t f

Problem 8

Policies and market-based mechanisms sometimes conflict instead of synergistically pushing a region towards a sustainable energy future.

Problem Dimensions


Poorly designed policies that prevent achievement of desired objectives.

• E.g. Electric cars merely shift the GHG emissions from the vehicle to the electricity generation source.

  1. If lowering GHG emissions is the purpose of a policy and a region’s electricity is generated from coal, then subsidizing electric cars would be less effective than if electricity came from renewable sources of energy.
  2. To promote solar energy many regions use a Feed-In-Tariff (FIT) program.

Uncoordinated inter-regional policies could have unintended detrimental effects.[1]

• E.g. Regulations in one municipality, like requiring all new construction be carbon neutral, might prompt developers and consumers to move to adjacent municipalities.

• A carbon tax to meet Kyoto Protocol targets in one province or state lowers the GHG emissions of the entire country. This creates opportunity for other provinces or states to free-ride.


The lack of binding national GHG reduction targets reduces the effectiveness of implementing market based mechanisms.

A. Subsidies for one form of renewable energy might take away funds for other types of renewable energy.[2]
B. While competition is sometimes economically efficient, collaboration between industries can increase social welfare by reducing uncertainty for consumers.[3]
C. Incentivizing large projects like Smart Grids which can incorporate renewables into the main grid depends on policies and market mechanisms working together. Promoting Smart Grids requires:

  1. Substantial funding.
  2. Integrating various types of technologies.
  3. Changing business models for utility companies.[4]
  4. Public awareness.



Conventional Solutions

Greater Scope in Policies

Governments need to scan for and remove distortive and policies and regulations.

Revisit Voter and Politician Accountability

• The public needs to require politicians and policy makers to examine the long term impact of their suggestions. The public also needs to encourage and accept strategic consideration of where we are going.
• Politicians need to intelligently discuss the long term requirements and implications of the decisions we make. They need to provide leadership.
• The public needs to accept the implementation of market based mechanisms and we also need to act against organizations or nations that do not, in whatever capacity is available to us, which could be as a consumer, a producer or political citizen.

We need to kill off some chronically and inherently polluting industries to show that sustainability is a matter of survival for industry.


Progressive Solutions

Impose a binding national GHG emissions reduction target which is shared among provinces/states, or a regulation where a proportion of the nation’s energy must come from renewable sources.

E.g. 17% of Germany’s electricity is derived from renewable sources in part because of its Renewable Energy Law. [5]

Promote policy coordination at the government level so that market-based mechanisms can be more efficient.

E.g. Set an adequately climate change levy on fossil fuels to:

  1. Pay for free public transportation that runs on clean energy.
  2. Implement the necessary infrastructure for alternative transportation.
  3. Charging stations for electric cars and hydrogen fuel cells.
  4. Encourage producers to power their operations with renewable energy.
  5. Implement Feed-In-Tariff and micro-FIT programs for multiple forms of renewable energy. [6]

In the absence of nationwide support for climate change protection, these solutions can be scaled down to individual provinces and municipalities.

Altering public perception starting with local communities will catalyze change at the national level [7]

  1. [1] Explained in Problem 5.
  2. [2] Expanded in Supplemental Analysis for Problem 6. 
  3. [3]   Explained in Problem 7.  
  4. [4]   Explained in Problem 3. 
  5. [5] Dr. José Etcheverry, Assistant Professor in the Faculty of Environmental Studies at York University and speaker for the German Experience session at ISES 2011.
  6. [6] http://fit.powerauthority.on.ca/
  7. [7] Expanded in Problems 3 and 9. 


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