Incumbents and institutions in sustainability transitions

Abstract

The current use of fossil fuels for the purpose of energy and materials production creates a number of pressing sustainability problems, such as climate change. Therefore, the fossil fuel system is in need of a fundamental transformation. However, despite this need, the targets set by policy makers, and the availability of renewable energy technologies, the fossil fuels system keeps expanding. This raises the question of why it is so difficult to move away from fossil fuels. To answer this question, this thesis focuses on both institutions and incumbents in the energy transition. The fossil fuel system is aligned with an extensive set of rules or institutions that both enable and constrain our behavior and provide meaning to our society. An important characteristic of institutions is that they provide stability and resist change. Incumbents have heavily invested in the fossil fuel system and therefore have extensive vested interests. Incumbents stand to lose a large share of their potential profits when energy production shifts towards renewable energy technologies. Therefore, it is likely that incumbents will attempt to protect their fossil fuel interests. The field of sustainability transitions has acknowledged the central role of institutions and the importance of incumbents in transition processes. However, little attention has been paid to the relationship between incumbents and institutions. This thesis focuses on how incumbents influence institutions as well as on how institutions influence incumbents. The theoretical framework consists of the institutional work and institutional logics stream within institutional theory. This thesis contains four case studies in the context of the Dutch fossil fuel system. The Netherlands was chosen for its stagnant energy transition and its many large incumbents related to fossil fuel activities. Our data collection includes interviews, newspaper articles, policy documents, annual reports, and organization websites. Analysis was conducted through categorization and constant comparison of the data in iteration with the theoretical framework. Multiple data sources were used to assure triangulation of the data. In terms of institutional work, this thesis concludes that incumbents influence institutions by cooperating with government, providing an alternative plan, framing private interests as public interests, commissioning research, and by speaking through the media. Incumbents are very capable at influencing institutions to their own benefit, and are more effective than new entrants’ institutional work. In terms of institutional logics, this thesis concludes that incumbent network operators’ behavior is guided by a hierarchy logic featuring operation according to the Gas Law, responsibility for safety and reliability, and preference for large-scale arrangements. Innovative practices tend to be at odds with this logic, as is the case with biomethane production. The implications of this thesis´ findings are that incumbents exert a considerable influence on the unfolding of sustainability transitions. Namely, institutions and institutional change are a crucial part of sustainability transitions and incumbents’ institutional work activities contribute to institutional change that is aligned with the incumbents’ interests. Dutch government should therefore develop its own energy transition vision, independent from incumbents and with ample attention for ideas from new entrants.