policymakers demonstrate

Economic Approaches to Energy, Environment and Sustainability 309
trilemma, with the objective of ‘ensur[ing] that Europe has secure, affordable
and climate-friendly energy’ (European Commission, 2015). Further research
should be conducted to determine how the concept of the Energy Union may
evolve over time to negotiate the elements of the trilemma, and remain robust in
the face of potentially abrupt changes in EU and Member State level priorities
(which are, and are likely to continue to be, substantially different).
A key element of the energy trilemma, as discussed in Section 7.4.1, is uncertainty.
Decision-makers must plan, invest and introduce policy instruments to
satisfy the energy trilemma in the face of a raft of unpredictable developments
that may occur over subsequent years and decades (e.g., technological development,
economic pressures, energy resource scarcity and prices, public preferences,
etc.). Whilst some of these uncertainties may be reduced, others are
likely to remain. Policies, policy mixes and strategies must therefore be flexible
and able to deal with uncertainties when they arise, as far as they are able
to, to prevent abrupt changes and maintain long-term credibility. Examples of
flexibility mechanisms are the forthcoming ‘Market Stability Reserve’ forthe
EU ETS (intended to reduce existing and reduce the risk of future permit oversupply),
and ‘degression’ mechanisms for renewables’ subsidies (i.e., an automatic
change in subsidy levels based on deployment rates) to prevent unacceptably
high costs. However, the occurrence of some uncertain or unexpected
events may be beneficial. For example, the rapid fall in oil prices that began
in August 2014 has facilitated the reduction of fossil fuel subsidies in many
countries around the world (IEA, 2015), and if it continues, may facilitate the
continued introduction of robust carbon pricing. This helps reduce market distortions
and the relative cost of low-carbon alternatives, and thus subsidies for
their deployment. The research priorities identified above would contribute to
the continued identification of appropriate approaches for policy flexibility and
resilience, and key options for reform that may be introduced when the political
economy allows.
7.6 The Science Policy Interface
Economic analysis of policies to address energy, environment and sustainability
challenges plays a central role in the development and implementation of such
policies in many countries – including in the European Union and EU Member
States. This chapter has demonstrated that a number of different schools
of economic thought tend to frame the relationship between the environment,
energy and the economy differently. They also emphasize different theoretical
frameworks and methods. As a result, there are often conflicting views in
answer to important policy questions, such as the most cost-effective strategy
for reducing GHG emissions in the EU. Additionally, many of the key questions
faced by policy communities working in these fields require an interdisciplinary