Energy reform in major emerging economies: new models for sustained growth:
Mastering public engagement
Governments are all too aware of the need for public support for their policies. Lack of buy-in by the public can derail proposed changes in energy policies put forward by reforming governments, particularly against a backdrop of slower economic growth. There is no clearer example of this than the development of shale gas, with public opposition, often based on misconceptions, impeding progress in a number of nations.
The vast majority of people rely on energy every day for heat, light and mobility – but despite the fundamental role it plays in everyone’s lives, the importance of energy reform often fails to register with consumers. In Mexico, for example, only 10% of respondents to a recent poll felt that energy reform is the most important reform, compared to 39% for education.95 At the very least, governments must find ways to engage the public to secure awareness of the importance of reform if they are to achieve any meaningful impact. The tide is changing though, as the burgeoning middle classes with access to social media find new ways to make their views known.
An expanded middle class in the emerging economies means higher demand for energy and heightened expectations of energy services, including access to affordable energy to sustain their needs, and stronger calls for environmental protection. The rise of social media is going hand-in-hand with rising demands for greater transparency in policy, including that of energy. Global environmental coalitions are spearheading calls for greater care for the environment using digital platforms. In China, public discontent surrounding levels of air pollution in major cities has stirred policy-makers into tackling this.
The complexity of the energy sector, and its central role in the wider economy, mean that serious reform involves negotiation and interplay between numerous interlocking institutions and political forces. Progress is therefore often slow – but the slow pace of change should not be a barrier. Engaging stakeholders across the energy value chain will be essential to build and sustain momentum for reforms, and constant communication is required to do this. Some form of opposition is inevitable, but experience has shown that public acceptance can be increased with the right engagement strategy and policy mechanisms. These include energy literacy initiatives, “nudge” techniques inspired by the fundamentals of behavioural economics, and broader consensus-building and targeted communication.
Public engagement takes different forms in different countries – vibrant democracies have long had more vocal populations, so their experience offers some insight for other nations. In the United Kingdom, Swiss-based chemicals group Ineos (which recently acquired a stake in a shale oil and gas license in Scotland) announced that it planned to pay 6% of revenues from any production to local landowners and communities.96 Through public engagement, reforming governments can ensure effective and transparent information-sharing, build public consensus for reforms and sustain public trust – both in the new policies and in the implementing institutions.
Opposition to reforms that are in the public interest can occur because of a belief that the benefits will not reach citizens; this is often the case for subsidy reform. Institutions can align expectations by sending clear and credible policy signals on the direction of change. Given government timeframes vis-à-vis those of the energy transition, it is important to consider how long-term commitments can be made credible – novel institutional and legal structures can provide this credibility. The United Kingdom’s statutory climate adviser, the Climate Change Committee, exists independently of governments; Mexico’s Climate Change Act legally ties hands of future governments, requiring them to accede to, amend or repeal legislation if they go back on targets.
Institutions that are trusted by citizens to execute policies in the public interest will perform better, as they guide public expectations, and will be held accountable for their successes and failures. Governments in Scandinavia have long been expected to invest in long-run issues related to the environment, and will be electorally liable if they do not. In Germany, despite electricity prices increasing over the past five years because of the Energiewende, 70% of the population still back the transition plans because of the public’s broad “trust in the state”.97The Guardian (2014) Energiewende: energy transition in Germany, 21 August 2014; BCG (2014) Germany’s Energiewende: The End of Power Market Liberalization?[/fn] By contrast, institutions that are not trusted – for example because they are subject to corruption or are not responsive to changing societal demands – will not be trusted to deliver policies in the public interest.
The next two case studies explore how public scrutiny can galvanize reform and, conversely, how support is required for reforms to have a long-lasting impact. Continuing public support and trust are fundamental to sustain long-term change. Reformers need to master the art of consensus-building and communication to continually sustain public trust.