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Steering the energy transition

Energy transitions require a lot of time; usually about 80 to 100 years (Sovacool, 2016). To mitigate climate change and advance sustainability, the current energy transition has to be accelerated; we cannot wait for renewable energy cost reductions to do the job. This implies that we have to use steering instruments.

Different instruments can be and are used for steering the energy transition towards sustainability. They range from command-and-control policies (technology bans, emission or efficiency standards) and market-based instruments (emission taxes, emission trading schemes) to promotion policies (feed-in tariffs, subsidies) and “sermons” (information, nudging, advice etc.) (Bemelmans-Videc et al., 2011).

Usually, a mix of instruments is used. Take Switzerland, for example. The Swiss impose an emission tax on CO2, which is levied on fossil fuels used in stationary installations (space heating, process heat). This tax, which is currently set at CHF 120/t CO2, makes it more expensive to use such fossil fuel-based systems and thus provides an incentive to move towards renewables or at least to more CO2-efficient technologies (for example, from oil to natural gas).

Very large emitters are exempt from this tax. However, they must participate in an emissions trading system – i.e. for every tonne of CO2 they emit, they must have an emissions right and an emissions permit. These permits are distributed to firms and traded among firms. A firm that wants to emit more has to buy such a permit from another firm, which results in a price for CO2-emissions. By handing out only a limited number of permits, the total amount of emissions can be controlled. This instrument achieves a reduction in a way that is similar to the CO2 tax. In both cases, emitters can still choose how much to emit but, as they have to pay for emissions, they have an incentive to reduce their emissions.

In addition to these “pull” policies, which aim to remove fossil fuel-based technologies from the market, there are “push” policies that support the market entry of new technologies. Most notable is a subsidy for renewables, where – for small installations – a part of the investment costs are refunded to investors. Furthermore, if end-users consume electricity that they generated themselves, they do not have to pay grid tariffs for this electricity, which makes electricity from small-scale photovoltaic installations competitive (grid tariffs in Switzerland are about CHF 0.11/kWh and thus a substantial part of electricity costs). As the end-users still rely on grid services for backup and thus cause costs that are comparable to users without their own photovoltaic installations, this exemption can be seen as a subsidy.

Finally, Switzerland also uses technology standards (for example, requirements on the energy efficiency of new buildings or emission restrictions for cars) and technology bans (for example, a ban on air conditioning in parts of Switzerland or on selling inefficient light bulbs).

In addition to these top-down or state-centred policy instruments, different actors (in addition to governments and states) also use a broad range of softer types of instruments at different levels, in addition to the international and national level. This is referred to as governance, i.e. bringing about collective action among different societal actors to achieve commonly shared goals (Lange et al., 2013; Sohre & Schubert, 2022).

Thus, the energy transition is driven by complex governance arrangements. These include

  • different instruments, objectives, and strategies (the policy dimension)
  • diverse actors and actor coalitions with their interests and interactions (the politics dimension)
  • and institutional conditions and structures at different levels (the polity dimension).

Forms of bottom-up governance are particularly relevant for changing energy consumption behaviour. Changing people’s behaviour is central to addressing energy demand (efficiency, sufficiency). This can be done by promoting renewable energies from the “bottom”, for instance (Burger et al., 2019; Sohre & Schubert, 2022).

Likewise, in Switzerland, certain forms of bottom-up governance contribute to the energy transition. Important governance arrangements are civic initiatives like (positive) energy communities or districts, movements, and grassroots or niche innovations (Mihailova et al., 2022; Seyfang & Haxeltine, 2012; Sohre & Schubert, 2022).

For instance, in energy communities called “Energie-Region” or “2000-Watt-Areal”, people establish shared visions of desirable futures, develop and test niche technologies and social innovations, and thus form lighthouse areas for the energy transition (Hewitt et al., 2019; Schmid et al., 2022).

Another example of bottom-up governance can be summarised under the term “nudging” (Sunstein & Thaler, 2008). The core of this idea is to shape the behaviour of individuals without normatively forcing or economically stimulating them, but to address the individuals with invisible “nudges”: unconscious modulations of their decision-making architectures (Burger et al., 2015).

As in other countries, nudging is used, for example, by setting new default values for green electricity tariffs, through labels or through feedback on energy consumption. They are essential instruments if they are designed in a target group-specific way and in combination with the other instruments (Berger et al., 2022; Burger et al., 2018; Ghesla et al., 2020).

Authors: Frank Krysiak, Annika Sohre


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