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5-Minute MBA in Energy Policy
Understand why energy policy seems to suck most of the times.
👋 Hello 1,172 climate buddies 🌳
What is this? This newsletter explores topics in climate, energy, and everything in between.
Today’s essay is a cross-post from my guest piece on Nick van Osdol’s publication.
It explains how (1) policy objectives, (2) the energy trilemma, and (3) energy security work in tandem.
Read on and get your 80/20 of energy policy in the next five minutes 🎓
5-Minute MBA in Energy Policy
By Art Lapinsch
Ever wonder why energy policy seems so, well, lame? Rest assured, you’re not alone.
Sometimes, it feels like politicians purposefully pick the worst possible policies. Or make them unnecessarily obtuse and hard to understand. But the reality is usually not as black and white.
This newsletter will provide a bit of nuance and help you understand how energy policy comes to be (hint, it doesn’t get dropped down chimneys by a giant white stork).
How Policymaking Works
Why is policymaking one of the highest-leverage tools of the energy transition and climate efforts?
Because policymaking allows you to write and rewrite the rules of the game. Which game? The game of our lives.
If you think about it, policies set the rules for everyday life—permissions, prohibitions, subsidies, etc. This impacts how players, including both individuals and organizations, behave during the game.
An example of a hypothetical policymaking sequence looks like this:
🎯 Policy Objective: Reduce Greenhouse Gas (GHG) emissions from transportation by 95%.
⚖️ Policy Instrument: Prohibit selling combustion engine vehicles in Belgium starting in 2027.
📉 Policy Outcome: Emissions drop by X% between 2027 – 2032.
🔎 Policy Evaluation: GHG emission reductions between 2027 – 2032 did not meet the policy objective.
🔄 Rinse & Repeat: Expand prohibitions into different types of vehicles (e.g., marine vessels, commercial airplanes, etc.).
A simpler term for “policy instrument” is “law.”
To write or rewrite the rules, policymakers introduce new laws or amend existing ones. In 2022, the US Congress passed the Inflation Reduction Act – aka IRA – full of different policy instruments to tackle various policy objectives.
Want to reduce residential energy usage? Great, grant $5,000 to every unit that meets Zero Energy Ready (ZER) standards.
Want to re-shore critical supply chains? Fantastic, introduce a tax incentive tied to a domestic sourcing quota.
You get the gist… Want something → Do something. Objective → Instrument.
The main takeaway is that energy policy and energy law are heavily intertwined.
The Infamous Energy Law and Policy Triangle
Now that you understand the basics of policy making procedures, it might feel like you have even more questions:
Like, why can’t politicians get a grip?
Why do some energy policy decisions seem to miss the mark (e.g., when Belgium and Germany moved to shutter nuclear power plants in recent years)?
Isn’t it obvious what the best option would be?
Meet the bane of energy policy makers’ existence: The Energy Law and Policy Triangle.
💶 Finance (Economics): What is the impact on the bottom line?
🌳 Environment (Climate): What is the impact on the environment?
🇺🇳 Politics (Energy Security): What is the impact on national security?
Besides looking like a structurally sound pyramid, it is still hard to balance. Prioritize one goal, and the other goals might suffer as a result.
Looking through this lens, it might become a bit clearer why different governments prioritize different energy sources:
The main takeaway here is that the tension between the conflicting priorities of finance, environment, and politics lead to the Energy Trilemma.
Each decision comes with a tradeoff.
The 4 As of Energy Security
Why is that?
Our societies run on energy and electricity. Communication, transportation, and other system-relevant functions like healthcare depend on the uninterrupted flow of electrons. Most places even use electricity to power sewage and drinking water pumps. Think about that for a second.
Grid failure means lights out. Literally and figuratively.
That’s why governments and other stakeholders tasked with grid operation are obsessed with energy security. That’s their #1 mandate.
During my Energy Law degree, a bureaucrat from the European Union anecdotally shared that you can argue everything in your favor by claiming it is for the benefit of “Security of Supply” – the EU’s term for Energy Security.
You can think of it through its 4As of Energy Security:
💶 Affordability: Can afford it?
🧭 Availability: Can we find it on the market? (theoretically)
🧲 Accessibility: Can we get it? (practically)
😱 Acceptability: Can we justify it?
The local and cultural context has a massive impact on evaluating the 4As.
Geographically speaking, Norway lives on another planet than Saudi Arabia. That’s why the former generates 90%+ of its electricity from hydropower while the latter depends 90%+ on oil.
Culturally speaking, France and Germany couldn’t be more opposed to their stance on nuclear energy. The former generates 60%+ of its electricity with nuclear fission. At the same time, Germany has phased out its last remaining nuclear power plants after decades of anti-nuclear campaigning.
Another way of thinking about energy security is through the following definition by the researchers Cherp and Jewell: Energy Security = “low vulnerability of critical energy systems.”
🤕 Low Vulnerability: Broken down into risk (i.e., the nature and source of risk) and resilience (i.e., the system’s adaptability).
⚡️ Critical Energy Systems: Divided into sectoral (primary energy sources, carriers and infrastructure, end-uses) and geographic aspects (global, national, regional).
Today, we can see increasing impacts of climate change on our energy infrastructures, such as the 2021 Texas Power Crisis (driven by extremely cold temperatures) or Europe’s Energy Crisis in 2022 (driven by extreme heat, among many other factors). Pair this reality with the risks of cyberattacks on grid infrastructure, and you begin to appreciate what a gargantuan task policymakers and national security professionals face.
Robustness of the energy system is the name of the game. With this in mind, let’s summarize: All policy objectives may be equal in the abstract, but in reality, those that protect and promote Energy Security tend to get primacy.
5-MINUTE MBA IN ENERGY POLICY
Next time you
analyze judge energy policy, remember to ask these three questions:
🎯 Policy Objective: What are they trying to do?
🧩 Energy Trilemma: What are the tradeoffs in this decision?
🛡️ Energy Security: What’s the (security) context of this decision?
That’s your 5-minute Energy Policy MBA, as easy as ABC.
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