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Policy Instruments. Extra midterm office hours. Today only change: 12-1:30, not 2-3:30 Next week Monday 1-3 Tuesday 12-2. Policy Instruments in Context. actions, policies, governance actions – behavioural actions energy choices by firms, consumers

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policy instruments

Policy Instruments

Sustainable Energy Policy

extra midterm office hours
Extra midterm office hours
  • Today only change: 12-1:30, not 2-3:30Next week
    • Monday 1-3
    • Tuesday 12-2

Sustainable Energy Policy

policy instruments in context
Policy Instruments in Context
  • actions, policies, governance
    • actions – behavioural actions
      • energy choices by firms, consumers
    • policies – rules produced by government that influence actions
      • Objectives (increase renewable electricity)
      • Instruments (renewable portfolio standard)
      • Settings (10% by 2012)
    • governance – who decides the rules

Energy Sustainable Energy Policy

toolbox of policy instruments jaccard
Toolbox of Policy Instruments – Jaccard
  • command and control regulation
  • financial disincentives (taxes)
  • financial incentives (subsidies)
  • voluntarism and information
  • market oriented regulations – emissions cap and tradable permits (ECTP)
  • market oriented regulations – artificial niche market regulations

sustainable energy policy

evaluative criteria
Evaluative Criteria
  • environmental effectiveness
  • economic efficiency
  • administrative feasibility
  • political feasibility

sustainable energy policy

command and control regulation
Command and Control Regulation
  • Legally binding
  • forces particular action
  • does not encourage actions beyond that required
  • require same actions from actors with different marginal costs of control
  • Example: automobile or appliance efficiency standard

sustainable energy policy

command and control regulation example proposed coal ghg regs
Command and Control Regulation – example – proposed coal GHG regs
  • Performance standard: coal plants can’t exceed 375 tons of CO2 per Gigawatt-hour
  • Current not possible with carbon capture and storage (CCS)
  • Starts in 2025 for new plants + those that have reached end

sustainable energy policy

financial disincentive taxes
Financial Disincentive - Taxes
  • Does not prohibit action, but taxes it
  • Can’t guarantee a particular outcome
  • Sensitive to diversity of producer costs and consumer preferences
  • Example: tax on tonne of carbon emitted – BC
    • 2010: $20 per tonne of CO2 equivalent
    • 2011: $25
    • 2012: $30

sustainable energy policy

financial incentives subsidies
Financial Incentives (Subsidies)
  • Government spending reduces cost of action
  • Examples:
    • rebate for fuel efficient cars (Canada’s ended)
    • ecoENERGY Retrofit Grants and Incentives
    • Royalty breaks for fossil fuel production
    • Research – see Post Partisan Power

sustainable energy policy

voluntarism and information
Voluntarism and Information
  • Can produce more informed decisions about costs and efficacy
  • Example: One Tonne Challenge

sustainable energy policy

market oriented regulations emissions cap and tradable permits ectp
market oriented regulations – emissions cap and tradable permits (ECTP)
  • Caps total amount of emissions
  • Distributes allowances (permits) to polluters
  • Polluters can trade permits
  • Effective in that you get greater certainty over emissions
  • Design issues in startup – should initial permits be auctioned off or “grandparented”
  • Example:
    • European Uni0n’s Emission Trading System
    • Western Climate Initiative

sustainable energy policy

stavins key design elements
Stavins: Key design elements
  • Gradual trajectory of emission reductions
  • Tradeable allowances
  • Upstream regulation with economy-wide effects
  • Mechanisms to reduce cost uncertainty
  • Allowance allocation
  • Provisions for offsets
  • Linkage with other countries

Sustainable Energy Policy

market oriented regulations artificial niche market regulations
market oriented regulations – artificial niche market regulations
  • Require a certain % of the market to have performance characteristics
  • Can “force” innovation
  • Examples
    • Renewable portfolio standard

sustainable energy policy

missing instruments
Missing Instruments?
  • direct provision
  • “Crown” corporations
  • National Oil Companies increasingly important
    • Klare: 81% of proven reserves controlled by NOCs

1990: Mulroney privatized, but kept 19% share

2004: fully privatized

sustainable energy policy

evaluative criteria1
Evaluative Criteria
  • environmental effectiveness
  • economic efficiency
  • administrative feasibility
  • political feasibility

sustainable energy policy

because of different marginal costs of control market based regulations are more cost effective
Because of different marginal costs of control, market-based regulations are more cost-effective

Sustainable Energy Policy

policy politics mismatch
Policy-Politics Mismatch
  • Politicians prefer non-compulsory policies
  • History shows us they are insufficient
  • Market-based instruments are more cost effective
  • Policy trend:
    • Failure of Congress to enact cap and trade leading US to pursue regs
    • Canada committed to harmonizing - Canada slowly pursuing regs

Sustainable Energy Policy