Skip to 0 minutes and 14 seconds Earlier in this session, we have defined energy transition policies as policy measures affecting the decisions of energy consumers and producers. These type of policies can be implemented by national governments, or even local authorities. National governments implement, for instance, subsidy schemes to stimulate house owners to implement energy saving measures. This national scope of such a policy does, however, not imply that international factors do not play any role. On the contrary, because energy markets are international markets, national policy measures to change the decisions of economic agents may have consequences for the decisions taken by agents in other countries.
Skip to 1 minute and 2 seconds The most prominent example of such an international relationship is how oil-producing countries, such as those in the Middle East, may respond to policy measures in oil-consuming countries to curb the use of oil. The direct effect of the latter type of measures may be that these countries indeed reduce their consumption of oil. The indirect effect, however, may be that the oil-producing countries raise their production of oil. Such an increase in production results in lower oil prices, which in turn triggers oil consumption. This response by the oil producers can be the optimal strategy to maximise their revenues from the oil resources.
Skip to 1 minute and 48 seconds This relationship between energy transition measures, which are meant to reduce the consumption of fossil fuels on the one hand, and the supply by oil producers on the other, is called the Green paradox. This relationship results from the fact that the producers of fossil fuels can only make money from these fuels by supplying them to the markets. If they see that the consumption of fossil fuels will decline in the future, they have an incentive to increase current production. The existence of this Green paradox is one of the greatest challenges for all policies to reduce carbon emissions by transforming fossil fuel economies to economies based on renewables.
International dimension of energy-transition policies
In this video Machiel discusses the international factors that play a role in implementing national energy transition policies. You will learn about such international relationships using the prominent example of the Green Paradox. Have your decisions as an energy consumer or producer been affected by policy measures in other countries? Please share your experiences with your fellow students in the comments section below.
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