Energy Efficiency Policy: Surveying the Puzzles
Promoting 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.
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.:
- Kenneth Gillingham & Richard G. Newell & Karen Palmer, 2009.
"Energy Efficiency Economics and Policy,"
NBER Working Papers
15031, National Bureau of Economic Research, Inc.
- Brennan, Timothy J., 2010.
"Optimal energy efficiency policies and regulatory demand-side management tests: How well do they match?,"
Elsevier, vol. 38(8), pages 3874-3885, August.
- Timothy J. Brennan, 2009. "Optimal Energy Efficiency Policies and Regulatory Demand-Side Management Tests: How Well Do They Match?," UMBC Economics Department Working Papers 09-109, UMBC Department of Economics, revised 01 Jan 2009.
- Timothy J. Brennan, 2004. "Market Failures in Real-Time Metering," Journal of Regulatory Economics, Springer, vol. 26(2), pages 119-139, 09.
- 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 319-333, September.
- Parry, Ian W.H. & Walls, Margaret & Harrington, Winston, 2007.
"Automobile Externalities and Policies,"
dp-06-26, Resources For the Future.
- Timothy Brennan, 2010. "Decoupling in electric utilities," Journal of Regulatory Economics, Springer, vol. 38(1), pages 49-69, August.
- 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.
- George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
- 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.
When requesting a correction, please mention this item's handle: RePEc:rff:dpaper:dp-11-27. See general information about how to correct material in RePEc.
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.