Energy Policy Instruments Research Articles

The evaluation of renewable energy policies across EU countries and US states: An econometric approach

Renewable energy policies are implemented to promote the diffusion of renewable energy sources within the market. However, their effectiveness on renewable electricity capacity remains subject to uncertainty. This paper addresses what renewable policy instruments are effective ways to increase capacity of renewable energy sources. This study employs a 1990–2008 panel dataset to conduct an econometric analysis of policy instruments, namely, feed-in tariffs, quotas, tenders and tax incentives, in promoting renewable energy deployment in 27 EU countries and 50 US states. The results suggest that renewable energy policy instruments play a significant role in encouraging renewable energy sources, but their effectiveness differs by the type of renewable energy policy instruments. Findings reveal that feed-in tariffs, tenders and tax incentives are effective mechanisms for stimulating deployment capacity of renewable energy sources for electricity, while the other commonly used policy instrument – quota – is not.

Estimation of the energy efficiency in Chinese provinces

China is one of the largest energy consumers and CO2 emitters globally. The growth rate of energy consumption in China is about 6 % per year, and it consumed 21 % of the world’s total energy in 2012. In recent years, the Chinese government decided to introduce several energy policy instruments to promote energy efficiency. For instance, the reduction targets for the level of energy intensity have been defined for provinces in China. However, energy intensity is not an accurate proxy for energy efficiency because changes in energy intensity are a function of changes in several socioeconomic factors. In this paper, we present an empirical analysis on the estimation of the persistent and transient energy efficiency of Chinese provinces by employing a log-log aggregate energy demand frontier model. The model is estimated by using data on 29 provinces observed over the period 2003 to 2012. Several econometric model specifications for panel data are used: the random effects model and the true random effects model along with other versions of these models. Our analysis shows that energy intensity cannot measure accurately the level of efficiency in the use of energy in Chinese provinces. Further, our empirical analysis shows that the average value of the persistent energy efficiency is around 0.81 whereas the average value of the transient energy efficiency is relatively high and shows a value of approximately 0.97. By improving the level of efficiency in the use of energy to 100 %, the total energy consumption in China would decrease by approximately 1000 Mtce, which corresponds to 25 % of total energy consumption in 2012.

A Tangled Web: Assessing overlaps between energy and environmental policy instruments along the electricity supply chain

AbstractIn OECD countries, many overlapping energy and environmental policy instruments are targeting the various stakeholders in the electricity supply chain (producers, transmission and distribution companies and various consumers). Although synergies between different policy instruments exist, e.g. reducing acidification and climate change by reducing energy consumption, there are also measures whose effects counter each other. Such counter effects arise not only within different environmental policy instruments but also with energy policy instruments. This paper surveys the overlaps in the policy instruments that target the European Union electricity system and characterizes their interactions. A framework for further assessment and analysis of overlaps and co‐effects between policy instruments is presented. The development of policies and their implementation using specific instruments may then be better aligned. A brief discussion on how trade‐offs can be structured is made, as well as some notes on issues to be considered towards policy integration. Copyright © 2015 John Wiley & Sons, Ltd and ERP Environment

Assessment of relevance of different effects in energy infrastructure revitalization in non-residential buildings

This paper analyses the effects of energy infrastructure revitalization in public non-residential buildings in the contexts of energy planning support and energy policy creation. The approach created acknowledges the different degree of relevance of the specific aspects, the specific interests of different stakeholders in energy activity and the variable degree of influence of each effect on the overall development and sustainability of energy solutions. It is based on the mathematical concept of the analytic hierarchy process (AHP) as a multi-criteria optimization procedure. AHP conclusions provide significant contributions in strategic development and transitional path planning and energy policy instruments implementation, while taking all local society and economic specificities into account.Given the fact that the effects of energy infrastructure revitalization are diverse and multidimensional, this method provides an analytical framework suitable for a comprehensive understanding and relative relevance evaluation of each of the effects with the use of structured organization of thinking, facts, new knowledge insights, intuition, experience and performance indicators. The method establishes a comprehensive and systematic algorithm for reasoning and revealing all aspects of energy infrastructure revitalization, and results in an arguable alternative choice in correlation with quantitative (economic, technical) and qualitative (environmental, social) criteria.

Does the sun shine in the High North? Vested interests as a barrier to solar energy deployment in Finland

This article deals with solar energy policy and solar energy potential in Finland. Finland is one of the few countries in the EU that has taken hardly any direct subsidies into use for solar energy. At the same time, the transition to renewables is crucial in mitigating climate change. Finland's irradiation is almost the same as that of Germany, a country that is one of the top markets for photovoltaics in the world, also due to its successful support policy. Why does Finland not do likewise and adopt a support policy for solar energy to enforce its mix of renewables? What, if any, policy mechanisms would be needed to promote solar energy?The article provides an overview of supportive solar energy policy instruments in the EU countries, and an analysis of Finland's official energy strategies. The empirical part also consists of semi-structured interviews with different actors in the solar energy sector in Finland: politicians, corporations, entrepreneurs, industry representatives, public administrators and NGOs. The key finding is that the support measures envisaged depend on the vested interests of the actors involved. It would seem that some kind of support mechanism is required but the type of mechanism is of lesser significance.

Tradable Renewable Quota vs. Feed-In Tariff vs. Feed-In Premium Under Uncertainty

We study the performance under uncertainty of three renewable energy policy instruments: Tradable Renewable Quota (TRQ), Feed-In-Tariff (FIT), and Feed-In-Premium (FIP). We develop a stylized model of the electricity market, where renewables are characterized by a positive learning externality, which the regulator aims to internalize. Assuming shocks on the fossil-based electricity supply, renewables supply, or on total electricity demand, we analytically derive the conditions determining the instruments’ relative welfare ranking. Although we generally confirm the key role of the slopes of marginal benefits and costs associated with the policy, the specific ranking depends on which type of uncertainty is considered, and whether shocks are permanent or transitory. However, a high learning rate generally favours the FIT, while TRQ is mostly dominated by the other two instruments. These results are confirmed in a numerical application to the US electricity market, in which the FIP emerges as the most and TRQ as the least robust overall choice.

Linking the emissions trading schemes of Europe and China - Combining climate and energy policy instruments

Both Europe and China have announced targets for greenhouse gas emissions reduction and renewable energy development. To achieve their emissions targets, Europe has introduced emissions trading scheme (ETS) since 2005 and China has planned to establish a national ETS in 2015. We assess the impact of a joint Europe-China ETS when both climate and energy policy instruments are simulated in a multiregional general equilibrium model. Our results show that a joint ETS markedly increases total carbon emissions from fossil fuels even though global mitigation costs are reduced. Moreover, a joint ETS helps China achieve its renewable energy target, but for Europe, it works opposite. While the renewable energy target does not help Europe achieve additional abatement, the renewable energy target in China reduces mitigation costs and emissions, and increases renewable energy consumption and sales of carbon allowances. Financial transfer through a joint ETS remains marginal compared to China’s demand for renewable energy subsidies. We conclude that as long as an absolute emissions cap is missing in China, a joint ETS is not attractive for mitigation and China’s renewable energy target can reduce emissions.

Look to Sweden: The Making of a New Renewable Energy Support Scheme in Norway

Two renewable energy support schemes have spread across Europe: green certificate schemes (GCSs) and feed‐in tariffs (FITs). After a decade‐long policy‐making process, Norwegian decision makers decided in 2011 to adopt a GCS compatible with the already existing one in Sweden and thereby establish a joint Norwegian‐Swedish GCS. The article explores this process of policy transfer, and asks to what extent competition and policy learning contributed to Norway's choice of a GCS. It finds that competition was a barrier to a joint Norwegian‐Swedish GCS rather than (as predicted by some scholars) a driver of policy transfer. In terms of policy learning, it finds that Norwegian bureaucrats systematically were searching for information about renewable energy policy instruments in a process characterised by rational learning. However, this information was not taken into account by elected policy makers, whose learning was unsystematic and almost exclusively influenced by Sweden – making it a process of bounded learning. Finally, domestic factors that facilitated and constrained the policy transfer process are identified in the article. A reluctant bureaucracy defending the status quo policies constrained the policy transfer process. GCS as a market‐based instrument independent of yearly allocations over the annual national budgets facilitated the process by securing strong support in a broad coalition of stakeholder groups and thereby cross‐partisan support. The latter finding may contribute to the literature by underscoring the importance of domestic political factors.

Impact of energy policy instruments on the estimated level of underlying energy efficiency in the EU residential sector

The promotion of energy efficiency is seen as one of the top priorities of EU energy policy (EC, 2010). In order to design and implement effective energy policy instruments, it is necessary to have information on energy demand price and income elasticities in addition to sound indicators of energy efficiency. This research combines the approaches taken in energy demand modelling and frontier analysis in order to econometrically estimate the level of energy efficiency for the residential sector in the EU-27 member states for the period 1996 to 2009. The estimates for the energy efficiency confirm that the EU residential sector indeed holds a relatively high potential for energy savings from reduced inefficiency. Therefore, despite the common objective to decrease ‘wasteful’ energy consumption, considerable variation in energy efficiency between the EU member states is established. Furthermore, an attempt is made to evaluate the impact of energy-efficiency measures undertaken in the EU residential sector by introducing an additional set of variables into the model and the results suggest that financial incentives and energy performance standards play an important role in promoting energy efficiency improvements, whereas informative measures do not have a significant impact.

Measurement of the 'Underlying Energy Efficiency' in Chinese Provinces

China is one of the largest consumers of energy globally. The country also emits some of the highest levels of CO2 globally. In 2009, 18% of the world’s total energy was consumed in China and the growth rate of energy consumption in China is 6.4% per year. In recent years, the Chinese government decided to introduce several energy policy instruments to promote energy efficiency. For instance, reduction targets for the level of energy intensity have been defined for provinces in China. However, energy intensity is not an accurate proxy for energy because changes in energy intensity are a function of changes in several socioeconomic factors. For this reason, in this paper we present an empirical analysis on the measurement of the persistent and transient underlying energy efficiency of Chinese provinces. For this purpose, a log-log aggregate energy demand frontier model is estimated by employing data on 29 provinces observed over the period 1996 to 2008. Several econometric model specifications for panel data are used: the random effects model and the true random effects model along with other versions of these models. Our analysis shows that energy intensity cannot measure accurately the level of in the use of energy in Chinese provinces. Further, our empirical analysis shows that the average value of the persistent underlying energy efficiency is around 0.78 whereas the average value of the transient underlying energy efficiency is approximately 0.93.

Implementation of energy efficiency projects by Dutch industry

As potentials for energy savings are huge, industry can provide a major contribution to energy savings goals. This paper focuses on the energy savings realized under the Dutch voluntary agreements in the period 2001–2011. Participants in these schemes are obliged to plan and implement all measures with a payback period of less than 5 years. This paper shows how many of these projects have been implemented and how much savings they generate. Our findings show that large differences exist in the realized savings between individual companies. There is however no significant difference in savings observed between companies that participate in the Emission Trading System (ETS) and companies that do not. Although it is impossible to disentangle the drivers behind the implementation of these projects, the amount of savings suggest that at least part of them was implemented because of different energy policy instruments.

Combination of Energy Policy Instruments: Creation of Added Value or Overlapping?

In this article we present an application of the energy and climate policy Interactions (ECPI) decision support tool for qualitative ex-ante assessment of 21 combinations of energy policy instruments. Considering the weight given to each criterion of ECPI, we reached an overall result that policy instruments are considered quite fungible as regards their integration to an overall energy policy mix. Interactions of policy instruments for increasing renewable energy sources utilization with energy efficiency improvement and climate change mitigation instruments present a substantial added value compared to their stand-alone implementation.

A general technology adoption model of solar photovoltaic under feed-in tariff policy incorporating learning and network effects

There is now a plethora of renewable energy policy instruments to support the adoption of renewable energy technology and the generation of renewable electricity. Different ways to characterize such policies have included whether these policies are Price driven or Quota (Quantity) driven, generation based or capacity driven, etc. All such incentive-based policies (vs. Command and control policies) attempt to correct market failure of under supply of renewable energy. This paper uses a technology adoption approach to study the feed-in tariff policy for the photovoltaic (PV) technology. We developed a general economic model to study the adoption incentive for smaller system under a feed-in tariff regime. The model incorporates both the learning effect of system cost and a negative network externality effect inherent in the feed-in tariff policy. The latter is due to that nonadopters would need to contribute to payment for adopters' electricity generation. Using numerical methods, we demonstrated that the feed-in tariff model has the potential to exhibit bandwagon or accelerated adoption effects. Cost learning is key to contributing to this but network effects would serve to dampen it. Our model seems to able to explain the rapid growth pattern in PV systems installation capacity and generation in Germany during the growth period of 1999–2003. We explore some policy implications of the model and suggest future research directions.

Energy in Swedish industry 2020 – current status, policy instruments, and policy implications

The EU has established so-called 20–20–20 targets, which in relation to energy mean that each Member State shall improve energy intensity levels by 3.3% annually, leading to a reduced primary energy use of 20% by the year 2020, calculated from a projected level based on the primary energy use in 2005. Sweden has established a less ambitious target of 1.7% annual energy intensity improvement through 2020. The aim of this paper is to evaluate, ex-ante, the EU 2020 primary energy target for the Swedish industrial sector. An applied backcasting methodology is used. The assessment made in this paper is that actions that lead to between 31.6 and 33.2 TWh/year reductions in energy end-use are needed if the EU target is to be achieved. Results from this paper shows that the current energy policy instruments are not sufficient to the EU or Swedish targets. Estimations in this paper are that a primary energy target of about 22.3 TWh/year is reasonable. The paper concludes by presenting a roadmap on how the Swedish 2020 target can be achieved through: i) energy management; ii) energy-efficient technology; and iii) energy supply measures, with an approximate cost of 280–300 MEUR or 75–80 kWh per public EUR. Three major additional policy measures are needed compared with the current policy: including all energy carriers, not just electricity, in the Swedish long-term agreements program PFE; setting up networks; and making it possible for third parties, i.e., industry, to deliver excess heat into the monopolized Swedish district heating grids.

A study on the implementation of renewable heating technologies in the domestic sector in Ireland with implications on consumers' decision-making

Abstract The paper critically reviews and explores the impact of renewable energy heat policies to induce technological change in Ireland. It is in response to the challenge of better understanding the broad effects and attributes of renewable energy policy instruments in Ireland and beyond. Using the Irish residential sector as a case study, and analysing data of more than 31,600 technology installations under the Irish Government's Greener Homes Scheme [GHS], the paper assesses the extent to which policy makers may be informed of the willingness of consumers to adopt these technologies in their homes. In doing so, it attempts to provide valuable guidance for policy evaluation in relation to renewable energy in the residential sector. It represents investment decisions and technological choice by the end user and reflects the growing concern among energy policy markets regarding the representation of user preferences. The overall intent is to investigate the implications of analysing different variables and their contribution to making more balanced renewable energy policies. It provides a critical analysis of the Greener Homes Scheme, the key instrument for implementing Ireland's renewable heating policy from 2006 to 2010, established to induce technological change within the residential sector. In assessing the impact of the Scheme, attention focuses on decision frameworks for technological choice and the treatment of market and behavioural failures. It considers how consumers have responded to new technological policies aimed at deploying renewable heat technologies, and the specific policies aimed at advancing certain technologies over others. Through a case study investigation, the paper explores the relationship and dependencies that influence consumers' decision-making regarding the choice of renewable energy heating technologies in the domestic sector in Ireland. Consumer preferences and their subsequent investment decisions, motives and technological choice are reflected. It concludes that while economic factors are important, a much broader variety of determinants is required when analysing the process of adoption of technology.

A Qualitative Assessment of EU Energy Policy Interactions

The aim of this article is the presentation of the Energy and Climate Policy Interactions decision support tool for assessing qualitatively ex-ante combinations of various energy and climate policy instruments. This tool integrates six methodological steps, wherein a policymaker can intervene and set preferences that affect the outcome of policy interactions. The advantage of this approach is that it demonstrates to some extent the qualitative effects of interacting policy instruments, depending on the current policy goals and preferences of users.

Explaining and Improving the Adoption of Voluntary Environmental Programs: A Social Cognition-Based View on Program Design, Implementation and Evaluation

Voluntary Environmental Programs (VEPs) targeted at businesses are increasingly used as environmental and energy policy instruments. Numerous studies have focused on technological, economic, political, social and cultural factors that influence the success of a program. However, academic research and policy analysis have mostly focused on the impact and efficiency of programs while processes of VEP adoption and implementation that explain outcomes have been neglected to some extent. Recently, a growing body of research on environment and energy related behaviors has manifested. The study of factors influencing adoption behavior can contribute significantly to the understanding of VEP acceptance at the individual, organizational and societal level. In addition, limitations to voluntary program design and evaluation can be reduced by the application of behavioral and theory-based program planning. Social cognition models from social psychology and the technology acceptance literature show great potential to improve systematic understanding of VEP adoption behavior and enhance existing program design and evaluation methods. The present article adds to the existing academic literature and evaluation practice by reviewing social cognition-based models to further knowledge regarding VEP design, implementation and evaluation processes.

Strategic Sovereign Wealth Fund Investment and the New Alliance Capitalism: A Network Mapping Investigation

Sovereign wealth funds (SWFs) have grown rapidly in recent years both in value and in number. Despite a great deal of popular debate, very little scholarly attention has centered on the ‘strategic use’ of SWFs by states, that is, as tools to promote national development. Using a ‘network mapping’ approach, I investigate two case studies involving extensive strategic SWF investment: Qatar, Abu Dhabi, and Dubai's use of SWFs to promote the development of their aerospace sectors; and the deployment of the China Investment Corporation as an instrument of Chinese raw materials and energy policy. Strategically oriented SWF investment can be seen as a state-adaptive strategy under contemporary conditions of globalization and financialization. The viability of such a strategy, however, hinges on the manner in which it feeds into the strategies of firms and states at the receiving end of investment.

Editor's Notes

Editor's Notes

The Era of State Energy Policy Innovation: A Review of Policy Instruments

AbstractU.S. energy and climate policy has evolved from the bottom‐up, led by state governments, and internationally recognized for the use of unconventional and innovative policy instruments. This study focuses on policy instruments adopted throughout the era of state energy policy innovation that aim to diversify, decentralize, and decarbonize the electricity sector. Specific attention is devoted to the renewable portfolio standard, net metering, interconnection standards, tax incentives, public benefit funds, and energy efficiency resource standards. This analysis synthesizes the findings from the energy policy literature and provides a summary of the current state of understanding about the effects of various state energy policy instruments, and concludes with a discussion of broader trends that have emerged from the use of policy instruments in the state energy policy innovation era.