How a government or business deals with the physical property used for work
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Energy policy is the manner in which a given entity (often governmental) has decided to address issues of energy development including energy conversion, distribution and use as well as reduction of greenhouse gas emissions in order to contribute to climate change mitigation. The attributes of energy policy may include legislation, international treaties, incentives to investment, guidelines for energy conservation, taxation and other public policy techniques. Energy is a core component of modern economies. A functioning economy requires not only labor and capital but also energy, for manufacturing processes, transportation, communication, agriculture, and more. Energy planning is more detailed than energy policy.
Access to energy is critical for basic social needs, such as lighting, heating, cooking, and healthcare. Given the importance of energy, the price of energy has a direct effect on jobs, economic productivity, business competitiveness, and the cost of goods and services.
Frequently the dominant issue of energy policy is the risk of supply-demand mismatch (see: energy crisis). Current energy policies also address environmental issues (see: climate change), particularly challenging because of the need to reconcile global objectives and international rules with domestic needs and laws.[2]
The attributes of energy policy may include legislation, international treaties, incentives to investment, guidelines for energy conservation, taxation and other public policy techniques.
Economic and energy modelling can be used by governmental or inter-governmental bodies as an advisory and analysis tool (see: economic model, POLES).
Policy contexts
National energy policy
Some governments state an explicit energy policy. Others do not but in any case, each government practices some type of energy policy.
Measures used to produce an energy policy
USAID's Mission Director to Pakistan, John Groarke in a group photo with the live-line trainers for Energy Policy Program - September, 2015.
A national energy policy comprises a set of measures involving that country's laws, treaties and agency directives. The energy policy of a sovereign nation may include one or more of the following measures:
statement of national policy regarding energy planning, energy generation, transmission and usage
legislation on commercial energy activities (trading, transport, storage, etc.)
instructions for state-owned energy sector assets and organizations
active participation in, co-ordination of and incentives for mineral fuels exploration (see geological survey) and other energy-related research and development policy command
international energy sector treaties and alliances,
general international trade agreements,
special relations with energy-rich countries, including military presence and/or domination.
Factors within an energy policy
There are a number of elements that are naturally contained in a national energy policy, regardless of which of the above measures was used to arrive at the resultant policy. The chief elements intrinsic to an energy policy are:[5]
What is the extent of energy self-sufficiency for this nation
Where future energy sources will derive
How future energy will be consumed (e.g. among sectors)
What fraction of the population will be acceptable to endure energy poverty
What are the goals for future energy intensity, ratio of energy consumed to GDP
What is the reliability standard for distribution reliability
What environmental externalities are acceptable and are forecast
What form of "portable energy" is forecast (e.g. sources of fuel for motor vehicles)
How will energy efficient hardware (e.g. hybrid vehicles, household appliances) be encouraged
How can the national policy drive province, state and municipal functions
What specific mechanisms (e.g. taxes, incentives, manufacturing standards) are in place to implement the total policy
Energy policy sometimes dominates and sometimes is dominated by other government policies. For example energy policy may dominate, supplying free coal to poor families and schools thus supporting social policy,[6] but thus causing air pollution and so impeding heath policy and environmental policy.[7]: 13 On the other hand energy policy may be dominated by defense policy, for example some counties started building expensive nuclear power plants to supply material for bombs.[8] Or defense policy may be dominated for a while, eventually resulting in stranded assets, such as Nord Stream 2.
Energy policy decisions are sometimes not taken democratically.[9]
Corporate energy policy
In 2019, some companies “have committed to set climate targets across their operations and value chains aligned with limiting global temperature rise to 1.5°C above pre-industrial levels and reaching net-zero emissions by no later than 2050”.[10] Corporate power purchase agreements can kickstart renewable energy projects,[11] but the energy polices of some countries do not allow or discourage them.[12]
Public policy has a role to play in renewable energy commercialization because the free market system has some fundamental limitations. As the Stern Review points out: "In a liberalised energy market, investors, operators and consumers should face the full cost of their decisions. But this is not the case in many economies or energy sectors. Many policies distort the market in favour of existing fossil fuel technologies."[13] The International Solar Energy Society has stated that "historical incentives for the conventional energy resources continue even today to bias markets by burying many of the real societal costs of their use".[14]
Fossil-fuel energy systems have different production, transmission, and end-use costs and characteristics than do renewable energy systems, and new promotional policies are needed to ensure that renewable systems develop as quickly and broadly as is socially desirable.[15]Lester Brown states that the market "does not incorporate the indirect costs of providing goods or services into prices, it does not value nature's services adequately, and it does not respect the sustainable-yield thresholds of natural systems".[16] It also favors the near term over the long term, thereby showing limited concern for future generations.[16] Tax and subsidy shifting can help overcome these problems,[17] though is also problematic to combine different international normative regimes regulating this issue.[18]
By country
Energy policies vary by country, see tables below.
Ensuring adequate energy supply to sustain economic growth has been a core concern of the Chinese government since 1949.[19] The country is the world's largest emitter of greenhouse gases, and coal in China is a major cause of global warming.[20] However, from 2010 to 2015 China reduced energy consumption per unit of GDP by 18%, and CO2 emissions per unit of GDP by 20%.[21] On a per-capita basis, it was the world's 51st largest emitter of greenhouse gases in 2016.[22]China is also the world's largest renewable energy producer.[23] China is the largest producer of hydroelectricity, solar power and wind power in the world. The energy policy of China is connected to its industrial policy. The goals of China's industrial policy dictate its energy needs.[24]
India
The energy policy of India is to increase energy in India and reduce energy poverty,[25] with more focus on developing alternative sources of energy, particularly nuclear, solar and wind energy.[26][27] India attained 63% overall energy self-sufficiency in 2017.[28][29][30] The primary energy consumption in India grew by 2.3% in 2019 and is the third biggest after China and USA with 5.8% global share.[31][32] The total primary energy consumption from coal (452.2 Mtoe; 45.88%), crude oil (239.1 Mtoe; 29.55%), natural gas (49.9 Mtoe; 6.17%), nuclear energy (8.8 Mtoe; 1.09%), hydro electricity (31.6 Mtoe; 3.91%) and renewable power (27.5 Mtoe; 3.40%) is 809.2 Mtoe (excluding traditional biomass use) in the calendar year 2018.[33] In 2018, India's net imports are nearly 205.3 million tons of crude oil and its products, 26.3 Mtoe of LNG and 141.7 Mtoe coal totaling to 373.3 Mtoe of primary energy which is equal to 46.13% of total primary energy consumption. India is largely dependent on fossil fuel imports to meet its energy demands – by 2030, India's dependence on energy imports is expected to exceed 53% of the country's total energy consumption.[34] About 80% of India's electricity generation is from fossil fuels. India is surplus in electricity generation and also marginal exporter of electricity in 2017.[35] Since the end of calendar year 2015, huge power generation capacity has been idling for want of electricity demand.[36] India ranks second after China in renewables production with 208.7 Mtoe in 2016.[28] The carbon intensity in India was 0.29 kg of CO2 per kWhe in 2016 which is more than that of USA, China and EU.[37]
Although the European Union has legislated, set targets, and negotiated internationally in the area of energy policy for many years, and evolved out of the European Coal and Steel Community, the concept of introducing a mandatory common European Union energy policy was only approved at the meeting of the European Council on October 27, 2005 in London. Following this the first policy proposals, Energy for a Changing World, were published by the European Commission, on January 10, 2007. The most well known energy policy objectives in the EU are 20/20/20 objectives, binding for all EU Member States. The EU is planning to increase the share of renewable energy in its final energy use to 20%, reduce greenhouse gases by 20% and increase energy efficiency by 20%.[40]
Russia
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Russia's energy policy which is set out in the government's Energy Strategy document, first approved in 2000, which sets out the government's policy to 2020 (later prolonged up to 2030). The Energy Strategy outlines several key priorities: an increase in energy efficiency, reducing the impact on the environment, sustainable development, energy development and technological development, as well as improved effectiveness and competitiveness. Greenhouse gas emissions by Russia are large because of its energy policy.[41] Russia, one of the world's energy superpowers, is rich in natural energy resources, the world's leading net energy exporter, and a major supplier to the European Union. While Russia has also signed and ratified the Kyoto Protocol numerous scholars note that Russia uses its energy exports as a foreign policy instrument towards other countries.[42][43]
United Kingdom
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The energy policy of the United Kingdom has achieved success in reducing energy intensity (but still relatively high), reducing energy poverty, and maintaining energy supply reliability to date.[when?] The United Kingdom has an ambitious goal to reduce carbon dioxide emissions for future years, but it is unclear whether the programs in place are sufficient to achieve this objective (the way to be so efficient as France is still hard). Regarding energy self sufficiency, the United Kingdom policy does not address this issue, other than to concede historic energy self sufficiency is currently ceasing to exist (due to the decline of the North Sea oil production). With regard to transport, the United Kingdom historically has a good policy record encouraging public transport links with cities, despite encountering problems with high speed trains, which have the potential to reduce dramatically domestic and short-haul European flights. The policy does not, however, significantly encourage hybrid vehicle use or ethanol fuel use, options which represent viable short term means to moderate rising transport fuel consumption. Regarding renewable energy, the United Kingdom has goals for wind and tidal energy. The White Paper on Energy, 2007, set the target that 20% of the UK's energy must come from renewable sources by 2020.
United States
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The energy policy of the United States is determined by federal, state, and local entities in the United States, which address issues of energy production, distribution, and consumption, such as building codes and gas mileage standards. Energy policy may include legislation, international treaties, subsidies and incentives to investment, guidelines for energy conservation, taxation and other public policy techniques. Several mandates have been proposed over the years, such as "gasoline will never exceed $1.00/gallon" (Nixon) ($0.26 per liter), and "the United States will never again import as much oil as it did in 1977" (Carter),[44] but no comprehensive long-term energy policy has been proposed, although there has been concern over this failure.[45]Energy policy acts have been passed in 1992, 2005, 2007, 2008, and 2009[46] which include many provisions for conservation, such as the Energy Star program, and energy development, with grants and tax incentives for both renewable energy and non-renewable energy.
There is also criticism that federal energy policies since the 1973 oil crisis have been dominated by crisis-mentality thinking, promoting expensive quick fixes and single-shot solutions that ignore market and technology realities. Instead of providing stable rules that support basic research while leaving plenty of scope for American entrepreneurship and innovation, congresses and presidents have repeatedly backed policies which promise solutions that are politically expedient, but whose prospects are doubtful, without adequate consideration of the dollar costs, environmental costs, or national security costs of their actions.[47][48] By 2018, the US is on the verge of achieving energy security or self-sufficiency as the total export of coal, natural gas, crude oil and petroleum products are exceeding imports.[49][50] The US had a trade surplus in the energy sector by 2018.[51][52] In the second half of 2019, the US is the top producer of oil and gas in the world.[53] After becoming net exporter of crude oil and its products for a brief period of less than one year, US is expected to become net importer of crude oil and its products in 2020 due to fall in price of crude oil.[54][55]
^Farah, Paolo Davide; Rossi, Piercarlo (December 2, 2011). "National Energy Policies and Energy Security in the Context of Climate Change and Global Environmental Risks: A Theoretical Framework for Reconciling Domestic and International Law Through a Multiscalar and Multilevel Approach". European Energy and Environmental Law Review. 2 (6): 232–244. SSRN1970698.
^Robert C. Armstrong, Catherine Wolfram, Robert Gross, Nathan S. Lewis, and M.V. Ramana et al., "The Frontiers of Energy", Nature Energy, Vol 1, 11 January 2016.
^Hamilton, Michael S. 2013. Energy Policy Analysis: A Conceptual Framework. Armonk, NY: M.E. Sharpe, Inc.
^Farah, Paolo Davide; Cima, Elena (2013). "Energy Trade and the WTO: Implications for Renewable Energy and the OPEC Cartel". Journal of International Economic Law (JIEL), Georgetown University Law Center. 4. SSRN2330416.
^Obrecht, Matevz; Denac, Matjaz (2013). "A sustainable energy policy for Slovenia : considering the potential of renewables and investment costs". Journal of Renewable and Sustainable Energy. 5 (3): 032301. doi:10.1063/1.4811283.
