Adequacy of Renewable Energy Policies: A Preliminary Assessment Graphics created by Ullupta conecum re volupta evelignis pe et doluptuam. Adequacy of Renewable Energy Policies: A Preliminary Assessment Muyi Yang Deepak Sharma Suwin Sandu

Content Background Objective Methods Emission reduction targets Policy incentives for promoting renewable energy Adequacy of existing policy incentives Conclusions

Background Global electricity generation has historically been dominated by fossil fuels This domination has made significant contribution to global socio- economic prosperity It has however made electricity industry one of the largest emitters of greenhouse gas

Global emissions by sector Source: OECD (2012) Environmental Outlook to 2050

Background (cont.) Efforts have therefore been undertaken to search for ways to defossilise electricity generation Various options are under consideration, such as, energy efficiency, clean coal, nuclear, etc. Among these options, a consensus seems to have emerged on the increased use of renewable energy as an attractive option for such defossilisation According to IEA (2016), reduction in the share of renewable generation from 22% in 2013, to 67% in 2050, could reduce emission intensity of electricity by 90%

Background (cont.) Such a significant increase in the share of renewable generation will however be a extremely challenging task Why? Because the uptake of renewable energy faces a range of technical, economic, regulatory and socio-political barriers Sound and effective policies are required to overcome these barriers, so as to promote renewable energy sufficient for redressing the climate change challenge

Objective To assess the adequacy of current renewable energy policies for defossilising electricity generation

Methods Assessment of the adequacy of existing renewable energy policies Emission reduction targets Incentive-structures for promoting renewable energy

Methods (cont.) The assessment is carried for 15 selected developed and developing countries Developed economies: Australia, New Zealand, United States, and major European countries (especially, Germany, Norway and United Kingdom) Emerging economies: Brazil, Chile, China, India, Malaysia, Thailand and South Africa Potential economies: Bangladesh, and Kenya

Emission reduction targets A significant variation in the ‘form’ of emission reduction targets Base year target in developed economies Targets for reducing projected emissions (i.e., baseline scenario target, and trajectory target), or for reducing energy intensity (i.e., intensity target), in most emerging and potential economies Some large emitters (such as, China) are also committed to peak their emissions before 2030

Emission reduction targets (cont.) A significant variation in the ‘conditionality’ of emission reduction targets Unconditional targets in developed economies and some emerging economies (such as, China, and India) Partial conditional targets in Chile, Malaysia, and Thailand Full conditional targets in potential economies

Emission reduction targets (cont.) Among the mitigation actions for achieving the emission reduction targets, increased use of renewable energy is one of the main areas for action

Policy incentives for renewable energy   Market-based Regulation-based Fiscal and Financial incentive Quantity- based Price-based Developed economies Australia √ Germany New Zealand Norway UK United States Emerging economies Brazil Chile China India Malaysia Thailand South Africa Potential economies Bangladesh Kenya

Policy incentives for renewable energy (cont.) Two broad groups of polices incentives Market-based: quantity-based (e.g., renewable portfolio standards), and price-based (e.g., CfD FiTs, and feed-in premium) Regulation-based: quantity-based (e.g., public auctions), and price- based (such as, FiTs)

Policy incentives for renewable energy (cont.)   Market-based Regulation-based Fiscal and Financial incentive Quantity- based Price-based Developed economies Australia √ Germany New Zealand Norway UK United States Emerging economies Brazil Chile China India Malaysia Thailand South Africa Potential economies Bangladesh Kenya

Policy incentives for renewable energy (cont.) A significant diversity in these incentives across the countries Developed economies tend to rely more on market-based policies Regulation-based policies appear to be favoured in emerging and potential economies Besides, financial (e.g., soft loans, and public grants) and fiscal (e.g., tax exemptions) benefits are also provided for renewable energy in most countries

Adequacy of existing policy incentives Existing policy incentives are inadequate Why? Because they essentially seek to improve the cost-competitiveness of renewable energy This approach is limited, because it almost exclusively focus on removing economic barriers Non-economic barriers are largely ignored

Adequacy of existing policy incentives (cont.) There are however ample evidences to suggest that these barriers could significantly impede the uptake of renewable energy Further, these barriers are closely linked with the wider socio-political interests Attempts to remove these barriers are therefore likely to disturb the prevailing socio-political interests, resulting in opposition to their removal

Conclusion Definitive targets for emission reduction are set in all developed, emerging and potential economies Several areas have also been identified for actions for achieving the targets, and renewable energy is one of the main action areas A range of policy incentives have been proposed to promote renewable energy There is significant diversity in these policy incentives across the countries

Conclusion (cont.) These incentives essentially seek to remove the economic barriers for renewable energy by, for example, providing price subsidies, tax benefits, and public grants They ignore non-economic barriers, despite amply evidences suggesting that these barriers could significantly impede the uptake of renewable energy They are therefore unlikely to promote renewable energy sufficient for redressing the climate change challenge

Conclusion (cont.) Further, these non-economic barriers are closely linked with the wider socio-political interests An understanding of these interests and how they affect the uptake of renewable energy is a pre-requisite for developing more effective policy incentives for promoting renewable energy

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