The role of policy

Abstract

In order to achieve a certain impact, like the reduction or limitation of greenhouse gas emissions, governments can apply policy instruments. Three elementary mechanisms to influence human behavior can be distinguished: providing information, setting rules and regulations, and providing economic incentives. Based on these mechanisms, a wide variety of policy instruments can be distinguished. Most countries apply a mix of policy instruments, often differing by sector and developing over time. In this section, special attention is paid to three categories: 1. Subsidies and financial incentives are generally considered as friendly policy instruments and have played a key role in policy making. Disadvantages are high government costs and free-rider effects. An example is the feed-in scheme for renewable electricity that is in place in many countries nowadays. 2. Norms and standards are strong policy instruments and are more and more applied. Norms and standards can lead to high costs for those regulated; this can be avoided by implementing them in a more flexible way. The efforts for guaranteeing compliance can be significant. Examples of standards are the energy efficiency standards for appliances like washing machines and refrigerators. 3. Voluntary agreements as such can take various forms from completely voluntary to near-regulation. Also here, significant government efforts are required to ensure a relevant impact. An example is the long-term agreement on industrial efficiency in the Netherlands, committing industry and government on a fixed annual improvement of energy efficiency. Policy making is part of a policy cycle, of which evaluation makes up an essential part.