Interdependency, Complexity and Unintended Consequences: A Systemic Risk Approach to the Global Energy Transition

The transition from a high carbon to a low carbon paradigm resembles previous transition processes (e.g. from plan to market, or from dictatorship to democracy) in that it will fundamentally change societies and economic systems. At the same time, it arguably is significantly more ‘engineered’ in the sense that – compared to, say, revolutionary processes – the end state is well defined, and worked towards, for instance in the shape of nationally or regionally defined decarbonization targets. Because of the deep interdependencies built into the incumbent economic system – not the least a function of the historic development of the energy system – these rather decentralized policy choices are likely to send ripple effects back into the system, with implications for third actors or countries. The low carbon transition may also run counter to established modes of production in a globalized economy as it implies an inherently more localized energy supply, and with it arguably more fragmented industrial structures. These deep structural changes triggered by the global energy transition may, therefore, come with the risk of unintended consequences. This article defines the key properties of the unfolding global energy transition, and discusses them against the backdrop of a systemic risk approach. The article describes the key elements of systemic risk, a novel approach in risk research, and offers a categorization of possible risk characteristics of the energy transition. Though primarily conceptual in nature, the article also offers implications for a forward-looking policy approach to the global energy transition.