Energy efficiency regulations, market and behavioural failures and standardization

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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’, 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.

Original languageEnglish
Title of host publicationPreventing Environmental Damage from Products
Subtitle of host publicationAn Analysis of the Policy and Regulatory Framework in Europe
PublisherCambridge University Press
Pages176-228
Number of pages53
ISBN (Electronic)9781108500128
ISBN (Print)9781108422444
DOIs
Publication statusPublished - 2018

Subject classification (UKÄ)

  • Law and Society

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