Energy Efficiency Resource Standards: Economics and Policy
Resources for the Future DP 12-10, February 2012
32 Pages Posted: 13 Jul 2013
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: Suggested Citation