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Policy Options: Market-Oriented Regulatory Policies
Market-oriented regulatory policies directly regulate
an aspect of the energy market, while providing
some market flexibility. With this type of policy
option, policy-makers choose to promote renewables
by setting technology standards or targets for connecting
renewable energy to the grid. Because market-oriented
policies set non-voluntary targets and standards,
we can be more confident that the environmental
targets will be reached. An added benefit is that
the law allows companies to choose the type of technology
that is most cost-effective for their to develop.
However, there are political challenges to market
policies' success. Mandatory standards set an aggregate
target for the economy or market. Confusion and
uneven results can arise because while all companies
are governed by the policy, the manner in which
they participate can differ.
The challenge is in creating an appropriate emission
or technology target. Governments can be criticized
for being too specific in the technology or form
of energy supported by the policy because this
reduces flexibility and can cause firms to pay
higher costs than are necessary to reach the target.
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