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The Economics of Conserved-Energy "Supply" Curves

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  • Steven E. Stoft

Abstract

This paper develops the theoretical underpinnings of conservation "supply" curves (CSCs), and in doing so uncovers several problems with current procedures for their construction. The CSC is shown to be derivable from a production isoquant, and not to be a true supply curve. The traditional algorithm for constructing a CSC from discrete measures is shown to be suboptimal, contrary to prior claims. Omitting conservation measures from consideration can lead to systematic, excessive conservation. The CSC concept is extended from, constant-service to constant-utility measures, and an improved approximation is, suggested for the cost of conserved energy (CCE) of measures that cause rebound. The appendix provides a formula for CCE that is simple yet more general than the one currently in use, but shows that even with this, generalization, CSCs cannot be constructed for a world with fluctuating energy prices.

Suggested Citation

  • Steven E. Stoft, 1995. "The Economics of Conserved-Energy "Supply" Curves," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 109-137.
  • Handle: RePEc:aen:journl:1995v16-04-a05
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    Cited by:

    1. Kenneth Gillingham & Karen Palmer, 2014. "Bridging the Energy Efficiency Gap: Policy Insights from Economic Theory and Empirical Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(1), pages 18-38, January.
    2. Nair, Gireesh & Gustavsson, Leif & Mahapatra, Krushna, 2010. "Factors influencing energy efficiency investments in existing Swedish residential buildings," Energy Policy, Elsevier, vol. 38(6), pages 2956-2963, June.
    3. Vogt-Schilb, Adrien & Hallegatte, Stéphane, 2014. "Marginal abatement cost curves and the optimal timing of mitigation measures," Energy Policy, Elsevier, vol. 66(C), pages 645-653.
    4. Martinaitis, Vytautas & Kazakevicius, Eduardas & Vitkauskas, Aloyzas, 2007. "A two-factor method for appraising building renovation and energy efficiency improvement projects," Energy Policy, Elsevier, vol. 35(1), pages 192-201, January.
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    6. de Almeida, Edmar Luiz Fagundes, 1998. "Energy efficiency and the limits of market forces: The example of the electric motor market in France," Energy Policy, Elsevier, vol. 26(8), pages 643-653, July.
    7. Haberl, Helmut & Adensam, Heidi & Geissler, Susanne, 1998. "Optimal climate protection strategies for space heating The case of Austria," Energy Policy, Elsevier, vol. 26(15), pages 1125-1135, December.
    8. Philip B. Thompson, 2002. "Consumer Theory, Home Production, And Energy Efficiency," Contemporary Economic Policy, Western Economic Association International, vol. 20(1), pages 50-59, January.
    9. Casillas, Christian E. & Kammen, Daniel M., 2011. "The delivery of low-cost, low-carbon rural energy services," Energy Policy, Elsevier, vol. 39(8), pages 4520-4528, August.
    10. repec:hal:wpaper:hal-00916328 is not listed on IDEAS
    11. Koopmans, Carl C. & te Velde, Dirk Willem, 2001. "Bridging the energy efficiency gap: using bottom-up information in a top-down energy demand model," Energy Economics, Elsevier, vol. 23(1), pages 57-75, January.
    12. Adrien Vogt-Schilb & Stéphane Hallegatte, 2013. "When Starting with the Most Expensive Option Makes Sense On Marginal Abatement Cost Curves and Optimal Abatement Pathways," Working Papers hal-00626261, HAL.
    13. Ruth, Matthias & Davidsdottir, Brynhildur & Laitner, Skip, 2000. "Impacts of market-based climate change policies on the US pulp and paper industry," Energy Policy, Elsevier, vol. 28(4), pages 259-270, April.
    14. Levihn, Fabian, 2016. "On the problem of optimizing through least cost per unit, when costs are negative: Implications for cost curves and the definition of economic efficiency," Energy, Elsevier, vol. 114(C), pages 1155-1163.
    15. Barbara Praetorius, 1996. "Nachfrageseitiges Marktversagen auf dem Energiemarkt: Empirische Evidenz, theoretische Aspekte, politische Folgerungen," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 65(2), pages 143-155.
    16. Levihn, F. & Nuur, C. & Laestadius, S., 2014. "Marginal abatement cost curves and abatement strategies: Taking option interdependency and investments unrelated to climate change into account," Energy, Elsevier, vol. 76(C), pages 336-344.
    17. McNeil, Michael A. & Bojda, Nicholas, 2012. "Cost-effectiveness of high-efficiency appliances in the U.S. residential sector: A case study," Energy Policy, Elsevier, vol. 45(C), pages 33-42.
    18. Fleiter, Tobias & Fehrenbach, Daniel & Worrell, Ernst & Eichhammer, Wolfgang, 2012. "Energy efficiency in the German pulp and paper industry – A model-based assessment of saving potentials," Energy, Elsevier, vol. 40(1), pages 84-99.

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    JEL classification:

    • F0 - International Economics - - General

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