Policy Brief

Europe’s demand for high-energy batteries is likely to surpass 1.0 TWh per year by 2030, and is expected to further outpace domestic production despite the latter’s ambitious growth. To strengthen Europe’s battery self-sufficiency and competitiveness, policy-makers must accelerate the expansion of production capacity and implement reliable industrial policies that account for sustained demand growth toward and beyond 2030.

Central bank management of climate risks is associated with climate politics, as opposed to a country’s economic exposure to transition risk, including stranded asset and clean energy investment risk. Central banks are not entirely autonomous actors that correct for the lack of national decarbonization policy—they rather complement existing national policies that aim to shift the economy from fossil fuels to clean energy.

Increasing solar photovoltaic and wind generation capacity beyond European 2030 targets could make electricity prices more stable, with reductions in sensitivity to fluctuations in the price of natural gas possibly outweighing the increasing influence of weather effects. Energy policies should account for the macroeconomic benefits of more stable energy prices as an important motivation for the deployment of renewables, in addition to their contribution to the mitigation of climate change.

Large emission reductions in buildings and transport are possible by integrating demand-side strategies to electrify energy use, improve technological efficiency, and reduce or shift patterns of activity. With enabling policies and infrastructures, final energy users can make significant contributions to climate goals, particularly through widespread deployment of heat pumps and electric vehicles.

Biomass associated with low upstream emissions offers cost-effective renewable carbon for negative emissions and production of chemicals, aviation and shipping fuels, reducing the need for more costly options like direct air capture. Policy support for sustainable biomass use alongside emerging technologies reduces energy system costs and the risk of missing emissions targets.

Scaling up green hydrogen will be difficult if future projects solely depend on expensive subsidies to overcome competitiveness barriers. Policy makers need to implement supportive policies grounded in realistic expectations, focusing on hydrogen-specific support in sectors where electrification isn’t feasible, while also gradually introducing technology-neutral market mechanisms such as carbon pricing.

In the United States, Democrats and Republicans are more likely to support energy projects that are community-owned, create jobs, and generate solar energy, but local elected officials underestimate their constituents’ support for projects with these characteristics. Since these officials play a key role in approving new energy projects and negotiating the benefits they bring to communities, aligning local elected officials’ perceptions with the public’s could improve progress toward just energy transitions.

Community solar, a business model where multiple customers buy output from shared solar systems, has expanded solar access among multifamily housing occupants, renters, and low-income households. Policies to enable community solar could be expanded and benefits of access augmented through targeted measures to support community solar adoption in underserved communities.

Investment in climate and energy (climate-tech) startups is growing in the US and worldwide, with public grants backing high-risk sectors and publicly funded startups exiting at higher rates with corporate investment. Public policies to incentivize corporate investment in these startups can therefore be an important, yet sometimes underestimated, part of meeting net-zero goals.

Recent reforms of the EU Emissions Trading System (EU ETS) boosted carbon prices by tightening the cap on emission allowances and increasing political commitment to it, which effectively made actors more farsighted. Policymakers should thus view prices as an indicator of credibility as well as scarcity, and manage potential future drops in the former by renewing commitment to the cap.

Zero-emission trucks will benefit from rapidly falling costs of batteries and fuel cells, which will enable their fast market diffusion. Industry and policy must prepare for battery-electric trucks with respect to their manufacturing and supply, adequate charging infrastructure and electricity grid expansions, as well as regulation.

Not all Australian communities are equally protected by consumer electricity retail regulations, with remote and Indigenous communities more likely to be underserved on multiple fronts. Communities in regions potentially critical to energy transition are often underserved by regulations that would otherwise ensure their own energy needs, hindering progress toward a just transition.

Low-income solar adopters are more likely to refer others to a fully subsidized solar programme when referral rewards are combined with an appeal to reciprocity and a simplified referral process, leading to five times as many solar contracts as when referral rewards are used alone. The findings highlight behavioural science strategies that administrators of low-income energy assistance programmes can use to cost-effectively accelerate programme uptake.

Compared to excise taxes and carbon taxes, setback restrictions on new oil wells have larger health benefits and worker compensation losses, but are more equitable by bringing greater benefits and lower losses to disadvantaged communities in California. For California to meet green gas emissions (GHG) targets, larger setbacks than currently proposed or additional supply-side policies are needed.

European fuel tax cuts will lead to significant income transfers to Russia, thus undermining the Union’s sanction efforts against the country. EU politicians should instead consider alternative policies, such as direct income transfers to households, if they want to shield citizens from increased fuel prices without benefiting Russia.

Considering the probability of occurrence of an extreme cold event similar to that in February 2021, winterization of the Texan power system pays off for risk-neutral utilities in the medium term. Risk aversion can cause under-investment, and policymakers should therefore take into account extreme event risks in decision-making and implement measures that increase winterization efforts.

For remote Indigenous communities prepaying for electricity in Australia’s Northern Territory, temperature extremes increase reliance on the services that energy provides and the risk of disconnection of those services. Policy should focus on reducing the frequency, duration and negative impacts of disconnection, within the context of a warming climate.

Without additional support policies, clean cooking could become unaffordable for about 470 million people by 2030 if a post-pandemic recovery is slow, and about 200 million people by 2030 under ambitious climate mitigation action. Acceleration of clean cooking transitions by tapping into pandemic recovery and climate funds to target the poorest people and regions globally is urgently needed.

Innovative energy business models, such as peer-to-peer trading or energy as a service, are attractive to different groups of customers. Disengaged consumers with low trust in the energy market could face further disadvantages, while already active consumers could reap even greater benefits, which risks widening existing socio-economic inequalities.

Wind energy repowering decisions are multifaceted and depend on the physical, political and social landscape, as factors such as noise regulation, aesthetics and political bargaining can significantly influence project development. Policy should recognise that a technology perspective alone cannot inform implementation pathways and should be supplemented with an understanding of the political and social dimensions.