The way we receive and consume energy has gone through major changes and continues to do so, and politics play a big role. For example, a leadership change can dramatically modify a country’s approach to climate change, energy, and sustainability. These kinds of policy shifts in the energy transition are happening around the world and are reshaping energy production and use patterns.

Let’s look at how new policies continue to drive the clean energy transition, what challenges remain, and how governments plan to ensure the shift away from fossil fuels is speedy and fair without negatively affecting the global energy supply.

What Are the Most Impactful Government Policies Driving the Global Energy Transition?

Government policies drive the shift to clean energy. Recently, many nations have installed climate policies and investments aimed at lowering emissions and increasing renewable energy sources.

Governments worldwide have committed nearly $2 trillion to support clean energy since 2020, with most of this funding coming from China, the European Union, and the United States. These are all signs that fossil fuels are on the way out and sustainable energy sources are the future of the energy system.

Plus, as investments into these clean energy policies continues to grow, it can help lower the overall cost of launching these programs. And with lowered cost will likely come even more investments. This will become a continuing cycle over time, until clean energy is as affordable, or maybe even more affordable than, fossil fuel energy.

How Does Carbon Pricing Impact Energy Markets?

Carbon pricing is another powerful policy tool. Through carbon taxes or cap-and-trade systems, governments can make it more expensive to emit greenhouse gases (GHGs), pushing industries toward cleaner energy choices.

As of 2024, governments have launched 75 carbon pricing schemes worldwide, which impact about 24% of global greenhouse gas emissions. This means many power companies and industries must factor in carbon costs, which pushes markets toward low-carbon energy sources.

These increased carbon costs can hit consumers in the wallet, but this is a long game. Over time, this will increase green energy adoption, and as more green energy adoption takes place, its costs will likely fall.

What Role Do Subsidies and Incentives Play in Accelerating Renewable Energy Adoption?

Subsidies and incentives help accelerate renewable energy use. By lowering costs and risks, governments make it easier for companies and consumers to choose clean energy.

In the 2000s, feed-in tariffs in countries such as Germany helped lower solar panel prices and helped boost solar use. Today, governments continue to use tax credits, rebates, and grants to support clean technology.

For example, the United States’ Inflation Reduction Act offers incentives for renewables, electric vehicles (EVs), and batteries. This act is projected to help double U.S. renewable power capacity, according to the International Energy Agency (IEA).

How Are Policymakers Addressing Energy Equity and Affordability During the Transition?

Policymakers recognize that the energy transition must be equitable and affordable. During the recent global energy crisis, many governments stepped in to protect consumers from rising prices. Together, they spent around $940 billion on emergency relief.

Countries are creating programs to help vulnerable communities benefit from clean energy without disproportionate costs. For example, the U.S. Justice40 initiative aims to channel 40% of climate investment benefits to disadvantaged communities, so things like solar panels, efficient appliances, and electric vehicles reach lower-income households.

The EU is also planning a Social Climate Fund to help citizens with home insulation, heat pumps, or access to cleaner transportation. 

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What Regulations Are Shaping the Phase-Out of Fossil Fuels, and How Effective Are They?

Many governments use regulations to phase out fossil fuels. These rules set end dates for high-carbon technologies. For example, mandating the closure of coal-fired power plants or banning sales of gasoline cars after a certain year.

The European Union has approved a rule requiring all new cars to be zero-emission by 2035​, signaling the end of new gasoline and diesel car sales. Countries such as Canada, the UK, and Germany have also pledged to phase out coal power generation by the 2030s.

Such policies are proving effective where implemented. Coal’s share of electricity in the UK fell from 39% to just 2% within a decade​. Clear phase-out timelines, combined with carbon pricing and cleaner alternatives, drove that rapid decline.

Phasing out fossil fuels globally remains a challenge. Some fast-growing economies are still adding new coal plants to meet their energy demands, while others are dismantling them. Nearly all new coal projects are concentrated in about 15 countries, mainly China and India​. 

Overall, phase-out regulations send a powerful message that clean energy is the future. As more nations adopt these rules and stick to them, they can significantly hasten the decline of coal, oil, and gas in the energy sector.

How Do International Agreements Influence National Energy Policies?

International agreements help guide national energy policies. When virtually all countries agreed in Paris to limit global warming, it created a framework where each nation had to outline its emissions-reduction plans. This global agreement has spurred many governments to enact domestic laws and targets in line with their pledges, such as boosting renewable energy deployment or aiming for net-zero emissions by 2050.

These accords also foster global peer pressure. Leaders know they will be held accountable on the world stage, which motivates them to follow through. At the 2023 COP28 summit, nearly 200 countries acknowledged the need to move away from fossil fuels in energy systems.

While international agreements are not enforceable, they can affect national policies by uniting countries around common climate goals and establishing mutual ambition. They also help free up financing and technological cooperation to help countries achieve those goals.

What Strategies Are Governments Using to Balance Energy Security With Decarbonization?

Balancing energy security with decarbonization has become a major focus for policymakers. Recent events, such as Russia’s war in Ukraine that dramatically increased gas prices, show the risks of relying too heavily on fossil fuels. Many countries have responded by treating clean energy as a climate policy and as a strategy for energy independence and resilience.

One approach is to increase our mix of energy sources rapidly. By building more renewable energy sources and other domestic energy sources, such as nuclear or sustainable biofuels, countries can reduce their dependence on imported coal, oil, and natural gas. One example of this diversification is Europe ramping up wind and solar projects to reduce its need for Russian oil.

Governments have also started to invest in energy storage, grid upgrades, and backup capacity to ensure reliability as they increase wind and solar power. An IEA report noted an increased policy focus on supporting home-grown manufacturing and supply chain security for clean energy technologies since 2020​.

Governments now understand a greener grid can also be a more secure grid. By diversifying the energy mix and innovating in technologies like storage, nations are working to meet energy demand reliably and cut emissions. The massive push for renewable energy and electrification is now viewed as a way to shield economies from the volatility of fossil fuel markets, while keeping the lights on.

How Do Policy Shifts Impact Investment in Emerging Clean Energy Technologies Like Hydrogen and Carbon Capture?

Changes to policy have a huge impact on investment in newer clean energy technologies like hydrogen and carbon capture. When governments offer strong incentives or set targets for these solutions, they provide private investors with the confidence to invest in them.

Hydrogen is a great example. Sixty governments now have hydrogen strategies, and many are funding green hydrogen projects. This has led to a boom in planned hydrogen production that could result in a fivefold increase of low-emission hydrogen production by 2030.

Carbon capture and storage (CCS) has also enjoyed boosts from government policies. The U.S. raised its carbon capture tax credits, sparking a wave of new CCS project announcements. Projections show U.S. carbon capture capacity could jump to roughly 700% to 164 million tons of CO2 captured per year by 2035 thanks to these incentives. Other countries are following suit by funding CCS hubs and demonstration projects to trap emissions from factories and power plants.

Through grants, tax credits, and clean energy standards, governments are speeding up the development of technologies like hydrogen and CCS. These new solutions will be crucial for lowering emissions in sectors where wind, solar, and electrification might not be enough.

Make Your Own Shift in Your Household Today

Global policy shifts in energy transition can help move the climate change needle on a global scale, through local laws and regulations and global pacts. You can also move the needle at the local level through smaller initiatives, such as installing solar panels, purchasing an electric vehicle (EV), or simply switching to LED light bulbs. Even the smallest changes on a large scale can help push the world toward a much greener future.

But those aren’t the only ways you can contribute to the move toward more sustainable energy use around the world. Especially considering the significant initial cost of things like installing solar panels or investing in an electric vehicle.

You can also move your local needle with minimal upfront investment by choosing an energy provider that offers a high level of renewable energy or one that allows you to switch to 100% renewable energy. This system gives you the power to rely more on renewable energy for your power without shelling out the cash needed to install solar panels or a wind turbine on your property.  

Learn more about Just Energy’s Green Energy initiatives. 

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