Energy Efficiency Policy: Surveying the Puzzles
AbstractPromoting energy efficiency (EE) has become a leading policy response to greenhouse gas emissions, energy dependence, and the cost of new generators and transmission lines. Such policies present numerous puzzles. Electricity prices below marginal production costs could warrant EE policies if EE and energy are substitutes, but they will not be substitutes if the energy price is sufficiently high. Using EE savings to meet renewable energy requirements can dramatically increase the marginal cost of electricity. Rejecting “rationality” of consumer energy choices raises doubts regarding cost–benefit analysis when demand curves may not reveal willingness to pay. Decoupling to guarantee constant profit regardless of use contradicts findings that incentive-based mechanisms outperform cost-of-service regulation. Regulators may implement EE policies to exercise buyer-side market power against generators, increasing consumer welfare but reducing overall economic performance. Encouraging utilities to take over potentially competitive EE contradicts policies to separate competitive from monopoly enterprises.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-11-27.
Date of creation: 06 Jul 2011
Date of revision:
energy efficiency; energy policy; decoupling; monopsony; vertical integration;
Find related papers by JEL classification:
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-03 (All new papers)
- NEP-ENE-2012-01-03 (Energy Economics)
- NEP-REG-2012-01-03 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Timothy J. Brennan, 2004. "Market Failures in Real-Time Metering," Journal of Regulatory Economics, Springer, vol. 26(2), pages 119-139, 09.
- Timothy Brennan, 2010. "Decoupling in electric utilities," Journal of Regulatory Economics, Springer, vol. 38(1), pages 49-69, August.
- Parry, Ian W.H. & Walls, Margaret & Harrington, Winston, 2007.
"Automobile Externalities and Policies,"
dp-06-26, Resources For the Future.
- Gillingham, Kenneth & Newell, Richard G. & Palmer, Karen, 2009.
"Energy Efficiency Economics and Policy,"
dp-09-13, Resources For the Future.
- George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
- Brennan, Timothy J, 1990. "Cross-Subsidization and Cost Misallocation by Regulated Monopolists," Journal of Regulatory Economics, Springer, vol. 2(1), pages 37-51, March.
- Brennan, Timothy J., 2011. "Energy efficiency and renewables policies: Promoting efficiency or facilitating monopsony?," Energy Policy, Elsevier, vol. 39(7), pages 3954-3965, July.
- Lenard, Thomas M., 2009. "Renewable Electricity Standards, Energy Efficiency, and Cost-Effective Climate-Change Policy," The Electricity Journal, Elsevier, vol. 22(8), pages 55-64, October.
- Beard, T Randolph & Kaserman, David L & Mayo, John W, 2001. "Regulation, Vertical Integration and Sabotage," Journal of Industrial Economics, Wiley Blackwell, vol. 49(3), pages 319-33, September.
- Brennan, Timothy J., 2010. "Optimal energy efficiency policies and regulatory demand-side management tests: How well do they match?," Energy Policy, Elsevier, vol. 38(8), pages 3874-3885, August.
- Schmid, Eva & Pahle, Michael & Knopf, Brigitte, 2013. "Renewable electricity generation in Germany: A meta-analysis of mitigation scenarios," Energy Policy, Elsevier, vol. 61(C), pages 1151-1163.
- Panzone, Luca A., 2013. "Saving money vs investing money: Do energy ratings influence consumer demand for energy efficient goods?," Energy Economics, Elsevier, vol. 38(C), pages 51-63.
- Palmer, Karen & Grausz, Samuel & Beasley, Blair & Brennan, Tim, 2012.
"Putting a Floor on Energy Savings: Comparing State Energy Efficiency Resource Standards,"
dp-12-11, Resources For the Future.
- 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.
- Brennan, Timothy J. & Palmer, Karen L., 2013.
"Energy efficiency resource standards: Economics and policy,"
Elsevier, vol. 25(C), pages 58-68.
- Brennan, Timothy J. & Palmer, Karen, 2012. "Energy Efficiency Resource Standards: Economics and Policy," Discussion Papers dp-12-10, Resources For the Future.
- Tanaka, Makoto & Chen, Yihsu, 2013. "Market power in renewable portfolio standards," Energy Economics, Elsevier, vol. 39(C), pages 187-196.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster).
If references are entirely missing, you can add them using this form.