Energy reform in major emerging economies: new models for sustained growth:
Architecting competitive energy systems
This section of the report explores the topic of energy reform in major emerging economies, focusing on seven of the largest emerging economies.
The analysis highlighted a number of findings, including:
Governments across major emerging economies should continue to architect the future energy transition through reforms in the energy sector. These are required to continue to adapt to a changing global energy landscape, particularly in the context of the gyrations of the global economy. Above all, reforms should aim to increase energy systems’ capacity for resilience; carrying on with business as usual will leave governments with insufficient capacity to withstand stress and will force them instead to react to changes, leaving them with little “room for manoeuvre”.
There is no universally applicable formula for energy reform. Each country must develop and implement policies that address its own unique circumstances. Successful energy reform cannot be defined against some ideal outcome, and there is no one-size-fits-all approach. Despite this, there are lessons to be learned from energy reforms implemented in other emerging economies with similar challenges over the last decades.
Reform is a long-term undertaking, with progress likely to be measured in decades rather than years. The closest definition of success will consist in a longer-term vision energy systems are moving towards, a process exercised with diligence and at a politically acceptable speed. Successful reform is as much about implementation as it is about the nature of the reform itself. The case studies explored in this report underlined that policy-makers should keep this in mind by:
- Enacting sound policies in solid institutions. Policy changes must go together with the ability and will to implement, which require solid institutions and strong governance. Effective reforms will require modernizing and reforming SOEs to increase their effectiveness.
- Signalling market readiness. Energy reforms should provide the right signals to markets to respond to emerging challenges in the energy system in the most effective way, and to attract the levels of inward investment required to facilitate the energy transition.
- Sustaining public engagement. Engaging stakeholders across the energy value chain will be essential to build and sustain momentum for reforms; this requires constant communication.
The complexity of the energy sector and its central role in the wider economy mean that serious reform will involve negotiation and interplay between numerous interlocking interests. Progress can appear slow-paced, but this should not be a barrier to serious reform. Although some degree of failure is perhaps inevitable, the benefits that will arise from success will dwarf any setbacks along the way. Ultimately, effective reforms have the potential to put competitiveness back on track and contribute to sustained growth in the long term.