Since tomorrow’s election is heavily focused on the appropriate scope of government, I have spent a little time lately reflecting upon the proper role of government in the energy sector.

In regards to the U.S. Presidential race, I will refrain from analyzing the respective policies and stances concerning energy of the two candidates.  This recent article from Fortune does a not-bad job of that.

Rather than get down into the weeds with an inordinately long list of specific ideas for a highly complex economic sector, I prefer to keep this discussion at a high-level, articulating basic principles that offer suggestions to guide elected officials and bureaucrats on how energy policies and regulations should be set.

This would be my short-list:

1. Establish marketplace rules with long-term clarity to enable best investment decisions on long-lived assets and business strategies
2. Ensure externalities from free-riders causing economic harm to society are fully internalized into market pricing signals
3. Deregulate those services that can be provided competitively, force breakups where there is excessive market power preventing competition from being effective, and aggressively regulate services where competitive alternatives don’t exist (providing incentives for cost efficiency and non-discrimination)
4. Promote full disclosure and transparency of information to all market participants to help in making optimal decisions
5. Privatize public sector assets in competitive market sectors, and hold (potentially acquire?) assets in non-competitive segments to eliminate the possibility of exploitation by for-profit monopolists
6. Set minimum standards of health, safety and environmental compliance, ensure these standards are met by all market participants, and enforce via meaningful penalties
7. Facilitate responsible development and production of energy resources – as long as all health, safety and environmental standards are fully met
8. Provide tax credits for pre-commercial research on new energy technologies to spur further innovation
9. Structure incentives or mandates based on desired market, social or environmental outcomes rather than technological outcomes

via The Proper Role of Government in Energy.