lecture_consumerpolicies_part2

lecture_consumerpolicies_part2 - Energy Policies Targeting...

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Unformatted text preview: Energy Policies Targeting Consumers (part 2) Energy Markets, Finance and Policy ECON 489/689 Common Theme of Energy Policy Every energy policy is essentially about increasing the supply or decreasing the demand of something! Economists like prices (most of the time we like priceswell see later) Source: Busse, Knittel, Zettelmeyer (2009) Effect of $1 increase in gasoline prices on new car purchases Prices Work! Production Tax Credit for Renewable Energy Prices Work! Do We Always Use Prices? 1. Gasoline tax vs. CAFE standards Do We Always Use Prices? 1. Gasoline tax vs. CAFE standards 2. Real-time pricing of electricity Do We Always Use Prices? Effective Energy Policy Can Use Prices to Achieve Goals A product with an extra bad attribute that is not charged to the seller Tax Example: NOx emissions A product with an extra good attribute that is not earned by the seller Subsidize Example: new innovation that has spillovers But these policies are still using prices as a policy instrument Prices as a Policy Tool Can Pose Challenges Who Likes Higher Prices? Political support for increased gasoline tax Dilemma: want to reduce demand but not willing to (transparently) charge higher prices Who Likes Uncertain Prices? Real-time electricity prices for retail customers Rollout of advance metering equipment in some states 9 Prices as a Policy Tool Can Pose Challenges Who Likes Higher Prices?...
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lecture_consumerpolicies_part2 - Energy Policies Targeting...

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