Energy economics

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For other uses, see Energy economics (disambiguation).
Not to be confused with Ecological economics, Environmental economics, Natural resource economics, or Thermoeconomics.
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Energy economics is a broad scientific subject area which includes topics related to supply and use of energy in societies.<ref>Sickles, Robin (2008). "energy economics." The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.</ref> Considering the cost of energy services and associated value gives economic meaning to the efficiency at which energy can be produced.<ref>Giraudet, Louis-Gaëtan; Missemer, Antoine (2019), The Economics of Energy Efficiency, a Historical Perspective, retrieved 2021-04-25</ref> Energy services can be defined as functions that generate and provide energy to the “desired end services or states”.<ref>Fell, Michael James (2017-05-01). "Energy services: A conceptual review". Energy Research & Social Science. 27: 129–140. doi:10.1016/j.erss.2017.02.010. ISSN 2214-6296.</ref> The efficiency of energy services is dependent on the engineered technology used to produce and supply energy. The goal is to minimise energy input required (e.g. kWh, mJ, see Units of Energy) to produce the energy service, such as lighting (lumens), heating (temperature) and fuel (natural gas). The main sectors considered in energy economics are transportation and building, although it is relevant to a broad scale of human activities, including households and businesses at a microeconomic level and resource management and environmental impacts at a macroeconomic level.

History

World prices for energy, 1991–2010. 2000=100.

Energy related issues have been actively present in economic literature since the 1973 oil crisis, but have their roots much further back in the history. As early as 1865, W.S. Jevons expressed his concern about the eventual depletion of coal resources in his book The Coal Question. One of the best known early attempts to work on the economics of exhaustible resources (incl. fossil fuel) was made by H. Hotelling, who derived a price path for non-renewable resources, known as Hotelling's rule.<ref>Hotelling, H. (1931). "The Economics of Exhaustible Resources". Journal of Political Economy. 39 (2): 137–175. doi:10.1086/254195. JSTOR 1822328. S2CID 44026808.</ref>

Development of energy economics theory over the last two centuries can be attributed to three main economic subjects – the rebound effect, the energy efficiency gap and more recently, 'green nudges'.

The Rebound Effect (1860s to 1930s)

Timeline of instrumental theories of energy economics

While energy efficiency is improved with new technology, expected energy savings are less-than proportional to the efficiency gains due to behavioural responses.<ref name=":0">Giraudet, Louis-Gaëtan; Missemer, Antoine (2019), The Economics of Energy Efficiency, a Historical Perspective, retrieved 2021-04-25</ref> There are three behavioural sub-theories to be considered: the direct rebound effect, which anticipates increased use of the energy service that was improved; the indirect rebound effect, which considers an increased income effect created by savings then allowing for increased energy consumption, and; the economy-wide effect, which results from an increase in energy prices due to the newly developed technology improvements.<ref>Herring, Horace; Roy, Robin (2007-04-01). "Technological innovation, energy efficient design and the rebound effect". Technovation. 27 (4): 194–203. doi:10.1016/j.technovation.2006.11.004. ISSN 0166-4972.</ref>

The Energy Efficiency Gap (1980s to 1990s)

Suboptimal investment in improvement of energy efficiency resulting from market failures/barriers prevents the optimal use of energy.<ref>Häckel, Björn; Pfosser, Stefan; Tränkler, Timm (2017-12-01). "Explaining the energy efficiency gap - Expected Utility Theory versus Cumulative Prospect Theory". Energy Policy. 111: 414–426. doi:10.1016/j.enpol.2017.09.026. ISSN 0301-4215.</ref> From an economical standpoint, a rational decision-maker with perfect information will optimally choose between the trade-off of initial investment and energy costs. However, due to uncertainties such as environmental externalities, the optimal potential energy efficiency is not always able to be achieved, thus creating an energy efficiency gap.

Green Nudges (1990s to Current)

While the energy efficiency gap considers economical investments, it does not consider behavioural anomalies in energy consumers. Growing concerns surrounding climate change and other environmental impacts have led to what economists would describe as irrational behaviours being exhibited by energy consumers. A contribution to this has been government interventions, coined "green nudges’ by Thaler and Sustein (2008),<ref>Thaler, Richard; Sunstein, Cass (2009). Nudge: Improving Decisions about Health, Wealth, and Happiness. Camberwell, Vic.: Penguin Group Australia. ISBN 9780141040011.</ref> such as feedback on energy bills. Now that it is realised people do not behave rationally, research into energy economics is more focused on behaviours and impacting decision-making to close the energy efficiency gap.<ref name=":0" />

Economic factors

Due to diversity of issues and methods applied and shared with a number of academic disciplines, energy economics does not present itself as a self-contained academic discipline, but it is an applied subdiscipline of economics. From the list of main topics of economics, some relate strongly to energy economics:

Energy economics also draws heavily on results of energy engineering, geology, political sciences, ecology etc. Recent focus of energy economics includes the following issues:

Some institutions of higher education (universities) recognise energy economics as a viable career opportunity, offering this as a curriculum. The University of Cambridge, Massachusetts Institute of Technology and the Vrije Universiteit Amsterdam are the top three research universities, and Resources for the Future the top research institute.<ref>"Economics Field Rankings: Energy Economics - IDEAS/RePEc". ideas.repec.org.</ref> There are numerous other research departments, companies, and professionals offering energy economics studies and consultations.

International Association for Energy Economics

International Association for Energy Economics (IAEE) is an international non-profit society of professionals interested in energy economics. IAEE was founded in 1977, during the period of the energy crisis. IAEE is incorporated under United States laws and has headquarters in Cleveland.

The IAEE operates through a 17-member Council of elected and appointed members. Council and officer members serve in a voluntary position.

IAEE has over 4,500 members worldwide (in over 100 countries). There are more than 25 national chapters, in countries where membership exceeds 25 individual members. Some of the regularly active national chapters of the IAEE are; USAEE - United States; GEE - Germany; BIEE - Great Britain; AEE - France; AIEE - Italy.

Publications

The International Association for Energy Economics publishes three publications throughout the year:

Conferences

The IAEE conferences address critical issues of vital concern and importance to governments and industries and provide a forum where policy issues are presented, considered and discussed at both formal sessions and informal social functions.

IAEE typically holds five Conferences each year. The main annual conference for IAEE is the IAEE International Conference which is organized at diverse locations around the world. From the year 1996 on these conferences have taken place (or will take place) in the following cities:

Other annual IAEE conferences are the North American Conference and the European Conference.

IAEE Awards

The Association's Immediate Past President annually chairs the Awards committee that selects the award recipients.

  • Outstanding Contributions to the Profession
  • Outstanding Contributions to the IAEE
  • The Energy Journal Campbell Watkins Best Paper Award
  • Economics of Energy & Environmental Policy Best Paper Award
  • Journalism Award

Sources, links and portals

Leading journals of energy economics include:

There are several other journals that regularly publish papers in energy economics:

Much progress in energy economics has been made through the conferences of the International Association for Energy Economics, the model comparison exercises of the (Stanford) Energy Modeling Forum and the meetings of the International Energy Workshop.

IDEAS/RePEc has a collection of recent working papers.<ref>"NEP-ENE: New economic research on Energy Economics | IDEAS/RePEc".</ref>

Leading energy economists

The top 20 leading energy economists as of December 2016 are:<ref>IDEAS/RePEc has a list of energy economists and a ranking of the same.</ref>

See also

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References

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Further reading

External links

Wikimedia Commons has media related to Energy economics.

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