The energy transition: A balancing act

Abstract

As the need for drastic reductions in global greenhouse gas emissions becomes increasingly urgent, governments and policymakers are developing proposals for climate change policies that aim to achieve net-zero emissions. However, the challenge lies in determining the most effective way to operationalize this transformation. While cost efficiency is often emphasized as a desirable property, experience shows that it is neither necessary nor sufficient to achieve a desirable policy portfolio. Instead, we advocate for a broader definition of economic efficiency: policies must also be feasible, fair, effective, and credible. Trade-offs between these criteria are common, and must be balanced to create a successful policy portfolio. The European experience provides interesting case studies with which to illustrate these efficiency dimensions and their implications.