This chapter discusses the choice between market-led vs government-led solutions to energy challenges. What is the appropriate role of government in relation to the energy system? Under what conditions is government intervention appropriate, and what kind of policies might be justified? Supply and demand curves are introduced, and negative externalitiesNegative externalities are defined. We then illustrate graphically why goods (such as electricity from coalCoal plants) that produce negative externalitiesNegative externalities (such as water and air pollution)Air pollution tend to be overproduced.