Question

You are the newly appointed U.S. Secretary of Energy. The President has asked you to make recommendations about government interference in the energy market.

Should you intervene more aggressively in the energy market to address environmental problems and climate change, or reduce government involvement, leaving the resolution of this issue more to "The Market"?

Discuss and justify one or the other position using course concepts and materials and from outside sources.

Answer 1

Climate change and energy are intimately connected to each other. Unbridled use of energy resources could give rise to Carbon emission which would exacerbate the problem of climate change. World over, more than 8 % of governments expenditures go to energy. If government stops subsidizing energy sector, its rational and just uses can be encouraged. But if government reduces its role, the problem of carbon might become more acute and profound as private sector would make investments which might discourage clean energy.

Thus,

• Government must reduce its role and encourage private sector in energy sector,
• But private sector must be incentivised to make investment in clean energy. Here government must provide subsidies to private sectors.
• Further, government can set up norms and regulations so that market system automatically move towards the environmental friendly energy.