Regulation, Economic Instruments, and Sustainable Energy

Abstract

This chapter explores the roles of policy instruments that might be introduced by governments to facilitate transition to a low carbon economy, with a focus on the energy sector. It focuses on policies that have a material impact on a country's emissions or impose significant total costs regulation. Investigating a range of policies, covering emission trading, fiscal incentives, technology and performance standards, feed‐in tariffs, and certificates, the chapter finds that no single policy instrument or set of instruments can claim superiority in terms of contributing to a sustainable global energy future. While economic instruments in principle have the edge over regulation in terms of their flexibility and consequently their efficiency, this is not always the case in practice. The chapter concludes that each country's individual energy profile will eventually determine which policies might sensibly form part of the policy mix, as well as the political, economic, and social constraints within which its government must make decisions.