Newell, P., 2000. Oceans apart? Business responses to global environmental issues in Europe and the United States. Environment: Science and Policy for Sustainable Development, 42 (9), 8–21. Levy, D.L., and Rothenberg, S., 2002. Heterogeneity and change in environmental strategy: Technological and political responses to climate change in the global automobile industry. In Hoffman, A. and Ventresca, M, (eds) Organizations, policy and the natural environment: Institutional and strategic perspectives, Stanford: Stanford Business Books, 73–193. Martin, N. and Rice, J. 2010. Analysing emission intensive firms as regulatory stakeholders: A role for adaptable business strategy. Business Strategy and the Environment 19, 64–75. McKinsey 2008. Möjligheter & kostnader för att reducera växtgasutsläpp i Sverige (Opportunities and costs to reduce greenhouse gases in Sweden). Available from: http://www.mckinsey.com/locations/sweden/globalwarming.asp. Accessed 16 Jul 2009. Okereke, C., 2007. An exploration of motivations, drivers and barriers to carbon management: The UK FTSE 100. European Management Journal, 25 (6), 475–486. Oliver, C., 1991. Strategic responses to institutional processes. The Academy of Management Review, 16 (1), 145–179. Proposition 2005/06:27 2005. Leverenssäkra elnät (Secure grids for electricity distribution). Available from: www.sweden.gov.se/content/1/c6/05/13/45/a13a3cfb.pdf. Accessed 31 Aug 2009. Sarasini, S., 2009. Constituting leadership via policy: Sweden as a pioneer of climate change mitigation. Mitigation and Adaptation Strategies for Global Change, 14 (7), 635–653. Sharma, S., and Vredenburg, H., 1998. Proactive corporate environmental strategy and the development of competitively valuable organizational capabilities. Strategic Management Journal, 19 (8), 729–753.
Skjærseth, J.B., and Skodvin, T., 2001. Climate change and the oil industry: Common problems, different strategies. Global Environmental Politics, 1 (4), 43–64. Unruh, G.C., 2000. Understanding carbon lock-in. Energy Policy 28, 817–830. Unruh, G.C., 2002. Escaping carbon lock-in. Energy Policy 30, 317–325. Zietsma, C., and McKnight, B., 2009. Building the iron cage: Institutional creation work in the context of competing proto–institutions. In Lawrence, T.B., Suddaby., R, and Leca, B., (eds) Institutional work: Actors and agency in institutional studies of organizations. Cambridge: Cambridge University Press. 143–177.
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Institutional work and climate change: Corporate political action in the Swedish electricity industry Steven Sarasini Under review by Scandinavian Journal of Management Abstract This paper utilises qualitative methods to examine drivers and motives of corporate political actions (CPA) linked to climate policy in the Swedish electricity industry. A range of CPA channels and strategies are examined in connection to two policy instruments – the EU emissiontrading scheme and the Swedish electricity certificate scheme. These instruments are the main drivers of climate-related investments in the sector. The study treats CPA as a form of institutional work and examines reasons for companies to seek to maintain / disrupt institutions. The study finds that CPA is driven primarily by the need to manage external resource dependencies and that where risks are more acute, companies are more likely to seek to disrupt regulative institutions. However, the study also shows that respondents’ appraisals of policy instruments are based on a convergent set of shared values (cognitive institutions) that form the basis of CPA and which actors do not seek to disrupt despite resource-based risks. CPA is thus characterised as a means to transmute cognitively held values and beliefs into regulative institutions. Key words: Corporate political action, institutional work, climate policy, Sweden. Introduction A common criticism of neoinstitutional theory (NIT) relates to its inability to account for agency in light of cognitive institutional constraints that limit actors’ capacity for free and autonomous action (Hardy and Maguire, 2008; Holm, 1995; Seo and Creed, 2002). To attend to this problem scholars have created the notion of ‘institutional entrepreneurs’ – actors who see new institutional frameworks as an opportunity to realise ‘highly-valued interests’ and which have the resources necessary to initiate institutional change (DiMaggio, 1988). Despite a recent upsurge on this topic, studies of institutional change and development have paid little attention to the way that individuals and organisations seek to maintain and disrupt institutional arrangements (Lawrence and Suddaby, 2006). Furthermore, few studies have focused on agency associated with public policy (Pancheco et al. 2010). This study forays into this void by examining drivers
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and motives of multi-level corporate political actions (CPA) by Swedish electricity producers vis-à-vis climate and energy policy. CPA refers to the way that companies seek to influence public policy self-interestedly (Baysinger, 1984; Getz, 1997; Hillman et al. 2004). As actors with critical stakes in climate and energy policies, energy companies initially reacted defensively to policies that threatened resource dependencies and economic interests (e.g. Ikwue and Skea, 1994; Levy and Rothenburg, 2002; Toke, 2008). However, there is evidence to suggest that the private sector has recently become more proactive on the climate issue (e.g. Okereke, 2007) and CPA appears to play a critical role in the institutionalisation of regulatory frameworks to tackle the climate issue (e.g. Markussen and Svedsson, 2005). However, neoinstitutional scholars have paid scant attention to CPA, which, as a means for companies to maintain or modify regulatory institutional arrangements, can further our understanding of the structure-agency paradox that challenges NIT. This paper examines whether corporate choices to maintain/disrupt existing policy instruments derive from the need to manage resource dependencies (in terms of the security with which financial resources are delivered to industry via the policy instrument in question); and/or cognitively institutionalised factors such as industry norms, values and beliefs regarding ‘appropriate’ policy design and the way CPA is channelled. This study utilises qualitative methods to examine drivers and motives of CPA in the Swedish electricity industry vis-à-vis climate/energy policy. Two instruments constitute the main policy drivers of climate-related investments in this sector – the European emission-trading scheme (EU ETS) and the Swedish electricity certificate scheme (ECS). The study examines both the content of CPA and the means by which it is channelled as proxies for institutional work in relation to these two instruments. Some companies pursue political activities individually whereas others work to influence policy via third-party organisations nationally and/or internationally. Hence the study comprises a multi-level analysis of CPA. The main theoretical aim is to examine the role of external resource dependencies compared to institutional mechanisms in order to elucidate what drives/motivates institutional maintenance and disruption. This paper consists of six sections of which this is the first. Section two reviews previous research on CPA and climate change and draws upon the NIT and CPA literatures to outline a conceptual framework for the study. Section three presents the results of the study, with analytical discussions presented in section four. Section five concludes.
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Background and theoretical considerations This paper examines why Swedish electricity producers seek to influence the design of two policy instruments that regulate their industry in relation to climate change – the EU emissiontrading scheme (ETS) and the Swedish electricity certificate scheme (ECS). Both instruments were introduced following EU directives that seek to integrate environmental protection and energy security. The ETS was introduced in 2005 in order to reduce the EU’s greenhouse gas emissions in line with targets set in conjunction with the Kyoto Protocol (Directive 2003/87/EC). The scheme is a ‘market-based instrument’ that generates tradable emission allowances for large installations in energy intensive industries. A key business issue here is related to the way that emission allowances are distributed to industry. Not all member states have been equally stringent as regards allowance allocations, to the extent that an inequitable distribution of capital may have occurred between national electricity industries. Hence, one could speculate that CPA focuses heavily on this issue given the need to manage external resource dependencies. Similarly, European renewable energy policy (which also encompasses climate-related objectives) is potentially a focal point of external resource management. Following EU directives, member states have established policies that create economic incentives for investments in renewable sources of electricity. In order to contribute to a Community-wide target of increasing the use of renewables, the Swedish government launched the ECS in 2003. Similar to the EU ETS, it is a market-based instrument that stipulates that a growing proportion of the electricity sold is produced from renewables. Together these instruments have reconfigured significantly the economics of Swedish electricity production such that companies are likely to seek to influence them via CPA. Previous research on CPA and climate change suggests that companies choose to support or oppose climate policy at least partly because of the need to manage external resource dependencies. When climate change first climbed the political agenda, for example, industries on either side of the Atlantic opposed policies that threatened the incumbency of fossil fuels in the economy. US companies from the oil and automobile sectors sought to undermine the scientific view that greenhouse gas emissions enhance global warming via the controversial Global Climate Coalition (Boiral, 2006; Levy and Egan, 2003; Levy and Kolk, 2002; Levy and Newell, 2000; Levy and Rothenberg, 2002; Newell and Paterson, 1998). Putting the science into question was seen to reduce the likelihood of regulatory action and protect the vested interests of these industries, which made little or no investment in low-carbon technologies (Jones and Levy,
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2007). Similarly, in the early 1990s, European industry was instrumental in blocking a proposal to introduce a carbon tax that sought to limit emissions (Ikwue and Skea, 1994; Newell and Paterson, 1998). Given the potential of the ETS and the ECS to direct resources to or away from companies, it is tempting to reckon that attempts to influence policy are solely driven by a range of resourcedependency related criteria as noted in the CPA literature (Schuler and Rehbein, 1997). If this were the case, then attempts to shape policy could adequately be described using the rational choice model of organisational decision-making adopted by resource dependency theory (Pfeffer and Salancik, 2003), and companies would presumably support policies that serve their interests and refute instruments that pose significant financial risks. However, some scholars have utilised NIT to argue that institutional factors influence corporate action on climate change (e.g. Levy and Kolk, 2002; Levy and Rothenburg, 2002; Kolk and Pinkse, 2007a). From this perspective, climate policy can be regarded as a regulative institution (Scott 2008) that, when viewed synchronically, coerces certain types of corporate action. For instance, the establishment of climate policies has stimulated a range of business practices aimed at reducing emissions (Dunn, 2002; Jones and Levy, 2007; Okereke, 2007; Pinkse, 2007; Skjærseth and Skodvin, 2001). When viewed diachronically, however, policy can be seen to coevolve with business practices. Despite their initial opposition to climate regulation, for example, European companies have become decidedly more supportive of policy whilst implementing a range of measures to reduce emissions (Okereke, 2007). Moreover, when European companies such as BP and Shell withdrew from the Global Climate Coalition, they became active within pro-climate organisations such as the World Business Council for Sustainable Development (Kolk and Levy, 2001), accepted anthropogenic global warming theory and made investments in renewable energy (Jones and Levy, 2007; Levy and Newell, 2000; Levy and Rothenberg, 2002). In Spain, CPA that focused on overcoming barriers to wind-power expansion at the local and national levels has meant that utilities’ investments have increased in a ‘virtuous cycle’ with policy developments (Stenzel and Frenzel, 2008). In contrast, utilities in Germany initially perceived the growth of an independent wind power industry as a threat and reacted defensively to the introduction of a feed-in-tariff, which initially hindered investments (Stenzel and Frenzel, 2008; Toke, 2008). Together these examples suggest that from a corporate perspective, market and nonmarket strategies co-evolve in a broader process of institutional change. Industry’s choice to back or block climate/energy policy is thus key to its institutionalisation and also the
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implementation of measures to tackle climate change, which fits with the recursive model of institutional change emphasised by some NIT scholars (e.g. Barley and Tolbert, 1997; Lawrence et al. 2009) However, research on CPA does not typically utilise neoinstitutional theory. Despite the fact that some scholars have noted that institutional factors can be a key determinant of CPA (e.g. Getz, 1997; Hillman and Keim, 1995), their work tends to utilise the economic institutionalism of North (1990) rather than NIT. These studies elucidate, for instance, how companies seek to transform political resources such as financial resources, ideologies and public opinion in order to increase or maintain “formal institutional resources (i.e. advantageous government structure or policy)” (Oberman, 1993: 216); how the presence of a strong political party can be regarded as an institutional factor that strongly influences business-government interactions and policy choices (Hillman and Keim, 1995); how business participation in policymaking is influenced by the degree of corporatism/pluralism in a particular national institutional setting (Hillman and Hitt, 1999; Hillman, 2003); or how institutionalised company-level departments and routines that engaged in political activity influence the manner in which companies respond to political issues (Getz, 1997; Rehbein and Schuler, 1995). Generally, and as regards institutions that are external to companies, the CPA literature tends to focus on how the formal and informal organisation of the political economy can influence business-government interactions (e.g. Hersch and McDougall, 2000; Schuler et al. 2002). Perhaps the main reason that these studies do not adopt NIT is that both the CPA literature and economic institutionalism depict companies as individually rational entities that pursue strategies to achieve autonomously defined goals. This point is evident if one considers the various definitions of CPA, all of which intimate that nonmarket strategies are the result of companies’ attempts to manage strategically some or other externally controlled resource (e.g. Baysinger, 1984; Getz, 1997; Hillman et al. 2004). The depiction of organisational behaviour as resulting from individually autonomous rationales clashes ontologically with the central tenets of NIT. Although some neoinstitutionalists such as Scott (2008) acknowledge that regulative institutions such as public policy can cause organisations to act instrumentally and expediently, others refute this idea because NIT is primarily a cultural-cognitive theory (Giddens, 1984; Jepperson, 1991; Meyer et al. 1994; Djelic and Quack, 2008). Rather than depicting actors as individually rational, institutions provide logics for action in that they constitute power relations, norms and values, actors’ beliefs,
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motives, social identities, interests and agency (March and Olsen 1989; Thornton and Ocasio, 1999; Glynn, 2000; Lounsbury et al. 2003; Lounsbury and Ventresca, 2003; Rao et al. 2003; Breiger and Mohr, 2004; Glynn and Lounsbury, 2005; Luo, 2007). They structure incentives and sanctions, legitimise specific personal goals, and depict appropriate behaviours, attitudes and solutions to problems (March and Olsen, 1989; Friedland and Alford, 1991; Ocasio, 1997; Rao et al. 2003; Luo 2007). It would appear that NIT is not a suitable theoretical framework for examining CPA as it is primarily interested in examining organisational actions that “defy traditional rational explanation” (Greenwood et al. 2008). Where companies pursue CPA as a means to manage external resource dependency it would appear that they act in the rational economic manner that NIT seeks to refute. However, the notion that NIT cannot consider public policy and regulation as institutional is slightly misguided. Despite the fact that institutions are primarily depicted as cognitive phenomena, they are “sometimes encoded in laws” (Greenwood and Suddaby, 2006) or in prescriptive symbolic systems (Glynn and Lounsbury, 2005) that comprise “assumptions, values, beliefs, formal and informal rules” (Chung and Luo, 2008). Rather than focusing on resource dependencies, NIT directs our attention to shared cognitively institutionalised structures that enable and constrain action (Hall and Taylor, 1996; March and Olsen, 1989; Djelic and Quack, 2008; Scott, 2008). From a neoinstitutional perspective, the decision to maintain/disrupt a policy instrument is related to how the policy aligns with socially constructed industry norms, values and preferences that shape action within organisational fields or industries (Powell and DiMaggio, 1991; Scott, 2008). As regards climate mitigation, there is a growing preference for market-based instruments – particularly among multinationals, which have pursued informational strategies to influence policymakers’ decisions accordingly (Kolk and Pinkse, 2007b). Large utilities are also in favour of flexibility in reducing emissions and have successfully lobbied for the free distribution of pollution permits within the EU ETS (Markussen and Svedsson, 2005). It would thus appear that there is a growing set of consensual preferences among private sector entities that policy instruments should be designed in a specific way and fulfil certain criteria, akin to the NIT approach. Institutional work Explaining processes of institutional change in light of cognitive structures that limit actors’ abilities to act with agency is one of the key issues faced by NIT (Hardy and Maguire, 2008). The problem is to explain how actors can influence institutions “if their actions, intentions, and
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rationality are all conditioned by the very institution they wish to change” (Holm, 1995, p.398). Whilst it is not the case that actors are ‘conditioned’ by regulative institutions in the same way as they are by cognitive institutions (Scott, 2008), focusing om CPA nonetheless provides the opportunity to contribute to the structure-agency debate within NIT. This paper seeks to make such a contribution using the concept of institutional work. Institutional work refers to “the purposive action of individuals and organizations aimed at creating, maintaining and disrupting institutions” (Lawrence and Suddaby 2006). By considering CPA in terms of institutional maintenance/disruption, a first means to investigate agency is to examine the reasons for companies to support or refute existing policy instruments in relation to cognitively institutionalised values and beliefs regarding climate policy in this particular industry setting. The first question this study seeks to address is: How do cognitive institutions influence CPA that seeks to maintain/disrupt policy instruments? The way in which industry values and beliefs (cognitive institutions) enacted via CPA are evaluated in this study is described in the method section below. This means of examining agency cannot be viewed separately from the need to manage external resource dependencies. For instance, corporate preferences for market-based instruments are generally linked to the notion that environmental protection should be cost-efficient. While such a preference could be described as a value-based judgement or norm, it is also related to external resources given that it 1) relates to costs/benefits of complying with policy instruments; and 2) includes consideration for the efficient protection of natural resource endowments. Examining institutional maintenance/disruption in this way thus provides an opportunity to investigate the conflation of institutional factors with the need to manage external resource dependencies. Lawrence and Suddaby (2006) comment only briefly on what happens to norms, values and beliefs when the source of conflict is resource dependencies – despite the fact Oliver (1991) argued that resource dependency can act as a key facilitator of agency. Examining the interplay between CPA and institutions is thus a means to explore an under-researched topic in studies of institutional work. Since cognitive institutions are socially constructed and shared among a collectivities (Berger and Luckmann, 1967; Meyer and Rowan, 1977; DiMaggio and Powell, 1991; Zucker, 1991; Scott, 2008), companies that seek to maintain or disrupt institutional arrangements based on values and beliefs that diverge from industry norms can be said to act with agency. Lawrence and Suddaby (2006) refer to the manner in which cognitive elements of institutions are
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maintained or disrupted as a subcategory of institutional work entitled ‘valorizing and demonizing’, which and refer to the extent to which institutional maintenance occurs via CPA by enacting “institutionalized beliefs and as a way of maintaining the power of those beliefs” (p.232). On the contrary, political actions that refute institutionalised beliefs can be regarded as disruptive institutional work. Hence a second research question this study addressed by this study is: How does the need to manage resource dependencies influence the maintenance / disruption of cognitively institutionalised values and beliefs regarding public policies? A second means to examine the maintenance/disruption of institutions is related to the manner in which companies channel CPA, which diverges according to different institutional settings. Relevant here is a subcategory of institutional work entitled ‘enabling’, where actors aim to introduce “certainty into institutional arrangements…to avoid intra-institutional conflict” (Lawrence and Suddaby, 2006, p.231). Companies may choose to channel CPA through industry associations, for example, because membership in associations improves the possibility that their interests will be represented and reduces the risk of acting alone. On the contrary, if companies aim to disrupt regulatory institutions, they may seek membership within associations that better represent their interests. Since institutions are regarded to have a homogenising effect (DiMaggio and Powell, 1983), one can posit that CPA is conventionally pursued via a range of institutionalised channels or bureaucracies, especially given the maturity of the industry in question. By pursuing CPA via institutionalised channels companies reinforce isomorphic trends that endure because of the certainty such institutional arrangements bring, whereas by seeking alternative channels companies disrupt isomorphic trends. Hence companies that operate via alternative channels are seen here to act with more agency in that they diverge from institutionalised norms. Furthermore, the traditional pluralist-collectivist dichotomy between Anglo-Saxon and corporatist countries suggests that companies are more likely to follow a potentially antagonistic, individualistic and transactional approach comprising political action committees and financial contributions in the former and a relational, participatory, consensus-based approach based on open deliberation in the latter (Hillman and Hitt, 1999; Schmidt, 1982; Schmitter, 1983). Given that Sweden is widely regarded as corporatist, one would expect CPA to be channelled via a range of formally institutionalised channels such as industry associations and open consultations. Notwithstanding, the establishment of the EU comprises a new (international) political marketplace that particularly multinational companies have sought to influence (Coen, 1997).
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Following their experiences with internal emission-trading schemes, for instance, BP and Shell provided important knowledge inputs that shaped the design of the EU ETS (Braun, 2009). Swedish electricity companies are thus faced with the choice of whether to channel CPA via national or EU bureaucracies, either indirectly (via lobby organisations) or via direct contact with legislatures. The latter may however require formalized structures such as public affairs units or offices close to legislating bodies (Hillman et al. 2009; Rehbein and Schuler, 1999). Where companies choose to pursue CPA through alternative channels in light of competition between lobby groups or other industry players (de Figueiredo and de Figueiredo, 2002; Hillman and Hitt, 1999; Rubin et al. 2001), competition over externally managed resources is likely a key issue. Hence a third question this study seeks to address is: How does the need to manage external resource dependencies influence the way that companies channel CPA? Method This study utilises qualitative methods (semi-structured interviews and document analysis) to examine drivers and motives of CPA across the Swedish electricity industry sector. A national industry was chosen as it is subject to a range of mostly convergent institutional arrangements and because the case provides a novel opportunity to examine the conflation of institutional and resource dependency processes and mechanisms. 36 organisations produce electricity in Sweden and sell it on the Nordic electricity market. Three multinational energy companies that share around 90% of the market dominate the industry. These companies also have market shares in mainland Europe, the US, Russia and the UK, and produce electricity from large-scale hydropower and nuclear power in Sweden. Two of these companies also produce electricity from fossil fuels in mainland Europe. Sweden’s largest energy company has close ties to the Swedish government given that it is state-owned. Over 30 municipal energy companies produce electricity in Sweden and are owned by the municipalities within which they operate. Municipal companies produce electricity from combined heat and power plants that run on biofuels, waste heat, small-scale hydropower, wind power and typically use fossil fuels for reserve capacity. Electricity is also produced by hundreds of private landowners in Sweden, who operate small-scale hydropower facilities, wind turbines or biofuelpowered furnaces. Overall, large nuclear/hydropower capacities and reserves of biomass mean that Sweden’s electricity is almost entirely free from carbon emissions. Respondents’ remarks are anonymised as much as possible and references to corporate names have been removed. It is
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however so that the large multinational electricity companies are few in number and may still be identifiable despite these efforts. Data collection 33 semi-structured interviews were conducted with respondents from Swedish electricity producers, industry associations and lobby organisations. In total respondents from 20 electricity companies of different sizes were interviewed. There are some geographical factors that affect companies’ operations – the south west coast is the only part of Sweden with natural gas infrastructure, and companies in other parts of the country are located close to large forested areas with easy access to biofuels and peat. Respondents were thus selected from different locations to ensure representativeness. Individuals responsible for CPA were interviewed. CEOs, environmental coordinators and electricity traders varyingly perform these tasks, although multinationals have employees with expertise in climate/energy policy instruments. The snowball method was used to identify industry and lobby organisations that feature prominently in policymaking circles. Following respondents’ recommendations, four respondents from the industry association for the electricity sector, Swedenergy, were selected for interviews. Two of these respondents are responsible for working groups on the ETS and the ECS; one is responsible for the creation of the ECS; and the other is the chief editor of the industry journal ‘ERA’. The latter provided a useful overview of the sector’s engagement with the climate issue from a historical perspective. Chief executives of the Swedish Wind Power Association and the Association of Small Electricity Producers (SERO) were also interviewed. The latter has over 3000 members which, given resource constraints, were not possible to include in the sample. SERO nonetheless provided an excellent overview of their preferences and actions regarding climate and energy policies. Interviews with company representatives consisted of two lines of questioning. Interviewees were asked 1) what they felt were the main strengths and weaknesses of the ECS and the EU ETS and 2) how and why they had participated in the development of these two instruments. The first question was designed to gauge industry preferences and expectations regarding policy and the legitimacy of instruments among field constituents as proxies for motives that underpin CPA. The second question sought to examine the means by which companies pursue CPA, the content of and reasons for their strategies (i.e. whether they support the policy instruments in question and why). Interviews were complemented by document analysis of position papers and reports
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available via company and industry association websites where available. 20 interviews were performed in person and 13 took place via telephone. Data analysis All interviews were recorded and transcribed. Transcripts were coded manually as follows. Firstly, interview data was separated into four broad categories – appraisals of policy instruments; issues pursued via CPA; motives and drivers of CPA; and channels for CPA. Unsurprisingly, it became apparent that both the motives and drivers of CPA and channels companies utilise to try and influence policy were contingent on positive/negative appraisals of specific policy issues. Appraisals were then coded using a range of environmental policy evaluation criteria, and codes were denoted by ‘+’ or ‘–’ to signify positive or negative appraisals. The range of criteria that are used to evaluate environmental policy includes feasibility, political acceptability, representation, participation, transparency, accountability, protection of basic rights – the list goes on (Crabbé and Leroy, 2008; Gunningham et al. 1998; Hildén et al. 2002; Huppes and Simonis, 2001). Whilst the majority of respondents did not use such terms to frame their arguments, data was analysed to show that a higher level of abstraction appraisals of policy instruments fell mainly under three criteria – effectiveness, efficiency and equity. Effectiveness refers to the extent to which a policy instrument fulfils environmental objectives. Efficiency is a ‘cost-result’ criterion that relates to the cost of environmental improvements (Hildén et al. 2002), whereas the term ‘dynamic efficiency’ is a separate measure that evaluates how instruments stimulate technological improvements. Crabbé and Leroy (2008) argue that effectiveness is a reflexive term where the above ‘rationalist’ depiction connotes an economic or business logic in contrast to interactionist (political bias focused on participation and deliberation) or institutionalist (judicial bias focused on functionality and institutional change) perspectives. Equity is also reflexive – the distributive justice of an instrument could mean intra- or intergenerational equity (Huppes and Simonis, 2001), equity between industry sectors (e.g. Markussen and Svedsson, 2005), or the interaction between instruments in a specific field of environmental policy (e.g. Sorrell and Sijm, 2003). Hence policy evaluation is an inherently value-based exercise – appraisals of policy instruments that are framed in terms of certain criteria defined in a certain way reveals the values and preferences of the respondents. To the extent that they converge on similar criteria, appraisals of policy reflect the set of socially
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constructed, cognitively institutionalised values and beliefs held among industry constituents that shape both evaluations of climate/energy policy and responses to it enacted via CPA. The categories that emerged were examined in order to identify an implicit and underlying rationale that formed the basis of appraisals. For example, intra- and intersectoral equity featured heavily in respondents’ considerations. Respondents were also asked why they had focused on certain issues and why they had pursued CPA via certain channels. From this mix of implicit and explicit data it was then possible to identify the main drivers and motives of CPA. Results This section describes the way in which respondents’ appraisals of the EU ETS and the Swedish ECS fit under the criteria for environmental policy evaluation outlined in the method section above. Furthermore, this section outlines the varying impacts of these two instruments in terms of external resource dependencies. As noted above, appraisals of the two instruments were framed in terms of three criteria – cost-efficiency, effectiveness and equity. The content of these appraisals is outlined below alongside companies’ decisions to voice their concerns via particular CPA channels. Generally, respondents were in favour of market-based instruments since “markets create more flexibility and freedom, and there are no heavy restrictions on companies. The market decides, not the government”. Respondents were cognizant of various policy design flaws, though not all of these formed the basis of CPA. The EU ETS and resource dependency The most significant impact of the ETS vis-à-vis external resource dependencies is that the scheme has allowed most companies to generate extra profits without having made substantial efforts to reduce emissions. The main reason for this is that electricity prices are set on the margin within the Nordic electricity market, such that that prices must incur the cost of electricity produced using fossil fuels. This means that despite the fact that Swedish electricity is mostly produced from nuclear and hydropower – which are emission free – companies pass on the opportunity costs of emission allowances to consumers and generate windfall profits. Despite the fact that this has consequences for the cost-efficiency, effectiveness and equity of the scheme, companies’ that are supportive of the scheme focused their appraisals on other policy design issues. The EU ETS and cost efficiency
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Respondents who support the ETS claimed that its main strengths are that it creates economic incentives to reduce emissions; allows companies to choose between emission reduction and buying allowances; and selects the cheapest measures to reduce emissions. Supporters of the ETS also noted that it has an official marketplace (via a national emissions trading registry), which reduces the risk of speculative trading and thus improves market liquidity. Some smaller companies experience disproportionate administrative costs, though these were not significant enough for these companies to seek to refute the ETS. Another concern is that the fragmented state of global climate policy is seen impinge on cost-efficiency since many cheap options to reduce emissions are not covered by the ETS. Only one respondent, SERO, vehemently opposed the ETS and proposed that it be replaced by a carbon tax based on concerns for cost efficiency: “Taxes have worked quite well in Sweden in the past. As it stands now, producers without emissions benefit from the ETS – they receive revenues that are larger by approximately 1 Eurocent per kilowatt-hour. Even though we are carbon free consumers still have to pay more for electricity. A tax would be a more efficient system”. The EU ETS and effectiveness Most respondents were satisfied with the effectiveness of the scheme given that it incentivises measures to reduce emissions and provides signals regarding fuels and technologies for electricity production. Particularly multinationals have implemented measures that would not otherwise be economically viable (e.g. research and development on carbon sequestration technology); established targets to become carbon free; and started to substitute fossil fuels with carbon-free alternatives. In contrast, municipal energy companies find it more difficult to substitute fossil fuels since they comprise a small portion of their portfolios, such that they must purchase allowances. Municipal companies are nonetheless supportive of the ETS as the overall economic effect is positive. The fragmented state of global climate policy is seen to confound the effectiveness of the ETS given the prospect of emissions being released elsewhere (leakage). That member states utilise different allocation methods is seen to compromise the scheme’s effectiveness: “It means that it is more attractive to build combined heat and power in Germany than in Sweden. But it is not better in terms of emissions”. The EU ETS and equity
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Since the ETS targets a handful of energy-intensive sectors and does not include all greenhouse gases, respondents cited concerns for intersectoral equity – particularly since emission-intensive industries such as transport and aviation are excluded. The lack of a global carbon market poses risks for multinational electricity companies since large industrial customers may relocate energy-intensive operations, such that the fragmented state of global climate policy is also seen to create an unlevel playing field. A second equity issue relates to the way that pollution permits are allocated within the scheme. Divergent allocation methods are also seen to compromise both the inter- and intrasectoral equity of the scheme. For the second (current) phase of emission trading, the Swedish government decided to abolish partially the method of grandfathering allowances deployed in the first phase whereas other member states did not. This created a heated debate in the electricity industry since other member states over-allocated, which led to windfall profiteering and distorted market competition. In the current phase the Swedish electricity industry receives no free allocations, in contrast to Swedish heavy industries and electricity producers in countries such as Germany and Denmark. The debate on allocation methods has continued regarding the post-2012 ETS. Swedenergy, the Swedish electricity industry association, advocated auctioning as the fairest, most effective allocation method, although it faced resistance from members that operate in the wider context of the EU. One multinational electricity company opposed these plans because of fossil-fuel dependency in mainland Europe, claiming that auctioning poses a threat to energy security. This company, together with Swedenergy, the Swedish Natural Gas Association and the Swedish District Heating Association then made a failed attempt to lobby for a more gradual introduction of auctioning. Swedenergy has been also been active on two other issues – the use of the Kyoto flexible mechanisms1 and the introduction of a cap decided at the EU level rather than via member states’ National Allocation Plans2. A cap is seen as a better means of establishing a fair and equitable trading system and the flexible mechanisms are seen to achieve cost-efficient reductions at a faster pace. The ETS and channels for CPA !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1
The Clean Development and Joint Implementation Mechanisms allow companies reduce emissions by investing in projects abroad where mitigation is more cost-efficient. 2 The distribution of emission permits between national industry sectors is currently decided via member states’ National Allocation Plans. Whilst the European Commission oversees National Allocation Plans, responsibility for allocation lies ultimately with member states government authorities.
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CPA is pursued via three main channels – industry associations; direct interaction with policymakers, government authorities and agencies; and independently organised lobbying bodies that facilitate interaction with other interested partners. The three multinational energy companies that operate in Sweden have channelled some of their CPA through industry associations. Swedenergy has a working group dedicated to emission trading whose members cooperate in order to participate in public consultations regarding the national implementation of the scheme. The inclusion of multinationals can pose problems in trying to reach consensus within industry associations: “When I sit at Swedenergy there is a bit of a conflict given that I have to consider the view of the entire conglomerate, whereas other companies advocate views based only on what happens in Sweden. All the other companies preferred full auctioning [in the second phase of the ETS] but we didn’t, because we operate beyond Swedish borders”. Multinationals also pursue CPA via direct interaction with Swedish politicians, Eurelectric (the main European electricity industry association), and various other fora. They have offices in Brussels in order to interact directly with EU policymakers. They produce strikingly similar position papers that advocate emission trading, a long-term global CO2 market; equitable treatment of different industries; the inclusion of all global emissions; use of the flexible mechanisms; and auctioning as the preferred allocation method. In contrast, municipal companies pursue CPA more passively and indirectly via two industry associations – Swedenergy and the Swedish District Heating Association. Respondents perceived the ETS to be of lesser importance as most have low emissions and are not significantly affected by carbon prices: “We emit very little carbon dioxide – the economic value of emission trading permits is very small, especially in comparison to electricity certificates”. Another reason that municipal companies to limit themselves to CPA via industry organisations is that they lack the resources to engage at a broader level: “We are too small to have an impact via the European Parliament, so we participate via our industry association. They send emails for public consultations to which I reply. They have an office in Brussels, so hopefully they promote our views”. A handful of municipal energy companies claimed that industry associations misrepresent their interests because multinationals are too dominant. Although others refuted this view, respondents that staked this claim also refrained from CPA via industry associations.
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The Swedish ECS and resource dependency The majority of respondents have benefitted from the economic incentives created via the ECS and support the scheme because they like its market-based design, claiming that it is technologically and competitively neutral. Most respondents have made investments in biomass fuelled CHP, small-scale hydropower and wind power since the ECS was introduced. Investments in wind turbines have increased fivefold since 2007 and are expected to increase further since potentials for cheaper options are nearly used up. The possibility to refurbish existing plants, which allows companies to replace ageing equipment and increase efficiency or production capacity, is also seen to be positive. Since wind turbine technology has developed, the possibility to generate certificates from refurbishment allows companies to replace older turbines with newer, larger ones that produce more electricity. However, contrary to claims that all actors have the same opportunities to generate revenues via the ECS, SERO argued that: “It is impossible to apply for a loan to cover 80-90% of the costs of a wind turbine because banks want to know how much we will receive from electricity certificates beyond 2015. The only possible response is to say that we don’t know. The bank then requires that we provide 50% of the capital ourselves, so it is only really possible to borrow 40-50% of the overall cost. Larger actors do not need to borrow as much since they are so profitable”. The ECS thus appears to create more acute risks vis-à-vis external resource dependencies for smaller electricity producers, despite the fact that it was designed to be competitively neutral. The Swedish ECS and cost efficiency Most respondents argued that cost-efficiency is one of the main strengths of the ECS, because market demand drives investments and selects the cheapest options first. The most ardent proponents argued that the scheme’s market-based design facilitates investments in renewables with minimal government intervention and without having to rely on public finances, where the main benefit to consumers is that renewables are implemented at the lowest possible cost. However, SERO has repeatedly opposed the ECS and argued that the scheme is not costefficient due to value-added taxes and administrative charges: “There is a study which shows that the ECS will cost 70 billion Swedish crowns whereas an equivalent feed-in tariff would have cost 40 billion. From a socioeconomic perspective the certificate scheme is horribly expensive because of all the extra costs”. Another criticism of the scheme is that it lacks an
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official marketplace, such that certificate trades occur via brokers. A lack of information regarding supply and demand is thought to encourage speculative trading that jeopardises the liquidity of the certificate market and the cost-efficiency of the scheme. The Swedish ECS and effectiveness In 2000 the Swedish government introduced the ECS to replace direct subsidies for renewables. Prior to this decision government officials produced a pre-study that assessed four types of support systems (certificates schemes, feed-in tariffs, tendering procedures and subsidies). The study focused mainly on the benefits of certificate schemes in terms of cost-efficiency. Electricity producers were politically active at this early stage and voiced concerns for the effectiveness of the scheme. Having successfully lobbied for subsidies for renewables since the late 1980s, SERO was involved the pre-study: “I was part of the group that did the pre-study. It was clear to me that the feed-in tariff system provides more security to investments. The other government officials were interested in certificates schemes. As an advisor to the Swedish Centre Party, it was my job to write the party’s official position in light of the forthcoming proposal. However, government officials from the Swedish Trade and Industry Department performed something of a coup by convincing energy spokespersons from the Centre Party, the Green Party, and the Left Party that certificates schemes were the only option, and that feed-in tariffs would not comply with EU competition legislation. They agreed, but only because they hadn’t fully understood the context. Then they promised that none of their parties would oppose the system and that they would allow officials from the Department to implement the ECS”. Following the pre-study a former director of Swedenergy was asked by the government to design the ECS: “I said I would do it if I could choose the participants. I asked everybody in the industry – producers and authorities. When the investigation was opened for public consultation, only one objection was made. Usually there are more, but we received only one from SERO. They wrote that they were afraid that certificate prices would drop to zero. In reality they wanted a feed-in tariff. They referred to the success of feed-in tariffs in Germany, Denmark and Spain. I
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replied, stating that feed-in tariffs are fine if there are no limits in terms of costs, but that if cost is an issue then it is necessary to put pressure on producers via competition in the certificate market. Everybody else was in favour of the ECS”. Most respondents also argued that the limited size of the certificate market also results in price volatility, which impinges on both the effectiveness and the cost-efficiency of the scheme. However, with the exception of multinationals, most companies focus on improving the incentives provided by the scheme rather than expanding it to include other member states. The Swedish ECS and equity As noted above, smaller electricity producers challenge the competitive neutrality of the scheme because they cannot acquire loans with the same ease as larger companies. Hence the Swedish Wind Power Association, a handful of smaller companies and SERO are concerned that a concentration of renewables ownership among larger companies will occur. Furthermore, a second equity concern voiced by these organisations is that investments will take place in member states with potentials for and whose schemes offer greater incentives to invest in renewables. For instance, the Swedish system does offer extra support for offshore wind, but it is inadequate to compete with the UK system; Norway “has better potentials for wind and hydropower”; and Finland have proposed a feed-in tariff, so “the risk is that investments will move there instead”. As a result the Swedish Wind Power Association and SERO have advocated complementary support systems. The Wind Power Association is in favour of a tendering system for offshore projects, facilitating competition between prospective bidders. Some companies are in favour of raising the quota obligation such that Sweden generates a surplus of electricity supplied from renewables, which can then be exported to countries that struggle to meet targets. SERO is similarly in favour of increased support, though it has chosen another course of action. Despite initial opposition to the ECS, SERO has started to lobby for a parallel feed-in tariff that allows small producers “the possibility to choose between the security of the feed-in tariff, or they could gamble on the ECS. Feed-in is the most effective system. As a first step, we would like to complement the ECS with a feed-in tariff”. The Swedish ECS and channels for CPA Municipal energy companies have participated more actively in the development of the ECS than with the ETS, although CPA has mostly been mediated via the same channels. All !
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municipal respondents are in support of the ECS and its market-based design. One municipal company has been active on the issue of the market transparency (vis-à-vis the lack of an official marketplace) having arranged conferences and seminars in conjunction with a larger company in its region. Multinationals seek to influence the design of the ECS in almost exactly the same manner as with the ETS – they lobby EU policymakers directly and via industry organisations. Multinationals do not see the possibility of investments occurring in other member states as a problem: “I think the statement that offshore wind will not be triggered by this scheme is correct but it is not wrong”. Multinationals advocate a pan-European certificate scheme, which is seen to be most optimal in terms of cost-efficiency. Rather than pushing for changes that would make investments within Sweden more secure, multinationals are in favour of maximum flexibility in meeting targets. Swedenergy’s position is strikingly similar to that of the multinationals, as it is also in favour of harmonised support for renewables based on a certificates scheme, suggesting some truth in claims that large companies dominate the organisation at the expense of smaller companies’ preferences. SERO, however, has sought a different path by pursuing CPA via organisations such as the European Renewable Energy Foundation, the European Wind Energy association and the Swedish WPA that belong to the European renewable energy lobby. Discussion These findings indicate that climate policy is for the most part legitimate among members of the Swedish electricity industry, and that its legitimacy is founded upon the efficiency and stability with which financial resources incentivise business strategies to tackle climate change. It has been noted previously that companies that are highly dependent on the government for revenues are more likely to engage in CPA, especially if they have low levels of organisational slack (Hillman and Hitt, 1999; Hillman et al. 2009) and that policy salience (the impact of regulation on companies’ task environments) is another decisive factor (Cook and Barry, 1995; Magee, 2002; Schuler and Rehbein, 1997). If one considers the range of activities described here, a very convincing argument can be made that the need to manage external resource dependencies is the sole driver of CPA. For instance, where resource dependencies are not that significant to companies’ task environments – as is the case for municipal companies that do not extensively rely upon fossil fuels in the context of the EU ETS – CPA is not a priority to the extent that it is for companies who are heavily reliant on government subsidies for investments in renewables. Likewise, multinationals that have made investments in carbon sequestration technologies and which are dependent on energy-intensive industrial customers subject to global competition are
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keen to ensure that climate policy is both stable in the long term and comprehensive in terms of sectoral and geographical coverage. Without this multinationals’ resource dependencies are put at risk: “The most important issue for us is a global price for carbon dioxide emissions. Otherwise a situation may arise where our big customers relocate to other parts of the world. A lot of our customers are from energy intensive industries. They are hurt substantially by the increased electricity price that has resulted from the ETS. Electricity prices are much higher in Europe than in other parts of the world”. However there are reasons to believe that CPA is motivated by more than just resource dependencies. If one considers the cognitive dimensions of political activities, respondents were principally concerned with three policy evaluation criteria – the cost-efficiency, effectiveness and equity of the two instruments in question. Whilst preferences for these categories is to be expected of an industry (Crabbé and Leroy, 2008) it is striking to note that nearly all respondents framed their acceptance or opposition of policy on these criteria – particularly efficiency and effectiveness. For instance, the focus on effectiveness is reflected in both positive and negative appraisals of the ETS and the ECS. Proponents argued that the instruments deliver emission reductions at lowest possible cost (cost-efficiency delivers effectiveness) and disputants argued that the fragmented state of global climate policy results in leakage (inequity delivers ineffectiveness). Respondents were remarkably homogenous in framing their appraisals in terms of equity, efficiency and effectiveness, which reflects a shared or socially constructed view regarding the appropriateness of climate policy instruments. Even when resource dependencies are at stake and constituents seek to disrupt instruments, which is the case for the association of small energy producers (SERO), the response was to criticise policy in terms of these criteria. Furthermore, in doing so SERO cited a recent academic study that criticised the socioeconomic costs of the Swedish ECS (Bergek and Johansson, 2010). However, the main argument of the study in question was that the ECS is lacklustre in terms of dynamic efficiency, given a lack of support in bringing new renewable technologies to the market. The fact that SERO overlooked this argument is rather spectacular given the overarching objectives of Swedish energy policy and its focus on eco-innovation (Sarasini, 2009). It does nonetheless reinforce the notion that industry members share a collective understanding of the means by which to evaluate environmental policy, akin to the NIT perspective.
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That is not to say, however, that resource dependencies are unimportant. Views regarding market-based policy design diverge based on company size. Multinationals are in favour of maximum flexibility vis-à-vis policy harmonisation across the globe; municipal energy companies are concerned for inequities across the EU whereas small electricity producers and particularly the Swedish Wind Power Association are concerned that flexibility may boost the concentration of capital among larger players and result in investments moving abroad. These views are perhaps differentiated because multinationals generally tend to think globally; municipal companies think regionally and small companies locally. The undercurrent here is resource dependency – multinationals do not perceive risks associated with investments in renewables, for example, being made other parts of the EU, whereas municipal companies do. The latter are also more concerned about inequities in the ETS and in a similar vein smaller companies worry that they cannot acquire the capital required to glean revenues from the ECS. Notwithstanding, resource dependencies, even when threatened, are a seemingly inadequate means for respondents to disrupt cognitively institutionalised values and beliefs regarding environmental policy. In spite of problems related to institutional suboptimality (regarding the various inefficiencies of policy) and uncertainty (regarding medium- to long-term policy frameworks) – which have been noted as antecedents of institutional change (Child et al. 2007; Hardy and Maguire, 2008; Maguire et al. 2004; Seo and Creed, 2002) – none of the respondents sought to refute cognitively institutionalised values and beliefs of the industry via appraisals of climate policy despite the fact these mechanisms are at play. Even SERO’s refutation of both the ETS and the ECS is based on judgements of policy (in)effectiveness. While SERO seeks to disrupt existing policy instruments because of risks to resource dependencies, the organisation also elicits the same set of criteria as the rest of the industry in order to criticise public policy. SERO’s institutional work thus disrupts at the regulatory level yet maintains at the cognitive level. The ways that companies channel CPA tell a different story. Most CPA is isomorphic in that it is conducted via institutionalised channels. Most CPA occurs indirectly via industry associations, as one would expect in a corporatist setting (see table 1). Whilst multinational companies also seek to influence policymaking bodies directly, they are also active within institutionalised bureaucracies such as Swedenergy. The main reason for this discrepancy is company size – smaller companies argued that they neither have the status required to pursue CPA independently nor the same levels of expertise as multinationals. The latter assimilate vast
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information on individual policies and are thus more capable of using their expertise to influence policy. Multinationals also have offices in Brussels and maintain close ties with national governments such that they are better positioned to make key inputs, and as larger companies, multinationals are more visible on the political plane. Where municipal companies have pursued CPA on an individual basis, it is usually via legal channels and is based on policy design issues that pose significant threats to company operations. These findings are not unusual – company size is frequently cited as a proxy for the level of resources available for political activities in the CPA literature (Schuler and Rehbein, 1997) and neoinstitutionalists have noted the essentiality of resources vis-à-vis actors’ agency (e.g. DiMaggio, 1988). However, where resource dependencies are at risk, companies felt obliged to channel CPA in a manner that breaks with isomorphic trends. SERO pursued CPA indirectly via an unlikely set of organisations that belong to the European renewable energy lobby. SERO argued that it chose this path because it felt these organisations better represent its interests when compared with Swedish industry associations where it feels marginalised by dominant industry players. Whilst the main driver of these activities is resource dependency, SERO’s position as a peripheral industry player corroborates the neoinstitutional claim that such actors are more likely to act with agency given that they are less constrained by institutions, especially if larger companies dominate particular institutional settings (Garud et al. 2002; Haveman and Rao, 1997; Hirsch, 1986; Leblebici, 1991; Tushman and Anderson, 1986). Similarly, the CPA literature notes that policy salience – the impact of regulation on companies’ task environments – is a decisive factor in determining CPA (Cook and Barry, 1995; Magee, 2002; Schuler and Rehbein, 1997) and can force companies to pursue CPA through alternative channels (de Figueiredo and de Figueiredo, 2002; Hillman and Hitt, 1999; Rubin et al. 2001). SERO’s actions are driven by these factors given that subsidies are so critical to smaller producers’ renewable investment opportunities. Here a clear distinction can be made between companies that maintain existing institutional channels for CPA and those that are disruptive. Because of the factors described above the majority channel CPA via existing institutionalised bureaucracies and thus partake in maintenance work. However, those that experience significant risks associated with resource dependencies mediate CPA through alternative channels. CPA channels Direct interaction (with policymakers, government authorities or agencies)
Indirect interaction (via third party organisation)
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Smaller electricity producers (SERO) National
Municipal energy companies (Swedenergy, Swedish District Heating Association, Department of Trade and Industry, WPA)
Some municipal energy companies Multinationals
Multinationals (Swedenergy) Smaller electricity producers (EREF, EWEA, WPA) EU
Municipal energy companies (Swedenergy, Swedish District Heating Association, WPA)
Multinationals
Multinationals (Eurelectric) Table 1: channels for CPA in the Swedish electricity industry
Conclusion Since the instruments of Swedish climate and energy policy were introduced following EU directives, one could argue that the EU institutions should be regarded as the hub of institutional entrepreneurship in Swedish and other member states’ electricity sectors. However that would discount energy companies’ and numerous other stakeholders’ contributions to the institutionalisation of climate regulations. Whilst this study has focused on just one microcosm of such activity, it nevertheless elucidates some of the mechanisms, processes and pressures faced by companies in light of regulatory developments. The story here is one of collective institutional work, whereby an industry sector works for the most part collectively to contribute to the institutionalisation of climate/energy policy. Where CPA occurs via institutionalised channels and provides inputs to emerging regulatory framework, it represents institutional maintenance work that, when viewed in terms of cognitive institutional dimensions is crucial for the legitimacy of public policy. On the contrary, organisations that channel CPA in a manner that breaks with industry trends and/or refutes regulatory frameworks engage in disruptive institutional work that can threaten the legitimacy of public policy. NIT should recognise CPA for its agency, despite the fact that it does not always fit with contemporary notions of institutional entrepreneurship. This study provides some insights regarding the interplay between regulative and cognitive institutional dimensions. Although some NIT scholars disregard the notion that regulative mechanisms such as public policy belong to this field of study, others note that cognitive factors are “sometimes encoded in laws” (Greenwood and Suddaby 2006) or in prescriptive symbolic systems (Glynn and Lounsbury 2005) that comprise “assumptions, values, beliefs, formal and
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informal rules” (Chung and Luo 2008). When treated this way, studies of CPA provide a means to elucidate how cognitive institutions become embedded in their regulative counterparts. In particular, this study makes a theoretical contribution my demonstrating how CPA is a means for the translation of corporate preferences, values and beliefs into regulative institutions via institutional work. Institutional work, then, can be regarded as a mechanism whereby cognitively held values and beliefs are transmuted into regulative institutions. A second theoretical contribution is that this study shows how risks associated with resource dependencies are not sufficient to dislodge actors’ values and beliefs regarding the appropriateness of public policy. Whilst the study shows that such risks can facilitate agency insofar as actors are able to challenge and seek to disrupt regulative institutional arrangements, it also shows that these were not sufficient to incite agency vis-à-vis cognitive institutional elements. On the contrary, one could contend that the motives to engage in institutional work (i.e. maintenance / disruption of regulative institutional arrangements based on the need to manage external resource dependencies) is an epiphenomenon of cognitively institutionalised elements, which effectively extends the notion that institutions constitute actor rationalities (Meyer, Boli and Thomas, 1994; Sahlin and Wedlin, 2008) to studies of institutional work. This has implications for the concept of institutional work. Its founders utilise adjectives such as ‘purposive’ and ‘conscious’ alongside concepts such as ‘intentionality’ to refer to the manner in which individuals and organisations actively and deliberately seek to create, maintain and/or disrupt institutional arrangements (see Lawrence and Suddaby, 2006; Lawrence et al. 2009). The concept of institutional work would benefit from a more careful treatment of what may be regarded as ‘conscious’ action and future studies could thus focus on the interplay between regulative and cognitive dimensions of institutional work. Whilst this study shows that the maintenance / disruption of regulative institutions is based on active and conscious decisions related to resource-based interests, future research could seek to examine what constitutes interests in the field of institutional work, especially given a stated predilection for studies at the micro-level (Lawrence et al. 2009; Marti and Mair 2009) and the need to better understand the agency of individuals (Battilana and D’Aunno, 2009). A useful starting point would be to compare the individual psychodynamic attributes of institutional entrepreneurs (Kisfalvi and Maguire, 2011) with individuals who participate in institutional work. Since the latter, as noted in this study, are more likely to engage in collective institutional projects (especially as regards institutional maintenance) it remains to be seen whether they are required to have the same
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individual qualities and attributes as institutional entrepreneurs. Future research could thus examine how individuals who partake in institutional work respond to environmental stimuli given particular personal historical trajectories and formative experiences, and indeed whether a level of reflexivity or conscious intentionality similar to that inherent to institutional entrepreneurship is applicable to institutional work. Finally, whilst this study focuses on the way organisations seek to influence institutions, the processes examined here could arguably be part of a broader process of institutional change where institutions and action influence one another recursively. The recursive relationship between action and institution is central to the concept of institutional work (see Lawrence et al. 2009) yet in order to study this phenomenon more explicitly – and in order to examine action as a means to maintain and change institutions in a more dynamic fashion than Giddens’ (1984) “static portrayal of structuration” – studies of institutional change require a diachronic focus (Barley and Tolbert 1997). However for such an approach to deliver results an “enormous amount of luck or prescience [is] required to recognize an emerging institution and then gather data on relevant, ongoing actions and interactions” (Barley and Tolbert 1997, p. 100). Climate policy attempts to bring about a long-term process of institutional change that can be described as ‘decarbonisation’. Hence the climate issue provides an opportunity to examine this recursive model as new policies and corporate actions unfold over periods of decades. Decarbonisation also comprises multi-level institutional arrangements that are both present- and future-oriented. Hence it provides the opportunity to examine the concept of intentionality in relation to institutional work (Lawrence et al. 2009; Emirbayer and Mische 1998) and may thus provide clues as how to better navigate the structure-agency paradox faced by NIT. Acknowledgements This research was funded by the Swedish Research Council for Environment, Agricultural Sciences and Spatial Planning (FORMAS). Special thanks to Josef Pallas, Katarina Buhr, Merle Jacob and two anonymous reviewers for sharing your views on the study. References Barley S.R. & Tolbert, P.S. (1997). Institutionalization and Structuration: Studying the Links between Action and Institution. In Organization Studies, 18(1), 93-117. Battilana, J. & D’Aunno, T. (2009). Institutional Work and the Paradox of Embedded Agency. In T. Lawrence, R. Suddaby, & B. Leca (Eds.), Institutional Work: Actors and Agency in !
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