Why nations lead or lag in energy transitions

Summary

This article examines the divergent responses of countries to energy transitions and climate policy, particularly in the context of energy price shocks, such as Russia's invasion of Ukraine. It identifies three pathways for policy change: insulation, where governments are shielded from political opposition; compensation, where governments ease the burden of transition costs for businesses and consumers; and market-driven, where market forces dictate the pace of change. Drawing on historical case studies from the 1970s oil crises and contemporary climate change policies, the study highlights how variations in political institutions—such as electoral systems, bureaucratic autonomy, and welfare state structures—shape national approaches to energy transitions. The findings suggest that countries with strong institutions are better positioned to implement policy-driven transitions, while those lacking such mechanisms tend to rely on market-driven approaches or short-term measures. The paper underscores the importance of understanding these institutional factors in crafting effective energy transition policies.