Renewable-energy Economy - Public Policy Landscape

Public Policy Landscape

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.

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".

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.

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". It also favors the near term over the long term, thereby showing limited concern for future generations. Tax and subsidy shifting can help overcome these problems.