According to the 2025 Energy Transition Index, which factor is crucial for attracting long-term investment in energy transition?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Adaptive and stable policy frameworks.
According to the 2025 Energy Transition Index (ETI), the most crucial factor for attracting long-term investment is the presence of adaptive and stable policy frameworks. Investors require a predictable regulatory environment to commit the massive capital needed for renewable infrastructure. Policies that balance long-term climate targets with flexibility to accommodate technological shifts reduce financial risks and ensure a steady flow of "green" capital. This stability acts as a "transition enabler," fostering trust between global investors and governments to move away from carbon-intensive energy systems.
Analysis of Other options:
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High electricity tariffs: While these may increase revenue for utilities, they often hurt economic affordability and discourage public support for the energy transition.
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Rapid fossil fuel subsidies: Subsidies for fossil fuels are actually barriers to transition as they make clean energy less competitive and distort market prices.
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Deregulated industrial zones: Full deregulation can lead to environmental neglect; investors prefer clear, sustainable regulations over a complete lack of oversight.