Editing IPCC:AR6/WGIII/Chapter-6 (section)

=== 6.6.3 The Institutional and Societal Characteristics of Net-zero Energy Systems ===

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The transition to net-zeroenergy systems is not just technological; it requires shifts in institutions, organisations, and society more generally. As such, it involves institutional changes alongside changes in supply, technology, or markets ( [[#Andrews-Speed--2016|Andrews-Speed 2016]] , [[#Pai--2021|Pai et al. 2021]] ). Institutional relationships between governments and energy sector actors (e.g., consumers, electricity companies) affect the nature of net-zero systems, as these entities may collaborate on or dispute net-zero goals and measures to achieve them. For example, following the Fukushima disaster, Japan placed emphasis on government-utility-public cooperation on use of nuclear power as a means of reducing carbon emissions ( [[#Sklarew--2018|Sklarew 2018]] ). Institutions are instrumental in shaping net-zero energy systems in multiple ways, complemented by and interacting with the behaviours of actors and policy regimes in these systems (Figure 6.24).

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[[File:083976c0393afc4b07b3911a963008ba IPCC_AR6_WGIII_Figure_6_24.png]]

'''Figure 6.24 | A four-level framework for institutional change.''' The diagram depicts three levels of institutions (1–3) which collectively govern actor behaviours (4). Source: with permission from [[#Andrews-Speed--2016|Andrews-Speed (2016)]] .

One level of institutional interactions reflects embedded institutions, norms, beliefs, and ideas that would need to change to support net-zero energy systems. This applies, for example, to the objectives of modern economies and the potentially contradictory dynamics embedded in the concept of ‘green growth’ ( [[#Stegemann--2018|Stegemann and Ossewaarde 2018]] ; [[#Stoknes--2018|Stoknes and Rockström 2018]] ). The institutional environment – the political and legal systems that govern exchanges and protect property rights – would also need to be different in net-zero energy systems. In this setting, changing regulations or subsidies that continue to favour carbon-intensive systems over the technologies of a net-zero energy system might prove difficult ( [[#Sovacool--2017|Sovacool 2017]] ). More generally, net-zero energy systems will need new regulatory frameworks to undertake new challenges, from managing a more interconnected grid to adequately governing underground storage of CO 2 . Institutions may also govern specific transactions, such as firms or networks that supply energy fuels or services. Current actors are typically resistant to disruptions, even if such disruptions may broadly benefit society ( [[#Kungl--2015|Kungl 2015]] ; [[#Schmid--2017|Schmid et al. 2017]] ; [[#Mori--2018|Mori 2018]] ).

For example, one energy system characterised by differentiated institutional interactions is the USA, where delivery of liquid fuels is lightly regulated, while electricity delivery is closely regulated ( [[#Dworkin--2013|Dworkin et al. 2013]] ). Reforming this two-pronged system for decarbonisation would require four types of institutional change: (i) changes to the control systems that coordinate generation and transmission through a pyramidal architecture for the operational control, dispatch, and delivery of electricity with a primary emphasis on reliability; (ii) changes to the financing of central-station power plants through long-term bonds, as valued by Wall Street ratings analysts; (iii) changes to the structure of investor-owned utilities that attract private investors who expected decades of technological stability to yield long-term, low-risk revenues; and (iv) changes to regulations to restructure and limit excessive returns and easy entry of new retail competitors, all recognising local and national concerns through state and federal regulatory agencies. The example shows how decision-making and the infrastructures involved are layered, and can create ‘nested hierarchies’ where institutions fulfil multiple roles for energy governance or regulation simultaneously ( [[#Stern--2016b|Stern et al. 2016b]] ). Internationally and across different parts of the energy system, institutional challenges such as these could become even more stark and complex ( [[#Van%20de%20Graaf--2013|Van de Graaf 2013]] ).

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