Policies to support sustainable energy in a competitive electricity industry

This paper presents an analysis of policy instruments which could be integrated into competition reforms so as to promote a more sustainable electricity industry. These instruments include: voluntary programs, green energy schemes, wires charges, competitive bidding programs, tax incentives, premium buyback rates, portfolio standards, energy taxes, emissions trading, and market-oriented emissions reduction schemes. The paper highlights the importance of clarifying policy objectives, as the optimum choice of instruments for reducing greenhouse gas emissions differs from those instruments best suited to promoting renewable energy. Criteria used for analysing instruments include: the effectiveness of the instrument for achieving change, the economic efficiency of the instrument, equity issues which arise from the instruments implementation, the instruments administrative feasibility, and its acceptability to target groups.