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The Challenges of Climate for Energy Markets

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Abstract

Among the many complex issues of technology, governance, and market design affecting the electricity sector, climate policy has become dominant. From the perspective of a nonspecialist looking at this changing dominance, a quiz illuminates some of the peculiar uses of language one can find in climate change and energy efficiency policy. Six economic challenges are then examined: cap-and-trade vs. taxes, non-price regulations, energy efficiency policies, mitigation vs. adaptation, trade effects, and transmission planning. Three additional challenges affect not just the means to the climate policy end but also the end itself: the “fat tails†problem, discount rates, and whether environmental protection should be evaluated by aggregating willingness to pay across persons. Planners in the public and private sectors need to be aware of not only the economic policy challenges but also arguments that may influence the intensity of the climate policies with which they have to cope.

Suggested Citation

  • Timothy J. Brennan, 2009. "The Challenges of Climate for Energy Markets," UMBC Economics Department Working Papers 09-111, UMBC Department of Economics, revised 01 Sep 2009.
    • Handle: RePEc:umb:econwp:09111
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    More about this item

    Keywords

    climate change; energy policy; electricity;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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