Selling and Saving Energy: Energy Efficiency Obligations in Liberalized Energy Markets

Louis-Gaëtan Giraudet (giraudet@centre-cired.fr), Matthieu Glachant and Jean-Philippe Nicolaï
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Louis-Gaëtan Giraudet: CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique
Jean-Philippe Nicolaï: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique, ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]

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Abstract: In Europe, energy efficiency obligations are imposed on energy retailers competing in liberalized energy markets. They comply by subsidizing energy efficiency investments made by energy end-users within or outside their customer base. We develop a model describing how competition in the energy market affects compliance strategies. We find that, instead of selecting the most cost-effective investments options, firms may either target their most elastic customers, which enables them to increase their retail price, or their competitor's customers, which protects their sales. Allowing firms to trade obligations can restore cost-effectiveness, but reduces consumer surplus. Overall, the degree of flexibility that should be incorporated into such programs crucially depends on the degree of heterogeneity across investment costs and the relative weights governments assign to cost-effectiveness and consumer surplus.

Keywords: Energy efficiency; Imperfect competition; Information asymmetry; Internal and external compliance. (search for similar items in EconPapers)
Date: 2020-09-01
New Economics Papers: this item is included in nep-com, nep-ene and nep-reg
Note: View the original document on HAL open archive server: https://minesparis-psl.hal.science/hal-03109922v1
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Published in Energy Journal, 2020, 41 (01), ⟨10.5547/01956574.41.SI1.lgir⟩

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Journal Article: Selling and Saving Energy: Energy Efficiency Obligations in Liberalized Energy Markets (2020)
Journal Article: Selling and Saving Energy: Energy Efficiency Obligations in Liberalized Energy Markets (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03109922

DOI: 10.5547/01956574.41.SI1.lgir

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