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Energy efficiency resource standards: Economics and policy

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  • Brennan, Timothy J.
  • Palmer, Karen L.

Abstract

Twenty states in the United States have adopted energy efficiency resource standards (EERS) that specify absolute or percentage reductions in energy use relative to business as usual. We examine how an EERS compares to policies oriented to meeting objectives, such as reducing greenhouse gas emissions, correcting for consumer error in energy efficiency investment, or reducing peak demand absent real-time prices. If reducing energy use is a policy goal, one could use energy taxes or cap-and-trade systems rather than an EERS. An EERS can be optimal under special conditions, but to achieve optimal goals following energy efficiency investments, the marginal external harm must fall with greater energy use. This could happen if inframarginal energy has greater negative externalities, particularly regarding emissions, than energy employed at the margin. We conclude with a table of suggestions policy makers should consider when deciding whether and how to adopt an EERS.

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Bibliographic Info

Article provided by Elsevier in its journal Utilities Policy.

Volume (Year): 25 (2013)
Issue (Month): C ()
Pages: 58-68

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Handle: RePEc:eee:juipol:v:25:y:2013:i:c:p:58-68

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Web page: http://www.elsevier.com/locate/inca/30478

Related research

Keywords: Energy efficiency resource standards; Energy efficiency; Electricity; Conservation;

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References

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  1. Ian W.H. Parry & Wallace E. Oates, 2000. "Policy analysis in the presence of distorting taxes," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 19(4), pages 603-613.
  2. O'Neill, Richard P. & Sotkiewicz, Paul M. & Hobbs, Benjamin F. & Rothkopf, Michael H. & Stewart, William R., 2005. "Efficient market-clearing prices in markets with nonconvexities," European Journal of Operational Research, Elsevier, vol. 164(1), pages 269-285, July.
  3. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Wiley Blackwell, vol. 41(4), pages 477-91, October.
  4. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
  5. Dermot Gately, 1980. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables: Comment," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 373-374, Spring.
  6. Kenneth Gillingham & Richard G. Newell & Karen Palmer, 2009. "Energy Efficiency Economics and Policy," NBER Working Papers 15031, National Bureau of Economic Research, Inc.
  7. Timothy Brennan, 2010. "Decoupling in electric utilities," Journal of Regulatory Economics, Springer, vol. 38(1), pages 49-69, August.
  8. Louis-Gaëtan Giraudet & Luc Bodineau & Dominique Finon, 2011. "The costs and benefits of white certificates schemes," Working Papers hal-00866420, HAL.
  9. Brennan, Timothy J., 2007. "Electricity Markets and Energy Security: Friends or Foes?," Discussion Papers dp-07-46, Resources For the Future.
  10. Brennan, Timothy J., 2011. "Energy efficiency and renewables policies: Promoting efficiency or facilitating monopsony?," Energy Policy, Elsevier, vol. 39(7), pages 3954-3965, July.
  11. Dennis Coates, 2007. "Stadiums And Arenas: Economic Development Or Economic Redistribution?," Contemporary Economic Policy, Western Economic Association International, vol. 25(4), pages 565-577, October.
  12. Brennan, Timothy J., 2006. ""Green" preferences as regulatory policy instrument," Ecological Economics, Elsevier, vol. 56(1), pages 144-154, January.
  13. Brown, Stephen P.A. & Huntington, Hillard G., 2010. "Reassessing the Oil Security Premium," Discussion Papers dp-10-05, Resources For the Future.
  14. Tsvetan Tsvetanov & Kathleen Segerson, 2011. "Re-Evaluating the Role of Energy Efficiency Standards: A Time-Consistent Behavioral Economics Approach," Working Papers 07, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  15. Brennan, Timothy J., 2011. "Energy Efficiency Policy: Surveying the Puzzles," Discussion Papers dp-11-27, Resources For the Future.
  16. Louis-Gaëtan Giraudet & Luc Bodineau & Dominique Finon, 2011. "The costs and benefits of white certificates schemes," CIRED Working Papers hal-00866420, HAL.
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Cited by:
  1. Palmer, Karen L. & Grausz, Samuel & Beasley, Blair & Brennan, Timothy J., 2013. "Putting a floor on energy savings: Comparing state energy efficiency resource standards," Utilities Policy, Elsevier, vol. 25(C), pages 43-57.

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