 So, we have seen now all the different modules related to energy resources, economics and environment. Now, we put these all together to look at energy policy. So, in this module and the next one, we will be focusing on energy policy. So, the first question that we should think about is what is an energy policy? The definition of a policy and you can look at the Wikipedia definition says that policy is a principle or a protocol to guide decisions and achieve some desired rational outcomes. So, we can in our daily life, we can look at different kinds of policies which have been adopted, policies which have been adopted by the government, policies which have been adopted by institutions, by the state, by the local authority. And let us look at how do we analyze, what is the framework by which we look at different policies. So, when we talk about policies, we need to understand that what are the decisions involved and what is the policy trying to impact which kind of decisions, who are the stakeholders that means, who are the people who are involved in that in these decisions and who are affected by the policies. And then based on this, what are the discrete policies to impact those decisions and to look at the stakeholders, we can then see based on a particular policy, what will be the impact on individual stakeholders, what will be the stakeholders perceptions. We can set for ourselves some goals related to the policies and after setting those goals, we can have some quantifiable criteria and that means these will be metrics or numbers that we calculate, we can see they could be quantifiable, they could be qualitative, we can look at that and do an analysis to see whether or not a particular policy is going to be useful, is going to be good. So, in any policy, whenever we talk in terms of policy analysis and specially when we in our context, we are talking of policies related to energy, we can look at list out decisions, the stakeholders, policies, goals, the criteria and then do the analysis. We can also put down what are the institutions and the mechanisms who is going to implement the policies. So with this, let us try and see if you look at the global energy assessment, the chapter 22 deals with policies and in that they specify a set of different goals which are usually there for energy policy. The first one is the, is that we want to increase energy access and we will talk about this a little bit more, we try and see what are the kind of, that means we would like the entire population to have access to energy so that they can have a better quality of life and develop the capacities for energy transitions with the energy sectors are in transition, we are having changes and we need to be able to have the capacity to not get disrupted by these transitions and to be able to cope with these transitions. And hence energy security, we have already seen what is the implication in terms of security where we want to have reliable energy supply. So the goal of an energy policy will be trying to increase the security. Manage the energy related market power. So for instance, there could be monopolies or oligopolies and a policy would try to see that you balance it out so that everyone has a fair chance and then smaller players can also have an ability to compete in the market. Manage the energy resource endowment. So the resources may be distributed and we want to make sure that these distributions are such that over different generations through the intergenerational equity or we want to look at how these resources can be managed in an appropriate fashion. In most of the energy sectors, especially when we are looking at fossil fuels, there are adverse environmental impacts, there are adverse human health impacts and one of the goals of the, when we analyze energy policies is to reduce the environment and human health impacts. We want to also look at new technologies and accelerate the energy related technological change and in some cases for instance when we are talking of maintaining CO2 emissions less than 1.5 degrees, we want to, we have an international agreement, the Paris Agreement, we want to coordinate and implement some of the international energy related policies. So these are sort of a listing of possible different kinds of energy goals and one will have some aspects of this or some combination of this and most of this. When we think in terms of energy policies, you may want to look at the scope and the elements of the policies. So for instance, if you look at your own institution, for instance, we are thinking in terms of the IIT campus. In the case of the IIT campus, we would like to see what are the policies related to energy. If we think about it, it is about how we are distributing the electricity within the campus. Are we charging based on a fixed rate? Is the, do we have renewable sources of energy on the campus and are we having incentives and penalties for energy efficiency and the usage of energy? We can look at, again in the hostels, there is LPG being used for cooking, we are looking at the waste. Can we use the waste to generate some of the energy? Can we have a sustainable way of doing the cooking energy? We can look at what are the elements of transport. For instance, several campuses in our campus, we do not permit students to have motorized transport within the campus and there could be, we could also have, we have a, we can have an electric vehicle going around the campus, a fleet of electric vehicles. We can look at, again within transport, some portions of the area where there is no vehicles allowed. There are new campuses being built which are completely, which are completely vehicle free and these are like walkable campuses. So in each of this, when you decide the policy is related to a campus, you can decide what are the goals. The goals are to ensure that there is very little environmental impact. The goals are to also provide a cost effective transportation. We can list out what all are the policy instruments, list out the challenges, existing institutions and the roles, the time horizon and create a framework by which we analyze the policy. So this is in terms of the campus. We can go beyond the campus to the region in our case that is that becomes Poway and we can look at in Poway what kind of policies are there, who is deciding what are the things. If you are in a rural area, we can look at a village and we can see whether that village has connection to the grid, whether it has a microgrid, whether it has some common areas for electricity. We can go to the next level where we look at a number of villages in a block and we can look at a set of policies for the block and we can look at a city or a region. So in the case of Mumbai, we can see which are the agencies, what are the kind of things. Should Mumbai have a policy where it is going to have electric vehicle charging stations, for instance, what about the air quality in Mumbai and things like that. We can go from the city to the region to the state Maharashtra and we can make an energy policy and a plan for the state. What is Maharashtra's policy in terms of net metering? Do we have if people are connecting photovoltaics to their rooftops, what kind of incentives will be given and we go one step of aggregation further, we can go to the country level at India and we can see a large number of centrally decided policies related to the energy sector and then of course we can go to the world as a whole where we can have, we are thinking in terms of the IPCC, we are thinking of the Paris agreements, we have agreements on trade and a whole host of things. So we can decide what is the scope, which is the focus and look at the different elements and then analyze the policies and I would urge you to think in terms of some real life examples that you are familiar with, list out some policies and describe the framework for the policy formulation who is going to formulate the policy, how are we going to analyze it, who are the stakeholders, what are the policy goals, what are the criteria by which you are going to assess the policy, which institutions will implement it, what is the type of analysis that we should be focusing on and compare, comment on existing policies vis-a-vis some new policies with respect to different stakeholders. You should do this with a specific example then you will get an idea of how this framework works. Now what I will do is I will take you through a few policy examples to illustrate how we can analyze this framework, but you should try and do this yourself so that you get an idea of this is logical common sense kind of framework, but if you list out in the same fashion, you will get an idea of how we can do policy analysis. So, in the case of one of the things that we talked of when we talk of policies is what are the instruments or what is the way in which we are going to implement policies. So, there are number of different instruments. So, for instance there are regulating instruments, for instance where we can ration, we can provide an emission quota or we can mandate a technology. So, for instance we can say that every power plant will be fitted with some pollution control equipment and we specify that that is this is the kind of technology that is mandated or we can say that different units will have the will have a certain amount of emission quotas and people can stick within that quota if they exceed the quota they will be penalized if they are less than the quota they get an incentive. We can also provide performance standards and benchmarks. So, that means if your emissions or your efficiency is better than a particular thing then that means you are you have a and there is a minimum performance standard that you have to meet. And this is often there for instance in the case of vehicle emissions we have standards which we have to adhere to which is based on the different years in which the models are we could also have this is in terms of a regulating instruments we can have implied deregulation in terms of a emission permit trading and this has been done in the European Union and there could be green certificates we can have voluntary agreements. And then there are this whole set of incentives fiscal and financial instruments taxes subsidies or grants and so there is this possibility we can either ration or we can provide subsidies or taxes to give you an example if we just take a fuel where you have price and quantity and if we see if you have the demand at going like this and you have a supply curve. So, in the normal case this point is the Q and this is the equilibrium price Q0 P0. Now, suppose so this is let us say for a fuel suppose the fuel is subsidized and in the sense that we are giving a subsidy to the we are providing a subsidy to the consumer. So, if we are providing a subsidy to the consumer there is a product to the producer we have a subsidy. So, that means we have a fixed amount per product which would mean that now yeah ok s dash s dash and you can see what happens here this then now with the subsidy this is Q with a producer subsidy right. The demand remains the same the point increases and if this is a fuel where the this is a fossil fuel in the case of the subsidy the emissions will of course increase because of this now the price also decreases the effective price decreases and this is why are we providing this subsidy but we may be providing this subsidy from a development goal or from a equity goal and with the idea that we would like that fuel to be affordable. So, for instance we have a subsidy for kerosene we have a subsidy for LPG for cooking gas so that people can afford it and with the result that this will result in this kind of a thing. This is where this subsidy is if this subsidy is given essentially to the producer this is like a producer subsidy and often instead of that we could give this subsidy to the consumer and if we look at a consumer subsidy which means that the consumer is given a certain amount and then in the original case this now becomes this is your D dash and this becomes P consumer subsidy. So, in both these cases what will happen is that we are producing more than the earlier case the equilibrium point shifts and you can see then what happens is because we are providing this we now have this is the consumer this is this amount which is subsidized. So, effectively this is the effective price but we are this much is given as a subsidy so the consumer ends up paying less than in the earlier case and in so this is one set of things if we think in terms of putting a tax we move in the other direction and we are reducing the amount of the quantity and then the price also effectively increases instead of doing this we could also do this by rationing and providing the quantity. The difference in both these cases is that if we ration and provide a quantity fix the quantity we do not know how much that quantity should be and where the market will operate. But in effect either of these are the choices that either we put it in terms of a target and ration or we put it in terms of a tax the subsidy or the tax. In the case of new technologies that we want to get through and where we want them to initially have a bigger volumes we can also provide them in terms of a grant and an initial capital subsidy for instance if this has happened in the case of solar for many of this has happened in for wind and happened for many of the renewables. So these are in terms of the fiscal and financial instruments another instrument that we had which we talked about earlier when we looked at the economic the module on energy economics is that we can have accelerated depreciation and so if we have an accelerated depreciation it means that we are reducing the tax impact and because of that effectively it will act like an initial subsidy. There are many other supportive actions that we may provide in terms of policy instruments often one of the barriers is because of lack of information. So we can provide dissemination we can reduce the transaction cost we can improve knowledge and market transparency. So these are some of the possible policy instruments there are of course many other possible policy instruments. So this is from the IPCC report by Perrell you can see that when we look at the taxes and we can see what kind of the instruments which are there whether it is a tax subsidy or we fund research development research development and design we can have regulation in all of this we can substitute the fuels we can look at energy efficiency we can change the structure of the production we can look at new clean technologies coming in and then based on that based on all of this there will be an impact based on the kind of elasticity that we have and will result in a change in the kind of emissions which we are looking at. So if we can create a model of our system either through an input output or through computable general equilibrium or any other model of the economy that is there and we can see when we impact when we implement a policy instrument what happens overall and so this is the way in which there are a large number of different policy documents in the earlier years we used to have in the days of the planning commission we used to have five year plans and you can take a look at some of these which will give you an idea of how the planning and implementation was being done. There was an integrated energy policy report and that is was an attempt in 2008 from the planning commission where the different sectoral approaches were planned to be put together. There was also national action plan on climate change and then the national solar mission earlier it is to be called the Jawaharlal Nehru National Solar Mission the national mission for enhanced energy efficiency there are different kinds of there was the energy electricity act and the electricity regulation commission act ultra mega power projects rural electrification policy and then our intended domestic commitments which we committed to in Paris which is now which we have signed off and we will discuss some of these in detail. There are this is only a subset of the different kinds of policies there are many different policy options. So as we saw we have actually a number of different possibilities we can look at market or government and typically we can look at policies implementing through the market or we can look at a government intervention where we mandate or legislate or we can look at an independent regulator looking at this. So there is these are the options that we have in many of these systems what will happen is that the market usually has imperfection so it needs regulation and several at several times the government also intervenes. So it is always a hybrid of all of this and this is what makes policy analysis and interpretation much more complicated. The problem in all of this is when we look at a physical system if I am looking at a heating water and I have an electric heater I can measure the temperatures I can estimate the time I will get exactly I can create a model which will exactly replicate and I can decide what kind of how much heating for what temperature when I look at a system which has a physical system we have energy you have energy supply we have energy use but there is a behavioral component in terms of individuals and their responses companies and their responses and the experimentation at that kind of scale whether it is at the local city state or country is quite expensive. So one can create some mental models one can create some mathematical models like we saw the input output models and then we can see what will be the impacts and this is often done and then you try and you compare the policies and then you try and see adopt and enact it and then see what happens and sometimes one makes mistakes in doing the policy because there are unintended impacts of these policies. For instance in the Indian context in the initial years when we started on renewables we started providing an incentive for capital subsidy for wind machines we also had a tax benefit and in some states we also had sales tax benefit so in many cases there was an incentive where people installed wind farms in areas where there was not enough sufficient wind the relatively low capacity factor and even though there was not much generation the company is still benefited in terms of all the other benefits which were there. So this was of course corrected later on so that was why at one point we had a overall capacity factor of wind generation in our country of less than 14 percent. Now that has that is increasing with the change in the policy. So what are the criteria to analyze policy again this is from the global energy assessment chapter 22. We can look at the effectiveness of the policy. Effectiveness will be judged in terms of its ability to meet the goal that was set. We can look at the economic efficiency what happens what is the in terms of overall economics what is the overall is there a surplus or is there a loss and the consumer and producer surplus does it get decreased and overall impact on the GDP or on the income of the different stakeholders. We can look at administrative feasibility how easy and cost effective is it to implement is there a possibility that this will be there will be distortions which will be there. We also want to see what is the equity impact. Equity impact means that how does it affect the poorest of the poor and is it is the impact equal across different income classes and then of course the equity impact can affect the policy political acceptability and of course political acceptability is not is a is a tricky thing and it depends on a whole host of different things including perceptions and so that is that is a tricky point but when you are looking at large scale policies which affect a whole set of population we need to look at this. Policy robustness if there are any changes that we have not anticipated if anything different environmental factors change thus the policy result do the policy results remain the same. Policy consistency overall when we think in terms of investments and in terms of decision making it is important that over the years we do not keep changing policies so that it is difficult to then take decision. So, overall we should try to see that policies are consistent over different governments over different kinds of different time periods. So, these are typically the kind of criteria.