Governments Must Invest and Regulate to Reduce Energy Costs: Report

Governments must deliberately use public investment and regulation to rapidly scale-up clean energy technologies to bring down costs, achieve global climate goals and boost economies worldwide, according to a new report launched today by leading international economists and energy policy experts.

Ten Principles for Policymaking in the Energy Transition: Lessons from experience calls for governments to urgently reshape their policy approaches to accelerate innovation, job-creation, and cost reduction in the transition from fossil fuels to clean energy.

The report, based on a comprehensive analysis of the last three decades of global energy policy, shows that to replicate the outstanding successes of the energy transition so far, such as offshore wind and solar PV, governments must go beyond just providing a ‘level playing field’ where technologies are left to compete against each other.

In fact, they should proactively use the three levers of policy: investment, tax and regulation, to accelerate innovation and cost reduction in clean technologies. The report recommends that governments should also target ‘tipping points’, where clean technologies gain an advantage over fossil fuels, leading to a rapid reallocation of investment.

Contrary to some of the advice given to governments over the past 30 years, government policy, investment and regulation can cut energy costs instead of increasing them, crowd in private investment instead of crowding it out, and accelerate innovation and growth.

The successes of onshore wind, offshore wind, solar PV and electric vehicles were driven by governments directly identifying and supporting the technologies that they needed to succeed.

Laura Diaz Anadon, Professor of Climate Change Policy at the University of Cambridge, one of the lead authors, said: “Governments cannot simply set the goal and expect the market to deliver. They must be active participants; investing and regulating to bring down costs and making strategic technology choices to incentivise, de-risk and focus the private sector. Doing so in an adaptive fashion can deliver a transition to clean energy that is faster, cheaper and more sustainable for all.”