Energy Policy Instruments Perspectives on their Choice, Combination and Evaluation

University dissertation from Lund Institute of Technology Department of Technology and Society Environmental and Energy Systems Studies Box 118, SE?221 00 Lund, Sweden

Abstract: Abstract The thesis aims at providing a better understanding of public policy instruments used in policy-making within the energy sector, particularly regarding their role in the change towards an increased use of renewable energy sources for generation of electricity. The research was guided by an underlying assumption that a markedly higher proportion of the energy generated from renewable sources can be considerably enhanced by use of policy instruments that support the development and the market creation of new, renewable energy technologies. The thesis consists of two parts. In the first part, the effects that policy instruments can have on technological development and the creation of markets are examined. The issue was empirically examined in connection with the wind power development in Sweden. The underlying aim was to identify potential measures that could be useful in terms of increasing the effectiveness of governmental interventions directed at effecting change in energy systems. Two such measures of relevance to energy policy-making could be identified. First, it was concluded that obtaining a balanced combination of policy instruments supporting technological development and the creation of markets for new technologies is of importance; i.e. reducing the risk of a premature lock-in of technologies that could turn out to be inferior in the long run. Secondly, it was concluded that evaluating the outcome of policy programmes in the sense of their effect on technological change, can be important in increasing the effectiveness of policy interventions. It was suggested that a systematic, continuous and systems-based approach to evaluation can be useful for the feedback on ongoing programmes and for the input on future decisions concerning relevant interventions. The second part of the thesis is concerned with policy formation; i.e. the process of choosing and adopting policy instruments. How policy instruments are selected and the factors that influenced this are analysed in the case of the Swedish green certificate trading scheme. The choice was shown to be based on a combination of factors. These included the characteristics of the instrument, in terms of cost-efficiency, non-interference with a deregulated electricity market and the effectiveness in terms of achieving a quantitative target. The choice was also found to be influenced by both the domestic and the European context and by the policy makers? preferences for market-based alternatives. EU policies appear to have strengthened the preferences for a market-based support scheme, as well as providing additional justification of the preferences for a specific instrument. The findings obtained highlight the complexity of public policy-making, helping to provide a better understanding of the broader context of changing energy systems. On the whole, the findings can be seen as contributing to knowledge of the societal aspects of technological solutions involved in the transition to a more sustainable energy system. The findings can also provide input to future research and can help policy makers to select more promising policy options and to improve the planning, design and evaluation of policy instruments or to refine ongoing policy programs.

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