Instrument mix for energy transition: A method for policy formulation

The present paper illustrates a methodological strategy to address the first phases of the policy cycle – namely agenda setting, impact analysis, and policy formulation – with the aim of fostering the development of an innovation niche. Through a combination of fuzzy cognitive maps and social network analysis, our methodology allows firstly assessing the needs of the niche and then, the identification of the most effective instrument mix and policy brokers to overcome the niche's criticalities. We investigate the case of the Italian liquid biofuel niche, which offers a near-ideal laboratory for testing our methodological approach due to its recent slump. Our simulations show that the persistence of negative context conditions in the niche under investigation would be detrimental for all three niche development mechanisms – i.e., networking, learning, and convergence of expectations – and especially for the last one, thus providing a clear priority in setting the policy agenda. Additionally, the impact analysis highlights that the combination of different policy instruments better supports the niche mechanisms than the implementation of single instruments. Finally, our methodology enables identification of the most effective instrument mix by considering interactions and feedback effects among instruments.