Energy policy guides the use of energy sources and infrastructure, helping economies expand. Furthermore, it can protect people and the environment from harmful impacts associated with fossil fuel combustion.
Countries design energy policies to suit their national interests. This may involve decarbonization, system reliability, resource diversification, technology export potential and electricity access as part of the mix.
Fossil Fuels
Fossil fuels account for an estimated 80 percent of global energy production. When burned, they release carbon dioxide into the atmosphere – acting as a greenhouse gas and contributing to global warming. Unfortunately, fossil fuels are non-renewable sources of energy and will eventually run out, forcing us to find more sustainable solutions.
The extraction and burning of fossil fuels produces harmful air pollutants, including benzene (a chemical linked to leukemia), formaldehyde (a known carcinogen) and particulate matter. Mining operations and fracking expose workers to toxic substances; furthermore, coal and oil and gas production in predominantly Black or low-income communities has increased their vulnerability to climate change impacts.
Policies which reduce demand rather than supply for planet-warming fossil fuels are more effective at combatting climate change. To ensure a smooth transition, transition policies should be equitable and tailored specifically to local requirements, providing support for worker pensions, healthcare benefits and income support during retraining.
Nuclear Power
Nuclear energy generation accounts for roughly 10% of total worldwide energy production and can help ensure stable electricity systems while complementing decarbonisation strategies with carbon-free generation.
Nuclear is one of the cheapest sources of electricity, providing security, reliability and extremely low greenhouse gas emissions. However, nuclear faces market failure risks in markets characterized by low gas prices or subsidies for intermittent renewable sources like solar.
Pricing external benefits has the power to address market failures by offering compensation for nuclear’s positive contributions (e.g. through zero-emission credits or ZECs). It could also make nuclear more competitive in markets that charge fossil fuel generators for their impacts on climate – such as carbon taxes or emissions trading regimes. Aging nuclear plants present additional safety challenges, with risks from production accidents and exposure to radiation being major concerns; deaths related to such accidents being far fewer in nuclear than in either coal or natural gas generation plants.
Renewable Energy
The 2015 Paris Climate Change Agreement inspired numerous countries to implement or strengthen renewable energy policies. Beyond their carbon reduction potential, affordable renewables also create economic development and jobs while decreasing dependence on imported fossil fuels for energy security.
Renewable energies offer many opportunities for electricity production and heat production in buildings, industry, and transport – providing both electricity and heat production while helping mitigate climate change adaptation and resilience efforts.
Renewable technologies can be costly to deploy, so governments often support their development through targeted policy measures like tax incentives and auction mechanisms. A feed-in tariff (FIT) is a popular policy option which guarantees renewable energy producers privileged grid access with a guaranteed payment rate, encouraging investment into renewables while covering costs through surcharges on all electric customers of a utility providing the FIT. Furthermore, numerous states/provinces and local municipalities have established green banks to facilitate financing renewable projects.
Energy Efficiency
Economic policy to encourage energy efficiency and consumption reduction is a central tenet in transitioning towards low-carbon energy systems. Subsidies have proven successful at increasing market demand for efficient products and services while stimulating energy-saving behaviours and investments, but research shows that rates of subsidization vary across regions – low-income communities more vulnerable to energy insecurity and the effects of climate change tend to receive only a smaller portion of overall subsidies awarded.
Governments can create financing mechanisms to assist consumers with the higher upfront costs associated with energy efficiency upgrades. Such sources could include public benefits funds (a fee on utility bills used to support energy efficiency), green banks or property assessment programs. Furthermore, governments can create incentive mechanisms through rebates or demand response programs designed to incentivize users to shift their energy usage during times of peak energy demand and ease pressure on the power grid.