Energy policy refers to a set of rules and incentives designed to influence how society uses energy. Governments typically create national energy policies while local, regional, or global measures may also be taken as part of energy strategy implementation plans.

Energy policies encompass various strategies such as regulating energy markets, providing financial support (subsidies) for renewables, setting energy efficiency standards and encouraging research and development. Energy policies may also assist domestic oil and gas production while protecting the environment.

Renewable Energy

Electricity from renewable sources such as solar, wind, and hydropower has become the cornerstone of global efforts to reduce carbon emissions, improve air quality, and support sustainable economic development. Decarbonizing 90% of world power sector by 2050 through such renewables may allow countries to rid themselves of fossil fuel import dependency while mitigating climate change.

Governments play a critical role in driving renewable energy adoption by offering incentives like tax credits, grants, and feed-in tariffs to reduce upfront costs and increase financial viability. Such policies help drive investments that contribute to meeting our global goals for energy access, poverty alleviation, climate action and job creation – especially considering that renewable energy jobs create three times more employment than fossil fuel jobs do.

Fossil Fuels

Fossil fuels are formed through the decomposition of plants and animals over millions of years, and when burned for energy they release carbon dioxide into the atmosphere causing global warming.

Subsidies to increase fossil fuel production offer limited advantages in terms of energy affordability. They also exacerbate energy dependency and raise supply risks due to geopolitical conflicts, natural disasters or market volatility.

An effective approach to energy access involves managing demand rather than subsidizing prices directly, since subsidies encourage overconsumption, distort energy markets and discourage investments in cleaner technologies like electric vehicles or efficiency improvements.

The OECD tracks and measures government transfers and tax expenditures supporting fossil fuel consumption or production via its Inventory of Fossil Fuel Subsidies. This work serves as an invaluable source for policymakers attempting to remove ineffective fossil fuel subsidies – an objective set forth at international forums such as COP and the G20. Furthermore, its findings contribute towards developing and disseminating clean technologies that can replace fossil fuels without increasing climate risks such as carbon capture utilization and storage (CCUS).

Energy Efficiency

Energy efficiency can reduce both consumption and emissions while providing economic advantages to consumers, including cost savings, increased services access, and environmental mitigation. To realize these goals, energy efficient standards and labeling programs for major electric equipment can be implemented with rigorous cost-benefit (CBA) or net economic impact (NIA) analyses being performed on major pieces.

Energy-efficiency improvements have contributed significantly to reducing global energy intensity since 2000, and by speeding them up could account for one third of all emission reductions needed to reach net zero carbon by 2050. These reductions can be accomplished through speeding up electrification, implementing technical efficiency upgrades and encouraging behavioral changes.

Emerging economies often struggle with accessing electricity due to upfront costs associated with energy efficient appliances and equipment, yet this can be overcome through lifecycle cost analysis – a financial metric which calculates all associated expenses of investments over their entire lifetime – which allows policymakers to understand both positive and negative impacts associated with various energy-efficiency regulations.

Energy Storage

Energy storage is an invaluable tool in supporting renewable energy policies and achieving sustainability in both electricity consumption and generation. It adds flexibility to electric grids by storing energy during periods of low demand and discharging it when demand spikes – helping smooth out electricity prices and reduce peak demand charges for both commercial and industrial consumers. Furthermore, storage helps regulate frequency and voltage and can defer costly transmission and distribution investments to alleviate congestion issues.

States can promote energy storage through various incentives and regulations, including net metering and rate design. Allowing residential and commercial energy storage systems to participate in energy auctions or increasing PACE financing value of solar plus storage technologies makes these solutions more appealing; other policy tools include procurement targets that stipulate an amount of storage that utilities must purchase by certain dates in order to signal long-term government interest and encourage greater investments into energy storage solutions.