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Energy efficiency regulations, market and behavioural failures and standardization

Dalhammar, Carl LU ; Luth Richter, Jessika LU and Machacek, Erika (2018) p.176-228
Abstract

Introduction: A large number of policy instruments have been developed to induce energy efficiency and mitigate climate change. Traditional policy evaluations have assessed the performance of individual policy instruments, applying criteria such as target effectiveness, cost-effectiveness, legitimacy and distributional effects. More recently there has been a shift of interest in how policy instruments interact and the role of the policy mix. There is growing recognition that it is difficult to design ‘optimal’ policy solutions, and that the existence of multiple market failures implies that a wider mix of policy approaches are required in order to overcome them. Therefore, more effort is devoted to finding suitable ‘policy packages’,... (More)

Introduction: A large number of policy instruments have been developed to induce energy efficiency and mitigate climate change. Traditional policy evaluations have assessed the performance of individual policy instruments, applying criteria such as target effectiveness, cost-effectiveness, legitimacy and distributional effects. More recently there has been a shift of interest in how policy instruments interact and the role of the policy mix. There is growing recognition that it is difficult to design ‘optimal’ policy solutions, and that the existence of multiple market failures implies that a wider mix of policy approaches are required in order to overcome them. Therefore, more effort is devoted to finding suitable ‘policy packages’, where the instruments work in synergy and inconsistencies are minimized. While carbon pricing policies have often been considered the best option for cutting carbon emissions in the most cost-effective way, this is increasingly questioned. For instance, mandatory regulations offer certain benefits relative to pricing, which could include: (1) they send a clear signal to industries, and provide more information than price signals which are often too diffused, resulting in decisions constrained by bounded rationality; (2) they may have lower transaction costs, as transaction costs are quite high, especially in emission trading schemes; and (3) they may overcome market and behavioural failures such as information asymmetries and computational constraints affecting the transmission and analysis of information, leading to sub-optimal decisions among societal actors. As experience with carbon pricing has also demonstrated, there are political economy constraints with carbon pricing that result in far less effective pricing policies than theory would suggest. Some authors who focus on past technological breakthroughs suggest there is little reason to believe that carbon pricing alone can bring about the technological change needed to significantly reduce emissions. It should also be recognized that the choice of policy instruments is influenced by political and discursive struggles concerning the nature of the problem and its solutions: some actors view climate change mainly as a market failure issue to be corrected by carbon pricing; others primarily consider climate change to be an energy system challenge requiring the decarbonizing of societal systems.

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Please use this url to cite or link to this publication:
author
organization
publishing date
type
Chapter in Book/Report/Conference proceeding
publication status
published
subject
host publication
Preventing Environmental Damage from Products
pages
53 pages
publisher
Cambridge University Press
external identifiers
  • scopus:85051611274
ISBN
9781108500128
9781108422444
DOI
10.1017/9781108500128.008
language
English
LU publication?
yes
id
1dd0f4b9-fb00-4863-82a6-fc9b2acb786e
date added to LUP
2018-09-13 11:50:17
date last changed
2019-05-21 04:11:06
@inbook{1dd0f4b9-fb00-4863-82a6-fc9b2acb786e,
  abstract     = {<p>Introduction: A large number of policy instruments have been developed to induce energy efficiency and mitigate climate change. Traditional policy evaluations have assessed the performance of individual policy instruments, applying criteria such as target effectiveness, cost-effectiveness, legitimacy and distributional effects. More recently there has been a shift of interest in how policy instruments interact and the role of the policy mix. There is growing recognition that it is difficult to design ‘optimal’ policy solutions, and that the existence of multiple market failures implies that a wider mix of policy approaches are required in order to overcome them. Therefore, more effort is devoted to finding suitable ‘policy packages’, where the instruments work in synergy and inconsistencies are minimized. While carbon pricing policies have often been considered the best option for cutting carbon emissions in the most cost-effective way, this is increasingly questioned. For instance, mandatory regulations offer certain benefits relative to pricing, which could include: (1) they send a clear signal to industries, and provide more information than price signals which are often too diffused, resulting in decisions constrained by bounded rationality; (2) they may have lower transaction costs, as transaction costs are quite high, especially in emission trading schemes; and (3) they may overcome market and behavioural failures such as information asymmetries and computational constraints affecting the transmission and analysis of information, leading to sub-optimal decisions among societal actors. As experience with carbon pricing has also demonstrated, there are political economy constraints with carbon pricing that result in far less effective pricing policies than theory would suggest. Some authors who focus on past technological breakthroughs suggest there is little reason to believe that carbon pricing alone can bring about the technological change needed to significantly reduce emissions. It should also be recognized that the choice of policy instruments is influenced by political and discursive struggles concerning the nature of the problem and its solutions: some actors view climate change mainly as a market failure issue to be corrected by carbon pricing; others primarily consider climate change to be an energy system challenge requiring the decarbonizing of societal systems.</p>},
  author       = {Dalhammar, Carl and Luth Richter, Jessika and Machacek, Erika},
  isbn         = {9781108500128},
  language     = {eng},
  pages        = {176--228},
  publisher    = {Cambridge University Press},
  title        = {Energy efficiency regulations, market and behavioural failures and standardization},
  url          = {http://dx.doi.org/10.1017/9781108500128.008},
  year         = {2018},
}