Energy governance models

The shape and pace of the transition to low-carbon energy will differ around the globe due to variations in energy governance models. Energy governance, broadly defined, is the system of mandates and incentives that shapes the types of fuels and electricity generation infrastructure used within geopolitical boundaries. Two central features of energy governance involve the organization and structure of the institutions that regulate energy and the economic actors that provide fuels and electricity. With respect to institutions, some energy governance involves federalist-type systems, such as the United States or the European Union, in which a top-down actor issues directives for lower-level governments to implement, or top-down and lower-level actors operate in parallel. Energy governance also involves more centralized approaches and decentralized ones, in which governmental sub-units issue their own mandates and incentives - sometimes in coordination with each other, and sometimes not. With respect to the economic organization of energy actors, there are three basic models: government- owned and directed fuel extraction and electricity provision; competitive and partially deregulated industries; and hybrids, involving both government-led and private energy development. There are many organizational variations within these three primary economic models. For example, some systems primarily involve vertically-integrated firms that provide electricity generation, transmission, and distribution or fuel production and transport, whereas others are more restructured. All of these models pose opportunities and challenges in terms of transitioning rapidly to zero-carbon or net-zero carbon energy. For example, a strong, centralized government with a government- owned, vertically-integrated energy industry can quickly lower emissions, but any institutional disinclination to do so can stall the transition. A relatively decentralized approach involving numerous private, restructured actors can result in slower, more tepid or disorganized efforts to lower carbon but also allows for the development of innovative, aggressive carbon reduction strategies that might ultimately find broader support.