Indira Urazova and Tara Laan from the International Institute for Sustainable Development study tipping points to identify key areas for public intervention necessary for a transition to green energy. Positive tipping points occur when a threshold is reached in adopting new technology or practices, resulting in significant changes across the sector and accelerating its widespread adoption. For instance, the International Energy Agency projects that renewable energy will surpass coal for the first time in 2025, indicating a tipping point has been reached in the electricity sector.
As tipping points are influenced by multiple factors, policies need to create and amplify positive feedback mechanisms to facilitate a rapid and universal transition. The main purpose of state intervention should focus on reducing the cost of renewable energy including its production, storage, and distribution. Achieving this will ensure long-term certainty for investors and private stakeholders. Additionally, if fossil fuel prices reflect the true ecological impact of the sector, such policies will create further incentives to transition from brown energies. Investments in modernizing infrastructure will also enhance the attractiveness of the renewable energy sector.
However, strong state intervention can be costly and challenging for emerging markets and developing economies. Financial measures such as subsidies, loan guarantees, public investments, or tax reforms require increasing public spending with limited budget flexibility. Experience shows that debt instruments are more prevalent when dealing with cost-competitive and less risky technologies. Development finance institutions as well as international cooperation can help mitigate the financial burden associated with transitioning to green energy.
