Climate Change Mitigation in Southern Africa: Zambia study

1
Thematic Area 2 Assessment of Policy Instruments
in the Context of Current Market Structure,
Institutional Capacities and Risks in Developing
Countries Kirsten Halsnæs and Emilio La Rovere
2
Elements

• Identification of issues to be examined in depth.
• Literature review
• Discussion about how the thematic issues can be
  reflected in analytical approaches and tools that
  are used by the countries.
• Case examples based on country studies.

3
Issues for Inspiration

• Synergies and tradeoffs between energy access and
  affordability, efficiency, and environmental
  goals
• Energy efficiency and prices.
• ESKOMs.
• DSM programs.
• Relationship between energy sector goals and
  social and environmental policy perspectives
• Externality approach.
• National development goals and MDGs.
• Involvement of finance and development
  ministries.
• How to improve the policy environment on the top
  of already implemented liberalisation reforms
• Environmental taxes.
• Responsibilities of private entities.

4
Issues for Inspiration, continued

• Are there good examples of energy market areas,
  where specific policies have been successfull in
  reducing transaction costs and risks discussion
  of replication possibilities
• FDI frameworks.
• Investments in the power sector.
• Locally managed efficiency programs.
• Select areas for more in depth assessment
  including literature review

5
Understanding Development

• Dual Economy
• Multiple Transitions 
• Informal Activities
• Subsistence Production 
• Market Performance and Disequilibria
• Non-commercial Fuels
• Non-economic Concerns 
• Policy Distortions

6
Analytical Approaches and Modelling Tools

• Case example Energy market reforms and
  accessability of the poor
• Market reforms can be assessed in sectoral
  partial equilibrium models and in macroeconomic
  models so a picture can be provided about costs
  and energy supply structure.
• However, statistical ex post analysis of energy
  access of specific income groups might provide
  more interesting results.
• Experiences from international studies include
  Stanford project on Energy for Sustainable
  Development and GNESD study on Energy Access for
  the poor.

7
Analytical Approaches and Modelling Tools

• Case example How to improve the policy
  environment on the top of market liberalisation
• Environmental taxes can be assessed in sectoral
  partial equilibrium models and in macroeconomic
  models.
• However, they can not describe real market
  features of DCs.
• Limitations relate to distortions, no
  transaction costs and other frictions, informal
  sector spillovers.
• Special attention should be given to
  distributional impacts, political issues,
  affordability, non-commercial fuels,
  competitiveness.

8
Analytical Approaches and Modelling Tools

• Case example How to improve the policy
  environment on the top of market liberalisation
• Responsibilities of private entities which for
  example can be implemented in terms of regulatory
  measures and standards. These instruments to some
  extent can be integrated in energy sector models
  (technology standards).
• Limitations Exogenous selection of technology
  standards, which do not need to be a cost
  effective solution to the problems requires very
  detailed technology information demand
  side/consumer behaviour is not well captured.
• Special attention should be given to cost
  effectiveness, finance, distributional impacts.

9
Conclusions for Thematic Area 2

• Issues need to be addressed both in an analytical
  way and through empirical analysis.
• Some aspects can be addressed in formalised
  models, but other aspects require additional
  statistical analysis and new approaches.
• Preferable to select a few areas and go into
  depth.