Energy Efficiency Resource Standards: Economics and Policy

Resources for the Future DP 12-10, February 2012

32 Pages Posted: 13 Jul 2013

See all articles by Timothy J. Brennan

Timothy J. Brennan

Resources for the Future

Karen L. Palmer

Resources for the Future

Date Written: February 27, 2012

Abstract

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 infra-marginal energy has greater negative externalities, particularly regarding emissions, than energy employed at the margin.

Keywords: energy efficiency resource standards, energy efficiency, electricity, conservation

JEL Classification: L94, Q48, D02

Suggested Citation

Brennan, Timothy J. and Palmer, Karen, Energy Efficiency Resource Standards: Economics and Policy (February 27, 2012). Resources for the Future DP 12-10, February 2012, Available at SSRN: https://ssrn.com/abstract=2014260 or http://dx.doi.org/10.2139/ssrn.2014260

Timothy J. Brennan (Contact Author)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Karen Palmer

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

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