Should the United States Create Trading Markets for Energy Efficiency?

Abstract

Many scholars have argued that energy savings should be "packaged" into tradable certificates to create market incentives to save energy. The trading price for the certificates could incentivize investments in energy efficient equipment and practices that firms might otherwise overlook. This essay examines the handful of energy efficiency markets that are operating abroad and challenges the conventional wisdom about these markets. It concludes that the United States should not adopt these markets given their complexity, problems of additionality, and the potential for strategic gaming of the markets.

Keywords: environmental law, climate change, energy law, energy efficiency, Europe, India