Energy Conservation: Technology Push or Policy Pull

摘要

A fundamental problem facing government energy conservation policy makers is the proper mix of two polar strategies designed to encourage energy conservation in the private sector. These include ''Policy Pull'' strategies, in which accelerated depreciation for energy conserving devices, Btu taxes, and other broad based policy instruments are used to increase the demand for energy conserving devices, or modes of operation; and ''Technology Push'' strategies, in which the private sector and the government collaboratively fund research, design, or development of new energy conserving devices, thus increasing the supply of such devices. The need for government-provided energy conservation incentives beyond those now provided the private sector by current elevated energy prices is assumed to be based upon the tendency of current energy prices to be below the true replacement cost of the energy, and the apparent tendency of the private sector to systematically underestimate future increases in energy prices. Thus, policies aimed at adjusting private sector costs and/or benefits of energy conservation options are appropriate responses, since they focus upon the reason for government intervention in the first place. Both strategies have their uncertainties, drawbacks, and benefits. This paper explores these aspects of each, develops an interactive model of government policy choice and private sector response where two distinct sets of variables are under the control of the two groups, applies the model to energy conservation programs in the iron and steel industry, and draws some conclusions about the usefulness of the two policies. (ERA citation 04:013623)