World Energy Outlook 2006

Government Policies and Measures
As in previous editions of the Outlook, the Reference Scenario takes account
of those government policies and measures that have been enacted or adopted
– in this case, by mid-2006 – though many of them have not yet been fully
implemented. The impact on energy demand and supply of the most recent
measures does not show up in historical market data, which are available only
up to 2004 for all countries. 1 Many of them are designed to curb the growth
in energy demand, in response to heightened concerns about energy security,
as well as climate change and other environmental problems. These initiatives
cover a wide array of sectors and involve a variety of policy instruments.
Importantly, unlike the Alternative Policy Scenario, the Reference Scenario
does not take into consideration possible, potential or even likely future policy
actions. Thus, the Reference Scenario projections should not be considered
forecasts, but rather a baseline vision of how energy markets would evolve if
governments do nothing beyond what they have already committed themselves
to doing to influence long-term energy trends. By contrast, the Alternative
Policy Scenario, which forms Part B of this Outlook, analyses the impact of a
range of policies and measures that countries in all regions are considering
adopting or might reasonably be expected to adopt at some point over the
projection period.
Although the Reference Scenario assumes that there will be no change in
energy and environmental policies through the projection period, exactly how
existing policies will be implemented in the future is not always clear.
Inevitably, a degree of judgement is involved in translating stated policies into
formal assumptions for modelling purposes. These assumptions vary by fuel
and by region. For example, electricity and gas market reforms, where
approved, are assumed to move ahead, but at varying speeds among countries
and regions. Progress is assumed to be made in liberalising cross-border energy
trade and investment, and in reforming energy subsidies, but these policies are
expected to be pursued most energetically in OECD countries. In all cases, the
rates of excise duty and value-added or sales tax applied to different energy
sources and carriers are assumed to remain constant. As a result, assumed
changes in international prices (see below) have different effects on the retail
prices of each fuel and in each region, according to the type of tax applied and
the rates currently levied. Similarly, in this Reference Scenario, it is assumed
that there will be no changes in national policies on nuclear power. Nuclear
energy will, therefore, remain an option for power generation only in those
countries that have not officially banned it or decided to phase it out.
1. Data for some countries and some fuels are available for 2005 and are included.
54 World Energy Outlook 2006 - THE REFERENCE SCENARIO
© OECD/IEA, 2007