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Energy economics is a broad science subject area which includes topics related to energy supply and energy demand of energy in society.Sickles, Robin (2008). "energy economics." The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. Considering the cost of energy services and associated value gives Economics to the efficiency at which energy 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 Energy storage used to produce and supply energy. The goal is to minimise energy input required (e.g. kWh, joule, see Units of Energy) to produce the energy service, such as lighting (lumens), Heating element (temperature) and fuel (natural gas). The main sectors considered in energy economics are and building, although it is relevant to a broad scale of human activities, including and at a Microeconomics level and resource management and environmental impacts at a Macroeconomics level.
Interdisciplinary scientist Vaclav Smil has asserted that "every economic activity is fundamentally nothing but a conversion of one kind of energy to another, and monies are just a convenient (and often rather unrepresentative) proxy for valuing the energy flows."
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 Nudge theory'.
The Rebound Effect (1860s to 1930s)
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 /barriers prevents the optimal use of energy. From an economical standpoint, a Decision-making with perfect information 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 Nudge theory (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 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), (2025). 9780141040011, Penguin Group Australia. ISBN 9780141040011 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.
Energy economics also draws heavily on results of energy engineering, geology, political sciences, ecology etc. Recent focus of energy economics includes the following issues:
Some institutions of higher education (universities) recognise energy economics as a viable career opportunity, offering this as a curriculum. The University of Cambridge, Massachusetts Institute of Technology and the Vrije Universiteit Amsterdam are the top three research universities, and Resources for the Future the top research institute. There are numerous other research departments, companies, and professionals offering energy economics studies and consultations.
The IAEE operates through a 17-member Council of elected and appointed members. Council and officer members serve in a voluntary position.
IAEE has over 4,500 members worldwide (in over 100 countries). There are more than 25 national chapters, in countries where membership exceeds 25 individual members. Some of the regularly active national chapters of the IAEE are; USAEE - United States; GEE - Germany; BIEE - Great Britain; AEE - France; AIEE - Italy.
IAEE typically holds five Conferences each year. The main annual conference for IAEE is the IAEE International Conference which is organized at diverse locations around the world. From the year 1996 on these conferences have taken place (or will take place) in the following cities:
Other annual IAEE conferences are the North American Conference and the European Conference.
There are several other journals that regularly publish papers in energy economics:
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.
RePEc has a collection of recent working papers.
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