February 8, 2012
Sustainable Energy Policy
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Today only change: 12-1:30, not 2-3:30
Next week
 Monday 1-3
 Tuesday 12-2
Sustainable Energy Policy
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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
February 8, 2012
Energy Sustainable Energy Policy
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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
February 8, 2012
sustainable energy policy
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environmental effectiveness
economic efficiency
administrative feasibility
political feasibility
February 8, 2012
sustainable energy policy
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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
February 8, 2012
sustainable energy policy
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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
February 2, 2012
sustainable energy policy
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
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 2010: $20 per tonne of CO2 equivalent
 2011: $25
 2012: $30
February 8, 2012
sustainable energy policy
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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
February 8, 2012
sustainable energy policy
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Can produce more informed
decisions about costs and
efficacy
Example: One Tonne Challenge
February 8, 2012
sustainable energy policy
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:
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 European Uni0n’s Emission Trading System
 Western Climate Initiative
February 8, 2012
sustainable energy policy
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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
February 8, 2012
Sustainable Energy Policy
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Require a certain % of the market to have
performance characteristics
Can “force” innovation
Examples
 Renewable portfolio standard
February 8, 2012
sustainable energy policy
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direct provision
“Crown” corporations
National Oil Companies
increasingly important
 Klare: 81% of proven reserves
controlled by NOCs
1990: Mulroney
privatized, but kept
19% share
2004: fully privatized
February 8, 2012
sustainable energy policy
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environmental effectiveness
economic efficiency
administrative feasibility
political feasibility
February 8, 2012
sustainable energy policy
Pre-mitigation
Regulation: 30% reduction
Cap and trade: 30%
reduction
Coal Plant
Emissions: 1000 t/yr
Emissions: 700 t/yr
Emissions: 400 t/yr
Costs: $20/t
Costs: 0
Costs: $6,000
Costs: $0
Cement Plant
Emissions: 1000 t/yr
Emissions: 700 t/yr
Emissions: 1000 t/yr
Costs: $40/t
Costs: 0
Costs: $12,000
Costs: $12,000 (to coal
plant)
Total
February 8, 2012
Emissions: 2000 t/yr
Emission: 1,400 t/yr
Emission: 1,400 t/yr
Costs: 0
Cost: $18,000
Cost: $12,000
Sustainable Energy Policy
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effectiveness
efficiency
Administrative
feasibility
political
feasibility
Info/persuasion
subsidy
Emission tax
Cap and trade
C&C Regulation
February 8, 2012
Sustainable Energy Policy
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January 21, 2010
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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 8, 2012
Sustainable Energy Policy
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