Abstract

The energy market is characterized by significant imperfections. Negative external effects and other market imperfections have, among other things, a serious consequence - they send the wrong price signals and mask the real costs that arise in the process of energy production and consumption. As a result, there is a serious degradation of the environment at the local and global level. Negative effects at the global level, such as the depletion of non-renewable resources and changes in the global climate, represent the most serious challenges facing humanity today. Public sector responses to market imperfections, in the form of various measures and instruments, are well known in economic theory and have proved effective in practice in many circumstances. However, the fact that giving priority to economic and social goals in public policies can have and often results in deterioration of the quality of the environment is mainly ignored in the professional literature even today. In addition, the failure of energy regulations leads to environmental degradation. The situation is especially critical in many developing countries. In the race to achieve goals in the field of industry, agriculture or energy, there are major environmental problems that lead to environmental unsustainability as collateral damage. From an economic point of view, both the effectiveness and efficiency of energy policy are important, in terms of its potential to contribute to improvements in the field of environmental protection and energy efficiency. One of the best strategies is to introduce important aspects of the environment into the market sphere. In this way, the limitations of natural resources would be reflected in their prices. Abolishing the practice of large subsidies and underestimation of fossil fuel prices is certainly a step in the right direction.

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