improved efficiency and less waste in all sectors; and improved carbon sinks such as plants and soil, which has implications for bioenergy (Fay & others 2015). As Arent & others (2017: 9) note, the political economy of clean energy transitions in developing countries presents “some of the thorniest and most important challenges”, as they involve “the full economic system with implications for competitiveness and economic growth”.

# **Scaling up clean energy transitions to meet global goals thus relies on policies and institutions which address concerns far beyond the understood objectives of 1990s model power sector reforms.** As may

be the case for any reform, each of the four low-carbon development pathways suggested by Fay & others (2015) also risk getting captured by vested interests. It is beyond the scope of this paper to review the large body of literature on this topic. However, at a high-level, political economy solutions include: applying standards to new (rather than existing) capital; and designing institutions predictable enough to encourage long-term investment but flexible enough to adjust to new information, with clear criteria for when to end public support to low-carbon technologies or industries (Fay & others 2015: 18-20). This is in addition to more general citizen engagement measures, not specific to climate change.<sup>63</sup> Banerjee & others’ (2017) regulatory indicators for energy efficiency and renewable energy include only three that explicitly involve 1990s model elements.<sup>64</sup> The remainder of this section highlights select literature on direct and indirect links of clean energy with model sector reforms.

**Statistical studies find limited correlations between model reforms and clean energy.** Erdogdu (2014a) finds that carbon dioxide emissions per unit of power are lower when model reforms are more extensive in high-income countries, but there is no such association in low- to middle-income countries. Vagliasindi & Besant-Jones (2013) find more nuances for different reform elements and diverse groups of countries. Emissions intensity is worse with privatization (despite increased labor productivity, possibly due to lax enforcement of emissions standards), but better with competition in generation (despite no significant general correlation between competition and productivity).<sup>65</sup> Unfortunately, there are no clear explanations for these observations. Despites suggestions that establishing a regulator can increase accountability to community environmental concerns such as pollution reduction (World Bank 1993), the above studies demonstrate only a tentative relationship between clean energy and power sector regulation in past decades. In any case, analysis of past circumstances may be a poor guide for the future given the large gap between current carbon-intensity of energy and global clean energy goals.

# **Through incentives for efficiency, and fuel and technologies, model reforms may indirectly enable or**

**hinder clean energy outcomes.** Improved economic efficiency directly supports clean energy―and energy efficiency―to the extent that the cost of power generation correlates with emissions intensity, and that price signals affect behavior. This is likely to be the case when power is priced at the marginal cost (which is greater for fossil fuels than hydropower, for example), but not necessarily at average cost, which dominates

> 63 For example, ensuring that the public benefit from policies (rather than focusing on firms), including through social protection and compensation schemes, and communication campaigns sensitive to stakeholder perceptions (Fay & others 2015: 18-20).

> 64 These relate to renewable energy, and are: ‘legal private ownership of generation’; ‘guaranteed access to the grid’; and ‘rules that allow customers to purchase power directly from a third party’. As another example, the World Economic Forum Energy Transition Indicators make no reference to market reform elements.

> 65 The pattern is more complex with regulators and unbundling. Emission intensity is better with a regulator than without in small, low-income countries, but worse in large, middle- to high-income countries. Emissions intensity is worse with vertical unbundling in small, low-income countries, but better in large, middle- to high-income countries (Vagliasindi & Besant-Jones 2013).

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