Energy Policy 102 (2017) 116–124

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Energy Policy
journal homepage: www.elsevier.com/locate/enpol

How to reduce household carbon emissions: A review of experience and MARK

policy design considerations
⁎
Xiaoling Zhanga, , Yue Wanga,b
a
Department of Public Policy, City University of Hong Kong; City University of Hong Kong Shenzhen Research Institute, Hong Kong
b
Department of Urban and Regional Planning, College of Urban and Environmental Sciences, Peking University, People's Republic of China

A R T I C L E I N F O A BS T RAC T

Keywords: Global warming and environment problems caused by the excessive emission of greenhouse gases (GHGs),
Energy policy along with rapid economic development has attracted the attention of many countries and regions of the world.
Household carbon emission Reducing GHG emissions is essential to mitigate the threat of global warming. Household carbon (dioxide)
Demand-supply emissions have been recognized as one of the most important contributors to climate change, with a significant
impact on both the local and global environment, and various policy instruments have been implemented by
governments to bring about the reduction.
This paper reviews these carbon abatement policy measures from demand-side and supply-side perspectives
based on 144 countries across the world. The advantages and disadvantages of the policies are analyzed and it is
found that income level largely affects the choice of policy, with high-income countries being mostly associated
with demand-side policy instruments. Low-income countries adopt less demand-side policy measures and
mainly depend on supply-side polices such as targets and regulations. Geographic location is also an important
factor influencing the choice of policy instruments due to the different climates between different regions,
although targets, regulations and carbon taxes are dominant GHG reduction policy measures worldwide. In
America, tendering and net metering are popular, while in Europe feed-in-tariff (FIT) policies are implemented
for more than 70% of the time. In Asia, policy measures, whether supply-side or demand-side, are
comparatively weakly implemented and influenced by location, urbanization and economic growth. This paper
suggests that, although the economic level is different, low-income countries and particularly developing
countries can promote carbon abatement as well as the financial market by gradually changing from supply-side
policy instruments to demand-side policies. This critical review provides a systematic understanding of various
carbon emission policies in different countries and regions worldwide, which will provide significant assistance
for the development of policies to reduce household carbon emissions.

1. Introduction
Global warming, as the main threat to human society today, is
fundamentally associated with energy consumption and greenhouse
gas (GHG) emissions. GHG emissions resulting from the use of
electricity and heating energy in households account for 30–40% of
all sectors combined (Hinnells, 2008). The household sector, repre-
senting 17% of global carbon dioxide (CO2) emissions, plays a
significant role in mitigating global climate change (Nejat et al.,
2015). Ten countries, including China, the United States, India,
Russia, Japan, Germany, South Korea, Canada, Iran and the United
Kingdom constitute the world's major GHG emitters. Their emissions
account for nearly two-thirds of total emissions, which indicates their
considerable and direct effects on world energy expenditure and the
global environment (Nejat et al., 2015). For example, China's CO2
emissions have grown at an average annual rate of 5.8% since reforms
began in 1978. In 2008, China overtook the United States as the largest
single emitter of CO2 and now accounts for over 25% of world
emissions. Moreover, given China's continuing high growth rate, it is
likely that its contribution to world emissions will continue to grow for
some time (Chen and Groenewold, 2015).
Many countries apply mitigation strategies to reduce energy con-
sumption. These strategies incorporate financial incentives or subsidies
by such means as taxes, support funds, premiums, etc., and also non-
financial incentives such as regulations, standards and prohibitions
(Cardenas et al., 2016). The European Union, for example, has
numerous national and supranational climate policies aiming to reach
a target of 20% reduction in GHG emissions by 2020 (Schaffrin and

⁎
Corresponding author.
E-mail addresses: xiaoling.zhang@cityu.edu.hk (X. Zhang), wangyuexuanxuan@pku.edu.cn (Y. Wang).

http://dx.doi.org/10.1016/j.enpol.2016.12.010
Received 25 May 2016; Received in revised form 1 December 2016; Accepted 3 December 2016
0301-4215/ © 2016 Elsevier Ltd. All rights reserved.
X. Zhang, Y. Wang
Reibling, 2015). China is under considerable pressure to reduce its CO2
emissions and has made a public commitment to substantial cuts by
2020 (Chen and Groenewold, 2015). The Chinese government also uses
economic incentives to solve the issues resulting from energy use, such
as introducing taxes on high-sulfur coals, and granting loans and
subsidies to enterprises using energy efficient production facilities and
techniques.
However, the effectiveness of these policies is important for
researchers and policy makers alike. Berkeley (1998) concluded that
the implementation of emission policies requires customized imple-
mentation strategies because of the particular set of conditions created
by the specific combination of barriers and actors in each country. In
addition, various policy instruments with different characteristics can
be adapted to different regions.
Many researchers have studied policy practices for carbon emis-
sions in individual circumstances, however, there is no overview of the
characteristics of carbon abatement policy instruments worldwide. It is
also necessary to strengthen such research by systematically assessing
the implementation and effectiveness of policy practices and under-
stand the considerations that led to their choice. It is therefore
important to understand the advantages and disadvantages of the
various policy instruments involved in mitigating carbon emissions. In
response, this paper reviews carbon abatement policy measures from
both demand-side and supply-side perspectives based on 144 countries
around the world, aiming to explore the factors influencing the choice
and implementation of policies and provide a systematic understand-
ing of carbon emission reduction policies.
The remainder of the article is structured as follows. In Section 2,
the global status of household energy consumption is discussed. This
section also presents the data characteristics of different countries and
regions, followed by the methodology of the study in Section 3. In
Section 4, the national characteristics of household carbon emission
reduction policies and measures from the perspectives of demand-side
and supply-side are discussed. A discussion of the findings is provided
in Section 5, followed by some concluding remarks in Section 6
concerning the effectiveness of various policy instruments and the
systematical understanding of the development carbon abatement
policies for planners and policy makers.
2. Global status of household energy consumption
Recently, the issues of climate change and global warming have
received unprecedented attention internationally. The United Nation's
Intergovernmental Panel on Climate Change (IPCC) announced that
the global average temperature has risen by 0.74 ℃ during the period
from 1906 to 2005. Continued GHG emissions at or above current rates
will cause further warming and induce many changes in the global
climate system. Depending on the level of GHG emitted, climatologists
predict increases in global temperature during this century from 2 to
6 °C (Yau, 2010). The household sector is an important consumption
sector. In China, for example, the direct and indirect CO2 emissions
from household consumption accounted for more than 40% of total
carbon emissions from primary energy utilization during 1992–2007
(Yau, 2010), while UK households contribute around 74% to total
emissions (Baiocchi et al., 2010). Many studies have focused on this
issue. As Table 1 indicates, household energy consumption plays an
essential role in the carbon emissions in different countries and the
studies made often provide insights into the measures used for its
reduction. Das and Paul (2014), for example, found that household
energy use in India in terms of cooking, lighting of homes and fuel used
for privately owned motorized vehicles, contributes to a large share of
CO2 emissions, while household conservation in Singapore has always
been a high priority on the national agenda (He and Kua, 2013). The
residential energy use of households accounts for 42% and 33% of the
total carbon emissions in the United States and Lithuania respectively
(Streimikiene, 2015; Das and Paul, 2014); residential energy consump-
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Energy Policy 102 (2017) 116–124
tion in China accounted for about 11% of total energy consumption in
2012; while about 61% of the carbon footprint in Japan was derived
from household consumption in 2005 (Nansai et al., 2012). Other
scholars have also evaluated household consumption in Denmark and
Netherlands respectively (Munksgaard et al., 2000; Vringer et al.,
1995). Household emissions are also often correlated with income
(Perobelli et al., 2015), with Reinders et al.’s comparison of 11
European countries, for example, finding a linear relationship with
total household expenditure (Reinders et al., 2003).
Households can be seen as the end-users of goods produced and
services delivered by economic production sectors. The energy used
along entire production-consumption chains is attributed to household
expenditure. And the energy requirements of households can be
considered as either direct or indirect (Wilting et al., 1998). Based on
the studies in Table 1, direct household energy consists of using
electricity, motor fuels and natural gas. Indirect use consists of buying
goods (food products, clothes, etc.) and using services (insurances,
public transport, etc.) as illustrated in Fig. 1. Based on this concept, the
major part of the energy requirement is allocated to the household
sector, with 80% for the United States (Bin and Dowlatabadi, 2005);
75% for India (Pachauri and Spreng, 2002); and 61% for Japan (Nansai
et al., 2012). Therefore, it is critical to reduce carbon emissions in
household consumption.
To mitigate the energy and environment pressures caused by
household energy consumption, substantial policies have been imple-
mented in many countries. Policy interventions, both technological as
well as economic can limit GHG emissions (Das and Paul, 2014). Policy
instruments are recognized as the methods used by governments to
achieve a desired effect (Zhou and Yang, 2016) and the most recent
literature highlights the importance of these policies in reducing carbon
emissions. This paper reviews the policies used worldwide for reducing
household carbon emissions and analyzes them from both supply-side
and demand-side perspectives.
3. Method
To obtain a comprehensive understanding of the policies used to
reduce carbon emissions, a strict literature retrieval process was
conducted based on the two most popular indexed databases of
Scopus and Science Direct. The publications indexed by these data-
bases are regarded as high quality. The procedure used for retrieving
relevant papers was as follows. First, a comprehensive search for
potential related papers was carried out of the databases over the
period from 01/01/1996 to 31/12/2015. This included articles in
international journals such as Applied Energy, Journal of Cleaner
Production, Renewable Energy, Renewable and Sustainable Energy
Reviews and Energy Policy since these journals have published a great
number of papers concerning carbon emissions. Approximately 300
papers were collected after the first scanning. A detailed examination
was then made of the collected papers by scanning the titles and
abstracts, and filtering the collected papers in order to match the
research scope. As this was to analyze the carbon-abatement policy
measures in different countries and areas, papers concerning environ-
mental protection policy (e.g. air pollution and solid waste), for
instance, were excluded. A further examination was conducted to avoid
duplication. After manually browsing the remaining papers, a total of
221 papers were selected for further in-depth analysis.
This papers relating to carbon emission policy were extracted from
the two major academic databases of Scopus and Science Direct. Asia,
Europe, America and other regions were selected for a search period
delimited to the period between 1996 and 2015. Fig. 2 shows the
number papers found by region and year of publication. This indicates
the growing interest in the topic over the years as countries have
started to focus on climate change and carbon emissions. Strategies
over the years have changed from merely setting definable targets to
policy guidance. Governments now not only encourage technology
X. Zhang, Y. Wang Energy Policy 102 (2017) 116–124

Table 1
Studies of household carbon emissions in different countries.

Source Title Country Description

Perobelli et al. (2105) The increase in Brazilian household income and its Brazil Household characteristics, expenditure and behavior have a significant
impact on CO2 emissions: evidence for 2003 and 2009 influence on CO2 emissions.
from input–output tables
Lee and Lee (2014) The influence of urban form on GHG emissions in the U. U.S. Household and residential energy use accounts for 42% of total U.S.
S. household sector carbon emissions. It highlights the importance of smart growth policies
to build more compact cities.
Streimikiene (2015) Assessment of reasonably achievable GHG emission Lithuania Households consume 1/3 of the total energy in Lithuania. Household
reduction targets in Lithuanian households GHG emissions are directly related to the amount of energy consumed
in households.
Das and Paul (2014) CO2 emissions from household consumption in India India By 2006–07, household fuel consumption had increased CO2 emissions
between 1993–94 and 2006–07: a decomposition analysis to 18% of the total. This involves the direct energy consumed by
households in terms of cooking, lighting of homes and fuel used for
privately owned motorized vehicles. Much of the energy is also
embodied in the goods and services consumed by households, which
accounts for a large share of indirect CO2 emissions.
Zhou and Yang (2016) Understanding household energy consumption behavior: China It is reported that residential energy consumption accounted for about
the contribution of big data analytics 11% of China's total energy consumption in 2012.
Nansai et al. (2012) Characterization of the economic requirements for a Japan It is revealed that about 61% of Japan's carbon footprint is derived from
“carbon-debt-free country” Japanese household consumption in 2005.
Munksgaard et al. Impact of household consumption on CO2 emissions Denmark Danish household consumption increased by 58% over the period
(2000) 1966–1992 while CO2 emissions only increased by 7%.
Vringer and Blok The direct and indirect energy requirements of The Netherlands One way of reducing CO2 emissions is to reduce direct and indirect
(1995) households in The Netherlands household energy requirements. The total average energy demand per
household in the Netherlands in 1990 was 240 GJ, of which 54% was
indirect consumption.
Sanchez-Choliz et al. Environmental impact of household activity in Spain Spain The analysis reveals that pollution in Spain is closely linked to food
(2007) production, energy, extractive industries and paper manufacturing.
Reinders et al. (2003) The direct and indirect energy requirements of EU The differences between countries in the total energy requirement of
households in the European Union household are mainly due to difference in total household expenditure,
and the indirect energy requirement is linearly related to total
household expenditure in 11 EU member states.
He and Kua (2013) Lessons for integrated household energy conservation Singapore Household conservation has always been given a high priority in the
policy from Singapore's southwest Eco-living Program national agenda.

innovation but also increasingly advocate incentive instruments, such

Resource
as subsidies, tax and other financial incentives.
Production Consumption

Non-energy
Raw materials Production Goods & 4. Energy policies
sectors services
Household Carbon
emission It is recognized that governments use policy instruments as their
Energy Goods & main method to achieve a desired effect. In general, these can be
services
Energy divided into demand-pull policies and supply-side policy instruments
Primary energy Energy supply
(Zhi et al., 2014). From the perspective of implementation, there are
system
two types’ policy instruments used - incentive instruments and
mandatory regulatory instruments. Incentive instruments, such as
Fig. 1. Energy requirements of household consumption (based on Liu et al. (2011) and tax credits for certain types of investment or subsidies for certain
Wilting et al. (1998)). products are used as a way of influencing the actions of corporations
and families. Regulatory instruments, on the other hand, in particu-
larly laws and regulations, are the most commonly used in some
countries and regions, such as Canada, especially for environmental
issues. There has been a growing consensus in recent years that both
mandatory and incentive instruments have major roles to play for such
important issues as the environment.

4.1. Demand-side policy practices

Demand-side policy aims to reduce overall demand for energy by

stimulating energy savings and conservation on the consumption side
(Yi, 2015). Demand-side policy relating to energy consumption in
different countries and regions cover various forms of policy instru-
ments, including carbon tax, FIT, cap-and-trade policy, energy pay-
ment, tradable renewable energy certificates, loans and subsidies, etc.
The main goal of demand-side policy instruments is to incentivize the
Fig. 2. Number of papers relating to carbon emission policies.
energy market and encourage the development of renewable energy
technology.

118
X. Zhang, Y. Wang
4.1.1. Carbon tax
Carbon tax is a tax levied on carbon dioxide for the purpose of
mitigation global climate change. Tax-based policies have been im-
plemented in many countries, such as Finland, Denmark, Sweden,
Norway, The Netherlands, Italy, New Zealand, Canada, Great Britain,
Chile, the United States and Switzerland, under the principal that
polluters must pay for the negative externalities produced. Carbon tax
is a form resulting from Pigovian tax that eliminates the gap between
net marginal private and net marginal social cost because of the
negative externality of carbon emissions. Carbon tax can provide
continuous emission reduction incentives to potential emissions with-
out limit, create sustained fiscal income and lower transaction costs.
Some studies assert that carbon tax is an effective method of reducing
carbon intensity and the demand for energy, which in turn decreases
GHG emissions. According to Eide et al. (2014), this is because carbon
taxes can encourage improvement and innovation in technology,
equipment and capital investments in countries where they are
implemented. Additionally, carbon tax is simpler and faster to imple-
ment and more transparent than other policy measures.
Although carbon tax can reduce carbon emissions with less cost, it
is not without some controversy. Carbon tax has the weakness of lower
political feasibility and greater uncertainty regarding its effect on
emission reductions. For example, the introduction of a Chilean carbon
tax will produce an expected annual reduction in carbon emissions of
only 1%, accompanied by an expected 3.4% increase in the marginal
cost of power production on the main Chilean power system (Vera and
Sauma, 2015). Researchers also argue that carbon taxes may result in
increased energy prices, which is regressive to least privileged people in
society.
4.1.2. Feed-in tariff policy
FIT policy is a performance-based rather than investment-based
incentive mechanism used to encourage the development of renewable
electricity technologies. The FIT scheme involves an obligation on the
part of electric utilities to purchase the electricity produced by renew-
able energy producers in their service area at a tariff determined by the
public authorities and guaranteed for a specified period of time
(Menanteau et al., 2003). FIT policies comprise more than 70% of
policies currently implemented in Europe. As represented by Germany,
Denmark, Spain and China, FIT policies are essentially of form of price
regulation. In general, FIT systems intend to encourage the production
of renewable energies through a government guaranteed purchase rate
that is generally set above conventional rates. The German FIT, for
instance, requires public energy supply companies to buy renewable
generated power at 90% of the average price of electricity charged to
the final consumers in the previous year (Butler and Neuhoff, 2008).
The FIT payment design consists of fixed-price and premium-price
portions, with most countries with FIT policies choosing the fixed-price
approach (Klein et. al. 2008). The most important design criteria for
FITs are: (i) a carefully calculated starting value; (ii) a dynamic
decrease of the FIT that takes into account technological learning;
and (iii) the implementation of a stepped and technology-specific tariff
structure (Klein et al., 2008).
FIT can most directly provide a stable and profitable market for
developing wind projects; it is better for industrial development and
job creation than renewable portfolio standards (RPS) (Lipp, 2007);
and effectively encourages investment in the generation of electricity
from renewable energy sources (RES-E) because the guaranteed prices
can dramatically reduce their risk in the consumption market.
However, guaranteed prices also have a negative impact on competi-
tiveness and therefore reduce the incentive to reduce costs.
4.1.3. Cap-and-trade
Cap-and-trade is a trading-based approach to pricing carbon. The
cap-and-trade policies include three elements: 1) the cap, or the phase-
out schedule; 2) tradable emission allowances to enable early imple-
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Energy Policy 102 (2017) 116–124
mentation of the most cost-effective reductions; and 3) a formula for
distributing the emission allowances (Shammin and Bullard, 2009).
Based on the cap, a certain number of permits are issued each year,
such as one permit or allowance per ton of CO2 or CO2 equivalent
GHGs. The cap can be tightened by reducing the number of permits
issued each year. A market place is also set up where permits can be
traded (Durning, 2009). The U.S., for example, has established a cap-
and-trade system aiming to cut GHG emissions by approximately 2%
annually through to 2050 (Shammin and Bullard, 2009).
The popular and intellectual appeal of the cap-and-trade system,
however, obscures a number of practical considerations that, at a
minimum, counsel against its use as the leading edge of domestic
efforts to combat climate change. The process of implementation is
relatively slow, because of the inherent delays in the rulemaking
process (including the likelihood of litigation over whatever regulatory
system is adopted). In addition, the effectiveness of a cap-and-trade
system could be undermined by the challenge of setting baselines for
emission reduction targets, the free distribution of allowances and the
use of offsets in lieu of meaningful emission reduction measures (Avi-
Yonah and Uhlman, 2009). Compared with carbon tax set-in-advance,
which provides cost certainty, cap-and-trade provides certainty of the
environmental benefit that result from its implementation. However,
because cap-and-trade imposes a fixed cap without regard to the cost to
the economy at large or to individual polluters of attaining the cap, cap-
and-trade suffers from lack of certainty of the cost it imposes (Avi-
Yonah and Uhlman, 2009).
4.1.4. Tradable renewable energy certificates
Renewable energy credits, also known as tradable renewable energy
certificates (TRCS), represent the non-energy attributes of electricity
produced from renewable sources. They can be sold independently
from, or bundled with, commodity electricity. Though perhaps most
often used as a means of tracking compliance with RPS and verifying
wholesale renewable energy transactions more generally, TRCS also
provide a green power purchasing option for both residential and non-
residential customers (Fitzgerald et al., 2003). Tradable renewable
energy systems are becoming increasing popular especially in the
United States and Europe.
The advantages of TRCS are that they provides a simple, transpar-
ent verification tool for renewable energy transactions, facilitate
liquidity and depth in renewable energy markets, potential offer a
new revenue stream for renewable energy generators and can facilitate
the purchase of green power by end-use customers. The second and
more innovative aim is the Internet Trading Project - to create a real
market for certificates, which may also allow for the creation of
derivative products, such as sell and buy options, futures, banking
and borrowing (Bertoldi and Huld, 2006).
A further issue that has been discussed is whether to include saving
measures in the certificate that do not include energy-efficiency
improvements but do encourage behavioral changes According to
Bertoldi and Huld (2006), users may decide to switch off equipment
- decreasing the set point (heating or cooling) and resulting in a smaller
production output will produce energy savings. Therefore, it is
necessary to adjust the certificates since they may have an ex post
effect on climate condition, e.g., very hot summers or colder winters.
4.1.5. Subsidies
Renewable energy subsidies are highly effective policy instruments,
especially for addressing energy market issues in terms of new
technologies and carbon pricing. Many countries and governments
have used subsidies directly from financial budgets to pay for the
investment in renewable energy technology. For example, U.S.
President Obama released an ambitious 2016 Federal Government
Budget Proposal to invest $7.4 billion in clean energy technology
programs across all agencies (Laporte, 2015). In Japan and California,
policymakers have chosen this mechanism instead of specifying the
X. Zhang, Y. Wang
subsidy as a percentage of installed cost. It is believed that consumers
will then choose the most cost-effective system rather than trying to
maximize its cost (Gipe, 2006).
However, there are some important disadvantages of subsidies.
They cannot maintain incentive once the energy efficiency technology
has been applied for example. Also, according to Gipe (2006), ‘in
general, subsidies have failed to promote the widespread deployment of
renewables’.
4.1.6. Loans and funds
Loans, especially low-interest loans, are very popular with some
governments in addressing a one-sided development equation. Loans
can support development through providing a low-cost source of
capital for renewable energy projects. For example, low-interest loans
have been an important element in Germany's success, because they
allow small firms, farmers and even individuals to invest in renewable
development (Gipe, 2006). Nevertheless, as with other monetary
measures, loans can be used to aid investment, but cannot cause the
investment.
Public benefit funds (PBF) are also an important demand-side
policy tool. Most PBFs were developed in the late 1990s to provide
sustained support for renewable energy and energy efficiency. For
example, PBFs in New Jersey reduce carbon by providing funds for new
construction, building retrofits, HVAC systems, Energy Star products,
combined heat and power, energy audits and energy-efficiency projects
for low-income residents. Some researchers have examined whether
PBF can reduce carbon intensity. Yi (2016), for example, uses fixed-
effect panel regressions with a panel data set for 48 continental states
from 1990 to 2008, finding that PBF is effective in reducing electricity
consumption.
4.2. Supply-side policy practices
Compared with demand-pull policies, supply-side policy instru-
ments are less diversified (Zhi et al., 2014). Supply-side policy in
carbon mitigation aims to change the generation fuel mix, mainly by
increasing the percentage of renewable resources and natural gas.
Governments in general encourage the cost-efficient generation of
utilities and quantifying the amount of household carbon consumption
by setting standards and regulations. The main supply-side policies
implemented across the world are such as standards, targets and
regulations, tendering and net metering.
4.2.1. Standards
Various countries set standards and regulations to meet reduced
GHG emission targets. RPS is a relatively new policy mechanism being
put to use in several countries and has spread quickly in recent years,
from three European countries, nine U.S. states and Australia to many
European and other countries. The main reason is that RPS provides an
incentive for renewable producers to reduce costs, links regulated
market outcomes to an environmental target and reduces government
involvement (Sun and Nie, 2015). In the U.S., for example, RPS is the
most popular policy instrument today, since the government tends to
seek energy diversification that can reduce the dependence of the coal
combustion. RPS policy requires electricity utilities to provide renew-
able electricity to their customers, typically as a percentage of total
energy use, and therefore promoting renewable energy technology. It
indirectly reduces carbon emissions by providing financial incentives in
the form of guaranteed revenue. Indeed, RPS is a popular policy in the
U.S. that sets annual goals for renewable energy generation capacity
over a long period of time.
Compared with FITs, RPS programs tend to allow more price
competition between different types of renewable energy, but can be
limited in competition through eligibility and multipliers for RPS
programs, while FITs guarantee the purchase of all renewable energy
regardless of cost. Similarly, RPS is more efficient in reducing carbon
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Energy Policy 102 (2017) 116–124
emissions and to increasing consumer surplus, while FIT is more
efficient in increase the quantity of renewable-energy (Sun and Nie,
2015). Nevertheless, there are doubts about the policy in terms of its
effectiveness on total carbon emissions. As Yi (2015) concludes, “RPS
did not appear to be effective in reducing total carbons by the end of
2008”.
4.2.2. Targets and regulations
Targets are the most commonly used all over the world. More than
80% of countries worldwide set targets to reduce their emissions.
Governments often issue mandatory regulations in order to achieve the
targets involved. For example, in 2007, the EU agreed on an indepen-
dent GHG emission reduction commitment of 20% by 2020 compared
to 1990 levels and a 30% reduction by 2020 subject to a comprehensive
international climate change agreement (Streimikiene and Balezentis,
2016); while the UK introduced its Climate Change Act, committing to
a GHG emission reduction of 80% by 2050 compared to the 1990 level.
These ambitious targets are usually applied with other instruments
such as regulations and mandatory rules. The experience of imple-
menting energy regulations in different countries worldwide indicates
that the code structure, enforcement criteria, energy efficiency mea-
sures and performance assessment, previous regulations, their nature,
and integrated approach of code development are all important
considerations for the successful implementation energy regulations
(Chandel et al., 2016).
An advantage of targets and regulations is the administrative
operation, which is transparent and extensive. However, since the
procedure of implementation is mandatory, the supply-demand situa-
tion can be easily overlooked. In addition, the progress and accom-
plishment of the targets is difficult to assess and control as well as less
sensitive to market demand due to lack of effective monitoring and
financial incentives.
4.2.3. Tendering
In 1990s, many European countries (e.g., France and Denmark for
wind energy and Ireland for alternative energy) used the tendering
system to promote the development of renewable energy. The most
successful strategy is in England and Wales, known as the non-fossil
fuel obligation (NFFO). This involves calls for tenders to acquire
specific amounts of capacity or generation from specified types of
RES (Haas et al., 2011). In tendering or competitive bidding systems, a
state, electricity purchasing authority, or electricity supplier issues a
call for tender (Request for Proposals) to supply a certain amount of
generation under a long-term contract or Power Purchase Agreement
(PPA). Tendering addresses both access and price elements of devel-
opment. By awarding a long-term contract, the offering institution
provides access and payment based on the winning bid (Gipe, 2006).
In 2001/2002, however, most of these European countries decided
to change their strategy due to the poor effectiveness of the tendering
systems. The UK switched to NFFO in 2002, while Ireland and France
changed to FIT systems. The tendering procedure, which stimulates
strong competition between energy generators and hence results in
cost-efficiency and price reduction, has not yet been successful in
promoting renewable electricity. This may be due to the intermittency
of tenders and the resulting uncertainty in the market, or may be due to
the complexity of the procedures involved. Some also argue that such
solicitations can lead to unrealistically low renewable energy bids,
resulting in funds being committed to projects that fail to materialize
(Linder et al., 2005).
4.2.4. Net metering
Net metering describes the practice of metering the relative energy
consumption of electricity consumers who also generates electricity
from their own energy producing facilities (in particular photovoltaic
facilities). The measurement is done with a bi-directional meter or a
pair of unidirectional meters spinning in opposite directions. In cases
X. Zhang, Y. Wang Energy Policy 102 (2017) 116–124

Fig. 3. Policy measures in different income level countries.

where the electricity production exceeds consumption, the electricity-

meter spins backwards and the value at the end is smaller than at the
beginning of the period. This registers the net consumption of Fig. 5. Rate of policy measures in different regions.
electricity by the consumer. Net metering provides a win-win situation
for utilities and local communities. Compared with FIT, net metering
side incentive instruments are considered to be a weaker control
only requires only one meter, while a FIT requires two. However,
measure compared to mandatory regulation instruments. Public ben-
according to Yamamoto (2012), FIT can produce more social welfare
efit funds (PBF), for example, are effective in reducing carbon emis-
than net metering when there is only a small reduction; if the reduction
sions (Yi, 2015). Demand-side policy instruments for emission mitiga-
is large, the opposite is the case.
tion provide incentives for the market for renewable energy. In
Germany, for example, the government provides low-interest loans
for renewable energy projects. This has been successful since it
5. Discussion
encouraged small firms, or even individuals, to invest in renewable
energy projects (Gipe, 2006), which in turn also promotes an economic
Faced with an increasing amount of GHG emissions, various
boost.
countries have adopted various kinds of policy measures to reduce
Since the role of income affects household carbon emissions (Han
their carbon emissions. Data from the Global Status Report indicate
et al., 2015; Zha et al., 2010), we compared the different income levels
that, by 2014, almost 144 countries worldwide had employed energy
of various countries (based on the policy instruments of 144 countries)
policies at the state or national levels. In the early stages of policy-
and found that high-income countries depend on most on demand-side
making, the study of GHG abatement mainly focused on mandatory
policies to incentivize the energy market, providing strong financial
targets, such as setting targets, standards and regulations. In recent
support. Through funds or payments, governments support renewable
years, more governments tend to use policy direction and incentive
energy sources and the application of cost-efficient technologies. Lower
measures to reduce carbon emissions. Based on the 144 countries
income countries mainly achieve carbon emissions goals by supply-side
worldwide policies, it is clearly found that majority of countries have
policies. Mandatory regulations and energy targets are dominant
set carbon emission targets (80.5%) and impose carbon taxes (72.15%)
measures (Fig. 3). FIT, for example, has been implemented in
(Fig. 3). In America, supply-side policies, especially net metering and
64.44% of high-income countries and regions, with only 17.4% of
tendering, seem to be even more significant. In contrast, demand-side
low-income countries. Similarly, subsidies (64%) and tradable renew-
policies play a dominant role in Europe, with FIT, tradable renewable
able credits (44%) are well implemented in high-income countries,
energy and grants being the most popular (Fig. 5). In addition,
compared to only 17.4% and 1.3% respectively of low-income coun-
technological tools and structural alterations for reducing GHG emis-
tries. High-income governments achieve carbon reduction goals mainly
sions are also popular. Technological components, for example, play a
through demand-side policies, with the purpose of incentivizing the
particularly prominent role in Romania, Slovakia and Bulgaria.
economic market and creating fiscal income.
Furthermore, many countries recently are tending to seek a combina-
Governments also encourage cost-efficient technology through the
tion of various policies.
demand-side policy instruments. In China, for example, the govern-
The advantages and disadvantages of the various carbon emission
ment has built energy efficiency technologies (EETs) to mitigate
policy instruments in use from both supply-side and demand-side
emissions, although it is still uncertain whether energy efficiency can
perspectives are summarized in Table 2.
influence changes in GHG emission levels. According to Liobikiene and
The effectiveness of demand-side policy instruments the indirectly
Mandravickaite (2006), it is only growth in the share of renewable
contribute to the reduction of carbon emissions by providing funds for
energy resources that significantly drives the reduction in GHG
renewable energy and cost-efficient technology, although the demand-
emissions.
Supply-side policy instruments, such as mandatory regulations and
Industrial
targets, have a strong ability to reduce carbon emissions (Fig. 4).
Renewable energy environment Studies show that mandatory administration instruments can obtain
Demand Financial satisfactory effects in a short time, especially when they are applied in
side subsidy
Cost-efficiency crisis management (Rosenthal and Kouzmin, 1997). Targets, regula-
Indirectly impact
technology tions and standards are commonly used by governments for promoting
Policy the energy
measures consumption. carbon mitigation. More than 80% of the world's countries use
Carbon emission mandatory targets to achieve their emission goals (Fig. 5). The U.S.
Targets & Standards abatement is yet uses supply-side policy instruments to reduce carbon emission more
Supply Mandatory unknown.
regulation
than European countries and the government seeks energy diversifica-
side
tion to reduce the dependence on the coal combustion by setting
Quantify metering
Consumption annual goals for renewable energy generation capacity (RPS).
environment
According to Sun and Nie (2015), RPS provides a more efficient means
Fig. 4. Demand and supply-side policy measures.
of reducing carbon emissions and improving consumer surplus. In

121
X. Zhang, Y. Wang Energy Policy 102 (2017) 116–124

Uncertainty in the market and complexity

Uncertainty in the market and complexity

To set the baseline of emission reduction
Inequity; impact on the growth of GDP

directly affect the carbon consumption

Lack of incentives and finance; lack of

To create a real market for certificates

To be cost-effective in technology; to
High administrative complexity and

No extra funding support for new

of the procedures involved.

of the procedures involved.

Needs targeted and careful
implementation
transparency.

monitoring.
Challenges

techniques
targets

Fig. 6. Policy measures in different regions.

Tariff level is very difficult to determine;

Cannot incentivize investment in itself.

Uncertain effect on emission reduction

market once the technology has been

addition, Asian countries and other regions both use less supply-side
No ecological benefits ensured yet.

Cannot maintain incentives in the

Overlooks the marketing function

Influenced by the supply-demand

Not been successful in promoting

and demand-side policies but focus only on targets and carbon tax tools
(see Fig. 6). Supply-side policy instruments have a greater advantage in
implementation and operation. On the other hand, supply-side policy
Difficult to set the price
Fake emission credits

instruments also have limitations. For example, regulations and targets

renewable electricity.

have poor adaptability and a slow response to market changes (Li and
financial burden.
Disadvantages

Colombier, 2009).
condition
applied

6. Conclusion

Since greenhouse gas emissions are threatening the global climate

Create sustained fiscal income; less cost; easy to implement

Can be implemented solely as an accounting procedure and

Allows small firms and individuals to invest in renewable

and household consumption has been increasingly played an essential

role, many countries have already focused on their reduction through
More cost-effective than RPS, which makes use of

various policy instruments. In order to meet carbon abatement targets,

requires no special metering, or even any prior

therefore, household carbon reduction cannot be neglected. Before

further actions can be contemplated, therefore, it is important to fully
understand the household carbon emission policy instruments being
Simple and transparent verification

used and identify the efficiency of policy practices for future study. This
Business-friendly; produces jobs

Cost-efficiency; price reduction

paper analyzed the current carbon emission policies implemented in

Provides financial incentives

arrangement or notification.
Mandatory policy; efficient

different countries and areas and provided a comprehensive review of

competitive solicitation

energy policies from both demand-side and supply-side. This critical

review can help interested scholars and policy makers to gain an in-
Can be targeted

depth understanding of the field and is also of great value for exploring
energy projects

new research topics concerning policies for reducing household carbon

Advantages

emissions.
Various governments have developed policy instruments to reduce
household carbon emissions because of the realization that HCEs
contribute significantly to GHG emissions. Since 2006, many govern-
To call for tenders to supply a certain amount of generation
To constrain the aggregate emissions of regulated sources

consumers who also generates electricity from their own

ments have changed their policies from simply setting carbon abate-
To meter the relative energy consumption of electricity
To support the development of new renewable power

ment targets to developing a variety of supply and demand-side

by creating a limited number of tradable emission

incentives. Policy selection is attributed to many factors, the most

To aid investment in renewable energy projects

significant of which being are income, location, and social equity. As

To invest in renewable energy technology

To promote renewable energy technology

Pandey (2002) observes, existence of large-scale inequity and poverty,

To provide a renewable energy market

the dominance of traditional life-style and markets in rural areas,

To directly reduce GHG emissions

existence of multiple social and economic barriers to capital flow and

technological diffusion can all affect the policies adopted.
energy producing facilities.

From the literature and data from 144 countries, it is confirmed

To curtail CO2 emissions

that countries worldwide now appreciate the importance of reducing

Advantages and disadvantages of different policies.

GHG emissions. The role of income has a significant impact on the

energy policies adopted, with demand-side policy instruments being
dominant in high-level income countries because governments can
allowances.
generation

reduce carbon emissions by providing incentives for the energy market

Purpose

and in turn obtain fiscal income. Accordingly, renewable energy

technology also receives funding support. For middle-income countries
(such as the Czech Republic, Bulgaria and Estonia governments) tend
RPS (renewable portfolio

Targets and regulations

to reduce carbon emissions by a policy of transferring economic

energy certificates
Tradeable renewable
FIT (feed-in tariff)

structure, while low income countries mainly depend on mandatory

Renewable energy

measures such as regulations and targets. At the same time, location is

Cap-and-trade

standards)

Net metering
Grants/loans
subsidies
Carbon tax

another significant factor considered by the policy makers even in the

Tendering

same country, due to different energy-saving characteristics or pro-

Table 2.

Policy

pensities to purchase energy-saving appliances (Zhang et al., 2015).

Of relevance here is the externality of policy outcomes, an issue that

122
X. Zhang, Y. Wang
GHG abatement policy
Location Economic Equity Community Monitoring
Consumption Government Policy
guiding supporting
Pricing Subsidy
mechanis mechanis Utilities
Energy
generation
Cost-efficiency
Income
Environment
al Carbon technology
emission
Consumptio
Marketing
n
mechanism Demand
Lifestyle market
Improve
Energy transportation system
Fig. 7. The proposed energy system.
increasingly occurs in policy studies. Of these externalities, is the equity
of burden sharing. It is known that the poor depend more on domestic
fundamental energy products, while the rich rely much more on energy
service. However, in implementation, social equity and justice, espe-
cially for low-income households, dominates considerations. According
to Shammin and Bullard (2009) the carbon emissions of low-income
households are primarily for essential needs (housing, transportation,
etc.), while nearly 50% of the carbon emissions of high-income house-
holds are from the consumption of non-energy goods and services –
many of them nonessential. Policy instruments directly affect the cost
of energy products, which leads to more burden on the poor. From a
consumer level, therefore, the equity for poor households and com-
munities also needs to be considered in policy development and
monitoring of outcomes, as these are extremely critical elements that
are easily ignored and overlooked. From a government level, the status
of national economy and geographic location should also be considered
for policy development.
It is appreciated that government, users and utilities generation are
the main actors in the system of energy conservation and environ-
mental protection (Fig. 7). It is necessary to balance the demand-
supply market between the users and utility generation. Governments
can provide subsidies and grants for the development of renewable
energy technologies. On the other hand, for energy consumption,
governments play the role of encouraging users to adjust their lifestyle
and attitudes through policy guidance in lowering energy demand.
Users, as the main energy consumers, play the most important role in
the energy consumption system, with several factors (e.g., income level,
environment awareness and lifestyle) affecting their behavior. Utility
generators, supplying the energy market and technological support, are
the key to reducing carbon emissions influenced by policy support and
demand for energy. Meanwhile, energy transport systems, which have
always been ignored by regulations and standards, also contribute to
carbon emissions.
There is room for improving the effectiveness of both supply and
demand-sides of policy instruments. Supply-side instruments have
more advantages in implementation and operation if a sound monitor-
ing mechanism is developed. Carbon emission targets and regulations,
although insensitive to the market, have an indispensable and funda-
mental role all over the world. Therefore, it is necessary for regulators
to be constantly updated to meet the new challenges and demands of
the market and for new technologies. Demand-side policy instruments
have become dominant especially in high-income countries and regions
in recent years and benefit from the flexibility and elasticity of the
Energy Policy 102 (2017) 116–124
market place. As well as contributing to the fiscal income, these
indirectly reduce carbon emissions even if the beneficial effects of
carbon mitigation are still uncertain. Most importantly, however,
Outcome demand-side policy instruments can swiftly provide financial incen-
tives and support for new, and more cost efficient, renewable energy
technologies.
Since the realization that different types of policy instruments can
reduce GHG emissions, governments are increasingly combining policy
measures for the same technology. For example, combining FITs with
the investment subsidies and soft loans. However, as Mir-Artigues and
Rio (2014), notes, combining deployment instruments is not a cost-
containment strategy and further study is needed to examine this more
closely and explore the lessons and combinations of carbon abatement
policy instruments available.
Funding
support
Acknowledgement
The research is supported by the Environment and Conservation
Fund (Project No: 92110732) funded by HKSAR Depts., National
Natural Science Foundation of China (No.71673232), the National
Natural Science Foundation of China for Distinguished Young Scholars
(No. 71225005), the Early Career Scheme of Hong Kong Research
grant council (Project No: 9048039), the General Research Funding of
Hong Kong Research grant council (Project No: 9042363). The work
described in this paper was also substantially supported by the
Matching fund for NSFC (Project No: 9680114 and 7004309); and
the Lincoln Institute of Land Policy Foundation project, (USA &
China) (project no: R-IND6604).
Appendix A. Supplementary material
Supplementary data associated with this article can be found in the
online version at http://dx.doi.org/10.1016/j.enpol.2016.12.010.
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