Economics of energy efficiency

Kenneth Gillingham and Erica Myers

Chapter Chapter 11 in Handbook on Electricity Regulation, 2025, pp 254-267 from Edward Elgar Publishing

Abstract: The economics of energy efficiency have come a long way in the past two decades. This handbook chapter reviews major issues in the economics of energy efficiency, focusing on the most recent literature. We point out that much has been learned about potential mechanisms underlying the seemingly paradoxical gap between the observed energy efficiency and analyst-modeled optimal energy efficiency. While there is no simple consensus in the literature that applies in all contexts, we discuss how hidden costs and overestimated energy savings may account for some of the gap, and how behavioral anomalies and principal-agent issues (along with environmental externalities) may also play a role. We discuss policy implications along the way.

Keywords: Energy efficiency; Principal–agent problems; Market failures; Behavioral anomalies; Climate policy (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035314348
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