The fourth remark challenges the causality structure of conventional energy demand models. Rather than looking at the effect of prices and income on a given structure of energy supply and demand, the new approach seeks to devise a system of economic incentives which would lead to a desired structure of the energy system. Although it is in striking contrast to conventional analytical methods, this new approach is gaining increasing attention for long-run decisions.
This line of argumentation stresses the wide range of technical substitution opportunities of energy by capital. In energy-intensive countries, as the United States and Eastern Europe, the same energy services can be provided with available technologies by reducing primary energy flows by a factor of 10. In Western Europe this reduction factor is approximately 5. Aspects of sustainability which impose limits to the use of exhaustible resources and to the emissions into the natural resources air, water and soil define the set of feasible energy structures.
The validity of this argumentation rests on the proposition that it is much easier in the long run to predict required energy services, the corresponding technologies and as a consequence the resulting energy flows which together meet certain sustainability constraints than to speculate about required energy flows without explicitly considering the complex structure of an energy system.
In a second step this approach requires the adjustment of the economic incentive system in order to induce decisions which meet the desired energy structures. The level of energy prices in general will have to be raised to provide incentives for switching to energy-efficient technologies. Prices for renewable energy sources will have to be lower than for exhaustible resources. Prices for final energy consumption will also have to reflect the impact on the environment and their exergy content. If markets are not able to process this information adjustments by selective taxes will have to be made.
A wide range of other policy instruments is available to provide incentives for restructuring an energy system towards the desired paths. Permits for emissions, e.g. CO2, can be issued and traded at regional, national and international levels. Funds can be created which recycle the revenues of energy taxes by supporting the propagation of efficient energy technologies. Technical standards, e.g. for the average fleet fuel consumption of cars, may be considered.
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Global warming is a huge problem which will significantly affect every country in the world. Many people all over the world are trying to do whatever they can to help combat the effects of global warming. One of the ways that people can fight global warming is to reduce their dependence on non-renewable energy sources like oil and petroleum based products.