Energy economics is a broad scientific subject area which includes topics related to supply and use of energy in societies. Considering the cost of energy services and associated value gives economic meaning to the

efficiency Efficiency is the often measurable ability to avoid wasting materials, energy, efforts, money, and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully, and without ...

at which energy can be produced. Energy services can be defined as functions that generate and provide energy to the “desired end services or states”. 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 The lumen (symbol: lm) is the unit of luminous flux, a measure of the total quantity of visible light emitted by a source per unit of time, in the International System of Units (SI). Luminous flux differs from power ( radiant flux) in that radia ...

), heating ( temperature) and

fuel A fuel is any material that can be made to react with other substances so that it releases energy as thermal energy or to be used for work. The concept was originally applied solely to those materials capable of releasing chemical energy but ...

( 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 A household consists of two or more persons who live in the same dwelling. It may be of a single family or another type of person group. The household is the basic unit of analysis in many social, microeconomic and government models, and is impo ...

and businesses at a

microeconomic Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics fo ...

level and resource management and environmental impacts at a macroeconomic level. 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: * Computable general equilibrium * Econometrics * Environmental economics *

Finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...

* Industrial organization * Input–output model *

Microeconomics Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics fo ...

Macroeconomics Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, and ...

* Operations research * Resource economics Energy economics also draws heavily on results of energy engineering, geology,

political sciences Political science is the scientific study of politics. It is a social science dealing with systems of governance and power, and the analysis of political activities, political thought, political behavior, and associated constitutions and la ...

, ecology etc. Recent focus of energy economics includes the following issues: * Climate change and climate policy *

Demand response Demand response is a change in the power consumption of an electric utility customer to better match the demand for power with the supply. Until the 21st century decrease in the cost of pumped storage and batteries electric energy could not be ...

Elasticity Elasticity often refers to: *Elasticity (physics), continuum mechanics of bodies that deform reversibly under stress Elasticity may also refer to: Information technology * Elasticity (data store), the flexibility of the data model and the cl ...

supply and demand In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris paribus, holding all else equal, in a perfect competition, competitive market, the unit price for a ...

in energy market * Energy and

economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of ...

* Energy derivatives *

Energy elasticity Energy elasticity is a term used with reference to the energy intensity of Gross Domestic Product. It is "''the percentage change in energy consumption to achieve one per cent change in national GDP''". This term has been used when describing sus ...

* Energy forecasting * Energy markets and electricity markets - liberalisation, (de- or re-) regulation * Economics of energy infrastructure *

Energy policy Energy policy is the manner in which a given entity (often governmental) has decided to address issues of energy development including energy conversion, distribution and use as well as reduction of greenhouse gas emissions in order to contri ...

Environmental policy Environmental policy is the commitment of an organization or government to the laws, regulations, and other policy mechanisms concerning environmental issues. These issues generally include air and water pollution, waste management, ecosystem mana ...

* Risk analysis and

security of supply Energy security is the association between national security and the availability of natural resources for energy consumption. Access to (relatively) cheap energy has become essential to the functioning of modern economies. However, the uneven d ...

Sustainability Specific definitions of sustainability are difficult to agree on and have varied in the literature and over time. The concept of sustainability can be used to guide decisions at the global, national, and individual levels (e.g. sustainable livi ...

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. There are numerous other research departments, companies and professionals offering energy economics studies and consultations.

History

Energy related issues have been actively present in economic literature since the

1973 oil crisis The 1973 oil crisis or first oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries (OAPEC), led by Saudi Arabia, proclaimed an oil embargo. The embargo was targeted at nations that had supp ...

, 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 World energy resources are the estimated maximum capacity for energy production given all available resources on Earth. They can be divided by type into fossil fuel, nuclear fuel and renewable resources. Fossil fuel Remaining reserves of fo ...

in his book ''The Coal Question''. One of the best known early attempts to work on the economics of exhaustible resources (incl.

fossil fuel A fossil fuel is a hydrocarbon-containing material formed naturally in the Earth's crust from the remains of dead plants and animals that is extracted and burned as a fuel. The main fossil fuels are coal, oil, and natural gas. Fossil fuels m ...

) was made by H. Hotelling, who derived a price path for non-renewable resources, known as Hotelling's rule. 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 Energy efficiency gap refers to the improvement potential of energy efficiency or the difference between the cost-minimizing level of energy efficiency and the level of energy efficiency actually realized. It has attracted considerable attention ...

and more recently, 'green nudges'. The Rebound Effect (1860s to 1930s) Energy_Economics_-_Instrumental_Theories

While energy efficiency is improved with new technology, expected energy savings are less-than proportional to the efficiency gains due to behavioural responses. 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. 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. From an economical standpoint, a rational decision-maker with

perfect information In economics, perfect information (sometimes referred to as "no hidden information") is a feature of perfect competition. With perfect information in a market, all consumers and producers have complete and instantaneous knowledge of all market pr ...

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), 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.

Sources, links and portals

Leading journals of energy economics include: * '' Energy Economics'' * ''

The Energy Journal ''The Energy Journal'' is a quarterly peer-reviewed academic journal published by the International Association for Energy Economics and covering issues related to energy economics. It was established in 1980 and the editor-in-chief is Adonis Ya ...

'' * ''

Resource and Energy Economics ''Resource and Energy Economics'' is a quarterly peer-reviewed academic journal covering energy economics and environmental economics published by Elsevier. It was established in 1978 as ''Resources and Energy'' and obtained its current title i ...

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

Energy – The International Journal In physics, energy (from Ancient Greek: ἐνέργεια, ''enérgeia'', “activity”) is the quantitative property that is transferred to a body or to a physical system, recognizable in the performance of work and in the form of heat a ...

'' * ''

Energy Policy Energy policy is the manner in which a given entity (often governmental) has decided to address issues of energy development including energy conversion, distribution and use as well as reduction of greenhouse gas emissions in order to contri ...

'' * '' International Journal of Global Energy Issues'' * ''

Journal of Energy Markets A journal, from the Old French ''journal'' (meaning "daily"), may refer to: *Bullet journal, a method of personal organization * Diary, a record of what happened over the course of a day or other period *Daybook, also known as a general journal, ...

'' * ''

Utilities Policy A public utility company (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and r ...

'' Much progress in energy economics has been made through the conferences of the

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 State ...

, the model comparison exercises of the (Stanford) Energy Modeling Forum and the meetings of the

International Energy Workshop International is an adjective (also used as a noun) meaning "between nations". International may also refer to: Music Albums * ''International'' (Kevin Michael album), 2011 * ''International'' (New Order album), 2002 * ''International'' (The T ...

IDEAS/RePEc Research Papers in Economics (RePEc) is a collaborative effort of hundreds of volunteers in many countries to enhance the dissemination of research in economics. The heart of the project is a decentralized database of working papers, preprints, ...

has a collection of recent working papers.

Leading energy economists

The top 20 leading energy economists as of December 2016 are:

has
list of energy economists
and

*

Martin L. Weitzman Martin Lawrence Weitzman (April 1, 1942 – August 27, 2019) was an economist and a professor of economics at Harvard University. He was among the most influential economists in the world according to Research Papers in Economics (RePEc). His late ...

* Lutz Kilian *

Robert S. Pindyck Robert Stephen Pindyck ( ; born January 5, 1945) is an American economist, Bank of Tokyo-Mitsubishi Professor of Economics and Finance at Sloan School of Management at Massachusetts Institute of Technology. He is also a research associate with the ...

* David M Newbery *

Kenneth J. Arrow Kenneth Joseph Arrow (23 August 1921 – 21 February 2017) was an American economist, mathematician, writer, and political theorist. He was the joint winner of the Nobel Memorial Prize in Economic Sciences with John Hicks in 1972. In economics ...

* Richard S.J. Tol * Severin Borenstein * Richard G. Newell * Frederick (Rick) van der Ploeg * Michael Greenstone * Richard Schmalensee * James Hamilton * Robert Norman Stavins * Ilhan Ozturk * Paul Joskow * Ramazan Sari *

Jeffrey A. Frankel Jeffrey Alexander "Jeff" Frankel (born November 5, 1952, in San Francisco, California) is an international macroeconomist. He works as the James W. Harpel Professor of Capital Formation and Growth at Harvard Kennedy School. Education Frankel gr ...

* David Ian Stern * Kenneth S. Rogoff * Rafal Weron * Michael Gerald Pollitt * Ugur Soytas

History

Sources, links and portals

Leading energy economists

See also

References

Further reading