Energy economics is a broad scientific subject area which includes topics related to supply and

use Use may refer to: * Use (law), an obligation on a person to whom property has been conveyed * Use (liturgy), a special form of Roman Catholic ritual adopted for use in a particular diocese * Use–mention distinction, the distinction between using ...

energy 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 ...

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

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 Energy is defined via work, so the SI unit of energy is the same as the unit of work – the joule (J), named in honour of James Prescott Joule and his experiments on the mechanical equivalent of heat. In slightly more fundamental terms, ...

) to produce the energy service, such as

lighting Lighting or illumination is the deliberate use of light to achieve practical or aesthetic effects. Lighting includes the use of both artificial light sources like lamps and light fixtures, as well as natural illumination by capturing dayl ...

( lumens), heating (

temperature Temperature is a physical quantity that expresses quantitatively the perceptions of hotness and coldness. Temperature is measured with a thermometer. Thermometers are calibrated in various temperature scales that historically have relied o ...

) 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 b ...

(

natural gas Natural gas (also called fossil gas or simply gas) is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane in addition to various smaller amounts of other higher alkanes. Low levels of trace gases like carbon d ...

). The main sectors considered in energy economics are

transportation Transport (in British English), or transportation (in American English), is the intentional movement of humans, animals, and goods from one location to another. Modes of transport include air, land ( rail and road), water, cable, pipelin ...

and

building A building, or edifice, is an enclosed structure with a roof and walls standing more or less permanently in one place, such as a house or factory (although there's also portable buildings). Buildings come in a variety of sizes, shapes, and func ...

, 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 im ...

and

businesses Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services). It is also "any activity or enterprise entered into for profit." Having a business name does not separ ...

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 In organizational studies, resource management is the efficient and effective development of an organization's resources when they are needed. Such resources may include the financial resources, inventory, human skills, production resources, or ...

and environmental impacts at a

macroeconomic 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, an ...

level. Due to diversity of issues and methods applied and shared with a number of

academic discipline An academy (Attic Greek: Ἀκαδήμεια; Koine Greek Ἀκαδημία) is an institution of secondary education, secondary or tertiary education, tertiary higher education, higher learning (and generally also research or honorary membershi ...

s, energy economics does not present itself as a self-contained academic discipline, but it is an applied subdiscipline of

economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...

. From the list of main topics of economics, some relate strongly to energy economics: * Computable general equilibrium *

Econometrics Econometrics is the application of statistical methods to economic data in order to give empirical content to economic relationships. M. Hashem Pesaran (1987). "Econometrics," '' The New Palgrave: A Dictionary of Economics'', v. 2, p. 8 p. ...

* 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 f ...

* Industrial organization *

Input–output model In economics, an input–output model is a quantitative economic model that represents the interdependencies between different sectors of a national economy or different regional economies.Thijs Ten Raa, Input–Output Economics: Theory and Ap ...

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 Operations research ( en-GB, operational research) (U.S. Air Force Specialty Code: Operations Analysis), often shortened to the initialism OR, is a discipline that deals with the development and application of analytical methods to improve decis ...

Resource economics Natural resource economics deals with the supply, demand, and allocation of the Earth's natural resources. One main objective of natural resource economics is to better understand the role of natural resources in the economy in order to deve ...

Energy economics also draws heavily on results of energy

engineering Engineering is the use of scientific principles to design and build machines, structures, and other items, including bridges, tunnels, roads, vehicles, and buildings. The discipline of engineering encompasses a broad range of more speciali ...

geology Geology () is a branch of natural science concerned with Earth and other Astronomical object, astronomical objects, the features or rock (geology), rocks of which it is composed, and the processes by which they change over time. Modern 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 l ...

ecology Ecology () is the study of the relationships between living organisms, including humans, and their physical environment. Ecology considers organisms at the individual, population, community, ecosystem, and biosphere level. Ecology overl ...

etc. Recent focus of energy economics includes the following issues: *

Climate change In common usage, climate change describes global warming—the ongoing increase in global average temperature—and its effects on Earth's climate system. Climate change in a broader sense also includes previous long-term changes to ...

and

climate policy The politics of climate change results from different perspectives on how to respond to climate change. Global warming is driven largely by the emissions of greenhouse gases due to human economic activity, especially the burning of fossil fuel ...

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 of

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 o ...

Energy derivative An energy derivative is a derivative contract based on (derived from) an underlying energy asset, such as natural gas, crude oil, or electricity. Energy derivatives are exotic derivatives and include exchange-traded contracts such as futures and ...

s * Energy elasticity * Energy forecasting * Energy markets and

electricity market In a broad sense, an electricity market is a system that facilitates the exchange of electricity-related goods and services. During more than a century of evolution of the electric power industry, the economics of the electricity markets had u ...

s -

liberalisation Liberalization or liberalisation (British English) is a broad term that refers to the practice of making laws, systems, or opinions less severe, usually in the sense of eliminating certain government regulations or restrictions. The term is used m ...

, (de- or re-)

regulation Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. ...

* 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 contr ...

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 ma ...

* Risk analysis and security of supply *

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 A university () is an institution of higher (or tertiary) education and research which awards academic degrees in several academic disciplines. Universities typically offer both undergraduate and postgraduate programs. In the United State ...

) recognise energy economics as a viable career opportunity, offering this as a

curriculum In education, a curriculum (; plural, : curricula or curriculums) is broadly defined as the totality of student experiences that occur in the educational process. The term often refers specifically to a planned sequence of instruction, or to ...

. The

University of Cambridge , mottoeng = Literal: From here, light and sacred draughts. Non literal: From this place, we gain enlightenment and precious knowledge. , established = , other_name = The Chancellor, Masters and Schola ...

Massachusetts Institute of Technology The Massachusetts Institute of Technology (MIT) is a private land-grant research university in Cambridge, Massachusetts. Established in 1861, MIT has played a key role in the development of modern technology and science, and is one of th ...

and the Vrije Universiteit Amsterdam are the top three research universities, and

Resources for the Future Resources for the Future (RFF) is an American nonprofit organization, founded in 1952 that conducts independent research into environmental, energy, and natural resource issues, primarily via economics and other social sciences. Headquartered in ...

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 su ...

, 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 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 ma ...

) was made by H. Hotelling, who derived a price path for non-renewable resources, known as

Hotelling's rule Hotelling's rule defines the net price path as a function of time while maximizing economic rent in the time of fully extracting a non-renewable natural resource. The maximum rent is also known as Hotelling rent or scarcity rent and is the maxim ...

. 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) Energy_Economics_-_Instrumental_Theories

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 In common usage, climate change describes global warming—the ongoing increase in global average temperature—and its effects on Earth's climate system. Climate change in a broader sense also includes previous long-term changes to ...

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 Y ...

'' * ''

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 in 19 ...

'' There are several other journals that regularly publish papers in energy economics: * '' Energy – The International Journal'' * ''

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 contr ...

'' * '' International Journal of Global Energy Issues'' * '' Journal of Energy Markets'' * '' Utilities Policy'' 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 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 * 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 * 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 * 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