1. Introduction
Energy plays a key role in both the lives of human beings and the development of economies. There have been three typical transitions for energy application: 1. Coal replaced wood to be the main energy source; 2. Oil replaced coal to be the dominant energy source; 3. The transition from fossil fuels to renewable energy. In 2018, the US Energy Information Administration (EIA) estimated that 80% of the energy was derived from fossil fuels, specifically 36% from petroleum, 13.2% from coal, and 31% from natural gas. Nuclear energy and renewable energy accounted for 11% and 8%, respectively [
1]. However, since three major energy crises arose—the 1973 oil crisis, the 1979 energy crisis, and the 1990 oil-price hike—government have been engaged in encouraging consumers to conserve energy and apply renewable energy. Energy usage can cause serious environmental pollution. Excessive burning of fossil fuels results in the depleting natural resources as well as a steady increase of carbon dioxide emissions, which is believed to be responsible for increasing average global temperatures. In the report of the IPCC (2014) [
2], the best-case scenario assumes that greenhouse gas emissions peak by 2020 and then decline substantially. Meanwhile, a fall between 0.2 °C and 1 °C above the long-term average may occur in global average temperature in 2100. In the models by Giorgetta et al. [
3], one of the worst-case scenarios reflects a doubling of CO
2 and shows a rise in mean global temperature of about 3–4 °C by 2100, and it is predicted that global average temperature in 2100 would actually fall between 1.5 °C and 2 °C below the 1950–1980 average. With an increase of 2 °C over pre-industrial levels, a significant world climatic change is expected to occur with detrimental social, human and economic impact. Therefore, to avoid such temperature increase, governments and concerned members of civil society are engaged in implementing appropriate yet practical policies and actions in response. On 2 November 2014 in Copenhagen, the Intergovernmental Panel on Climate Change (IPCC) and the leaders of the United Nations (UN) expressed their concern about the near future and the main findings of the IPCC Fifth Assessment Synthesis Report (IPCC, 2014). The UN Secretary-General declared: ‘Leaders must act, time is not on our side’ [
4]. Governments are expected to act immediately to address the issues of energy crisis and environment problems. Indeed, the world’s governments have been slow to respond to this situation. A recent initiative, i.e., the Paris climate accord in 2015, is promising, with the United States and China agreeing to abide by the agreement.
The challenges of growing energy demand and environmental pollution require policies and governance on energy resources [
5]. A systemic transition towards more efficient energy regimes requires a strategically designed sequence of actions involving all policy levels, from local to global [
6]. A broad range of policy tools have been introduced such as tradable emission rights, taxes, and subsidies, as well as regulation such as feed-in-tariffs for renewable energy production [
6]. Given China’s rapid economic growth, the overconsumption of energy and heavy carbonisation of the economy make it an important player in oil and gas markets. The US energy policy has focused on four traditional objectives: 1. Secure, plentiful, diverse energy supply; 2. Robust, reliable energy infrastructure; 3. Affordable and stable energy price; 4. Environmentally sustainable energy production and use [
7]. To address the challenge of climate change, the European Union (EU) has adopted a set of quite ambitious policies to bring down greenhouse gas (GHG) emissions in 2020 by 20% with respect to 1990, raise the share of renewables in final energy consumption to 20% in 2020, and realise energy savings of 20% in 2020 compared to an official baseline energy consumption level [
7]. How policy frameworks appropriately designed is the key to facilitate sufficient private capital flowing into clean energy investment. It is essential to understand how to create effective frameworks for clean energy investment and the corresponding risk-return.
However, previous studies on energy policy are mostly focusing on the development of a specific energy policy (e.g., building energy performance certification) in different countries or the renewable energy law and policies in a specific country. It is essential to understand the development history of those successive sustainable energy policies in some counties to provide guidance for designing appropriate and effective energy policies for other countries. Overall, the paper provides a unique, unified reference benchmark for future work concerning the development of renewable and sustainable energy policy.
Our paper presents a review of sustainable energy policies in five countries, i.e., United States (US), Germany, United Kingdom (UK), Denmark and China. Then, a summary of how to design a policy is provided with its interaction with economy and environment. Three important sustainable energy policies, i.e., Energy-Efficiency Standard (EES), Feed-in-Tariff (FiT), and Building Energy Performance Certification (BEPC) Schemes, are described in detail in
Section 4.
2. Framework of Sustainable Energy Policy
In the EU context, it has repeatedly stated to be at the forefront of global action against climate change. In December 2019, EU has announced new European Climate Law “European Green Deal” which aims to respond to the escalating climate crisis by achieving net-zero greenhouse gas (GHG) emissions from the EU by 2050 [
8]. To reach this ambitious goal, a comprehensive policy framework is required, encompassing the climate, energy, environmental, industrial, economic and social aspects of this unprecedented process [
9]. The deal’s four pillars would be carbon pricing, sustainable investment, industrial policy, and a just transition [
10].
Maya-Drysdale et al. [
11] evaluated the vision strategy in EU New Green Deal for the energy planning of eight European cities by applying an analytical framework of critical elements of Strategic Energy Planning for 100% renewable systems. Despite carbon emission reduction ambitions, the cities are not approaching the vision strategy very effectively. The energy planning is still tied to the urban planning paradigm and traditions, which limits the strategic planning and does not fit very well with the vision strategy [
11].
The European Green Deal can be successfully implemented by intelligently promoting the deep decarbonisation by accompanying the economic and industrial transformation this necessarily implies, and by ensuring the social inclusiveness of the overall process. However, this is a complicated task which requires a paradigm shift of the economy from fossil fuels to zero-carbon in a way that is socially and politically viable. The European Green Deal can be considered as an efficient reallocation mechanism, fostering investment shifts and labor substitution in key economic sectors, while helping the most vulnerable segments of society throughout the process.
On the basis of the potential consequences of climate change, one of the biggest challenges faced for governments worldwide is the transformation of energy systems from fossil fuels to renewable energies. Climate change is responsible for the increase in extreme weather events, as well as an unbroken series of hottest years on record. In recognition of this, 179 countries and the EU spent two weeks in Paris during December 2015 hammering out an agreement to keep global temperature increase well below 2 °C and if possible, below 1.5 °C. The reduction in temperature can only be achieved through a significant reduction in the emission of greenhouse gases. Known as COP21, (The 21st Conference of the Parties to the UN Framework Convention on Climate Change) it was one of the largest gatherings of world leaders ever seen. The US pledged to cut US climate pollution by 26–28% from 2005 levels. The EU plans to cut emissions by 40% by 2030 on 1990 levels. China’s target is to reach peak CO
2 emissions by 2030 at the latest, lower the carbon intensity of GDP by 60% to 65% below 2005 levels by 2030, and to increase the share of non-fossil energy carriers of the total primary energy supply to around 20%. After committing to the Paris Agreement, the reduction of greenhouse gas emissions is assumed to be achieved through the implementation of national energy policies [
12]. In June 2019, the UK became the first major economy to enshrine ‘net-zero’ by 2050 in law, as shown in
Figure 1, which conveys the accelerating momentum for net-zero globally.
Although the share of electricity from renewable sources is on the raise in most countries after the introduction of substantial subsidies, conventional energy technologies and fossil fuels still dominate the market of electricity generation with approximately 75% market share in the European Union. Three major technological changes have been proposed for the sustainable energy development strategies: energy savings on the demand side [
13,
14], efficiency improvement in the energy production [
15,
16], and replacement of fossil fuels by various sources of renewable energy [
17,
18]. The need for development of sustainable energy policy is driven by the carbon emissions of the countries. The highest global carbon emissions contributed by a single country in 2018 are by China, i.e., 10,065 metric tons, followed by the USA with 5416 metric tons of CO
2 emissions. The European Union has the third highest carbon emission levels with Germany as the most significant contributor [
19]. The United Kingdom is also considered as a key country for the sustainable development policy with ambitious sustainable energy goals. Considering the above, this study discusses energy policies of five countries, i.e., China, the United States, Germany, the United Kingdom and Denmark, which are the leading countries in development of sustainable energy policies and renewable energy technologies [
20]. The presentation of the development of sustainable energy policies in these countries can provide positive guidance on policy design to achieve a sustainable development.
2.1. United States of America Energy Policy Context
Historically, the USA appears in the list of the first countries that incorporated energy policy in its economic system. In its beginning (by the Colonial period), the US energy policy was based on the standing timber for heating and industry [
21]. However, with the discovery of coal benefits for industry applications (19th century), such policy changed direction towards an industrial revolution [
21]. Over time, the use of coal was reduced with the integration of oil energy source. This is attributed to the fact that oil energy sources were easier and safer to utilise than coal.
Another important aspect that produced energy policy transformation was in 1883 at Niagara Falls (New York, NY, USA), with the construction of the first hydroelectric power source. Hydropower generation (first renewable energy source) opened a pathway for the 20th century to different power plants based on petroleum, natural gas, diesel, and nuclear. During the 20th century, the US economically growth rapidly reaching a peak just after the World War II. The success of its economy was in part due to the regulations based on electrical energy production [
22].
Until the 1990s, hydropower and solid biomass were the most used renewable energy. However, this fact changed with the developments of new renewable technologies. Biofuels, solar, and wind energy became very popular at the end of the 20th century. This is attributed to the advantages that they present, such as: (1) low environmental impact; (2) low or no production of emissions of CO
2 and other polluting gases into the atmosphere; (3) natural resource with external dependence; (4) suitable option to complement conventional energy sources [
23]. The employment of more renewable energies could lead to a more sustainable economy. However, without an adequate policy, this was not going to be possible, as history demonstrated. In 2009, the US became the second largest (after China) country around the globe emissary of carbon dioxide (CO
2) with a total of 8413 million metric tons of CO
2 as reported in Reference [
24]. This fact produced several penalties to the country, leading to a decrement in the US economy. Another problem that the US was facing was the wearing out of the energy sources. Potential solutions to these issues led to the creation of energy policies that could regulate the energy sector; under this need, the US formulated the Energy Independence and Security Act (EISA) [
25] and the Energy Policy Act (EPAct) [
26]. In the EPAct and IEA analyzed the given problem and proposed (in the beginning of the 2000s) regulations based on energy conservation and efficiency.
The conservation and efficiency strategies given in the EPAct05 and EISA took four milestones: 1. Transportation energy conservation and efficiency provisions; 2. Buildings energy conservation and efficiency provisions; 3. Industry energy conservation and efficiency provisions; 4. Electric power energy conservation and efficiency provisions. The most relevant policy for each sector is presented in
Table 1,
Table 2,
Table 3 and
Table 4 [
27]. The EPAct05 and EISA leads to an enlargement of US energy conservation, transforming the outlook for US oil imports and carbon emissions.
2.2. Germany Energy Policy Context
Germany is generally recognised to be the pioneer in establishing energy policy for sustainable development, and it is currently the most successful country for the promotion of renewable energy towards a sustainable energy system transition. Research and development of energy policy is the responsibility of the Federal Ministry of Economics and Technology (BMWi). Environmental policies, including nuclear safety, climate change and the impacts of fossil fuel combustion, are undertaken by the Federal Ministry of Environment, Nature Conservation and Nuclear Safety (BMU). The German Energy Agency (DENA) created in 2000 is in charge of the promotion of energy efficiency and energy conservation. The Federal Cartel Office (FCO) or the state-level competition offices is responsible for the regulation of competition in energy and electricity markets. Furthermore, independent expert panels and institutes organise discussions and provide reports for guiding energy policy.
In 2011, German government announced the Energiewende (‘energy transformation’) and decided to reduce the amount of fossil fuels from 80% of energy supply to 20% by 2050. The phase-out of nuclear energy, reduction of fossil fuels and dramatic increase in projected energy efficiency are the three major components of the German Enrgiewende.
Figure 2 provides an overview of electricity production from different energy sources between the period 1990 and 2015 in Germany (adopted from [
28,
29]). Until 2000, nearly 80% of electricity production came from lignite (25.7%), hard coal (24.8%), nuclear (29.4%) and the rest came from natural gas (8.5%) and renewables (6.6%). The share of renewables has been observed to increase dramatically (from 6.6% in 2000 to 30% in 2015) and the share of nuclear was halved from 29.4% in 2000 to 14.1% in 2015. Since the Fukushima accident, the decision to phase-out nuclear energy may cause the share of nuclear to reach zero by 2022 [
29]. Electricity production from nature gas provides less than 10% in 2015 while it was negligible for domestic oil compared to demand.
2.3. United Kingdom Energy Policy Context
The UK has a legal obligation under EU law to generate 20% of all energy consumption from renewable energy sources by 2020, and it has a legally mandated policy goal of an 80% reduction in national greenhouse gas (GHG) emissions to 80% of the base line i.e., 1990 GHG emissions, by 2050. [
30,
31]. However, later in 2019, the UK government introduced changes to the Climate Change Act 2008 and introduced amendment by introducing the term “Net-Zero”. The amendment states “The amendment in this Order has the effect that the minimum percentage by which the net UK carbon account for the year 2050 must be lower than the 1990 baseline is increased from 80% to 100%” [
30,
31,
32].
The UK has a legal obligation under EU law to generate 20% of all energy consumption from renewable energy sources by 2020, and it has a legally mandated policy goal of an 80% reduction in national climate change emissions by 2050 which was made in 2008, and to reach net-zero carbon emissions by 2050 through an amendment to the law made in 2019 [
30,
31,
32,
33]. Over the last two decades, substantial policy instruments have been introduced and amended, including enhanced construction and design standards (e.g., building control regulation), compulsory energy labelling (Energy Performance Certificates (EPC) and Display Energy Certificates), and a fairly unstable range of financial penalties and incentives (e.g., the Green Deal, Feed-in Tariffs, Energy Efficiency Opportunities Scheme, Climate Change Levy) [
34]. A summarised description on the UK national energy policy framework towards energy efficiency and renewable energy production is given in
Table 5.
In 2011, The Minimum Energy Efficiency Standard (MEES) was introduced in the United Kingdom, based on which the properties or these building materials rated G and F will be removed from the market. According to the report from Department of Energy and Climate Change in 2015, approximately 8% (representing around 200,000 units of the leased commercial stock in England and Wales) of non-domestic buildings had an EPC rating of F, and a further 10% of non-domestic buildings had an EPC rating of G.
2.4. Denmark Energy Policy Context
The establishment of Danish energy policy for renewable energy has a long history that can be traced back to the 1890s. Nowadays, Denmark is a leading country on how sustainable development strategies constituted by a combination of energy savings, efficiency improvement technologies and renewable generation are implemented. Since the energy crisis of the 1970s, Denmark has experienced the transformation of electricity generation from large, centralised thermal power stations to renewable electricity [
46,
47]. National energy plans were developed through wide discussion on energy security, self-sufficiency, efficiency, and greenhouse gas reductions. Nuclear power was not involved in the alternative plans as there was significant public opposition to the installation of nuclear plants [
47].
In 2001, an expert group was formed by the Danish Energy Agency to investigate the problem of excess electricity generation arising from the high penetration of wind generation and combined heating and power plant in the Danish energy system [
48]. A series of long-term year 2020 energy system is analyzed by Aalborg University to identify investments in more flexible energy systems in Denmark [
49]. A Danish future year 2020 energy system was defined by the expert group in accordance with Danish long-term energy policies and strategies.
Denmark has a leading role in the development of wind power generation which can go back to Poul la Cour who developed and built a wind turbine for electricity production and thus initiated modern wind power development. In 1918, 120 rural wind power stations were established with rated turbine powers between 20 and 35 kW, and wind generation (3 MW) accounted for around 3% of the Danish electricity demand (80 MW). The beginning of the modern phase of Danish wind energy use started from 1975 when a report was proposed on a broad wind energy programme in Denmark published by a committee set up by the Danish Academy of Technical Sciences (ATV) [
50]. In 1976, a second report was issued by the Academy to further outline a five-year programme in the field of wind energy [
50]. In 1977, the national government and the Danish utilities jointly supported to implement a wind power programme for the development of large-scale electricity-producing wind turbines. In 1996, the Danish government started Danish energy policy for offshore wind power of 4000 MW in 2030 in Energy 21. By the end of 2001, wind generation contributed nearly 12% of gross electricity consumption, while it provided 18.2% of the total gross electricity production in 2005 [
46,
47]. A share of electricity from renewable sources for Denmark is given in
Table 6.
2.5. China Energy Policy Context
Building energy consumption has been widely recognised as one major sector that threatens sustainable development all over the world, and it is expected to continue to increase in the next decades. Since the first building design standard had been issued in 1986, China government has established a systematic design standard for the new buildings in different climate zones, including design standards and acceptance standards for the residential building as well as public building [
52] (
Table 7). It is noted that the standard is updated every several years, and the newly items are summarised in
Table 8.
In China, a series of national plans have been formulated for the development and utilisation of renewable energy, which is also recognised as a political and economic issue (see
Figure 3). As important strategies, the national plans provide basic guidelines and periodical targets for China’s renewable energy law and policy system, which greatly accelerate the optimisation of social resources allocation, the improvement of market mechanism and mobilisation of renewable energy investment [
57].
In 2017, the National Development and Reform Commission (NDRC) of China issued the 13th Five Year Plan on energy development, and this is the basic outline of China’s energy policy from 2016 to 2020 [
58]. The Category of electricity generation from coal, natural gas, wind power and solar power can be found from the report as summarised in
Figure 4. The improvement of energy demand and energy supply structure is the pillar of the energy policy in the 13th Five Year Plan, which aims to address the problem of “placing an emphasis on facility construction, but disregarding usage” in the existing renewable energy policy.
In Reference [
59], 2656 energy-related province-level laws and regulations are identified and further categorised into specific types of command and control policies; financial incentives; awards; intellectual property rights; and education and information policies.
3. Modelling Sustainable Energy Policy
An effective policy is defined as ‘the extent to which intended objectives are met, for instance, the actual increase in the amount of RE electricity generated or share of RE in total energy supplied within a specified time period’ needs to ‘incite investment’ [
61]. The development of sustainable energy is widely acknowledged to depend on related policies determined by policy-makers and the government. It is a vital procedure to design and model an appropriate energy policy scheme since it affects the economic, environment, and technology development, as illustrated in
Figure 5. In general, a well-developed policy contains a closed loop involving six major procedures: policy design, policy implementation, policy monitoring, policy assessment, policy feedback and policy amendment. In terms of the development of RE policy, five common criteria (
Figure 6) were identified to judge whether it is successful or not [
62]:
Effectiveness (Extent to which the objectives are met);
Efficiency (Innovation with decrease in costs);
Equity (Fair distribution of the rents between RE developer and government);
Institutional feasibility (Extent political support is provided to the policy);
Replicability (Extent to which the policy can be adopted in other countries).
Modelling of the energy policies requires systemwide analysis of the complexities posed by the new technologies being incorporated in the system. The complex interactions of variables affecting the decision-making process with possible alternatives must be determined for designing an effective policy. Simulation studies containing major modelling methodologies and themes are presented in
Table 9 [
63].
Several empirical studies conclude that governments and stakeholders need to actively increase RE adoption and promote effective policy incentives and policy controls so as to reduce the CO
2 emissions prevalent in their countries and regions [
74]. The simplest energy policy is to fix the reward/penalty value for a product or an activity such as feed-in-tariff (FiT) and carbon tax. However, the value for feed-in-tariff or carbon tax is usually different for different places, which has attracted great attention from academic experts as well as the government [
75,
76,
77,
78]. The modelling of sustainable energy policy is expected to be a key factor for developing a successful policy.
A review of literature presents many studies proposing such policies. For example, in the study of Lu et al. [
79], a segment function was introduced as the model of penalty cost for the design of RES in zero energy buildings, the parameters were determined by trial test for the case of Hong Kong Zero Carbon Building. Then, the authors of Reference [
80] further proposed a simple quadratic function as the reward-penalty model, and the effectiveness of the proposed model was investigated based on a single-family house located in Shanghai city, China. In the two cases, the proposed RPM was designed to obtain an environmentally friendly, but economically viable optimum for ZEB owners by rewarding them a bonus and fining them according to the achieved ZEB level. In order to mitigate the overgeneration from the uncontrollable property of renewable sources, a reward/penalty mechanism for the demand response programs is designed for maximizing the benefit of supply side under the constraint the benefit of customer side is not sacrificed, which is solved by using particle swarm optimisation [
81]. Wu et al. [
82] proposed a simple but transparent exercise with a FiT mechanism of which the subsidy cost is passed through to final consumers by adding a tax or surcharge on electricity consumption, which forms the type of subsidy with a direct price impact on the electricity price. The two types of renewable support schemes, i.e., a subsidy scheme like a feed-in-tariff without price impact and a subsidy scheme with a direct price impact were then evaluated and compared. They found that a support scheme with price impact is much more effective in reducing CO
2 emissions while the difference in GDP between the two policies is small [
82].
Obrecht and Denac proposed two simplified energy policy models which represent useful tools for greater RES application, more predictable and accurate future energy policy measures, and efficiently satisfy international agreements and objectives, as shown in
Figure 7 and
Figure 8 [
83]. The two models are very similar but Model 2 contains a very different final goal. Model 2 shapes the direction of future energy demand and supply so that it can achieve the transition to more sustainable energy and the legally binding objectives.
Systems dynamics (SD) has been widely applied to the energy policy related problems [
63,
84,
85,
86,
87] and assessment of environmental impact [
88,
89,
90]. Qudrat-Ullah [
63] investigated the modelling and simulation issues in service of energy policy and identified energy policy modelling related issues. The identified issues include the characterisation of energy systems as complex, dynamic system with numerous uncertainties, non-linearities, time lags, and intertwined feedback loops. Qudrat-Ullah suggested that system dynamic modelling can be a viable solution to address these issues. Based on the three traditional categories under classification of energy policy formulation, i.e., strategic, tactical and operational problems, the author further classified energy policy formulation problems into six categories, i.e., energy-economy-environment (3E) problem, energy demand-supply management problem, new product innovation problem, capacity management problem, energy pricing problem, and hybrid energy management problem [
91,
92]. An in-depth review of some of the sustainable policies is presented in the proceeding section.