Energy transitions: The role of institutions and market structures

Wind turbines at the Mehrum coal-fired power station in the Peine district in Lower Saxony, Mehrum. The phase-out of coal is planned by 2038. Julian Stratenschulte via GettyImages

Excerpt from theconversation.com

Many studies indicate that the root causes of climate change are mostly human activities. The 2021 Intergovernmental Panel on Climate Change (IPCC) report warns that many of these climate changes are already irreversible. But there’s still hope. The message of the IPCC report is crystal clear: we have to raise the ambition level of mitigation.

This means that drastic changes are needed to mitigate environmental degradation. These are radical structural changes that will accelerate the fight against climate change. It’s clear from the IPCC report that time is not on humanity’s side.

When policymakers discuss and promote the just energy transition, they do so within each country’s institutional characteristics. The just energy transition refers to the move from fossil fuels to cleaner alternatives with the minimum negative consequences for society and the economy.

Economies with better quality institutions do better in managing the transition. This is because these institutions can, among other things, encourage innovation and efficient allocation of resources.