Spring 2020 - 58296 - PA 388K - Advanced Topics in Public Policy

Political Economy of Energy Policy Reform

Overview. When pursuing energy reform, policymakers inevitably face decisions about the direction, timing, pace, and sequence of policy implementation. Does the solution to a problem require more market or more state intervention? Which type of intervention, if any? When should the reform be launched, during a crisis, after an electoral campaign, at the low-end of a price cycle? Is it better to apply shock therapy, changing a set of policies all at once, or to apply a gradual strategy? Should a reform program target first intermediate goods or should it start with final goods? What sequence of policy changes is most appropriate to accomplish the reform’s objectives?

Then there’s the question of how to make the new policies “stick”, or last long enough for them to deliver their intended results. Liberalizing prices may be economically sound, but it is also unpopular, raising doubts about the credible commitment of the government to such a policy. A government with a strong mandate will face less difficulties selling a controversial policy, but this is hardly a guarantee that the policy will prevail when things get difficult or the political situation changes. What type of institutions and practices help the government signal and sustain its commitment to the new policy regardless of a change in circumstances? How can it secure the legitimacy and support to push a reform forward? How should it communicate and shape public opinion around a policy shift?

In this seminar we will discuss questions like these and review relevant academic literature on the political economy of energy policy reform. We will analyze policy change in a broad set of energy subsectors, taking the time to stop on some of the most difficult policy challenges, such as ownership and control of national oil companies, energy subsidy reform, gasoline and electricity market transformation, and the promotion of renewable energy. Our aim will be to distill lessons from international experience relevant to the craft of energy policymaking.

Learning goals. Through this course, students will:

Acquire an understanding of the economic and political determinants of energy reform.
Identify the components of a strategy for energy-policy change.
Identify the evolution of ideas on energy policy reform.
Learn tools to analyze policy reforms.
Evaluate the advantages and limitations of alternative approaches to policy change.
Develop their analytical, presentation and writing skills.

Course requirements and assignments. This course is a seminar. You are expected to attend regularly, read all materials assigned, participate actively in class discussion, and write policy memos and a research paper.