Evaluating Energy Efficiency Policies with Energy-Economy Models

Abstract

The growing complexities of energy systems, environmental problems, and technology markets are driving and testing most energy-economy models to their limits. To further advance bottom-up models from a multidisciplinary energy efficiency policy evaluation perspective, we review and critically analyze bottom-up energy-economy models and corresponding evaluation studies on energy efficiency policies to induce technological change. We use the household sector as a case study. Our analysis focuses on decision frameworks for technology choice, type of evaluation being carried out, treatment of market and behavioral failures, evaluated policy instruments, and key determinants used to mimic policy instruments. Although the review confirms criticism related to energy-economy models (e.g., unrealistic representation of decision making by consumers when choosing technologies), they provide valuable guidance for policy evaluation related to energy efficiency. Different areas to further advance models remain open, particularly related to modeling issues, techno-economic and environmental aspects, behavioral determinants, and policy considerations.