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Energy efficiency resource standards: Economics and policy

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

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30478

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  1. Tsvetan Tsvetanov & Kathleen Segerson, 2011. "Re-Evaluating the Role of Energy Efficiency Standards: A Time-Consistent Behavioral Economics Approach," Working papers 2011-24, University of Connecticut, Department of Economics.
  2. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Wiley Blackwell, vol. 41(4), pages 477-91, October.
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  7. Brennan, Timothy J., 2007. "Electricity Markets and Energy Security: Friends or Foes?," Discussion Papers dp-07-46, Resources For the Future.
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  9. 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.
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  12. 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.
  13. Timothy Brennan, 2010. "Decoupling in electric utilities," Journal of Regulatory Economics, Springer, vol. 38(1), pages 49-69, August.
  14. Brennan, Timothy J., 2011. "Energy Efficiency Policy: Surveying the Puzzles," Discussion Papers dp-11-27, Resources For the Future.
  15. Louis-Gaƫtan Giraudet & Luc Bodineau & Dominique Finon, 2011. "The costs and benefits of white certificates schemes," CIRED Working Papers hal-00866420, HAL.
  16. 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.
  17. 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.
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