POLICY MATRIX

DIMENSIONS OF POLICY FOR THE REDUCTION OF CARBON DIOXIDE EMISSIONS AND THE  MITIGATION OF CLIMATE CHANGE.

This page is currently trying to set an agenda for a more comprehensive analysis of ways in which we could or should be thinking about energy issues. Thoughts welcome. It begins with a matrix outline, which can then be populated to provide a systematic classification.

	POWER SECTOR	TRANSPORT	HEAT. BUILDINGS AND INDUSTRIAL PROCESSES
INNOVATION The dark matter of economics. We know it’s there and we know it to be core to development, but understanding it is a different matter.	Innovation is the key driver of change in the power sector. We can choose within a range of transformative options for low carbon power generation - nuclear, wind, tidal, solar, geothermal etc. But technical factors then also demand smart grids, energy storage and new models for electricity consumption. “Net zero” implies bio-energy with CCS (BECCS). But what are the right innovation policies, and where are these to be targeted?	Electric vehicles are already with us.  A role for hydrogen vehicles too? Ammonia also canvassed as an alternative for the chemical storage of energy from primary electricity. No clear solution in sight for road freight, aviation and shipping. Other less obvious innovations, eg driverless cars, may present unforeseen opportunities and challenges	Innovations now in train include air and ground source heat pumps, techniques of building design, integration with solar applications, and new materials. Other possible new developments include various forms of heat storage. Policies considered for the future include heat networks, relatively novel in the UK.
MARKETS & PRICING. The economist’s bunch of keys.* A sine qua non, or “without this, nothing else will work”.	Carbon taxes or (reducing) tradeable allowances? Immediate gain from pricing the CO2 externality. Capacity markets and other markets – who really calls the shots with these? Better network pricing fundamental to a low carbon power sector.	With transport as the premium use of hydrocarbons, prices sometimes considered a lesser instrument. But consistency matters, eg between transport modes, and the evidence is that long term price elasticity can matter. Pricing for congestion also reduces emissions.	This sector is the home of the “rebound effect”, the Jeavons paradox, most effectively addressed by pricing CO2. Price elasticity is significant. Domestic heating is also a very sensitive sector politically, raising issues of fuel poverty inter alia.
REGULATION AND LAW. To be defined in the broadest possible terms, to include social and behavioural norms, and governance at all levels. Defining who takes responsibility for what?	Continued focus on consumer appliances, eg labelling, and on metering/control. Mandating energy companies to low carbon? Governance defines the structures for interconnections, markets, network pricing, innovation and decentralisation. Defining who takes responsibility for what?	Specific areas of regulation (broadly defined) with clear value in terms of lower emissions include measures to limit congestion, vehicle standards, and speed limits. City planning and many policies outside energy sector have indirect impact on demand for transport.	Building regulations. Retrofitting and heat networks also raise major questions for regulatory frameworks, as do some of the new heat technologies, and trend towards decentralised systems.