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Overcoming Market Barriers and Using Market Forces to Advance Energy

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Shruti Vaidyanathan, et al.
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This paper presents the improvements in energy use per dollar of GDP in the United States since 1970 and the new policies that could help the United States achieve efficiency improvements of up to 31% by 2030. It addresses four main market barriers affecting the economics of energy efficiency and fuel efficiency—imperfection information, split incentives (principal-agent problems), externalities, and imperfect competition—and recommends policy mechanisms to address them. The authors provided order-of-magnitude cost-savings estimates based on the adoption of their recommendations and find that the United States could save 19% of its projected energy use in 2030, which represents $1.4 trillion (NPV) for 2014 to 2030.