Consumer Surplus from Energy Transitions

Abstract

Energy transitions have led to major advances in human wellbeing. However, little evidence exists about the scale of the net benefits. By developing a new method for identifying the demand curve, this paper estimates the consumer surplus associated with heating, transport and lighting over more than two hundred years and identifies the gains from key energy transitions. For certain energy transitions, the increase was dramatic, reflecting the transformations in society and lifestyles that mobility and illumination provided in the nineteenth and twentieth centuries. Yet, the net benefits related to heating technologies only rose modestly. Finally, due to saturation effects of the demand for energy services, future technological developments and energy transitions may benefit consumers (though not necessarily society as a whole) less than those in the past.

Energy Efficiency: What Has Research Delivered in the Last 40 Years?

“…The subset of barriers that some economists would consider market failures can be summarized as comprising energy market failures (e.g., unpriced environmental externalities and average-cost pricing), information market failures (e.g., asymmetric information and principalagent problems), capital market failures (e.g., credit constraints), and innovation market failures (e.g., arising from R&D spillovers, in which innovating firms cannot capture the full benefits of their efforts) (16,52). Although evidence of certain market failures is persuasive, specifically regarding information market failures (54,55), more work is needed to quantify the potential energy savings from addressing them.…”

“…It has proven difficult to measure the costs and benefits in a comprehensive manner, as they vary widely depending on multiple factors and contexts, and data availability varies considerably across geographies. Fouquet (55) shows that in the United Kingdom, consumer surplus rose substantially during key energy transitions involving energy efficiency.…”

Twin transitions of decarbonisation and digitalisation: A historical perspective on energy and information in European economies

“…In Italy and Spain, coal only dominated the energy mix from the early twentieth century. Despite the transitions to coal, per capita woodfuel consumption declined only gradually, indicating that coal did not fully replace woodfuel consumption, instead it was added on-top-of woodfuel, enabling better standards of living [88]. The delayed transition to coal implied that woodfuel remained more important in Italy and Spain than in Germany and France until well into the twentieth century.…”

Introduction to the Handbook on Green Growth

“…To preserve natural capital in the process of economic development, technological, as well as managerial and institutional, innovation will play an important role in decreasing the impact on the environment. They can also be sources of welfare gains to consumers (Fouquet, 2018). Finally, they may also be a source of green growth, although the nature of technological change and the crowding-out effect of innovation policies need to be considered carefully (Smulders and De Nooij, 2003).…”