Economic Barriers and Incentives in the Energy Transition: A Comparative Analysis of Policy Frameworks and Market Responses

Authors: Mădălina Ana Burduja, Dorel Mihai Paraschiv

Abstract

The shift to green energy is not merely a technological challenge but a multifaceted economic upheaval. In numerous countries, the process remains precarious, influenced by regional constraints, shifting political climates, and the need to balance cost, long-term outcomes, and energy independence. This article examines how economic mechanisms—specifically carbon pricing, subsidies, and green finance—affect investment trends in renewable energy across various policy environments. The research used a comparative methodology, examining the cases of the European Union, the United States, and South Korea. It integrates policy research with quantitative techniques, such as panel data regression and correlation analysis, to evaluate the effects of carbon pricing and government subsidies on private-sector investments in renewable energy. Findings indicate that effectively structured carbon pricing mechanisms and consistent regulatory frameworks are essential catalysts for investment in renewable technology. Capital expenditure-based subsidies are effective in initial market development, but operational expenditure-based incentives promote long-term efficiency. The data reveals a strong positive association between government subsidies and private-sector investment, especially in nations with open regulatory frameworks. Green finance instruments, including green bonds, are becoming vital facilitators but necessitate more alignment with public policy. This research enhances the literature by providing a comprehensive economic analysis of energy transition programs, connecting public incentives with private sector responses. It offers a mostly overlooked viewpoint on nations such as South Korea, emphasising the impact of varied institutional environments on policy efficacy. The results provide evidence-based suggestions for policymakers: promote stable carbon prices, align subsidies with performance metrics, and enhance green finance markets. These insights facilitate the development of economically robust, investor-attractive energy markets that support an equitable and sustainable transition, particularly relevant to Romania and other OECD nations undergoing the shift to renewable energy.