1. Policy Instruments
February 6, 2013
Sustainable Energy Policy

2. 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
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Energy Sustainable Energy Policy

3. 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
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sustainable energy policy

4. Evaluative Criteria environmental effectiveness economic efficiency
administrative feasibility
political feasibility
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5. 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
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sustainable energy policy

6. 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
he setting of a performance standard of 375 tonnes CO2/Gwh for Canada's 53 coal-fired electricity generating units promises little. There are several "flexibilities" (Environment Canada's term) built into the proposed regulation: they don't apply to existing units until they are "old" years old and at the end of a power purchasing contract. Existing units are otherwise grandfathered. Also, "new" units built before 2015 are not subject to the performance standard.
sustainable energy policy

7. 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
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sustainable energy policy

8. 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
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sustainable energy policy

9. Voluntarism and Information
Can produce more informed decisions about costs and efficacy
Example: One Tonne Challenge
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sustainable energy policy

10. 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
California cap and trade program
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11. February 6, 2013
Sustainable Energy Policy

12. 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
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Sustainable Energy Policy

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

14. Missing Instruments? direct provision “Crown” corporations
National Oil Companies increasingly important
Klare: 81% of proven reserves controlled by NOCs
Klare: 81% of proven reserves controlled by NOCs
1990: Mulroney privatized, but kept 19% share
2004: fully privatized
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sustainable energy policy

15. Evaluative Criteria environmental effectiveness economic efficiency
administrative feasibility
political feasibility
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16. Because of different marginal costs of control, market-based regulations are more cost-effective
Pre-mitigation
Regulation: 30% reduction
Cap and trade: 30% reduction
Coal Plant
Costs: $20/t
Emissions: t/yr
Costs: 0
Emissions: 700 t/yr
Costs: $6,000
Emissions: 400 t/yr
Costs: $0
Cement Plant
Costs: $40/t
Costs: $12,000
Costs: $12,000 (to coal plant)
Total
Emissions: t/yr
Emission: 1,400 t/yr
Cost: $18,000
Cost: $12,000
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Sustainable Energy Policy

17. Evaluating energy sustainability policy instruments
effectiveness
efficiency
Administrative feasibility
political feasibility
Info/persuasion
subsidy
Emission tax
Cap and trade
C&C Regulation
February 6, 2013
Sustainable Energy Policy

18. January 21, 2010

19. Carbon tax in 2008 federal election
“I believe that good policy is good politics”
Stephane Dion
Humiliating loss, resignation as party leader
Message, or messenger?
Sustainable Energy Policy

20. Carbon tax in 2009 BC election
NDP “axe the tax” campaign
Campbell and BC Liberals win 3rd majority government
Sustainable Energy Policy

21. Federal conflict in
Repeated Harper government attacks on NDP for supporting a carbon tax
NDP’s position is cap and trade
Sustainable Energy Policy

22. 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
February 6, 2013
Sustainable Energy Policy