The Lessons of Practice: Domestic policy reform as a way to address climate change

The report examines domestic policy reforms in developing countries focused on price reform, energy efficiency, and low-carbon fuels to mitigate climate change. It analyzes the political and economic barriers to price reform, the necessity of legal frameworks and specialized agencies for energy efficiency, and the role of financial incentives and standards. The document also evaluates the use of input, output, outcome, and impact indicators for monitoring, reporting, and verification (MRV) of Nationally Appropriate Mitigation Actions (NAMAs), concluding that only impact indicators provide a reliable basis for financial rewards, despite significant data gaps in developing countries.

• Energy price reform is critical for reducing greenhouse gas emissions, but is often resisted in developing countries due to political and social factors. In authoritarian or semi-authoritarian regimes, there is a systematic bias toward lower energy prices to forestall public protest.
• Case studies in Iran and Egypt demonstrate that eliminating energy subsidies can significantly reduce energy consumption and GHG emissions. In Iran, fast price reform by 2009 without sectoral measures could have decreased damage costs and GHG emissions by half.
• Effective energy efficiency policy requires a legal basis, such as an energy efficiency law, to implement mandatory functions including audits, reporting, labelling, and the creation of a specialized energy agency.
• Energy labelling is a cost-effective tool for correcting information asymmetries, but developing countries face higher obstacles in establishing testing facilities and ensuring compliance compared to developed nations.
• Financial incentives for energy efficiency should be temporary tools to transform markets rather than permanent corrections. Grants and concessional finance are most effective in lower-income countries, while loan guarantees are best suited for environments with functioning banking systems.
• Energy Service Companies (ESCOs) have seen limited success in developing countries compared to industrialized nations due to factors such as the size of the banking system and the lack of technical and business experience among staff.
• Building energy efficiency is a high priority in developing countries due to rapid new construction, yet most countries fail to produce significant savings because of poor enforcement of building standards.
• Low-carbon electricity generation typically requires substantial subsidies because it is rarely financially viable on its own. Feed-in tariffs are identified as one of the simplest support schemes for promoting renewable electricity.
• The document argues that for Nationally Appropriate Mitigation Actions (NAMAs) to be a basis for financial transfers, they must be measured via impact indicators, as outcome indicators are too complex and unreliable for rewarding effort.
• A proposed mechanism for supporting grid-connected renewables in developing countries involves developed countries purchasing certificates of renewable origin to set against their own renewable portfolio obligations.
• Technical assistance for energy policy reform is often uncoordinated and fails when it is not aligned with the immediate political priorities of the recipient government.

APA

Lucas, N. (2009). The Lessons of Practice: Domestic policy reform as a way to address climate change. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/bali_2_copenhagen_dom_policy_lessons.pdf

Chicago

Lucas, Nigel. The Lessons of Practice: Domestic policy reform as a way to address climate change. International Institute for Sustainable Development, 2009. https://www.iisd.org/system/files/publications/bali_2_copenhagen_dom_policy_lessons.pdf.

Wikipedia

{{cite report |last1=Lucas |first1=Nigel |title=The Lessons of Practice: Domestic policy reform as a way to address climate change |publisher=International Institute for Sustainable Development |date=November 2009 |url=https://www.iisd.org/system/files/publications/bali_2_copenhagen_dom_policy_lessons.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lucas2009lessons, author = {Lucas, Nigel}, title = {{The Lessons of Practice: Domestic policy reform as a way to address climate change}}, institution = {International Institute for Sustainable Development}, year = {2009}, month = nov, url = {https://www.iisd.org/system/files/publications/bali_2_copenhagen_dom_policy_lessons.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }