Regulated Energy Transition


Implementing a range of regulatory initiatives can accelerate the transition to cleaner energy generation. These include redirecting fossil fuel subsidies, favouring low-carbon products through trade regulation, and setting a price on fossil fuels that reflects their true costs. If implemented in a concerted manner, these initiatives could act as a strong vehicle for shifting demand away from fossil fuels towards low-carbon alternatives.

Currently, fossil fuels are among the most heavily subsidized commodities. In many cases, the impact is so significant that renewables would become competitive compared with fossil-fuel-based energy in an unsubsidized market. Consequently, redirecting fossil fuel subsidies towards investments in energy efficiency and low-carbon technologies would have a dual effect against fossil fuel lock-in by making them less competitive while lowering demand. Investing the redirected funds nationally could support the development of efficient low-carbon energy systems and industries to maintain competitiveness in international markets.

Moreover, national governments or regional bodies like the European Union can use existing international trade regulations to promote a shift away from energy-intensive products relying heavily on fossil fuels. Within this arena, ensuring correct implementation within the framework of international trade agreements is key.

A third prominent area of interest is the pricing of fossil fuels themselves. In many countries, the costs to human health incurred due to local air pollution from fossil fuels exceed GDP growth, in effect making the country poorer each year. Reflecting damages such as these in the price of fossil fuels through, for example, taxes or trade schemes could shift energy consumption to sources that protect the climate and local environments. In addition, this would enhance national economic resilience by providing funds for the transition to a more sustainable energy system at the same time.

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