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Review of Environmental Economics and Policy Advance Access published online on June 11, 2009
Review of Environmental Economics and Policy, doi:10.1093/reep/rep004
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© The Author 2009. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org

Reflections—Energy Efficiency Policy: Pipe Dream or Pipeline to the Future?

Tom Tietenberg*

* Upon his retirement from teaching in May 2008, the author immediately accepted an appointment as one of three Trustees of the Energy and Carbon Savings Trust. This Trust was established by the Maine legislature to receive all of the revenues from the sale of Maine carbon allowances under the Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade policy covering ten states in the northeastern United States. The Trust is mandated to invest the proceeds in energy efficiency within the state, being guided by benefit–cost and cost-effectiveness criteria. RGGI may be the first program in the world to use this specific source of revenue to promote energy efficiency, but it is unlikely to be the last.

In recent years, the amount of both private and public money dedicated to promoting energy efficiency has increased a great deal. Is this a good investment? This "Reflections" article examines the potential for further investment opportunities, the case for government intervention, and the evidence on the effectiveness of the various forms of intervention. The evidence suggests that the challenge of breaking down the barriers is more difficult than conventional wisdom would have us believe. Internalizing externalities and assuring an adequate flow of information is helpful, but not likely to be sufficient. The significant challenges posed by these barriers suggest that policy makers must recognize an expanded set of barriers and respond with some ingenuity in applying an expanded set of available instruments.

JEL Classification: Q48, Q38


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