Transition to clean energy shaped by political institutions

Published in the journal Science, the study explores why advanced industrialised countries took divergent paths in their responses to both the current energy price shock and to the oil crisis of the 1970s. In doing so, the authors identify the political factors that allow some countries to take the lead in adopting new sources of energy while others lag behind, finding that the structure of political institutions can either help or hinder energy reforms.

The international team of researchers from the UK, the US, Canada, and the Netherlands found that governments can pursue energy transitions through one of three pathways:
insulation (where policymakers are shielded from political opposition), compensation (where policymakers ease the burden of adjustment for business and consumers) or markets (where policymakers step back and let the markets drive change).

The first two pathways enable a policy-driven approach that hastens transitions by helping governments overcome opposition to costly reforms. When neither of these paths are available, governments retreat and let markets determine the pace of change.

The authors found that a country’s political institutions are a key determinant of the route they take. Countries that are most successful in changing their energy systems have institutions that absorb political pushback from constituents, such as consumers or corporations, either by insulating policymakers from political opposition or by compensating constituents for the costs of change.

Countries in northern Europe, for example, have electoral institutions that help to insulate policymakers from voter discontent, as well as robust welfare states that can compensate households impacted by reforms. As a result, these countries were found to be more successful at managing the costs related to energy transitions both in the 1970s and today. Meanwhile, countries that lack such institutions, including the US, UK, and Australia, often follow market-driven transitions, waiting for the price of new technologies to drop before adopting them.

Co-author Dr Jared Finnegan (UCL Political Science) said: “We found that governments in countries that have the institutional capacity for insulation or compensation are typically the early adopters of strong energy and climate policy, such as stringent carbon pricing, expansion of zero-carbon electricity, and investments in costly new energy technologies.

“It is then only after new technologies become cost competitive in the market that countries like the UK and US start to make significant progress toward adoption, since the institutional landscape of these countries makes costly policy-driven change much more politically risky.”

The researchers say that their findings offer important lessons as governments around the world race to reduce greenhouse gas emissions and limit the impacts of climate change.

They suggest that one way to help insulate policymakers from political pushback is to allocate regulatory power to independent agencies less likely to be subject to the demands of voters or lobbyists. An example of this is the California Air Resources Board (CARB), a relatively autonomous agency that has been tasked with implementing many of California’s climate goals. Thanks in part to CARB, California is often considered a global leader in limiting greenhouse gas emissions, despite being a state within the US.

Germany, another climate policy forerunner, was highlighted as a country that uses compensation to achieve its ambitious climate goals. The Coal Compromise, for example, brought together disparate groups — including environmentalists, coal executives, trade unions and leaders from coal mining regions — to agree on a plan to phase out coal by the year 2038. To achieve this goal, the country will provide economic support to workers and regional economies that are dependent on coal, while bolstering the job market in other industries.

Dr Finnegan added: “While resource endowments are important, we want to show that countries’ ability to pursue different energy pathways fundamentally depends on politics.”

Links

• Read the full study in Science 
• Dr Jared Finnegan's academic profile
• UCL Political Science
• UCL Policy Lab
• UCL Faculty of Social & Historical Sciences 

Source

• UC Berkeley 

Image

• Credit: iStock / studio-fi

Media contact
Evie Calder

Tel: +44 20 7679 8557
E: e.calder [at] ucl.ac.uk