Framework for government interventions in energy markets
The energy transition demands rapid changes in the energy market, a pace the market itself cannot always handle. To maintain momentum towards the goals of the Paris Climate Agreement, the government will need to play an active role in the energy transition. This report outlines an intervention framework to support the government in identifying an energy transition issue and selecting the right policy instrument to address it effectively and efficiently.
Key insights
Why government intervention in the energy transition is necessary
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- The energy transition requires large-scale investments and a rapid switch that the market cannot achieve independently.
- Governments play a crucial role in promoting innovation and ensuring security of supply.
Criteria for government intervention
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- Interventions should be aimed at social importance, such as climate goals and energy security.
- Proportionality: the government may only intervene if the market cannot solve the challenge independently.
- Effectiveness and efficiency: Policies should have measurable goals and not use more resources than necessary.
Policy instruments and market interventions
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- State-owned companies can help develop crucial energy networks and infrastructure.
- Public-private partnerships can spread risks and stimulate innovation.
- Regulation and subsidies can steer market parties and stimulate sustainable behavior.
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